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Friday Failure – Weak Bounce Levels Turn Into Resistance

Resistance is, unfortunately, not futile for our indices.  

On Monday we discussed our expectations for a 2% weak bounce for the week, which would be a 20% retrace of the 10% drop I had predicted we'd have way back (and a bit early) in March.  That constitutes a WEAK bounce and not a rally and they almost fooled us on Monday by taking back most of that 2% on day one but, since then – it's been pathetic and we've essentially done nothing the rest of the week.  

The levels we were looking for were laid out in Monday's Member Chat and in Tuesday morning's post and were:

  • Dow – 12,750 (12,540 is 20% retrace/weak bounce), now 12,529 – off by 11
  • S&P – 1,343 (1,319), now 1,320 – off by 1
  • Nas – 2,900 (2,840) , now 2,839 – off by 1
  • NYSE – 7,720 (7,560), now 7,552 – off by 8 
  • RUT – 780, (765), now 766 – off by 1

SPY DAILYSo, out of 25,024 points worth of predictions, our system is off by 22 for the week – less than 0.1% – not too shabby!  This is our 5% Rule in action and it works very well in a Bot-driven market.  

As you can see from our Big Chart above, 2 of our indices (S&P &, Nasdaq) are right on their lines and the Russell is just over it's -5% line on yesterday's super-stick while the NYSE is just under and the Dow is a very silly index anyway and we don't really care what it does as long as it's in the ballpark but notice it's 2.5% WEAKER than the other indices (5% weaker than the S&P, which has held up best).  

The strong Dollar is not good for Dow components, who make much of their income overseas and some of the components, like AXP, CAT, CVX, HPQ, IBM, JPM, MSFT, PG, UTX and XOM have been tremendous drags for various reasons but they are all looking a bit more attractive at these prices so I think it's time to play the Dow bullish – in case we do get good news over the weekend.  

NYSII'll put up a specific play in the Morning Alert but the simple idea is the Dow is 2.5% behind 3 of our majors and 5% behind the S&P and, since it's the rest of the World that's dragging us down – if we're going to go short, it's EDZ (now $18.54) – and we already discussed various hedges using EDZ in yesterday's Member Chat and it's been our primary hedge for quite a while (see last Thursday's post for two we recently closed). 

While we HOPE (not a valid investing strategy) that we're at least going to get an oversold move up – let's keep in mind looking at Dave Fry's NYSE Summation Index, that we may have said the same thin last Summer in mid July – when the S&P was at (drum-roll please) 1,300 – on it's way to 1,100 over the next 3 weeks!

So it's not that the market hasn't gone anywhere in the past 4 days – it hasn't actually gone anywhere for a year…  

The Dow was 12,550, S&P 1,300, Nasdaq 2,850, NYSE 8,450 and Russell 840 – hmm, the RUT and the NYSE aren't doing so good and they are our broadest indexes and down about 10% from last July.  Where's that bull market they've been talking about?  So now we see that the Dow isn't really that far off base – only per it's more recent performance but, over the long haul – it's the S&P that's over-achieving and perhaps that means a nice SDS trade (ultra-short S&P) would do us well for the weekend.  

The key to a good short-term hedge is to have an attainable goal and manage your losses (as it is insurance) and we can see from the S&P chart that 1,290 is a solid floor and they're at 1,320 so that's 30 points down, which is 2.25%, which is 4.5% on the 2x SDS which is $16.88 x 1.045 = $17.63.  So, not a very sexy move expected BUT the SDS June $16 call is only $1.08 – just .19 of premium.  The June $17 calls, on the other hand, are .58 and 100% premium so, if we set up a bull call spread of the SDS June $16/17 calls, our net entry is .50 and we can offset that by selling CHK June $13 puts for .40 (or any other stock you'd REALLY like to own if it drops 15% in 3 weeks) and now we're in the whole spread for just net .10 in cash with a 900% upside potential if SPY drops on us.

UUP WEEKLYThat's a nice hedge!  You can also be more aggressive with CHK long-term, selling the 2014 $13 puts for $4.20.  You net into CHK at the same price and let's say we sell 10 of those and collect $4,200, which obligates us to buy 1,000 shares of CHK for $13.  TOS says the net margin on that sale is just $1,350 and we can take that $4,200 and use $3,000 of it to buy 60 of the bull call spreads and now we have a potential $6,000 hedge for the weekend (through June expirations) and we still have $1,200 left from the put sale so our net entry on 1,000 CHK would be reduced by $1.20 to $11.80, which is 25% BELOW the current price.

That means we are getting $6,000 of upside protection for free in exchange for promising to buy CHK for $11.80 and, if CHK is higher than $13 in Jan 2014, we keep the $1,200, which is an 88% return on margin.  Won't you sleep better over the weekend with protection like that?  

Cash is still king as we now (since we only got a weak bounce and failed to break over) are back to leaning bearish.  From the news chatter, it's very, VERY doubtful the EU comes up with a concrete solution over the weekend and it is slightly possible the EU melts down over the next 3 days and we wake up Tuesday down 300 points or more.  Setting the tone into the weekend (from SA Market Currents):

The slow-motion train wreck continues in Greece, with police urging citizens to keep their money in the banks rather than sowing the seeds for a wave of home thefts. Greek banks have seen almost 25% of their deposits drained out over the last two years, and are likely to be shored up today or Monday with €18B of bailout funds that are weeks overdue.

"Greece is a failed state," says incoming Deutsche Bank co-CEO Jurgen Fitschen, speaking at a conference. Moving on to Spain, he says the numbers needed to revive the country's banks are "staggering."

The real nightmare scenario for the EU power elite is what if Greece exits EMU and thrives, says BNY's Simon Derrick. If Greece leaves, devalues, collapses, and then quickly rebounds (a la Iceland, though it was never part of the eurozone), the other struggling states (and their electorates) are sure to take notice. 

The euro hit a 22-month low against the dollar yesterday, and has lost 5% in the last 3 weeks after barely moving against the dollar for most of the year. There's no end of reasons, though a notable downward driver is confirmation from some of Europe's biggest fund managers that they've been dumping euro assets on Grexit concerns.

Bankia shares are suspended in Madrid amid reports the Spanish lender plans to ask for a government bailout of over €15B following a board meeting later today.

Catalan President Artur Mas appeals to Madrid for a rescue, saying his region (home to Barcelona) is running out of debt financing options. "We don't care how (Madrid helps), but we need to make payments at the end of the month." The euro falls to session lows at $1.2510.

Mario Monti's insistence he can bring Germany around to acting in the EU's "common good" may rest on support from Merkel's domestic opposition parties, which are far more disposed to liability sharing. They believe they have the blueprint for such with a so-called European redemption fund floated back in November.

 "Monti couldn't reform (his) own country, now he will deliver substantial changes in (the) EU treaty that requires loss of sovereignty for 17 nations," asks Uldis Zelminis, responding to the Italian PM's confidence he can persuade the EU to go for common eurobonds.

With the focus so strongly on Europe, it has been easy to miss the data pointing to economic trouble in China, India, South Africa, Brazil and elsewhere. The specter of renewed crisis looms large if activity is slowing in sync around the globe and not just in isolated regions. 

As I said the other day on BNN, US equities may be the best place to park your money but that's more of a commentary on how absolutely TERRIBLE the rest of the World looks – certainly not a ringing endorsement of US equities.  You can't seriously read this news and conclude that it's time to buy commodities and the last crash should have taught you that gold drops along with everything else, which is why CASH IS KING – we can always find something to buy later if we have our cash – now if only there were a bank we trusted to put it in….

Have a great holiday weekend, 

- Phil

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  1. Phil – todays title:  bonce – bounce

  2. Not much data this morning:

    Japan CPI Ex-Fresh Food (YoY) / 0.2% (0.1% expected)
    Japan CPI Ex-Food & Energy (YoY) / -0.3% (-0.4% expected)
    Japan CPI (YoY) / 0.4% (0.4% expected)
    Germany GfK Consumer Confidence / 5.7 (5.6 expected)

    Still to come at 9:55 EST – US U. of Michigan Confidence. It does move the market on big misses either way. 77.8 is expected.

  3. Phil, I'm beginning to feel that JBTFD will be back in play soon…..

  4. Since today is OpEx, and MoMo stocks will Pin to a strike, is a somewhat valid strategy to short calls today on stikes with low open interest?  

  5. Lightspeed –  Anyone use them as a broker?  They offer 0.60/contract, no ticket charges, but it looks like options data is $45/mo.  I'm going to open a demo account.  My buddies firm was bought by Lightspeed.

  6. Elon Musk (Paypal,Tesla, Space-x) is a stud…..

    Live video of the space station hook-up.

  7. Shockingly tax revenues in Greece are coming up short of expected:

    A report by the State General Accounting Office in fact suggests that the budget revenues target this year will have to be revised, as there is a forecast for a lag of 1.35 billion euros. This is mainly attributed to income tax revenues (seen missing their target by 330 million euros) due to cuts in salaries and pensions, direct taxes from previous years (275 million), transaction taxes (209 million), special consumption taxes (110 million), and the postponement of the early renewal of the Athens International Airport concession contract (230 million).

    Of course, when you have unemployment over 20%, when you cut salaries and basically strangle the country with austerity measures, should you expect higher revenues… Morons! 

    But it's probably a bad example, there must be tons of examples where austerity actually did increase revenues even when paired with tax cuts!

  8. As usual earning expectations are lowered for the next few quarters and raised for the future:

    Snapshots of Expected Future S&P 500 Trailing Year Earnings per Share, 2009-2012

    I guess we'll be able to lower them eventually!

  9. any thoughts on whether CHK will fall back from here or continue up? Wondering about taking some profits or staying on. July 14 calls up 35%.

  10. According to the McClellan Oscillator we are back to neutral.  We are now at a – 37.

  11. I am still in the Jun QQQ puts but some might have gotten out when they ran to over $0.80 yesterday…

  12. well, FBOW i took them off at $3. Thank you very much.

  13. that's "for what it's worth"

  14. Someone better fix AAPL quick or it is going to tank the market.
    IFLAN, GOOG looks interesting short for momo

  15. burrben- would love to hear back what you think- I have looked at them and considered trying them- thanks

  16. DCTH is so depressing.
    They just don't stop dulliting :(

  17. Good morning!  

    I feel better now that I got all those negatives off my chest in the post.  Keep in mind that CASH IS KING and that goes for our virtual portfolios too – if you have play money to be bullish with – great – but now way should we be playing aggressive with money we can't afford to lose in this environment.  

    This is going to be a crazy time to start the new Income Portfolio – we'll be lucky just to keep the cash but there are plenty of people in my Mom's shoes, who don't have that option.  If she leaves $500,000 in cash, at the end of the  year she'll have $450,000 – some people NEED their money to work for them and think about how many people are forced into that position – putting money in 2% savings accounts ($10,000 on $500,000 while inflation eats away the rest) or having to gamble in a market that hasn't done a thing in the past year.  

    Of course, not doing a thing is great for those of us who sell options for a living but, unfortunately, ending up flat is only coming after swinging 20% down and 20% back up – that's a really tough bronco to ride out!  

    Anyway, so our AGGRESSIVE, SPECULATIVE, SMALL virtual portfolios are all BULLISH and I have no reason to change that.  They are all ahead and, if we sell off, our gains are our hedge.  While it sucks to get knocked back to zero – if the market drops 20% but you still have 100% of what you started with – you are in pretty good shape.  So our risk/reward equation on portfolios we're ahead on is that there are many things that can happen – QE/Bailout-wise – that COULD rocket the markets over the weekend and, if not – we have some very solid support under the indexes at this week's lows, which is a drop we already survived.  So, possible huge gap up that we can participate in vs. possible  move back down to Monday's lows is where we are.  Again – given the choice with money I can't afford to lose – I chose cash.  Given the choice with gambling money – I choose to gamble long….

    Let's go another level on that logic.  My Mom, for example, has $500,000 cash now sidelined and our prospects are not looking good for an easy time making $4K a month at this iffy level.  I can take $20,000 and put it into $25KP-type plays and risk losing 50% of it on a huge drop and where does that leave her?  It leaves here with $490,000, which is 98% of her cash – AFTER the markets take a horrific dive and the VIX is way up, etc. etc.  So I would be much more excited about deploying her $490,000 bullish after a 5-10% drop next week than I am about deploying $500,000 now and, meanwhile, if the market does take off, we make $5-10,000, which is enough to be able to sit on the sidelines patiently for 2 months with our $500K and wait for perfect opportunities.  See how the risk/reward works out?  

    On the bullish side – I'm encouraged that the Dollar was at 80.60 at the open as the EU tested $1.25 on whatever silly thing spooked them even more than they were already spooked.  The Pound touched $1.565 and held that and the Yen touched 79.50 (too strong) and held that and good old EUR/CHF is back to 1.2010 so things are all on track again at the SNB.  

    Oil is encouraging at $90.77, gold is $1,565 so no major QE rumors it seems, silver is $28.24 and copper is still $3.4475.  Nat gas failed on yesterday's big inventory build (usual in summer-time) and is down at $2.60 again but CHK doesn't care and is testing $16.  Gasoline is $2.8188, rejected at $2.835 and we discussed going long early this morning on /RB at 2.815 for a ride to $2.85 so you didn't miss much and $2.82 makes a good on/off line for bull plays.  I'm pretty confident in this one.  

    So – bullish Dow trade was the promise from the morning and that's going to be July $131 calls at .80, which have a .20 delta so every 100 points the Dow gains is 25% in your pocket.  That's fun for a day trade and not too risky over the weekend as a drop in the Dow would pump up the VIX and probably keep them from losing the whole .20 per 100 on the way down.  

    Keep in mind those bounce levels are:


    • Dow – 12,750 (12,540 is 20% retrace/weak bounce), now 12,513
    • S&P – 1,343 (1,319), now 1,322
    • Nas – 2,900 (2,840) , now 2,842
    • NYSE – 7,720 (7,560), now 7,554
    • RUT – 780, (765), now 767 – off by 1

    That's an improvement from this morning already and 3 green is bullish but only if it sticks.  Otherwise, I love the SDS spread in the morning post.  AAPL $560 is killing the Nasdaq, even with a 1% recovery in the SOX this morning.  We need AAPL to bounce off that line if we're going to make any real progress today but it's all very light holiday volume and Consumer Sentiment at 9:55 is likely to suck and may give us a low for the morning. 

    Europe was up a point and is now down half a point across the board, I doubt we'll get a lot of traction until they go home no matter what and yesterday sucked all the way until about 2pm but then it was amazing – imagine what they'll be able to do today with half the volume!  

  18. Gd Morning,
    Q: What does TOS stand for?

  19. basically in the same positio as yesterday…. SP 500  holds above 1318 then more tests of the 1325 resistance level…. if stocks break thru resistance then the SP could make a quick trip up to 1345… even as high as 1370ish…..flipside a break of 1318 leads to another test of 1310.. and maybe 1300ish.
     I favor the upside.

  20. TOS = thinkorswim which is a trading platform

  21. st.jean:
    May 24th, 2012 at 3:59 pm | Permalink
    Ignore this user The October 600 AAPL call for 35 went through.   So we got 1 @ 37 and 1 @ 35.

  22. Thx…

  23. Thanks dclark!… I have to remind lflan to mention the portfolio name in his comments!

  24. Thanks 1020! 

    Data/StJ – No news is good news I think today.  

