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Thursday Thrust – Do We Have Enough Fuel To Fight Dollar Gravity?


That's how much the Dollar has risen in the month of May.  Should we be surprised then, that the S&P has fallen 7.2% – from 1,415 to 1,313?  The Dow is down 900 points and that's 6.7% etc.  Are the chart's, in fact, giving us a misleading view of how well our markets are doing?  I said to Members in this morning's chat:

Big Chart still indicating a constructive floor although it doesn't feel like it.  Don't forget we're supposed to adjust our lines vs the Dollar and the Dollar is up 5.4% in May.  This is a BIG factor because it means ALL stocks should be 5.4% cheaper when you buy them with Dollars so look 2 2.5% lines higher and THAT's where we've recovered to – back to our April highs in a Dollar-neutral market.  

Will the Dollar go up forever and keep shoving the indexes lower?  Probably not and, if the Euro ever comes back and the Dollar falls – we will see a spectacular rally and all the bears will whine about how unfair it is ect. but I'll tell you right now it's a very simple and natural thing for us to have a sudden 2.5-5% pop on any can-kicking resolution from Europe and/or stimulus from the Fed.  

It's very impressive that we've made any progress at all since the 21st as the Dollar has moved 2.4% since then (81-83) and that also means gold is holding up pretty well and gasoline is a huge rip-off as well as, of course TLT is up to 126.16 because the Dollars the notes are priced in are rising and that's part of your net gains in TBills too.  

Back in the last Euro panic in 2010, when the Euro dropped to $1.19, the Dollar topped out at $88.71 but it was a spike high (that lasted May – July) and 83 was the consolidated top so we may get another blow-off top in the Dollar if there is no concrete action to "fix" the Euro and that can still drive stocks and commodities much lower which is why Cashy and Cautious remains a good strategy – especially when our CASH is gaining 6.4% a month in buying power!  

What's most impressive about our bounce off the "bottom" over the past 10 days is that we've managed this DESPITE the Dollar jumping another 2.5%.  We discussed Stock Market Physics last week and the rising Dollar is like increasing gravity in our market equations, making it much harder for the indexes to show progress as they are pulled down (in price) by the increasing value of the Dollars they are purchased in.  

Stocks, just like any marketable commodity, are priced in Dollars and if the buying power of my Dollar goes up 10% then I should expect to be able to buy one share of CVX for $97.50 instead of $108 the same way that, if I were in Paris and my Dollar went up 10%, that my croissant should be 10% cheaper at my next breakfast.  

None of this is taken into account in standard TA and very few charts are adjusted for short-term moves in the Dollar which is amazingly foolish – kind of like deciding whether or not to dive off a cliff and deciding the water level isn't a factor – so you just make your decision based on "other stuff."  

Notice the night and day difference between our major indexes priced in Dollars and priced in Euros.  The Dow is actually HIGHER than it was at the end of April, as is the S&P.  Gold is, as we would expect, holding up in adjusted currency terms but oil and copper are legitimately falling, no matter how you measure them and that too makes sense based on what we know about fundamental demand.  Overall – it's not the markets that went crazy – it's the currency they are priced in!

QQQ WEEKLYAt the beginning of May, AAPL was priced at $575 and could buy us 5.4 barrels of oil at $106 and today AAPL is at $582 and can buy us 6.6 barrels of oil at $88.  Oil is just as arbitrary a thing to price AAPL in as Dollars but, priced in oil, AAPL is up 22% for the month.  You'd better learn to think like this if we begin to have a deflationary market as it's all about RELATIVE asset protection as everything you own or want to buy gets cheaper and cheaper.  This has been happening to Japan for 20 years now.  

I still maintain that without the FUEL of outside stimulus, our markets don't have the THRUST to fight the gravity of the rising Dollar and we will eventually keep drifting lower.  We ran the numbers yesterday in Member Chat and came up with $10Bn of stimulus/bailouts required for each point above 1,200 on the S&P between now and the end of the year.  So it will cost $1.5Tn in Global stimulus for us to finish the year at 1,350 while a lack of stimulus will run us back down to 1,200 – down 8.6% from where we are now.  

While we are having fun with our bullish bottom-fishing, there's certainly no penalty for staying in cash as our cash gained 5.4% this month for an annualized 64.8% return on what's under our mattress (as long as it's in US Dollars) and there's certainly not too many stocks we can invest in that are likely to match the performance of doing nothing if we're going to have these monthly gains in our currency.  

Yesterday I mentioned a few nice hedges that can return 1,000% and more if the market keeps tumbling and I sincerely hope we don't need to add more of them but we tested our $62 target on the QQQs yesterday, as expected, as well as our very reliable 12,400 line in the Dow and we played them bullish as planned but it really will be the last straw if those break down and the Dollar pops back over 83 because we're dangerously close to a major breakdown in the Euro, back to $1.19 and that will send the Dollar back to 88 and another 5% will melt off the markets as fast as we're losing our Arctic Ice Shelves to Global Warming (which is another thing our World leaders never get around to doing something about).  

If I KNEW the EU leaders were not going to take any action – I'd be gung-ho bearish.  Unfortunately, it won't take much at all to "fix" things over there for another 6 months and that will pop the Euro right back to $1.29 and the Dollar back to 80 and the markets up 2.5% or more and it could all happen any day so we need to play both sides of the fence – "just in case" while we wait for a break – one way or the other….

