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Which Way Wednesday – Hurts So Good!

Finally – news so bad it's GOOD!

Commercial Real Estate is down 14% in China so far this year with Residential right behind, down 13.5% – all on 11.8% fewer sales than last year.  Foreign investment in Chinese properties has dropped 42.9% year to date.  China's main banks are not lending any money – due to lack of demand, not supply and 45% of Chinese companies predict a slowdown this year and next.  Brazil is right behind China with their own real estate market collapsing and the IMF is racing over to Australia to assess the damage done to their banks by the bursting property bubble and EU property values are also off 20% from their 2007 peaks – even in London and Frankfurt – which were supposed to be "immune" from this nonsense.  

Good – let's get it all out in the open finally!  

PhotobucketItalian Banks are in turmoil and their Government is considering using troops to protect the Banksters after one was shot last week.  There is a run on the Greek Banks with almost $900M withdrawn this month and virtually no liquidity should people want more.  Meanwhile, The Institute of International Finance has estimated that the global cost of a Greek exit could hit $1,300,000,000,000. When Argentina defaulted in 2001, foreign debtors lost around 70% of their investments.  Is $1.3Tn finally a number that matters?  

That's right folks, the Global situation is a complete and utter disaster – which is why we went long on the Russell Futures (/TF) at 775 and Oil Futures (/CL) at $92.50 in Member Chat this morning.  Where the Hell else are you going to put your money if not in US Equities?  That was my conclusion at 11:54 in yesterday's Chat, when I said to Members:  

Nice pop off the EU close – still seems like people are abandoning the sinking ship of state over there and money has nowhere to go but US equities (but TBills and Dollars are getting some love too).  With gold, silver, oil and copper all looking weak – where the hell are people supposed to put money?

SPY DAILYWe noted that there were 16 stocks that were hitting their 2009 panic lows which we were very comfortable moving into in what we're calling our "Twice in a Lifetime List" – named that since I pointed out that we never thought we would get an opportunity for entries like that again in our lifetimes.  Once example of a stock on that list is CHK, now priced at just $9Bn with $60Bn in proven reserves (15% of reserves) while XOM is priced at $400Bn against $2Tn in proven reserves (25%).  That's putting CHK into the realm of a no-brainer buy for a big oil company looking to shore up their reserves, right?

Of course we don't just BUY CHK at $14.50 – not when someone is willing to PAY US $5.50 to buy CHK for $15 in Jan 2014.  Even if we do end up buying the stock for $15, our net entry on CHK is $9.50 for selling the naked put – that's 35% off the already drastically discounted price – that's not bad for an initial entry is it?

We already have some aggressive spread trades on CHK but, for the purposes of our Twice in a Lifetime List, we're looking to take advantage of the panic pricing in long puts at the same time as we take the money and run on our Long Put List – where we took advantage of the complacency pricing in puts when the market was toppy and the VIX was low.  See how easy that is to play?  

XLF WEEKLYWe filled the gap on Dave Fry's S&P chart in the Futures this morning, touching 1,320.75 at 3:30 and we're already back at 1,336.  As I said on Monday morning: "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."  So we're certainly not going to complain when the market follows our script essentially to the penny

Our other targets were that 775 line on the Russell, where we went long (now 780), $92.50 oil (now $93 and the Egg McMuffins are paid for!) and 12,500 on the the Dow and those Futures (/YM) tagged 12,545 before bouncing with the S&P and that's close enough on the Dow, which is the stupidest of all our indexes anyway.  

XLF $14.50 is another target and we've been playing that one long with FAS and JPM is another stock we went long on (see Monday's post) but a bit more cautiously as we're not sure where the bottom is there.

We still have our hedges, of course – who knows what craziness this market will rain down on our heads.  Cash is still King but a few pokes at some longs here protected by some disaster hedges not only keeps things interesting, but lets us take profits on both sides during these wild gyrations.  The simple DXD May $12 calls, for example, that I pointed out in Monday's post at $1.45, closed at $1.85 yesterday so even if you missed our original entry at $1.20 – they still made a quick 27% in 48 hours!  

The CAT May $95 puts that we were hedging with (also from Monday Morning's post) shot up from $1.45 to $2.80 yesterday, almost a double in 2 days there and up closer to 200% from our original .95 entry (from our Long Put List) while even the SQQQ June $10/14 bull call spread popped another .40 from $1.70 – a 23% gain in 2 days but our net entry was just .45 and net $2.10 currently makes for a 366% gain on that hedge.  

That's how we can buy with confidence – using leveraged protection we can commit just a little cash to our hedges while we begin to deploy some bullish money at what we HOPE (not a valid investing strategy) is the bottom.  If we're wrong – then the money we make off the hedges goes towards some dollar cost averaging on our longs.  If we're right, relatively small losses on the hedges are certainly forgotten as we have our long-term bullish positions at rock-bottom prices.  

Every trader knows the trick is to buy low and sell high but what's the point of knowing that if you don't have an investing strategy that let's you pull the trigger?  

We were discussing scaling strategies in Member Chat this morning and I think the real key in taking advantage of these situations is to always have a healthy degree of paranoia.  If you ALWAYS assume that whatever you buy will drop 20% – then you are more likely to be pleasantly surprised than shockingly disappointed (see "How to Buy a Stock for a 15-20% Discount With Our Buy/Write Strategies").  To use our friends at JPM as an example, the stock is $36.24 so let's say you have a $100K portfolio and you want to put 10% to work buying JPM.  You can:  

  • Sell the 4 2014 $32 puts for $5.20.  That puts $2,080 in your pocket against about $1,310 in net ordinary margin so you are keeping ALL of your cash but stand to make $2,080 (20% of $10,000) if JPM simply holds $32 through Jan 2014.  Worst case is you are assigned 400 shares of JPM at net $26.80 and you own $10,720 of JPM stock at 26% off the already discounted price.  
  • You can also scale in by using our buy/write strategy to buy 100 shares at $36.24 and sell the 2014 $30 calls for $9 and the $32 puts for $5.20 for net $22.04 ($2,204) on 100 and if JPM is below $32 in Jan 2014, you will be assigned another 100 at $32 for an average of $27.02 on 200 shares ($5,404).  Even if JPM is down at $15 in 2012, you still have $4,596 on the side and you could buy 300 more shares at $15 ($4,500 assuming you still liked them) and then you'd have 500 shares at an average of $19.80 – a 45% discount off the current price.  

These discounts are so good that we are, in fact, often DISAPPOINTED if JPM goes up and we "only" make $796 when we are called away at $30 off our initial $2,204 investment (36%).  Of course once JPM does move up significantly and it becomes unlikely that we'll be scaling into a larger position, the rest of our $10,000 allocation ($7,796) to buy JPM is freed up to initiate a position on the next bargain we identify.  It's not a complicated strategy – it just takes a lot of patience and THAT is the most difficult thing we try to teach our Members.

As I've been saying all week – we're still not very bullish until we punch through our Must Hold levels and we stand ready to add more bearish bets (and maybe even pull the bullish ones) if we once again are rejected at our weak bounce levels (see yesterday's morning Alert to Members).  It's still 1,360 or bust for the S&P this week and it's all up to Facebook to boost the markets on Friday as the Fed seems to be sidelined through the elections – unless, of course things get REALLY bad – but we're not there —- yet….

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  1. Oil Lines

    R3 – 97.44
    R2 – 96.46
    R1 – 94.56
    PP – 93.58
    S1 – 91.68
    S2 – 90.70
    S3 – 88.80

  2. Phil,
    When time permits, could you post the location (or list itself) of the original 'Twice in a Lifetime stks'

  3. Econ numbers this morning:

    Japan Machine Order (MoM) / -2.8% (-3.5% expected)
    Japan Machine Order (YoY) / -1.1% (4.4% expected) – A slight miss there….
    Japan Service Industry Index (MoM) / -0.6% (-0.4% expected)
    Great Britain Jobless Claims Change / -13.7K (5.0K expected)
    Great Britain Unemployment / 8.2% (8.4% expected)
    Euro-Zone CPI Core (YoY) / 1.6% (1.5% expected)
    Euro-Zone CPI (YoY) / 2.6% (2.6% expected)
    Switzerland ZEW Survey / -4.0
    US Building Permits / 715K (730K expected)
    US Housing Starts / 717K (685K expected)
    US Building Permits (MoM) / -7.0% (-4.5% expected)
    US Housing Starts (MoM) / 2.6% (4.7% expected)

    US construction numbers are not looking good and the Japan stats don't point to strong growth ahead.

    Still to come:

    9:15 EST – US Industrial Production (0.6% expected)
    14:00 EST – FOMC Minutes

    And tonight, Japan GDP numbers and industrial production.

  4. PP for today:

  5. 8800:  I think this is it….

    Meanwhile, this is early-stage panic and it's a good opportunity to go long on a few things like CHK, CSCO, AAPL, GLW, GNW, FTR, FCX, AA, BA, BAC, GMCR (yes, I said it!), HOV, HPQ, OIH, SVU, WFR…  You get the idea.  It's a good time to sell puts against stocks you REALLY want to own if they drop another 20% – just in case they don't!  

  6. Phil,
      I have 15 sold JAN 2014 $25 Puts on CHK. Would you advise taking advantage of the high premium on the $15 Puts to roll some or all of the $25s?

  7. CHK- I think we are gonna have a ton of talk around these guys today—-- I sold Jan13 $17.5 puts-- I wonder if I should roll them out to Jan14 $15 puts— might cost a nickle…. get an additional year plus $2.50 in strike.

  8. So industrial production beats (1.1% vs. 0.6%), but prior was revised down from 0% to -0.6%.  Tell me, what is the Fed doing all day? 

  9. That could be a big story…


    Overnight the Chinese currency has continued to lose ground against the dollar, with yuan forwards declining to a four-month low. The explanation for the continuing softness in the renminbi is twofold – the dollar is in high demand at a time of enormous uncertainty over Europe’s future, and domestic economic conditions in China have been much weaker than expected.

    Twelve month NDFs are trading at a 1% discount to the onshore spot rate, which implies that the forward market expects a depreciation of the yuan over the next year. As we noted in an extensive blog piece yesterday (More RMB depreciation cannot be ruled out), capital outflow from China has been accelerating in recent weeks, with the likes of the dollar and sterling the major beneficiaries. This capital outflow is likely to be in evidence for some time.

    In which case, forget about Greece and the euro. China’s capital outflow problem is the real ticking time-bomb for markets.

    If China fails to plug this problem sharpish, the world’s biggest put option — the China growth story — could quite genuinely come undone.

  10. 50 Years Of Government Spending, In 1 Graph

    Good thing rates are low now….  And getting lower. Let's borrow more while the rest of the world is willing to pay us to take their money!

  11. Since my portfolio is pretty bullish long term, I like this article :)  
    Is a summer crash coming?

  12. Gas is still cheap in the US:

    Go to article for a larger picture.

  13. Morning Phil,
    I'm in the FAS May (Friday) $86/88 bull call spread at $1.30 with the $83 puts for $1.10 offset.
    Wait it out or adjust today?

  14. Phil or any one of knowledge Spending some time in Europe this year and in addition to my laptop I need an other support for my trading. Question would it be better to buy an other laptop to handle specially the TOS platform or will an I pad do the job even that I have to handle my records of trading on exel. It looks like my laptop of 4g ram does not handle the platform to well have to reload 3x per day. TIA

  15. Newt,
    Thx for the 'twice' list response.

  16. iPad / Yodi – I could not use my iPad to trade on an extended period with TOS. My laptop that has only 4 GB runs TOS without any problems. But I run Win 7 64-bits and I suspect that the OS might be the issue with yours unless it's a really old one.

  17. AAPL refuses to get off the mat and is making lower lows.  AAPL represents 4.31% of SPY and 18.57% of QQQ.  Manipulating AAPL seems like an easy proxy for the market.

  18. Yodi/ If I may give you an advice, it all depends where you will stay.
    Most hotels in Europe have an ethernet free internet connection. More expensive hotels offer complimentary Wifi for ONE device only and charge you for more. My experience.
    My advice is to bring a laptop…or to learn how to say "You must be kidding me" in 27 languages.

  19. Good morning!  

    Very simple this week – if we don't make those weak bounce levels – it's BEARISH!  


