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Monday Market Meltdown – All Fall Down!

Our "Must Hold" lines didn't hold:

It's not too complicated to know what happens next – we've been talking about it for long enough and the Dow has already tested that 12,800 line – leading the way for the next 5% drop on all of our major indices.  

It's far too late to say "I told you so" as there's nothing to be done about it now – I can only tell you what's going to happen in the future – the rest is up to you and now we'll be seeing our RUT 775 goal and maybe 12,500 on the Dow and this is the point at which we expect the Central Banksters to step in with at least TALK about more easing although Europe is such a mess, it may put off intervention a bit longer than we had expected.  

So, as I keep saying: "Cash is KING" as we wait for a clear sign that it's safe to do some bargain-hunting once again.  We've already gotten some nice entries on out-of-favor stocks like CHK and, soon, JPM but that doesn't mean they won't get even cheaper in a real panic so we'll see how things play out but hopefully the real bottom-fishers show up soon and at least put a floor under some of our discounted equities. 

SPY DAILY It's a very long way down to our next support level on the S&P which never filled the gap up over 1,320 from early February, which just so happens to be our 2.5% line for that index as well – so we'd expect to see some strong support around there.

That then, brings us to the question – is the news bad enough to justify more than a 7% correction in the S&P?  Other than JPM, which I feel is an isolated incident and not even a really big deal to JPM, the rest of this Global mess is nothing more than the stuff we've been pointing to all year as we warned the Emperor seemed a bit under-dressed for a rally.  

We initiated our Long Put List on March 15th – a little early with our top call but it certainly gave us plenty of time to nail down some great entry points.  The next Friday (3/23) I was wondering "Are There Any Dips Left to Buy?" and it's amusing to look back at our conservative TZA hedge that day, which was the April $17/18 bull call spread at .42, selling the $17 puts for $1 for a .58 credit (finished at $1.58, up 272%) as well as our bullish play on TLT, which was the April $108/110 bull call spread at $1.15, selling the $108 puts for $1.30 for a .15 credit that finished at $2.15 for a 1,433% gain.  

Now TZA is at $19.93 and we took a far more aggressive hedge on them in Friday's Member Chat to protect our early bottom-fishing expeditions and TLT is going to be over $120 this morning – getting to the point where we prefer to be short on them, not long!  Other hedges from that March 23rd post are still working and should be doing really well today

  • CAT May $95 puts at .95, now $1.45 – up 52%
  • SQQQ June $10/14 bull call spread at $1.05, selling $10 puts for .60 for net .45, now $1.70 – up 277%
  • DXD May $12 calls at $1.20, now $1.45 – up 20%

Of course WAY back in March of 2012, we were nervously shorting oil futures at $107.50 as it seemed like the rules of logic were completely suspended on that commodity.  Now we wonder if they can hold $95 (probably not).  On Wednesday, the 28th, I noted that $3.5Tn in RUMORED (never happened) easing was still not enough to prop up the Global Markets and I laid out the crux of our bear case in that post.  

We had a very fake rally to close out the month but we weren't buying it and Friday's post was titled: "Friday Fade – March Goes Out Like A Lamb (To the Slaughter)" in which I said:  

What's our biggest concern?  It's still those pesky bottom 99% consumers and the fact that they simply don't have the money to support a 30% run-up in the market – unless, of course, actual earnings and revenues don't matter anymore – then we can carry on with our rally. 

We plunged that first week in April (see "Monday Musings – New Quarter Not So Shiny") but then recovered into the end of the month and now we are plunging again but it's all the same nonsense.  As we expected, earnings were pretty weak with consumers all over the World pulling back but the markets are STILL up 100 S&P points (8%) for the year and 1,280 on the S&P is about the 200 dma so it's not at all out of the question that we retest that 5% line BUT, just like I did not see any particular reason we should go higher in March and April – I don't see any major proof that we should be lower either.  

There is nothing I would point out today that we haven't been pointing out for two months now.  Our major sin was being too far ahead of the Retailers and having to wait for them to catch up to our point of view.  We're not going to make that mistake by catching falling knives in this round – not when we have such a clear set of levels to give us crystal clear buy and sell signals (and see our April 30th post for a good example of our skeptical nature that keeps us out of trouble).  

The real worry here, that can lead us back into a real panic mode, is the renewed fear of risk that has been brought to the surface by JPM this week.  It's not shocking news to find out that a TBTF institution is still gambling hundreds of Billions of Dollars every day.  Why shouldn't they – it's YOUR money, not theirs!  

If they win, they get to keep some of the winnings and, if they lose, then you don't get your money back and they get bailed out and gamble with the next suckers' money.  Is there any reason for them not to gamble?  Certainly there are no regulations to stop them…

We'll see if we find a floor to stop the markets from going lower today.  Hopefully, this is the blow-off bottom we've bee looking for, with VIX and TLT in the low 20s – if we get some decent volume and put in a nice bottom – it would be nice to get on the buy side again but let's not rush it.   Without some form of stimulus – what is there to get excited about?  

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  1. Oil Lines

    R3 – 98.3
    R2 – 97.75
    R1 – 96.66
    PP – 96.11
    S1 – 95.02
    S2 – 94.47
    S3 – 93.38

  2. Question for Pharm – so far VVUS has moved in tandem with ARNA,, meaning that it went up when the panel voted for Lorcarsin, but maybe it would be a good idea to short VVUS since as the FDA dates approach, it's likely to to go down as ARNA goes up…or not?  Value your opinion on this – I'd like to short VVUS but not sure at what point… 

  3. AA/Phil:  Just following up on your comment this morning on the possibility of Nat.Gas hitting $0.00 over the summer --   Bloomberg had this article: Aluminum Buyers in Japan to Pay Record Fee on Supply Drop showing both Japan and China boosting aluminum imports in the face of AA cutting production — in fact Japan is paying record fees.
      Couple that with the fact that energy costs accounting for around 65-70% of production and smelting, AA should be seeing a renaissance in margins and profits, no?  
    The market is tanking, so I am looking for positions to add to.  It would seem AA should be well positioned to bounce back strong from this downturn.

  4. Scotbraze – I just sent you the spreadsheet. Hopefully got the right email!

  5. stjeanluc – thanks!  I'll take a look.  Very much appreciated.

  6. I didn't have time this weekend to create the usual Econ calendar but here are some numbers for today:

    Euro-Zone Industrial Production (YoY) / -2.2% (-1.4% expected)
    Euro-Zone Industrial Production (MoM) March / -0.3% (0.4% expected)

    There was also bond and bill sales in Spain and Italy and rates rose compare to last time!


    The Treasury raised 2.9 billion euros ($3.8 billion) in 12- and 18-month Treasury bills, just under the top of the targeted range. Yields on the shorter paper rose by around a seventh from the last primary auction in April to just under 3 percent.


    Rome paid 3.91 percent on average to sell a reopening of its March 2015 bond, marginally higher than at the last sale a month ago and the highest cost for that maturity since January.

  7. Tomorrow is a huge day for data – we will get GDP figures from Greece, France, Germany, Portugal and the Euro-Zone. Then Economic Sentiment survey from Germany. And Consumer confidence from Japan. Greece will also sell 3-month bills.

    To finish, retail sales in the US and CPI! And then business inventories. And tomorrow night, Machine orders from Japan and the service sector index.

    Might want to tread carefully today, could be rock and rolling ahead!

  8. PP for today:

    VVUS/jer – I have been advocating shorting them, but when the date moved, I wanted to see what happened with ARNA. I am looking at the Sept ones, as the date is Jul 17 (3 days b’f OPEX). As it gets closer, the volatility is only going to get bigger. The July 20/15 bull put spread is 1.74, and the Sept is 2.02. ARNA is before VVUS now, so it will be a bit tricky. But this is what I am watching.

  9. Natural Gas (NG)
    Phil, when you say natural gas can go to 0 like in UK a couple of years back, does that mean the NG futures contract of the month in which the prices are impacted plummets to near 0 or are the prices impacted, are the spot market and the futures (NG) price isn't impacted?

  10. "Take away all my silver.
    Take away all my gold.
    And hand me a stack of paper.
    Well paper money, paper money won't hold."
    Montrose, 1990.
    Was listening to some old CDs this weekend, I wonder if Sammy Hagar took his own advice back then and bought lots of gold at $400/ounce?

  11. McClellan Oscillator -100 coming into today.  Slightly oversold.  When it's over -200 is when it starts to get interesting.

  12. The volatility spreadsheet is up to date with this week's numbers!

  13. Wow, everyone must be buying home builders for their land holdings…..they are looking like CMG and PCLN….

  14. Good thing we kept the GLL calls! I guess we need to raise the stops!

  15. Pharm, it's the magical Buffett Effect, if fat cats buy up all the distressed homes then builders will have something to do again…

  16. Yes, mrm, it is a land grab by those that have cash'o'la…..we knew that in 2008 when the shoe fell off.  Now it comes out in the open.

  17. Buffet Effect/Mr M – We are already seeing this in our area of Northern California.
     In particular, from the article: "would-be investors will face some competition in getting the best deals. "I probably say [give advice] twice a week to different investor purchasers that come into my office, and a lot of first-time homebuyers are trying to come into the market right now, too."

  18. A tad too bullish with FAS still….

  19. Phil,
    I have the WFR  JAN13 $7.50 short puts which will be most likely be assigned to me.  These puts are covered, and my cost basis, after assignment will be $4.61.  I want to own this stock long term, does it make sense to sell MAY12 $1 calls and reduce the cost of the underlying if assigned?  Thanks for your insight.

  20. OK… CHK announces just before market close that they are going to miss a filing, driving millions (on volume) to sell.
    Then after the bell announces a $3 billion loan agreement and that everything is OK…
    And this is legal because????  See, the dog IS working with the man. 

  21. Good morning! 
    Looks like the DJI already hit my 12,700 target and we could lose another 400 on a breakdown here. All put selling is off for me until I see ALL the majors show signs of bottoming. Time to buy back any calls that are ahead of expectations. Hopefully we get a blow off bottom that spikes the VIX for new entries. Finally a market that will keep me from falling asleep.

  22. Good morning! 

    To call a bottom or not to call a bottom – that is the question?  

    We're certainly going to see some dip buyers here but it all depends on what will stick.  Until we re-take 3 of 5 of those Must Hold lines, any move up is meaningless but I'm all for taking bullish pokes off the following lines with tight stops IFF we hold these key spots:

    • XLF $14.50 is roughly FAS $89 and the FAS May (Friday) $86/88 bull call spread is $1.30 and you can sell the $83 puts for $1.10 for net .20 on the $2 spread that's 100% in the money.  
    • RUT 780 is TNA $51 and we expect 775 to be a floor and the May $50/52 bull call spread is $1.10 and you can sell the $49 puts for $1 for net .10 on the $2 spread.  

    The key to both of these is at least stopping out the short puts if we fail to hold our lines ($14.50 on XLF and 775 on the RUT) and it's very risky as we may have a long way to the bottom if Europe has a weak finish but, as I said above – there's really nothing new here to panic about – it's the same old stuff we've been talking about for weeks plus JPM to act as the cold slap in the face to wake people up. 

    That doesn't change the fact that US equities look safer than anything in Europe or Asia and, of course, the 1% bump in the Dollar is really hurting us now and that might turn back around before we break over 81 (now 80.80) but I wouldn't be surprised to see 82 or 82.50 so these are toe-dipping bullish plays at best – keep that in mind!   If we lose .25 here trying to make $2, then we'll take another poke at making $2 and risk another .25 at a lower level but we have no conviction here – there's no limit to how low we can go once people begin to panic! 

    Of course I still loves my CHK at $15.50, as it's a LONG-term play.  Plenty of ways to play that were outlined last week.  DMND is flying at $23.65 – swimming against the tide today and gold is way down to $1,556 so I guess maybe we should take the money and run on our GLD plays – we'll see how things look at the EU close. 

