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Tricky Tuesday – Tempting Turn Up Tests Technicals – Again

Here we go again!

Moving up today (pre-market) on no real news but rumors that CHINA! will provide some kind of stimulus (more cash for clunkers was the early story) but both our Futures and European stocks pared gains after China’s Xinhua News Agency said the country has no plan to introduce stimulus measures on the scale deployed during the financial crisis in response to this year’s economic slowdown.

As you can see from Russell's Economic Dashboard,  as of 4/30 the US was in a fairly typical range.  Our worst performing indicator, Mortgage Delinquencies, have actually come down a bit since this report so again, it's hard to be bearish on US Equities – especially when one considers the question – compared to what?  

EWP WEEKLYSpanish Retail Sales were off 9.8% from last year, which is 50% worse than the 6.3% expected by Economorons and a 164% increase over the 3.7% pace they were dropping at the month before (March).  Moody's is warning that A LEAST a quarter of 254 unrated European LBO deals with debts totaling $168Bn could default because of refinancing burdens exacerbated by the eurozone debt crisis. The refinancing peak will hit in 2014-2015, and new-issuer pricing will remain costly.

"Over half the debt maturing through 2015 is concentrated in 36 companies, each of which has over €1 billion of debt," said Chetan Modi, head of Moody's European leveraged finance. "While this debt is broadly dispersed across industries, there is a concentration of debt to be refinanced in 2014."

And these companies are now one year closer to the 2014-2015 refinancing peak, which is worrisome given the weak macroeconomic environment and generally low credit quality of the debt. Many bigger companies will seek to refinance via high-yield bonds, but will need to be "sufficiently creditworthy" to do this, and the openness of European and U.S. high-yield markets will determine how these companies can navigate the refinancing burden. Moody's said market access will likely remain in "windows," and it expects new-issuer pricing to remain costly.

Although we went into the weekend bullish in our short-term portfolios and we're ready to dip our toes in the water long-term again by setting up a brand new virtual $500,000 Income Portfolio – we remain Cashy and Cautious until we see some proper progress over our strong bounce levels and, so far, we're still waiting to see the WEAK bounce levels actually hold:

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

 The Russell is just over at 766 and our Futures are up about 0.666% – a sure sign that Lloyd Blankfein is calling the shots this morning!  The strong bounces are, by definition, 2% higher than the weak bounces as we're retracing a 10% drop in our indices. 

Last week, we got the whole 2% move back to the weak bounce zone on Monday but then we spent the entire week proving we couldn't hold it – this week we're not going to be satisfied with anything less than those strong bounce lines – per last Wednesday's discussion on Stock Market Physics, which we reviewed in the Thursday morning post.  

I hate to sound like a broken record but nothing is "fixed" in Europe and our premise for the month has been that there needs to be $1-1.5 TRILLION of genuine stimulus and/or bailouts in order to salvage this mess – whether from the ECB or the BOJ or the PBOC or the Fed or the IMF or even the BOE – ANYONE who has a few hundred Billion to spare needs to step up to the plate NOW – before this thing gets any worse.  

I said 14 months ago, last April, that "The Pain in Spain will Hardly Be Contained" and today El Mundo reports his inner circle concluding the government is in need of at least some form of a bailout. Bankia – deemed healthy just weeks ago – is now in need of  more than €20B while the country's bank restructuring fund has €5.3B, and that's just one bank. 

Spain is off almost 50% since I posted my warning and the CAC was at 3,900 that week, now 3,050 (down 22%) and the German DAX at 6,400 is down 12.4% from 7,200 while the FTSE was 5,600, now 5,350 (down 4.4%) – faring a bit better by NOT being a part of the Euro, which is trading at $1.252 this morning.  The dollar is officially scarce again, having risen against all 16 of its major peers since late July, putting the dollar index 12% higher than it was when the Fed launched QE in late 2008. New investment guidelines and regulations since the financial crisis leave dollar-denominated securities as one of the few options left as still super-safe.

Last Wednesday, as the Summit in Brussels was going on, Spanish PM Rajoy strongly urged that the ECB be allowed to step in and purchase sovereign debt, saying that their economy can't take much higher rates. Part of the problem on this was the last solution-- the last two LTRO's have loaded Spanish banks with Spanish government debt. When the value of this massive pile of debt goes down, the banks take losses. Last week, the value of these bonds went down, costing not only the Spanish state more money to service its debt but it's banks as well in these losses.

Out in the real world in which we all live, Friday afternoons are very much looked forward to. In the financial world, it is just the opposite-- Friday afternoons after market close is when companies and nations unload their really bad news, which at this point is actually expected. Unfortunately for Spain, the Governor of it's biggest state, Catalonia, could'nt wait until market close to crap all over the markets. He announced that his state would need help from the central Spanish government to meets its obligations as Catalonia was essentially now shut out of the bond markets. Catalonia will need help in finding about $16 billion or so. The Spanish 10 year Bond immediately tanked, leaving Spains banks with even more losses thanks to the aforementioned LTRO, nevermind the Catalan State Bonds, which also tanked, producing another flood of red ink at these very same Spanish banks. All of this is happening in a nation who's unemployment rate is now 24% and who's economy is actually contracting.

 When (not if) Spain goes under, the EU banking system will be in serious danger of collapsing. In the meantime, don't be surprised to see Rajoy's request that the ECB begin purchases materialize or even another LTRO, of which there were market rumors last week. Another LTRO will simply enable overleveraged Spanish banks to borrow money and use it to purchase even more unstable Catalan and Spanish Gov't debt. The noose is tightening and the stool underneath is looking less steady.

Ambrose Evans today in his blog mentions that Spain's newspaper, El Mundo, is reporting that Spain no longer has the power to bring down rates on their 10 year bond. Today it went up sharply to 6.47%. One problem with this is that the 10yr Bond is now 4.5% above Germany's Bund, and when you get to this point, a market trading group called LCH, which determines what margins should be on all commodities, raises the margin on you to trade this commodity.

This amounts to a margin call on all those who are long the Spanish 10 year. This is the point where many traders simply give up-- and they sell the Spanish 10 year, this exaserbating the problem. Ambrose also mentions that Spanish PM Rajoy has accepted the inevitability of a bailout.

We're entering dangerous ground here. Don't be surprised to see the ECB step in and quietly purchase Spanish debt as Spain, who contributes a whopping 12% to overall EU-area growth, is a much, much bigger deal than Greece (2%), who are also still a complete disaster (in case you forgot about them).  

Bloomberg/Businessweek had a great article this weekend – "What a Return to the Drachma Really Looks Like" in which they remind us: 

There’s no question that quitting the euro would be an easy way for Greece to shrink its unsupportable debt. Yet if Greece does leave or is kicked out of the single currency, it will most probably suffer inflation, layoffs, capital flight, shortages of essential commodities, and civil unrest, judging from what happened in Argentina when that country quit its dollar peg a decade ago. “Leaving is difficult and messy, so anyone who thinks it’s easy is just wrong,” says Lorenzo Bini Smaghi, a University of Chicago-trained economist who left the European Central Bank’s executive board last year. 


Argentina’s experience does show that devaluation and default don’t have to be disastrous in the long term. The short-term costs are sky-high, however. And if Greece goes off on its own, the useful external pressure for reform (aka meddling) will diminish.

A man waves an Argentine flag at the Plaza de Mayo in Buenos Aires on Dec. 20, 2001, after police used tear gas to disperse demonstrators.

The best outcome would be for Europe to form a fiscal union and switch decisively from austerity to growth—rescuing not only Greece but Ireland, Portugal, Spain, and Italy as well. That, however, doesn’t seem to be in the cards. Greece faces a choice between a bad situation and one that looks even worse.

According to Upside Trader:  "Guesstimates on a Greek exit from the Eurozone range anywhere from next week to the end of the year. Oh fun. The market hates uncertainty and we are neck deep right now. We could have a sell off of biblical proportions next week, stay flat or maybe rip higher. As a result, we are all on pins and needles unless you are all cash. No one wants to be caught leaning the wrong way, long or short.  Some stocks are oversold and some still need to get drilled into submission. It’s amazing that some coal stocks are trading below 2008 crash levels.  They never ring a bell at bottoms or tops, so pay attention."

I think that sets the tone for the week quite nicely.  I could go on for many more pages and I probably will in Member Chat as I have a lot of weekend reading to pass on but let's call this a morning post and move on as one thing is for certain this week – it's going to be another wild ride!  

Have fun out there.  

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  1. Jesper Koll, JPMorgan head of equities in Tokyo: "Japan is in a demographic Sweet spot" (at the 2:35 min. mark)

    He says wage deflation is ending and even though the population is aging, there is a 700,000 person shortage of health care workers to care for the aged who immense amount of savings which they now want to spend to enjoy their retirement and this poses great job opportunity.  The elderly pay more to the youth to help care for them and work for them and this transfers money to the youth and becomes a virtuous cycle.

  2. Economic numbers:

    First Monday's numbers:

    Japan Jobless Rate / 4.6% (4.5% expected)
    Japan Household Spending / 2.6% (2.5% expected)
    Japan Retail Trade / 5.8% (6.0% expected)
    Japan Large Retailers' Sales / -0.5% (-0.3% expected)

    Not so great news from Japan!

    Tuesday's numbers:

    Switzerland UBS Consumption Indicator / 1.41
    Germany CPI (MoM) / -0.2% (-0.1% expected)
    Germany CPI (YoY) / 1.9% (2.1% expected)
    Germany CPI EU-Harmonized (YoY) / 2.1% (2.2% expected)

    Inflation seems to be contained in Germany. I have it in green as inflation is lower than expected, but as we all know, we might need more inflation to take care of our debt problem.

    At 10:00 AM EST we have the US Consumer Confidence.

  3. Not a bad article:  Spain in Crisis, so short Germany

  4. VRTX…down 25% on cutting the numbers (positive to negative) on their Phase 2a drug study.   Now we can start thinking about selling some more puts on them, but need to see where they fall back to…40s is my WAG….

  5. we get through 1325 then 1340 is in the cards..with an outside chance of 1370

  6. Turning into another AAPL portfolio lflan…        :-)

  7. Good Morning!

  8. Go CHK!

  9. Hummm…..AAPL selling off, mrkt going up…..hummm……

  10. Good morning!  Looks like I didn't miss much taking Friday off.  DJI, SPX and IXIC are still trying to decide which side of the 200 EMA they want to be on but with a slight upward bias.  

  11. EDZ ouch?

    What was the aapl spread you recommend last week in OCT       550/600   ?
    Is this still tradable? What would you recommend today, in any?