    • S&P topped at 1,410 (rounding and ignoring spikes), low 1,340 is 70 points (5%!) so 20% retrace is 1,354 and 40% retrace is 1,368 – anything less than that and we're still in a downtrend.  
    • Dow topped at 13,320, low 12,680 is 640 points (5%!) so 20% retrace is 12,800 and 40% retrace is 1,930
    • Nas topped at 3,080, low 2,905 is 175 points (5.6%) so 20% retrace is 2,940 and 40% retrace is 3,015
    • NYSE topped at 8,200, low 7,700 is 500 points (6%) so 20% retrace is 7,800 and 40% retrace is 7,900
    • RUT topped at 830, low 780 is 50 points (6%) so 20% retrace is 790 and 40% retrace is 800

    We actually have lower lows now but I'm in no mood to recalculate every day – the point is that perhaps yesterday's weak bounce levels are today's strong bounce levels and we damned sure want to see those taken back in the very least.  

    Let's keep in mind that the Dollar is up 3.6% this month and the S&P is down 6% and that's pretty much the usual relationship so yes, your IBM stock may be down from $208 to $198 (5%) but at $208 you could trade a share of IBM for 1.96 barrels of oil at $106 and now you can trade one $198 share of IBM for 2.12 barrels of oil at $93 so your equivalent exchange is up 8%.  As Einstein pointed out – everything is relative and it's very hard to keep things in perspective when you get too narrowly focused on the balance of your portfolio or the squiggly lines on the charts that shimmer up and down almost at random – that's why I like to focus on our levels and simply see if they are holding or not…

    Keep in mind we are only taking bullish POKES at some stocks – just in case we do get a big bounce but, in general, we are skeptical and happy to take quick, LITTLE profits off the table and get back to cash whenever possible.  

    Notice what we've done with our $25KP, we pulled our realizable gains off the table and now we have the $25K we started with plus $24,270 in realized gains and all that firepower is now available to adjust our remaining UNrealized $9,862 in losses.  CASH IS KING!  BBY went way against us but I don't mind doubling down on BBY if they are going to insist on giving it away.  Same with FAS – the Fed is NOT going to let the Financials nose-dive.  We're ONLY down 6% – if the Fed did intervene on a 6% drop after a 12% gain from Jan, THEN I'd be upset.  As it is, I am encouraged by their restraint because we need to let stocks find their own proper floors after all this rumor-driven buying.  

    Still, we need to buy cautiously and treat this like a crisis that can still blow up in our faces but, as I said yesterday, there are certain stocks that follow Warren Buffett's rule that, if they closed the market for the next 3 years, we'd still be happy to have them in our portfolios.  So far, our twice in a lifetime list is:  


    I think someone may have mentioned another one I liked but those are a good start.  Be diversified and sell a 2014 put against them for a small initial entry – it's that simple!  Are we going to need coal in 2015?   Aluminum?  Steel?  Natural Gas?  Homes?  Banks?  Chips?  Telecom?  Groceries?…  You don't have to like them all but geeze – surely there are one or two that you can close your eyes and imagine being proud of handing over to your grandchildren one day.  These companies are priced like it's the end of the World – I'm just suggesting taking a small bet that the World doesn't end.  

    So it looks like we have an upside wheeee! this morning and that's going to be a great opportunity to add some hedges in case you couldn't sleep last night because you were under-protected.  We'll see how the day plays out but, so far, I'm discouraged by the lack of participation in the Financials but they often lag and it's a great chance to hitch a ride on the FAS train if we begin to break higher.  

    Unless we take back those weak bounce lines, it's not a real rally – be careful out there!  

    At the open: Dow +0.26% to 12665. S&P +0.36% to 1335. Nasdaq +0.35% to 2904.
    Treasurys: 30-year -0.35%. 10-yr -0.22%. 5-yr -0.11%.
    Commodities: Crude -1.14% to $92.91. Gold -1.09% to $1540.05.
    Currencies: Euro +0.07% vs. dollar. Yen +0.31%. Pound +0.3%.

    10:00 AM On the hour: Dow +0.58%. 10-yr -0.22%. Euro +0.14%vs. dollar. Crude -0.69% to $93.33. Gold -0.57% to $1548.15.

    Market preview: Stock futures are up as much of Europe turns higher after Angela Merkel appears to sooth markets with talk of keeping Greece in the eurozone, and using words like stimulus and not just austerity. The S&P benchmark is +0.5%. J.C. Penney (-15%) is taking an absolute shellacking following its miserable FQ1 report.Later: Fed's Bullard, FOMC minutes

    Apr. Industrial Production: +1.1% vs. +0.5% expected, +0% prior. Capacity utilization 79.2% vs. 79.0% expected, 78.6% (revised) prior.

    Apr. Housing Starts: +2.6% to 717K vs. 690K expected and 699K (revised) in Mar. Permits -7% to 715K vs. 725K expected and 769K in Mar.

    MBA Mortgage Applications: +9.2% vs. +1.7% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 3.96% from 4.01%.

    Canada March manufacturing sales jumped 1.9% vs. 0.3% expected. New orders +2%. Backlog of unfilled orders rose 2% to its highest level since March 2009. The loonie remains just below parity with the greenback, more attuned to activity far from Canadian shores.

    U.S. CFOs’ confidence in the global economy jumped more than five points in the latest CFO Quarterly Outlook Survey, and their optimism in their own companies saw a three point Q/Q increase. The majority of U.S. CFOs (62%) plan to hire in the next six months, but prospects aren’t so bright in Europe, where with only a third of CFOs (35%) say they plan to add staff.

    The U.S. economy could shrink as much as four percentage points in H1 2013 if Congress fails to address the expiration of $600B worth of tax breaks and jobless benefits by the end of this year, Goldman Sachs says. The chances of a worst-case "fiscal cliff" scenario are 35%, the firm says; more likely is Congress temporarily raising the debt limit and postponing tough decisions until 2013.

    European shares are giving up their meek rally attempt as ECB President Draghi takes the occasion of a gathering panic to speak about the bank's focus on price stability as keeping inflation expectations down. On Greece, he says the EU treaty sees no possibility of an exit from EMU. "Dude, a lot of stuff is not in the treaty,"snipes Dow Jones' Katie Martin.

    ECB President Draghi declines to comment when asked about the prospects for a Greek exit from EMU. Does this mean he's no longer denying the possibility? Or was he just rushing past reporters on his way to deliver a speech at 10 ET titled, "Monetary Policy in Uncertain Times." 

    Germany and France benefit from safe-haven status in bond sales, with Germany selling €4.11B ($5.2B) of 10-year bonds at an average yield of 1.47%, down from 1.77% and the lowest on record. France auctions €7B-€8B of four bonds maturing from 2014-2017, also with lower yields. It seems that M. Hollande isn't so scary after all.

    The Bank of England's Mervyn King confirms that contingency plans are being drawn up to shelter the U.K. from the impact of a possible eurozone break-up, according to BBC business editor Robert Peston. (via

    "Our biggest trading partner is tearing itself apart without any obvious solution," says BoE Governor King at a press conference. He's confident the U.K. economy can get back to its pre-crisis path, but it may take 10-20 years. As for recent strength in sterling: "A weaker pound is a vital part of the U.K.'s rebalancing." Sounds like additional QE remains on the table in the U.K.

    In its inflation report, the Bank of England looks ahead two years and sees inflation slowing below its 2% target and GDP at 2.6%. U.K. growth prospects are "unusually uncertain," with the eurozone debt crisis posing the biggest risk. 2012 growth forecast lowered to 0.8% from 1.2%. Pound -0.54% vs. USD.

    Spanish PM Mariano Rajoy warns parliament of the consequences of austerity measures not being passed. "We must reduce the public deficit because there is a serious risk that we will not be able to borrow, or borrow at astronomical prices," Rajoy says.

    A chart of Greek private sector bank deposits provides a clear image of a depression. Not to make light of the €700M withdrawn since the election, but reductions of that amount have been par for the course each week for several years, and likely reflect economic contraction as much as a bank run. There remains €165B in deposits in the system.

    Here's a cute one: The BOJ asset purchase program stumbled last night when the bank failed to meet its goal of purchasing ¥600B in 1 and 2-year paper as just €480.5B was offered up to be sold. "There is nothing to invest in when (banks) sell short-term notes," says an analyst. Two-year Japanese paper yields 0.11% … "nothing to invest in."

    "A major break in the growth model" means supposedly cheap Chinese stocks are to be avoided, says Deutsche's John-Paul Smith. Beijing, he argues, realizes it has lost control over regional governments that have built up huge debts by pursuing projects of dubious value. Policy is now focused on restoring discipline – as highlighted by the sacking of Bo Xilai.

    Patrick Chovanec details the "unraveling" of Chinese real estate: April housing starts -14.4% Y/Y, Office starts -21%, Retail starts -18.7%, Land sales -54.7%. Foreign funding of property development -80.8% Y/Y. The only thing holding up real estate investment is a flurry of completions by desperate developers. Once this ends, the hit to GDP may be enough to push the economy into a hard landing.

    Yawn!  Shareholders sue JPMorgan (JPM) in two separate lawsuits following its $2B+ trading loss, accusing the bank and its management of taking excessive risk.

    Abercrombie & Fitch (ANF -12.7%) falls sharply after itsoutlook on FY12 earnings rattle investors. The firm's earnings CC is under way (webcast), dominated by the theme that global sales for the retailer will stay challenged.

    Some of the excuses heard by Peter Kafka regarding GM'saborted Facebook (FB) ad campaign: GM's ad agencies did a poor job; GM's sales-driven culture was obsessed with short-term results; $10M is a tiny chunk of Facebook's ad sales; and Ford remains a fanof Facebook ads. Still, Kafka isn't satisfied. "[Facebook] needs to be able to prove conclusively that its ads work, in a scalable way, for a wide variety of advertisers. It can’t do that yet." (also)

    Taking the money and running!  As rumored last night, Facebook (FB) increases the size of its IPO to 421.2M shares from 337.4M. (S-1)

  20. Yay!
     Apple (AAPL) has ordered iPhone displays that measure at least 4", the WSJ reports, with production set to begin next month. With most rival high-end devices now sporting 4"+ displays, rumors (I,IIIII) have abounded that the next iPhone will sport a larger screen size, but this is the most concrete one yet. Samsung's (SSNLF.PK)recently-announced Galaxy S III will feature a 4.8" display.

    Reports that Apple has secured half the mobile DRAM capacity at an Elpida plant knocked 6.2% off Samsung's (SSNLF.PK) shares in Korean trading. Samsung, the world's largest DRAM maker, declined to comment.

    China Mobile (CHL) chairman Xi Guohua says his company is in talks with Apple (AAPL) to sell the iPhone, though he doesn't provide additional details. China Mobile, whose 667M subscribers make it the world's biggest carrier, has said in the past Apple haspromised to develop an iPhone that supports its TD-LTE 4G network, but the commercial launch of the network could be held up by regulators. Apple's China sales soared to $7.9B in FQ2.

  21. Yodi / Laptop
    I tried to use the IPad to trade with IB, and since it didn't support spread orders or pricing, I couldn't use it trade.  I ordered this 17.3 samsung that's only 1in thick and 6lbs.  I'm picking it up when I fly into the states.  I upgraded it to 16GB of RAM and put in a Samsung 830 256GB SSD.  It should be fast enough to last 4-5 years like my last one.  It's based on all the newest Intel and Nvidia HW.  If you're smart you can order a external caddy for the 1TB drive you remove to put the SSD in and use that as a external data drive or backup drive.
    Amazon is the cheapest if you include a Square Trade 3yr warranty with accidental damage protection.

  22. Going to sell a couple PLX Aug 6 puts, as Pharm recommended yesterday

  23. List/8800 – See above.  

    Oil up 2.1Mb – hopefully StJ has that chart updated.  Gasoline down 2.8Mb and Distillates down 1Mb so a net draw is bullish back to $94 at least.  

  24. 8800/ Twice list:
    As listed in this mornings email….

  25. 8800—- DUH- I  didn't read the post above

  26. Oil chart / Phil – Not yet but I could probably draw it for the next 12 months without looking at the official numbers!

  27. STjeanluc, lionel and Burrden, Thanks for the comment and advice. Please what is OS??? I do have had various toshibas and I have been happy with them. I still do not know what the problem with the bild up up of memory is. I have the same problem on my desktop here in Mexico as well with my Laptop reasonable new with 4G of RAM here and during my stay in Germany during March. My cousin/s house has good connection but still was the same. I will be traveling by RV mainly in Germany so I need only one of the 27 linguas. I plan to use a stick in case the park has no WFI. Thanks for any advice. 