    AAPL TODAY $555/560 bull call spread is $3.50 and makes $1.50 if $360 holds and can be pulled with a small loss (most likely) if it doesn't (or if QQQ fails $62, which would be a bad sign). 

    Dips/1020 – Only if we get more FREE MONEY.  

    Selling calls/Burr – You mean for the day?  It's super-risky – the kind of thing that works 9 times out of 10 but that 10th time wipes out the other 9 gains.  You can sell both sides of AAPL $560 for $5.60 and hope for a pin.  Just roll the loser if it doesn't or stop at $7 so you risk $1.40 to make possible $5.60 but note I'm not highlighting it as a generally good idea because it's too risky.  

    Consumer confidence is up!  Wow, that was unexpected, best level since Oct 2007??? WTF?  

    May. Reuters/UofM Consumer Sentiment79.3 vs. 77.8 expected and 77.8 prior.

    Bullish I guess but seems more like BS…

    Keep in mind my pet theory that more and more people lose their homes or go into debt and don't pick up calls they don't recognize (hiding from bill collectors in case you were never poor and don't know) and those people never get surveyed so this "random" survey ends up missing the bottom 50% entirely and maybe most of the bottom 80%, which is going to skew the survey more bullish as you're missing the very people who would have the worst sentiment.  

  25. Phil/ consumer confidence
    It will give us better entries for weekend hedges at the EOD!

  26. Look at NFLX shooting up $2 again today…. What's up with them now?

  27. Rolling with TOS any one has the same experience? I put in a roll and it shows the midprice of say 1.69 debit. At the moment it hits the floor they ask 1.72. After a while they see the sucker does not go for 1.72 they reduce to 1.69 again working, but no fill You put the bit up to 1.72 they go to 1.75. Just like a cat and mouse game. TOS says well they just give the order to the floor and can do nothing about it. What does any one else say?

  28. /ES is -4 and SPX is flat??

  29. Rolling / Yodi – In my experience you always get better prices by splitting the order. But you can get lucky depending on how liquid the options are.

  30. Hey, these QQQ puts in the 25KP might come in handy today!

  31. stjeanluc Thanks yes I did this the other day and I still landed 50$ down on the trade! Some times you can not will in a casino.

  32. Yo-yo market…

  33. Yodi – I think that the bid/ask spread is a very underestimated cost of trading… Everybody talks about commission rates and all, but the spread usually ends up costing you more.

  34. Elon/1020 – Yeah, I like him. 

    PCLN/Jabob – You mean thank you Goldman as now they can jack it back up to a nice, shortable level again.  Airlines have been running up and it's summer travel season anyway – terrible time to short PCLN.  

    50 dma's/StJ – That's very encouraging.  Down around 10% is generally a pretty good bottom signal but we've seen 5% a few times.  

    LOL StJ!  So funny to hear people criticize Krugman on austerity when he's one of the only guys who gets it.  Earnings chart is funny too but we fall for it every time, don't we?  



    I like the summation index (today's post) as it's slower moving.  As we discussed earlier in the week though, it's a bad thing when McClellan makes a big recovery off a weak bounce – think of it as indicating how much gas is left in the bullish tank and we used half (of max but we don't know that we even have that left) just to fail a weak bounce – that's not too encouraging!  

    $25KP/StJ – Let's kill the QQQs today!  They are .67 at the moment, I'd say let's stop at .60 as the morning low was .61 and we did want to get out anyway.  At .85 we'll be looking to take the money and run too.  

    FBOW/Morx – How is that "For What it's worth"?  ;)  

    Upside/Angel – I agree but so frustrating the way we move down before any move up.

    Europe is happier about our consumer confidence numbers than we are.  

    Bad fails to watch for the day:  CAT testing $90, BA near $70, AAPL $560, CMG $400, HD $50, IBM $195, MA $415, QQQ $62, SPY $132, V $120, WMT $65, XRT $59.  Let's look for them to hold along with 12,500, of course, 1,320, 2,850, 7,600 and 760. 

    NFLX/StJ – Created VP of Original Content position and people like the idea of them becoming a studio but the studios (SNE, TWX, VIA, NWS) trade at p/es in the low 10s, so the logic is completely irrational.   What would it take to get you to subscribe to NFLX just to see a new show.  Even if it were True Blood or Game of Thrones (gosh HBO is great!), I'm not sure I'd feel so compelled to see it that I'd pay money just to see them.  As it is, our 2 terrabytes of Tivos in the living room are filled with about 200 hours of shows we haven't seen yet (usually it peaks out around now and, over the summer, we wear it down a little).  

    TOS/Yodi – That's with everyone.  It's mostly just you trading against Robots and they are much more patient than you are.  The millisecond your order hits, they change their bids to try to squeeze you and if you lower yours, they will lower theirs too.  You have to either be patient or enter an order inside their bid when the momentum is in your favor but trying to make an entry or exit when the momentum is going against you is futile these days.

    And what StJ said – very hard to get a fill on a spread unless you give it a good, long time while it stays in your range as you have TWO bots working against you – one on each end.     

    S&P flat/Lol – That is interesting.  Maybe it's our SDS hedges and the Bots don't want to pay us…

    Well, we dodged the first bullet – now let's see if we can make a rally out of it…

  35. PHil, do you like TNA for an upside play, or is the DIA 131's your upside play?

  36. Phil, your example in the morning alert about using some of the cash to be aggressive was a real light-bulb moment for me, thank you.  

  37. Forget about Momo portfolio, anyone want to make a YOyo portfolio?

  38. StJ,
    Believed we added TQQQ yesterday to the 5K
    "TQQQ/$5KP, Canuck – That was the $50s for .95 – I was just pointing out how fast they can move up by comparing them to the others."

    Thanks again for all you do!!

  39. what happen to GOOG today???

  40. yodi/cat and mouse game,
    When I sold CMG 405 weekly calls early this week, the bid/ask was $1.75/$1.85.  The monent I put my order(only 10 contracts) in the bid/ask became $1.65/$1.75. After my order was filled at $1.65, the bid/ask change back to $1.75/$1.85 right away. The stock price barely moved. That's my experience.

  41. BBY $19 – Crawling from the wreckage.  

    TNA/Jerconn – The logic is based on the Dow being 5% below the S&P (our leader) vs. the others trailing by 2.5% so, if we begin to rally and line up, the Dow would seem to have the most ground to make up.  Also, as a rule of thumb, when I look over the Dow components and begin salivating, my doggie-brain tells me it's time to buy the Dow and I see AA $8.50, BA $70, BAC $7, CAT $90, CSCO $16, GE $19, HPQ $21.50, INTC $25.50, JPM $33.50, MCD $90, MSFT $29, PG $63, UTX $73 and XOM $82 – excuse me I'm drooling again…  ;)

    You're welcome Dennis.  It takes a lot of practice and experience to get used to that idea unfortunately – very hard to "teach" it as an abstract. 

    Dolllar testing $81.50, that's not good over that line.  Euro $1.2518, Pound $1.565, 79.60 Yen and – TA DA – 1.2009 for the Swiss!  

    TQQQ/$5KP, Rudy – Good catch, thanks. 

    OK, now CNBC is bumping Eminence Front (obscure who song from yesterday's chat) – tell me that someone in our chat isn't a CNBC tech?  

  42. PHIL its that magical sloppy buyer..'he's not lazy he's just resting!!"

  43. ha ha ha i can't even remember what i just wrote. That was "for better or worse". Seems like i used that line some other time in my life. i'll have to try to remember.
    i just ran to harris teeter to pick up watermellons for an event this evening. while i was there i grabed some half & half then came home and found i bought h&h last night at food lion!
    better check & see if i bought any stocks this morning.

  44. talk about decay in ETF's, at the same level on the dow last year, TNA was in the high 70's and low 80's.

  45. rustle--TNA is the RUT not Dow.. the RUT is down from 840.. decay yes but a ~~10% drop in RUT makes it seem more normal IMO.

  46. jabo/TNA
    Good point, wasn't thinking for a change.

  47. AAPL loving that 560 for now..

  48. Where's the fear / Where's the greed…

  49. CNBC/Phil – you think cramer's handlers don't has their minions tracking you!? probably developing bots to specifically 'work' your trades (and us).  A subtle way of letting you know "we're watching you."  or else the bumper music editor is a fanboy. ;-)

  50. Market must REALLY be messed up!  RIMM is ripping 3%!  Phil, you'll have to choose a song to post on the board today so CNBC has some idea what to play on Tuesday ~

  51. PHIL.
    I'm wondering how you like this trade idea for PGH?
    SELL 1x $7 PUT Jan 2013
    and BUY 2x $8 Call Jan 2013
    -- and still take $0.10 CREDIT.
    Assignment Net entry is $6.90  (52-wk low $7.20) currently trading at $7.34,  Dividend is still $0.07 or 11.25% annual.

  52. Good Morning…..I've been elsewhere this a.m.   Yes, sorry for the abbreviated post stj…..Indeed, I picked up the second October 600 call for the MoMo yesterday at 35, so we hold 2 contracts in the account.    My instinct a day or two ago to go short-term long on NFLX was correct, but today I would not do the trade.   I would buy more AAPL October 600 calls on any further retracement, but I do not have a MoMo  account  order for same.  I would also strongly consider going long LNKD if it retraces much further.  I think most of the MoMos we are watching will go up on Tuesday.

  53. Hello All – I just read a post that Senator Cantor is trying to have a vote on extending the Bush tax cuts before the August recess. 

  54. AAPL weakening..

  55. bobhu As I said it is just a crocked game for the small trader. The boots looking for suckers in any way they can but I always place the limit order at for me the best price. Sometimes I play a bit with it but so if they do not want to take it they can jump in the lake.

  56. At the open: Dow -0.11% to 12516. S&P +0.06% to 1321. Nasdaq +0.05% to 2841.

    Treasurys: 30-year +0.4%. 10-yr +0.21%. 5-yr +0.1%.

    Commodities: Crude +0.1% to $90.75. Gold +0.44% to $1564.35.

    Currencies: Euro -0.1% vs. dollar. Yen -0.01%. Pound 0.%.

    10:00 AM On the hour: Dow -0.05%. 10-yr +0.21%. Euro +0.10%vs. dollar. Crude +0.44% to $91.06. Gold +0.72% to $1568.75.

    11:00 AM On the hour: Dow -0.27%. 10-yr +0.27%. Euro -0.16% vs. dollar. Crude +0.27% to $90.91. Gold +0.27% to $1561.75.

    11:39 AM European shares close green for the 2nd consecutive session after a day of swings. Stoxx 50 +0.4% (gained about 1% on the week), Germany +0.4%, France +0.4%, Italy +0.4%, Spain +0.3%, U.K. flat. Euro flat at $1.2526 after earlier sliding to a $1.24 handle for the first time in 2 years.

    Market preview: Stock futures slip along with European bourses as shares of Spain's Bankia were suspended from trading ahead of a board meeting to approve a recapitalization plan. S&P-0.2%. Barring further unwelcome headlines in a headline-driven market, today's trading action could be light ahead of the three-day weekend. Still ahead: UofM consumer sentiment. 

    May. Reuters/UofM Consumer Sentiment79.3 vs. 77.8 expected and 77.8 prior.

    MIT's Billion Prices Project, which spent much of 2010 and 2011 showing inflation at a higher rate than official numbers – is now showing inflation falling faster than the CPI data. It's annualized pace has fallen below 2% while the government pegs it closer to 3%.

    The S&P 500 +0.2%, gets a little bounce following the better-than-expected consumer sentiment print. At 79.3, it's the highest read since October 2007. The improvement was led by a big rise in the current conditions index (to 87.3 from 82.9), but expectations declined to 71.7 from 72.3. 

    Both the Canadian and Aussie dollars are considered (rightly or wrongly) commodity currencies, but traders – by a large margin – are placing bets the loonie will perform better than the aussie as China slows, the RBA cuts rates, and the BoC stands pat or even hikes. FXA vs. FXC this year.

    New Signs of Global Slowdown (WSJ)

    "Another bazooka" may be necessary for Spanish banks facing deposit withdrawals, sitting on big losses on their government paper holdings, and having €85B of maturing debt in Q2 and Q3. The trouble is banks have little left in the way of collateral for further LTRO borrowing. They need QE, not another LTRO, writes Nomura. 

    June 17th?!?!?  We can't wait until June 17th!!!  Mario Monti invites Germany's Merkel, France's Hollande, and Spain's Rajoy to Italy for a summit following the June 17 Greek elections. Merkel has reportedly accepted the offer. Its seems like the sort of news floated to show the leaders are unconcerned about much happening between now and then.

    Duh!  Internal devaluation (otherwise known in the EU as austerity) is far more painful than external devaluation (letting the currency go), finds Morgan Stanley after aggregating past results from these options. Sadly for the Club Med states, this hasn't yet been an option, but what happens if the voters get a gander at the data? 

    With a record of poor shareholder returns, why do the TBTF banks (JPMCBAC) even exist, writes Sheila Bair. Capital markets certainly wouldn't finance such "unstable behemoths" if it weren't for their de facto government backstop. Jamie Dimon can provide a better return to shareholders by recognizing his bank is worth more in smaller pieces.

    Senators put federal regulators, not JPMorgan, on the hot seat (Washington Post)

    Why Politicians Don’t Care That Much About Reelection (Naked Capitalism)

    Get ready for the next gold rush!  The CME cuts margin requirements for trading gold contracts  by 10%, the 2nd reduction this year as volatility in the metal's price declines. The margin required for one contract will drop to $9,113 to $10,125, effective May 29. GLD +0.2% premarket.

    At the top of Goldman Sachs' VIP List of 50 stocks most important to hedge funds is Apple (AAPL), followed by GOOGESRXMSFTQCOMCGMPCLNJPM and LMCA. Leading the list of the firm's top 50 short positions is JNJXOMINTCIBMAMZNTCVX,VZDUK and DIS.

  57. Falling jet fuel prices could save airlines ~$5.5B, yet analysts have 
    failed to recognize the sector's huge growth potential and continue to substantially undervalue airline stocks, J.P. Morgan says. The firm expects net profits to rise ~20% at Alaska Air (ALK), ~40% at JetBlue (JBLU) and Southwest (LUV), and over 50% at US Airways (LCC) and United Continental (UAL)

    Chesapeake (CHK +1.8%) shares open higher on news of Carl Icahn's bet on the company, but Antoine Gara reminds that the Icahn rumors aren't a reason for investors to start buying. With or without Icahn, asset sales are the make or break issue as CHK tries to bridge a big funding gap. Also worth noting: The last time Icahn held a big CHK stake, he was in and out with barely a ripple.

    Analysts at Pritchard Capital say insiders at energy companies such as Newfield (NFX), W&T Offshore (WTI), Bill Barrett (BBG), Swift Energy (SFY) and Hess (HES) have been buying shares. While not a guarantee of a bottom, the firm finds the trend encouraging and "a sign that the stocks are presenting some very good values at current levels."

    A knock at the door could mean jackpot for Kansas farmers in certain areas, where oil companies are offering up to $1,250/acre for mineral rights that were going for $25/acre a year ago. One beneficiary could be John Deere (DE) as formerly strapped farmers swap their old equipment for new.