    Retail Sales, CPI and Empire Manufacturing will have to turn us around tomorrow.  After that we have lots of housing news and our own Industrial Production, which is not likely to be thrilling so no knight in shining armor on the horizon if we fail to hold the above levels and a long way to the bottom:  


    Date ET Release For Forecast Consensus Prior
    May 15 08:30 Retail Sales Apr 0.2% 0.2% 0.8%
    May 15 08:30 Retail Sales ex-auto Apr 0.2% 0.2% 0.8%
    May 15 08:30 CPI Apr 0.0% 0.0% 0.3%
    May 15 08:30 Core CPI Apr 0.2% 0.2% 0.2%
    May 15 08:30 Empire Manufacturing May 8.0 8.4 6.6
    May 15 09:00 Net Long-Term TIC Flows Mar NA NA $10.1B
    May 15 10:00 Business Inventories Mar 0.3% 0.3% 0.6%
    May 15 10:00 NAHB Housing Market Index May 26 26 25
    May 16 07:00 MBA Mortgage Index 05/12 NA NA 1.7%
    May 16 08:30 Housing Starts Apr 675K 680K 654K
    May 16 08:30 Building Permits Apr 725K 730K 747K
    May 16 09:15 Industrial Production Apr 0.4% 0.5% 0.0%
    May 16 09:15 Capacity Utilization Apr 78.9% 79.0% 78.6%
    May 16 10:30 Crude Inventories 05/12 NA NA 3.652M
    May 16 14:00 FOMC Minutes 4/25      
    May 17 08:30 Initial Claims 05/12 365K 365K 367K
    May 17 08:30 Continuing Claims 05/05 3250K 3250K 3229K
    May 17 10:00 Philadelphia Fed May 10.0 8.8 8.5
    May 17 10:00 Leading Indicators Apr 0.1% 0.2% 0.3%

  23. Kinki / AA — I'm bullish when I get them under $10 but of course $9 is better :)   Holding up nicely today given the climate.

  24. Phil/Cash is King

    I've been wanting to buy a few stocks.  BMY for example and haven't wanted to chase.  I have some highball put sell orders in just in case we get one of those 800 point dips.
    The news is just so terrible as you pointed out in Fridays post.  How much longer can they kick the can?

  25. Looks like 1.2825 is a must hold on EUR/USD..more pain if they fail

  26. Pharm, it looks like the ASCO run-up has started for SNSS, would you jump this train?

  27. phil,
    Given the validity of your cmts re picking a btm above, would you be inclined to scale into puts in want-to-own stks like JPM, WMT, etc? If so best contracts to sell – 2012 or 2013.

  28. Phil still trying to see clear with the bull rolls 4/20 we discussed my play SCO 2x Jul 31/36 at 5.40/2.90 now 11.05/7.15 as well sold 2x Jul12 31p at 1.65 now .45 Thinking of rolling the bull to Oct 36/41 for a net credit of 1.50. Appreciate your thoughts on the matter. TIA

  29. Man, this market doesn't even give you time to light a cigar and savor a little CMG dip, it's already bouncing and I'm already covering my puts…

  30. UUP bullish call spreads look interesting if one believes Europe keeps the dollar strong

  31. Sonders at Schwab on Euro fix
    1. Make companies more competitive, lay people off
    2. Cut Govt regulation
    3. Cut Taxes
    4. More Austerity
    Coming soon to America?

  32. AMZN - FYI, this one has quite a gap to fill to get back to April, I got some puts at 230 and will be looking for more on a bounce.  And by the way this one bounces hard when it runs, so I play it similarly to my previously articulated plays for CMG and PCLN where it's covered by day, then roll at EOD, then naked by night.

  33. is it correct that the CHK call was rolled in the 25K but not the 5K? If so, educate me as to why, plz?

  34. Oh, i see. they were different entries. That right?

  35. China's numbers have not been good lately!

    In my opinion this change in the growth rate of the state sector will be at the heart of the political economy choices, and difficulties, that Beijing will be forced to address in the next few years. It is likely to be much easier to keep political leaders happy when the value of the state sector is growing comfortably in the double-digit range than it is when it is growing in low single digits, or even contracting.

  36. Liz Ann could be Romney's choice for V.P……..

  37. Pharm / MNTA - six green candles in a row on this one, time to play again?  You were going to re-enter if it got to 14…

  38. AA/Kinki – Good one!  I think conditions are right for AA buying and $9 is always a good entry for them, especially as you can sell the 2014 $10 puts for $2.35 for a net $7.65 entry and TOS tells me the net margin to collect $2,300 for selling 10 of those is just $1,848, which is a very nice 124% return on margin if AA gets over 10 by Jan 2014.  No need to do anything else with that trade but you can also sell the $8 calls for $2.25 and buy the stock for $9 and then you have a buy/write at net $5.40/7.70 with a call away at $10 but it's not really any different than selling 2x the short puts.  You can be more conservative and sell the 2014 $8 puts for $1.30 for a net $6.70 entry – that's good too but I have more faith in AA than that so I'd rather have the $2.35 for selling the $10 puts.  

    EuroZone Data/StJ – Sounds like it would be prudent to wait for tomorrow before trying to get too bullish, no matter how today goes.  

    Nat gas/Checho – No, in Europe they actually PAID commercial users to bleed the pipes and put gas into their own storage units because they were dangerously overfilled.  That's what I mean by zero!  Not likely to happen here as CHK will shut production first but then that will be bad news for them, again.  Still, you have to think of energy, over the long-term, as somewhat exchangeable and if nat gas gets that cheap then people will convert to use more nat gas and then demand for nat gas will go up, etc.  It just takes more time than a day-trader (or average investor) has patience for to play out but it will play out over time.  Right now nat gas is 1/6th the price of oil per BTU – that's ridiculous.  Yes, oil can come down 50% to $50 but then nat gas is still 1/3 – so you see how this is very unlikely to last – even at $2 when about $6 nat gas is equivalent to $50 oil.  And those figures assume no one cares about the carbon differential, which is becoming more of an issue.  

    Reminds me of an old favorite by Alice Cooper, MrM:  

    Take away, take away my eyes
    Sometimes I'd rather be blind
    Break a heart, break a heart of stone
    Open it up but don't you leave it alone
    'Cuz that's all I got to give you
    Believe me Babe, it ain't been used
    My heart's a virgin, it never been tried
    And you know I'll never cry

     AMZN with a nice sell-off.  XRT back to $59.14.  

    WFR/Hemas – Selling May $1 calls?  I don't get that.  You can roll the Jan $7.50 puts ($5.30) to 2x the 2014 $5 puts at $3 and put another .70 in your pocket so I think that would mean you collected roughly $1.80 per long and your net on 2x becomes about $3.20 and then you can sell the $3 calls for .55 but I wouldn't unless they can't hold $2 and, of course, if you sell those without owning the stock, you face the danger of someone buying the company and totally screwing you over.  

    Dog and Man/Arivera – It's fun when you begin to see how the game is played, isn't it.  Just like with SHLD, who's CEO seemed to assassinate the stock in December, only to suddenly find ways just weeks later to show it was actually MORE valuable than before all the nonsense.  This is the advantage of being a value investor – as you have seen, I DON'T CARE what everyone is saying about CHK because I focus on what the company is worth.  Nothing blew up, no reserves were jettisoned into space, there were no material changes in their balance sheets – it was all just noise and you have to learn to ignore the noise and then you won't complain when this kind of BS happens – you'll just BUYBUYBUY while the sheeple are SELLSELLSELLing.  

    Perfect bounce off 775 in the futures and that's 780 on the RUT proper.  As long as they hold – it's bottom-fishing season!  

    Kicking the can/Exec – At this point, the best thing that can happen is for Greece to leave the Euro-zone because it won't be such a big deal (I've been telling Texas to take a hike for years!) and then we can see if Spain is savable (probably not).  Meanwhile, it costs about $3Tn per year of can kicking and that's 5% of the Global GDP while the US routinely goes 10% of our GDP into debt each year so all we have to do is convince the other majors to do their share and we can all extend and pretend for another few years at least. 

    Scaling into puts/8800 – I would call it more taking a poke at puts but stopping out in this round as, if we fail this level – the next levels could be much further down.  So rather than selling puts and doubling down on JPM, for example, I'd rather sell 5 2014 $30 puts for $3.45 ($1,725) with a stop at $4 and then I'd look to sell 10 $25 puts (now $2.60) for $3+ ($3,000-$275 loss from first round) and then stop those at $3.50 and look to sell 20 of the $20 puts (now $1.40) for $2 ($4,000 – $775 loss from first two rounds) so I'm pretty much trying to make the same $3,000 each time but each time I'm stopped out, I'm going to try to wait for a better price on lower strikes (assuming at each level we still think they'll come back, of course).  

    SCO/Yodi – I'm not clear on why you need to roll at all when you are so deep in the money?  Do you think oil is going down more?  You can take $11.05 off the table by selling the July $31s – that's a lot of money.  You can roll the July $36 caller at $7.15 to 3x the Oct $52 calls at $3.50 and now you are betting oil doesn't go below $80 (and if it does, you can still roll).  If that all works out, you net $11 off your $2.50 spread.  You can set a stop on 1/2 the calls at $4 and you still have $7 in your pocket, which is more than the max you can make on your spread anyway and then you are back to short 1x and you can use your $7 to re-cover the short calls if oil breaks below $85, for example. 

    CHK/Morx – Because we have more money in the $25KP!  

    Dollar testing 80.80 again.  Pound is back over $1.61 but Euro flatlining at $1.284.  

    VIX 21.36, TLT 121.14, XLF $14.59, RUT futures testing 780…


  39. FAS Money – $88.75, seems about right to me but let's buy back the $95 calls (.80) and we'll see if we have to roll those puts or not (I bet not).  Let's also roll our 2014 $13 calls down to the $12 calls for .60, that's investing $600 to buy $1,000 worth of intrinsic value – not a bad use of a small portion of our profits.  

    IWM Money – TNA at $51.40 – damn that's good!  I'm not as worried about the RUT bouncing as I am with FAS so we can leave these. 


    • GLL - Of course we take $3 and run!  
    • EDZ – Fine 
    • TNA is time to DD at .45.  They were $3.60 on the 1st so no reason to roll them with a month left – it's worth risking $225 since there's a possibility of a huge gain still there.  
    • CHK – Looks good to me!

    $25KP –  What a roller-coaster.  

    • DMND – On track. 
    • XRT – I'm glad to be done with them at $2.70. 
    • BBY – $19.60.  8(  
    • FAS – Nothing there I don't like.  I guess we should buy back those May $95 calls for .80 too.  
    • GLL – Let's take it and be happy at $3.
    • CHK – Looks good.
    • AMZN – Not very exciting so far.  

    Our unrealized loss is all FAS and BBY and I feel strongly those are a good value so nothing to do but wait and see how it plays out.  

  40. RPME/Austerity
    The recent election in Europe was a classic illustration of the theory that "what Government Giveth, Government can't taketh away.
    It also resonates well with this.
    Coming soon to America??? 
    It's hard to imagine that as long as there are voters and as long as there are politicians who cherish being reelected more than anything else, that there will be any serious cuts.

  41. Phil SCO Thanks great move!

  42. Any thoughts on NFLX at these levels?  Personally, I'm still bearish on them.

  43. Commentary from Forexlive

    UK FTSE -1.8% (lowest of the year)
    German DAX -1.8% (holding above last week’s lows)
    French CAC -2.1% (lowest close of the year)
    Spain IBEX -2.6% (lowest since 2003 but intraday crisis levels hold)
    Italy MIB -2.7% (lowest close since Sept)

  44. Phil,
    Thanks for the tactical variation re puts

  45. CLDX is running mrm, I prefer them.  Data are due May 23 on their flagship with SGEN technology.  From what I can read about it….could be a nice winner.

    SNSS – yes, but set tight stops…..and I mean…TIGHT.

    MNTA – well, they look like they could roll over with the candle pattern, let's sell some puts….how about Sept 12s for 1.30…yes those look tasty.

  46. Pharm, last question for the day – KERX is bouncing strongly, does that make AEZS a buy?  I recall that they have some sort of relationship.