  28. Yodi/ OS=betriebssystem
    Hopefully you ve  picked German :)

  29. Lionel, Thanks it is still easy to speak the mothers language even that I still speak some more but 27 that is why they can not win nor understand each other in Europe 

  30. Inspired by your first couple of paragraphs today and similar to the 5K play on EDZ. How about BCS with the June
    15/17 for a $1 as a new play?

  31. I hold CSCO Jan $17.5 puts sold for $2.10. Does it make sense to roll these to the 2014 $18's picking up $1.47 more credit  on a position I don't want to add to but want to keep?  My put to price would be $14.50 which is pretty close to the low even back in 2009.

  32. CSCO can be added to Twice in a Lifetime List (thanks Newt).  GLW also good and GNW as well but not AAPL, FCX, BA or GMCR – those were just bottoms I liked but not BOTTOMS historically.  

    CHK/Kevin – It depends where you are in the scale more than anything else.  If 15 is a 25% position, then sure it's great to roll down to 2x the $15 puts ($5.30 now) but, at the moment, they may go much lower or, if they don't – then 19 months from now, it's very likely that $25 is a good target and there's no real need to do anything.  I'll tell you what's tempting.  Buying back the 2014 $25 puts for $12.30 and selling 1x the 2014 $18 puts for $7.50 and 1x the Jan $17.50 puts for $5.50 so you move to 2x but half expires a year earlier and you can keep an eye on selling 1x of the 2014 $20 calls, now $3.25, for no less than $3 to cover a break below $14.50 as you would be happy to have to buy the stock to cover at $20, right?  

    CHK/Newt – Depends on your plan.  I'd keep an eye on the relationship and set a stop on what you're willing to pay for the roll, like .50 and then you don't have to worry unless the spread gets in trouble, which would indicate CHK is off-track anyway.  

    Copper/StJ – That's a completely irrational market at the moment.  

    Here comes $94 on oil!  

    S&P Futures (/ES) rejected at 1,340.   S&P proper failing it too.  

    China/StJ – That's why we have a flight into US Equities – there's really nowhere else to put money now.  

    FAS/Zip – I think the puts should expire worthless but the spread is iffy if we don't break higher but, on the other hand, you can only cash them for about $1.30 now – total rip off.  I suppose I'd roll the $86 calls ($3.15) to the June $90s at $5.35 (+$2.20) as they have the same Delta so you're not likely to get in trouble while you wait for the caller's $2 in premium to expire between now and Friday.  

    TOS/Yodi – I got a Sony Vaio F for my TOS.  It's a heavy gaming laptop and it runs everything great on a 16" screen and I added a Toshiba 14" USB LCD that runs as a 2nd screen off it with no trouble.  The Toshiba is very light and, of course, just the screen so you get a lot of real estate to play with without taking up too much space in the luggage (and no power supply for the Toshiba).  I take that plus my old 17" HP laptop and I'm pretty happy on the road with 3 screens plus my IPad.  

    Oh no – weak bounce and down and this bounce was weaker than yesterday's bounce – not good.  

  33. Here is your oil chart Phil…

    Unfrackin' real…. But no speculation at all!

  34. India based Piramal would rather invest in the US than India.

  35. Morning All!  Did I just miss something?  Anything that caused the sudden drop?

  36. I REALLY hate Greece
    REPORT: ECB Is Freezing Lending To Some Greek Banks

  37. AAPL/3Putt – Good point but it's hugging my $555 mark and I'm kind of liking them until they give it up.  

    That Samsung looks cool Burr – let me know how it works for you. 

    Oil/StJ – I mean the one where it showed the ever-increasing storage.  

    EDZ/Doro – I think we had such a nice move to $17 already, it's getting a little risky to push it unless we close weak today so be careful if we hold up as EEM can snap back hard when they have a reason to cheer up but, in general, EDZ is still a good hedge.  

    CSCO/DC – $1.47 for a year is a good deal but keep in mind CSCO was $13.15 in August's crash so it's not like $16.50 is a bottom you can count on.  

    Oil/StJ – Love it!  

    Wow, someone must have said something bad – I don't see anything but Euro dropped back to $1.27 and Pound at $1.5916 with Dollar shooting back up to 81.70 (now 81.55).  Something spooked the markets right at 11 (or some Bot automatically started doing something) – it might just be the sound of one fund punching the dump button…

    Dow volume 40M at 11 so much better than usual.  Even if we only do 10M between now and 3 we'll be at 80M so it would be nice if we recover here and get to 100M into the close.  

  38. Weeeeeeeeeeee!!!    Oil  :)

  39. Phil
    what plays would you recommend for BAC, XLF or AAPL in an IRA? Thanks

  40. Oil chart / Phil – As a note:

    On a seasonal basis, the current week is when crude oil inventories typically hit their highs for the year, so it will be interesting to see if inventories start to decline in the weeks ahead.

  41. Hi Phil,
    I'm  a complete novice in the oil markets.  Just watching and learning. Currently there seems to be a divergence between VLO and USO.  Your input would be interesting.

  42. CHK/ Phil: My plan is to own a mother load of CHK for as little as possible.  Family works the oil fields….nothing insider though. just roughnecks etc that see who's moving and shaking and hiring.

  43. Phil / lifetime — I'm curious why you're using 2009 lows rather than the 2008 lows?  Some issues you are saying they aren't a buy because they were lower in 2008 and others you are saying 2009 lows are a buy even though that low is higher than the 2008 low.  Anything in particular you're using to differentiate between the two?

  44. Re EDZ in the 5K – is the plan to leave it be and collect what we have coming? That makes sense to me but i am wondering if you have something else up your sleeve?

  45. yodi
    Your still into the brand name makes a difference, it is what is inside that makes the difference. 4 gig of ram is going to be a performance issue no matter what it looks like. My laptop has 4 gig of ram and it has issues on the same line as the big box with 24 gig and it doesn't have a name. The laptop is an Acer 2 core, if I try to watch any HD video it stops to buffer, that is because it uses all the ram for the picture, has to stop the picture to load more video, low def. no stopping. Who ever has a 16 gig unit waiting, it will run perfect!!

  46. rainman – also, does it matter from whence it fell? I have a MCD $90 put and MCD was waaaay lower in 2008 but also in 2007. It looks like it fell about 10 points from 62 to 52. What's that? 16%? so recently it went from 101 to 91,, so i might expect it to go to $85 if all things are equal.
    Guess what i am saying is if the value of the stock has gone way up do you expect it fall to the same level?

  47. UK FTSE 100 -0.6%
    German DAX -0.2%
    French CAC +0.3%
    Spain IBEX -1.3%
    Portugal PSI -1.8%
    Italy MIB -0.2%

    We seem to be holding up pretty well here

  48. I have EDZ Jun $12 that are result of many rolls. Would you recommend taking the money and run, or sell some Jun call to cover? I am mostly in CASH in my portfolio 

  49. Shadowfax Thanks for the info. yes i guess will have to pick up some higher RAM to see a little in to the future.

  50. Yodi / RAM   –  Some older laptops only support 4GB of RAM.  My Dell Inspiron 1720 will goto 6GB with some hacking.  The new laptops all goto 16GB or higher.  
    I only put 12GB in my new Samsung since it's hard to reach the 2nd stick of RAM.  
    You could also try to insert a memory stick and use Windows Readyboost if you have Win 7.  Or increase the size of your pagefile.

  51. Some interesting stats:

    Every year since 1989, Merrill Lynch surveys a few 100 institutional investors using a broad variety of quantitative, valuation, process and modeling questions. Their responses get summarized in a 39 chart, 27 page report.

    I find it interesting that the Price/Sales ratio doesn't show up in the top 10 as I have written about it in the past and correlation with performances is actually better than the P/E ratio for example. And knowing that 81% of institutions rely on P/E for decisions probably influences accounting practices that will affect that ratio!

  52. morx / MCD — I could see MCD breaking the mold because they have been growing internationally where others don't have the same opportunity for growth (basic materials for example). My question isn't so much looking for a formula but more so trying to pick Phil's brain at the macro level.  There is likely some reason CCJ is on the list while it is 65% over the 2008 low but it is a different reason than MT being on the list which is below the 2008 low.

  53. stj / PS — Shhhhh…. That's a secret ratio. One of my favorites!

  54. GS/Headless Chickens
    I can just picture it now, the war room at GS. Dimon and his crew are focused on damage limitation and how to protect his reputation, which means risk taking is far from top of mind. MS seems to have lost its way completely. Vikram and his men are discussing what a hedge is!! But Lloyd and his men have the map on the wall, and they see that this is theirs for the taking. For Lloyd, this is a once in a lifetime opportunity – salvage his reputation (who would have thunk it?) at the expense of Jamie. My money is on LB. Long, strong and positive on GS's future outlook.

  55. IRA/Crussell – I don't like AAPL for an IRA.  If they drop to $400 maybe but how could you possibly know that they are a safe long-term investment?  XLF I like as I don't see the US banking system collapsing or, if it does, what would it matter anymore?  BAC is too dangerous as well as it's just the one bank and, as JPM has proven – you never know what can happen at one bank.  So I'd go for XLF at $14.40 and sell the 2014 $14 calls for $2.10 and that's net $12.30 with a 13.8% profit if you are called away – a very reasonable rate of return with good downside protection.  Of course, if you didn't have an IRA and weren't wasting money trying to avoid taxes on money you can't make because you are keeping your money tied up in a stupid IRA, you could go for the XLF 2014 $10/14 bull call spread at $2.70 and sell the $12 puts for $1.25 for net $1.45 on the $4 spread and now you make $2.55 at $14 instead of $1.70 while tying up 75% less cash to do it.  But then you might have to pay long-term capital gains of 15 or maybe 20% by then and that would be terrible as you're only making 10 times more on your money, right?  

    VLO/New – Well VLO is a refiner and USO is oil so there isn't always a direct correlation.  XOM is a closer match.  There was a time when we had a Valero Rule for predicting oil moves but Bots and extreme speculation have thrown all that out the window and oil is an animal unto itself that can go up or down 5% on any given day (sometimes both).  

    CHK/Newt – I would just be careful through the summer as nat gas could fall to zero and it is possible that loan covenants of CHK could trigger and force them to divest assets at the bottom.   I think they are smarter than that and I think that's why they just flipped $4Bn in debt over (to avoid it) but that means we're now gambling with CHK that nat gas does turn around next year – it's possible that it doesn't.  Unlikely, but possible and you don't want to buy too many shares at $15 when you may be able to get 5x for $3 if it all does hit the fan one day…  

    2009/Rain – Because StockCharts weekly chart only goes back to 2009, and only to May now…  That's all the science there is there – just eyeballing the chart and figuring if it was that low in 2009 – when we KNOW things were too cheap, then it's probably too low now as well.   Feel free to do a more detailed study and come up with some more – the premise is simply stocks that are at or near their panic lows and are generating as much or more revenues and profits than they were at the time (without any obvious impairments going forward, of course).  

    EDZ/$5KP, Morx – I would love to pull the June $13s but we don't have the margin for naked May $16s and it might not be safe anyway so we're stuck with the spread and we'll likely roll the $16s to June somethings – likely the $17s ($1.85) at the moment as that would put another .50 in our pocket, dropping our net to .45 while widening our spread by $1.  Have to weigh that against taking a clean $3 off the table now.  

    Levels/Morx – Ah but those levels (panic lows) are prices at which these companies found buyers – even when people thought the World was going to end.  THAT'S the kind of entry I like!  

    This is a good time to review the classic:  

    The Worst-Case Scenario: Getting Real With Global GDP!

    I am NOT advocating a BUYBUYBUY premise, we are still 80% in cash (we got out at the end of April) but we have begun, at Dow 10,200 to begin scaling into positions in companies like the blue chips listed above. We are doing it in scaled amounts in option spreads that obligate us to buy another round that would put us in twice the current position at an average price 20% or more below the current price. That means, at approximately Dow 8,000, we will trigger our second round, deploying another 20% of our cash to buy twice as much stock in T, PFE, JNJ, MCD, UTX, KO… 

    Funny how consistent my message is…  We were down at S&P 1,000 at the time (June 6th, 2010) when I was trying to talk people into doing a little bottom fishing.  

    EDZ/Yshen – When in doubt, sell half my friend!  

    P/E/StJ – I'm surprised it's so overweighted.  

    CCJ/Rain – That low was CRAZY!  I was pounding the table for CCJ at $15 but it didn't last long.   It shot up to $25 like a bat out of hell and this is a commodity that actually is both scarce and very unlikely to be discovered in any new quantities so CCJ is a fantastic long-term hold – until they discover fusion – then it's a sell. 