    The EU escalates its fight with Argentina, filing a formal complaint with the WTO challenging the country's import regulations. EU officials say Argentina's decision to nationalize Repsol's local YPF unit was only the most recent in a series of moves by Cristina Kirchner's government that have harmed foreign investors and manufacturers. (earlier)

    Frontline (FRO) moves up 6.7% premarket after its Q1 report smashes the expectations of analysts. The company says the oil tanker market is recovering faster than it anticipated- Possibly a by-product of Iran using them for storage.  

    A number of shipping stocks run up gains after Frontline's earnings report paints the beat-up sector in a more favorable light. Though shippers still remain highly-susceptible to any signs of global economic malaise, oversupply issues seem to be slowly self-correcting in the industry. Advancers: SFL +6.2%OSG +4.8%NEWL+2.4%NMM +2.7%DRYS +1.5%.

    Curious in a country drowning in production overcapacity, Beijing gives the green light for Baosteel Group to build a 10M ton/year steel project in Guangdong province. Trying to stimulate growth, the government has indicated it will fast-track a number of other investment projects this year (Baosteel submitted this one for approval in 2008). 

    UTX received about $38B in orders at relatively tight spreads to Treasurys on its $9.8B bond offering, which is being used to fund the $18.4B acquisition of Goodrich (GR). The sale was the largest this year and the 6th largest on record. That's how it's done Facebook, write Andrea Johnson and Danielle Robinson.

    Christopher Matthews is the latest to sound the death knell on Best Buy (BBY) and RadioShack (RSH) with a take that delves right into the Death-by-Amazon thesis on the big-box retailers. Though he notes the well-documented competitive pressures the Internet brings down on the companies, it's also the seismic shift in consumer buying trends as integrated devices reduce electronics buying needs that sits as a tough overhang on sales to overcome.

    After bouncing a little yesterday, Facebook (FB -3.7%) is selling off again after Capstone Investments started coverage with a Hold, citing concerns about its valuation and the performance of its premium ads. It was reported yesterday Facebook, whose ad sales efforts have come under fire, will allow advertisers to buy premium ads via its site, or through third parties. This is likely to boost demand, but could come at the cost of lower ad rates. Zynga (ZNGA -4.4%) is also lower.

    Facebook Shows There’s a Sucker Born Every Minute (WSJ)

    GOOG may be down because they are spending a lot of money:  H-P's (HPQ) webOS team, its fate in limbo since the company ended hardware development for the platform, is being acquired by Google (GOOG), The Verge reports. Possible reasons for Google's interest: the ability to use elements of webOS' UI in Android; the commercialization of the Enyo app development platform; and the fact Android design chief Matias Duarte previously worked on webOS. Chances are Google paid a lot less than H-P's prior asking price of $1.2B. (HPQ layoffs)

    Piper's Gene Munster details the reasons he sees Apple (AAPL -0.6%reaching $1,000 over the next couple of years. Among them: a completely redesigned iPhone; an Apple TV set going for $1,500-$2,000; limited iPhone subsidy cuts (partly due to the low churn rates of iPhone users); continued margin strength; China demand; soaring tablet sales; and enterprise Mac/iOS adoption.

    Seriously?  Corporate Lobbying Group Asks Supreme Court Not To Use “Empirical Evidence” Of Corruption When Reconsidering Citizens United (Republic Report)

  58. Here we go again? IAEA says it has found highly enriched Uranium in Iran.

  59. The last Icahn trade didn't cause a ripple?  Didn't Icahn make like $500M on CHK the last time around?

  60. Well, we finally closed Europe, now maybe we can get something going…

    Dollar right at 80.50.

    Payback time – SODA now advertising on CNBC to work off their debt for killing Mark Haines (he did the taste test and died the next day).  

    Song/Rperi – Remind me next week and we'll pick a song a day and see if our mystery guy can go 3 for 3 Weds-Fri.  Today was Crawling from the Wreckage, above. 

    PGH/ITrade – Well you are getting a credit BECAUSE you are out of the money and, of course, PGH pays out 10% of it's market cap in dividends – that tends to keep a lid on the upside.  With your trade, you don't benefit from the dividends but PGH will still hand out .60 (3 checks) per $7.33 share while you hold and drop the value (assuming $7.33 is value) to $6.73, outside of whatever comes in to replace it.  Their cash flow has been about zero and the company is mainly nat gas – which isn't doing so hot so it's very possible that you are throwing .70 out the window in order to obligate yourself to own PGH at net $6.90 after they give away another $200M they can't afford to spend to dividend holders (who are not you).  I do like PGH as a LONG-TERM recovery play but they may go much lower first BUT WHY would I buy PGH when I can still buy CHK for $16 and BTU for $23.80 ?  

    Tax cuts/Ink – Yes, because they have done such wonders for the economy so far…

    Iran/Ink – Oh those crazy kids!    

    Icahn/Ink – Reporters have very short and very selective memories when they are trying to make a point – as do PR people who plant stories to spin something their way.  In this case the big boys aren't done buying CHK at the prices they chased the retailers out at so they are hammering CHK on all fronts.  In fact, CNBC right now is saying they "hear" that the asset sales are not going well.  What total BS – they haven't even had a few days to begin negotiating yet and CNBC says they are failing – it's a flat out lie meant to keep the listeners from participating in the stock's rally while the fundies back up the truck – so much so that a couple have hit 5% and had to disclose already!  

  61. Feels like a flatline:  

  62. A whole lot of nothing going on so far… SPX holding between 1320 and 1322 – probably by bots skimming pennies!

  63. Marc Faber may sound like Dracula but he agrees with me, saying "Cash US Dollars" is where he'd have his money right now.  

  64. Marc Faber/Phil
    I wouldn't let Marc Faber hang on your coat tails.  Last year when oil was $115, he also said we would never see $80 a barrel again in our lifetime, two months later we saw $77.  But then again, maybe he was just speaking to people in hospice.

  65. Phil…Bot SU Jan 13 35c @ 7.55 sometime ago. Have fully covered over time with Jan 50c,Jan 40c,andJan 25p.Not clear what my next move should be. Any advice? Thanks  Close to 2000 hrs and Learning

  66. Iflan,

      I'm short LNKD (short the Aug 100 call) b/c I feel the valuation is too high at current prices. What's your rationale for calling it to move higher? Trend analysis?

  67. Pharm,
    DCTH is now well below the prices you liked it at earlier and your exits.  @ $1.50 / share does it look more like a buy?

  68. SU/490 – They run into huge profit problems if oil is below $85 so pretty dangerous but your real problem is you haven't improved your position over time.  You can sell Sept $29 calls for $1.95 and spend $3.60 to roll the Jan $35s ($1.15) to the 2014 $30s ($4.65).  I don't know what you made selling the other calls but I sure hope it's $6!  You always want to roll before your call loses half it's value, otherwise you have nothing left to play with.  

    Think of it this way, if you have a 100% position and lose 20%, you're at 80% but now you need a 25% gain to get even. If you let it go to a 40% drop, you have 60% and need 66% to get even and another 10% down to 50% and you need a double just to get even.  If it's so easy to get a double, why'd you lose money in the first place.  

    See last night's discussion on scaling into positions – there is nothing more important than managing your entry sizes and THEN managing your losses.  People are so adverse to taking a 20% loss and walking away that they let themselves slip into positions where they have virtually no chance of winning – that's not good!  

    LNKD/Japar, Lflan – I don't think the TA looks very attractive either.  

  69. Phil,
    Your opinion about oxy vs xom for a long put sell in IRA


  70. button….unfortunately, I am not in the mood anymore.  I think they have a wonderful technology, but they refuse to move it in the direction that would maximize their product.

  71. DCTH / Pharm – you'd think if the existing investors were going to double down here they would stipulate some new management in return, you keep saying how good their product is but how bad their management is, do nobody else notice?  If they ever fix the team, it'll really lift off…

  72. Um….Thirty-one percent of U.S. homeowners with mortgages, or 15.7 million of them, were underwater on their mortgages in the first quarter of 2012, even though home values were on the rise, the real estate website Zillow reported this week.

  73. OXY/Harip – XOM is much safer.  If they both dropped 50% tomorrow, which one would you have more confidence doubling down on?  


    12:00 PM On the hour: Dow -0.15%. 10-yr +0.25%. Euro -0.11% vs. dollar. Crude +0.35% to $90.97. Gold +0.51% to $1565.45.

    1:00 PM On the hour: Dow -0.31%. 10-yr +0.31%. Euro -0.12% vs. dollar. Crude +0.14% to $90.78. Gold +0.52% to $1565.65.

    Home values increased 0.7% in March and stand 1.8% lower Y/Y, reports Zillow. Rents rose sharply, up 1.6% on the month and 3.2% Y/Y. The report also shows a big decline in foreclosures, confounding ideas they were set to increase following the settlement between the banks and the states in February.

    Really, they had to do this at 1pm?  S&P cuts its ratings on five Spanish banks, and affirms the ratings on another nine. Santander (STD) and BBVA aren't touched, but remain on "CreditWatch with negative implications."

    Spain looks set to inject another €19B into Bankia, giving the government about a 90% ownership stake in the troubled lender. This is in addition to €4.5B in preferred shares the government owned and flipped into common 2 weeks ago. The new capital will go towards upping provisions against losses in the bank's real estate portfolio.

    With credit conditions worsening abroad, Brazil makes it easier for three of the country's giant firms - VALE, Petrobas (PBR), and Electrobas – to tap the state development bank for funding. Together, the three make up 25% of the Bovespa index, which is+1.3% today. EWZ +2.2%

    With the 0.88% yield on its 10-year paper apparently not doing the trick, Japan signs up super-popular all-girl band AKB48 to help hawk JGBs to the citizenry. The group will headline a summer campaign composed of a number of other Japanese celebrities.

    Hudson City Bancorp (HCBK) could fetch a 31% premium to its current price in a sale to an acquirer "that could take substantial liability marks," reckons Stern Agree's Matt Kelley. Continued to be mentioned as a possible bidder is New York Community Bancorp (NYB).

    In "a moment of major promise and considerable danger," Royal Dutch Shell (RDS.A) will begin drilling test wells off the coast of northern Alaska in July, opening a new frontier in U.S. oil exploration. "We never expected a Democratic president… to open up the Arctic Ocean for drilling," Sierra Club's Michael Brune laments. 

    The labor crunch in Canada’s oil patch is not yet as bad as it was leading up to 2008, but Matt Underhill warns it could become far worse if firms do not adapt and expand their recruiting tactics. A recent report found Canada’s energy industry would need 40K more people in the next few years just to replace those planning to retire.

    Education stocks continue to bounce around wildly as select names are viewed as susceptible to the whims of an ongoing Senate debate on extending a 3.4% federal student loan rate – set to expire if a deal isn't worked out. While the Democrats and Republicans block each other's proposals, analysts reading the tea leaves say a deal will get done to avert upsetting parents (voters) before November's elections. COCO +9.7%NAUH +15.1%CECO+8.2%EDMC +7.2%

    Elan (ELN +7.6%) shares see notable strength followingpositive comments on the potential of the company's Alzheimer's drug Bapineuzumab: The FDA is signalling "they will be very reasonable about getting something to patients that has a modicum of benefit," Chairman Robert Ingram says. Also goosing shares is mention of ELN as a takeover target: "If an offer comes, we can't ignore it…"

    Good idea!  Airbus (EADSY.PKconsiders a plan to put larger seats on aisle seats of new A320a so that carriers can earn extra revenue on passengers that want (or need) extra space. The move would mark yet another incremental step in the industry toward a pay-for-services-used model that Spirit Airlines (SAVE +1.6%) seems to be making a splash with.

    Mobile devices now make up 20.2% of U.S. web traffic,according to ad network Chitika – smartphones account for 14.6%, and tablets, which are seeing traffic grow especially quickly, make up 5.6%. Such growth, which AT&T (T) and Verizon (VZ) claim justifiestheir spectrum-purchase attempts, begs the question of how long carriers can maintain their muted capex spending – infrastructure providers such as ERICALUJNPRFFIVALLT and PKT badly hope there's a pickup. (also)

    Android's (GOOG) tablet market standing receives another hit (previous) courtesy of Cisco (CSCO), which says it will no longer invest in its Cius enterprise tablet line. Instead, the company will focus on providing IP communications software for mobile devices via itsJabber and WebEx families. Cisco's move comes as enterprise iPad (AAPL) usage takes off, both due to corporate purchases and IT's "bring your own device" (BYOD) trend.

    In-line with an earlier rumor, Chinese sites are reporting iPhones will sold in China will come with Baidu (BIDUsearch supportstarting next month. No word on whether Baidu will replace Google as the default option – it was previously suggested Baidu wouldn't. Though a dominant player in Chinese PC search, Baidu was recently estimated to have only a 35% share of Chinese mobile search, in spite of support from many local phone vendors.

    Phil/Cost – any thoughts on them. Whenever I go there it is busy like crazy. Parking Lot full. Lineup for gas etc. Seems stuck in a trading range.

  75. mrm – then maybe BBBW should consider it…and I will run it….that should make people happy for a good return.  I think they need to license it out to the big pharma companies or generic makers of the chemotherapeutics..then they will get something.  For now, they just sit there and continue to do nothing.

  76. Map: Where are homes underwater?

    By Barry Ritholtz – May 25th, 2012, 7:02AM
    With U.S. home values off 35% from peak to tough, about 25% of those homeowners who have mortgages are now underwater — their mortgages are greater than the value of their homes.

    Zillow’s interactive map revelas what percentage of homes in your county or ZIP code are in negative equity, based on Q1 2012 data.

    The United States of Atlantis

    click for full interactive map


  77. Since 2011, 7 months have been negative going into the final week, with 6 of 7 weeks posting at least a 1% increase in the final week.

  78. Underwater/Pharm – Per the map above, this is still a total disaster.  60% in San Joaquin?  All those reds are 40%+ – that's just insane!

    COST/Ksone – I was very impressed with their last report.   They used to get hammered on gasoline sales when the prices ran up but they've learned to get that under control and business is booming.   I'd love to see them cheaper but I don't think they are going to get below $80 again.  So I like them but not in a really compelling way – not when there are so many stocks that are much, much cheaper (see Dow list above).  

    DCTH/Pharm – Bad management is their only problem?  Of course, that's a big one..

    1%/Rpme – We need another 2% at least to make a strong bounce next week. 

  79. Stj / Earnings expectations:  It is said that the farther away the occurrence of an event, the more precisely one can predict it. This is true by reason of the imprecision of human memory rather than any real ability to predict anything at all.

  80. Phil / Real Estate:   Amazing how Kansas and South Dakota held up in the real estate meltdown.  There's something to be said for country living, I suppose.  Or perhaps tornados have a culling effect of the stock of houses.

  81. LOL Zero…

  82. Zero, or perhaps nobody (except SOME of those whom were born there) want to live in the Midwest. No ocean/no mountains = NO FUN. Just a personal opinion after having spent 4 years in friggin Omaha, NE. Never again!lol

  83. light volume today?
    Phil--do you still expect mr stick today?

  84. Or that no one is buying in SD and Kansas…so everyone is leaving?  I have rentals in Kansas, right next the University of Kansas (KU).  They are holding up very well….

  85. Wow, talk about a chart that can go either way:

  86. Phil/HPQ/Your recent rec: the Jun 20/21 BCS is going according to plan, the spread is now 2.29/1.42. The greed in me says there is something to be adjusted here. How about closing the long calls and DD on the short 21 calls? You can roll 1X the short Jun 21 call to Jun 23 calls for a net debit of 0.71 and then get that back by selling another 1X Jun 23 call for 0.71 credit. Worth the effort?