  13. Pharm, have you moved in yet?

  14. Consumer confidence in 3 minutes!

  15. FB doesn't seem to catch a break – $30.23 now!

    That's not the way MoMo's usually work…

  16. Pharmboy/AAPL, selling off? it's up over $6.00, you ask too much… :-)

  17. Oops, Consumer Confidence at 64.9 – 69.6 was expected. That's a miss! 

    That might damper enthusiasm a bit.

  18. IWM lines
    74.50 74.90 75.33 75.55 75.90 76.22 76.55 76.85 77.05 77.25 77.66 78.00 78.53 78.73 79.29
    Trendline support 75.10

  19. Hello All – I think we have all seen this before this year…US markets jump after a long weekend. 

  20. Markets ignoring World events, consumer confidence, Case Shiller readings, played this game before and cashed out my longs and watching for now.

  21. AAPL…..weekly 550 puts sold Friday for 4.20 bought back today for 1.40.  I posted the trade but was not a MoMo portfolio trade.   Almost all MoMos up today, as expected.  Yes stj, the MoMo port right now is mostly an AAPL port.  It's the easiest place to make money.  BTW, today is my last day of trading until Monday next.  I'm going to a remote vacation spot tomorrow which has no means of communication, so I can't be setting up any 'fancy' trades that might pull one's portfolio under while away. 

  22. Iflan – would you cash June AAPL longs?

  23. iflan
    Would you cover the $600's (my only position) or let them ride higher?

  24. lflantheman, great calls as usual, thanks and have a very nice week.

  25. nicha…yes.  getting close to expiration.   I like October calls
    dclark….if the 600s are October let them ride.

  26. Dalls Fed miss and we go even higher?  Back to bad being good again.

  27. FU CMG !!!
    FU PCLN!!!

  28. Iflan:
    Yes they are October. Have a great week!

  29. nicha ….to clarify…I would close the June calls but stay long something AAPL.  If in doubt, just sell 1/2

  30. Iflan – I am in doubt, so sold half :) . Thanks.

  31. The FT has a recap of hours worked in European countries:


    Netherlands   — 1377
    Germany  –  1419
    Ireland   —  1664
    France   — (data missing for some reason)
    UK   —  1647
    Portugal    – 1714
    Italy   —  1778
    Poland   —  1939
    Greece   —  2109

    So much for the Southern country slackers…. The average Greeks spend more than 600 more hours at work than the average German! Of course, this doesn't take productivity into account. But still!

  32. Hey, I wanted to tell you all something.  I am not the kind of guy that gets impressed easily, but yesterday I was blown away by a grocery store!   I walked into a Whole Foods Market (my wife took me) while out of town for a soccer tournament.  I couldn't believe the place.  It was huge, had everything you could possibly imagine, and was packed with shoppers.  The employees were attentive and very helpful.   While shopping, a notation was made in my head to the effect " You need to own some stock in this company".  

  33. Good morning!

    Opening looking good – I guess we survived the weekend so people are excited about that – let's just enjoy the ride while it lasts and see how high they can take us, keeping in mind our goals are: 


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

    Nothing to get excited about until we begin flipping those strong bounce levels green.  RUT has the best chance of hitting it today but we'll see.

    FB hitting $30 – that sucks but I don't think people care anymore.  Don't forget $570 on AAPL is a nice test line to see if we have a real rally or not and now $600 is on GOOG as well.

    Yesterday I said I would start the Income Portfolio with the following 5 trade ideas – we're not starting it until next week but that doesn't mean these trade ideas aren't good (adjusted positions based on for today's price):


    • 10 CHK Oct $14 puts sold for $1.95 ($1,950) 
    • 10 BBY Sept $18 puts sold for $1.45 ($1,450) 
    • 10 BA Aug $65 puts sold for $2 ($2,000)
    • 10 DMND Sept $19 puts sold for $2 ($2,000) 
    • 20 AA Oct $8 puts sold for .55 ($1,100)

    Those are nice starters if you want to get into the bullish put-selling game before the VIX (21.75) goes away – look how fast these prices are already dropping!  

    Europe is moving up since 8am as polls in Greece (same as Friday) show lead for pro bailout/EU New Democracy party and still rumors of China stimulus.  Our own data is so-so but no one cares as it's a risk-on morning!  

    At the open: Dow +0.68% to 12540. S&P +0.77% to 1328. Nasdaq +0.87% to 2862.

    Treasurys: 30-year +0.23%. 10-yr +0.08%. 5-yr +0.06%.

    Commodities: Crude +0.65% to $91.45. Gold +0.67% to $1581.65.

    Currencies: Euro -0.1% vs. dollar. Yen +0.07%. Pound +0.04%.

    Market preview: Stock futures are higher, apparently cheered by polls in Greece showing a lead for the pro-bailout New Democracy party. Speculation about more stimulus in China is also providing support, although that's since been refuted. S&P benchmark+0.65%. Spain's bank troubles are being shrugged off of the moment, although not in Madrid trading. Later: Consumer Confidence, State Street Investor Confidence Index

    April Chicago Midwest Mfg. Index: +2.4% M/M. +12.0%Y/Y. Regional auto sector production rose 7.6%

    March S&P Case-Shiller Home Price Index: 0.09%M/Mvs. 0.2 expected, 0.15% prior. -2.6% Y/Y vs. -2.6% expected, -3.5%prior.

    More on Case-Shiller: Things have improved, but "housing prices have not turned," says S&P's David Blitzer. Prices in 5 out of 20 tracked major cities hit new post-crash lows vs. 9 doing so in February. Prices in seven cities – Phoenix, Miami, and Detroit among them – are now seeing positive annual rates of change. (full report,.pdf)

    May Consumer Confidence: 64.9 vs. 69.6 expected, 68.7 in April (revised). Expectations 77.6 vs.80.4  (revised). Present situation 45.9 vs. 51.2 (revised).

    Stocks ignore a big deterioration in consumer confidence, the S&P 500 at its session high, +1%. In addition to May's decline, all of the April figures were revised downward. Appraisals of the employment market: Jobs "hard to get" increased to 41% from 38.1%, jobs "plentiful" decreased to 7.9% from 8.4%

    Risk is catching a bid, maybe thanks to a rumor the ECB is set to make an 11 AM ET statement regarding possible bank recapitalizations. Stoxx 50 +0.6% after being in the red minutes ago. The euro bounces 25 pips, now buying $1.2550. S&P 500 futures+0.9%.

    The 90-day euro-dollar basis swap – 45 bps today vs. 158 bps in November – shows a far lower level of stress in EU money markets. However, adjusting for the 50 bp reduction in the ECB swap line rate, says Deutsche's Mohit Kumar, suggests the stress now is comparable to November, but with markets more confident the ECB will step in with dollar funding if need be.

    "A persistent view I encountered was that the euro ex Greece would strengthen rather than weaken," Citigroup's Steve Englander, commenting on client meetings. (via FT's Alice Ross)

    Iceland has indicted or jailed 200 of the bankers that were involved in its financial collapse. Given that the U.S. population is 981 times as big, that's the equivalent of over 196K American bankers.

    Stock buyback announcements fell to a combined $1.1B a day during the April-May earnings season, the lowest since mid-2009. In contrast, capital spending has been rising over the past two years and reached $63.6B in March. The trends suggest that CEOs are becoming more optimistic, and are investing to raise profits rather the share price.

    Beijing has no intention of rolling out a 2008-style stimulus package, according to a report from the official Xinhua News Agency. "The Chinese government's intention is very clear … the current efforts for stabilizing growth will not repeat old way of three years ago."

    OPEC's May output hit 31.8 mmb/day, its highest monthly rate since 2008, according to a Reuters survey, which interestingly finds Iranian crude shipments did not fall substantially.

    Chesapeake Energy (CHK +4.2%) pops higher at the open after Friday's news of Carl Icahn's 7.6% stake and his call for replacing at least four current board members. Oppenheimer believes rejecting Icahn's demands would prove CHK's board has not upheld its fiduciary responsibilities and would further discredit the board and CHK management.

    Coal shares zoom higher after Patriot Coal (PCX +3.6%names a new CEO and Goldman Sachs upgrades Peabody (BTU+5.3%) to Buy, saying it finds U.S. coal stocks “attractive” following a recent selloff. Goldman believes production cuts, higher gas prices and increased exports will help improve thermal coal prices in H2 2012. In addition to BTU, the firm calls SXC +1.7% and CNX +3.3% its favorites.

    Peabody Energy (BTU+4.7% premarket after shares are upgraded to Buy from Neutral at Goldman Sachs. The firm cites improving China macro data and Newcastle thermal prices that should drive greater Street credit for BTU's Australia business, and improved relative performance as PRB prices continue to rise from below cash costs to mid-cycle by the end of H1 2013.

    ArcelorMittal (MT+2% premarket after shares areupgraded to Overweight from Neutral at HSBC, as the firm believes the long-term steel outlook shows signs of improvement while global flat steel demand remains depressed. The firm cuts MT's estimates to account for H2 2012 risks, but finds the stock attractive as it discounts a very bleak scenario.

    On the whole, this is not a rally I'd chase until we see our levels taken.  

  34. Anyone….
    No posts from Phil???? since the main Tuesday post……

  35. Anyone….
    No posts from Phil???? since the main Tuesday post……

  36. Anyone….
    No posts from Phil???? since the main Tuesday post……

  37. wow sorry for the triple post …mouse going beserk

  38. st jean are you got everyone worked into a lather qe3!!
    that's not happening until the break evens are collapsing falling beliew zero for intermediate treasuries prior… to j hole speech in 2010 break evens fell and went to an average of about 1.5%

  39. jasu1:  You need a trap.
    Spain:  It is perhaps worth pointing out that the Spanish 10-year bond now yields 6.45%, while Guatemala's 10-year yields only 6%.

  40. Iflan/WFM  It could have been staged….. ;)

  41. Whole Foods does have nice stores.  They are really expensive, however, and there are several grocers here in Austin that have similar or better quality for only 20% more than the average supermarket compared to 100% more at Whole Foods.  Setting aside the high prices, a Saturday 10:00 AM trip to the downtown Austin Whole Foods is a great people watching experience.

  42. Stopped right at 1333 which is of course the 100% mark from the 2009 bottom

  43. QE3 / Angel – Indeed… They just won't give up that QE lifeline it seems!

  44. It's actually interesting that TLT is not moving much in correlation to the markets!

  45.  ACI – Arch Coal, down between 75%-85% over the last 12-18 months, just popped 3%+ today.   Any interest?

  46. 1020 – take over next Monday….I am stoked.