    JPM/Winston – I super doubt JPM would have revealed their trading issue if it weren't already addressed.  If they could have been attacked, it probably would have happened or maybe this market sell-off is an attempt to get them to capitulate and Jamie may be laughing his ass off as his $500M EDZ spread turns into $2Bn and PRESTO! he's even.  

  56. Phil / CHK - how would you adjust June 15/17 bcs from May 9th?  I also have Jan '13 12.5/17.5 from april 27th and Jan '14 25/35 from May 1st.  Don't plan on changing those at the moment.   

  57. DDR3 RAM is a major step in performance. It has higher density, 2 to 4 times faster execution, and can be triple threaded 50% more again than DDR2.
    Mr M is showing signs of decision time bouncing off the bottom for 2 days. The next move may end the decision although some times it takes 3 or 4 bounces. UP or DOWN!!

  58. Bounces and Must holds – can't see S&P reaching 1368 this week. i'm feeling pretty bearish.

  59. scottmi
    I keep telling myself to be patient. The BOTS are programed to drive humans crazy and take their money. As much as I want the market to crash the manipulators don't. The reason is there aren't enough commoners in the market so to go down they have to take most of the loss.

  60. Price-to-sales / Rainman – See my blog post last year:

    Both Hough and Kirkpatrick cite the work of O'Shaughnessy who ran some simulations and found that $10,000 invested in high Price/Sales ratio stocks would be worth $19,000 in 2003 while the same amount invested in low Price/Sales ration stocks would be worth $22 millions! Low Price/Sales stocks returned on average 16% a year. By adding requirements for earnings growth and price momentum, the simulation returns more than $53 millions by 2003.

    That was over 50 years… but good performances.

  61. Phil,
    I have a position in DDM May 66/67 BCS – entered @0.60 and not @0.25. It is an hedge and would like to roll it out. I guess I will let the caller expire worthless (hopefully). But what should I do with the 66 C. Roll it out and up?

  62. Oh, my SGEN sweepstakes….are heating up.  June 22.5 calls are flying off the shelf.

  63. Phil
    I get the benefits of not using an IRA due to 100% margin requirement, but this money was already in the IRA so just trying to maximize the return. If I did use an IRA for the XLF trade, it seems the straight Jan 14 $10/$14 BCS at $2.70 is a better way to go than to couple this with selling the $12 puts. My initial investment is $1.25 higher on the straight BCS, but my return on investment would be 48% versus 19% due to not tying up the margin on the puts. Yes?  

  64. 11:00 AM On the hour: Dow +0.38%. 10-yr -0.19%. Euro +0.08%vs. dollar. Crude -0.25% to $93.75. Gold -0.7% to $1546.15.

    11:40 AM European shares close mostly lower after being tossed about 2011-style by assorted pronouncements, leaks, and rumors. Stoxx to -0.2%, Germany -0.2%, France +0.3%, Italy -0.2%, Spain-1.2%, U.K. -0.6%. Euro flat at $1.2724.

    12:00 PM On the hour: Dow +0.38%. 10-yr -0.09%. Euro flat vs. dollar. Crude -0.72% to $93.31. Gold -0.59% to $1547.95.

    1:00 PM On the hour: Dow +0.18%. 10-yr -0.04%. Euro +0.10% vs. dollar. Crude -0.82% to $93.2. Gold -0.96% to $1542.15

    The "growth slowing" trade in a picture. David Schawel charts the fall this year and the plunge since April in the ratio of the Materials Spider (XLB) to the Consumer Staples Spider (XLP).

    Great Primer:  Hitchhiker’s Guide To The ETF Galaxy (ETF Database)

    Currency Markets Rev Up (WSJ)

    The dollar index looks set for its 11th consecutive day of gains thanks to jittery financial markets, but finds itself bumping intoheavy overhead resistance, says John Spence. UUP +3.2% in May.

    7 Reasons I Don’t Mind Sitting in Cash (Joe Fahmy)

    "Conditions are extremely favourable for promoting yuan convertibility on the capital account," says China's top securities regulator. However, the move towards freeing the renminbi will still be gradual, and even after it becomes fully convertible, the government may still use temporary capital controls in times of crisis. Some remain skeptical

    Beijing's talk about "internationalization" of the yuan may be a bluff, contends Izabella Kaminska, designed to maintain the illusion of China as a good investment destination, not an economy on the brink of collapse. Markets are calling, accelerating capital outflow from the country and pricing in continued depreciation of the yuan over the next year.

    More on the ECB/Greek bank operations: As Greeks withdraw money from the nation's banks, where are those euros coming from? The Greek banks borrow from the Greek central bank, which, in turn, borrows from the ECB. As Paul Krugman explains, the whole process depends on the ECB not saying "no more."

    While the news with respect to the ECB and the Greek banks may be more technical in nature (as opposed to cutting anybody off), Bloomberg's Linda Yueh reports sources at the central bank saying there are no plans for additional stimulus even if market tensions rise. A review of policy is under way, and expected to be completed in July.

    More on the ECB/Greek bank story: The ECB move to stop assistance to several (it appears 4) Greek banks is the result of their capital balances turning red. Under ECB rules, it cannot lend to such banks, who must instead borrow through the Bank of Greece (which, in essence, borrows from the ECB). No one is being cut off

    Get ready for a Marshall Plan for Greece, writes Matthew Lynn, arguing Germany has no other choice, given the risks posed by a Greek EMU exit. Something on the order of €23B (10% of Greece's economy) should do the trick – a small price to pay for avoiding catastrophe. Prepare for a market rally on the news.

    Check out the slowdown in China in real time, writes Sober Look, noting the one-year Shibor rate falling for an 8th consecutive day reflects a lack of demand for loans. Combined net lending by the nation's big 4 banks was about zero in the two weeks ended May 13. (earlier IIIIII)

    While JPMorgan's (JPM) CIO office was busy selling huge amounts of corporate-debt insurance in the deals that led to its $2B+ trading loss, a mutual fund elsewhere at the bank was busy buying it in the market. The plus: it shows that the asset management division is separate, as required. The minus: it could show that the bank is too big to manage. 

    As One JPMorgan Trader Sold Risky Contracts, Another (WTF?!?) One Bought Them (DealBook)

    Bruno Iksil – the "London Whale" in JPMorgan's (JPM) risk-management unit – is said to have left the bank in the wake of the disastrous trade that has cost $2B and counting. (earlier fallout)

    Chesapeake (CHK +0.5%) is raised to Hold from Sell by Deutsche Bank, citing the new $4B loan which increased liquidity to $4.7B. "With this financing, the company has alleviated one of our major risks giving them the runway to sell assets and finance FCF burn. While natural gas pricing risk is still an issue, we have seen pricing firm in the last couple of weeks."

    Fracking is getting safer and should present no major environmental problems in New York when the state allows drilling to commence – that’s the headline from a new study by the Shale Resources and Society Institute at the University of Buffalo. “This study presents a compelling case that state oversight of oil and gas regulation has been effective,” the lead author says.

    Natural gas stocks may have further to fall before becoming buy opportunities, Barclays' Grant Hofer says, estimates the gas-weighted names he covers could decline another 12% on average before trading at long-term average multiples (based on a $2 per mcf gas price). Oil names, however, are attractively valued and could rise an average of 14% to reach historical norms.

    Macquarie upgrades Silver Wheaton (SLW +1.5%) to Outperform in the wake of lackluster Q1 earnings and a stock slide of more than 30% in three months. The firm notes SLW ended the quarter with $1B in cash and $400M in available credit, putting the miner in position to acquire additional silver streams at accretive levels as alternative forms of financing become harder to obtain.

    Shares of Darden Restaurants (DRI +4.8%) are on amystery run higher on heavy volume as peers wallow to minor gains. Not only did shares set an all-time high, but option activity has spikedas well.

    Another obituary on GameStop (GME +1.5%): AAII Journal's Charles Rotblut cites the seismic changes in the video game business in presenting the bear case on GameStop and making it hissell of the week. He cites the firm's sluggish sales as indicative of a cyclical trend where gamers stand pat while waiting for a new launch schedule. But beyond gaming cycles, he says the biggest challenge of all may be a future where physical discs are obsolete in favor of downloaded games. (audio)

  65. Hard-luck THQ (
    THQI -10.1%) plunges yet again following its FQ4 report. Though results beat estimates, fears continue to growthat the game developer no longer has the scale to compete with larger rivals, following recent missteps. A sub-$1 stock price is also leading to worries THQ will be de-listed. The company is hoping upcoming releases for its DarksidersWWE, and Saints Row franchises will help drive a turnaround.

    A number of Internet stocks are rallying yet again ahead of Facebook's IPO, as expectations grow for a strong debut. GOOG+2.6%YELP +2.5%P +2.7%RENN +4.3%QPSA +2.7%DMD+6.3%LNKD +1.8%. However, top Facebook customer Zynga (ZNGA -2.7%) is giving back some of yesterday's gains.

    Wilsey Asset Management's Brent Wilsey says Green Mountain Coffee Roasters (GMCR +1.5%is a buy based on a valuation that has fallen back in line. He notes that shares picked up between $20-$24 could see a 30% run if GMCR goes back to trading at 10X 2013 earnings.

    Whirlpool (WHR +2.3%) jumps higher despite yesterday's revelation that John Paulson shed his stake in the company – a move that NBG's Brian Sozzi tweets is telling based on the company's "durable competitive advantages." Today's minor run in share price has been helped by a strong presentation by management at a JPMorgan homebuilding conference that includes a reiteration of full-year EPS at $6.50-$7.00.

    A week after diving on account of poor guidance anddownbeat commentary, Cisco (CSCO +0.5%) receives an upgrade to Overweight from Barclays' Jeff Kvaal, who argues the company's healthy book-to-bill and low DSOs suggest business isn't as bad as it seems. Kvaal also says checks indicate demand is stable, and thinks Cisco's server sales (3% of FQ3 revenue) can offset networking weakness. Future storage products are also seen as a possibility. (previous)

    Holy 1999 Batman  - LU back from the dead!?!  Nomura's Stuart Jeffrey thinks Alcatel-Lucent's (ALU+3.8%) May 22 core router announcement could be a game-changer. Alcatel's success in the edge router market (it has a 24% share) suggests it has a shot at disrupting Cisco (CSCO) and Juniper's (JNPR) near-duopoly in the core, Jeffrey argues, and a 10%-20% share would result in a 6%-14% 2014 operating income boost. Alcatel's carrier switch/router business was a bright spot in a dismal Q1, growing 23.5% Y/Y. 

    Groupon (GRPN +4.3%) is adding to this week's huge pre and post-earnings rally, undoubtedly boosted by short-covering. The gains come as AllThingsD reports Groupon has hired Amazon (AMZN) payments chief Vinayak Hegde to be its VP of engineering. Hegde joins several other former Amazon execs at Groupon, including CFO Jason Child, product VP Jeff Holden, and Americas VP Kal Raman.

    Are you freakin' kidding me?  How is this even legal?  Facebook's (FB) institutional investors are taking advantage of the boosting of the company's IPO offering size and price range to cash out. According to its latest S-1, VC backer Accel Partners will sell up to 28% of its stake, while Peter Thiel, Goldman Sachs, and Tiger Global each plan to sell up to 50%. Facebook's IPO insider selling is much higher than that seen for LinkedIn, Groupon, and Zynga's offerings, and is arguably a warning for investors tempted to chase the stock after it opens. 

    Micron (MU +5.4%) rallies following a bullish Raymond James note. The firm sees reports of Apple securing mobile DRAM capacity at bankrupt Elpida as an "implied endorsement" of Micron'sbid for Elpida, and thinks the acquisition could result in a "more strategic relationship" between Apple and Micron. There's certainly no love lost between Apple and current top DRAM supplier Samsung. (earlier)


    HTC's high-end One X and Evo 4G LTE Android phones are being held up by U.S. customs to investigate potential infringement of an Apple (AAPL) patent. The investigation is the result of an ITC injunction won by Apple on the sale of HTC devices featuring software that automatically adds links for phone numbers and e-mail addresses. No word on whether Apple also plans to seek an import ban on Skype for its similar click-to-call feature. (previous)

    Three lunchtime reads:

    1) Once again, break up the banks

    2) Greece is running out of time

    3) The ultimate sell signal

  66. Sell-off because departure of Iksil from JPM brings about fears that problem is deeper than revealed.  Global situation is so fragile that that's all it takes, which is why we can't afford to risk too bullish in positions until we pop our levels.  