  87.  Gee, Jrom, I guess those Afghan mountains just seep into your bones…maybe I should trek to Kandahar, beats looking at telephone poles and Kansas corn all to hell.
    Speaking of hell, Iran's uranium enrichment is not affecting markets, but could it?   "Iran increased its output of enriched uranium… according to International Atomic Energy Agency inspectors….Iran almost doubled its stockpile of 20 percent-enriched uranium, to 145 kilograms (320 pounds), from 73.7 kilograms in February, the IAEA said today…Iran had tripled its production of the material in the three months to Feb. 24….IAEA inspectors reported they’d found “the presence of particles” of 27 percent-enriched uranium at Iran’s Fordo facility. The particles were a result of “technical reasons beyond the operator’s control,” Iran told the Vienna-based agency, which is looking into the matter. Uranium enriched over 20 percent is technically highly-enriched, though most nuclear bombs use the heavy metal purified to 90 percent levels."  Phil, is there a level at which you'd start to bottom pick oil?

  88. Somebody liked the SQQQ in the 53.40 range.

  89. Good real estate theory ZZ!  

    Midwest/Jrom – I can't even stand Florida because it's so flat (and pointlessly hot in the summer – oh yeah, and the giant bugs they pretend aren't roaches but we all know better) but, at least if you drive no more than an hour east or west from wherever you are in the state, you hit an ocean.  

    Stick/Jabob – Volume on Dow is just 44M at 2pm, we may as well be closed so effort to stick the close would be minimal but it is more likely we flat-line due to many weekly option expirations.  Essentially, we had our move up on Monday and they suckered a bunch of people into buying calls and and we've gone nowhere since and all that premium has now vanished.  The good news is that, since the VIX has remained elevated this whole week – it is not likely that "THEY" are loading up on puts to take us down next week.  More likely they are uncovering today and Monday we can do another gap up but only IF Europe doesn't blow up over the weekend – which is iffy.  

    Gasoline is a good early stick test.  Way off my goal ($2.85) at 2:10 and $2.828 so will need a stick to have a big finish.  If they move up, that should make XOM and CVX happy and they are costing the Dow about 20 points at the moment so step one to a closing rally would be oil hitting $92 (now $91) and gasoline making $2.85+.  If we don't get that, I think it's unlikely we get a stick later. 

    HPQ/Winston – That's just greed, you should be thrilled to get $1 out of it!  The whole market could collapse next week and HPQ would sink with the rest of them.  Not worth playing games to me.   If, however, you had asked at 9:30 yesterday if you should sell the calls into the excitement when HPQ tested $22.50 and then buy back the short calls on the pullback to net more than $1 – THAT I would have liked.  That's why we ALWAYS sell into the initial excitement…

    Oil/ZZ – No.  You just wrote it yourself, 20% enriched is not 90% enriched.  All they have done is discovered Iran is engaging in the normal operation of a nuclear power plant which is all they ever said they were doing.  Why are people in this country so blindly prejudiced that they can't just accept it?  You know, Saddam didn't have any WMDs either – we haven't found ANY WMDs or nuclear threats in what is now what, a whole decade of looking?  That doesn't seem to stop the media from whipping the ditto-heads into a frenzy every time one of our "enemies" sneezes.  It's just ridiculous – Iran is a country that doesn't like us and hates Israel (almost as much as we hate Iran) but, on the whole, they're just trying to sell their oil and muddle through and building nuclear plants makes sense for them because they can't sell oil if they use it all up domestically on electricity.  What is it Freud said?  "Sometimes a cigar is just a cigar."  

    Well, that was a very disappointing move after a brief attempt to go higher.  XOM heading lower as oil goes DOWN into the close – now $90.82.  This is, of course good for VLO (lower oil and still-ridiculous gas) but not good for the broad markets as the oil patch still hasn't fully capitulated due to holding out for the holiday weekend.  If that's looking like a bust, then so is Q2 for these guys and that's going to bite us with downgrades and then with earnings (because labor costs are way up on the E&P side while prices continue to fall). 

    10 mins to NYMEX close – we'll see….

  90. Phil, great call on /RB!  Just cashed out for almost a penny gain in gas. :) Makes my time sitting here behind a computer in Kabul a little more pleasant! Ill be donating the gain to my fallen comrade's (Scott Pruitt) daughters college fund. He was a good guy and if any of you care to help out his daughters or to read about how he lost his life the information is below.
    Checks can be made payable to: FBO (For the benefit of) Jennifer and Jordyn Pruitt
    They can mailed to:
    Merchants and Marine Bank
    P.O. Box 188
    Gautier, Mississippi 39553-0188

    Have a good weekend all!

  91. IAEA: i am certain the the israelis will find 'beyond the operator's control" a loud chime to a) the ineptitude of iranian scientists b) the crass bellowing of iranian intent c) the IAEA's total lack of expressed ironic awareness in those findings…and bibi who wishes to be viewed as a solomon/ david cross will be smelling (thru his incisors) the mulitple choice of rationales to have the mullahs soiling thier burkhas while singing

  92. Phil/HPQ: I am talking about closing out the long calls right now. Then I would be naked 2X longer calls. I would be happy if HPQ tanked after I carried out this caper.

  93. what is with the Dow going down 3 times as much as the S&P, thoughts?

  94. '"I LIKE MY CIGAR TOO BUT I TAKE IT OUT ONCE IN AWHILE'  but perhaps only Groucho and Freud ever thought of the cigar as something  other than a a totem to a fleshy pink penumbra the cigar while having a SOMEWHAT intriguing shape nevertheless is still a steaming hot cylinder that gives off the smell of incinerated feces this was somehow a siren to fantasy to the master.(.and my fav postus bill)

  95. what a dull day- unless short the DOW

  96. 25K / 5K Hedges –  From what I can tell there are no downside hedges in either portfolio currently as the QQQ P's were closed.  Just want to make sure I'm correct, as I know lots of hedges were talked about yesterday and in the morn post.
    Thankfully Lord of the Rings is on TNT today or I'd be SO bored… :)

  97. BA – time to sell some of those puts?

  98. it is a dull day jthoma otherwise i wouldn't have time to wonder how a man could love cigars so much that he smoked 30 a day and had cancer burn a hole thru his cheek as a result…or how very few people know that jim cramer is actually 5'4'

  99. Jabo- Did not realize until today that over 50% of PCLN's revenues come from Europe- someone must think the Greeks will not be taking many cruises- unless down the river!

  100. Angel:  Sounds like you have a helluva weekend planned.  You're a Clinton fan, I take it?

  101. Really. Cramer is 5'4?

  102. TLT – just got my fill today for the Sept 110 puts at $1.01

  103. jthoma--and PCLN assumed a higher Euro.. as long as they don't fly high I will be very happy!
    Have a great long weekend everyone!!!

  104. angel,
    cramer, that explains how he slept in his car

  105. yes i really think clinto was perfect..yes he liked to engage in sexual activity with women 20 years younger than himself..i franky find that notion INCOMPHREHENSIBLE!..but he was so damn smart..i just liked his management results..of course nafta and glass steagall….certainly think he could be doing a much better job than the O and the Bush
    Yes he is listed at 5 6 but he wears  big shoes

  106. Looks like we're ending with a whimper.  

    Glad to help Jrom – good exit.  

    HPQ/Winston – Yes but what if they don't tank but pop 10% next week?  I'm just saying it's a bird in the hand thrown away for two in the bush.  You won being bullish on HPQ and now you're flipping 2x bearish after they DIDN'T disappoint on earnings…

    Dow/Ging – XOM and CVX big drag, BA, CAT and IBM alone costing them 35 points – that's most of the loss on 5 components, which is why the Dow is such a poor short-term indicator.  More importantly, AA, BAC, DIS, HPQ, INTC, MSFT, PFE, PG, T and WMT are green on a down 77 move (so far) as we once again test 12,400 in the Futures.  Good sign that we may be finding a bottom on some of these components.  

    Cigars/Angel – I always liked them.  My Uncle Alec was a cavalry officer and a tough old bastard with one of his middle fingers half blown off and he always kept a cigar there like it was meant to be a holder.  I really have no memory of him ever not smoking a cigar and I loved the smell but never did like them myself.  Although he sure sounded like he had throat cancer, he lived into his 90s and I don't even remember what he died of but I do remember visiting him in the hospital and he was smoking a cigar in bed.  

    Hedges/Burr – As I mentioned this morning, these are total gambles at the moment – could easily drop half on a bad outcome next week or they could double up on a good one – it's a coin flip and not worth hedging.  If you are worried about the positions in any way, shape or form then CASH is the correct hedge – this is not a predictable or protectable market at the moment – I think we had this conversation earlier in the week when I said (still applies) it's just not worth putting money on hedges and trying to guess the direction when it moves like this – cash is much, much easier to deal with until we have a better idea of which way things will go.  

    BA/Scott – LONG-TERM $70 is a nice entry.  2014 $60 puts can be sold for $7.30 – an even better entry at net $52.70, which is 24% off the current price.  

    LOL Sparky!  

    Silver flying up – $28.50.  Euro still $1.2512, Pound $1.565, Dollar 82.525.  Gas up to $2.8735 in a move after the NYMEX close.  

    NTDOY making new lows.  

    SOX actually getting stronger, up 1.44%.  Even WFR is up so you know the SOX are doing well.  

  107. Buying CRM July 130 puts for 4.55…come to Papa….

  108. Not so quick to call it a day as we may get some excitement here at the EOD.

  109. TLT – interesting how every other time TLT popped above $123, it went back down fast – but not this time as it has stayed up at these levels for a week now -  it feels like it is coiling for a bounce up from here.

  110. I don't think AAPL will break below 550 next week.  I'm selling 550 weekly puts (not for the MoMo).  These , of course, can be rolled.  I was selling 530 and 540 puts last week, and these will expire worthess today.  I'm moving the put sale up to 560 as I see upward pressure building on AAPL.

  111. …..that should read…..I'm moving the put sale up to 550…….

  112. This is funny :
    Ironic: the trade of the day is to be long $GMCR and short $AAPL and $GOOG. Strange world! LOL!

  113. lflan/AAPL – I am thinking the WWDC event will create some anticipation plus the markets have been tanking since the afternoon but AAPL has been the same. 

  114. Phil
    Is this one of those cases of not being faked out by the dip or should we be bias to the short side going into the long weekend?

  115. Phil--looks like a great BCS AAPL call this morning! Thank you!

  116. YMI breaking out….

  117. Phil- All is well with the world today- XRT up all day- LOL!

  118. AAPL 560 pin  -  Looks like it worked although I only did it small.  Mid is $1.51 now for about a $4.10 gain.  

    You can sell both sides of AAPL $560 for $5.60 and hope for a pin.

  119. Phil….I just went back and saw your today AAPL  555/560 bull call spread (9:59).   Now THAT was a good trade.!!!!

  120. Its a record…. CFTC..EUR short 195K vs 174K last week


  121. 55M on the Dow at 3:30 – We could bid 1M shares of AAPL at $565 and spark a huge rally on this volume (it would be 10% of the day's AAPL volume).  

    $550/Lflan – I like my $555 still. 

    Bias/Denlundy – I'm still gambling bullish on the small portfolios – if you look at the daily charts of the indexes, you'll see that we're forming squeezy triangle thingies and, generally, they are biased to the upside.  With the Euro at $1.25, we're almost at the point where they have to actually fall apart because falling apart is pretty much baked in so it's a gamble, make no mistake about that but I'm inclined to lean bullish – even in a hedged portfolio over this weekend.  

    Technically, we had a constructive week, consolidating for something.  Hopefully it's for a move up and not down!  

    Dow bounced right off 12,400 yet again in the Futures.  Keep in mind the Dollar is at $82.53 – very strong and a huge drag on the indexes.  

    AAPL/Jabob – That was a tough one to ride out, congrats!  

    XRT/Jthom – Well I think we learned our lesson betting against them – if they're up, we're going up and it doesn't matter what the facts are….

    AAPL/Burr – They are great when they work.  

    Thanks Lflan.  

    EUR/Kustomz – Yep, they are already priced to fail.  Will be a huge squeeze at some point if they don't.  

  122. BA/Phil – thanks, that 2014 60 put at $7.20 looks just the ticket.

  123. Take Time Today To Turn Timely Trades Toward Tuesday's  (up)Turning  Tempest

  124. Have a great weekend everyone!

  125. Great week! Excellent coverage. Have a great holiday all!

  126. Nice call on the AAPL Today $555/560 bull call spread. Love making a few extra bucks heading into a long weekend. Have a good Memorial day everyone! 

  127. You're welcome Scott. 

    Well a nice little mini-stick to finish off the week but we stopped going down and that's a good thing if it keeps up.  

    Have a great holiday everyone! 

    - Phil

  128. Zzzzzzzzzzzzzzzzzzzzzzzzzzzzz………."Maybe baby better come back later next week, 'Cause you see I'm on a losing streak.."   Actually, I did well this week, but the boredom made it feel worse than it was.  Have a good one, y'all!!

  129. Thanks Phil. The three day weekend will give me extra time to reread all the comments thruout the past week and pickup on what I missed in real time. I am really impressed by your comments and the flow of dialogue generated on the site. Have a great weekend.

  130. WTF?  Out of my 20 positions, one is down…… :)

  131. Have a GREAT weekend everyone.  Thanks for all the answers this week.  Thanks again Phil for taking the time to answer my questions.  I'm going to re-read all the answers to my questions and compile them into something of a notebook.
    I made some(hopefully) good entries on the TWIL list for my main account and IRA account, and I just watched the planting tree's videos again.  
    PS: I still vote for the PSW meetup to be in Mendoza Argentina or Santiago Chile!

  132. Burrben – when you compile your notebook, can you please pass it along. It will be a great help. I could also post some topics on the Wiki.

  133. There were some rowdy comments earlier in the week concerning your performance.  I started with $250,000 in cash as of Oct 1 and have realized gains of $81,000 thru close of business.  And that's in an IRA with no margin or naked trades. Whether Argentina or Chile I owe you a drink.  I'm looking forward to it.l 

  134. Phil – AAPL BCS was genius-  It was slow this Friday- Holiday weekend, so I could baby sit the trade @ work. I was greedy & bought back the 560 caller for less than $1, waited for the next wave- stick & sold the 555's for $7, $ 6 on a $5 spread !. Thanks for the idea..I wish i could execute these more often. It was just a few, but drinks are on me tonight tonight.
    I am checking out my friends band tonight: Check out their playlist:

  135. StJ – send me an email at pharmboy123 at gmail.  Tx.

  136. From FT on Eurozone risk:  Extensively excerpted, in case the link requires a subscription, sorry:
     "….The bankers, however, were alarmingly precise: amid all the speculation about Grexit, they told me, banks are increasingly reordering their European exposure along national lines, in terms of asset-liability matching (ALM), just in case the region splits apart. Thus, if a bank has loans to Spanish borrowers, say, it is trying to cover these with funding from Spain, rather than from Germany….The halcyon days of banks looking on the eurozone as a single currency bloc are over; cross-border risk matters….It is difficult to overstate the significance of this, or the potential hidden costs….High quality global journalism requires investment….“the financial crisis has led to a marked deterioration in European financial integration”; and since late 2011 “the integration of the euro area financial system [has] deteriorated further.”
    "The most visible sign of this, extensively quantified in the ECB report, is that spreads have jumped between sovereign bonds…But ALM trends are equally important….hints of fragmentation are even emerging in the LTRO; these days the ECB is increasingly demanding that when loans are extended to banks in troubled areas, this is done by their local national central bank, backed by local collateral. Hidden ringfencing is the flavour of the day even in central banking terms….  And this could have nasty economic implications. Last month the International Monetary Fund warned that eurozone banks were likely to embark on massive deleveraging over the following 18 months, to the tune of $2.6tn. But that projection assumed the eurozone remained a single bloc; if fracture keeps deepening, deleveraging will rise.     