  47. CLDX – all or nothing on the CDX-011 info being released.  I am surprised that it has not been leaked from ASCO, where they were denied entry b'c they filed a form wrong.  Either case, the June 4/5 Bull call spread for 40c.  Just a few. I have also covered the stock with the June $5 calls.  In addition, we have the 3/4 bull calls spread, which has held up, so don't go crazy on the stock just yet.  Let's see how things play out.

  48. Phil, next stop 1320? This week, or bounce first?

  49. XRT 25KP / Phil – Do mean close the position at $2.70?

  50. KERX/mrm – wouldn't touch 'em for now.  If one must, the Sept $2 Ps for 50c offer an ok entry.  AEZS is dead, as that is the trial that failed.

  51. AEZS has other things in the pipe, but it is a ways away, and they have a lot of shares outstanding.

  52. At the open: Dow -0.82% to 12716. S&P -0.98% to 1340. Nasdaq -0.94% to 2906.

    Treasurys: 30-year +0.69%. 10-yr +0.29%. 5-yr +0.1%.

    Commodities: Crude -1.87% to $94.33. Gold -1.5% to $1560.25.

    Currencies: Euro -0.63% vs. dollar. Yen -0.22%. Pound +0.05%.

    10:00 AM On the hour: Dow -0.91%. 10-yr +0.35%. Euro -0.58% vs. dollar. Crude -1.95% to $94.25. Gold -1.54% to $1559.55.

    11:00 AM On the hour: Dow -0.87%. 10-yr +0.35%. Euro -0.61% vs. dollar. Crude -1.86% to $94.34. Gold -1.35% to $1562.55.

    11:41 AM Off the lows … a mini-flurry of buying into the close takes some of the panic out of European shares today. Stoxx -2.3%, Germany -1.9%, France -2.3%, Italy -2.6%, Spain -2.7%, U.K. -1.9%. European financial ETF: EUFN -2%. Euro -0.6% to $1.2842.

    12:00 PM On the hour: Dow -0.69%. 10-yr +0.3%. Euro -0.55% vs. dollar. Crude -1.49% to $94.69. Gold -1.2% to $1564.95.

    Market preview: Greece remains in political deadlock and looks to be heading for new elections and then right out of the euro, sending shares of all sorts of national colors into the red. S&P futures-0.9%. Following news of varying degrees of seismicity, Yahoo +2.4%, Chesapeake +4.25% and Avon +5.5%, but is -14%. Later: Groupon earnings 

    Pre-2008, a nearly pure play on short-term interest rate expectations, financial stress is now a key part of the eurodollar trade, and a sell-off in the front end of the curve as the mid and back-ends rally is signalling plenty of it. One trader notes the spread between near-term futures and those 4-5 years out is trading at 2008 levels.

    The 10-year U.S. Treasury yield hits its lowest level of 2012, -6 bps to 1.77%. The long bond is off 7 bps to 2.94%, within a few ticks of its YTD low. One can't help but reflect on the near-universal bearishness towards Treasurys of top bond fund managers 60 basis points ago. TLT +1.3% premarket.

    Eurozone industrial production -2.2% in March Y/Y vs. -1.4% expected. (PR .pdf)

    The Australian dollar dips below parity with the greenback for the first time YTD, amidst the double-whammy of a slowing Chinaand EU jitters. China's weekend reserve ratio cut propped things for about 5 minutes on the open last night, but markets took on water soon after. Shanghai -0.6%, Hong Kong -1.2%, Sydney, where a lot of companies are going to make a lot more money with a weaker aussie, +0.2%

    Indian inflation unexpectedly accelerates to +7.2% Y/Y in April from +6.9% in March vs. consensus of +6.7%. "Many people have been calling for an easing in monetary policy but it makes it difficult for the RBI to moderate policy," says Chakravarthy Rangarajan of the PM's Economic Advisory Council.

    Already down on the day, the euro tumbles further as European Commission VP Almunia says the ECB has room to maneuver. He also suggests the EU move towards "debt mutualization." The euro is buying $1.2836, it's lowest level since January. FXE -0.6% premarket. 

    As cheeky traders flirt with the SNB's 1.20 floor on the euro/Swiss franc cross (driving it to CHF 1.2009), central bank chief Jordan tells an audience the franc remains "clearly overvalued." His remarks, however, fail to budge the pair. FXF -0.6%.

    Spain's 10-year bond yield soars 34 bps to 5.64%, the highest since late November, and nearing its all-time high. The 2-year +34 bps to 4.08%, the highest since mid-December. It has risen nearly 200 bps since the ECB's 2nd LTRO, leaving Spanish banks with massive losses on the 2-year paper they purchased with the cheap funding. Madrid -2.8%, Santander (STD-3.5% premarket.

    Even the newly announced €30B in loss provisions by the Spanish banks won't be enough to protect them against what are sure to be rising loan delinquencies, opines Moody's. Santander (STD-2.9%) is setting aside €2.7B (the bank earned €1.6B last Q), BBVA (BBVA-1.9%) €1.8B (earned €1B last Q). Neither are cutting their dividend.

    Solidarity with Greece will end if the country does not keep its commitments, says Angela Merkel, hitting the wires as she talks about another in a line of stinging election defeats for her party. Greece will "always" stay a member of the EU, she says. "What about EMU," asks ZH.

  53. Angela Merkel's conservative party 
    failed to win back powerin North Rhine-Westphalia, Germany's most populous state. Center-left social democrat Hannelore Kraft won the vote, a rebuke for Merkel and her austerity push. Frankfurt -1.3%.

    The cover of Der Spiegel: "Acropolis adieu! Why Greece must leave the euro now."

    President Karolos Papoulias has again held fruitless talks with Greek political parties in another attempt to persuade them to form a coalition. The hard-left and anti-austerity SYRIZA was having none of it despite top eurozone officials openly talking of a "Grexit." Another election looks likely.


    Despite the misery, Greeks really don't seem to want to leave the euro. "I've lived the poverty of the drachma and don't want to go back. Never!" says a pensioner who closed her pharmacy because of the crisis. On its front page, the Ta Nea daily shows a picture of a man shooting himself, with the blood splattered across the shape of Greece.

    Der Spiegel lays out in some detail – likely leaked from a German finmin task force – the mechanics of Greece's exit from the euro, including police posted behind sandbags to protect the banks, which would be closed for a week while drachmas are printed and distributed. The EU would still continue to provide assistance to the country, even as its institutions face huge losses on their Greek holdings.

    The ECB refrains from purchasing any sovereign debt under its SMP for the 9th consecutive week. With Spanish long-term yields returning near last year's panicky levels, one wonders how much longer the ECB will sit on its hands.

    "A hurricane is approaching," says a Chinese official, where 8 of 10 of the country's largest shipbuilders have yet to receive an order this year. Monetarists will take note of China's M1 data, in April the weakest since modern records began. "If China were a normal country, it would be hurtling into a brick wall," writes Ambrose Evans-Pritchard.

    While "bailout" is usually associated with the eurozone, Fox Business' Gerri Willis has a poll asking whether U.S. taxpayers will be forced to bail out California. The survey comes two days after Governor Jerry Brown said the state faces a $16B black hole

    It was Jamie Dimon who pushed for the transformation of the Chief Investment Office role from hedging risk to becoming a profit center, according to former execs there. "Hedging for profit as opposed to hedging just to counter losses," says the former CFO of the CIO, making especially curious JPM's lobbying to have the office's positions not classified as proprietary trading under the Volcker Rule.

    "Meet Matt Zames," tweets ZH of JPMorgan's new CIO. Zames, a Managing Director at JPM, is Chairman of the Treasury Borrowing Advisory Committee - a group made up of Wall Street heavy hitters that, well, advises the Treasury on its borrowing needs. Zames began his career as a MBS trader at LTCM.

    Wall Street banks should be forced to give up their trading operations, says the FDIC's Thomas Hoenig, with broker-dealer activities cleaved off from banks. Hoenig says TBTF firms have "little capacity to manage [their companies] systematically over time" and regulators are ill-equipped to supervise them. (see also: prop trading,regulatory fail)

    Apparently prop trading accounted for only $14B of losses out of a total $365B suffered during the credit crunch, according to research from analyst firm Tricumen. If that number-crunching is correct, that means Volcker supporters are rallying around a rule thataddresses only 3.8% of the losses.

    Notes from James Montier's The Flaws of Finance speech (given before the JPM news): "If you give CAPM and VaR to monkeys, they're going to create a financial crisis … VaR (Value-at-Risk) is like a vest that is 95% bulletproof (fails when you need it) … Bad models and bad assumptions tend to replace common sense … The more abstruse the maths, the more uncertain the results." (full speechstarting at about 18 min. mark; h/t Josh Brown)

    ROFL – They are just now figuring this out?  Pathetic!!!  Casino stocks open lower, with names tied to Macau and other Asian gambling regions feeling some of the sharpest stings. The slow realization that mega-sized Asian resorts may take years to realize those mega-profits has been creeping into the thought space of analysts. Decliners: MPEL -5.6%WYNN -3.1%LVS -2.8%PNK-3.4%- I'm sorry but analysts are idiots.  They really need to get rated or something before they are allowed to write about a company.  Can they be so enamored with CHINA! that they think multi-Billion Dollar investments will not have a long pay-back cycle?  Does anyone even know how to do math anymore?

    Citi's Deborah Weinswig cuts her Q1 earnings estimates for J.C. Penney (JCP) and Saks (SKS) after seeing other high-profile retailers get hit by increasing online sales and the growing cost of matching free shipping. She also says a higher level of promotions and markdowns of women's designer clothing will hurt the gross margins of the companies.

    As with crude, gold -1.4% to $1,561 has also gone red YTD. The latest CFTC data show a 20% decline in net long positions for speculators in gold futures contracts to the lowest level since December 2008, reports Goldcore.

    Crude -2.1% to $94.13, its lowest level of 2012 amidst panicky risk asset markets and Saudi Oil Minister Ali al-Naimi saying supply/demand fundamentals suggest a further 10% decline in prices.

    After commodities hit nearly two-year lows last week, investors are wondering whether the decade-long rally is over. Various headwinds prevail, including a slowdown in China, a U.S. economy that has yet to regain its momentum, and temporary supply gluts for some raw materials.

    "Like villains in horror movies, refiners are hard to kill." Sure enough, the refining business cycle is turning full circle, with many mothballed plants restarting under new owners and triggering a recovery in the refining margin between crude oil and oil products. So far, ~1.3M bbl/day of refining capacity planned to be closed is now expected to return to the market.

    Why an opportunity to buy Chevron (CVX -1%) at $90 could be ahead, according to Trade in Mexico: lower oil prices alreadybreaking below $95/bbl that could go lower, and the "contamination bomb" caused by Brazil's multi-billion dollar oil spill lawsuit. "However, Chevron is a top quality long-term holding, and [would be] worth buying ~$90."

    Seadrill's (SDRL -1.8%Q1 earnings fell 53% Y/Y, boosted by the sale of its Seawell subsidiary, masking revenues that came in better than expected. The Norwegian oil services firm expects a boost in the current quarter from two ultra-deepwater rigs starting operations, as well as a full quarter of earnings from a jack-up rig that went into operation in March.

    Australia may eventually produce as much as 100M tons of liquefied natural gas a year, making it the world's largest exporter of the fuel, Total (TOT) CEO Christophe de Margerie says. Total and Inpex (IPXHF.PK) are partners in two major projects in the country: the $34B Ichthys LNG project and the $16B Gladstone venture.

    Chevron (CVXsigns a deal to sell Japan's Tohoku Electric 1M tonnes of liquefied natural gas per year for 20 years. The gas will come from its $29B Wheatstone project in Western Australia, still under construction. Japan is ramping up natural gas use due to a shortfall in nuclear power output following last year's Fukushima disaster.

    Chesapeake Energy (CHK+5.3% as its conference call continues; highlight of the call so far as that CHK will delay or cancel its Eagle Ford production deal that would have generated $1B. McClendon says CHK still expects to sell assets in 2013 and be cash flow positive in 2014, with remaining assets worth $50B-$60B; says asset values will be "significantly higher when gas prices improve."