  67. Phil
    Is that deeper in JPM or other banks made the same stupid moves?
    Why did IWM drop the most?

  68. BMRN – out of July 40 Calls for 1.60….that was a 4 bagger.  May re-enter them later, but the candle pattern appears to be done.

  69. Pharm/SGEN – Do you expect them to report results for any trials soon?  TIA

  70. BAC getting ugly…
    what was the BAC pick for the year and how is it looking now--anyone?

  71. Once again AMZN gives up all the day's gains and right back to lows.  

    CHK/Terra – Still have 30 days but with that many positions I'd consolidate and roll the June $15s ($1.35) to the 2014 $18s ($3.85) for $2.50 and roll the 2014 $25s ($1.95) to the same $18s for another $1.90 and just buy back the $35s as they are just silly at .65 and that puts you in 2x the 2014 $18s covered with 1x the June $17s plus the Jan spread.  If CHK can't hold $14, you can sell 1x the June $13s (now $2.50) for about $2.25 and just put a stop on the $17s (now .60) so you still have a 1x cover but with a lot more premium sold.  You only have to pick up $1 a month for a few months and your longs are free.  

    Bearish/Scott – We're looking pretty bearish too!  

    DDM/Pat – Not much left in the $66s at .35 but, if you still want to be long on the Dow (not looking good at the moment), you can roll to June $65s ($2.50) for $2.15 and then, after this caller expires, you'll hopefully cover with the $66s (now $2) for $2.15 or better on a bounce and then you have the same .60 net entry with a $1 lower strike and another month.  

    IRA/Crussell – Yep, XLF dividend at .20ish is not worth owning the stock for and what's the difference to owning the stock when your break-even is $12.70 anyway?  

    JPM/Shadow – You have a bank managing $500Bn or so and they make a $2Bn mistake.  It's nothing in the grand scheme of things.   I think Iksil may have gotten a bit full of himself and overtraded and, since he was long-trusted, nobody put the brakes on him so a couple of heads rolled but I simply don't believe JPM is running wild with their bets.  It's an amazing thing that they make $2Bn a quarter trading, year after year and they finally have one miss.

  72. lnk – they already did.  ASCO is coming up as well.

  73. Silver getting murdered. JPM i'm sure, trying to make back some of Iksil's work.  But if Iksil's counterparty was part of JPM too then… as above, wtf? 

  74. JPM/Phil – yeah, and Citi had $3T in capital protfolio and fell the $6.  There is more than meets the eye here, and it is my belief as well as others in the treasury market that their books are cooked.  So even though they have $500Bn, what is their derivative risk that is a $100Tn market?

  75. Phil
    Again I totally agree with you. I think he was a lone wolf makeing the mistake of his life. It does prove we did not fix the banking system and the bamk that survived the best had their day coming. Banks may be the first bargins to pick up, after all they can't loose money this year.

  76. RSI on Nasdaq is 30 and McClellan is in oversold territory.  Think if we get a sell off near the EOD will cash out my bearish positions and just wait to play another day.

  77. Didn't wait, I'm out and will wait till tomorrow unless we have a huge stick at EOD

  78. FAS Money
    Any plans to roll the May 91 put?  Fas is trading at 84.48 and the put is trading at $6.80.  Entry price was $1.70

  79. Phil – how do you apply the 50% rule to a WFR Jan 2014 $3/5 bull call spread?  I bought 12 spreads for  $.55 and it is currently at $.29. Offset with $3 puts which are at $1.36, sold for $.78  Can't roll further out in time so is there a play besides patience?

  80. Oil back to $92.50 (/CL) good for another go with tight stops with 15 mins to NYMEX close.  

    BAC/Jabob – It was $5.50 at the time and we cashed out when they kissed $10 as we realized most of our gains 8 months early.  

    Risk/Pharm – Same as everyone.  They do try to match it on both sides.  It's like saying your bookie will be wiped out because he has $5M bet on NY and $5M bet on Toronto tonight so he's exposed for $10M but it's even worse than that because he also has $3M on the Mets and $3M on Cincy and $2M on Oakland and $2M on Texas and it's all so confusing and what if the whole thing blows up in his face because he only has $200,000 in cash?  To an outsider, who doesn't understand the bets – it could seem very scary but the bookie thinks you're a schmuck because obviously the bets cancel each other out and he gets the vig no matter who wins.   Like being a bookie – what JPM does isn't a new game, they've been doing it for many years and it's been battle tested.  I will be very surprised if this turns out to be a big deal in the end.  Remember UBS's $2Bn loss from a "rogue trader"?  That was 9/15/11 and they gapped down to $10, were back at $14.50 by Feb and now $11.44 and UBS is a $43Bn bank, JPM is 3x at $137Bn – even after being smacked down.  

    Cashing out/Rustle – I agree.  If we're wrong and the market goes down more – we can always use the cash to make more bearish bets but this has been a great sell-off and it's a great place to take some off the table. 

    FAS Money/Burr – Yes, we will have to roll it since we went the wrong way but no rush.  

    WFR/Rperi – Well it's so far out that it doesn't really apply plus there's not anywhere to go to adjust other than buying back the $5s at .25 if you can.  Then you're in the .55 calls for net .80 and you can hope they bounce and, if they drop to .40, you can DD and have 2x at .60 average and then if you sell the $5s for .25 you'd be in 2x at net .35 vs 1x at .55 so not a bad plan if it falls into place.  Generally though, with 19 months to go – a little patience goes a long way.  

  81. Risk Off  -  I'm starting to go more to cash with anything that's barely up, or down very small.  Seems like the VIX want's to pop, and I'm feeling too bullish.
    Out of the 2014 ECA puts and the 2013 OXY puts for even.  

  82. Fed minutes?

  83. yesterday werent you saying if we go below 775 be need to add more downside positions?

  84. Russel Phil
    I cashed out also. Who cares about the last dime? I kind of think a bounce is finally ripe and ready.

  85. Anyone knows why PBR is making 3 year lows?

  86. Fed minutes/Jabob – Yeah, I forgot all about them!  So has everyone else it seems – isn't that strange?

    Worth a look as there are tons of charts and graphs but the gist is that they are still seeing us on the road to a slow, steady recovery with well-contained inflation and sticky unemployment that won't really go down much in the next few years and they seem fine with that.  

    Summary is: No QE for you!  

  87. Property prices hold steady in Bombay even as there are no buyers:

    I wonder for how long though?

  88. FAS Money – May $91 puts ($7) can be rolled to 3x the $85 puts $2.45 for a .35 credit.  

    IWM Money – Let's buy back that July $55 call ($4.25).  Let's kill the May $54 callers at .25 as well.  

    $5KP – Nothing to do at the moment.  

    $25KP – Also not much to do.  

    • DMND – Up another 1.6% today. 
    • BBY – I'm not even going to look.
    • FAS – Spend $2.20 to roll Oct $100s ($8.80) down to $94s ($11)
    • CHK – No change 
    • AMZN – No change 

    That wasn't too hard…

  89. So, something I just learned in the options world.  A trade just went through for SGEN June 20 Calls at 1.69.  Dose anyone see it in their non-TOS trading platforms?  I do not.  I have another order in for 1.68…but the bid/ask is 1.65/1.75.  I just learned that they exchange does not need to show it in the penny pilot program on the last trade clause….what a crock.  The number of options are correct…but the last trade is not…….be careful, as things are not as they seem.

  90. Phil, would you play Groupon to the downside after FB comes public knowing that on June 1st, I believe, Groupon's lockout period ends and there is a very good amount of stock that will be sold according to CNBC.

  91. 775/Morx – We're not really below it.  Just sort of on it.  

    PBR/Obur – Between oil prices and nat gas, sector investors are losing their nerve.  

    Bombay/Nicha – Super crowded like NYC without viable suburban alternative so they can keep it up for a while.  If they go, the World is in deep doo-doo. 

    Not what they seem/Pharm – They never are.  

  92. Pharm – r u adding more to June SGEN 20/25 bcs?

  93. Phil
    XLF below 14.40

  94. Make that 14.30

    lots of these dogs with fleas hitting lows or close to it..

  96. Bombay/Phil – I hope we get some price reductions as it is just unaffordable. I am waiting to buy.

  97. Is mr stick dead??

  98. Burrben ECA Hier schmeisst du die Flinte ins Korn!! the Jan14 put needs to mature. You are paying practically all the premium back. I still even 50$ in plus the stock dropped only .25c on me. I wish all my plays were like this!!! This is to be suppose a long term play. We both chose to play the next month callers all was working out fine. Sold the Jul 22c for 1.30 now already by .70c in the plus.!!! Hell what a play.

  99. Nicha – I don't know what I have of SGEN right now….I have so much of it!!! :)

    I am adding those…yes.

  100. TLT making new YTD highs again today… It's on a roll with the dollar now!

    I just spoke to my sister who owns a consulting business in Spain but works also in France and she told me that business in Spain is so bad. She used to to 70% there and the rest outside. Now it's 10% in Spain! Not looking good.

  101. FU CHK!!!

  102. Yodi, yeah it's nothing against ECA, I'm still going to hold the stock and sell the calls, but I wan't to lighten my overall risk to the market right now.  

  103. XLB….falling off a cliff.

  104. Oh, lookie there…JNK May 39 Ps…are up….nice.  Bought for 15c last week. 

  105. Oberlacu / PBR — No, I don't, but ever since the Brazilian government started hitting them up for more government contributions and messing with their balance sheet, they have sold off more or less continuously.  Seem cheap to me, but with oil still falling [along with most of my other positions] I don't have the stones to pick any up.  

  106. At this point, I'm kind of counting on Facebook to save the markets.  If not, we'll be taking some very bearish disaster hedges – especially in the Qs.  

    GRPN/Rustle – If they get a good pop, then sure I like them short.  If anything, FB should be a threat to GRPN. 

    XLF/Denlundy – Yep, all looking very ugly at the moment but, situationally – we just need to watch and wait and see what holds and what fails.  We know the JPM news knocked down the Financials but we expected resignations so not really news.  We knew the Fed wouldn't be announcing QE3 in the minutes but many are just figuring it out.  AAPL is taking down the Nas on no particular news and it's dinging the S&P as well but it's just an afternoon move – certainly not something to run around repositioning over.   

    Waiting/Nicha – So is everyone else it seems. 

    Dow volume a bit lighter than we thought it would be – 96M at 3:30.

    TLT $122, VIX 22.50 – panic in the air.  

  107. GOOG is running the opposite way

  108. So how would one short the Great U.S. Farmland Bubble?

  109. CHK at $14 now… There is a fire sale again today!

  110. Farmland / Zero – Jim Rodgers was actually saying the other day that we should invest in farmland. Even after people can't buy iPhones and iPads, they will still need to buy food! And the US is the Saudi Arabia of food. That is until global warming creates havoc.

  111. Stj:  With all due respect, has Jim Rodgers ever been right?  He was pushing China as the future Empire of the Sun, as I recall.

  112. 2:00 PM On the hour: Dow +0.18%. 10-yr -0.09%. Euro -0.01% vs. dollar. Crude -1.26% to $92.8. Gold -1.4% to $1535.35.

    3:00 PM On the hour: Dow +0.15%. 10-yr -0.01%. Euro -0.06% vs. dollar. Crude -1.24% to $92.81. Gold -1.11% to $1539.75.

    "The buildup of debt worldwide took place over years – now the market has decided this is a problem in real-time," says Jeff Gundlach at the Ira Sohn conference. Deficits DO matter, he continues, and are now causing social unrest in Europe. "Nothing like a hot summer when 1/3 of the under-25 crowd have nothing to do but throw Molotov cocktails."

    Good summary:  The NBER's Justin Wolfers on the FOMC minutes: "We have a plan. We don't plan to follow it. But our plan to revise our plans isn't a plan either … (it's) painfully clear that forward guidance is mostly (baloney) and that it doesn't represent their current plans."

    FOMC Minutes: Little change from the previous stance. Some members are becoming more confident about the durability of the recovery, but several said additional easing may be needed should it falter. The Richmond Fed's Jeff Lacker dissented over the currency swap arrangements with Canada and Mexico.

    More on the FOMC minutes: The committee discussed the possibility of providing greater clarity about what conditions would be necessary to trigger a change in monetary policy. With the Fed on hold for now, the S&P 500 gives up just a shade more, -0.2%.

    Senior judge Karolos Papoulias has been sworn in as PM in Greece, and will head a caretaker government until new elections (expected on June 17). "There is no panic," he says of deposits exiting the banks, "but there is great fear which could turn into panic."