  47. Japan/Kinki – I don't know how long that "sweet spot" will last.  We were in a sweet spot in 2007…

    Germany/Burr – I was thinking about that in the morning post as clearly Germany has suffered less than the rest so far but last Sept, they fell below 5,000 on the DAX.  Now they're at 6,500 so a big 20% to fall back to that low while Spain is already lower and France is 400 points above at 3,100 (13%) and the FTSE is only about 10% over but it's a tricky play with Germany being relatively "safe" compared to the rest of Europe – for the moment.  

    1,370/Angel – Wow, you are full of hope this morning!  

    I put a soundtrack to Angel's prediction on the S&P:  "we get through 1325 then 1340 is in the cards..with an outside chance of 1370"

    EDZ/Jabob – It's supposed to be ouch when we're recovering, that's why it's a hedge and not a bet. 

    AAPL/QC – I don't remember that one!  I wouldn't chase today but, if $570 holds up then you can still sell AAPL Oct $450 puts for $11.50 and use that to buy the $550/600 bull call spread at $24 for net $12.50 on the $50 spread and that gives you a 300% gain at $600 with the worst case owning AAPL at net $462.50 (19% off).  

    IWM/Shadow – If there's a line every 0.4 what does it even mean?  That's every 0.5% – doesn't it become meaningless like that?  

    Ignoring/Rustle – Amazing, isn't it?  

    Have fun Lflan!  

    Slackers/StJ – It's all a myth.  It's PR by the top 1% who want the slaves to shut up and just work harder.  They pay less money for wages in those countries and those people need to work more to survive.  That's not a shocker – what's a shocker is the way the Fox crowd actually believes the BS PR spin spouted by that station and the journal that is completely without any factual backing but has become "common knowledge" – by those who believe knowledge comes from a TV set, anyway…

    Whole Foods/Lflan – I love that place but the stock's a little pricey.  They are like the AAPL store for food – they train their people well and focus on customer service and they charge a bit more for better quality products and – SURPRISE – people like that.  One by one I see people in my mostly middle-class neighborhood converting to Whole Foods for some (not all) of their shopping because some things are just so much better that it's silly not to stop by.  A good side effect is they drove our local Pathmark out of business (the worst in our area) and now a Fairway is going up in it's place – they are kind of in-between Whole Foods and a regular supermarket and that's a chain I'd buy if they IPO'd (NY area local).  

    Posts/Jasu – What are you talking about (3 times)?  Today is Tuesday you know so no, no new posts since this one.  

    Oh no, 11 comes and goes and now QE/Bailout from Europe and we're selling again!  Is this market a joke?  Are there really actual human beings who trade like this – in and out based on half-assed rumors like the audience in a Bugs Bunny cartoon?  

  48. Pharm – If you need any help, I'll run the "cold beverage and sympathy" table….. :)

  49. 1020 – sympathy for buying in troubled times to drink my life away in our Spool?…or just the pain from the heavy lifting? :)

  50. 1,333/Kinki – That's plenty for one day.  I'll be thrilled if they can hold 1,330. 

    TLT/StJ – And the VIX, not going down at all on this "rally" should tell us something.

    ACI/ZZ – No interest in them but BTU still very cheap and a way better company.  

    10:00 AM On the hour: Dow +0.9%. 10-yr +0.11%. Euro -0.09% vs. dollar. Crude +0.79% to $91.58. Gold +0.55% to $1579.85.

    May State Street Investor Confidence Index: 86.4,down from April's 87.1. Regional breakdown: North America -0.4 to 88.0, Europe -2.2 to 98.0 Asia-Pacific +2.3 to 89.0.

    May Texas Fed Manufacturing Outlook: Business Activity Index -5.1 vs. -3.4 prior. Manufacturing production 5.5 vs. 5.5. New orders 0 vs. 0. Capacity utilization 5 vs. 1.4. Shipments 0 vs. 0. Employment 8.5  vs. 11.8

    The amount of time that federal unemployment benefits extensions are effective for is being reduced, as per Congress' renewal of the program in February. The scheme ensured that the unemployed received allowances for up to 99 weeks, a period that conservatives attacked for encouraging structural unemployment.

    "The €1 Price Point." With about 20% of the population in Spain and Greece now below the poverty line, food companies such as Nestle (NSRGY.PK) and Unilever (UN) – hoping to reignite sales growth -  roll out in Southern Europe packaging and tactics typically reserved for emerging economies.

    Does Monetary Policy make Austerity Irrelevant? (Mainly Macro)

    BofA analyst Guy Moszkowski chops his profit forecasts for Goldman Sachs (GS), Morgan Stanley (MS) and Citigroup (C), citing weaker trading and investment banking results so far, and "macro fears." Meanwhile, the trading fiasco at JPM's CIO has "extinguished investor complacency regarding new regulation." 

    Value at Risk – the construct (Reszatonline)

    Macau-related casino names run up gains after Nomura's Harry Curtis calls the group "attractive" at current levels. The analyst sees free cash flow jumping as demand growth in Macau outruns supply growth by a good measure. MGM +4.4%MPEL +5.1%WYNN+3.6%.

    After getting their heads beat in for the last year, China bulls are getting even more delusional, writes the Also Sprach Analyst. The greatest cognitive dissonance is from those who rail against money printing and fiscal stimulus in the west believing it's a panacea in the Middle Kingdom. Update: China has already engaged in massive money printing and stimulus.

    Gold Set for Worst Run Since 1999 as Dollar Strengthens (Bloomberg)

    Funds Make Wrong-Way Bets Before Commodity Price Slump (Bloomberg)

    The shale gas revolution risks being limited or stopped unless the industry agrees to tougher environmental rules, the International Energy Agency warns. Adopting more stringent standards for fracking could increase the cost of a typical well by ~7%, but the entire industry could be damaged if companies ignore the “legitimate concerns” over fracking’s impact.

    In spite of today's rally, Facebook (FB -5.6%) is falling to new post-IPO lows in early trading, and is once more taking related names down with it. ZNGA -3.9%SVVC -1.6%GSVC -2.3%. Investor unease with Facebook's reported plans to become a smartphone vendor could be playing a role, but the company's still-high valuation is a more likely culprit.

    Facebook IPO Fallout is Investor Sentiment: After Facebook, More Fear of Stock Market (NYT)see also Stock Market Loses Face (WSJ)

    Avoid an economic catastrophe:  Vote Obama!


    Via Addicted2Success, here are a few awesome investment quotes by  a few of the worlds greatest investors:



    Insightful Investment Quotes

    warren-buffett quoteWarren Buffett (Net Worth $39 Billion) – “‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

    george-soros quoteGeorge Soros (Net Worth $22 Billion) - ”I’m only rich because I know when I’m wrong…I basically have survived by recognizing my mistakes.”

    david-rubenstein-quoteDavid Rubenstein (Net Worth $2.8 Billion) – “Persist – don’t take no for an answer. If you’re happy to sit at your desk and not take any risk, you’ll be sitting at your desk for the next 20 years.”

    ray-dalio quoteRay Dalio (Net Worth $6.5 Billion) – “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.

    edward-lampert quoteEddie Lampert (Net Worth $3 Billion) – “This idea of anticipation is key to investing and to business generally. You can’t wait for an opportunity to become obvious. You have to think, “Here’s what other people and companies have done under certain circumstances. Now, under these new circumstances, how is this management likely to behave?”

    t boone pickens quoteT. Boone Pickens (Net Worth $1.4 Billion) - “The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.”

    Charlie Munger quoteCharlie Munger (Net Worth $1 Billion) – “If you took our top fifteen decisions out, we’d have a pretty average record. It wasn’t hyperactivity, but a hell of a lot of patience. You stuck to your principles and when opportunities came along, you pounced on them with vigor.

    david-tepper quoteDavid Tepper (Net Worth $5 Billion) – “This company looks cheap, that company looks cheap, but the overall economy could completely screw it up. The key is to wait. Sometimes the hardest thing to do is to do nothing.

    Benjamin Graham QuoteBenjamin Graham  – “The individual investor should act consistently as an investor and not as a speculator. This means that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.”

    louis-bacon quoteLouis Bacon (Net Worth $1.4 Billion) – “As a speculator you must embrace disorder and chaos.”

    paul-tudor-jones quotePaul Tudor Jones (Net Worth $3.2 Billion) - “Were you want to be is always in control, never wishing, always trading, and always, first and foremost protecting your butt. After a while size means nothing. It gets back to whether you’re making 100% rate of return on $10,000 or $100 million dollars. It doesn’t make any difference.”

    bruce-kovner quoteBruce Kovner (Net Worth $4.3 Billion) - ” My experience with novice traders is that they trade three to five times too big. They are taking 5 to 10 percent risks on a trade when they should be taking 1 to 2 percent risks. The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.”

    rene-rivkin-quoteRene Rivkin (Net Worth $346 Million) - “When buying shares, ask yourself, would you buy the whole company?”

    peter lynch quotePeter Lynch (Net Worth $352 Million) – “I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.”

    John Templeton QuoteJohn Templeton (Net Worth $20 Billion)- “The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.”

    jack bogle quoteJohn (Jack) Bogle (Net Worth $4 Billion) - “If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”

  52. 11:38 AM European shares close mostly higher after a day of swings between gains and losses. Stoxx 50 +0.5%, Germany +1.2%, France+1.3%, Italy +0.2%, U.K. +0.7%. Spain -2.5% today and more than 4% for the week as its economy and government finances spiral downward.

  53. Phil
    The lines are for daytrading only and I never noticed some were .5%. Half a point is a nice 1.5% on the tripples even 1 per day is nice and most big moves are during off hours. Notice that we opened and struggled with 77.25 then went over and danced at 77.66 before failing. I don't know were we will open but if the lines are plotted things happen at those lines during the day because they have done it many times in the past. .5% is 1/10 the 5% rule. Computers like these numbers, now we stop at 77.25 again + or – a bit. If they didn't turn out right most of the time I would not dare post them and JRW's are about the smae as mine every time he posts, he is better and faster than me and I await his return so I don't spend 3 hours on the weekend computing them.

  54. Pharm – mmmm….both?  ;)

  55. buuu bye FXE….thanks for playing.  THAT has been a monster trade.

  56. T. Boone Pickens (Net Worth $1.4 Billion) - “Oil is going to $200 a barrel, it's still cheap here at $115” – numerous times on CNBC.

  57. Euro fails $1.25 – $1.2479 – HARSH!

    Pound $1.5625, 79.44 Yen to the Dollar, which is at 82.62 and EUR/CHF, amazingly, is back to 1.2009. 

    Commodities crashing hard, we missed the oil short at $92 – went from hope to total loss of faith at 11am – what silliness!  