    BHP Billiton (BHP) leaves the door open to the possibility of a writedown on its U.S. shale gas assets, saying it will decide the issue by the end of its fiscal year on June 30. BHP bought the 1.6M-acre Fayetteville and Petrohawk shale gas assets last year for a combined  $17B billion, but shale gas prices have been cut in half since the acquisitions. BHP -1.7% premarket. 

  54. Strange doing with shares of Delta Air Lines (
    DAL) after trading is halted after the stock trips up circuit breakers on a relatively timid 1.1% upside move. Over 5M shares of DAL have already been swapped today in early action, although traders are madly tweeting that a fat finger trade could be behind the drama. 

    Sirius XM (SIRI -2.8%) trades lower on growing concernsthat Liberty Media's recent share purchases (III) could be diluted by the company to as high as 367M shares.

    Best Buy's (BBY +0.8%) founder and Chairman Richard Schulze is stepping down after failure to tell board's audit committee about allegations against former CEO Brian Dunn. Schulze is being replaced by director Hatim Tyabji. (PR)

    More on Best Buy's (BBY) Schulze resigning: An independent probe finds that Brian Dunn, who quit as CEO in April, "violated company policy by engaging in an extremely close personal relationship with a female employee" but didn't misuse company resources. Schulze learned about the allegations in December but didn't tell the committee. (PR

    Best Buy's (BBY) independent directors shift their positionover annual elections for the board and now recommend that shareholders approve the proposal. Previously, they were neutral. The board as a whole also supports the idea as "an additional demonstration of our commitment to strong corporate governance practices." 

    A123 Systems (AONE -7.7%) continues its slide from last week after cutting FY12 guidance, further pressured today by adowngrade to Sell on valuation at Craig-Hallum following the report. The firm says AONE's outlook remains cloudy and that business would need to ramp substantially to justify its current share price.

    Shares of New York Times (NYTfall 7.3% premarket. On Friday, the company announced that it sold its remaining shares of Fenway Sports Group – the parent company of baseball's Boston Red Sox – for a cool $63M but it's wary comments from Barclays on the lack of a full time CEO at NYT that could be tipping trading sentiment.

    After years of rapid growth, YouTube's (GOOG) video views have fallen 28% since December (a seasonally strong month) and are only up 16% Y/Y, per comScore. However, minutes viewed are up 52% Y/Y, as the site focuses on increasing viewer engagement through TV-like channels, and investing in and promoting professional content. (also)

    Amazon's (AMZN) sales tax issues continue to stay muddledto say the least, with legal experts now saying a settlement between Texas and the company to end their dispute may be illegal. Though Amazon says its prefers a federal framework on the issue, it has been working out sales tax deals on a state-by-state basis that may ultimately work to its favor by sucking in cash-hungry states to less-than-stellar deals.

    Beaten-down Groupon (GRPN +12.1%) is rallying strongly ahead of this afternoon's Q1 report. With Groupon sporting a short ratio of 5.8 as of April 30, short-covering is likely playing a role. (previous

    See how this nonsense works?  Shares of Monster Worldwide (MWWfall back 5.8% after getting tipsy last week from reports that LinkedIn and P-E firm Silver Lake were in the hunt to acquire the company. Though LinkedIn vehemently denies having any interest, apparently it got roped into taking a "courtesy" call from Monster's bankers at BofA – which was just enough to get the rumor mill churning. 

    Despite reports of softish demand from institutions for Facebook's (FB) IPO, it's a different story with retail investors, says IPO Boutique's Scott Sweet. "Early channel checks just completed, are revealing huge retail interest…many with extremely large orders," says Sweet. 

    SocGen's Andy Perkins cuts his rating on Nokia (NOK) to "sell" from "hold" and slashes his price target to €1.80 from €3, saying that plunging handset sales, large operating losses and restructuring costs will burn into its cash pile, and "even bring into question Nokia's very survival." ADRs -4.7%.

    The next 15-inch MacBook Pro (AAPL) will feature a retina display, an ultra-thin design that doesn't include an optical drive, and USB 3.0 support, reports 9to5 Mac. The claims are generally in-line with past rumors (III). The higher graphics processing needs of a retina display would be a positive for expected graphics chip supplier Nvidia (NVDA).

    Apple (AAPL) is reportedly in talks to acquire Loewe, a German maker of high-end TVs and speakers sporting minimalist designs, with a final decision due this week. A source claims Apple is offering $112M, a 47% premium to Loewe's Friday close on the Frankfurt exchange. The report comes shortly after Foxconn's chairman said his company is preparing to make an Apple TV set. Sharp, which just received an investment from Foxconn, owns 28.8% of Loewe. Update: Loewe is denying the rumor, but some investors aren't convinced, as its shares are still up 24.6%.

  55. You're welcome Yodi – I think it's great that you are starting to understand these more complex trade ideas!  

    NFLX/Ultra – I don't think they're safe to short but I think NFLX is a long-term $0.  I'd love to see them go for $100 again and then I'd be excited about shorting them. 

    Thanks for EU levels Kustomz.  

    You're welcome 8800. 

    1,320/Tarpoon – Depends on our data but, if not this week – we'll likely avoid it completely.  

    XRT/StJ – Yes.  Our mistake has been not taking advantage of the channel between $59 and $61.  No sense in staying in it when we're ahead and, if they pop back up, then we know we want to re-short.  

  56. ARIA at new all time highs.  This is a both a WHEE!! and an anti-FU.

  57. The smartest money manager I know [Fernando Parames, my holdings in his fund up 24% 2011] just gave an interview in which he states that "the fact that nobody wants to buy [Euro] equities right now is a very good sign."

  58. Our markets not very exciting since EU close.  I'm thinking they are buying our equities but we're not so far.  

    VIX and TLT calming down a little – those are really our key indicators at the moment.  

    Good thing/ZZ – How so?  Good for US equities?  

  59. Zero - I didn't get any seach hits for the name you entered, did you mean Francisco Paramés?  Which of his funds are you in?

  60. It seems like groundhog day lately: we gap down at the open, they we reverse, going up till Europe close than a a bit higher and sell off into the close. Dont think today will be an exception…

  61. Phil any interest in a bull put spread in TLT?…or still too risky ahaead of tomorrow's data?

  62. dp, dont be so sure. They will most likely buy into the close thinking tomorrow there will be a pop in the morning. Lots of data tomorrow, can't see the shorts not having to cover a bit into the close.

  63. FAS Money XLF Roll
    Man I just can't get filled on the roll of the 13 calls down to the 12 calls.  Mid is just sitting tough at 0.69.  No worries though…

  64. Phil:  I'm listening to the interview now:  In Spanish, so give me a little time to get through it.

  65. Phil,
    I have 1/2 position in WFR all in stock assigned from previous puts.  My basis is $5.68.  Sold Jan 13 $2.5 for a full position that would be an entry of $2.00.  ( Should have waited a few days!) If I am assigned, I would have a basis of $3.84 on the full position.  I have some July $7.00 Calls I sold a while back that are almost worthless now.  Any additional thoughts on how to play this? 

  66. Phil: adjusting short calls
    since my primary goal is generating income on margin, selling both puts and calls, I am accepting there will always be one side of the trade that is losing on paper.  I am getting better at balancing and am now thinking ahead as to my moves if the positions I had sold more calls against move hard to the downside, thus requiring adjustments to the short puts.  Several positions have short calls out in Aug, Sept, Oct  so I know I have time to roll and add some short puts along and down to create wider strangles.  My general question is will it also make sense to move some calls down to free up some margin and create flexibility in the event of a sharp turn back up? ex roll 4 PCLN Oct 760's to 2 Jan 13 720's, or roll to the 4 Jan 13 $760's for more premium but less flexibility? not all my positions are as volatile, other stocks are ones I'm focusing on and getting a feel for their ranges. ie HOG but the question is the same when I'm already fully scaled into a position and don't want to commit more margin to it  TIA.

  67. SLW - out with good earnings today but still broke through both of its long-term support lines.  Not sure how low this one can go but it will be a back-up-the-truck buy the day before QE3 is announced….

  68. OK, markets boring again.  Anyone think OWS will show up at the JPM shareholder meeting tomorrow?  He's probably made the most dumb assed remarks to piss them off.

  69. ONTY – well, we have played them in the past, and they finished their stock offering at $4 and it has held here pretty well over the past 2 mo..  I am going to buy a few November 5 calls for 45c, sell a few Nov $4 puts for 65c.  So net entry is 3.80 if put to me.

  70. He says in general that 1998 was he worst year because everything was so expensive he could find no value, but now that the market has gone nowhere for a couple of years he's finding attractive companies.  1/  he has only 20% of his portfolio in Spain, 2/ he has investments in many countries, including the U.S., 3/ his five major holdings are in Holland, Germany, Switzerland, France and Italy respectively 4/ he adds they are "fundamental" in character [he bought BMW years ago and still has it] 5/ the interviewer asks his to "name names" and he names Schindler in Schweiz, GDF Suez in Holland, Exor S.P.A. in Italy [Agnelli family], and a French aerospace company I couldn't distinguish.  He was asked about Greece, and said that countries depreciating their currencies were not necessarily bad for equities — he pointed out Argentina's collapse, which made them more competitive and boosted their equities tremendously.  He was asked about Spain over the next 10 years and shrugged, saying that if the government cleans up the banks, clean up the utility sector, and reduces debt, obviously Spanish companies will start to perform, but since that has nothing to do with analyzing particular companies he has no more idea than anyone else what will happen.

  71. ERF/phil – heck of a dividend at this price. last in this range in 2009 when hit low low of $9.69. How low do you think we might see oil this summer?  

  72. Nice catch at the 200 Minute averages of the DJI, SPX, Naz, NYA, QQQ and VIX. Tell me the bots aren't in control!

  73. Great quote from a book I'm reading: "Life, after all, is very simple — we choose to make it complex because it's better for the economy" :)

  74. Pharm / ONTY – thanks for the reminder, I forgot to keep a watch this one.  Last time you made this reco I was in at 3.75 and out a 9, let's hope that lightning strikes twice!

  75. rainman- if you can not dislike Jamie Dimon and the arrogance he represents- you just can not dislike people or the financial sector.

  76. poor lady who got canned probably had nothing to do with the trade!

  77. she just was the easiest one to throw under the bus so they could say " see, we took corrective action so all is well"

  78. 4th attempt the charm at the 134.86 PP?  Come on boyz…ur losing ur luster.

  79. FU CHK!!!

  80. Hummm.  Romney wants to repeal Sarbanes/Oxley and Frank/Dodd.  Obama supports gay marriage and birth control for women.  Wonder which one the public will focus on….personal choice, or screw them but give them 'hope' for reaching the American Dream? No pun intended.

  81. CHK  / FYI
    I was able to sell the 20 of the 2014 10 puts for $2.68 today.  Got the idea from :
    CHK/Dropti – Absolutely I recommend that. Especially with a stock where you are netting in at $7.50 with the sale of the 2014 $10 puts and you stand to make $2.50, which is 33% on 100% margin in 18 months. Even better, net TOS margin (non-PM) is just $1,000 so you make 150% on margin with that trade if CHK holds $10 – not much better use of $1,000 that I can think of!

  82. Hi, Pharmboy,
    Do you know about QLTI?  Just recently, they reported positive results of Phase 1B on a medication to treat a rare eye disease.  I am personally interested because I have family members having that disease.  What do you think of them from scientific point of view?  Thanks.

  83. AMZN - buying a few weekly calls here as a stick bet…

  84. MRX is holding it's line as well, and I see from the earnings that they traded up to 40 then fell back. Now they are moving back that direction.  I like selling the October $35 Ps for 2.15, buying the June $35/38 BCS for 1.75.  Aggressive, but I am playing this for filling that gap up.  Start small, and stay nimble.

  85. Actually, try the BCS for MRX at 1.50.  Slowly increase it to a max of 1.75.  The 35 Call has a wide spread.

  86. QLTI/cwan – have not heard of them.  I need to look at the technology and drugs.  There is a bit of competition in the wet AMD space.

  87. Yodi / ECA
    Are you going to take the May 22 sold call to expiration, or try to buy it back for 0.05 and roll to June?