  137. The FT admonition on "high qualily journalism" was not part of the excerpt.

  138. Done Pharm…

  139. burrben- don't know that we will meet there but  I have been to Argentina 11 times in the past 9 years- you can tell I don't like it :) - it is my favorite destination and I have said many a time- if I ever pull the plug on the US- Argentina is where I would move. It has it all- beautiful country- good people- wonderful weather- and the best part of all- they don't have a rule for everything as we do here in the states. It is so refreshing to visit and not be hassled about anything and everything- but it only lasts until you get back to the airport and have to deal with Delta. Last year after a wonderful trip I got to the checkpoint to board and they said " you can not take that caramel sauce on the airplane ( I had bought it in the airport)- I knew I was back to the US and had not even taken off yet! Truly a wonderful place!

  140. China might already be in a recession…

    You heard me right: China might be in a recession today. We can't trust the country's GDP numbers. Just ask possibly-future premier Le Keqiang. In a 2007 cable made public by Wikileaks, Le dismissed China's GDP figures as "man-made." Le explained that he only looked at three statistics to gauge the health of the economy: (1) Bank lending, (2) Electricity consumption, and (3) Rail cargo volume. And these measures say China's economy is screeching to a halt. [...]

    But this time might be different. The normal rules don't always apply to China. Its hybrid statist-capitalist system makes it a black box — and a black box that could very well power through a housing slump. When the banks are state-owned and the big companies are state-owned, the government can hypothetically demand that they make and take out loans. Or it can bring much more pressure on private companies to do so. Or launch a massive fiscal stimulus. 

    This might be little more than a blip. China's leaders could easily step on the economic throttle and get growth back on target over the coming months. But there's real weakness beneath the headline numbers. And the track record of countries deliberately popping bubbles is awful. 

    But if there was ever a place where things might be different, it's China. For the sake of the world economy, let's hope so.

  141. angelcur
    "yes he liked to engage in sexual activity with women 20 years younger than himself"
    you say that like it's a bad thing………. ;)
    somebody once said "why do the Rolling Stone's "F" 20 year old girls  -  answer: "because they CAN".
    now that I think about it,  I don't think I've ever laid down with somebody 20 years younger, but I certainly wouldn't rule it out under the right circumstances (not likely to happen)  :).   In all seriousness though, I think the most important thing is the "intent', and also the "expectations" of both people.  Speaking for myself, and I know I'm not a neutral observer, but I've always felt my own intentions and, well, how can I say it……….the "quality" of my soul, if I may be so bold, have very often been MUCH better than my peers. It's actually gotten me in trouble (emotionally, at times)  because I haven't been "cynical" enough about some of the women I've known. In other words, their "intentions" were at a lot lower "level" than mine. Very sad to say, but it has "hardened" me, unfortunately. Lack of trust, and all that….
    It's not impossible (and not saying how old I am), but somebody, say 48, could have a very enlightened and meaningful (for both parties)  relationship of some sort with someone 20 years "his" junior. There are some 28 year olds who are almost more "mature" than some 48 year olds (just to choose some numbers at random).
    Now, on the other hand, (and I thought Clinton was great), having an intern who figuratively carried her "presidential kneepads" with her, AND the whole cigar insertion thing, THAT'S  incomprehensible to me. Guess I expect better from a POTUS.
    sorry to get off the subject of buying and selling option premium, but you brought it up  :)
    -all the best….

  142. Wow, this guy actually kinda of agrees with Phil and the group. 

  143. Phil / Hedging – As requested, a reminder for a short tutorial on hedging.  Thanks for sending me back to the strategy section.  Every time I explore the WEB site I find additional postings as well as a further understanding of the core concepts.  TIA
    Everyone… Have a fun holiday weekend!

  144. Phil – Have you ever thought of taking your family on a cruise to Alaska?
    It's an awesome trip, especially for the kids (been twice) and just booked another that includes the mom-in-law.
    Holland America (our favorite) has some great deals that round trip out of Seattle, with July's prices (best time to go)
    among the lowest of the season. I can assure you, your family would love it.

    Have a great weekend!

  145. KRO – anyone following Kronos?  Sabrient has them with a Strong Buy.

  146. Kronos/Canuck

    Enjoy :)

  147. diamond – thanks for the above, 'The Art of Selling Well: Part 1"…looking forward to the next part.

  148. Bear Trap/Diamond:  The title of that article had me confused.  I always thought the term "bear trap" to mean a dip before the continuation of a bullish rally.  The indicator is flashing a bearish signal, a "dead-cat bounce", which I have always thought of as a "bull trap", because it traps bullish investors.  As opposed to a bull market dip which traps bearish investors.
    Anyhoo, It kind of jibes with Phil's interpretation of the market oscillators in that this bounced burned off a large amount of "oversoldness" without making up a lot of ground in prices which makes the current rally suspect.   Not surprising, considering seasonality and the fact that the whole world is a mess. 

  149. Good morning! 
    We have another new format for StockWorldWeekly so please let us know if we're going in the right direction or not.   
    Thanks Den! 
    Argentina/Burr – I'll go if we can go skiing at Las Lenas in July or August – that's on my bucket list (which, sadly, at 49, I have to begin to consider checking off – especially the more physical stuff).  
    Nice momentum playing the AAPL position Randers – that's just the right way to work it.
    Ichan/Lol – What a trouble-maker.  I think he's looking to sell them for a quick profit or at least create an interest so he can dump out – not what the company needs right now.  
    Europe/ZZ – You see what's going on here, right?  Banks create debt crisis, real estate values plunge, borrowing costs rise, banks begin demanding local assets be pledged (at rock-bottom values) against new loans as much higher rates and PRESTO! – it's what Jefferson warned us about:

    "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

    Whether Jefferson actually said it or not, it's a good quote that gets to the heart of the game that's been played since the Magna Carta – the Nobles sell their land at the top to the peasants, then they spend the next 20 years driving property prices down and raising taxes on lands and the raising the price of commodities and the price of money that the peasants need until the peasants are forced to sell their land back to the nobles for pennies on the Dollar.  Then the Nobles reverse the process and pump the value of the land back up over the next 20 years and cash out by selling it to the peasants again.  It's a fantastic scam!  
    China/StJ – A recession would be getting off lightly.  
    McCullough/Burr – Hmm, not sure that's a good thing as he's not one of my favorite analysts…  
    Hedging/Jfaw – OK, the idea was that you read some stuff and ask me questions – not that I do it all from scratch!  It is a topic that's been done to death so it's very hard for me to get motivated to think of a whole thing on my own.  Either in the Education section or the Portfolio section there is a series on "Smart Portfolio Management" and those have some hedging basics and, of course, our new income portfolio will go through the hedging process live while it's being built.  
    Alaska/1020 – When Disney puts their new boat up there I do plan on going.  I think the kids would not be thrilled with several days in on another boat so we'll see.  I do want to go though…  

    Actually, I'm planning on taking the kids to Vegas and LA in July (6-16th tentatively) so any suggestions would be appreciated.  I figure I'll work Mon/Tues, take Weds off and drive across desert (must be something cool to do along the way?) and then finish up in LA.  They've never been out west (other than SF when they were too little and Tahoe and Vail for skiing) so I want to hit some highlights like the Grand Canyon (heli trip from LV), Nobu Las Vegas and some of the cool pools, Hollywood, Malibu, Berverly Hills, Nobu LA (we love sush!), Disney and maybe the SD Zoo but – if anyone has any cool ins somewhere or good suggestions – please let me know.  Jackie's 10 but acts like she's 18 and Maddie is 12 and will likely be reading a book the whole time except when I point things out and she glances up and says "yeah, great".  

    KRO/Canuck – Nice company.  I like companies that provide boring, essential materials.  We're in a bad part of the cycle but if you're scaling in fro the long-term, they're a good play.  
    Bear trap/Diamond – That's an interesting take.    As to nat gas – we're only at the beginning of the summer build, I think it's a bit silly to use technicals when this is a fundamental issue – there WILL be more gas than we have the capacity to store – hard to imagine they can hold $2 under those conditions unless the producers show tremendous restraint and cut back significantly on production BUT nat gas is essentially a waste by-product of oil drilling and there's plenty of those guys who aren't going to cut back on anything because, even if it's $1 or .25 – it's just bonus money to them on top of what they get for the crude they're drilling for.  When your wells are gas only – you labor under a very different set of economics.  
    I like that selling article!  

  150. May has been a truly awful month for stocks. How awful? The Dow has enjoyed only four up days so far this month, the first month with so few positive trading days since September 1903. Recent history doesn't offer much hope for near-term relief, as the S&P has shed more than 2% during the four trading days after Memorial Day in each of the last two years. 

    Is the “cult of the equity” dead? Institutional investors have slashed their equity holdings over the past decade. Stocks have not been this far out of favor in over a half a century. “Ultimately what is going on is that fundamental tenets of capitalist society are being questioned,” says Allianz's Andreas Utermann. This is stunning in light of overwhelming evidence that, in the long run, equities outperform. From 1900 to 2010, they beat inflation by 6.3% a year in the U.S., compared with only 1.8% for bonds.

    Told you so!  SNB President Jordan dismisses calls from Swiss industry to raise the floor on the euro/franc exchange rate, giving the impression the central bank has its hands full just maintaining the CHF 1.20 floor. Meanwhile, a working group suggests capital controls, among other measures, to defend against franc strength in the event the crisis worsens.

    Red flag for the U.S. economy? Lending during Q1 fell by more than $56B Q/Q, or 0.8%, a reversal from three consecutive quarters in which lending expanded. While lending to larger commercial and industrial customers continues to rise, nearly all other types of loans declined, including those to small businesses.

    Housing prices in just 2 of the 20 largest U.S. metro areas have returned to 2006 levels – Dallas and Houston. Oil? Luck? Perhaps, but a Texas law requiring any homeowner refinancing a mortgage or taking out a home equity loan to have at least 20% equityin their home may have helped shield the state from at least part of the housing bust. 

    IMF head Lagarde tells The Guardian her agency has no intention of easing the terms of Greece's bailout package. Greeks need to help themselves by paying their taxes, she says, adding she has more sympathy for poor African children than Greek ones – interesting sentiments from one who was part of the regime that oversaw hundreds of billions transferred to financial institutions in the aftermath of the GFC. 

    After a barrage of criticism following yesterday's remarksthat Greeks need to stop complaining and pay their taxes, IMF chief Lagarde clarifies, saying her comments were directed at the "most privileged." Nice. When in a hole, best to stop digging. Comment stream on Lagarde's Facebook page.

    The pro-bailout New Democracy (23.2%) party has overtaken Syriza (22%) in a new opinion poll in Greece. Election rules give the victorious party a 50-seat bonus in Parliament, so even a tiny victory margin is significant in determining who forms the next government. Markets are pricing in disaster. What if things continue to muddle along?

    Did S&P tip that Spain's Popular might be next in line for a bailout, asks the WSJ's David Enrich. He notes the bank is mentioned in the same breath as Bankia regarding government support in theS&P downgrade report. Enrich on the Bankia chronology: "Last summer, IPO. Last month, 'well capitalized.' Last week, €10B hole. Today, €19B bailout."

    With mounting losses in its home market, Spain's Banco Santander (STD) is under political pressure to unload at least a portion of its profitable Brazilian unit. Likely bidders might be Banco do Brasil (BDORY.PK) or Bradesco (BBD). Shares of Santander's Brazilian unit have been on the rise this year in anticipation of the sale.

    What Makes Countries Rich or Poor? (NY Review of Books)

    Europe’s New Normal (Foreign Affairs)


    Rex Nutting's column asserting "Obama's spending binge never happened" has created a buzz in some high places, and it's true that the president's spending levels are little changed from FY2009, the last Bush budget. But that was a TARP-inflated one-off, and Obama must take the blame for choosing not to reverse that elevated level of spending… or for not spending enough.

    The London Whale was hooked by a NYC "monster." The tale of how Boaz Weinstein and other hedge fund managers took JPMorgan for billions. Now running his own money, Weinstein was once a whale himself on the wrong side of a trade – he and his team at Deutsche Bank losing $1.8B in 2008.

    Speaking on the issue of increased financial regulation, Goldman's Jim O'Neill asks rhetorically: “Is it really that entirely desirable to have financial stability at the expense of everything else? I sort of think you want your investment bank to be a little unstable.” – pure Goldman gold.

    A mild, dry winter during 2011-12 plus continued advances in unconventional drilling enabled producers to boost oil productionfrom North Dakota’s Bakken formation to record highs, ConocoPhillips (COP) says. This month, North Dakota surpassed Alaska to become the second oil-producing state in the U.S., following Texas.

    The sharp fall in crude oil prices typically is seen as a negative for equities, since it reflects worries over weakening global economies, but the outperformance of the Dow Transports hints that falling crude eventually may be a boon for stocks. If crude’s sharp drop really reflected slowing demand, shouldn't transports be falling at least as fast as the broad market, as they did in late 2008 and mid-2011?

    Don't worry, they only took our good guys:  Responding to a report from The Verge that Google (GOOG) had acquired H-P's (HPQ) webOS team, H-P clarifies that "some key members" of the team working on the webOS-based Enyo app development platform have left the company, but "the majority of the engineering and leadership team remains." It adds the Enyo team is looking to hire new engineers.

    Is Google Wallet (GOOG), off to a sputtering start, a victim of its dependence on NFC technology? Not only are NFC chips found in only a small (albeit growing) percentage of phones, the technology requires an ecosystem that doesn't exist, in part due to rival agendas. Meanwhile, PayPal (EBAY) is rolling out an app-based service that allows users to pay before walking into a store, and Starbucks has had success with a solution that scans barcodes appearing on a phone's display. Then there's Square

    Among giant U.S. IPOs of the last 10 years, Facebook (FB), which is now down 16% from its $38 offering price, has posted the worst performance, according to Bloomberg's data. Of course, many pre-IPO investors are also underwater: a SecondMarket chartshows Facebook reached current levels in Feb. '11, and largely remained above them until this week. Options trading begins on Tuesday, and could bring additional volatility.

    Thanks to Nokia's (NOK) Lumia releases, Windows Phone (MSFT) managed to account for 4.1% of Western European smartphone sales in Q1, per IDC. Android (GOOG) had 55% of the market, the iPhone (AAPL) 25%, and BlackBerry (RIMM) devices 9% (down from 17% a year earlier). A Microsoft exec recently claimedWindows Phone had 7% of the Chinese smartphone market. Nokia's high-end Lumia 900 was launched early in Q2.

    Engadget's review of Samsung's (SSNLF.PKGalaxy S III is positive, but far from glowing. The device's performance, camera, and display are praised, but its software, which Samsung has heavily emphasized, is found lacking, and the site declares HTC's One X a better high-end Android (GOOG) option. The Verge is more enthusiastic, calling the S III a "technological triumph." Though Samsung currently looks unstoppable in the Android market, it's worth remembering HTC looked the same way a year ago.