    0.5% Rule/Shadow – On the 5% rule, with indexes, 0.625% is an observable resistance but the way this market moves up and down – hardly worth noting overall..  

    Of course everyone is acting like we just had a huge sell-off, which we did, but we're still up nicely for the day…

  58. USD goes down / Market goes up…USD goes up / Market goes down…

  59. Phil!  You forgot my favorite quote: Carl Icahn (Net Worth $13 Billion) – “You learn in this business: If you want a friend, get a dog”

  60. PHIL yeah i think 1370 is possible..i am now buying the previous resistance of 1325 area as support..i'll be very quick to bail if we start drifting back to the 1322 area tho..egan jones just downgraded spain..amazing its news to anyone..seems to be to egan jones tho!

  61. I have my buy in for 100 shrs FB @ 28.
    Getting closer….

  62. 1020/FB
    I have my order in for FB @ 2.80, also getting closer

  63. rustle123 -   :)
    That's today's offer, tomorrow is another day…..

  64. FU FB!  :)

  65. MORX / Laptop Repair
    I posted a detailed note at the end of Thursday's thread  (7:01 pm) about how to fix your laptop.
    Worth reading (imo) if you've not done so.

  66. newbie – i will check it out. much thanks.

  67. Dollar/53787 – That's normal.  Equities are priced in Dollars so they're going to move inverse to the currency – we use that a lot to pick turns. 

    Icahn/1020 – Good one.  

    1,322/Angel – What we want now, it to see those weak bounce lines (last week's highs) acting as support.

    FB/1020 – They have options now, you can sell Jan $25 puts for $3.30.  I wouldn't as I think they are lucky to be worth $25 when things settle down but it sure beats spending $28.  

    LOL Rustle!  

    Pound held $1.56, now $1.562.  Euro stopped at $1.246, now $1.247 but not impressive at all until they get $1.25 back.  

    I'm liking oil if they cross back over the $90.50 line (/CL) on the assumption that there will be an assumption of good consumption over the holiday weekend being enough to get them back over $91 but I don't think it's good to be greedy here and, of course, very tight stops below but a re-entry at $90 if that line holds.  

    Dollar 82.625 at the moment so watch that as over 82.70 is very bearish and under 82.40 would be bullish but Euro is in big, big trouble for the technical (margin) reasons we discussed re. Spain this morning.  If they can't get back over $1.25, people will begin to panic (and no, this is not panic yet!).  

  68. Income Port –  Just FYI, all the short puts filled at Phil's prices except DMND, still waiting on that one.  The short TWIL puts are running getting away though :0
    (which is good!)

  69. Phil – Seacor Holdings – CKH?
    I've been reading this blog, and he does a very detailed report on them.  From my understand he think's it a good bet.  I'm impressed with the quality of the research.  What do you think?

  70. PHil – nice turn of phrase but maybe you meant "assumption that there will be a resumption (not assumption as second time) of good consumption"   – if so, you may be making a correct presumption…

  71. Shorting Facebook – medium term?
    What do you think about selling the Dec 41 Calls for $1.35?  I'm overall bearish on them, but if they do break up I'd think 40 would be a significant line.  Thoughts?

  72. VIX is up and the market also up. Something gotta give soon :)

  73. Newbie – very nice! Sorry i missed the post. i was out Fri night. My wife is going to NY w/"the girls" next week so i will be looking for exciting things to keep me out of trouble. I will let you know how it turns out. Thanks again.
    BTW – where are you located incase i have to bring it to you. :)

  74. iflantheman / Whole Foods
    I have not been there for several years. My impression was that the prices were obscene. I saw a large (not much larger than standard) jar of spaghetti sauce for $8  !  That's a jar that would cost no more than $4 in a regular grocery. But is WAS "organic", whatever that's worth these days.
    They have a very nice selection of extremely high quality fruits and vegetables though. But I would never go there to buy anything but bread, fruits, and vegies.

  75. 12:00 PM On the hour: Dow +0.77%. 10-yr +0.19%. Euro -0.45%vs. dollar. Crude -0.12% to $90.75. Gold -0.63% to $1561.35.

    The estimates for falling German yields continue to get taken down, Nomura positing they could go negative out to 5 years if the market begins to price in a break-up of the eurozone. Ten-year Bunds, says the bank, could challenge the 0.44% level hit by JGBs in 2003. "We hope that this scenario does not materialize." Current German yield curve.

    Spain is downgraded to B from BB- by Egan-Jones, which notes the country's GDP is exceeded by the assets of its two biggest banks (via). The euro is plunging, hitting a new multi-year low at $1.2483. 

    The ECB's weekly statement - showing a €25.3B decline in loans made under the LTROs and a €34.1B increase in "other claims" – suggests, says John Carney, a bank(s) was forced to make early repayment after its collateral became ineligible, and instead draw emergency financing. Perhaps this, not the Egan-Jones report has the euro diving.

    Adding to Carl Icahn's call for a board shakeup at Chesapeake (CHK), NY State Comptroller Thomas DiNapoli sends aletter to shareholders urging them to withdraw support for two board members. DiNapoli says CHK's falling share price and financial condition would warrant throwing out all members, but with only two up for election, the vote should be viewed as a proxy for the entire board.

    PG&E (PCG +0.1%) unit Pacific Gas & Electric may be facing a hefty penalty for 3,062 violations of rules about operating high-pressure gas pipelines at or near densely populated areas. Pacific Gas could be fined $20K for every day of violations from 1993-2011, and $50K for each day this year. 

    Joy Global (JOY +4.7%) gets a bounce today after testing recent support, and getting a boost from positive comments out of Barclays that the stock is cheap at current levels. The firm says the shares already reflect the weak U.S. coal market, and downside could be limited given JOY's strong backlog and high aftermarket exposure.

    If major Chinese solar vendors, who now have to contend with U.S. tariffs in addition to the industry's pricing and oversupplywoes, continue to struggle, the Chinese government is "likely to adjust the entire supply chain," Digitimes reports. That might not go over well with governments upset over Chinese subsidies for solar vendors, but would back up reports the government favors industry consolidation. LDK Solar (LDK -12.5%), the one firm specifically named in the report, is off sharply.

    Kraft (KFT -0.1%) has it eyes set on gaining a bigger share in China's 77B yuan ($12B) snack food market with an onslaught of new products tweaked for local tastes. Ritz crackers that taste like beef stew and mango-flavored Oreos are just the start for the company, as it plays catch up to rivals already armed with re-engineered products for the region. 

    Digitimes joins Barclays in providing negative PC commentary: the site reports Taiwanese notebook contract manufacturers have begun slashing orders to component vendors, and that this could be a sign June shipments will be lower than expected. It's added PC OEMs have become conservative with their orders due to the impact of Europe's macro troubles, though contract manufacturers still expect strong 2H demand on the back of Windows 8 (MSFT) and Intel's (INTCIvy Bridge.

    Seagate (STX -2.3%) and Western Digital (WDC -2.1%) sell off following a downgrade to Equal Weight from Barclays' Ben Reitzes, who sees soft PC demand hurting the companies' 2H results. Reitzes also claims notebook hard drive prices, boosted by capacity shortages, are falling faster than expected, and says his checks indicate hard drive production cuts and PC inventory tightening. Moreover, he expects Apple's rumored plans to sell a cheaper MacBook Air to hurt hard drive demand.

    "Advanced manufacturing," which combines mass production with the flexibility of customization, could represent the biggest transformation in factories since Henry Ford invented the assembly line. GE used it to cut dishwasher production time by 68% and the space required by over 80%. 

  76. FB …….Phil….you know this thing will turn around and head northward sometime.   What's your best guess?   It's not worth 40 right now (no-one will pay even 30), but it might be worth 25, or 20, and some put sales several months out at the right level might come in very well. 

  77. Iflan:  Why do we think FB is worth a particular number?  There doesn't seem to be much of an objective basis for one.  It's ability to make money with ads seems, at best, unproven.  Wouldn't Alcoa or Bank of America, e.g., be a safer bet?  

  78. Wow, a FB Jun 29 straddle goes for more than $3 expecting more than a 10% move again in the next 2 weeks! This is a MoMo stock except that the momentum is in the wrong direction.

  79. zeroxzero…..It's worth something because 900 million people have signed up for the thing.   If they ever get the right CEO in there to spank that Zucker… kid they could figure out how to turn it into a cash cow.  Oh yeah, it's worth something. 

  80. 1020 … email me when you get a chance.  pharmboy123 at gmail.  Thx.

  81. And the volume on these FB options might make it a nice trading instrument no matter what you think of the stock. But they really need to trade them in penny increment. For a $30 (or less) stock, it's ridiculous to have nickel quotes!

  82. newbie / WFM — I actually buy spaghetti sauce there.  Not at $8 though, just slightly more expensive than the other grocers.  My reason for buying it there is that it is difficult to find spaghetti sauce without added sugar (why does everything have to have sugar in it these days? Even pretzels have it now!).  I can get generic sauce in a can at the major grocers around here that doesn't have added sugar or I can get jars at whole foods.  I know many people don't read labels but if you do, you're more likely to find yourself attracted to WFM since many of the foods they sell have understandable labels.  Also, if you are at all interested in HOW your food is produced, you are more likely to find that knowledge at WFM than at the other major's.  I've actually have started enjoying steak again at home after trying their grass fed beef.  It might cost more but I can't find a palatable steak at the other majors. I don't even consider it more expensive since the choice is no beef or pay the price (still cheaper than a steakhouse). Also, their chickens aren't mutants like the ones you find at the other grocers (the size of turkeys!).  I don't even see the other grocers as being competition. I see farmers markets being their competition. People who've made the choice to pay attention to what they ingest are more likely to shop WFM (or similar) or farmer's markets, and not the majors IMO.  I doubt anyone would argue that eating healthy is expensive!

  83. Iflan:  FB has to be the most successful IPO ever for a company that has no visible means of support.  It's revenues are laughable, given the price.  But who can disagree that the right CEO doing the right things might boost it's value?  It would indeed be sweet if Zucker retired, but you how founders are…..

  84. rainman/sauce
    Sugar is added to neutralize the acidity in Tomato Sauce.  If you make it yourself, you can use artificial sweetener, but it's not a lot of sugar used.  I make my own.

  85. I don't know about you guys but I just had 10 mins when I couldn't get in.  

    If the site does go down, the first place I go is to Seeking Alpha and we do comments in the chat under my most recent article, which should be that day's post unless it's early in the day.  To find it, all you need to do is follow me there and in the top right corner you'll see latest articles and lower down the page, you'll see latest comments so takes 2 seconds but only if you remember to follow me now because – when the server goes down – I can't repost this stuff, can I?  