  88. Last week was pretty bad for world indices…

  89. Phil any trading idea about jpm? Long term.

  90. Dear jthoma,
    That "poor lady" makes about $15 million per year.  She supervised the CIO.  She certainly should be canned.  (I am not implying that it is not, also, Dimon's responsibility.  Maybe he should be canned too.)
    Working at Highbridge gave me some insight into how things work at the senior executive level at JPM.  The senior executives there (this is probably true of all large financial firms) are politicians far more than they are investment managers, traders or even administrative managers.

  91. TLT/Sage – I don't think people are done panicking yet.  As StJ noted earlier, we have a lot of data to get through in the EuroZone first.  

    FAS roll/Burr – It's only attractive at .60 or less. 

    WFR/Button – So your basis is $5.68/3.84 ish so it does make sense to sell 1/2 the 2014 $3 calls for .60 as that drops you to $5.08/3.54 and you can always deal with rolling out later.  As I mentioned above, I wouldn't do that sale unless they can't hold $2 but, at a certain point, you have to look towards pairing potential losses.  

    Another option is taking the $2 loss now and buying 4x the 2014 $3/5 bull call spreads at .32 and selling the 2014 $3 puts for $1.30 so your worse case is being back in 1x at net $2.98 and your best case is a profit of $8 at $5.  At the same $3.84 you need to break even now on 2x, you would collect $3.36 back and come out ahead of the game and everything above that is gravy. 

    Margin/Lincoln – Yes, that's a good way to look at improving your margins.  If you are comfortable that 4x at $760 will not be hit and that $720 is safe as well then rolling to 2x the short $720s is a great way to conserve margin.  HOWEVER – I would point out that if you are in any way, shape or form tight on margin – you are crazy to be messing around with short sales of calls on $700 stocks in the first place as a 20% black swan move overnight could blow out your whole portfolio.  

    SLW/MrM – They are no different than any other miner – a glut of global supply fueled by excessive speculation on one end and rising costs on the other.  The earnings were good but not so good that it justifies them at 3x more than their 2009 lows or at last year's highs when silver is failing last year's highs.  SLW's Q was saved by a 26% rise in production  - on joy, more silver flooding the markets!   Be very careful when your entire investing premise is based on free money from the Fed and not because it's actually a good company on it's own. 

    OWS/Rain – Gosh I hope so! 

    Currencies/ZZ – Certainly depreciating currencies is not bad for exporters.  Also, their "value" rises relative to the underlying currency so that always looks good too.  That's a lot of ifs on Spain though – doesn't give me the warm fuzzies. 

    ERF/Scott – Wow, they really drain their piggy bank to pay those dividends!  They've run up $350M in debt and $125M in other liabilities over the past 3 years and run cash down $65M and their payables are up $200M to pay those monthly dividends.  I have to think there's a good reason people are bailing on these guys and driving up that dividend percentage relative to the price.  In their defense, they don't seem to have ever missed a payment but they did cut it over 50% in 2008.  You can sell Oct $14 puts for $1 and that's more than you'd get in dividends between now and then and it gives you a net $13 entry on the first round – if you were going to try them, that's the way I'd go but, on the whole, I'd rather wait and see if they find a floor.  

    Good article Rain. 

    Certainly we should not be excited that we're "only" down 0.5% today.  Actually the RUT and NYSE are closer to 1% and they are simply harder to manipulate than the others.  



    If A is a success in life, then A equals x plus y plus z. Work is x; y is play; and z is keeping your mouth shut. – Einstein

    JPM/Smala – I put a few up last week but cheaper now at $36.  I'd keep it simple and just sell the 2014 $30 puts for $4.25 as that's a net $25.75 entry and, if you want to get fancier than that, you can add a $35/45 bull call spread at $3.60 and you're still in 1x for net $29.35 worst case (20% more off) and then you can make up to $10.65 if they recover to $45 by then.  

  92. I wouldn't touch a bank with your 10' pole……biotechs on the other hand, they actually cure things (sort of).

  93. Lookie lookie….CLDX is playing hookie… go go go

  94. Burrben,
    It is not always the right way but I forget about the May 22c for .05 cents even that TOS does not take any commission and I sold the Jul 22c for 1.30 5/10/12 but I think I even advised this. Regret today the Jul. 22 is down to .85. It takes all day to work these suckers if you work on a monthly bases. I would say wait a day or so until the dust settles one day the market will go up again just look at the up and down today. It looks like the herd does not know which way to run. Phil/s FAS trade was good this morning but you can not think about it to long. 

  95. Burrden one more thing to note is that if a caller is down to .05 or even .20 in case of a CC TOS does not charge me any margin as long as you hold the stock, so it pays you sometimes to let the caller die and just sell the next month caller. Obviously not every once cup of tea as it could backfire and you have to handle naked caller.

  96. Yodi / Thanks for the advice.  Since this is the first time I'm playing with selling CC's each month, you're experience is very helpful.  I'll prob get out at 0.05 if I can so I don't worry about it, and then sell June or July.  

  97. Groupon up 20% on word it will be added to the Dow Jones Industrial Average
    This is a joke right….right? This has to be a joke..

  98. PCLN at 666

  99. 666, jabo…

  100. ronresnik- Out of interest- why was the trader himself not canned- was she his supervisor? Having lived my life in the industry I would say that is the danger of multi-level management- when you have professional management people supervising traders they have no clue as to risk etc.- as you said- " they are politicians" not traders.

  101. good one Pharm!

  102. joke/dpast – this whole market is a joke. unbelievable.

  103. Hi, Pharmboy,
    Thanks for your comments on QLTI.  I am actually interested in a drug named QLT091001, which treats Retinitis Pigmentosa (RP).  I haven't heard other drugs treating RP successfully yet.  So, this Phase 1B result is kinda exciting for RP patients.  Of course, RP is quite rare, about 1 in 2500 in population.  Maybe that's why the announcement of their Phase 1B result didn't move the stock that much?

  104. Poor Lady/Ron – Considering JPM lobbied against having their trades restricted, you can see why she's "retiring" and not being fired.  They'd have a very tough time firing her for doing what they wanted.  

    Getting ugly signs again across the board.  No Greek government leads to weeks of additional uncertainty.  

    VIX 21.65, TLT $120.99, XLF $14.54, CHK $15.42 – UGLY!!!

    Dow volume 82M at 3pm

    GRPN/Dpast – It's a joke if people actually believe it. 

    PCLN/Jabob – I wonder if they'll pin that close? 

  105. Sold my TZA shares from April 23 ($20.08) today via a limit order placed last week for $20.80. Today's high was $20.87.
    Now I'm left with my Jan 23 shares which I paid $21.87 for. I'm comfortable having them still, in case things take a turn for the drastically worse this week or next  (not that I'm expecting, but certainly COULD happen, with such "weakness" the last 2 weeks).

  106. and  you are right if she was the supervisor- I mistakenly assumed she was not

  107. Phil / SLW - not really a Fed play, SLW makes money on silver above $9, I got in below that and now make money day trading calls against it on big spikes up, as I have posted in the past.  But if there's more QE, buying calls may be more lucrative on this one than selling calls and I'll be changing my tune..

  108. RP/cwan – Phase 1b usually is looking for any signs of tox.  Sometimes in rare diseases is Phase 1b a 'light' efficacy study, but that is more in the cancer arena.  I will do some reading.

  109. Burrden But not today. It is never a good day to sell calls on a down market!!! Wait and see.

  110. and bulls have tits if she " resigned"!

  111. jthoma
    "why was the trader himself not canned?"
    it ain't over 'til it's over…………..
    he will be, she was just the first one announced……..
    they almost certainly need him there for the moment to help "unwind" it…….. Drew gave the "order" but apparently he was the "mechanic" and is probably the one person who understands them the most.
    but his resume will be on the street soon………

  112. mrm – PAAS is another good one in the Silver sector….

  113. I assumed golden boy himself would trade them out of it- LOL!

  114. Pharm / PAAS – agreed, I've played that one on up waves in the past.  Also if QE hits one can play HL because the stock price is down near the price of SLW options, so if you're wrong you can just hold and wait!

  115. and even money says it ends up over 4 billion$

  116. unless they hire Phil :) :)

  117. AAPL
    I'm getting close to selling another AAPL Jan14 390 Put for $36.50 if they'll fill me.  

  118. Poor lady/Phil/jthoma — I agree!  And at that level, in general, absent obvious misconduct, it is usually a "retirement" or a "resignation" rather than a firing. 

  119. 1:00 PM On the hour: Dow -0.57%. 10-yr +0.27%. Euro -0.55% vs. dollar. Crude -1.83% to $94.38. Gold -1.46% to $1560.95.

    2:00 PM On the hour: Dow -0.47%. 10-yr +0.22%. Euro -0.54% vs. dollar. Crude -1.67% to $94.53. Gold -1.3% to $1563.35

    3:00 PM On the hour: Dow -0.75%. 10-yr +0.26%. Euro -0.56% vs. dollar. Crude -1.75% to $94.45. Gold -1.48% to $1560.55.

    At 2.28%, the S&P 500 dividend yield is 51 bps higher than the yield on the 10-year Treasury. Anybody under 50 is mostly unfamiliar with stocks yielding more than Treasurys as the only other time it's occurred in the last half century was at the winter 2009 lows. Fifty-one bps and any returns from adaptable managements and human ingenuity are to be had for free.

    "Wall Street is capitalism in its purest form, and capitalism is predicated on bad behavior," rants William Deresiewicz in the NYT. "Shafting your workers, hurting your customers…Leaving the public to pick up the tab. These aren’t anomalies; this is how the system works," Deresiewicz writes, adding that capitalist values areantithetical to democratic one.

    "This one's on you Ben," writes David Schawel, not blaming the Chairman for the JPM failure, but for creating an environment in which investors (including banks) have no alternative but to seek out risk to get returns. Another example: The explosion in AUM at mortgage REITs which use high leverage to generate returns. "These will blow up at some point."

    Mohamed El-Erian suggests a "smaller and less imperfect" monetary union, and calls for leaders to create an "off ramp," to allow exiting eurozone members to remain in the EU. Increasingly clear, not just in Athens, but in capitals across the continent, is a power shift from politicians to angry populations. 

    Calling China's monetary easing thus far "reactive," Stephen Jen suggests it's far different from the aggressive and pre-emptive easing policy many had predicted this year. Pimco's Ramin Toloui has a similar take, advising those who expect a 2009-style stimulus to not hold their breath

    While slowing Chinese growth is generally thought of as a bad thing, HSBC's Frederic Neumann points out that there are some benefits. "The U.S. might not be in too bad a shape because it would benefit form cheaper commodity and oil prices," Neumann says. Not so for Australia, Canada, Brazil and Indonesia, though.

    All in all another BRIC falls off the wall:  Top Brazilian officials privately cut their forecast for 2012 economic growth to 3%, inline with private economists, and well below the government's official 4.5% forecast. They remain confident growth will bounce in H2, thanks to 350 basis points in rate cuts working through the pipeline as well as a number of expansive fiscal measures. The Bovespa today, -2.8%.

    The JPMorgan loss prompts the Senate into action, where Banking Committee Chairman Tim Johnson says he will holdadditional hearings on Wall Street reform. The hearings will include representatives from the SEC, CFTC, and the FDIC, and, presumably, Jamie Dimon, among others from JPM.

    S&P reiterates its positive view on consumer staples ETFs (XLP,VDC,[[FCD… helping the sector slightly outperform broad market indexes on the day. The agency cites the group's defensive nature, as well as its solid growth and dividend record in making its bullish call. Top holdings include PGKOKFTCOSTPEPWMTMO.

    The sand rush is on: Wisconsin and Minnesota have tons of strong sand with round grains – just what the the oil and gas industry needs for use in fracking. Wisconsin officials say the number of mines in the state has doubled to more than 60 since just last fall. But the boom could prove shaky, as much of the sand is used to drill for natural gas, and low prices are forcing producers to cut production.

    Energy execs are letting go of wishful thinking on natural gas prices. Last week's Baker Hughes (BHI) survey highlighted two records: the number of rigs pumping oil reaches 1,372 – an all-time high – and the percentage of rigs drilling for nat gas is at just above 30% – an all-time low. Gas rigs dipped below 600; some see the point where supply and demand start to balance again is 600-650.