    Though Apple (AAPL) continues to heavily promote Siri – itjust hired John Malkovich to do some ads – the voice assistant service, which is powered by Nuance's (NUAN) voice recognition technology, remains a lightning rod for criticism. Disgruntled user Jon Friedman calls Siri a "gimmick for self-indulgent people with a tremendous amount of time on their hands." "Steve would have lost his mind over Siri," a former Apple employee recently told Adam Lashinsky.

    The Trouble with Scientism: Why history and the humanities are also a form of knowledge. (The New Republic)

  151. Barry's succinct summation of week’s events:


    1) With all the fears of Spanish and Italian spillover from Greece, both stocks and bonds in each are little changed on week.
    2) French feel good with new Pres as consumer confidence rises to best since Nov ’10.
    3) German consumer confidence holds at just .2 pts from highest since Mar ’11.
    4) April New Home sales total 343k annualized, above expectations and the 2nd best over the past 2 yrs.
    5) Apr Existing Home sales a touch above estimates but months supply rises to 6.6 from 6.2.
    6) With mortgage rates hitting another new low, refi’s up 5.6% to 14 week high.
    7) UoM confidence rises to most since Oct ’07 in May as one yr inflation expectations fall to 3.0%, the lowest since Dec ’10 in response to a 3 month low in gasoline prices.
    8) KC region mfr’g rises to 9 from 3.



    1)Greek stocks fall another 12%, down 91% from the high in ’07, a greater fall top to bottom than during the US Great Depression.
    2) German IFO business confidence falls to 6 month low, mfr’g PMI drops to lowest since June ’09 at 45, French PMI at 44.4.
    3) Euro zone mfr’g and services composite index declines to lowest since June ’09.
    4) UK Q1 GDP contraction revised even lower.
    5) Italian consumer confidence falls to new low.
    6) China’s HSBC flash mfr’g index remains below 50 for 7th straight month falling .6 pts, Shanghai index loses at 5 1/2 week low.
    7) US Durable Goods fall .6% ex transports and 1.9% at the core vs an expected gain for both.
    8) Initial Jobless Claims total 370k, in line but declining trend over past yr has stopped for now.
    9) Richmond mfr’g falls to 4 from 14.
    10) Notwithstanding new low in mortgage rates, purchase apps fall 3% to 4 week low.
    11) Fitch downgrades Japan’s credit rating to A+, not a surprise but Japan continues its path to its European moment.

  152. Lots of data next week:

  153. Good Morning!
    Phil, I would suggest hitting the California Coast.
    Fly into SFO.
    A couple days in San Francisco
    Drive down the coast to Monterey and cruise Carmel's 17 mile drive.
    Take the 1 down to Big Sur and Morrow Bay – Awesome.
    Santa Barbara, Malibu, L.A. (meh) Orange county (Disneyland in the summer? Veeery nice!) Newport Beach (home of PIMCO)
    Then a beautiful coast drive from San Clemente into Oceanside, Carlsbad (hey Phil!) Encinitas, Del Mar, La Jolla, Mission Bay.
    Fly out of SAN.
    All this with daytime highs from 60 to 75 degrees.
    You can fry an egg on the sidewalk in Vegas, mid July…….  :)

  154. Phil – newsletter feedback – well….. 

    Formatting is a bit sloppy – for instance: Numbers on the first page (upper left) go into the SWW title; first and second pages have different font sizes, etc…not sure if that is intended.  In addition, "inside PSW member chat" some are different formats, fonts, etc. as well.

    What happened to the 'week in review' section that moved (or did not affect) the market? 

    I still am not a fan of the daily remakes and think it could be reduced to one page that highlights the week on the board, but that is me – others may feel differently.  I think the first page should be a recap of the week that has come and gone (last week's did), as well as recapping the last weeks newsletter (if necessary).  Then get into the picks from past newsletters and possibly new ones (see BBY comment below).

    The BBY and XLF boxes with picks seem out of place, as they are on the front page….why should I read the rest of the newsletter now that I know that those are there?

    Again, it is nice that there are a bunch of trades that did/are doing well, but what can the newsletter give to readers besides an advertisement of the current trades in chat that have done well? 

    I want more 'other' articles.  Mish had a good one on Friday, and Lee Adler has had a few doozies this week.  ZeroHedge, as controversial as they are, has some good ones as well (some with links) – or ones to think about at least.  How about StJ's charts? 

    I like the Iron Condor section…..and the idea of a 'teaching' options section every week…..

    Hope this helps…..


    Others on the board, please comment, good and bad…..

  155. Vegas|1020 – yes, the heat may make Vegas a bad plan for July.

    SWW/Pharm – formatting is in experimental stage still. I find it valuable to review things as my main use for newsletters and chat archives is to go back in time and see what happened under similar market conditions. I don’t understand what happened to week in review when that’s what the daily recaps are. I suppose we could hold back trades as a teaser until later but we’re not trying to get people to watch commercials here and the trades we’re reviewing are the trade ideas from last week’s SWW and the new trades are trades from chat that are still playable. I would have liked more content to but it just didnt happen this week. Feel free to send me any articles you think should be featured in the weekly newsletter directly.

  156. Brussels considers a EU-wide "deposit guarantee scheme"to be funded by a new tax on banks, reports the Sunday Times. Top brass feels removing the threat of bank collapse can check the spread of contagion from Greece to Spain and beyond. It seems, however, Greek fears are less about deposit risk and more about denomination risk, i.e. waking up one morning to find your euro deposits converted to drachmas. 

    Though academic research suggests that the stocks of companies that make political donations perform worse than ones that don't, this year's elections could see corporate political spending skyrocket with a Supreme Court ruling having opened the door for unlimited spending on campaigns. Shareholders at Boeing (BA), IBM, PepsiCo (PEP) and BofA (BAC) seem to get the picture – having put forward motions to curb political spending. But their resolutions failed, so execs may squander more resources on campaigns with no benefit to investors.

  157. Phil — not only is Vegas too hot in the summer, but the drive there is nothing anyone wants to do.  Nothing cool along the way…just 270 miles of hot, boring road.  Also, getting to the OC (Disneyland) or to SD (Zoo) can be a pain, as well, so you should take the drive only if you can avoid peak driving times, which is like almost all the time!  
    Of course, I always recommend a visit to Santa Barbara.

  158. escohen5/The Drive   Very true…. (I've driven that road at least once every year since '85)
    ….on the other hand, if you would like to save $$$ and not go to the Moon, it's the next best thing….
    Phil, just picture your neck of the woods with nothing but the occasional "yucka" tree.    :)

  159. Phil – just let me know if you'd like some specifics on most anything California.
    I'd be happy to help!

  160. Well, i need stuff to do with teenage girls who are jaded travelers. Thought Vegas would be exciting for them more so than just LA. I was in Vegas one July and didn’t bother me except on the 9 th hole of a golf course – I was swinging my driver back and suddenly got dizzy and almost passed out. Then I realized beer wasn’t all that good at rehydrating you.

    I wanted to go to Niagra Falls and Toronto but they have zero interest.

  161. Diamond – thanks for posting that indicatior.  I have been following it and then lost my link to it;

  162. SSW Format:
    Something about the layout I find too busy and hard on the eyes (or I'm just getting old).  Also, I find the two column format difficult to read.  
    I do like the strategy section, picking out one thing to discuss weekly.
    I like the recap of not only the trades that worked this week, but reminding us of a few that are still playable, including hedges.
    My two cents worth anyways.

  163. SWW Format – too busy, fonts are off, color on the paper makes it look unprofessional. The old format was better for me.

  164. Phil – July is a GREAT time for: California's Central Coast! :-)
    Hearst Castle

  165. Phil / Hedging – Sorry.  I do look forward to the education.  I am going on my third month
    as a member and have learned a ton but this hedging has me asking more questions than I have found answers to.
    For instance, the other day the MoMo's placed a hedge since they were too bullish.  This was a short term hedge
    to protect against a sudden downward move in AAPL.  I am not sure why that was placed other than to take out
    insurance in case AAPL tanked.

    I am going the other direction, I am planting trees, I want to double my portfolios in ten years. 
    The plays to date (CHK, BTU, AU, AUY, FCX, OIH, SVU) are all short puts (Jan 13 and Jan14) except
    for AU, AUY which I have 100 shares ea. bought before PSW.  These are between 2 IRA's.  I also have a
    401K that is in cash that needs to get working (8% company match).  I expect to have that working again and use the IRA's as a hedge when needed (correct application of insurance?)

    The introduction the other day to the new income portfolio started out (I could have misinterpreted)
    discussing a 5K hedge. I am not sure I followed that since there was nothing to hedge yet.  Since hedging
    is insurance, you can use 3x ETF's as that insurance.  Favorites EDM, TZA, SQQQ, etc.

    So, if I am following along and interpreting correctly:

    1.  If you expect the markets to head higher (Technicals pointing that way, no or a minimal hedge).
    2.  Marking topping, you expect a slight pull back and the rally to resume. Place a hedge
    like a TZA call to protect against a downside move.  For instance July 22 call for 3.00. So, a 5% move
    in the /TF gives you a 15% move in TZA.   With a .60 delta, TZA would move 66% from 3.00 to 5.00.  So the
    trick is to figure out how much you need to insure (portfolio size * expected market drop (Do you take
    into account the portfolio beta??) and apply accordingly.
    3.  Sell calls against longs as market is topping. (partial insurance since delta (ITM) will be around .50).
    4.  As the market tops, scale into hedging as the degree of the correction presents itself.

    Please keep in mind that before PSW, I was like most novices, vertical.  So, the hedging concept in new to me.
    I have no problem with investigating any subject to include more detailed reading on hedging.  I have read numerous
    investing books (Oneal, monstor stocks, etc.) but none of them helps you learn how to invest
    and trade like PSW.  Myself, and all the new members thank you and the board for the help given us.

    I look forward to seeing if I am on track with hedging.


  166. Phil — when our girls were that age (they are 18 and 15 now), we would stay down in Carlsbad at a place that used to be called the Four Seasons Aviara, but is now a Park Hyatt.  The girls loved it, and it was five minutes from Legoland.  Then San Diego and the Zoo is about 20 minutes further south.  North to Disneyland is about an hour.  So, a good mid-point.
    If you're going north, as Diamond says, the Central Coast is great in the summer.  Unlike the drive to Vegas, the drive to Santa Barbara is very nice…only 90 miles, and the last 30 on the coast.  I recommend the Four Seasons Biltmore, right on the beach in Montecito.  The town is busy but not overly tourist-y, with great restaurants and nice shopping on State Street.
    You might continue on up the coast to Hearst Castle and that area, but I'm not sure that girls of that age group would find it all that interesting….

  167. Hearst Castle is Great!  Carlsbad is rad….right 1020!  The Wild Animal Park … I like it better than the Zoo.

  168. More on Hedging – Spent a lot of time reading PSW WIKI on hedging and other WEB articles.  Seems I have the basics down per my last post..  As noted earlier… Why hedge before starting the buying process concerning the income portfolio?  Seems bankers (home buying) and Phil have something in common; insure your asset first.
    One thing I am seeing is that for the long term portfolio's, buy/writes and entering selling puts is a hedge in itself.  Buying correctly, asset and time wise, allows for less hedging down the road.
    As the articles Phil posted in the WIKI alludes to, it's a math problem that should become part of your investing plan.  Be able to peel the hedge off and add more based based on the market conditions; this should become second nature.
    Any comments on my portfolio's mentioned above:  I need to be able to hedge a 401K (crappy mutual funds) with my cash and 2 IRA accounts.  Use the IRA's to hedge the longs in the 401K or scale out as the market gets choppy?

  169. Phil; seriously take the California suggestions into consideration. We drove down to Anaheim (DisneyLand), with 3 kids, then headed south along the Pacific Coast Hwy, to San Diego. We thought it was the most awesome place to come back to visit again in the future. There's something about the sand, the surf, the breeze, that rejuvinates the soul. BTW; 1020, Carlsbad was our favourite place too…Kids loved seeing real surfers, living the life. There's enough beach for everyone and you can't buy that kind of weather back home in Canada. 

  170. Pharm, I must say that nearly anywhere on our north coast is awesome and Carlsbad is perfect at any age and for any attitude….
    Phil, as escohen5 stated, the Park Hyatt is a great place for familys and a great jumping off point for nearly anything in San Diego.
    Your challenge is to keep things interesting for your girls….. :)
    San Francisco: Alcatraz and the Steinhart Aquarium (this one comes with a rain forest) in Golden Gate Park. Also, in the same area as Steinhart is the Exploratorium (very cool)
    I would consider the Fairmont Hotel with views from some rooms of the Golden Gate and the Bay Bridge.
    Monterey is a great stop for it's unique Cannery Row and maybe the best aquarium in the world…..
    The 17 mile drive and the drive south thru Big Sur on Hwy 1 is rated one of the best drives in the world….
    Not to mention the Redwoods. Won't find that on the east coast…..
    Once in So Cal, the Disney California Adventure would be a first for the family.
    And maybe along the way, mix in some new fun kids to hang with and you have a pretty good vacation!

  171. Thanks 53787 – I would say in every other home in my neighborhood, there lives a surfer.
    It's a completely different vibe out here….

  172. 1020; The "vibe" no kidding about that. I remember laughing to myself, while watching the seagulls. The gulls just sit there chilling out, taking in the warm breeze. All day they're just hanging out…lol. They seemed so content, it was too funny.

  173. Phil – forgot to mention that a drive like that would require a vehicle with bigger windows and a back seat that's not like an old couch you find in some of Detroit's finest. I would recommend an SUV or a nice Minivan. I believe these guys have one-way rentals….

  174. 53787 -  You should see our pelicans, talk about chillin…. :)

  175. 53787 – Have a good evening.

  176. Thx 1020 -

  177. Beijing's Credulous Home Buyers

    'As competition between developers gets fiercer, the companies have found a new way of marketing: pitching mortgage packages that allow home buyers to make the down payment in installments over a period of several months. 

    “The deal will be settled several months later (when the down payment has been paid in full). Who knows what will happen then?” said one senior property insustry executive, on the condition of anonymity. 

    In the capital’s Daxing District, one property company allows home buyers to pay two thirds of the down payment , then sign a contract with a bank promising that they will pay the remainder before the construction is complete.
    “Banks are grabbing customers. They have very flexible policies now,” said one  sales woman.

    Another developer has even cut the size of the “first down payment” to 5% of the home price for those first-home buyers. The remaining 25% – the largest available mortgages are for 70% of the home’s value – should be paid in installments within nine months.'