    Puts/Burr – Just make sure you are exercising moderation.  If Europe collapses, they can take us all down 20% with them.  

    CKH/Burr – Not at their 2009 lows so not all that interesting to me as there are other things to buy that are and I don't know what their mix is with oil and gas but more gas = rough summer, most likely.  This is always a nice sector, long-term but a lot nicer if you are PATIENT and buy them in a periodic bottom so below $80 for sure and $60 was their 2009 low which means $87 is a good place to wait.  On a side note – you seem to be involved in a stunning amount of stocks.  I find more than 20 to be a tremendous, unmanageable burden for most people.  

    Assumptions/Jerconn – How dare you question my turns of phrase!  No, I did mean my assumption that others would assume that consumption would increase – hence the "rumor" trade ahead of the news (and out before reality has a chance to disappoint). 

    FB/Burr – I think I'd rather pick a horse that has one of my children's names at the Meadowlands on Friday than guess what FB will do between now and December.  I can sell CHK Jan $10 puts for $1.40 – why on earth would I want to mess around selling FB calls to make $1.35 in December when I would have no conviction on the position if it moved against me?  What if FB pops back to $34, still not the IPO price but a $5 move should run the short calls up to $2.50 (the price of the $36s).  What is the plan there?  Will you take the $1.15 loss or dig a deeper hole or ride it out (but the next $5 would put you at -$4)?  What is your conviction for shorting FB?  As I have said numerous times this past month, with CHK I have an easy decision tree so I see any move down as an opportunity to buy more – THAT's the kind of trade you make long-term.  

    Obscene/Newbie – In my area, as food prices rose, the gap between Whole Foods and my local market dipped significantly.  As WFM is further from my house – I usually go there first and buy things that are fresh and interesting and then go to the regular supermarket to pick up "normal" stuff so the same thing, essentially, I pick up bread, fruits, veggies (but not all as some are just as good at the A&P) and fish or prepared foods but not their meat as my local butcher is better than they are.  So, on the whole, I think WFM has it's uses but it would suck to live in the city where that's your local market as it probably would add about 30% to your monthly bill. 

    FB/Lflan – $25 tops but it won't be a bargain at $25 so I wouldn't pay that either.  Now they want to make a phone – give me a break!  That's just a company that doesn't have a clue what to do to monetize a large number of free eyeballs.  How pissed are GOOG (forward p/e 11.5) and AAPL (forward p/e 10.5) and MSFT (forward p/e 9.5) that FB (forward p/e 45 and I bet they miss) gets all this attention?  These are long-term established companies with tens of Billions in revenues, solid profits and the proven ability to monetize and grow their products – FB hasn't even filed an earnings report yet you're interested in paying 4-5x for them over the real companies that are on sale – it's an amazing thing to watch how investors behave with these stocks….

    And what ZZ said! 

    Oil tapped $92.75 and died again, back to $92.50.  Gotta be quick to make money on these moves.  

    900M/Lflan – It's worth $10 per user tops, that's $9Bn, not $62Bn.  I don't think any public companies fetch more than $10 per eyeball but what multiple should they get?  2x, 3x, 5x – not 6.5x at $29.  FB themselves have only been able to pull about .10 per user and it's not because they didn't feel like trying (as is the company line) – it's because they're not as good as GOOG at monetizing eyeballs (who have 1Bn ACTUAL users per day vs. FBs questionable count).  After 13 years of incredible growth, GOOG has gotten revenues to $40Bn and is dropping $10Bn to the bottom line so they are ACTUALLY earning $10 per user while FB is ACTUALLY making $1 per user with a 4x valuation so, if we split the difference because FB has SO much potential (very easy to argue they do not, of course), then FB comes out to about $15 – and that's only if GOOG or MSFT or someone else don't build a better mousetrap than FB has in the next 3 years.  

    Spaghetti sauce/Rain – I like Rao's but that one is $8. Eating healthy is expensive because we subsidize unhealthy eating.  This country has some really crazy policies about food. 

  86. Phil, I got a database error and it kicked me out, have not seen that one before.

  87. rainman….When I got married I asked my wife to be frugal about everything except food, and that we should feed ourselves and the kids the cleanest and best we can find.  Trouble is, people lie to you.  For instance, it's been shown that over 30% of food labelled as 'organic' contains pesticides (it has been sprayed, secretly).  The only certain way to obtain clean food is to raise it yourself.  This means doing your own gardening, canning and freezing, which I do.  That's right, I MULTI-task.   I used to raise my own chickens, turkeys and beef.  I grew up on a farm so the skills were already there.  We can't all do this but many people do seek clean food and are willing to pay for it.  Some of the food we eat contains  pesticides, herbicides, bacteria, not to mention added sugar, colorings, you name it.  A lot of it is just plain poison.   How do you feel today?   Can I buy you a 'slideburger', and would you like that supersized, with a 40 ounce sugared drink?     :)    

  88. K Phil…..I'm on your side.  Forget the FB.  I'll just ignore it and buy some more AAPL, ……and GOOG. 

  89. Ah, Iflan…but then eating healthy would not be good for my business……come on, we live longer now eating poorly than when we were eating healthy!

  90.  The root of MoMo stocks.  Which, as explained herein, doesn't mean you shouldn't buy them, but a quick trigger finger on the "Sell" button probably helps.

  91. FU FAKEBOOK!!!
    What a POS!

  92. FB/lflan:  I think that 900M user number might be very inflated.  I believe FB counts people who click the "Like" button on some website as a "user".  Also there are now for-pay marketing services that specialize in creating fake FB and Twitter identities and click the "Like" button for fan pages as a part of a marketing campaign.

    I believe Barry Ritholtz estimated the true number to be around 150M — which is still alot of users but a big difference from the reported 900M. 

  93. Kinki:  "User" is definitely a FB term that merits scrutiny.  I have an account — fake name, fake data, 6 "friends", never once pushed "Like."  I use it to follow a couple of rock bands, and see photos that my [6] friends post.  I doubt FB will be coining money from my usage.

  94. kinki—sort of like the fake 31.91 close…
    I think they make the Ibanks seem like angels…
    what a sham..

  95. Well, if FB is going down as one of the worst 'success' stories of 2012, short MS, they were behind it….

  96. kinkistyle….I'm a registered FB user that used it maybe twice.   One of my kids talked me into it.  Then next time I visited the site a couple of people from who knows where wanted to 'be my friend'.   Say what?   I then tried to 'sign off' the site and found it slightly more difficult than winning three state lotteries in one day.  I couldn't do it.  So I'm probably still a 'member' , but I never go there.   So you are right.  900 million stated.  Maybe three or four regular users.    Let's short it!  

  97. Ifland / Generational:  I have friends with kids that have 6,000+ friends, don't deploy any privacy settings and post their phone numbers and other data for all to see.  I'm not sure these kids have very deep pockets, though, so the question of how to monetize eyeballs remains problematic.

  98. Shorting CRM…..I have the July 130s, buying a few more.  (Using Opts methods of course….) 3.5% stop.

  99. rustle / sugar — Yes but it hasn't always been the case that all spaghetti sauce had sugar.  Just like many other things on the shelf that didn't use to have as much sugar as they do now.  The problem is that the "smart" people who produce our food know that we instinctively eat sweet or salty foods.  Salt in particular is more effective for taste when it is on the surface rather than cooked in and they know that as well but they can't guarantee you'll salt that mcnugget so they do it for you.  I think the link to diabetes will be "discovered" at some point (not to mention the addictive nature of our foods).  If we didn't fluoridate our water, I'd bet the diabetes and tooth decay charts would line up pretty nicely.

  100. Euro diving, market getting toasted, thank goodness for the short FXEs!!

  101. Correction:  Trading platform software getting toasted, major departures from reality, sorry!!

  102. VRTX – if you can sell the October 35 Ps for 1.40 or better…..should be a good deal.  I don't see them retracing through that floor.  I will try a few.

  103. FB — Our house even has a facebook page.

  104. Pharm — I think that's why the fed groups meds and food into the FDA. They scratch each other's backs.

  105. FB –  On the minor Pro side, I create and admin 5 of the small business facebook pages for companies down here in SJDS.  Once we get the pretty photos and flyers and tripadvisor plug-in setup, we use the facebook ad's to drive business.  Each business pays about $30/mo to facebook which results in $1/day worth of ad's.  
    Once we set up the facebook ad's, many of the shops become "liked" by people in town and by other supporting businesses.  Then they can make a facebook post, and people know about the food/drink specials, or fishing trips, or festivals.  From what they tell me, it seems to drive traffic to the shops since people will book trips/reservations.  
    Just my 2c from a small biz side.  Not a 100billion idea, but it does work in a small way.

  106. NG falling off a cliff.

  107. Phil / # of stocks.
    I just counted, I have about 22 that I manage with positions.  Since I don't work full time now, it's not all that hard to manage those, but I don't think I'll be adding many more.  Most of the ones we talk about on here frequently, so I get a good perspective.  
    I just like to read alot, and like to bring up stocks that we don't talk about here very often.  Maybe I'll get published one day in the SWW!

  108. FB/Rainman — my cat has a FB page.  Really!  I sold the June 30 call earlier…..

  109. Pharm ,(I have been offline)  Is VRTX a buy here, i.e., selling the puts.

  110. Pharmboy- I hope you do well- I have been early- I read all the quarterlies and 10 Q's- crap cpmpany and run very poorly- the more revenues go up the more they lose- also big question about accounting as they give away options like water and do not account for them- we should have worked for them- options that reallty don't count-:)

  111. silentstorm44/VRTX, Pharm recommended to sell VRTX Oct, $35 puts for $1.40 or better at 2:33pm.

  112. Hi Phil – I'm looking for long term strategy that generates an 8(ish)% return.  I like and use the "buy stocks for 15-20% discount" but am looking for more downside protection.  How do we feel about collars?  Other suggestions?

  113. znga has a better business than FB as they have a good presence in smartphone.
    Those who got in as a proxy for FB are selling it. It is a better buy in this space.

  114. Error/Rpme – Yep, they are looking into it.

    MS/Pharm – Very unfair that MS gets fallout for this.  They raised money for their client and raised a lot of it – that's their job.  Actually, the fact that they got them $16Bn at that ridiculous valuation is in itself a testament to how well they did their job.  I don't want to go public with an IBank that leaves 50% on the table – I want to go public with an IBank that gets me every possible dollar of "value" for my shares.  

    Fluoride/Rain – Are you saying fluoride prevents diabetes somehow?  