    Einhorn goes Jim Chanos on China, saying the country views Western investors as marks. It's infrastructure is overbuilt, the roads are empty, the houses unsold. Other than owning U.S. companies that may sell there, he's staying out (h/t Josh Brown). More from Einhorn. 

    More from Gundlach at Ira Sohn: He suggests another contrarian pairs trade – Long Spain (EWP), short SPY. One he mentioned a few weeks ago – long natural gas, short Apple is performing famously well. Believing the Fed isn't raising rates anytime soon, he suggests a leveraged long position in Libor.

    Philippe Laffont pitches Virgin Media (VMED) at the Ira Sohn conference, suggesting it's in a small universe of companies that can buy back shares consistently over the next 5 years. In fact, the company could repurchase all of its stock with free cash flow over the next 5-9 years. "Imagine what that last share will be worth." Stock pops, +2.4%.

    Herbalife (HLF +8.9%) soars as the company's name has not (yet) been uttered by David Einhorn at Ira Sohn. More from Einhorn.

    Petrobras (PBR +2.2%) reports its Q1 net profit dropped 16% Y/Y as higher sales volumes were offset by lower foreign exchange gains on overseas debt, but EPS of ~$0.36 and revenues (+22% Y/Y) easily beat analyst estimates. Exports rose to 714K bbl/day vs. 631K bbl/day in the year-ago period; demand for gasoline and diesel rose 24% and 9%, respectively. 

    J.P. Morgan's Chris Blansett chops KLA-Tencor (KLAC-4.7%), Lam Research (LRCX -4.5%) and Novellus (NVLS -4.4%) to Underweight, predicting a "downtick" in capital expenditures by chip foundries in H2 of this year, and that capex in the memory and logic sectors of the business will be lower than many investors expect.

    Google (GOOG) rolls out its Knowledge Graph, a panel that appears on the right side of search results and contains a variety of info relevant to a query. Part of a broader effort to include more semantic info in its results, Google claims its Knowledge Graph database holds info about 500M people, places, and things, culled from dozens of web sources. The move comes as Bing (MSFT) unveils a semantic search overhaul focused on social media content.

    Gartner estimates mobile phone sales fell 2% Y/Y in Q1 – that's a bit worse than the 1.5% drop estimated by IDC, and leads the firm to think its 2012 estimates will have to come down. However, Gartner believes smartphone shipments grew 44.7% Y/Y (IDC is at 42.5%), with Android (GOOG) and the iPhone (AAPL) accounting for 56.1% and 22.9% of sales, respectively. NOK's Symbian saw its smartphone share fall by over 2/3 to 8.9%, while RIMM's fell by nearly half to 6.9%. (also

  113. The Dow is the best behaved of all the indices but NASDAQ is down 0.7% almost on the back of AAPL – only 20 points away from the Down 5% line. I guess live and die with it!

    Phil – Time to brush off the old Big Chart!

  114. Rodgers / Zero – I actually don't care for the guy – he is another whore pushing his own picks, but on the subject of food, I can't disagree!

  115. TNA May (Friday) $47/49 bull call spread at $1.60 – 5 in the $5KP and 10 in the $25KP.  

  116. Einhorn, Chanos / Phil – I think that in retrospect we will see that Chanos was right all along with China. As opposed to the Rodgers of the world (who was wrong on China even if he is right on ags), Chanos always seem to make a logical and well supported argument. That's more that we can say for most guy on CNBC. He might have been early, but good ones usually are.

  117. Phil – Don't (BBY 18.96) Look!…..  ;)

  118. RUT testing how far Phil lets it go past 775 before it officially blows the level.  AAPL finally catching a bid, maybe some short covering.  If the bulls could muster a squeeze above 1340/1345, they might goose the market for FB on Friday.

  119. Apple calls just popped.

  120. Seriously – Who wants to buy this market?…..

  121. zerohedge just tweeted "remember when the market was a discounting mechanism?" hahaha

  122. yah i remmeber saying that five months ago..on rodgers..gosh he is lets call him tyrion

  123. Fed/StJ – Thanks but came early on a busy day!  Usually they say something on CNBC – I totally forgot it was coming. 

    GOOG crankin' – If FB is worth $100B, GOOG is worth $1Tn!  

    Farmland/ZZ – I wouldn't say it's a bubble with 7Bn mouths to feed.  

    CHK very sad.  Ironically, Nat Gas flying to $2.63, up .13 today (5%).  

    Rodgers/ZZ – He bugged out to China ages ago.  All his eggs are in that basket.  Now he's poking back around the US before he's completely wiped out.  

    Old chart/StJ – Gosh I hope not!  That would be sad.  

    Lalalala 1020, I can't hear you!  

    Even XRT went down today – $59.05.  

    135M on the Dow at the bell.  Big volume surge was mostly down but not too damaging at the end. 

    RUT/3putt – Had they blown it this morning, I'd have been more bearish but we have to see if overnight confirms this move.  China was down 600 yesterday, do they have another 400 in them?  

    Who/1020 – That's the point.  They are doing a great and highly coincidental job of flushing people out ahead of what is likely to be the biggest IPO of all time.  Scam or not, it's very likely FB will set off a buying frenzy in the space and we finish the week off with a bang.  If that doesn't happen – I will be very, very bearish but from what I'm hearing and the way they are extending the offer and raising the price – it's way oversubscribed.  Also, we have to consider that people are cashing out 1-5% of their holdings to raise cash for FB on Friday – sure it's moronic, but that's what people do.  

    Has it been announced that Iksul (Bruno the Whale) is leaving JPM?
    I'm not seeing any news about it on Bloomberg or Google news.
    The only mention I see is from about Noon today, at Bloom, saying he is still working there…..

    Of course, I totally expect he WILL be let go, but, I think it was yesterday that I said I thought he would stay as long as they need him to help "unwind" most of it, and then he'll leave after that.
    Knowledge or comments?

  125. FB / cartooon
    I love the FB stock certificate. It think it should be law that everybody who wants to purchase FB shares be required to read that and initial it before getting shares.

  126. It think    should be   >I think

  127. @Felipe

    Someone else may have posted this but, if not……

  128. Phil/Who  Makes sense – though, it could reverse as early as lunch…..

  129. I don't like when CFO's resign even when they leave for another opportunity. Especially with the stock in the toilet.
    4:10 PM MEMC Electronic Materials (WFR) says it will transition the Chief Financial Officer role to Brian Wuebbels from the company's current CFO, Mark Murphy, who resigned earlier today. Mr. Murphy plans to return to Praxair(PX) to become President of Praxair Surface Technologies. Mr. Murphy will work with WFR in a consulting role over the near term to assist in the transition. (Read the comments on this)

  130. I have to say that I don't feel bad about that:


    Sec. 212. [8 U.S.C. 1182] details general classes of alients ineligible to gain entrance into the United States. And the law specifically references people in Saverin’s category …

    Former citizens who renounced citizenship to avoid taxation.-Any alien who is a former citizen of the United States who officially renounces United States citizenship and who is determined by the Attorney General to have renounced United States citizenship for the purpose of avoiding taxation by the United States is excludable.

    I mean the guy fled to US to avoid crime in Brazil, went to a college that is partly funded by our government through research grants and other program, would have not had the opportunity he had to start Facebook had he been is some 3rd world country and then he leaves to avoid paying taxes on billions of dollar which would leave him with enough to not work a day in his life. Good riddance!

  131. I love Paul Volcker:

    “You’ve got great advantages if you’re a government regulated bank,” Volcker explained. “Take the two big remaining investment banks — used to call them investment banks — Goldman Sachs and Morgan Stanley. Both during the crisis got a banking license. Why’d they get a banking license? They wanted the protection of the government in the middle of the crisis. Now the crisis is over, if they want to do proprietary trading, they want to do a lot of other things, it’s very simple: give up their banking license.”

    Back to you Jamie… And don't come back to you sugar daddy when you need him again!

  132. Phil – You talked about it the other day and look like Formula 1 will be in NJ soon. And that track looks great…

  133. I'll stand my ground on farmland against all you city slickers.  When you look at who's been buying farmland over the last five years [hint:  the farmers were selling] and the price-vs.-any conceivable yield, you will conclude, "bubble."  Homilies like "people will always need to eat" or "they ain't making any more of it" would be laughed out of PSW if applied to Frito-Lay or FCX.  Farmland isn't any different.  Oh, and on the "7 Billion" — the projected demographic profiles of most countries indicate that you should be loading up on Pampers instead of prairie.

  134. Phil – FB IPO, that is on the Nasdaq right? If we go down tomorrow do you like buying weekly QQQ calls or /NQ futures for the FB bounce on Friday?

  135. Phil – RE: "StockCharts weekly chart only goes back to 2009" (2009/Rain)
    Note: 3 years is just one of's "Predefined" ranges.
    If you want it to go further back, set chart date manually by selecting: "Start/End" in the "Range" drop down menu, and then filling in the date you want to start with.

  136. Just for fun, here are the old levels:

    The broader indices would not look good there either!

  137. JPM
    I just looked at the Financials for JPM.  60 Billion in revenue, 17 Billion in profit.
    That's a REALLY good profit margin, right?
    Question 1 – The "2.3" Billion loss, which will probably be at LEAST 4 Billion,  if not more so, is not really ALL that much, in context, is it?
    What I mean is, lot's of business have a"poor quarter". Assuming the total loss from the Whale thing is not more than around $4 Billion, isn't that a "fairly minor" thing in the Big Picture?
    I know you wrote something a few days back (Friday maybe) saying that this was a fairly minor bump in the road. Now that I've had a few days to read about it, my thinking is similar, assuming this is not the tip of some huge iceberg, which I assume it is not.
    Question 2 – Also, I did not realize until Monday night that the shareholder Meeting was scheduled for Tuesday. Obviously that played a part in the timing of their announcement Thursday, right?  They couln't wait until 2 days AFTER the meeting, right?
    Question 3 – Is a 16 or 18 Billion dollar loss in market cap since Thursday an over-reaction?

  138. hi newbie
    my .01 input
    To me it's not the amount $2bn or the relationship of the $2Bn to JPM's total profit or size — it's the fact that it was not detected or seen coming.
    This tells me it could have been $10Bn or 18Bn or more and there is/was no firewall or early warning system in place to catch a loss coming down the pike!.
    Dimon and MSM keep talking about the size of loss as RELATIVELY small — Dimon likes that talk because it draws attention from the fact that it was a totally unexpected surprise — and that's a HUGH issue.

  139. International Monetary Fund Managing Director Christine Lagarde: "If I knew (that the euro zone will fail), I probably would not tell you. But it so happens that the political drive that I see, that I hear from the key leaders is to actually keep it together," she said in the interview on Dutch public television Nieuwsuur.
    Damn, and here I thought we'd get a heads up…

  140. Phil
    relating to TNA May (Friday) $47/49 bull call spread at $1.60 – 5 in the $5KP and 10 in the $25KP.  Why not the $45/48 bull call spread at $2.50.  We then grab a quick .50 instead of .35?

  141. I guess we could expect a bounce to the mean…


    With commodities continuing to take it on the chin on a daily basis, below is an updated snapshot of our trading range charts for ten of the most widely followed commodities.  For each chart, the green shading represents between two standard deviations above and below the 50-day moving average.  Moves above or below the green shading are considered overbought or oversold.  As you'll see in the charts, every commodity with the exception of natural gas is currently at or below the bottom of its trading range.  

    Oil, gold, silver, platinum, and orange juice are the most oversold, while wheat, corn, coffee and copper aren't far behind.  If you look at the charts, over the last year, most commodities have bounced when they have gotten this oversold, so we should be due for at least a small rally soon.

    Time to open a small position in Orange Juice?

  142. I would say coffee!

  143. Phil / CHK – Based on my post the other day, CHK is now below my entry price (JAN 17.50 PUTS for an entry at 14.30).  I am considering a DD, JAN 12.50 for an entry of 9.15 for an average entry of 11.73.  Would you recommend a different strike? Something else?  Hold Steady?

  144. Phil / CHK – You can also just say 'Read the post concerning CHK Jan 14 Put for 5.50'.  Thanks!

  145. I guess it's all good then… Mitt Romney on the JPM loss:

    “A trading loss of this nature is something from which JPMorgan should learn, and I think as well regulators should look at it just to understand what happened and why it happened. But…this was not a loss to the taxpayers of America. This was a loss to shareholders and owners of JPMorgan and that’s the way America works Some people experienced a loss in this case because of a bad decision. By the way, there was someone who made a gain. The $2 billion JPMorgan lost someone else gained.