  178. Phil – some SSW feedback – it feels "disjoint."  Placing both a review of your comments and some excerpts from "chat" on the same page gives a good review of what happened each day, but it doesn't give a feeling for the "week."  Personally I prefer when there's a digest of your comments and stock/option selections and how they panned out, and a smattering of excerpts from "chat," but they are treated as separate topics.  I also like just one column on the page, otherwise we have to scroll back up to the top of each page.  Just my two cents…this felt more like a daily review than like a weekly review…

  179. PHil – also getting back to your Iran comments.  You want to say that Iran has nothing more than commercial intentions with its uranium enrichment.  However, most sources I have seen say that 3% is sufficient for electricity production, while Iran is pushing for 20% enrichment, by its own admission for "purposes of medical research."  In other words, Iran itself is saying that 20% is not for commercial electricity production.  For electricity, 3% is sufficient.  
        You're missing something else here.  Iran has declared and repeatedly declares, its intention to "wipe Israel off the map."  The Middle East is not like living in NJ, where if a politician says something there's at least a reasonable chance that he fully intends to do the opposite.  In the ME, if your neighbor says he intends to destroy you, you better take him seriously because in this neigborhood, "might makes right" and chances are better than 50% that your neighbor means what he says. Especially when he has a long history of trying to undermine and terrorize and destroy.  And in fact, it is the entire Middle East that is afraid of Iran's intentions, certainly not only Israel…
      So, bottom line is that it's rather naive and dangerous to swallow Iran's line that all of its nuclear research is for purposes of power generation, etc…common sense as well as serious intelligence assessments indicate otherwise…

  180. Germany Breaks Solar Power Record

    "Still, global fears about a second accident at Fukushima or even at another plant, have pushed many leaders to make drastic energy policy changes. Germany’s Angela Merkel appears to be at the head of this movement. Germany set a new world solar power record producing 22 gigawatts of power over the course of Friday and Saturday, Reuters reports. That amount was enough to power nearly 50 percent of the country’s energy needs at midday."

    Japan's Kyocera has plans to build a 70 Megawatt solar plant in Kagoshima and Softbank is planning an even larger 200 megawatt solar plant in Hokkaido.  In addition it looks like Japan and Hawaii (and several Pacific Island nations) are partnering up to break their over-dependence on oil and pursue renewable energy sources including solar and geothermal: Hawaii could be part of Japan's push to boost energy efficiency

    Its not surprising to me that these two top engineering and forward-thinking powerhouses are making large strides in solar.  Anyway as long as these type of projects are going on, we still need solar companies like WFR and the push to seek oil alternatives by economic powerhouses like Japan, who by the way, have been pushing Natural Gas since the late 90's when I was living there (again: FORWARD-THINKING) should be good for CHK.

  181. Good morning!  

    Futures up about 0.6% as Asia had a decent morning and Europe is up half a point with a poll from Greece that they are leaning towards austerity/EU parties in the elections (17th) outweighing continued bad news from Spain (for the moment).  

    That pumped the Euro and Pound up half a point to $1.256 and $1.569 but neither one exactly what you would call strong.  79.37 Yen to the Dollar and the Swiss are having trouble keeping it together at $1.2018.   Dollar is still strong at 82.18 after saying no way to falling below 82.  

    Oil $91.78, gold $1,578, silver $28.50, copper $3.48 (rejected at $3.50 on Dollar bounce), nat gas $2.55 and gasoline NOW at my target $2.85 so they snuck it up in time to stick it to drivers today.  

    3:54 AM Asian shares rise after opinion polls show that the pro-bailout New Democracy is in the lead in Greece ahead of the election next month, although fears about Spain limit gains. Japan +0.1%, Hong Kong +0.5%, China +1.2%, India +0.7%

    4:15 AM As in Asia, EU shares are mostly higher following weekend polls that put the pro-bailout New Democracy in the lead in Greece. EU STOXX 50 +0.2%, London +0.9%, Paris +0.4% and Frankfurt+1%, although Milan is -0.3% and Madrid is -1% as Bankia gets hammered over its bailout and takes down other banks with it. 

    7:19 AM S&P futures, +0.8%, are off their best levels, but remain higher as most of Europe puts in a marginal rally today. Stoxx 50+0.4%, Germany +0.6%. Spain -0.7% as the debts of its banks begin to move onto the government balance sheet. Spanish 10-year notes +15 bps to 6.46% – starting to close in on the panicky November peak of 6.70%.

    In addition to U.S. markets being closed for Memorial Day, Switzerland is shut. Germany and France are also enjoying bank holidays, although equity markets are open.

    The optimism over Greece is helping to boost the euro by0.3%, although the bank fears in the Spain are very possibly the reason why 10-year bonds yields are 15 bps higher at 6.46%. Italian yields are +5 bps at 5.72% and those for Portugal are +9 bps at 12.34%.

    Bankia hurtles 24.5% lower in Madrid following news that Spain's government will provide €19B to the lender. Shares had been suspended on Friday ahead of the announcement by Bankia of its recapitalization requirements. The developments are pressuring other bank stocks, with Bankinter (BKNIY.PK-4.1% and Santander (STD)-1.1%.

    Why would anyone own the preferred shares of Banco Santander (STD), writes John Hempton. They yield 10%, but offer no chance of capital appreciation. Do the holders believe Spain will do as the U.S., and bail out the banks at no cost to the preferred? It won't happen, says Hempton. Better to own the common – with an earnings yield of 40% and at least the chance of capital gain.

    There won't be any external rescue of Spanish banks, says PM Rajoy, now holding a press conference. The nationalization of Bankia, he says, is about gaining the confidence of the markets and protecting Spanish savings. Live here, in Spanish.

    The European Commission is poised to soon unveil plans for putting the burden of rescuing collapsing banks on bondholders rather than taxpayers, the FT reports. Regulators will be able to fire the management, and write down non-guaranteed deposits and senior unsecured bondholders. A major bondholder says that while it's "not a bad framework,” the plan is "not going to be well received."

    Draft EU findings reportedly praise Mario Monti's government for the progress it's made in reforming Italy's economy, although criticizes it for not doing enough to tackle tax evasion and the rather large black economy. The report, which is due on Wednesday, also warns that austerity "may depress domestic demand and growth in the short term." 

    Former Greek technocrat PM Lucas Papademos warns that the country's finances could collapse unless the election on June 17 produces a stable government. The situation is going downhill faster than expected amid a significant fall in tax revenue and an easing of spending restraints during two election campaigns.

    Prime broker Newedge abandons Greece, telling clients it will only process sell orders and stop margin lending for Greek shares. Earlier, trade-credit insurer Euler Hermes said it may cut back coverage of exports to Greece. The pressure grows on Greek citizens to deliver an outcome in June elections that pleases Brussels and the IMF.

    The minutes of the BOJ's April meeting show that policy makers are worried about a "misunderstanding" that the bank will automatically increase the size of its bond buying until it reaches its 1% inflation target irrespective of what the rest of economy is doing. However, the BOJ also wants markets to know that it will act if the economy falters. 

    With renewable-energy subsidies as the fuel, a trade war between the U.S. and China is heating up. Markets both countries see as strategic (like America's $8.4B solar market) are playing host to increasing WTO challenges. And that's not to mention skirmishes over steel pipes, poultry, tires and music. 

    Profits at Chinese industrial companies -2.2% Y/Y in April to 407.6B yuan ($64.2B) vs. +4.5% in March, demonstrating how the economic weakening is affecting some of the country's biggest firms. In January-April, profits at state-controlled enterprises -9.9% to 457.8B yuan.

    Attn: TSLA fans – I'm just saying….  Shares in China's BYD, which is backed by Warren Buffett, tumbled in Hong Kong and Shenzen following a weekend accident in which its electric e6 taxi caught fire and three people died. It's still unclear why the vehicle burst into flames, but if the lithium-ion battery was the cause, the implications could affect the global car sector.

    As part of its restructuring efforts, Research In Motion (RIMM) is planning across-the-board layoffs that will cover at least 2,000 employees, sources tell The Globe and Mail. It's added RIM, which has about 16,500 employees (down from a peak of ~20K), plans to announce the news around June 1, and has been quietly conducting layoffs in advance. A source tells Reuters the job cuts could eventually total 6,000. (also)

    A Facebook (FB) phone will arrive next year, multiple sources tell the NYT's Nick Bilton – a prior report suggested a Q3 launch. It's added Facebook has hired Apple engineers with iPhone experience, and is exploring multiple smartphone projects. The news comes as Facebook comes under pressure to improve mobile monetization, and rolls out a PC/mobile app store and an HTML5 app development platform. Facebook is also rumored to be interested in browser maker Opera.

  182. SWW/Canuck – I agree a bit too busy, just trying to find ways to denote sections but eliminating two columns?  I don't see that.  That is the idea of the recap – to find trade ideas that are still playable for less-active weekly readers and to put it in the context of why we liked the trade idea in the first place.  

    Busy/Nicha – Well we don't have any professional editors yet – it's a work in progress.

    Sights/Diamond – Thanks 

    Calrsbad sounds nice Esco and 53787.  I heard you can camp out at the Zoo though, that sounds like fun.  I think we'll probably spend a night or two at Disney, although I doubt it's all that great compared to Orlando.  I want to do a day of surfing lessons for the kids too.  Jackie's a jock, she'll probably be doing handstands on the board by the end of the day!  

    SF/1020 – Might be another trip if we stick with Vegas, otherwise too many things.  Redwoods too but also on my list.  I'm saving a north trip for a July when we have snow left in Tahoe so we can start it off by skiing and then drive to coast and hit the beaches and the redwoods up north.  

    Car/1020 – Don't we want a convertible?  

    Oh dear, markets back to nose-dive.  Not serious yet but looking weak.  

    Iran/Jerconn – By that logic, we have to kill them then.  They have declared their intention to murder and it's 50/50 they will – how does that leave us a choice?  You can never be sure they don't have chemical or biological or radioactive weapons unless we invade their country, wipe out their government and install our own dictatorship which, I suppose, we have to do because they said they had bad intentions and it's better than 50% they'll carry them out.  Not much sense in pretending it can end any other way, is there?

    Renwables/Kinki – At some point, this will give their manufacturers a big advantage as well.  

  183. Phil – according to your Iran logic, then, we must either believe the Iranian gov't entirely and believe that what they say is what they intend (and therefore kill them before they kill us) or not at all (and we can peacefully go to sleep while they peacefully enrich their peaceful uranium for peaceful purposes).
    There's another approach – it's called "respect them and suspect them" – slap on the sanctions and explore the alternatives until you're sure they don't mean what they say…I believe that's what your good friend Obama is trying at the moment and also g-five is pushing for…and by the way they're not getting a heck of a lot of cooperation from Iran.  Under such circumstances, what is there to gain by ignoring the fact that Iran is the cause of most of the terrorism in the Middle East (Hezbullah and Hamas are Iranian proxies, for example, but the long tentacles of Iranian terror have been discovered in such places as Libya and Argentina as well).  Given the facts in front of us, isn't it a bit ridiculous to assume that all Iran plans for its nuclear policy is electricity generation? 

  184. Good Morning!
    Phil/Disneyland   I would say two days will be enough for Disney and the California and the Cali park is more fun for teens.
    S.F. – Skiing in July?  I would not use your skis in the middle of April!  Out here, we call it "slush"  :)
    Convertible – Of course, if going straight to So. Cal. -  I have two!
    Surfing – Better yet,  Kayak!
    You could make a week out of Mission Bay alone. Great location and lots to do. Fly in and out of SAN.

  185. Phil, Don't forget Coronado – Best Beach!
    On second thought, you could make an entire week at the Hotel Del….. :)

  186. Hedging/JFW – First of all, always keep in mind that insurance is a bet you expect to lose.   You don't buy life insurance hoping you will die and you don't buy health insurance hoping you get cancer so you get your money's worth.  A hedge is an insurance play to mitigate your losses – if you have any.

    One mistake people make is over-hedging.  Another is hedging to the wrong time-frame, like buying term insurance to cover yourself in college, when you really don't need it.  Why do we buy life insurance?  Because we want to insure our family is compensated for our lost earning power should we die sooner than expected.  

    So, with your portfolio, if you don't have it set up with the expectation of earning money – what's the point of hedging it?  

    If you are talking about buying stocks that bring you no income and then "hedging" them by betting they go down when you really hope they go up – that's not hedging, that's betting against yourself.  That's like betting $10,000 in the Mets but then betting $2,000 on the Phillies in case they win – it makes no sense.  If you don't know who's going to win – BET LESS or DON'T BET AT ALL! 

    So, back to basics:  

    If you have a stock and you want to hedge it.  Sell a call.  

    If you already have a covered stock or a vertical or a buy/write and you want to hedge it, then you might want to consider opposite bets because you SOLD premium already and you EXPECT to earn that premium over time so you can AFFORD to have INSURANCE to protect that premium.  

    It's not about timing – the hedge is insurance.  If you have a certain point at which you get comfortable and feel you need less insurance – great but it goes back to life insurance and medical insurance – at what point do you decide you need none?  

    You have the right idea, when we sell a short put for an initial entry or a buy/write – we are giving ourselves a built-in 15-20% hedge.  This is another mistake people make because you really don't need to insure against a 10% drop if your break-even is 20% down, right?  What people fail to realize is that, if the market drops 20% and you still have 90% of your money, you are actually more than 10% better off in buying power.  So spending 5% to make sure you don't lose 10% on a 20% drop is silly as you're GUARANTEEING that you will lose 5% on any gain.  

    That's why buy/writes are so important – a buy/write guarantees me a return, even if the market is flat.  That allows me to buy more insurance since I don't need a move up to make money and now I have changed the equation so I make 15% on a flatline less the 5% insurance but, if we drop 5%, maybe my insurance makes 10% and my buy/write still makes 10% so now there's actually a zone where I make more money from a small dip than I will from a move up!  

    That's why there are no generic answers to this – you need to learn to understand the concepts and apply them to your situation.  We'll be starting a new income portfolio next week and let's say we open with 5 put sales like:  

    • 10 CHK July $14 puts sold for $1,10 ($1,100) 
    • 10 BBY July $18 puts sold for .85 ($850) 
    • 10 BA July $65 puts sold for $1.35 ($1,350)
    • 10 DMND July $20 puts sold for $1.60 ($1,600) 
    • 30 AA July $8 puts sold for .30 ($900)

    So that's $5,800 collected in month one and we're obligated to buy $14,000 worth of CHK, $18,000 of BBY, $65,000 of BA, $20,000 of DMND and $24,000 of AA for $141,000 out of our $1M in buying power ($500KP) used up to generate our $4,000 monthly income requirement.  

    In this situation, what do we fear?  Each is a stock we don't mind owning more of although BA would be a stretch if we had to DD but the Jan $47.50 puts are $1.30 so we assume we can roll out of trouble.

    How much then, do I want to spend on insurance here?  Pretty much nothing – if they stocks go up, I make $5,800 and if the stocks go down, I will roll and sell more with my $859,000 of remaining buying power and because I WANT to own more of these stocks cheaper – buying insurance would only be betting against myself.  

    LONG-TERM, however, I will want to hedge so, since I am collecting $1,800 more than I need, I could put $800 into a speculative long-term hedge like EDZ Jan $22/31 bull call spread at $1.20 so I can buy 6 of those for $720 and now, in a catastrophe, I've got $4,500 coming to me.  

    That means, as long as I stop out my $5,800 worth of short puts before they lose more than $4,000 – I should be on the way to mitigating some of the damages WHILE THE STOCKS I WANT TO BUY WITH MY REMAINING $490,000+ CASH ARE GETTING CHEAPER!  

    The less cash you have, the more you need to hedge, which is why you need to learn and practice these techniques over time.  It would be nice if there was some magical book that said "if you have this, do this" but there isn't – there are many, many non-magical books that are sold to suckers as some sort of cure-all for whatever market conditions ail you but it's all BS.  