    FB/Burr – Sounds like a good use of it. 

    Nat gas/Rain – Wow, $2.48!  Gasoline at $2.83 too – not a good day for the energy sector or any commodities with the Dollar at 82.60.  

    GLD Aug $158 calls at $2.90 were $5 on the 18th and $7.50 a month ago so a nice hedge against QE if you are bearish.  I'm not a big fan of gold but a rumor can give you a quick $1 (33%) and rumors are what it's all about this week with the month ending on Thursday.  

    Overall, we held our weak bounce lines and we're making progress towards our strong bounce levels – ignoring the BS morning pump – that's our story and we're sticking to it!

  115. MS……Well, all the banks have P/Es of 14 and under….MS has a 19 as of now.  I think they are overvalued…and took less in fees on the FB deal thus 'they did their job"…oh and don't mind the increase in share offering to screw the retail investor…and that MS also owns a ton at $35…etc etc…. I really don't care about FB (just a thought that crossed my mind), but I think MS has EU debt that will crush their balance sheet when the light comes through that dark, dark tunnel.

  116. Phil / Fluoride — No, I'm saying our sugar consumption is causing the rise in diabetes.  Looks to be about a 15 year lag if you look at the spike in consuption in 1980 vs the spike in diabetes in '96.

  117. MS / Pharm – I agree with you on these guys. They are now down 40% since early April – not a sign of confidence from the market!

  118. And 40% is really higher than the other IB even though they have all been hit!

  119. 22/Burr – That makes me feel better!  ;) 

    Long-Term/Bryan – Next week we begin the new $500K Income Portfolio.  I hate collars but you'll see how we build it.  Go to the end of Friday's chat and you'll see some weekend discussion about hedging and scaling in along with the 5 picks I noted above that make a nice start for that kind of goal.  

    1:00 PM On the hour: Dow +0.66%. 10-yr +0.23%. Euro -0.48% vs. dollar. Crude -0.23% to $90.66. Gold -0.75% to $1559.45.

    2:00 PM On the hour: Dow +0.67%. 10-yr +0.18%. Euro -0.47% vs. dollar. Crude +0.03% to $90.89. Gold -1.05% to $1554.65

    3:00 PM On the hour: Dow +0.78%. 10-yr +0.08%. Euro -0.43% vs. dollar. Crude -0.07% to $90.8. Gold -0.98% to $1555.75.

    How strong has the dollar rally been in May? The Bullish Dollar ETF (UUP) has had just 3 down days this month, notes John Spence. The move up has pushed the greenback to the verge of a technical breakout, writes Andrew Nyquist, suggesting we're near the end of a multi-year bottoming period for the currency. Commodity investors, take note.

     Investors in a defensive mood can always turn to dividend stock plays, writes Russ Koesterich. Indices of dividend stocks have volatility of just 80% or less than the S&P 500. And don't forget emerging markets, where dividend indices also exhibit lower volatility than the broad markets in which they reside. 

    Afternoon market booster:  JPMorgan's Brian Tunick says May chain-store retail sales will come in strong as the sector marks its 10th straight quarter of growth of over 5% since the depths of 2009's slowdown. It's a different story with luxury names – still roiling from a number of high profile warnings (IIIIII) and conflicting opinions on the future of China's high-end spending 

    A "European Redemption Pact" – in which the Club Med states pledge their gold and Germany its pristine credit – resurfaces after being shot down by Merkel in November. The plan would make common any sovereign debt above 60% of GDP. Merkel remains opposed, but her political power weakens daily and opposition parties are becoming louder in support of the idea.

    Foreign sellers to Greece are demanding payment upfront (except Iran, which has no other choice). Foreign buyers of Greek goods are delaying payment as the size of their bill (in euro-terms) will be reduced if the drachma returns. When it comes to credit, writes Sober Look, Greece is already out of EMU.

    Bank of Spain Governor Ordonez is stepping down from his post on June 10, one month ahead of the end of his term.

    The early departure of Bank of Spain Governor Ordonez is because of alleged "grave misconduct" in his handling of the Bankia bailout, says the head of a trade union whose lawsuit against Ordonez was allowed to move forward today by a judge. (via)

    Canada on strike!  Canadian Pacific (CP +1.4%) says it will open up negotiations with on-strike Teamsters if employees return back to work. The Canadian government has already taken up the issue with legislation aimed at ending the strike, noting the railroad stoppage costs the Canadian economy $540M a week. 

    Peru on strike!  Peru's government declared a state of emergency last night in southern Peru after deadly protests opposing Xstrata's (XSRAF.PK+5.2%) Tintaya copper mine. Anti-mining activists have recently halted investments in several planned mines, such as Southern Copper's (SCCO +2.1%) Tia Maria project and Newmont Mining's (NEM -1.9%Minas Conga project

    Boeing (BA) will maintain its program of raising productionof its revamped 737 jet to 42 by 2013 from 35 currently despite Airbus' (EADSF.PK) plans to scale back its ramp up. "We've been a little bit more thoughtful and measured in our approach to increasing production," Boeing exec Randy Tinseth says.

    The slowdown in China's economic growth may not be the only reason behind a rapid decline of U.S. lumber exports as well as a big drop in shares of timber REITs like PCH and PCL and forest product firms such as WY. Another reason: U.S. wood, whose prices are up 27% YTD, is no longer a bargain, which could mean a better year for the timber business than investors suspect.

    Movie studios increasingly target China with marketing tied to new releases with an eye on the explosive growth in theaters in the nation. Though the government only allow studios to walk away with 25% of gross sales, it's 25% of a huge number as forecasts point to China's box-office haul surpassing North America by 2020. Just this weekend, Men in Black 3 brought in $19.5M – marking the 7th best weekend tally ever for a film in China – as star Will Smith made a promotional appearance via Skype to a pleased Beijing audience.

    A123 Systems (AONE) is soaring 16.1%. With no major company news, the surge could be due to Fisker Automotive's disclosure that its hybrid electric-gasoline luxury Karma sedans generated revenue of over $100M in the first four months of the year. A123 supplies the battery packs for the Karma vehicles.

    Today's selloff in Facebook (FB -9.8%) is happening even though CLSA's James Lee is starting coverage with a Buy and $40 PT. Lee notes Facebook's ad click rates, a major concern for many, are much higher when an ad targets a "fan" of a product or service, and expects this trend and others to drive online ad share gains at Google's (GOOG) expense. On the flip side, Paul R. La Monica's talks with money managers find little interest in buying Facebook shares, mostly due to valuation concerns.

    As Research In Motion (RIMM +0.3%) reportedly prepares huge layoffs, it might face the prospect of another big inventory write-down. The value of RIM's in-house inventories rose 18% Q/Q during its February quarter, per Bloomberg, and BlackBerries have also been piling up in the channel as share losses grow. RIM took a $485M inventory charge related to its PlayBook tablet in December, and a $267M charge related to BlackBerry inventories in March

    RBC's Amit Daryanani sees Apple's (AAPL +0.8%) iPhone sales soaring above 55M in the December quarter thanks to a redesigned iPhone sporting 4G connectivity. He also predicts iPhone unit sales will rise 77% for the whole of 2012, and 42% in 2013. Moreover, in spite of iPad cannibalization, Daryanani predicts Mac sales will rise 10%-15% Y/Y in 2012 on the back of an upcomingproduct refresh

    Cirrus Logic (CRUS +7.4%) is getting a lift from speculationApple's (AAPL) much-rumored TV set will use Cirrus' audio codec chips. Apple uses Cirrus' chips in the iPhone and iPad, and accounts for the lion's share of the company's revenue. In April, Cirrus said it's taking out a $100M credit line to support "multiple new products this fall," though speculation at the time centered around an iPad Mini.

    Three lunchtime reads:

    1) The end of the euro: a survivor’s guide

    2) Balancing risk: REITs that outperform in good times and bad

    3) The new death-of-equities is premature 

  120. Interesting that on the day they buy a coal miner, (Vale) Goldman upgrades BTU!

  121. Hulbert/Mr. M – That sounds about right to me.  

    MS/Pharm – I don't disagree there, I just think the crap they are taking for FB is uncalled for but, on the whole, not a very safe looking IBank.  

    Sugar/Rain – That I knew, I was just wondering if you had some other link I hadn't heard of. 

    62M on Dow at 3:15 – I thought we were going to be open today?  

    Still, nice slow-motion stick since noon getting us back near the highs is a commendable job.  

    Interesting/Deano – I know, an amazing coincidence.  

  122. RIMM problems / Phil – Well, color me surprised….   ;-)

  123. Bad news kids – Turns out some RSS feed programs are giving us trouble with obnoxious amounts of requests.  They are trying to see if it's some particular one – probably something new someone is doing – but they may have to cut the RSS feeds for a while until they can come up with a solution.  

    If you do have an RSS reader – please try to make sure it is making reasonable requests of our data feed – not every 5 seconds or whatever.   Thanks.  

  124. FB – yes, definitely generational. I find it is a good way to keep in touch with people I dont really feel like making a phone call to! lol. Plus, from an active duty military member's perspective, we have friends all over the world. We dont have a home phone in most deployed locations so the moral tent phones, skype, and facebook are the only ways we can keep in touch with friends and family…

  125. TOL/LEN are two other stocks that baffle me….hitting 5 yr highs on houses that they are selling in numbers from how many years ago?  Toll sold 671 last Q.  P/E of almost 70…….yeah, they are worth it.

  126. Vix had a P=bar again it looks like.

  127. Phil / sugar — No, I was just saying that a chart of tooth decay would look like the diabetes chart if we didn't fluoridate our water from our increase in sugar consumption. And BTW, the medical commuity still takes the stance that our sugar consumption isn't linked to the increase in diabetes. That's why I said they would one day "discover" the link.

  128. My new price target for FB is……15 bucks….. ;)

  129. Japan Demographic/Phil:  Koll makes that point in the video too.  We can't predict how long this demographic "sweet spot" will last, all we know is what the situation on the ground is right now.  
    Not to get too into some quasi-post-Malthusian dialectic here, but I read a quote somewhere that said China has so much cheap human labor that rather than invest in technology, it is more cost effective for them just to hire a bunch of people to do the work.   We all know about the big strides in productivity U.S. corporations are making in lieu of hiring workers since we entered the global recession.   The opposite side of the coin of our chronic high unemployment is the increased capital expenditure by corporations to increase productivity and efficiency through investment in technology.    I think there is a similar phenomenon occurring in Japan but the problem over there is not high unemployment but shrinking population.  But the end effect is the same — an increase in productivity at the expense of human capital.   
    People don't really point it out much, but China has also peaked in its population and thanks to their One-Child policy they're starting to age as well while their economy has just started its development.  Who knows how long they can play their cheap labor/mercantilism game while their population growth is starting to resemble that of a developed nation and with competition the other hungry BRIC nations and burgeoning African and S.E. Asian markets.