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  1. 1.59 on the 10 year.
    Pharm, your estimate may be too high….. :)

  2. Jobless numbers, GDP numbers:
    So bad they are good, or just plain suck ?!

  3. Hey 1020….just doing my best guestimates based upon the cool, steady sunshine we have in rad-Carls-bad…. 8)

  4. Pretty darn good Pharm…. :)

  5. Economic Numbers:

    Japan Housing Starts / 10.3% (3.2% expected)
    Switzerland GDP (YoY) / 2.0% (0.7% expected))
    Switzerland GDP (QoQ) / 0.7% (0.0% expected)
    Germany Retail Sales (YoY) / -3.8% (0.3% expected)
    France PPI (YoY) / 2.7% (2.9% expected)
    France Consumer Spending (YoY) / 0.4% (0.0% expected)
    Germany Unemployment Change / 0K (-7K expected)
    Germany Unemployment Rate / 6.7% (6.8% expected)
    Eurozone CPI Estimate (YoY) / 2.4% (2.5% expected)
    US ADP Employment Change / 133K (150K expected)
    US GDP (1Q) / 1.9% (1.9% expected)
    US Initial Jobless Claim / 383K (370K expected)

    At 9:45 AM EST we have the Chicago Purchasing Manager report.
    At 10:30 AM EST we have the Nat Gas Report
    At 11:00 AM EST we have the Crude Oil report

  6. I agree- compared to the rest of the world it would not be surprising to see us go to 1% yield. A difficult thing to fathom for those of us who have lived in a period of higher rates and saw the 80's. I remember 17% treasuries and 12-14% tax free bonds. One of the trades of the century was buying zero coupon treasuries at 15% plus yield which in less than 24 months had returned over 30%- made equities pale. The downside was the older bonds which people owned went to being worth >50 on the dollar if anyone needed their money.

  7. jthoma – yeah, too bad the retail investor rarely buys bonds/treasuries in their 401K or accounts….hell, you need 10M to even start thinking of buying those bonds….

  8. RSS / Phil – Did you eventually deactivate the RSS feed? Cant access it.  Any chance you can enable it again? It really made it much easier to follow the conversations and comments.  Thanks

  9. Pharmboy- If we try to print our way out of this debacle these 10 year treasuries will plummett in value- if anyone was foolish enough to buy 20 or 30 year bonds they will once again see .50 to .60 on the dollar.

  10. Hummmm….this cannot be good, a huge, huge miss…. Q1 Corporate Profits: +11.4B vs. +16.8B in Q4.

  11. My favorite Blonde tune…..lets hope "the man from Mars" starts his meal on Capitol Hill…..

  12. jthoma…..really?  I think Japan has proven that theory wrong, at least so far.  Read this….

  13. Thanks- I have my homework now- my history says if we get the inflation as a result of printing- yields rise and bond values fall- often precipitously.

  14. Phil – hate to bother you again about disaster hedges since you've been putting up some nice ones and I keep meaning to use them but moving on to other trades…what can we do with EDZ at this point?  Thanks for your patience…

  15. 1020
    I read that one earlier. Once less moron the world has to listen to. Guess what, if you play with deadly snakes they may bite you and kill you!

  16. RSS – Seems to be down.  I have my reader to only check once every 5 min.

  17. Phil – Would it make sense to sell more premium on the call side since it would not add any margin?

  18. dclark41 – Amazing, isn't it? This is what this guy said about his father's demise…..
    Wolford said watched his own father die at the age of 39 after a rattlesnake bit him during a similar service.
    "He lived 101/2 hours," Wolford told the Washington Post Magazine. "When he got bit, he said he wanted to die in the church. Three hours after he was bitten, his kidneys shut down. After a while, your heart stops. I hated to see him go, but he died for what he believed in.
    "I know it's real; it is the power of God," Wolford told the Washington Post Magazine last year. "If I didn't do it, if I'd never gotten back involved, it'd be the same as denying the power and saying it was not real."
    Wow!  I need to get out more often…. :)

  19. 1020
    He didn't fall too far from the tree! His own dad died from the same thing? Probably the same snake!

  20. 1020, pharm - i love visiting SoCal but it is a pretty homogenous area. As the discussion yesterday was also about it's wonders i was remembering thinking how claustorphobic i would feel only being able to travel in one direction. "how do i get to costco?" "take the 5 north." "how do i get to this resturant?" "take the 5 south." Do you think it produces a lack of creativity or narrow mindedness?
    I am writting this mostly in jest. but i was wondering what the locals thought of it?

  21. Lflan is not around this week so everybody needs to adjust their position based on greed/fear! But that's 15% in 10 days…

  22. Chicago PMI stunk @52.7

  23. OK, so we broke Dow 12400, QQQ 62, RUT 760…. any new hedges?

  24. Good morning! 

    Very blah data so far – not too bad, not too good – just blah.  

    Of course we had been hoping for good data to help lift the markets and 1.9% GDP ain't it but, compared to Europe – we're doing fantastic!  

    The ADP number was so-so on the surface but there was actually a LOSS of 2,000 manufacturing jobs against a gain of 133,000 service jobs – so more wage slaves and less productive careers is the summary there.  

    Oil is still at $87.75 with inventories at 11 and I'd play them bullish here but get the hell out before the inventories, which can easily be a huge disappointment if they don't reflect a nice up-tick in demand over the holiday weekend.  I would think jet fuel (distillates) won't disappoint as all the planes seem to be full but it seemed to me, in my town, that there weren't all that many trips taken for the weekend.  I hate going places on the Holidays as it's too crowded anyway – maybe some of you live in holiday towns and can tell us what you observed?  

    Things should be simple today – anything red is bad!  Our weak bounce levels WERE 12,540, 1,319, 2,840, 7,560 and 765 so all red at the moment with Nas and RUT close enough to make a play this morning and then it would be up to the S&P to prove there's still gas in the bulls tank on the last day of the month.  The first day of the month (tomorrow) is usually an up day but not sure if that applies to Fridays and nothing is going to help if that Dollar is over 83 or Euro fails $1.24.  

    Swiss got things right back under control at 1.2009 so another win for the brave and the crazy on that short play from this morning.  The Nikkei topped out at 8,570 and is now drifting around between 8,525 and 8,550 with the Yen super-strong at 78.50.  

    EDZ is still very cheap at $18 and the July $18/22 bull call spread is $1 and you can offset that with anything on the TWIL list or sell the $15 puts for .80 and net .20 and if you stop that spread at .50, you still have a .30 credit on the short $15s, which is a nice entry point on EDZ anyway (net $14.70). 

    If the Qs fail to hold $62 and the Dow fails to hold 12,400 – then TQQQ June $40 puts at .90 make a nice momentum play – looking for a quick .20.   

    Be careful though, it's hard to tell what's real while the EU is open.  

    Chicago PMI off a cliff at 52.7 – worst since fall of 2009!  Game on for the bears – now we'll see what holds….  