    Kennametal (KMT -2.7%) shares slide after reporting slower April order growth. Demand for the company's drill bits and cutting tools is closely watched since it tends to track industrial and mining activity, but falling demand for U.S. coal is particularly problematic for KMT. "We believe the next six months are likely to prove challenging for KMT," William Blair says.

    Barrick Gold (ABX -1%) hopes to extend the mine life at its Peru operations as it aims to increase reserves through exploration projects, says the general manager of the local subsidiary. "The price of gold always has an influence on extending mine life," Darrell Wagner says, adding "but we are also looking for new satellite deposits."

    Arch Coal (ACI +1.1%) is upgraded to Buy from Neutral at UBS but with a lower target price of $11 from $12 due to valuation, as the stock has sold off during the past several months. The firm says ultimately ACI is levered to natural gas pricing, so if prices rise, ACI should benefit as coal stocks tend to trade on pricing expectations.

    Silver Wheaton's (SLW -5.7%) 20% Y/Y increase in earnings and 26% gain in revenues during its Q1 isn't enough to satisfy investors, as both readings came in below expectations. CEO Randy Smallwood voices concern that "challenging global financial markets have made access to traditional forms of capital, such as debt and equity, much more difficult."

    The Bundesbank brushes aside a report from the country's Federal Court of Auditors questioning the accuracy of the accounting of Germany's 3.4 tons of gold reserves, some of which are parked abroad. "There is no doubt about the integrity and the reputation of these foreign central banks where the gold is held," says the Buba.

    Guggenheim raises its ratings on a slew of homebuilders to Buy today, saying the sharp decrease in existing home inventories has reduced exisiting home competition to a level supportive of order growth: Lennar (LEN +0.7%), Pulte (PHM -1.1%), Ryland (RYL -0.9%), Toll Brothers (TOL -0.6%), M/I Homes (MHO +1.2%).

    CLSA's Jon Oh has a take on the selloff in casino stocks that has continued unabashed in May on risk-off trading and cut into impressive YTD returns for WYNNMPELMGM, and LVS. The gaming sector analyst concedes that names in the group are easy to trim given their China exposure and high beta correlation, but he keeps a decidedly positive outlook for long-term growth potential for the industry.

  120. Phil / Hedge
    I think I need a good hedge on the downside for my Portfolio.  Most of my trades are bullish in nature, and my DIA puts are expiring this month.  
    I don't know if it matters, but my whole Port is +14K delta, -2K gamma, -2K vega, -74 Theta

  121. Gaming giants in a rush to prepare for a potential legalization of online poker 
    aren't overly concerned with the backgrounds of some of the companies that they're partnering with to provide Internet play. While MGM Resorts (MGM -3.3%) and Caesars Entertainment (CZR -5.5%) are both in development with firms that have been under the DoJ radar in the past – Native American tribes and online ventures such as Zynga (ZNGA) and Facebook (FB) are also seeing that those with the most experience have had a few legal hiccups along the way.

    As expected, LightSquared has filed for Chapter 11 bankruptcy. The would-be 4G network provider claims to have both debt and assets of more than $1B. How much Dish Network (DISH) and other creditors get back could depend heavily on the value assigned to LightSquared's spectrum, which is plagued by GPS interference issues.

    Amazon (AMZN -1.4%aims to launch a front-lit Kindle by the end of July, according to a report from Reuters. While the new version is likely to be a battery hog, it will eliminate the need to attach a clunky light to use the e-reader in the dark.

    More on Groupon's (GRPN +14.7%rally: In addition to short-covering, shares are getting a lift from a bullish Benchmark notethat argues the Facebook IPO could result in a "big rally" for Groupon. The firm also thinks Groupon will "meet or beat" Q1 estimates this afternoon and report improving cash conversion figures, though it's concerned about Q2 guidance. 

    Facebook (FB) will reportedly stop taking IPO orderstomorrow, 2 days ahead of schedule; the news backs up signs ofstrong retail interest. Meanwhile, BTIG's Richard Greenfield and Forrester's Nate Elliott express concerns about Facebook's ad monetization ability. Facebook "still hasn't stumbled upon a model that’s proven consistently successful for marketers," says Elliott, and thinks the company simply isn't as focused on serving advertisers as it is consumers. 

    Gizmodo can't help but speculate that tech-savvy people may not be running cable companies such as Time Warner Cable (TWC +0.8%) after exec Glenn Britt misfires on a couple of softball questions in a group interview with the NYT. The exec warmed up his audience by admitting unfamiliarity with Apple's AirPlay – after contending that no simple way to get Internet-based video onto the television screen exists. Then as a showstopper, he lamented that the little hockey puck Apple TV thing can't push Internet content to TVs.

    With the U.S. mobile industry nearing saturationwireless carriers appear to have seen a net decline in postpaid subscribers in seasonally weak Q1, as gains for AT&T (T) and Verizon (VZVOD) were offset by losses for Sprint (S), T-Mobile (DTEGY.PK), and others. Slowing smartphone sales were a major culprit.

    Apple (AAPLsuper-bull Brian White says April sales for a group of Taiwanese manufacturers whom he estimates receive 60%-70% of their revenue from Apple fell 8% M/M. Though this is worse than the usual 1% drop, White claims the results are in-line with his projections and well above Apple's (typically conservative) guidance for a 13% Q/Q revenue decline.

    Finally!  More from the Apple (AAPL) rumor mill: Pac Crest's Andy Hargreaves says his checks indicate a smaller iPad will launch before the holiday season, and thinks it could sport a 30% gross margin at a price of $299. Digitimes claims Taiwanese manufacturers arebuilding new plants to meet demand for the smaller iPad and next-gen iPhone, and that suppliers have begun shipping components for upcoming MacBook launches

    The first Windows 8 (MSFT) tablets sporting Intel (INTC) CPUs will arrive in November, sources tell CNET. It's added the devices will use Intel's upcoming Clover Trail Atom CPUs, and over half will be PC/tablet hybrids. A successful launch could give a lift to touchscreen controller vendors such as ATMLCY, and SYNA. A prior report claimed both Intel and ARM-based (ARMH) Windows 8 hardware will arrive in October.

    Three lunchtime reads:

    1) Default now or default later?

    2) Krugman: Why we regulate

    3) The expansion limps ahead

  122. PAAS just landing on a 78.6% retracement down from top (up from 2008 low of 8.860. PAAS has been a big disappointment through 2011-2012. Earnings tomorrow.

  123. MA / Phil – Time for my lesson. I am looking at MA going down.  Currently it trades around 416.  I see next support around 402 (50% Fib).  Which is the best trade for maximum potential? A 415 Jun Put or a 400 Jun Put?  What should i be looking for? The various deltas? Cheers

  124. greek communist chief wont attend meeting-bloomy

  125. AAPL testing $560

  126. Phil- looks like you may have nailed the pin!

  127. financials back to lod- not a promising sign

  128. SLW/MrM – IF there is QE, THEN I like them but I wouldn't put the cart before the horse. 

    Hedge/Burr – Looking at the multi-chart, you can see that it's the Nas that is the clear outperformer (as they were into the 2008 crash but they caught up just fine!).  It's a little tricky factoring in AAPL but that pie has been baked already and, noting the news above, they may actually have that slowdown they warned about but no one seems to believe.  So that makes SQQQ interesting at $50 with the June $49/53 bull call spread at $1.50, selling $45 puts for the same so a 10% drop is needed to hurt you and that's a 3.3% rise in the Nas, back to over 3,000.  Or you could cover with AAPL July $400 puts at $1.30 as it's not likely things get that bad or you could sell one AAPL 2014 $250 put for $8 and pay for 4 of the spreads for each one and still make net $2 on the short puts if AAPL just holds $250.  

    TZA is still my next favorite June $18/23 bull call spread is $2 with TZA at $20.50 and you can offset that with GS July $80 puts at $1.25 or WYNN July $90 puts at $1.85 or XOM Jan $65 puts at $1.65 as a few examples although a $5 spread that's $2 in the money is pretty good protection by itself for $2.  

    MA/Dpast – You expect a $15 move down so you want to look at what puts, $15 apart, give you a good return.  June $385 puts are $4.25 and the June $400 puts are $7.75 so a near double.  The $415 puts are $13.30 so no better and you get hurt more if it goes against you.  Moving to July, we have $375 puts at $6.60, $390 puts at $10 and $405 puts at $15.50 so not as good as June so – depending on your time-frame and how sure you are – it looks like maybe the June $385 puts give you the best bang for your buck. 

    Greeks/Angel – The main takeaway from that story is the Communists are already in a position to force issues.  

    Very simple to watch VIX and TLT today – both heading to the highs to close the day.   Both turned off their lows right at 2pm and they went down together earlier in the day.  Better indicators than the Dollar today, which is still trying to break over 80.80. 

  129. Tks Phil, for your comments on WFR. 

  130. Pharmboy, RE QLTI,  Thanks!

  131. Phil, as as  my post was tongue-in-cheek, I'm counting on you to call "the day before QE3 is announced" 8) .

  132. PHIL:interesting that the msm is talking about the commparty in greece as though they are in complete disarray and fractious..'beeg suprize coming for the snow monkeys!"

  133. Well that was a crap start to the week, wasn't it?  

    No capitulation – just a slow melt-down that continues apace.  

    You're welcome Hemas. 

    Calling QE/MrM – Once thing we've learned from QE1 and 2 is that you don't need to call it.  Let them announce it and, no matter how much it's already baked in – we still shoot higher on the announcement for another 2 weeks.  That's when I'd get in.  

    Commies/Angel – How long before we once again are asked "Are you now or have you ever been a Member of the Communist Party?" 

    Jim Rogers says we're doomed!  

    At the close: Dow -0.92% to 12703. S&P -1.06% to 1339. Nasdaq -1.06% to 2902.

    Treasurys: 30-year +0.77%. 10-yr +0.28%. 5-yr +0.09%.

    Commodities: Crude -2.05% to $94.16. Gold -1.67% to $1557.55.

    Currencies: Euro -0.63% vs. dollar. Yen -0.09%. Pound -0.14%.

    Market recap: Stocks fell sharply, with the S&P breaking below 1340, and the euro lost ground as the crisis in Greece intensified and investors sought safety. Nearly everything outside of German bunds and U.S. Treasurys took a dive; commodities of all sorts slid, and yields on 10-year T-notes fell to 1.782%, lowest of the year. NYSE decliners led advancers by more than three to one.

    Technical bears take note: The S&P 500 has closed below its 50-day moving average for the first time since November, 2011, having dropped for seven of the past nine trading days.

    This is about the time when it starts to dawn that the fabledSecond Half Recovery isn't coming, writes Josh Brown, warning this summer is shaping up to be a lot like the last and the one before that. For the bulls, there's the cheap valuation, poor sentiment, and lower gas prices. On the side of the bears, there's everything else.

    Eddy Elfenbein's list of 13 "way, way, way overpriced" stocks: AMZNMMICRMNFLXKOWFMCOSTSRCLSBUXNKEARBACMGISRG.

    Continued strength in the dollar weighs on commodities, sending the CRB Index -1.2%, its fifth straight loss and eighth in nine sessions. Crude oil -1.3% at $94.76/bbl, natural gas -3.2% at $2.43 per MMBtu, gold -1.4% at $1561.10/oz., silver -1.9% to $28.35/oz. CRB is now -5.5% YTD, trading at its lowest level since Aug. 2010 and below its 10-year average price of 289.3. 

    Charts of the CRB, Gold, Gold miners, and Treasury yieldsnow vs. summer 2008. "There's a strong whiff of deflation in the air," writes Robert Sinn, "(but) there is no way we are going to have another Lehman episode, right?"

    Jeff Matthews ponders the curiosity of a CEO being run out of a town for modest resume inflation while the sell-side gets lathered up for H-P (HPQ) "non-GAAP" earnings – in which good stuff like revenue from acquired companies is included, while amortization and restructuring charges are left out.