    Having a foot in both the U.S. and Japan, I can see the similarities in how our respective roads and how they travel in a kind of parallel.  I also notice how both countries are using technological advancement to make up for the lack of population growth and/or cheap labor.  Something which I believe both nations have a sizable head-start over China because of the necessity of it for the past few years, for the U.S., and few decades, for Japan.

    …or probably just some rationalizing based on some confirmation bias bullishness on both countries.  Anyway, I just like sticking up for Japan. :P

  130. Wow, 70M on the DJI @ 3:45.  Is today a holiday too?

  131. Another note on facebook 'users' – I have 5 nephews and nieces, all under 18 and all of them on facebook with fake ages. Even their pet dog has a page (so they can play a game…). How many users are such, and how does this distort any age related analysis?

  132. To further the discussion about MS – compare their current CDS levels to others in the industry:

    Not inspiring much confidence!

  133. TOL/Pharm – Due to write-downs, they won't have to pay taxes for the rest of this decade.   Also, they have been buying land and half-finished developments for pennies on the Dollar from smaller developers who didn't make it so selling for 2005 prices suits them just fine.  

    Fluoridating/Rain – Just something I wanted to know as NJ is a barbaric state that doesn't fluoridate the water.  

    Japan/Kinki – Going to take a really large sweet spot to get over that 220% debt to GDP ratio before they run out of wealthy old people to fund the country.  

    FB/Yshen – That's right, I seem to remember a thing about all the kids lying about their ages so they could get accounts.  

    CDS/StJ – GS surprisingly high, especially when C is 263 and JPM already screwed up and is still 146?  

  134. Wow, was that the bell already?  This day flew past!  Nothing like an up 100, down 100, up 100 day to keep things interesting….

    On the whole, it was constructively bullish and we proved the weak bounce levels can hold.  Now we move on (hopefully) to challenge the strong bounce levels – maybe more rumors of EU action tomorrow!  

  135. CDS / Phil – I am guessing there is always the specter of legal action with GS… If you use these CDS as guideline, it would seem to me that the place to be is WFC!

  136. I will see you guys next on Monday!    Good trading!   

  137. Phil – RE: Fluoride … drink tea!
    Tea plants accumulate fluoride in their leaves.

  138. someone selling into climaxile excitement
    i like FB. i get to see & hear much more of my children, grands, nieces & nephs than i would without it.

  139. Have fun Lflan!  

  140. Have a good one lflan.

  141. the all knowing CNBC!! I cannot imagine the sentiment surrounding Facebomb getting worse than it is…who likes the stock here….sounds to me like many of the institutional investors who received a larger allocation than what they really wanted are exiting positions today….maybe the stock is set up for a quick 2 or 3 day bounce..zuck instills no confidence and he seems a strange little fellow…

  142. Phil, San Diego…if you want to see the desert, dont drive from Vegas, take Interstate 8 east to Sunrise Highway up to Mt Laguna. Past the lodge is the desert view, almost a shear drop from 6000 feet down to the desert floor, you can see for miles and do it from a nice, cool vantage point with pine trees, go to Julian for lunch, hiking, boating, spend the same amount of time as that boring, moonscape drive. The Hotel Del is probably the best place to stay. Eat at the Old Town Mexican Cafe, carnitas or Roberto's and get the carne asada burrito. The zoo is a must and if you do the wild animal park, there used to be an early morning ride along with the vets as they fed the animals before all the people arrived, kids will like alot. Could catch some shakespeare at the Old Globe. BTW, LA Sucks!

  143. another nice FB thing is the people who post what music they are listening to on Spotify. Never would i have thought to listen to all the variety of artists and genre that my "young" friends are into. One of my playlists i named Facebook music.

  144. RIMM shares halted on news.  Q1 loss of $0.43 – analysts expected a profit.  hired JPM to explore options.

  145. Morx:  I use Grooveshark, pay $6 per year, get lots of reccys on new music and…..this is the bomb for me…..get to hear lots of not-on-CD concert uploads from just about everyone you've ever heard of — amazing stuff, who knew?  Plus you can tap into other user's playlists at any time, which brings on even more variety.  I barely ever put on a CD at this point, just Wifi'd the whole house and crank it up everywhere.

  146. RIMM under 10—wow.. maybe JPM should 'advise' them to buy FB?

  147. So CNBC's Cramer stated that the EU/Greece thing is like the bail out of Argentina….really?  Really?  The US bailed out Argentina via the IMF…..Um, the EU/Greece thing is not like Argentina, WTF listens to this crap….tell me why we were up today?

  148. And now RIMM below $10 in AH trading… The only hope is that someone buys them eventually and the price is getting better every day!

    Today seems to prove that Josh Brown Rule of Trading # 7 is correct:


    7. Don't buy stocks trading over 30 times earnings or under 7 times earnings – something is wrong in both cases.  Stay away from anything not trading on a US exchange.  Avoid the 52-week low list – a loser is a loser.
    Look at FB and RIMM – P/E above 30 and below 7 respectively! There are exceptions but want to take the risk when you have companies like INTC, IBM, AAPL and others to trade.

  149. Fluoride is terrible for human beings?  It's rat poison (really).  What they put in water is derived from phosphate mining.  Many towns across the country are now taking it out of their water supplies.
    97% of western Europe has chosen fluoride-free water . No difference exists in tooth decay between fluoridated & unfluoridated countries. 
    If you want it for your teeth, brush with it.  Why would any medication that requires correct dosing be added to the water supply where different people drink vastly different amounts of water?

  150. BP is 4….uh oh…..

  151. Spain delays and prays….inspires lots of confidence, no?  I love this quote:

    “Spain has engaged in a policy of delay and pray,” Echavarren said in an interview. “The problem hasn’t been quantified by anyone because there is huge pressure not to tell the truth.”

    They can't quantify it, huh? Holy Schmoly Batman…..

  152. Tough to be completely convinced today as volume was only about 2/3 the usual volume!

  153. Tea/Diamond – I did not know that.  

    Old Globe/Rpme – I like that idea a lot.  Ride along too, thanks.  

    RIMM/Rperi – Seems to me like they are out of options…

    Cramer/Pharm – It's amazing the authority with which he can totally wrong.  

    Fluoride/Peedle – I don't know, the CDC still lists fluoridation as one of the ten great public health achievements of the 20th century and I know that kids in NJ get a hell of a lot more cavities than we did in Rockland, NY, where we drank our rat poison and we liked it!   Actually I'm surprised to see that old argument resurrected but there always seems to be some group that's against anything being done for the general welfare:

    File:Unholy three.png

    Big Chart – No volume but does look kind of like a rally off the bottom. 

  154. Hi Phil;
    Love your newsletter. It's getting better every week. I can't follow u everyday since I went back to work as a bus broker,but the weekly summary is very helpful.I took a flyer on this position on VDSI:
    Buy 12 C,Sept $7.50 at $3.40,Sell Sept. $10 C at $ $1.75 and Sept. $7.50 P at $.35 for net $1.30 on $ $2.50 spread.Worst case buy at $8.80. Stock now at $7.23. I'm thinking of bailing out of position and taking my loss instead of waiting  to get 1200 shares at $8.80

  155. Phil / HPQ / CL
    Thank's for that HPQ earnings trade, I sold 20 of the $1 spread for 0.95 today for a gain of around $760, and played /CL off the 90.50 line all the way up to 90.80 line for another few hundy.
    Anyway, THANKS for all you do and all the questions you answer.  Es Mucho Appreciado!!

  156. Rpme/San Diego:
    Man,that note to Phil about seeing the desert makes me want to fly to Vegas just  so I  can make that drive.

  157. Phil – Speaking of tea …
    The absolute BEST tea maker I have ever owned is the One-Touch Tea Maker by Breville. It's perfect for brewing loose leaf teas!

  158. Broken Wing Butterfly – i mentioned this the other day, learned about it at an Etrade options trading seminar the other week. Presenter was Jim Bittman from the CBOE. Good presentation. He called out the BWB as his favorite options strategy as is a credit play (selling premium!) with low margin requirement, and easily adjustible. I put one on AMZN last week for June, buying one 210 call @10.49, selling three 215 calls @ 7.46, and buying two 220 calls @ 5.02 for net credit of $185. Nice profit curve.. directional, with nice extra gain if stock just waffles without moving.  In this case, I am anticipating AMZN to go down, but again, many ways to quickly and easily adjust to cover still at profit if direction changes and moves against the trade.  If stock moves strongly in my direction i make my full credit..or can adjust to a bear call spread if think is not coming back up. If stock stays right where it is today, can make even more right up to an additional $485 or additional 263%.   This strategy certainly has it's place for me i believe. More about it here.

  159. Scottmi, regarding broken wing butterfly, aren't you buying too much premium in one month?

  160. While this proposal could be considered somewhat past its sell-by date, I would suggest that it might in the end prove a humanitarian course of action, given the likelihood of high and sustained future U.S. unemployment in our increasingly machine-driven world.  Keep an open mind, Phil!! Excerpt:
     "I have been assured by a knowing American of my acquaintance in London that a reasonably active citizen, modestly well fed, at any age up to three score years and ten can be made into a useful and active slave who, since he will receive no emolument for his pains, such as they are, can instantly and economically be turned into an active contributor to our country’s wealth and recovery.
    No doubt there will be those grave economists who argue that slavery is an inefficient form of production, and that our Country made a Great Step when it abolished the system some two hundred years ago. As to my own part, having turned my thoughts for many years upon this important subject, and maturely weighed the several schemes of other projectors, I have formed the following conclusions.
    First, that our Country’s influence on the World was never so great as when slavery flourished in our land.
    Second, while the fainthearted may consider that slavery is an outmoded, even an illiberal concept, right-thinking citizens will understand that whereas abolition might have seemed a comfortable notion in more prosperous Times, it is nothing but an Expensive Luxury in today’s more difficult circumstances.
    Third, since most slaves will die of their exertions before attaining the age of 70, the State will thereby be spared the very considerable expense of food, clothing and shelter during their unproductive years.
    Fourth, those same grave economists who voice their doubts are the very people responsible for our present troubles, and therefore their views may safely be ignored."