    At the open: Dow -0.04% to 12416. S&P -0.05% to 1313. Nasdaq -0.08% to 2835.
    Treasurys: 30-year +0.21%. 10-yr +0.02%. 5-yr +0.02%.
    Commodities: Crude -0.26% to $87.59. Gold +0.14% to $1567.85.
    Currencies: Euro +0.21% vs. dollar. Yen -0.6%. Pound -0.06%.

    Market preview: And it was all going so well. EU shares and U.S. stock futures were humming along nicely, helped by fallingGerman unemployment, until disappointing U.S. jobless claims and ADP data sent markets tumbling. The S&P benchmark is +0.2%. LionsGate is -4% following its FQ4 loss, while Kohl's is -4.3% after May same-store sales. Later: Chicago PMI 

    Treasury yields at all-time lows? Apparently it's not a problem for fear-ridden investors who keep yanking money out of stock funds while dumping cash into bond funds. Investors pulled ~$7.2B from U.S. stock mutual funds during the week ended May 23, according to the latest ICI data, in the second biggest weekly outflow this year.

    A check of bond yields (of the "safe" countries) shows new records being hit again this morning. The 10-year Treasury yield is off a hair to 1.62%, Germany's 10-year Bund is 1.26%. Ten-year Gilts in the U.K. fall to 1.63%. At 0.82%, Japan is no longer such an outlier. In fact, Switzerland at 0.59% (and negative yields out to 2 years) is well lower.

    May. Challenger Job-Cut Report: 61,887, up 52.5%  from 40,559 prior.

    May. ADP Jobs Report: +133K vs. +113K prior (revised from 119K) and expectations of 154K.

    Q1 GDP (revised): +1.9% vs. +1.9% forecast, +2.2% first estimate.  Price index +2.4%, +2.4% first estimate.

    Initial Jobless Claims: 383K vs. 370K consensus (prior week revised to 373K from 370K). Continuing claims -36K to 3.24M.

    Bloomberg's U.S. Weekly Consumer Comfort Index rises to -39.2 from -42. It's the 2nd consecutive rise for the gauge which before that had been sliding for several weeks. 

    Q1 Corporate Profits: +11.4B vs. +16.8B in Q4.

    Chicago PMI: 52.7 vs. 56.1 expected, 56.2 prior. Employment 57.0 vs. 58.7 prior. New orders 52.9 vs. 57.4 prior. Prices paid 60.4 vs. 68.6 prior.

    German retail sales rose 0.6% in April against estimates for 0.2%. Sales were down 3.8% Y/Y. Despite economic difficulty at its neighbors, the German employment situation remains strong. As goes it, should go retail sales.

    The overall takeaway from analysts on the round of sales numbers from reporting retailers is that consumers are stepping back in to the market to update their wardrobes as pent-up demand is slowly unleashed. Big names such as Target, Macy's, and Limited Brand performed better than smaller specialty stores, while discounters T.J. Maxx and Ross Stores also held their own.

    The ECB cannot "fill the vacuum" left by governments who are unable to create conditions for growth or undertake fiscal reform, Mario Draghi tells EU parliament. Despite inflation remaining above the bank's 2% target, markets assume the ECB has no choice but tocut rates, perhaps as early as next week.

    "We do not see (the) possibility of direct recapitalization of banks from the eurozone's permanent bailout fund," says the European Commission, according to a Reuters headline. It seems to suggest the EC in furious backpedal from its proposal of just the opposite yesterday (which prompted a major 30 minute rally in Europe). 

    "The risk of a Greek exit is material and rising," but a full break-up of the euro remains "highly unlikely," says Fitch, beautifully summarizing current conventional wisdom. Some Greek corporations with international sales, but operating domestically, could find themselves getting paid in euros, but paying labor in drachmas, and thus make out rather well.

    The ECB restores acccess to normal credit lines for Greece's four largest banks after they received €18B worth of EU cash on Monday. "We will avoid bank runs by solvent banks," Mario Draghi tells the EU parliament. The question is whether it will be enough to reassure Greeks that their is money safe in the banks. (see also)

    Greek bank deposits actually gained a bit during April, according to the Bank of Greece, rising to €166B from €165.4B. Of course, May is the month in question as the crisis was relatively quiescent in April, and the election was on May 6.

    New Greek poll: Pro-bailout New Democracy 25%, anti-bailout Syriza 22.7%. Buy. Yesterday: poll #1, poll #2.

    Gold is edging up this morning, but remains down more than 6% for the month – its worst May performance since a 10% drop in 1982. The bulls are waiting for a trigger, says David Jollie, whether it be QE or maybe a period of EU stability. Stability? We're losing track. Is stability supposed to be good or bad for gold? 

  25. Phil – what would you think of the income portfolio being used in an IRA?

  26. BBY/ 25k:  did we roll these to Sept 20s?

  27. 25KP BBY / Phil – I guess we can proceed with what you outlined this morning and roll the BBY June 25 Puts to the Dec 20 Puts (now 3.35). We'll take the $5800 loss and sell $6700 of premium then to make up for it. 

  28. Jrom was right yesterday… Oil does now have a 86 handle. How about that!

  29. Gd morning all
    How's the volume this morn…is this "the sell off"

  30. Phil at what point would you consider doubling down on TLT?  Bought 5 Sep $110 puts at net $1.27.  They are currently at $73.5, which is $.10 away from a 50% loss, but you had said LT was capable of going to 140 in a panic.  Doubling down now would put me at net $1.00.
    Thank you.

  31. rperi
    Phil DD yesterday at .72. I tried all day and never got close to that price.

  32. TLT / rperi – In the portfolios we have already DD at $0.72 yesterday. You might soon be getting a better price as TLT is now rocketing higher!

  33. morx – the 5 is a great way to get around, as long as you time it right…. ;)
    If you're looking for inspiration, get off the 5 and drive west, less than a half mile!  :)

  34. is that like saying, take a long walk off a short pier? :)

  35. rperi
    Just filled at .70 (TLT)

  36. i was wondering about DD on CHK jun 15s?

  37. Pharmboy- Your CRM puts are looking good- glad as I am getting some of my money back.

  38. Free money for all…
    I just sold the last of my TZA that I held since January. Feel good to get out with 1.1% profit. It took a LOT of patience to wait to get back to not loosing on that trade. Wasted a lot of time, but I'd rather loose or Breakeven that loose.
    RUT should start turning down any minute now, and TZA should keep going up now, since I just sold mine.
    So go heavy on TNA!