    Good business analysis there…

  146. And from a blog reader out there…

    You know, it’s interesting, as an attorney, I spend a lot of time reading the libertarians over at the Volokh Conspiracy.  To a man, they purport to believe in the sanctity of contract rights.  During the auto bailout, they raged and gnashed their teeth when various bondholders were forced to take losses by the big unions and their lackeys in the administration.  Remarkably, they never have anything to say when a worker gets screwed out of earned pension benefits or health care coverage.  It’s as if the contract rights of labor are somehow illegitimate or second-class compared to the inviolate rights of the One Percent.

    I said the same thing when we had all these guys on CNBC in 2009 saying that the execs at AIG and the banks should get their bonuses because, by Gosh, a contract is a contract. But when they tore down the union contracts and renegotiated deals it was for the greater good. Shared sacrifices, GOP style!

  147. Disregard the above 2 posts.  As i read today's board (CHK…Etc..) it just reinforces why I am a member.

  148. I am a new member.  i am going thru the process but would like to review the disaster hedges asap. Would someone be good enough to post the link or the hedges. tks

  149. StJean / Levels
    Ok I never really looked hard at the Level's numbers, but now that I do, it looks like the Dow is a multiple of the S&P, and NYSE is a multiple of the RUT.  Just wondering why this is.  I got confused when you and Phil re-did the levels after Eliot left.

  150. ban2 / JPM
    That's a VERY GOOD point that I hadn't given all that much thought to.
    From the news reports, it sounds like Dimon and the others truly did not know the magnitude until mid to late May. Also, from reports, it sounds like mid May was when things really started to move very hard against them, and then did pretty much every day for about two weeks.
    btw, as I was reading over the weekend, and on Monday, I saw something in the Journal to the effect that Ina Drew had tried to "minimize" the importance of the position. The tone of the article (it didn't make it real clear) was that she was trying to MINIMIZE IT TO JPM MANAGEMENT (meaning Dimon). If that's true, I imagine he wasn't terribly happy about it  :)
    Is this a "Zero Sum" situation? Does it necessarily hold that every dollar JPM lost was a gain to some other party? Or is there a "vaporization" somewhere, that does not have to be a profit by a counter party? If so, shouldn't that be pointed out in more news articles? Yeah, a big loss for JPM, but if a whole bunch of smaller hedgies "got one over" on JP, that seems not so bad. They're certainly not complaining.
    When I make a small profit on my TNA / TZA, I just "mentally pretend" that I made the profit off Goldman!

  151. Levels / Burrben – I think that it's mostly a coincidence. Phil calculates the numbers by looking at long term charts and levels of support and resistance. Eliot and I just plot the numbers given by Phil.

  152. Iksul/Newbie – No, you have it right, rumors but certain that, for now, he's staying. 

    Grant/Flips – Have you ever wondered who has time to watch this stuff?  

    WFR/Rain – I don't blame the guy, the stress there must be enormous.  PX is a nice little business with a market cap nearly 100x WFR – who's gonna turn that opportunity down?  

    Saverin/StJ – I don't think he's getting all that much but, then again, not much from FB could be a couple of Billion!  The way he was screwed over by Zuckerberg and the US Justice System – I sure don't blame him for telling this country to F off.  He funded the company as an 1/3 money partner and was literally pushed out by the Silicon Valley mafia and tricked into diluting his position away to nothing.  Sure he's a dumb-ass for letting it happen but I'm sure Jobs could have done it to Woz or Gates could have done it to Paul Allen – you just can't expect your partners to be such sons of bitches and, if they are – one would imagine there would be a remedy through the legal system but this poor bastard got shafted – in as much as you can call ending up with a couple of Billion Dollars getting shafted!  

    Formula 1/StJ – I used to live right at the end of that track.  Up the hill on the far right – that turn would be right under my window.  

    Farmers/ZZ – They are not stupid.  When people come around offering them 10 year's worth of income for the land – they take it!  Those same farmers will take a year or two off, waiting patiently and, when the land comes back down in price – they'll buy it right back.  But people do need to eat – even when they're wearing depends.  

    QQQ/Jrom – Not a bad idea but be careful.  If anything goes wrong with FB IPO – look out below!  

    Stockcharts/Diamond – Thanks but it's the default gallery view I keep up during the day and I'm pretty sure I can't adjust those defaults.  

    Big Chart – Arrrggghhh ! 

  153. Disaster Hedges/Millcreek – I don't think there are any current disaster hedges in place for these levels.  As Phil noted above, the likely candidate may be the Qs.  Stay tuned early morning as I'm sure Phil will post something should futures, etc. warrant them.

  154. JPM/Newbie – That was my take on it.

    JPM/Ban – We're back to the bookie thing now.  Sometimes a bookie takes a big bet on one team and then finds he can't lay it off in time due to lack of interest and he finds himself unintentionally imbalanced.  Sometimes he's lucky and sometimes he isn't but the imbalance of one bet does not mean his other 500 bets are imbalanced.  It is possible that finding one imbalance you may wonder if this particular bookie is sloppy but it happens to the best of them once in a while and they usually break someone's knee-caps and move on.  That's probably all this is for JPM – one of the runners either didn't lay off a big bet properly or, even worse, he caught the gambling bug and thought he could beat the odds.  Either way – you make sure you pay your debts – take the guy or guys who were responsible and make an example of them so the rest of your crew stays in line and then it's back to business…

    TNA/Den – That is a better play.  I did not see it at the time.  

    Ranges/StJ – Amazing how fast we move from top to bottom.  I don't like those cloud things though because they just stretch to accommodate a bigger move so the tops and bottoms aren't very meaningful predictors of a change of direction.   Very strange doings with coffee and OJ – almost down 50% – does seem like a lot.  I suppose both are optional food items but wheat getting whacked too.  

    CHK/Jfaw – It seems like you have it under control.  If your net is $14.30 and it's 1x – given that we're not sure CHK won't go down further, I wouldn't rush to DD.  I don't know what your current position is, other than net $14.30 but the Jan $17.50 puts are now $6.10 and they can be rolled to 2x the 2014 $10 puts, now $3.30 and that can't be a bother, right?  So I assume you sold the $17.50 puts for $3.20 and that means splitting them to 2x the 2014 $10 puts would net you another .50 so about $1.80 per 2014 $10 put is a net $8.20 entry as is on 2x.  If you are itching to take advantage of the dip, I'd suggest selling the Jan $12.50 puts for $3.35 and setting a stop on the $17.50 puts at $7, at which point you would be able to double down on the $12.50 puts and then you would be 2x there about even ($1.60 per short put) and THOSE should be rollable to the 2014 $10 puts if you need to but, meanwhile – if it goes well, you'll simply sell the additional 1x of the Jan $12.50s for $3.35 and then CHK finds a floor and heads back up and now you've sold 2x $3.20 (ish) and are on a good track again. 

    Contracts/StJ – Do not get me started!  

    Disaster Hedges/Millcreek – Welcome!  For an overview of the strategy, check out:  


    Hedging For Disaster – 5 Plays that Make 500% if the Market Falls (Members Only)

    As to specific hedges – Remind me tomorrow and I can post a couple of useful ones (but hopefully we won't be needing them).  

    Multiples/Burr – Blame the bots.  They have things so synchronized, the indexes are lining up.  

    Zero Sum/Newbie – In theory, there are counterparties for the trades and, near the top, it can be a zero sum game as JPM isn't getting raped by fees and bid/ask spreads that suck their money away with every trade they make.   Sure there are winners and losers but keep in mind that, most quarters, JPM makes their $2Bn and everyone else loses.  That's why this is all much ado about nothing most likely. 

    Hedges/Jbaker – Oh we have plenty of hedges like TZA, EDZ, SQQQ etc that we've taken the past couple of weeks – we just didn't do official disaster hedges as we decided instead this time to make the Long Put List when we were topping. 

  155. Phil / CHK – Thanks for the advice… I will study.  I have 5 Puts (Yes… I scaled in incorrectly).  If I have learned anything over the last few months is to have PATIENCE.  If I am reading the board correctly, the advice is to wait and see where the floor is made, decide if CHK is still a long term investment based on knowledge to date which you have laid out in today's postings (thanks) then if it is still a good investments (microwave theory) DD and sell Puts into the move up as a way to further scale in.  Ultimately, the motivation is to build a long term portfolio!  CHK, if all goes well, should be a stellar holding.

  156.  An interesting take on jobs….. 

  157. Good morning!  

    Damn, our futures were looking good until Europe opened – those guys are hopeless – as in, having no hope…

    2:29 AM Asian markets pitch higher, for a change, after a choppy session. Japan +0.9% to 8877. Hong Kong +0.7% to 19390. China+1.3% to 2376. India +1.0% to 16190.

    Japan's Q1 GDP expanded at a faster-than-expected annualized pace of 4.1%, outstripping consensus of 3.5%. Compared to the previous quarter, GDP rose 1%. The growth was driven by a strong rebound in exports but also by post-earthquake reconstruction activity, which means the growth – high compared to developed peers – is likely unsustainable.

    China topped India as the world's top consumer of gold in Q1, solidifying expectations that China will be the largest source of demand for gold in 2012, according to the World Gold Council. On the whole, Q1 volume demand for gold was down 5% Y/Y while the average gold price of $1,690.57 was +22% Y/Y.

    China will start a trial next week that expands the scope of short-selling, according to the China Securities Journal, allowing 25 brokerages to borrow stocks for clients who wish to short, and to borrow money on behalf of clients for margin financing. 

    That was 2:29 but the Hang Seng dropped 250 points into it's close as Europe opened and finished down 0.31% at 19,200.  The Nikkei and Shanghai were already closed so they held their gains but India lost half to 0.42%.  

    Europe is down about half a point, at the day's lows (so far).  

    Britain must make ready for the storm as clueless Europe tears itself apart. Usually it's war that does the damage; there's a certain irony in the fact that this time around it's a project designed to prevent these periodic outbreaks of insanity by binding nations together in irredeemable economic and legal union – the euro. In fact, the single currency is having the exact opposite effect, only bizarrely, Europeans still refuse to see it. Even the Greeks still cling, ever more desperately, to this totemic symbol of European solidarity.

    Spain's final Q1 GDP -0.4% Y/Y, in-line with expectations and previous estimate. GDP -0.3% Q/Q, also in-line with expectations and previous estimate.

    Rajoy Risks Bailout Yields in Trial of Spain's FundingSpain will try to show investors it can keep funding itself today as yields approach levels that pushed other nations into bailouts and foreign investors shun the country’s bonds. Spain will seek to sell 1.5 billion euros ($1.9 billion) to 2.5 billion euros of bonds maturing in 2015 and 2016, about half the level it aimed for a year ago. Spanish 10-year bond yields rose as high as 6.5 percent yesterday, approaching the 7 percent mark that pushed Greece, Ireland and Portugal toward European rescue packages. “Spain is potentially the biggest euro-zone accident waiting to happen,” said Neil Williams, chief economist at Hermes Fund Management in London. “Unless there is a sudden and sustainable improvement in Spain’s underlying competitiveness the next round of euro-zone governments’ support will have to stretch beyond the debtor nations currently on investors’ radars.”

    Spain Bids to Pin Down Real Estate Losses. Spain’s government will on Thursday announce the appointment of Blackrock and Oliver Wyman as independent valuers of the real estate loans that lie at the heart of the country’s banking crisis.

    "The centrist parties will rebound" in June elections, contends a Greek businessman, dismissing polls pointing to a victory for the left-wing Syriza party. Toss in the influence of France's new president, and another Greek rescue just might occur this summer. Whatever one thinks of such schemes, another can-kicking deal is not being priced into markets at the moment.

    The Fabled Greek Mega-Bailout.

    Prospects for European Banks Once Again Darken. The start of 2012 was meant to herald a brighter future for European banks. Five months on, the picture is darkening fast. Until recently, European banks were basking in the glow of €1 trillion ($1.27 trillion) of cheap loans dished out by the European Central Bank. With fears that Greece could exit the euro back on the horizon, a credit-rating review of 114 European financial institutions under way by Moody's and the need for many European banks to shrink themselves back to health, the outlook is less rosy, analysts say. "Clearly sentiment has soured," said James Longsdon, a managing director of European, Middle East and Africa institutions at Fitch Ratings.

    Huge Risk of Euro Breakup if EU Fails to Act – David Cameron. David Cameron will issue his starkest warning yet on the plight of the euro on Thursday, saying unless urgent action is taken there will be a breakup, adding he will do whatever possible to keep Britain safe in perilous times. Cameron's stark message comes only a day after the chancellor, George Osborne, had said open speculation about the eurozone was itself damaging the European economy. Cameron and Osborne now believe that with the failure of the Greeks to form a government, a direct warning has to be given to the eurozone leaders about the scale of the threat, and the need for urgent action.