    Unfortunately people are very susceptible to false claims about finances and investing because it's very complex AND we all like to believe we understand it but very few of us really do.  That's how con men get you – they play off your fears of looking stupid or being out of control and they sell you a "cure" or a "system" that will make it all work for you.  For hundreds of years, the most brilliant minds in the World have been trying out millions of market "systems" and yet, strangely, no one is a Trillionaire yet.  Doesn't it stand to reason that, if there was a system that guaranteed to turn $100,000 into a Million than $1M could become $10M and $10M becomes $100M and then $1Bn, $10Bn, $100Bn, $1Tn – it's so simple if you just have a system!!!  

    See how silly that it – it's all BS.  The only "system" that works is conservative investing over long periods of time and even that isn't fool-proof but I've seen enough fools pull it off that we'd have to say it's at least fool-resistant…

    No one wants to hear that though.  You probably don't want to hear it.  It's not fun, it's not exciting, it's not sexy but it works.  Take $100,000 and make 10% a year for 20 years and it turns into $672,749.99.  Take $100,000 and put another $10,000 a year in over the same time period and, even if you only make 8% a year, it jumps to $960,324.93.  At 10% it's $1.3M so your ROI on the extra $200,000 is $628,000 – a triple!   

    So, how you do make a triple?  You invest 10% of your income at 10% over 20 years.  That does work – that's just math!  If you start with NOTHING and you invest $10,000 a year for 20 years ($200,000) you have $630,000 at 10%.  How do we do that?  

    How about selling 10 AA 2014 $8 puts for $1.50 ($1,500).  Your obligation is to buy $8,000 worth of AA for net $6,500 (you have the $1,500) and that's 15% made on your $10,000 allocation and even if you get assigned, you still have $3,500 left to DD.  Next January, you'll have another $10,000 to invest and, if AA is doing well, maybe you'll sell something else for another $1,500 under similar terms.  If AA is doing poorly, let's say it fell to $4 and you never stopped out.  Well then your $6,500 investment is worth $4,000 and you're down $1,500 out of $10,000 but now you have $18,500 to invest at lower prices and, even if you don't want AA – hopefully there will be other bargains out there and hopefully you can make back some of the initial losses. 

    I know, it's a horrible boring way to invest.  You have $10,000 burning a hole in your pocket and you sell 10 puts for $1,500 and you're done for 18 months with $8,500 sitting around doing nothing and $3,500 completely unspoken for.  But, if you make a dull trade like that every year and make 15% on your money – 15% of $10,000 a year over 20 years is $1.2M!  

    Greed is the real enemy to most investors.  This country is disgusting in that they don't drill it into kids in college that, whatever they earn, they should take 10% of it, AT LEAST, and invest it in something long-term safe.  Let's say the average college grad makes $30K and puts an average of $3,500 away for the first 10 years at 8% – that's $54,759.  Next 10 years they put away an average of $5,000 and then they have $196,448.  Next 10 years they put away $7,500 and that takes them to $541,457 and if they keep putting away just $7,500 a year for the next 10 years, they'll have $1.3M and that's based on a $75,000 annual salary so almost 20 years of income saved up for retirement by JUST putting 10% aside at 8% over 40 years. 

    If you have kids and you start them off with $2,000 a year for the 20 years before they go to college and manage to make 10% a year off that, they'll have $126,000 on their 20th birthday and that $126,000 left totally alone with no additions for the next 40 years, would be (at 10%) – $5.7M.  That's all your Dad would have had to do for you to be able to hit 60 with $5.7M.   Could your dad have spared $2,000 a month when you were first born?  

    Even $50,000, left alone for 40 years at just 8% grows to $1M.  I spent $50,000 on my friggin' college and now I'm 49 and today I'd have $465,000 instead of the education.  College was fun but, on the whole, it wasn't anything I couldn't have read in a book and then gone to work earlier (and made another $100K).  

    So my kids will be taught this math and, when they are ready for college, they will be presented with a briefcase with $250,000 in cash and they will told they can use it to go to college or they can invest it for 20 years at 8% and have $1.2M by the time they are 38 or $5.4M by the time they are 58 from which, each year, they will be able to draw $400,000 a year to live on.  

    THAT'S INVESTING – Don't mistake gambling for investing.  As our friend Charles Dow used to say:  

    "The man who begins to speculate in stocks with the intention of making a fortune usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes gets rich." 

  187. Iran/Jerconn – Hey, I don't have an answer which means though, that I'm not inclined to go to war over a simple lack of trust.  Imagine if Russia or China demanded they inspect our nuclear facilities and wanted full access to all our research and data and site verification of all of our materials to determine if they could potentially be used for something other than generating electricity (with even scientific research banned).  What would your speech be then as our Frenemies respect but suspect us?  I'm sorry I just don't see the World so conveniently black and white as that.  I don't like Iran but I believe the average Iranian, including many of their leaders are people just like us who, just like us, don't like being told what they can and can't do by bullies.  Yes, they have made threats – but so did we, including Iran in the "axis of evil" and vowing to stop them at all costs.  On the whole, we're just living in an Orwellian nightmare anyway – following the script from 1984 to the letter:


    "As long as a country is at war, its citizens will put up with personal deprivation. But, the citizens must think that it is a just war, that the enemies are devils whom they are morally obliged to exterminate. The psychology behind Hate Week is precisely that of working up both party members and proles into a frenzy of self-righteous hate for the enemy, pushing out of their minds all thought of the unsatisfactory lives that they themselves are living."

    Thanks 1020!   As to skiing in July – I've done it several times up in Tahoe.  They close in April usually but there's sometimes enough snow left at the top of Squaw that you can get a few days in around July 4th – not fresh powder but you can ski a few runs in your bathing suit and then jump in the pool at the top of the tram and then have a BBQ on the beach by the lake that evening and watch the fireworks – certainly my favorite way to spend July 4th and I've been on a yacht parked by the Statue of Liberty for the NY Show and in the Charles River listening to the Boston Symphony while fireworks went on overhead (3 times for that one as it is very nice) so it's not like I don't make an effort to do cool things on the 4th…

  188. A Fourth of July sighting of 1020 skiing in a bathing suit would be a rare sighting indeed!
    I would love to take the family to see the Boston Pops on the 4th. Any bugs on the river?
    The 1020's don't do Bugs…..

  189. Phil – first of all that's an impressive photo of Tahoe in July, if that's what it is…now back to Iran – your assumption of equivalence between our western governments and Iran's autocracy, and between us and the Iranian population, just doesn't stand up to scrutiny.  We may not be okay with Russia or China inspecting us, but that does not imply that Iran should not allow us to inspect them.  The Iranian government is motivated by religious figures who assume that absolute Truth is at their fingertips and therefore they are divinely sanctioned to "wipe Israel off the map" or wipe anyone else off the map that they so choose…the American gov't still has to stand for election and to at least some extent they have to answer to their actions.  The Iranian gov't has noone to answer to but Allah (in their own opinion).  And even if Iranian's are on the whole a good bunch of buds who we could go out with and enjoy a beer, it is not they who we are dealing with.  As was evident from the last presidential elections, their voices are not heard, they are repressed and manipulated.  Moreover, just as they were getting their act together and maybe just about ready to throw the clerical bums out, your good friend Obama left them high and dry for the mullah's to fire on them at will.  So, let's not draw a moral equivalency between what we would or wouldn't tolerate, and what we think the Iranian's should put up with from us…and by the way noone is talking about "taking over," conquering, or otherwise occupying Iran – the discussion is how to take out their nuclear facilities, nothing else.  The discussion is not about whether the average Iranian would be okay with that, but about whether it is necessary in order to maintain the peace in the region and the world at large.

  190. car / You definitely want a convertible in Southern CA.  Hertz offers the Volvo C70 retractable hard-top convertible.  Beverly Hills Rent-A-Car, which has a location in Las Vegas, offers the Mercedes E550 soft-top convertible.

  191. Power of Compounding/Phil: Great monologue Phil.  Another one for the books.  I bet you could give one hell of a TED presentation that would be worth more than most of the existing TED presentations combined.  Then the RSA guy who does those elaborate magic marker illustrations based on TED talks might do a drawing based on it.  It'd be great.

  192. SWW/Phil – i appreciate the effort to develop this.. It is clear your primary audience is not the daily-participating subscribers. So to put on the hat of the weekend reader who would like a summary of the week gone, a healthy dose of option concepts, but mostly is looking for actionable information for the NEXT week, here goes:
    1/ i like the friday close numbers at top of front page. also like the table of contents.
    2/ highlights of the week on page one is great. what was THE news for the market and any particular stocks or market swings that were affected.
    3/ the week that was - i'd like to see this condensed to just a two page spread for all five days, or three if you must. member chat comments was great in the old SWW..with a snippet here and there. taking up a 1/4 page per day now is too much.  again, the week that was is history. what happened that is pertinent to the trades we'll be considering for the next week..that's most important. And call out the results of any short term trades that were put on and closed in the week, or longer ones that closed in the week. If lessons can be drawn from any particular trades, explain it.
    4/ The week ahead – what's the phil take on the week ahead? not interested in a rotating opinion from others is PHILSTOCKWORLD we are subscribing to.. Love the news events calendar being included. Valuable to have this in whatever SWW settles down to, imho.
    5/ Option Strategies – love this and this should be the section for rotating 'experts.' Over time, the subscriber should have a good library of strategies, ranging from a primer on covered call writing (ala craig's ira strategy) to buy/write basics, to iron condors, broken wing butterflies, premium selling, naked put writing as an entry, concepts on trade managment such as out at 20% and/or roll at 50%, etc, and hedging 101 type stuff again and again and again using the real world examples that come up every week in member chat. Also this would be the section for exanding on various concepts like stock market physics, Phil's microwave theory, etc.
    6/ Biotech corner – a must keep page! thank you Pharmboy!
    7/ Missed seeing the big chart. An excellent back page/last page item.
    8/ color.. don't get too spashy with images.. sucks my inkjet dry! specific examples, on the front page, the PPT slide-like graphics to shot the BBY and XLF trade ideas was hard to read and wasted space. the pictures on the side of the trade added nothing for me.  If font sized can all be a bit larger would be good too. needs to be readable when printed out on paper.

  193. SWW/Phil – friday close numbers.. also would be good to include the VIX.

  194. Two cents more on a Western vacation: After 10 years living in San Diego and more than 20 with places like UT and NV, I would agree with the tenor of the comments here — either head to San Diego, which is amazingly cool compared to LA in summertime, or head to SFO/Palo Alto/ Humboldt coast/Wine Country.  LA is a traffic-clogged furnace, I would avoid it like the plague.  Nevada is even hotter — like 125-130F hot.  I have nothing to tell you about Las Vegas, other than Tahoe would be equally entertaining, has a wonderful lake, and, again, is much cooler.  I once drove Philly to LA after college, and remember pasting newpapers to the inside windows, A/C notwithstanding, and bathing in the ice cold Colorado river and finding my [long] hair dry by the time I made it 100 yards back to the car!!  Bottom line — stick to northern venues, or mountains, forests and lakes.  Jackson Hole is very cool at that time of year, in both senses.  And you are welcome to stay in my Utah mountain place, [8,600 ft] if you approach SLC at any point, 20 mins from the airport, if you're tired of hotels by then.

  195. For those interested in bottom-picking coal companies, a caveat: "San Francisco, CA - Coal is going down in the United States, and that's good news for the Earth's climate. The US Energy Information Administration has announced that coal, the dirtiest and most carbon-intensive conventional fossil fuel, generated only 36 per cent of US electricity in the first quarter of 2012. That amounts to a staggering 20 per cent decline from one year earlier. And the EIA anticipates additional decline by year's end, suggesting a historic setback for coal, which has provided the majority of the US' electricity for many decades.

    Even more encouraging, however, is the largely unknown story behind coal's retreat. Mainstream media coverage has credited low prices for natural gas – coal's chief competitor – and the Obama administration's March 27 announcement of stricter limits on greenhouse gas emissions from US power plants. And certainly both of those developments played a role. 
    But a third factor – a persistent grassroots citizens' rebellion that has blocked the construction of 166 (and counting) proposed coal-fired power plants – has been at least as important. At the very time when President Obama's "cap-and-trade" climate legislation was going down in flames in Washington, local activists across the United States were helping to impose "a de facto moratorium on new coal", in the words of Lester Brown of the Earth Policy Institute, one of the first analysts to note the trend. "

  196. Phil I see you have been meditating Hedging/JFW 
    In deed I must congratulate you on this article excellent explanation!!! An other copy for my collection. Do not blame me again if I pull it out again 11 month later!!!

  197. Hi all - DD = double down ?, drawdown ?… clarification please.

  198. DD = Doubledown

  199.    UBS writes this week that risks to U.S. equities are weighted to the upside — "Our forecasts are predicated on the view of UBS economists and strategists that a Greek exit from the Euro will not occur, and that U.S. GDP will grow at 2.3% in 2012. Given the conservative assumptions used in our model, we believe risks are skewed to the upside. However, a disorderly Greek exit or weaker-than-expected economic growth would likely cause earnings to fall short of our estimates."  On a more somber note, it's being pointed out that Telefonica [Spain] has it's 3-year bonds yielding 3%, while Spanish govt. 3 year notes currently yield 5.22%.  This is temporary, one would suspect.   

  200. thx nicha….

  201. Phil / Hedging – Excellent and thanks; most informative!.  With your OK, I will add it to WIKI for other 'newbie's' to read and take heed of.  I have been trying to get both my kids (avg. age 30) to get into investing.  I will also send them your reply so they can also see what is possible over time with the correct techniques.

  202. Summer vacation?
    Nothing beats San Diego, and North County of SD.
    Orange County has its ‘nuveau’ charm too.
    And as someone said, Santa Barbara, San Luis Obispo and even Pismo Beach, San Francisco are unbeatable for vacations.
    I try to “vacation” every weekend, if I can along the coast….no hassles so far…no passport, no currency problems, no illness, no ‘corrupt policio’ etc to worry about…simply Unbeatable!

  203. NatGas / Bloom Energy
    Since we love our NatGas plays here, anybody heard about Bloom Energy?  They aren't public yet, but have some great stories.
    Even AAPL is using them,

  204. Good morning!  

    I hope everyone had a nice holiday.  I could have used one more day myself as I was in a really good pool and BBQ groove this weekend…

    Futures looking bright on Chinese stimulus rumors.  Asia was up about 1% but Europe still with many worries (I'll get to later). 

    Bugs/1020 – I don't remember them being bad and I'm not a bug fan either.  

    Iran/Jerconn - Who could possibly argue with such sweeping and absolute statements about what Iranians think and do?  

    C70/Ron – My favorite rental car (need one that fits the kids).  

    RSA/Kinki – That would be cool. 

    Good comments Scott, thanks.

    Utah/ZZ – I like that idea for a winter trip, thanks! 

    Zombies/Palotay – We'll have to keep tabs on that trend…

    Thanks Yodi, I think.

    Dollar/Nicha – Who'd a thunk it?  

    UBS/ZZ – I have to agree.  There's just nowhere else to go but US equities.  

    Wiki/Jfaw – Sure, you don't need my permission, that's what the Wiki is for.  

    Sans/Maya – Vacation every weekend.  That's a good attitude.  

    Bloom/Burr – I like their tech.  Didn't realize they were getting that many big deals already.  Very encouraging.  It's also a good example of how temporary our glut of nat gas is.  There are all sorts of ways we can use nat gas if we feel there is a steady supply at reasonable prices. 

  205. Phil Thanks Yodi, I think.
    This was seriously mend no German humor!!!!