  39. Here we go — IXIC 2805, SPX 1202, IWM 75, Dow 12,350 — Boy those retail guys know how to align things don't they? 8)

  40. SEE!   TZA is up 25 cents since I sold a few minutes ago…………

  41. Phil
    EDZ -
    If you pull up a chart of EEM vs SPY, EEM got hammered before ours.
    IMO – it looks like SPY and IWM may offer better downside than the emerging markets.

    Obviously, emerging markets can go much lower from here, but commodities have already take a good hit.

  42. Go FTR!
    Imagine if we were going up!

  43. VIX testing 25, TLT $127.33, volume, unfortunately, just 14M on the Dow at 10 so no panic/capitulation yet.  

    GDP/DC – Not bad enough to bring the Fed to the table, unfortunately.  

    Dollar 83.07, oil $86.75 – hopeless…

    Bonds/Jthom – This generation is ill-equipped to deal with bond investing – it's such an alien concept.  

    WMT making new highs ($66). 

    RSS/Dpast. Burr – They are setting up a mirror server for RSS so the requests don't bog down the main sight.  

    Corp profits/Pharm – Funny how it doesn't get a mention but I think it's hugely important.  Cash flow dropped $98.4Bn.  These are, of course, taxable profits though – the "before tax profits" were up $251Bn vs down $8.3Bn in Q4 but mostly due to a normal, but huge, decrease in the capital consumption adjustment.  

    Good article Pharm!  

    EDZ/Jerconn – GMTA, see above!  

    FAS Money/StJ – It would have made sense on Tuesday ($14.25) but not at $13.75 when we may just be re-testing last week's lows.  

    Hedges/Haschade – How's that for 60-second service?  8) 

    Income Portfolio/Morx – The problem is it utilizes a lot of short puts, which can be a margin issue for IRAs.  Other than that, it's a good mix for IRA investing.  

    BBY/$25KP, Newt – Yes, that's a good roll to sell more premium and decrease margin.

    TLT/Rperi – We went for the DD yesterday at .72 on the Sept $110 puts – easy fill this morning (and a whopping 10,000 open contracts shows you how much our little group affects the markets!).  If TLT goes to $140 – our next move would be to roll back in time and down in strike – the Jan $105 puts are $1.18 so + .46 to move there and hopefully we can make that roll, or a better one for .25 or less if TLT spikes up.  

    TLT/DC – They are selling at .70 and .71 this morning.   Heck the Sept $113 puts are selling for $1.05 so that's .35 more to be up $3 in strikes – those are a good deal too!  

    CHK/Morx – We don't want to catch a falling knife if the market is collapsing.  Once we establish a good floor, then we can look to see what's cheap-looking.  

    TZA/Newbie – Congrats – good attitude!  

    EDZ/Samz – Still a long way to go before we're in a real disaster.  I think the US indices are a buy here – despite visual evidence to the contrary.  

    FB $27!   My brother called me yesterday and said "should I buy it now" and I said "Why, is it $15 already?"  

  44. Remember, we get the Nat Gas report at 10:30 AM and the Crude oil one at 11:00 AM today (because of the holiday)

  45. Watched "Inside Job" last night.  Although it made me sick to my stomach, worth a watch.

  46. Phil- I am not sure being better equipped to deal with bond investing is much consolation for getting old- LOL!

  47. morx – No way!  I don't know you well enough…. ;)
    Seriously, the 5 runs about a half mile from the ocean, from about San Clemente to Del Mar.
    BTW, the Oceanside pier, is the longest wooden pier on the west coast…… After a long walk to the end of the pier, you can enjoy a good burger and a chocolate shake!

  48. FB $27!   My brother called me yesterday and said "should I buy it now" and I said "Why, is it $15 already?"  
    American sarcasm!!!

  49. Phil, you mention the US indicies are a buy here, what time horizon do you mean? Might we not first re-test the May lows?

  50. Phil / FB — :)   I'm not even sure it's worth 15 at this point. 

  51. Yodi / sarcasm — That's east coast sarcasm, west coasters don't always pickup on it.

  52. TLT over 128 now… 

  53. Phil / PE shops – 2 buyouts announced today – consolidated container acquired by Bain and Talbots acquired by Sycamore.  PE shops supposedly have about $200 bn to put to work in next few years or they have to return it to the LPs.  hopefully we will see some of our down and out names such as SVU get taken out if they remain at these low price levels. 

  54. 1020 -
    i can't wait to go back! The adventure park this time…

  55. Phil:
    Would you roll those June $50 TQQQ calls (5k) out to July ($55's for .35) or would you DD here (~.58)?

  56. rainman be carefull you do not land up with a eastcoast dollar and a westcoast dollar as well!!!

  57. yodi / east vs. west — They nearly did in 2009: California Has Successfully Created Its Own Currency

  58. 83.17.  Euro $1.2362, Pound $1.5395 – so sad…

    Nat gas was another build but that's normal this time of year as we march towards overflowing inventories.  

    EIA Natural Gas Inventory: +71 bcf. Futures -0.6% to $2.41

    TLT $128, VIX 25.15 – Dow volume 26M at 10:45 – now we're getting somewhere.  

    Buying Now/Tarpoon – A LONG time horizon for a buy.  I'm just talking about bottom-fishing from a cash and hedged position.  It's good to take a poke at significant levels (1,300, 2,800, 12,400, 750, 7,400) and take the quick 20% loss off the table and then take another poke at 1,200, 2,500, 11,000, 666, 6,750) and another one 10% down from that.  If we are deploying 10% of our cash and taking 20% losses each time, even 50% down from here we're only going to lose 10% but we'll still have 90% of our cash at S&P 650 and all we have to do is catch it right once and we'll make that 10% back very quickly.  Or, we can not play and stay in cash and ignore the carnage – either way is good.  

    FB/Rain – I think at $15 it gets interesting.  Not cheap even there but at least playable.  