    Euroland's €1 trillion question: after Greece goes, can Spain stay inEveryone knows Greece is leaving the euro, the real challenge is preventing the fall-out extending to Spain.

    The Dollar is back at 81.63 after bottoming at 81.37 and the Euro dove from $1.2745 back to $1.2714 so far.  $1.5895 to the Pound is a lower low than yesterday with 80.32 Yen to the strong Dollar and, of course, EUR/CHF is 1.2009.  

    Oil $93.10, gold $1,548 on China news, silver $27.50, copper $3.49 (bad), nat gas $2.645 and gasoline $2.914.  

    Rumors are still driving the market and here's the one that's sinking us at the moment:  

    It's open season on the trading positions at JPMorgan's (JPM) Chief Investment Office, and the $2B loss disclosed 4 days ago has grown to $3B, according to sources. Markets will fluctuate and today's loss could be tomorrow's gain, but this is a bank – holding government-insured deposits and with access to near-free capital from the Fed – not a hedge fund.

    JPMorgan's(JPM) Trading Loss Is Said to Rise at Least 50%The trading losses suffered by JPMorgan Chase have surged in recent days, surpassing the bank’s initial $2 billion estimate by at least $1 billion, according to people with knowledge of the losses. When Jamie Dimon, JPMorgan’s chief executive, announced the losses last Thursday, he indicated they could double within the next few quarters. But that process has been compressed into four trading days as hedge funds and other investors take advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank.

    JPMorgan(JPM) Fallout 'Could Get a Lot Worse': WhitneyThe JPMorgan Chase trading controversy comes at an inopportune time both for the bank and the industry as a whole, which needs to rethink the way it does business, analyst Meredith Whitney told CNBC.

    Thursday's economic calendar:

    8:30 Initial Jobless Claims

    10:00 E-Commerce Retail Sales

    10:00 Philly Fed Business Outlook

    10:00 Leading Indicators

    10:30 EIA Natural Gas Inventory

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet 

    Notes From Ira Sohn Conference Presentations 2012.

    Dollar Funding Costs Jump as Debt Sales Scrapped: Credit Markets. The cost to borrow in dollars is rising at the fastest pace in five months as Europe's debt crisis leads investors to seek shelter in U.S. assets, spurring companies from China to Brazil to cancel bond sales. One-year cross-currency basis swaps fell to 68 basis points below the euro interbank offered rate yesterday from 53 on May 10, the biggest four-day drop since Dec. 14.

    The current consensus view of U.S. equity strategists is for investors to allocate just 52% of their portfolios to equities. This is thelowest allocation since March 2009, and the most negative they've been on stocks since the bull market began more than three years ago. "Sounds like a buying opportunity," says Bespoke co-founder and contrarian investor Justin Walters. Simply put, when strategists hate stocks most, it is usually near the best time to buy.

    Fed Governor Elizabeth Duke says that while the housing market is slowly mending, it's still in need of a lot of help. Any sustainable housing recovery depends on more action from Congress and federal regulators to stabilize the U.S. mortgage market. What can they do? They can start by loosening lending standards by banks and mortgage lenders, Duke says. That will go a long way towards attracting buyers back to the market. 

    News from Fantasy-Land!  The Cleveland Fed's May estimate of inflation expectations over the next 10 years clocks in at 1.38%, a hair less than the last report. It's a fairly new model, and combines information from a number of sources in the hope of improving on the so-called "break-even" rate derived from TIPS.

    More BRICs falling out of the wall:  Russian Funds Flee as Anti-Putin Demonstrators Dig InInvestors are fleeing Russia as demonstrators against President Vladimir Putin dig in, exacerbating the impact of Europe’s debt crisis on the country’s markets, money managers from Frankfurt to Moscow said. Activists who clashed with police before Putin’s May 7 inauguration are protesting non-stop in Moscow, using the Occupy Wall Street movement’s tactics. As the benchmark RTS equity index entered a bear market, Russia-focused equity funds recorded $251 million of outflows in the seven days to May 9, the most this year, while China lost $127 million, India $148 million and Brazil $167 million, EPFR Global data show.

    BRIC Stocks Erase 2012 Gains as Technology Shares Drop on ChinaThe MSCI BRIC Index for shares in Brazil, Russia, India and China tumbled for a fourth day, wiping out this year’s gains, as concern deepened that China’s economic growth is slowing and Europe’s debt crisis is spreading. The benchmark measure for the largest developing nations dropped 2.3 percent to 262.10 as of 4:35 p.m. in New York, led by an 11 percent decline in Shanghai-based Semiconductor Manufacturing Corp. after it was cut from the MSCI China Index. The Bovespa Index fell for a seventh day. Usinas Siderurgicas de Minas Gerais SA, Brazil’s second-largest steelmaker, dropped 7.3 percent. The MSCI Emerging Markets Index hit the lowest level since Jan. 2. Gauges sank more than 2 percent from Hungary to Taiwan.

    Managers Buy Russia CDS On Oil Price Drop. Asset managers are buying credit default swaps on Russia because of the impact lower oil prices could have on the country's finances.

    N. Korea Ship Seizes Chinese Boats for Ransom, Global Times SaysA North Korean ship seized three Chinese boats with 29 fishermen aboard and demanded more than $140,000 to release them, China’s Global Times newspaper reported today. The fishing boats were captured at gunpoint while trawling in Chinese waters on May 8, the newspaper said, citing an owner of one of the boats, identified as Zhang Dechang. He said the captors were demanding 300,000 yuan ($47,500) to release each vessel. China’s Foreign Ministry is trying to verify what happened and resolve the issue, state-run China Central Television reported on its website yesterday. A standoff could strain ties between North Korea and China, its main financial and diplomatic backer.

    Fall in Chinese Loans Poses Economic ThreatBanks Narrow Range of Firms They Are Willing to Assist, While Companies Are Wary of Borrowing Amid Unsure Prospects.

    It Looks A Lot Like China's Security Head Is About To Be Ousted.

    As Internet IPO activity (headlined by you-know-who) heats up, M&A activity is cooling off. PwC believes only 9 Internet M&A deals were conducted in Q1, down from 20 in the year-ago period. For the tech sector overall, deal volume fell to 64 from 76 in the year-ago period, and 69 in Q4. However, average deal size rose to $452M from $330M. The decline in deal activity could prove a headache for bigger tech names that badly need to buy an upstart to shore up a product weakness.

    Shareholders ask a judge to delay Chesapeake Energy's (CHK -4.2%) June 8 annual meeting, arguing investors need more information to make "an informed vote" on proposals concerning Aubrey McClendon's and the re-election of board members. 

    In its Energy in Charts report, the American Petroleum Institute warns of a looming U.S. energy crunch, calling for steps from opening up more federal lands for drilling to accessing more U.S. coastal areas for oil and gas exploration. A Center for American Progress response stresses the results of unchecked global warming that could ensue if Big Oil is granted its wish list.

    The Most Important Energy Project In The World Is Happening In This Remote Part Of Canada.

    "Good news for all North American oil producers": The spread between Brent crude and WTI will collapse as the reversed Seaway pipeline is completed and expanded, Canadian National Resources (CNQ) President Steve Laut predicts. The spread should equal the ~$4/bbl cost of shipping on the line upon completion in 2013, Laut says. (earlier)

    Senators Urge Regulators To Act On Speculative Trading Limits. Senators have urged "swift action" from regulators to curb speculation in gas and oil markets, even as the price of gas has started to fall.

  158. As Netflix (
    NFLX -4.2%) has another down day, CFO David Wells proclaims customers who cancelled their subscriptions last year due to displeasure with Netflix's price hike are rejoining the service, and that rejoining subscribers (those who left a year ago or less) amount to 1/3 of new subscriptions. Of course, that might also be a sign of slowing first-time subscriber adds. Separately, Netflix is rolling out a revamped web video player.

     "There's an elephant in the room," says David Einhorn at Ira Sohn, unveiling bearishness (but no short of yet) on Amazon (AMZN). He wonders if it's really a better business than the companies it's taking a bite out of. "Operating profits haven't grown at all. They've taken $30B in profitless revenues from other retailers." (previous)

    Two days ahead of the biggest tech IPO ever, debate continues to swirl over the long-term health of Facebook's (FB) ad business. The WPP Group's Martin Sorrell asks whether Facebook's focus on social interactions makes it an ineffective marketing platform, albeit a useful one for PR and word-of-mouth. Others tout Facebook'seffectiveness as a brand and community-building tool, while granting Google (GOOG) is superior for driving commerce.

    Ahead of Facebook(FB) IPO, a Skeptical Madison Ave. With Facebook, Mark Zuckerberg has created a seemingly perfect home on the Web, one where people feel comfortable chatting with friends, playing games, sharing photos and videos, listening to music and revealing the most intimate details of their lives. The $100 billion question is whether Facebook will be a perfect home for advertisers, as well.

    As retail interest in the Facebook (FB) IPO hits a fever pitch, the company is increasing the number of shares available at the end of its IPO lockup period (lasts 91 days) by 96M to 268M. Of course, many institutional holders are using the IPO itself to cash out

    With Apple (AAPL) TV set rumors popping up every week, and Google (GOOG) doing whatever it can to make its TV platform a success, the TV industry is about to see a platform war commence that's similar to the mobile industry's fight, argues Forrester. And in that war, Microsoft (MSFT) currently has the pole position thanks to the Xbox and its long list of content deals. Microsoft recently boasted its 40M Xbox Live users spend over half their Xbox time consuming video/music.

    Sounds like a BS rumor to me!  The retina displays Apple (AAPL) is reportedly planning to use in next-gen MacBook models due next month could cost nearly $100 more than regular displays, estimates NPD's Richard Shim. That could put some near-term pressure on Apple's gross margin, which hit a record in the March quarter, though the company's history of cutting favorable deals with component suppliers might limit the impact. (also)

    David Einhorn and Jeff Gundlach square off over Apple (AAPL) at the Ira Sohn conference. Einhorn sees no reason why Apple can't eventually have a $1T market cap, and touts its software strength, cross-selling ability, and relatively low hedge fund ownership rate as positives. Gundlach continues to think (previous) Apple product refreshes will lose their ability to wow consumers. (more)

    So it's the usual madness this morning and still – there really is nowhere to put your money except Dollars, US Equities and TBills.  

    We will need a few disaster hedges because, if Facebook does fail – disaster will be a completely inadequate description of what is going to happen next week. 

    Of course FB could do well but the hyenas could succeed in taking down AAPL and the Nas anyway or possibly JPM could fail and wreck the Global markets or Greece could exit the EU and rip a $500Bn loss through the Financial sector anyway…

    Remember the good old days when we used to only worry about Iran closing the Strait of Hormuz?  What every happened to those wacky kids anyway?  

  159. Phil / FAS / Hedges
    So I had a nice wake-up email from my broker that the short 91 FAS puts was a mis-trade and I didn't get out at $7.  I'm therefore still holding the 2 short 91's priced now at most likely at $9+ with FAS at 82.  I sold these for $2.69  I did short 6 of the 85's for $2.70 for a net credit of $8.10, but these are down some as well.  
    With the open looking crappy, I'm thinking of shorting some futures here pre-open.  I was obviously underhedged for this move down as my account has lost about 10% of it's value since last friday even with the SQQQ hedge we did last week. I'd like to stop the pain as the news from our bastards in the EU keeps getting worse.

  160. Burrben, With the high VIX it distorts the value of your short puts, as Phil often says: are you on track or not. I sold the 2013 CHK 7.50 puts and am down alot but not worried – except if you have margin problems the you must take the hit. When VIX goes back down your putters will move in your direction alot also.

  161. jomptien
    These are the FAS puts from the FAS money portfolio, which expire tomorrow.  Vol isn't playing a big piece here since FAS is at 82, and these 91's have $9 of intrinsic value already.  This is more about a delta move than a vega increase…although I also feel pain on the long term sold puts.  

  162. Burrben, If they expire tomorrow then yes, its different.

  163. WMT bribing officials in foreign countries – shocking! Here in SE Asia, you can not get any govt. business done unless you bribe someone. Mexico and others I'm sure the same. In the US though you bribe a Senator or Congressman. Only trouble is the bigger the company the bigger bribe you can make so it freezes out the smaller ones.

  164. FU FAS!  StJ, you should re-update FAS Money…it's a bloodbath.  FU FAS!