  161. BWB/Silent – the trade is net selling premium. Not sure what you mean by "buying too much premium in one month." Low delta, and i believe you can design them delta and gamma neutral if you choose..i'm still learning.  Easy way to get the setup in TOS is to choose the Unbalanced Butterfly spread option when looking at the option chains.  End of day today could put same trade on for net $155 credit to you at a 1x entry. Delta for this is -14.05 and of course, you can always adjust and roll your own to meet your own aims.  for myself, AMZN continues to waffle.. i'll let it evaporate up and if get's above my $185 profit target, will put tight stops on to close it if turns back down at all..  really has tons of flexibility now still but will see what happens with that as expiration closes in.  I'll track this as if i sold a july expiration set also, with intention of closing at or near june expiry to see what that extra time might allow for easier exit…

  162. Obscure music track/Phil – here's one from The Who next time you discuss water..

  163. Good morning! 

    And what a mess it is.  Oil failing $89.50, Euro $1.2435, Pound $1.558, 79.09 Yen to the Dollar at 82.78 and that's with the Swiss doing their usual prop job so the Euro is weaker than it seems – NOT GOOD!

    Gold $1.549 because this sell-off is due to a lack of stimulus (gee, what a surprise) as China says no to easing and Europe says the usual nothing at all.   Silver $27.54, copper $3.41 is very bad, Nat gas plunging to $2.41 and gasoline even falling to $2.80.

    Pretty catastrophic and the Futures are down about a point with Spain down ANOTHER 2.5% and the EU markets down about 1.2%.   

    This would be a great day for us to put in a solid floor and shake Europe off but, on the whole, they are collapsing and I'm not sure we can really ignore that.  

    3:25 AM Asian markets are down, with heavy losses in Hong Kong as hopes of Chinese stimulus measures were dampened. Japan -0.3%. Hong Kong -1.9%. China -0.2%. India -0.5%.

    6:00 AM Overseas: Japan -0.3%. Hong Kong -1.9%. China -0.2%. India -0.8%. London -1.4%. Paris -1.0%. Frankfurt -1.1%.

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    7:30 Challenger Job-Cut Report

    7:45 ICSC Retail Store Sales

    8:55 Redbook Chain Store Sales

    10:00 Pending Home Sales

    1:00 PM Fed's Dudley: 'Job polarization and rising inequality'

    1:20 PM Fed's Fisher: 'Federal Reserve Operations and Economic Update'

    4:30 PM Fed's Rosengren speaks at Worcester Regional Research Center. 

    The euro falls to an almost two-year low as Spain's borrowing costs climb. The euro touched $1.2457, the weakest since July 2010, before recovering slightly to $1.2469.

    Italy sells €3.391B of 2017 bonds vs. a target of €3.5B, with the yield rising to 5.66% from 4.86% in April. The demand edges up to 1.35 from 1.34. Italy also sells €2.34B of 10-year bonds vs. target of €2.75B at 6.03% vs 5.84%, with demand 1.4 vs 1.48.

    Yields on Italian 10-year bonds jump 23 bps and pass 6% following the government's less than stellar bond auction. Spanish yields continue their march higher and are +21 bps at 6.65%, hitting pre-ECB LTRO levels. Meanwhile, German yields fall to a fresh record low of 1.318%.

    Spanish bond yields are under increased pressure after ratings firm Egan Jones downgraded the country's debt yesterday to B from BB- with a negative outlook, pushing Spanish debt further into junk status. Moody's, Fitch and S&P still rate Spanish debt as investment grade. 10-yr yield +7 bps to 6.483%. (also: Bankia woes,Ordonez departure)

    The ECB tweets that "contrary to media reports," the bank "has not been consulted and has not expressed a position" on Spanish plans to recapitalize Bankia. "The ECB stands ready to give advice on the development of such plans," it says.

    The European Commission is prepared to ask EU finmins togive Spain an additional year - until 2014 – to meet its budget deficit target of 3%, according to a report in El Pais. Strategy papers set to be delivered by the EC today also include draft recommendations on pensions, the financial system, taxes and labor reforms.

    Round and round the aid money goes. Greece's €130B of bailout funds are mainly being used to service the interest on the country's debt, reports the NYT, so money coming from the Troika is flowing right back into the Troika's own pockets.

    Europe should be "realistic," devalue its currency and accept painful reforms so it can emerge from this crisis stronger, says Bank of Thailand Governor Prasarn Trairatvorakul. Thailand experienced this firsthand, shrinking 10.5% in '98 after setting off the Asian financial crisis, before undertaking radical changes and pulling back to average growth of 4% from 2000-2009.

    Aussie retail sales unexpectedly fell in April for the first time in ten months, dropping 0.2% to A$21.2B ($20.7B) as consumers remain "stubbornly cautious."  Australia's currency, stocks and bond yields all moved lower as bets increased for a central bank rate cut. AUD -0.3% to $0.9798. ASX 200 -0.5%.

    June could be the turning point for the markets and the economy, according to economist Mark Zandi. "We’re going to get a lot of clarity on a lot of big issues. June jobs data I think will provide insight into whether the slow down is simply weather pay back or whether there's a fundamental downshift in the economy."

    One sentiment indicator followed by the team at UBS suggests stocks have plenty of downside before a bottom is signaled. At 26.6% the ratio of bearish newsletter writers is nowhere near its October peak of 46.3%, when the S&P was making its 2011 low. "We still have a high level of complacency," writes UBS. 

    Ed Yardeni looks at reshoring U.S. jobs due to cheaper energy costs, as truck stops add tanks of LNG because the fuel is so much cheaper than diesel: "Trucks transport roughly three-quarters of American freight, so lower transportation costs could provide a big boost to the economy," adding between a half and a full percentage point to annual GDP growth over the next 10-15 years. 

    Equity markets are discounting oil prices as low as $70/bbl, which has sent share prices of some E&P companies well below the net asset value of their oil reserves. But Will Riley says this "valuation gap" has created opportunities for investors; the consensus is that oil prices will trend higher in the long run, and there are lots of "good stories" in east Africa's exploration potential.

    Coverage of Delta (DAL), US Airways (LCC) and United Continental (UAL) is initiated at Imperial Capital at Outperform with respective price targets of $19, $20 and $32. Delta had already reached a 52-week high during the session, sparked by falling oil prices; also a possible factor was American Airlines' (AAMRQ.PK)assertion that it can survive without a merger.

    Chesapeake (CHK) must raise at least $7B through asset sales this year and another $2B next year to comply with credit line covenants, Jefferies calculates, and to get there it may be forced to part with some of its prized assets in undeveloped oil shale fields in Ohio and south Texas. The current market environment makes CHK's plan to spin off its oilfield services subsidiary "unlikely."

  164. Thanks Dflam!  On VDSI, I think they are small but growing and their revenues/profits are very uneven and hard to predict.  They missed high expectations last Q after kicking ass in the prior 4 – especially last Q, where they pretty much doubled estimated earnings.  I don't think I'd bail unless you have something much better to do with the money:


    "While total revenues were below our expectations in the first quarter of 2012, our intake of new orders and our pipeline of potential orders remained strong throughout the period," stated T. Kendall Hunt, Chairman & CEO.  "Revenues were generally lower than we expected due to the timing of receipt of new orders and production delays associated with the Chinese New Year.  The outlook for the full-year 2012, however, continues to be strong and on track with our previous expectations.  We continue to believe that 2012 will be a year in which we fortify and enhance our strong position in our core business while we develop the market for our DIGIPASS as a Service business line."

    "The results for the first quarter reflected an 18% decline in revenues from the Banking market partially offset by a 29% increase in revenues from the Enterprise and Application Security market," saidJan Valcke, VASCO's President and COO.  "The decline in revenue from the Banking market primarily reflects the fact that we had unusually large orders in our backlog entering into 2011 that were not replaced by orders of a similar size in our backlog entering 2012.  Order intake through the first quarter of 2012, however, has been the best in our history and we are narrowing the gap in the order backlog at the beginning of the year.  We were also pleased with the improvement in our gross margin rate, which increased from 63% in 2011 to 68% in 2012."

    HPQ/Burr – You're welcome and nicely played.  Very good on oil and this morning is a triple-underlined example of why we played for the little move that was only the assumption of the assumption because we had a feeling the assumption was wrong and that's why we wanted to be hit and run on that trade (as you always should be in the futures anyway).  

    Now we're possibly testing $89 oil (/CL) and 82.85 on the Dollar so a nice line to play oil bullish if the Dollar backs off!  

    Futures getting worse though so not too enthusiastic – just looking for something bullish to play.  Wouldn't take much for things to turn up – just a good rumor. 

    Tea/Diamond – That thing does look nice but I drink 90% iced green tea and I already have the ultimate device for that.  Nonetheless, I believe you have found my next Father's Day present!  

    Butterflies/Scott – They are nice sometimes.  I prefer to stretch them over time, going longer in time on the June $220s, for example to reduce the Theta decay but it depends on your long-term outlook, of course.  

  165. Too much premium/Silent – Good call!  That's why I prefer to go longer in time to avoid that nasty premium decay!  

    Slavery/ZZ – I look forward to us giving up the pretense and recognizing the current work environment for what it is although I very much doubt it will happen as the employers used to be responsible for feeding, clothing and housing their slaves and their children, who they also had to in some way educate.  When a slave got sick – the slaveowner would pay a doctor as the cost of buying a new slave was prohibitive.  Already, we are talking about spending far, far more than WMT currently does to get 40 hours of work out of someone as it would be impossible to do all this for $320 a week.  Nope, those slaves had it good compared to modern minimum wage workers…

    Water/Scott – How about this one:  

    Pete Townshend – Drowned 1979 by IvorTheEngineDriver

  166. Marketwatch – Front Page
    "Spain will be euro exit No1'
    Arent they tired of panicking US small investors?
    Isnt that a "terrorism"?
    Where is George W Bush when we need him…

  167. Phil / Spain – Italy crash  -  I wouldn't mind placing a craps roll bet that there will be more pain in the future before there is more relief.  We used to call them "Disaster Puts" at work.  Buy something for 0.10-0.25 and hope it goes to $1.  If you lose, you lose.  You like anything for that?  Maybe just some puts on EWP, FXE?  Or how about playing that Germany feels some pain?
    More pain plays!  I love the smell of capitulation in the morning!

  168. Nice call on oil this morning Phil.

  169. Phil, Like Burr is saying Germany will either have to deal with higher interest rates or lower exports. Any way to play that?

  170. Changing the Matrix:
    The European Commission called for direct euro-area aid for troubled banks and touted common bond issuance as an antidote to the debt crisis now threatening to overwhelm Spain.
    The commission, the European Union’s central regulator, sided with Spain in proposing that the euro’s permanent bailout fund inject cash to banks instead of channeling the money via national governments.