    Sarcasm/Yodi, rain:  


    Sarcasm: the last refuge of modest and chaste-souled people when the privacy of their soul is coarsely and intrusively invaded. - Dostoevsky

    PE/Terra – Yes, I agree.  I've been contacted to do a consulting job for people looking to deploy a shocking amount of money but it's similar to what I want to do myself with the BBBW and I'd rather do it here if there's enough interest.  Either way, I see a ton of opportunities to deploy capital these days and it will turn into a race once things do finally turn back up.  

    TQQQ/DC – I would do nothing until we see what holds.  We're retesting last week's lows – let's see if they hold or not.   Won't that influence our decision.  Also, with just two weeks left, you want to avoid buying more premium that expires in two weeks.  

    Oil inventories exactly what we thought with a BUILD in crude, a very disappointing small draw in gasoline and a proper drawdown in distillates but only because they shifted more production to gasoline this weekend.  

    EIA Petroleum Inventories: Crude +2.2M barrels vs. consensus of -0.4M. Gasoline -0.8M vs. consensus of -0.3M. Distillates -1.7M vs. consensus of +0.1M. 

    We never did get the pop and now we're getting a drop to $86.35 and maybe see $84.50, which won't be good for the indexes as the energy sector drags us down (again).  

  59. rainman Currency what do the call it DRACHMA ????

  60. what you think about the DIA $126 calls for $0.60 here

  61. rainman – The first time I witnessed "east coast" sarcasm, I was visiting NYC.  I loved it!!!
    Say what you mean, mean what you say……

  62. ….and what Phil said… (where does he find this stuff?)  :)

  63. Lionel, oil is bouncing of S1! Want to take a shot?

  64. Phil – The roll of the Sept 110 puts to 114 is 0.44 – is that a god roll to make or better wait for some floor for this drop?

  65. Looks like the dollar got rejected at R1. Maybe a breather….

  66. Retail is starting to panic….SGEN is getting to be a good deal again….Sept $17.5 Ps for $2 or better when they get there.

  67. FB can't even hold 27--wow..
    ruining people's marriages and wallets (if they are long)..

  68. Jabo… may I?
    FU FB!!! 

  69. TZA:  I have a BCS Jun 20/27— it has a small gain ND on it w/o including put prem. was 2.20.. Roll or cash out for a freshy???

  70. Jabob – FB at ,$27 is bad for California too I imagine.

  71. Sometimes certain trades put a smile on my face more than others…   
    I sold those Dec FB 41's for $1.35, and they are down to $1, for a nice % gain.  Barely offsetting other losses, but still, somehow they warm my heart.  Almost like the bullish SCO trade….

  72. Shorting TLT is going to be a good idea in 2020…..but, short term, Operation Twist ends soon, so could take a stab at something on a small scale.  From the way I understand things, when short term debt comes to term, they are taking the cash and reinvesting in longer term treasuries to keep the curve down…..That is a breakout on TLT, but it pierced the upper BB, so be careful shorting….

  73. DIA/Itrade – I like them for a gamble but not if the S&P can't hold 1,300.  

    TLT/$25KP, Yshen – I do like that roll a lot, anytime you can roll for .10 on the Dollar – it's a good idea to do so if you intend to stick with the position but it also gets cheaper to roll as TLT goes higher (per $1) and now we're at $128.85 and I said yesterday we could hit $140 so I'm not in a huge hurry to roll for .10 now when I might be able to make the same roll for .05 later.  If not, then I'd be happy to pay .15 per $1 to roll up $3 or $4 AFTER we see a nice top in TLT that gives us the confidence to do so.  

    TZA/Newt – Well they're only at $22 and you can cash the $20s for $3.10 and leave the short $27s (now .58) as it's not terribly likely TZA will pop 20% in two weeks (down 7% in the RUT to 707).  Again, there's no sure things, Europe could collapse and we could be at 650 on the RUT but you can pick up the July $26/33 bull call spread (now $1) to cover a move over $24 if you have to. 

    We're holding for the moment but we're also down 2.5% from Tuesday's close so we should be weak bouncing back 1/2 a point at least and even a 1% move back up (erasing today's losses) would still ony be a strong bounce off that dip. 

  74. Awesome thanks all!  I got a fill at $0.67 so in for 10 at net $0.97.  Off the grid all day yesterday and was not able to read up until just now.  See what I get for missing a day! Thanks again.

  75. DIA Jun 128 Calls from yesterday, down 28%.  Close out or Roll?  I'm thinking just close out and take a small hit..

  76. It really is fascinating to watch how the BOTs move in to perform damage control once the volume dry's up. 
    They really don't want this to get away from them.

  77. Rolled my Jun $18 CHK puts to the July $17's for even.

  78. GTHP….DD now at 57c.

  79. Feeling good article about CHL
    I bought CHL for 47.80 and sold the Jan13 47.5 Straddle for 11.  CHL is now at 50.45, Stradde is at 8.22.

  80. Glad to hear on Bloomberg that the US is going to increase the use of drones to monitor citizens- Orwell knew what he was writing about- it just tokk a little longer than he anticipated!

  81. Pharmboy- are you going to roll down your CRM puts or ride these?

  82. Just seeing that in NJ, residents will have to pay sales tax on starting July 2013.  That sucks.

  83. Just to show that VXX is really a bad instrument to even hedge… Since March 15 when the VIX made its low if the year, the VIX is up over 70% while VXX is up only 36%. Of course, VIX options are also problematic but that means that hedging using volatility instruments is not simple.

  84. JPMorgan reports that, in the first 5 months of 2012, the macro funds did not increase their exposure to equities — but the long/short funds have.

  85. And while I am at it, it's interesting to see that the correlation between dollar and the broader market is pretty close looking at that last 20 some days when the dollar bottomed:

    The dollar is up 5.5% since then and the market is off by 6.17%.

  86. jthoma – riding the July 130s.  I used Opts methods, so if they retrace a bit (say above today's S2 at 137.6 ans stay above), I would sell some.  I have covered with Weekly 130s right now….full cover.  The 200d MA is up next, which is also the lower BB.

  87. Phil – any thoughts on SVU or plays we can make?

  88. Nice cup and handle on the 3 min SPY.  Measured move would be right back to where we opened….whaddya think….

  89. thanks

  90. The "Spanish Whale" lands on global equity markets.

  91. $TRIN is starting to fall… is VIX….

  92. is this a floor? or a bounce?