    Groupon (GRPN): Q1 EPS of $0.02 beats by $0.01. Revenue of $559.3M (+89% Y/Y) beats by $28.5M. Gross billings were $1.35B (+103% Y/Y). Expects Q2 revenue of $550M-$590M vs. $559.3M consensus. Expect Q2 operating income of $25M-$45M. Shares +11.4% AH. (PR)

  134. MRM, here's another one in the silver space: FSM (Fortuna Silver Mines), until recently traded on the Toronto exchange and just moved over to Amex, I believe, cheap at around $3.50, but a junior.  I did well with them and am looking at getting back in…I believe they are near the bottom of their range, tho I expect as silver continues to go down they will go even lower…

  135. MRM, correction, FSM on the NYSE and now at $3.70…

  136. Phil: black swans
    Thanks for the reply earlier.  I'm okay margin overall, don't want any one position to be more than 10% of the total.  I have faced numerous 20% moves to the upside on positions I've sold short calls on, it is the "black swans" hitting short put positions that would worry me more since that can lead to a business doing worse and worse for years, possibly BK.  Other than a buyout at 20% premium what would a "black swan" be to cause fatal damage on short calls?  I thought I already worried about everything, now you're adding to my list :(

  137. New out of Greece – not good…

    I have been informed by both the Prime Minister and the Governor of the Bank of Greece and the Finance Minister about the country’s cash position and the risk of collapse of the banking system if there are continued withdrawals of deposits from banks due to the insecurity the political situation poses for citizens.



    Something else that jumps out: there seemed to be no agreement on whether or not Greece should pay off a €436m foreign-law bond.

    That bond comes due on Tuesday. (With a 30-day grace period).

  138. Good stuff in the NY Times:


    THERE is an ongoing debate in this country about the rich: who they are, what their social role may be, whether they are good or bad. Well, consider the following. A recent study found that 10 percent of people who work on Wall Street are “clinical psychopaths,” exhibiting a lack of interest in and empathy for others and an “unparalleled capacity for lying, fabrication, and manipulation.” (The proportion at large is 1 percent.) Another study concluded that the rich are more likely to lie, cheat and break the law. [...]

    Capitalist values are also antithetical to democratic ones. Like Christian ethics, the principles of republican government require us to consider the interests of others. Capitalism, which entails the single-minded pursuit of profit, would have us believe that it’s every man for himself.

    There’s been a lot of talk lately about “job creators,” a phrase begotten by Frank Luntz, the right-wing propaganda guru, on the ghost of Ayn Rand. The rich deserve our gratitude as well as everything they have, in other words, and all the rest is envy.

    Enormous matters of policy depend on these perceptions: what we’re going to tax, and how much; what we’re going to spend, and on whom. But while “job creators” may be a new term, the adulation it expresses — and the contempt that it so clearly signals — are not. “Poor Americans are urged to hate themselves,” Kurt Vonnegut wrote in “Slaughterhouse-Five.” And so, “they mock themselves and glorify their betters.” Our most destructive lie, he added, “is that it is very easy for any American to make money.” The lie goes on. The poor are lazy, stupid and evil. The rich are brilliant, courageous and good. They shower their beneficence upon the rest of us.

    Mandeville believed the individual pursuit of self-interest could redound to public benefit, but unlike Adam Smith, he didn’t think it did so on its own. Smith’s “hand” was “invisible” — the automatic operation of the market. Mandeville’s involved “the dextrous Management of a skilful Politician” — in modern terms, legislation, regulation and taxation. Or as he versified it, “Vice is beneficial found, / When it’s by Justice lopt, and bound.”

  139. After Hours post
    company history, Dick Schulze, etc
    "More on Best Buy's (BBY) Schulze resigning: An independent probe finds that Brian Dunn, who quit as CEO in April, "violated company policy by engaging in an extremely close personal relationship with a female employee" but didn't misuse company resources. Schulze learned about the allegations in December but didn't tell the committee. (PR) :
    The power of the penis does eventually get a lot of people in trouble, doesn't it?  It still astounds me how people at very high levels of power, with unmeasurable wealth, end up getting into massive trouble "over a girl" (no offense intended).
    Regarding Dick Schulze:      Best Buy is based in my home town (Minneapolis). Always has been. It was founded here by Dick Schulze back in the mid 1970's. The guy has so much money it is uncountable. I think  last I heard a few years ago his Net Worth was around 1.2 to 1.5 Billion.
    He's been well known around town for three decades ("a man and his money are soon invited everywhere" -Warren Buffet).
    He has a reputation as both a philanthropist but also a life long world class  a-hole. If I remember (without looking it up) I think his wife got sick with cancer a few years back, and passed away. I think he donated a large amount of money to cancer research. Don't quote me too exactly on that, I'm going from rough memory.
    Best Buy started out as two tiny stores in Minneapolis called "Sound of Music", back in the early to mid 70's.  I bought part of my first stereo system there. One of their first stores was actually in a large (and decent) oversized "mobile home" type building on the hill overlooking the Ridgedale shopping center in Minnetonka Mn. In the late 70's the "stereo wars" were in full bore here, and Sound of Music would beat any other price-very aggressively. This was back when walking into a shop to spend $800 on a stereo system was a big deal, and a salesman would happily spend a half hour with you (and they actually KNEW what Total Harmonic Distortion was). Remember stereo shops where they had all the beautiful full color "brochure sheets" on each model? We'd take those and study them for WEEKS before making a buying decision.
    Best Buy had a number of repetitive patterns back in about the mid 1990's of "bait and switch". They were "charged", I believe, in some way over it. Maybe only a complaint by the Attorney General of Minnesota or something perhaps, don't remember exactly. Placing ads for 100 different products at loss leader prices, when they only had 3 copies of each product in the stores, but they would have a "similar" product sitting on the shelf right next to it that was  "only" $50 more, and they would have a HUNDRED copies of THOSE products in each store. The salesmen would then point out that the product they DID have in stock was a really good deal, and only 50 or a 100 dollars more. Presumably those would be products that they either made higher markups on or that they had to unload due to excessive inventory, or wanted to get rid of before the new products came in.
    After the first "major round" of these loss leader bait and switch tactics were in the news, they "behaved themselves" for a while, then the same thing happened a couple years later.
    I've always been pretty down on Best Buy, as a store (not as an investment). I've never thought about them in investing terms. I've been in the stores over the years (haven't gone there much in about the last 5 years or so though).
    Personal opinion--they've never had employees who knew anything. They have always been the "lowest level" of electronics store people, very much "lowest common denominator".  More like shelf stockers and people who could write up sales tickets. We've been lucky in Mpls, we have always had several other Stereo (not microwave) stores here, generally a little more upscale than BBY. We also have several very high end stereo shops.
    Back to Schulze—--This thing might be an opportunity for him to "retire", but it's not all that big a deal, in terms of his overall career, nor for the stores or the company in general. If this little thing had not happened, he would have been of retirement age anyway. To tell the truth, I thought he already had retired a year or two back. So, no big deal, really. Maybe he had retired previously as CEO, but not Chairman. I don't know. Not a big deal though.
    Two interesting tidbits, and if anybody here has ever worked in large mass market electronics stores, or in similar lines of business, please comment………
    A number of years ago (and it might not be the case anymore-I think BBY went to a "no commission" style years ago, not sure if they stuck with it) I found out that at BBY the prices were "coded" so the employee's would know which items were "commission" items and which weren't. If the price ended in  ".98" (i.e  $19.98), then it was a commission item. If it ended in ".99", then it was a "no-commission" item.  Tricky!
    Also, Best Buy had such purchasing power with the manufacturers that they were able to get "proprietary" or "custom" model numbers assigned to some of the stereo and tv  products they sold, to prevent customers from doing price comparisons at other stores.  So, you might see a Pioneer Model ZX2034  at Best Buy, but no other retailer would have the same model number, so you couldn't go to the other end of the mall to Circuit City and look for a Pioneer Model ZX2034 to check the price.
    Lastly, both Kenwood (one of my favorite brands, as it was the first amp I ever bought and it is still going strong some 37 years later) and Apple, for a long time would NOT allow their stuff to be sold at Best Buy stores, because they considered  them too "down scale", and also because they felt Best Buy did not have the needed commitment to Customer Service, or to Sales Expertise to do justice to their products (both still very true in my opinion).  Both companies eventually gave in, probably due just to sales needs and market share reasons, I suppose. The knowledge level of the employees definitely get better.
    For a long time, some people (at least here in the Mpls metro area) thought of Best Buy as a "last resort" place to go buy something, and even then, only if you already knew what you wanted, and didn't want to rely on any sales knowledge).
    The "Geek Squad" was started by one guy, Robert Stephens (with a minority partner) years before Best Buy ever heard of them. He started out doing computer repairs informally, riding his bicycle to customer appointments around the University area.  Over time, he got some "classic" and one-off rather weird cars, and created the "Geek Squad" name and schtick. When he sold it to BBY, he became a VP there. He just left the company very recently (within the last 6 months, if memory serves). THAT is entrepreneurship!
    A Few years back when it became well known that Geek Squad guys had a wide spread habit of copying porn off customer computers and storing it on one or more servers fro "sharing among the boys" it was a pretty big news item here. It didn't help the overall image and reputation of Best Buy. The power of the penis.

  140. newbie how did i know that was your text when reading it from the bottom? guess is we will not be asked it will be a matter of camera and drone perspecitves and body language will just be known and we will be jailed at a place called rojo para decree!

  141. Hi Phil,
    I have FAS Jul 100/115 debit spread, which has dropped a little too fast in last week. Original spread (acquired for $7.5) is now down 45% ($3.15).  With current market uncertainty, what would be a good roll or exit strategy for this spread. Thanks in advance.

  142. angel
    sorry i don't actually understand the question….and rojo para decree is what?

  143. Phil – With the announcement that Facebook is going to price at $34-38, what are your feelings about the stock?  I'd hate to miss out on another Google but have some concerns about how Facebook would do in the context of the broader falling market.  Curious as to what you think a fair value is and where you see the stock going in the short and long term.  Thanks and, of course, I'd appreciate any insight anyone else could offer.

  144. TNA
    Placed limit order tonight for one lot of TNA at $48.66

  145. newbie i just meant i knew you had posted that comment and i started reading it from the bottom to top..
    the other was a response to phils question to me about worries we are all mad here!

  146. Facebook,
    seems like a logical thought, for anybody plans to hold it, if, what will the company and it's results be like in 3 years and 5 years?
    where will the growth come from to make the stock and company worth so much? nearly everybody on the planet is already a member (not me)
    if I had a 14 year old daughter, she would NOT be on Facebook, and it wouldn't matter how much she hated me for it….
    the privacy versus growth equation seems tough to get around. they've already blown it big time, at least twice. probably haven't learned their lesson, either.  don't think they care
    seems like a stock that would be psychologically hard to sell in 6 months or a year if they are down 25%
    2 cents

  147. Ballmer must have really pissed off someone at Forbes. Ballmer is "worst CEO" at large Public Company..   i think unfair as microsoft has continued to increase revenues.

  148. angel,
    ok, thanks.  
    i try to put a little zing and color in my posts when i can. my sense of humor and irony might not be as well developed as other people's, but, oh well
    madness here,  yep.    madness and brilliance, a thin line, you know the cliche'
    thanks for clarifying about the "rojo" thing.   no espanol.

  149. GRPN/Phil – I made the mistake of buying $9 July puts on GRPN @ $1.45 today in my paper account.  With hindsight, perhaps not the best decision!   What would you recommend as a roll tomorrow?  Something like July $12/$10 bear put spread, assuming GRPN may fail with the market?  Or just run away snivelling? :)

  150. Holy mama: GAO: Recoverable Oil in Colorado, Utah, Wyoming 'About Equal to Entire World’s Proven Oil Reserves'
    U.S. Geological Survey estimates 3 trillion barrels of shale oil in the Green River formation (which is federal land), half of which is currently recoverable.   I don't know about the next few months, but I am feeling really upbeat about our prospects for the foreseeable future.  Hugh Hendry is right:  God just keeps on blessing us for some reason.