  93. every swoon is met with aggressive sloppy dip buying…hand over fist get me in can't get enough buying designed to cause short-covering and huge gains in call options intraday….i would like to see a couple of days of real swoons with no big intraday moves higher to feel better about sustainable advance…i added to longs around 1300 i am using recent lows of 1297 as  a partial stop

  94. Looks like we have a floor.  isn't first day of month usually positive?

  95. Hello All – So now the rumors that the IMF will save Spainare circulating?

  96. lnk – IMF is not big enough, unless it is JRW's 'Marshall Plan 2'. 

  97. Year by Year listing of all the bottom calls in housing.   Amazing.

  98. Friggin' amazing isn't it?

  99. No reason the IMF can't get bigger.

  100. Dear God…

  101. OK, now we have a IHS on the 3 min SPY chart…so new measured move would be 1.50is up from here, or 133.20ish.

  102. And GEurope arises from the ashes: "Another ECB policymaker, Bank of Italy governor Ignazio Visco, went further, saying political inertia and bad economic decisions had put "the entire European edifice" at risk and only a clear path to political union could save the euro."

  103. Check that 131.90 on the target, sorry, my lines were a bit off…yes, just a smidge….

  104. Phil, Have you ever looked into Binary Options?

  105. Pharm – Wait a minute, the IMF is discussing contingency plans if Spain can't find funds to bailout Bankia.  As in, ONE bank, not Spain itself or the rest of the banks that are sure to be in trouble.  The thought of that is a little scary. 

  106. Phil : thinking of selling 2013 $5 puts as a good entry. What say u?

  107. StJeanluc/ Great call on oil!
    Sorry I was away this morning.

  108. Jromeha/
    "I think oil is going to 86.90 today, maybe even below 86, yall are playing with fire!"
    Great prediction too

  109. Now the Nas is dragging but good improvement overall.  We'll see if AAPL can take back $580.

    Good fill Rperi – Just don't forget our primary goal is to take 1/2 off the table even at the lower basis (TLT). 

    DIA/Burr – I wouldn't close into this dip, we're just getting flushed again.  

    CHK/Rain – It's a good roll but I still think $18 is makeable over 2 weeks – look how well we're holding up on two terrible days. 

    CHL/Burr – I like them, they are like T in the 60s. 

    AMZN/Rustle – That party is over.  I'm sure all the states will begin putting their foot down now that they do $50Bn in tax-free sales – that's $3.5Bn in missing revenues!  

    Wow, moving now!  Still, until we're green, it's just a strong bounce and still a weak bounce in the bigger picture…

    SVU/Trader – They pay a 7.4% dividend (.35) so you WANT to own the stock.  That means buying them at $4.48 and selling the 2014 $5 puts and calls for $3 for net $1.48/3.24 which makes that .35 dividend 23.6% of your cash entry while you wait.  

    Cup & Handle/Pharm – Isn't that crazy?   I'm still not seeing news to justify this.  

    Volume drying up fast as we move up but, of course, it was never very heavy as we sold off either. 

    IMF/Ink – That's not how I read the chatter.  They are making plans but their plans involve first getting more money because the IMF can't possibly bail out Spain on their own.

    Bottom calls/Burr – I love that!  

    Binary/1020 – Sure, it's called betting.  I never played them but it's essentially a proposition bet – more fun to take the over/unders during Football season.  

    Mystery puts/Dflam – If it's SVU, I'd sell the 2014 $5 puts for $2 as that's great money. 

    Well, that "rally" was great fun – RUT and NAS are both dragging by half a point but boy did the VIX run away fast!  This is why I love selling those long puts while we're falling!  

    Dollar still dangerous at 83.08. 

  110. Phil/Binary   Yes, but it seems to dovetail well with futures trading…..

  111. Look at TLT, off by $2 in the space of 2 hours! Easy come, easy goes…

  112. phil: mystery puts were ACI 2013 $5 at $.84 for net $4.26 entry

  113. TLT – amazing that it hit $129 AND I do not sense panic in the markets.  IF we were to retest last summers lows, it could easily hit 135 or 140 couldn't it?

  114. And rumors of the IMF helping Spain surge the market again, and now they are saying that these talks are normal.  Wonder if the market will sell off now or was that enough to give it one last push higher to end the month.

  115. 10:00 AM On the hour: Dow -0.35%. 10-yr +0.1%. Euro +0.14% vs. dollar. Crude -1.32% to $86.67. Gold -0.44% to $1558.75.

    11:00 AM On the hour: Dow -0.65%. 10-yr +0.25%. Euro -0.03% vs. dollar. Crude -1.39% to $86.59. Gold -0.05% to $1564.85

    11:41 AM European shares close down marginally after a big swing from up to down, and then a sharp move higher in the session's last few minutes. Stoxx 50 -0.1%, Germany -0.3%, France  -0.1%, Italy-0.1%, Spain -0.1%, U.K. +0.5%. Germany 2-year yields have turned negative and the euro carved out a new 2-year low before bouncing to flat at $1.2365.

    12:00 PM On the hour: Dow -0.44%. 10-yr +0.27%. Euro -0.04% vs. dollar. Crude -1.99% to $86.08. Gold -0.07% to $1564.55

    1:00 PM On the hour: Dow +0.01%. 10-yr +0.06%. Euro -0.03% vs. dollar. Crude -1% to $86.94. Gold +0.12% to $1567.55.

    More on the Chicago PMI miss: At 52.9, New Orders hits its lowest level since September 2009. Same for production at 50.0. Prices paid at 60.4 hits its lowest level since September 2010. Order backlogs dive to 46.3, the lowest since October 2009. "A decrease in order intake and backlog … has caused our first workforce reductions since the Carter years," says one respondent.

    The Dow reverses a triple digit loss to turn green, though the other averages remain down. S&P 500 -0.2%, Nasdaq -0.5%. Helping the DJIA is Wal-Mart, +1.7% to another 12-1/2 year high ahead of its shareholder meeting in which those carrying on about the Mexican affair are likely to be shouted down by those giving a high-five to management.

    "Risk appetite is just completely gone out," says Citi's Gregg Anderson as the 10-year Treasury yield falls to a record 1.53%. Extreme levels are seemingly everywhere. Those who are longTreasurys, long Bunds, long Gilts, or short euros need to ask themselves how long they expect the central banks to sit on their hands.

    Mortgage rates hit new record lows in the week ending May 31, Freddie Mac reports, with the 30-year fixed-rate average declining to 3.75% and the 15-year fixed-rate falling to 2.97%. A week ago, the rates were 3.78% and 3.04%, respectively; a year ago, 4.55% and 3.74%.

    The German 2-year Schatz yield turns negative for the first time, now offering -0.01 basis points. How low can it go? Swiss 2-year paper at -0.22% is a start. The 10-year Bund continues to race to sub-1%, now yielding 1.21%

    Come on, this is officially ridiculous:   Yields on 10-year U.K. gilts fall to 1.571%, meaning that the government can borrow at the cheapest rate in history, with history being since the creation of capital markets in the late 17th century. With inflation double that, writes Ed Conway, "it spells sheer fear that pretty much every other major asset out there is treated with serious paranoia." Apart from Treasurys and Bunds of course. 

    Bearish positioning towards the euro remains at extreme levels, according to the CitiFX Positioning Indicator. Adding to the usual reasons for being short euros is talk the SNB – a buyer of the euro vs. the franc – is covering itself by selling euros vs. the dollar (probably just talk as this doesn't make a whole lot of sense). The euro is flat at $1.2372.

    The IMF has begun discussions on contingency plans for a rescue loan to Spain should the country be unable to bail out its banking system, according to sources. Left unsaid is who is going to bail out the IMF as a rescue of Spain is surely beyond the agency's current resources.

    Ahead of a meet between Lagarde and Spain's deputy PM today, the IMF says it's not drafting any plans for a Spanish bailout. The agency does say, however, it's open to negotiating a better way to meet Greece's program goals. Did the IMF just blink,wonders ZH.

    The IMF clarifies an earlier story about bailout discussions for Spain, saying the talks are strictly internal to the agency and a normal course of business. There are no talks ongoing with Spain.

    Capital outflow from Spain hit €66.2B in March, the largest amount since records began being kept in 1990 and against a €5.4B inflow a year ago. This is March data, and the early word for April shows a continuation of the trend. The country's deposit base is about €1.6T.

    Turnout remains low in the rain for today's Irish vote on the EU fiscal treaty. The highest turnout is in North-central Dublin at 20%, but most other districts are reporting levels in the teens or single digits. Polls remain open until 5 ET, and the referendum is expected to comfortably pass.

    "Investors appear to have thrown in the towel on Brazil," says BAML of a survey of fund managers. Fourteen percent are underweight Brazil, a sharp turnaround from a month ago when 20% were overweight. The central bank has been aggressively slashing rates – normally a green light for stocks – but investors are reading the cuts as panic moves in a stagnating economy. EWZ -31.7% Y/Y.

    More on the fund manager survey: Money flowing out of Brazil is moving elsewhere in Latin America as fund managers are overweight Chile, Mexico, and Colombia. Also popular are Taiwan and India. Countries underweight: China, Thailand, Russia South Korea, and Turkey.

    Regulators are examining 48 insurers across 13 countries to assess whether they should be designated as "systemically important" as part of an attempt to prevent a repeat of the financial crisis. The designation could lead to higher capital requirements – the industry doesn't have a global minimum standard – and increased supervision.

    Major oil services stocks (OIH -3.1%) are hammered in early trading, capping a brutal May as crude oil prices declined and equities reeled in the face of the European debt crisis and slowing global growth. SLB -3.8%WFT -4.5%HAL -2.9%BHI -2.5%RIG-2.2%.

    Chesapeake (CHK -0.7%needs to sell $7B of assets this year to avoid breaching a covenant in one of its debt agreements, Moody’s analyst Peter Speer writes, adding to similar comments from Jefferies. CHK’s cash flow has declined along with the price of natural gas, Speer notes, and it “risks exceeding the 4x debt/EBITDA limitation in its credit facility" in H2 2012."

    As WTI crude continues its protracted descent, now -1.4%to $86.55/bbl, oil is now officially in bear territory, BMO's Sal Guatieri says. Deutsche Bank also joins the sliding sentiment, as "physical fundamentals are also weakening with crude oil inventories on the rise." How low can oil go? "Following the 2008 credit crisis and global downturn, it bottomed at $31,” Guatieri recalls. 

    As reported by Jackie!  China is estimated to hold triple the shale reserves of the U.S., but PetroChina (PTR) says it may take five years to figure out ways to unlock its reserves, meaning China must keep buying overseas energy assets to fuel the world's no. 2 economy. China has yet to produce the fuel commercially because its drillers lack technology and face tougher geology.

    Mayor Michael Bloomberg proposes a sweeping ban in New York City on large-sized sugary drinks at restaurants, movie theaters, and from street vendors in one of the most ambitious local measures to take on obesity. If passed, the new law would prohibit the sale of sodas, pre-sweetened ice teas, and sugar-laced energy drinks larger than 16 ounces. In somewhat twisted logic, New Yorkers could still buy two 16-ounce drinks – instead of one 32-ouncer. On the mayor's radar: DPSKOPEPMNSTCOT

    Michael Bloomberg abruptly cancels a live appearance with AllThingsD as a controversy over his plan to ban large-sized sugary drinks in NYC creates outrage in public forums and from the beverage industry. While the city served as a successful model for public smoking restrictions, it's a bit harder to craft an argument over the dangers of second-hand soda drinking. A statement from Coca-Cola (KO -0.2%) cuts to the chase: "New Yorkers expect and deserve better than this." - In other words "You'll have to answer to the Coca-Cola company!"

    Casino stocks open weak across the board, led lower by Melco Crown (MPEL -6.7%) and MGM Resorts (MGM -4.4%). Enthusiasm has been dented by slumping stock markets in Asia, with a large part of the thesis for growth in the sector tied to a boom in Asian operations.

    Commenting at the Sanford Bernstein Strategic Decisions Conference, Humana (HUM -1.2%) CEO Michael McCallister says says it's hard to do scenario planning now regarding healthcare bill, as the most material impact will occur after the presidential election. Regardless, McCallister says, the fundamentals for the business will not change from either outcome. ( presentation )

    Johnson & Johnson (JNJ) files for FDA marketing approvalof its Type 2 diabetes pill canagliflozin, which is one of J&J's most promising drug candidates. (PR)

    Elan (ELN -3.1%) slips on a downgrade to Neutral on valuation at UBS, noting that Bapineuzumab's economic potential may be lower than expected.