  151. IRWD – going to buy a few NoV $15 calls and sell the Aug $12.5 Ps to finance the buy.  They are scheduled to receive an FDA  letter in September.  I think they get approval, as the FDA asked for a 3 mo extension….that typically signals a good thing…but time will tell……

    SGEN…continues to hold the line.  I love this company, and the stock has 33% short interest, so something has to give.

    CRIS – I think they pop after OPEX.   Pop up that is.

    EXEL – see CRIS.

    YMI – continue to accumulate.

    PLX – ditto, although, I must admit, I have scaled back to buy YMI.

    AVEO – remember, ASCO is in June, and cancer companies tend to deflate after the meeting.  We have the June 12.5 calls and puts.  I would get out of the puts right before June JIC we can resell the $10 puts for a better price.

    QLTI/cwan – for the drug you are interested in, it appears to be a synthetic retinoid replacement therapy for 11-cis-retinal, for the potential treatment of Leber's congenital amaurosis (LCA) and retinitis pigmentosa (RP).  In Phase 1b, which was a modified subset of patients with LCA.  For RP, they are still enrolling.  The trial was looking for 24 patients, and the LCA subjects were the first to enroll.  Overall, it looks promising.  For RP, it could be a waiting game, as they were having issues enrolling these subjects.  In essance, they may have something, but these are very early trials, and there is no positive control (if there is one).  I would start VERY small if you like what you see, and then scale in accordingly.  The company has fast track and orphan designation for LCA and RP, but the first (fast track) is not as important as the latter (orphan). 

  152. On another note, I have been discussing things with my bond junkie, and he notes that MS is most likely insolvent, but time will tell.  I noted a while ago (January 2011) that he said MS would go to 20 (the stock was at ~$30 then), then possibly to 10.  After that the target was back to 20 based upon all the hoopla and the bond issues in the EU, and now the prediction is that they shorted bonds (UST), and are getting their arses handed to them (who's been saying 1.5% on the 10 yr?????).  So….the prediction is that the stock should go to sub-10, and thus to cover, the UST should continue to do better…..prediction – MS is about $6/share sometime this year…..+/- a dollar or two.  Which means, in essance, the US market is going to have a very, very, very tough road ahead.


    Good night, and good riddance.  A drinkie poo I will have.

  153. Hi all,
    Schwab out with their market perspective :
    They do not expect a steep decline in market – more a soft period that gradually recovers with summer rally.  I am thinking memories of 2008-9 are still too fresh to have same type of another event to reoccur.  But even 2010 and 2011 summer swoons seem too scary to my portfolio which some how always ends up too bullish near market tops.

  154. Swans/Lincoln – Just that if you are tight on margin, even just 2 $700 short calls moving $140 on you can subtract $28,000 of margin – that's very dangerous if you suddenly have to liquidate things.  

    Big Chart – Ouch!  We're hanging on by a thread now.

    LOL Angel – Very efficient!

    FAS/DrM – The July $100s are still $5 – seems you paid a bit much for the spread but not much to be done about that.  I'd buy back the $115s for $1.65 and spend another $3 to roll down to the $92s.  That will put you in the July $92 calls (now $8) for net $12.15, which they were higher than on Thursday.  If XLF can't hold $14.50, you can sell the $100s (now $5) to get back the money you spent and then you are in the $8 spread for net $7.15 and, if XLF keeps going lower, you can spend that $5 to roll down another $10+ to widen the spread again or to roll to October to buy more time.  Keep in mind, if sticking with it like that doesn't sound appealing, then ti's best to take the loss and move on but that's something you really need to decide before you are down 45% or, frankly, before you go spending $7.50 on a very aggressive spread in the first place.  

    Facebook/LDM – $100Bn is simply too much for the company.  GOOG IPO'd in 2004 so 8 years of proving what is now $37Bn in revenues and $9Bn in net profits with $35Bn in cash and they only fetch a value of $200Bn.  Facebook has been around a long time but has just $3.7Bn in revenues and $668M in income and, of course, no cash.  I don't even see the point in discussing the relative merits of giving FB $100Bn vs $200Bn to GOOG – they are not even in the same league, nor will they be if FB manages to grow 10x over the next 5 years while GOOG stands still.  That's how stupid FB's valuation is.  That won't stop them from having a huge IPO and maybe passing GOOG in market cap in the very near future – but it also won't stop it from being ridiculous and I can't wait to short them!   So, to answer your question – overpriced by a mile at the IPO, likely to go even higher, then crash and burn as people finally realize it will take them decades to get their money back. 

    Ballmer/Scott – I totally agree with Forbes and have said so for years before they caught on.  Just because MSFT is an unsinkable juggernaut doesn't mean the captain isn't an incompetent boob.  

    GRPN/Scot – Wow, you paid over 15% of a company's stock price in premium and it didn't go your way – what a shocker!  What do I suggest?  I suggest going back to our New Member Guide and trying again because clearly you missed some pretty basic points we try to make – like trying to never be the dumb-ass who pays 15% of a company's stock price in premium for out of the money puts.  The funny thing is they closed at $1.50 so get the hell out and be happy is probably the best move if they are even close.  It's a ridiculous Momo stock and you gambled into earnings by offering a 15% advantage to the guy you bought puts from (who is happily laughing his ass off right now) and now you lost your gamble.  Do you think you will make it better by gambling more?  Even your premise is off – "assuming GRPN may fail with the market" – THAT'S going to be the reason you short GRPN – because it's in the market and maybe the whole market will fail and take GRPN with it and that will then make you feel like you didn't screw up by betting against them on earnings?  This is a TERRIBLE investing premise.  With an 89% increase in revenues q/q and 300% y/y and the stock price cut in half this year – I'm sure there are better stocks to short and far better tickers to spend your time staring at every day.  

    Shale/Kinki – That's been there for ages but it's not all recoverable at any price and mostly we need sustainable $100+ per barrel to make it worthwhile and that's assuming we don't care about the devastating environmental destruction that would be caused by the use of water alone.  It's really the kind of thing that makes me not worry about running out of oil in 20 years, when I assume we'll have better recovery techniques than we do now.  

    Nice rundown Pharm!  MS rumors have been going around for ages but maybe where there's smoke, there's fire.  

    $32M/Aussie – Will be interesting to see how the shareholders feel about that tomorrow. 

    Soft landing/DrM – Hmm, now when were we promised a "soft landing" before?  

  155. Tuesday's economic calendar:

    7:45 ICSC Retail Store Sales

    8:30 Consumer Price Index

    8:30 Empire State Mfg Survey

    8:30 Retail Sales

    8:55 Redbook Chain Store Sales

    9:00 Treasury International Capital

    9:30 Fed's Duke: 'Prescriptions for Housing Recovery'

    10:00 Business Inventories

    10:00 NAHB Housing Market Index 

    Moody's downgrades 26 Italian banks by one to four notches noting an economy back in recession, mounting asset quality challenges, and restricted access to funding markets. The ratings outlook for all of the affected banks remains negative. The euro slides another few pips to $1.2825.

    Regulators shut down trading in nearly 400 microcap stocks today, in one of the SEC's biggest efforts yet to crack down on potential fraudsters using "pump and dump" tactics before they occur. The crackdown is a big move for the SEC as it attempts to sort through nearly 3000 companies on the OTC Pink Sheets that provide no financial information, especially when you consider that they generally suspend only a few companies every couple of weeks or so.

    Do ETF's tempt longer-term investors to become traders? Those temptations have always been around, says MarketWatch's Chuck Jaffe, but it's not just because of the investment vehicle. Better technology and tighter spreads are also playing a big part in corrupting long-term horizons. In the end, unfortunately, Jaffe says that most investors who chase this strategy for the thrills usually wind up buying at the top and selling at the bottom. (video)

    Among the new positions added by David Tepper's Appaloosa Management in Q1 are Bank of America (BAC), Citigroup (C) and Hartford (HIG). Tepper also likes a couple of mortgage REITs, taking new positions in Chimera (CIM) and Two Harbors (TWO). (13-F)

    More on David Tepper: The fund manager made big bets on tech in Q1. Tepper more than tripled his position in Apple (AAPL) to 685K shares, and boosted his Microsoft (MSFT) and Oracle (ORCL) positions by 500K and 1.1M shares, respectively. He also established new positions in GOOGBRCMFIOEMCNTAPNUANMRVL, and SNDK. (13-F)

    The big U.S. airlines got passengers to their destinations on time at a record rate - 84% – in Q1, Transportation Department datasays, thanks to fewer planes in the air and mild weather. So it makes sense that Hawaiian Airlines (HA) grades highest; next came AirTran (LUV) and US Airways (LCC). Bottom three: ExpressJet (SKYW), Virgin America, United (UAL).

    Panasonic (PC) and Sony (SNE) are reportedly in talks to form a JV that would produce OLED TVs, with the goal of commercializing sets by 2015. Though offering superior image quality and lower power consumption than LCD TVs, progress in mass-producing OLED sets at a reasonable price has been slow, much to the chagrin of Universal Display (PANL). Nonethless, LG and Samsung OLED TVs are due in the coming months. (previous)

    Rural telco CenturyLink (CTL) remains a compelling value play, according to SA's Saibus Research. Saibus notes CenturyLink'sQ1 report demonstrated a further narrowing of its revenue losses, as well as continued growth for its broadband, TV, and data center ops. Though CenturyLink's 7.3% dividend yield is smaller than peer Windstream's (WIN) 10.1%, the former is seen as a better value due to factors such as its Verizon Wireless reseller deal and strong credit rating.

    The 28nm chip supply issues that affected Qualcomm's (QCOM) June quarter chip guidance are overblown, says Piper's Gus Richard, arguing the company can obtain alternate sources to current supplier TSMC (TSM) by Q4. Richard also touts the low power consumption of Qualcomm's 4G baseband chips, and declares its high-end MSM8960 processor, believed to be the U.S. version of Samsung's Galaxy S III, to offer an unmatched level of integration. (also)

    As Facebook's (FB) IPO draws closer, Mark Zuckerberg,hoodie and all, has become a hot-button subject. The NYT's talks with Silicon Valley figures turned up plenty of praise for Zuckerberg's leadership skills, curiosity, and willingness to delegate authority. Steve Wozniak sees the hacker-in-chief as a combination of himself and Steve Jobs. Henry Blodget points out Zuck, who just turned 28, is 3 years older than Jobs was when Apple went public.

     Groupon (GRPN): Q1 EPS of $0.02 beats by $0.01. Revenue of $559.3M (+89% Y/Y) beats by $28.5M. Gross billings were $1.35B (+103% Y/Y). Expects Q2 revenue of $550M-$590M vs. $559.3M consensus. Expects Q2 operating income of $25M-$45M. Sh

  156. More on Groupon's 
    Q1: North American revenue +33% Q/Q to $238.6M, the fastest growth rate since Q1 2011. International revenue grew only 3% to $320.7M. Revenue equaled 41% of gross billings (40% in Q4). Active customers +140% Y/Y and +11% Q/Q  to 36.9M, over 100K merchants served. Free cash flow was $70.6M. better than net income of $16.3M. Accounts payable/accured merchants payable, a closely-watched figure, rose 10% Q/Q to $616.8M. GRPN +12.1% AH. (PR)

    Apple (AAPL) plans to introduce photo-sharing features for iCloud at its Worldwide Developer Conference next month, sources tell the WSJ. The features, part of a larger iCloud upgrade, would put Apple into more direct competition with Facebook/Instagram (FB), and underscores the somewhat-frosty relationship between the companies. However, Apple's social networking forays largely haven't panned out

    In-line with earlier rumors, The Verge and ABC News report Apple's upcoming MacBook Pros (AAPL) will sport Nvidia (NVDA) graphics processors to go with retina displays; current models useAMD graphics chips. According to an earlier 9to5 Mac report, there are signs the 15" Pro will use Nvidia's GeForce GT 650M, a high-end chip.

  157. Phil, I deserved that, and I appreciate the candor.

  158. jerconn / FSM – thanks, I'll take a look.  FYI I'm accumulating JAG down here in my IRA, to fire and forget. It's below its 2009 price and price/book is 0.5, very low for a miner.