    Green Mountain Coffee Roasters (GMCR -4.4%) trades lower as court filings unveiled show that the SEC's probe of the company isn't finished yet. How the company recognizes revenue is still on the radar of the agency, according to hearing transcripts.

    Netflix (NFLX-6.3% after BofA cuts its 2012 earnings forecast for the company, citing fears about U.S. streaming growth and the costs related to its international expansion. 

    Facebook (FB -3.4%) can't catch a break. Shares are making new lows today even though Pivotal Research is upgradingshares to Hold on valuation grounds, and Topeka Capital is starting coverage at Buy. Shares are now down 29% from their $38 IPO price. Yesterday, Kleiner Perkins VC Mary Meeker (previousdefended the company, but added Kleiner didn't make a single investment in a $1B fund in Q1 because "the private market is a bubble."

    Google (GOOG) and Facebook (FB) are vying to take a stake in popular music video site Vevo, the NY Post reports, with the winner likely to score a lucrative ad deal. Vevo, a JV featuring Universal, Sony (SNE), and Abu Dhabi Media, is reportedly valued at $1B on revenue of $150M. Vevo currently relies on YouTube for PC distribution, but also has popular mobile apps independent of YouTube, and has received a lift from Facebook Open Graph integration.

    Derek Thompson has 3 takeaways from a Mary Meeker adapted graph comparing consumer attention and the flow of ad dollars: "We still love TV. Advertisers still love print. Audiences move faster than advertisers." Print accounts for 25% of ad spend but just 7% of the attention, meaning that advertisers are behind the curve, or eyeballs on print are worth more than on mobile.

  116. Microsoft (
    MSFT) is pulling out all the stops to create a healthy app ecosystem for Windows 8 tablets, something that's bound to take some effort given a new UI and CPU architecture. Microsoft has trained over 80 design firms to help developers build Windows 8 apps, and is even encouraging its own employees to write apps. Recently, Michael Mace posted a lengthy treatise on why tablet developers need to take Windows 8 seriously. (yesterday)

    Amazon (AMZN +1%) outperforms a little after Nomuraasserts the company's margins, which have steadily declined as itramped its e-commerce, Kindle, and web services investments, may be bottoming. Higher shipping fees and other policy changes "may signal an increasing sense of economic discipline," Nomura adds, as may $1.2B worth of stock buybacks. Amazon rallied in April following its Q1 report, thanks in part to a better-than-expected gross margin.

    "There are a bunch of people" within Research In Motion (RIMM) "that still don't understand how dire the situation is," a sourcetells the WSJ. It's also reported RIM "still isn't actively shopping itself outright," even though it faces continued pressure from activist investors to do so. Then again, the source adds "nobody is serious about buying RIM right now."

    Three lunchtime reads:

    1) Markets will rally when Greece leaves euro

    2) Implications of weakening Chinese commodity demand

    3) Reform: a nonprofit facing down the bankers

  117. Bapineuzumab – "economic potential may be lower than expected" – um, try 0….well, kept people employed, but I would be VERY surprised if any positive data released.

  118. Binary/1020 – Would be a distraction for me (as is Football betting!) and you're not selling premium, you're buying it. 

    ACI/Dflam – Why, did BTU get expensive? 

    TLT/Canuck – Yep, that's about what I see on a real panic but then it's time to load up the truck and short it.  

    Oil stopped moving up at $87.50, silver rejected at $28, Euro can't get over $1.24, Pound barely holding $1.54 – this is just a bounce I think…

  119. Phil on the CHK news above and in general… do you like this trade?
    Jan 2013
    Sell 12.5 put
    Buy 12.5 call
    Sell 17.5 call
    = cost $0.63
    >> I missed the 1st entry on CHK awhile back

  120. Owl RSS readers appear to be a major problem.  They are trying to identify specific issues that are slowing down the site.  

  121. FB. A good friend of ours called me two days before the IPO asking my opinion about the the company and buying stock. You see she had 20K from her teachers retirement in cash, and it had been sitting there for the past 10 years returning nothing. Since her husband, who works for Wells Fargo as a residential lending manager is not doing so well, she feels pressured to try to make some money.
    I told her that I had no interest in  buying the IPO, and then told her " you have to ask yourself the question 'how will you feel if your investment goes down 50%', and what would you then do?" She said she was just sure the stock would double, triple etc. "just like Google did".
    I know she bought, but hope she didn't buy the full boat.

  122. Phil / CHK — You certainly might be right but my original premise of a short squeeze was blown so, being conservative,  I'd rather own them at $17 in Jul than $18 in Jun.  My intention wasn't to own them but selling puts gives you more wiggle room than buying calls. That's not to say I'll be upset getting assigned but I'm willingto wait a month for another 5.5% discount (or two for an 11% discount, etc…). I'm in no hurry to own them with the clouds over their head.

  123. CHK/Itrade – You also missed the 2nd – 99th entry then…  I think it's better to take advantage of the high VIX and go longer, the 2014 $5/15 bull call spread is $6.20 and you can sell the $15 puts for $4.80 for net $1.40 on the $10 spread that's 100% in the money and your break-even is way down at $10.70.  

    DIA $120 puts at .77 are a good momentum play for the Dow possibly failing 12,400 again – watch the futures (now 12,398) for a stop on that line.  

  124. Again no volume with 54m
    Like yesterday all the trading comes in the last hour

  125. Phil, I am extremely cashy and thinking of turning bearish, S&P to 1200 before year end, I can't find any good news. Your thoughts.

  126. Phil, if you had to choose between UPL and CHK what would you choose?

  127. The 10s chart on the Oil future looks so perfect. If only humans could prevent from trading and it will look like a Pong screenshot under a stroboscopic light…

  128. Momentum is over and out even on DIA puts – they went up .05 tops but do make good protection on a break-down. 

  129. Phil,
      What do you think about selling the 2014 PBR $18 puts for $3.7?

  130. lionel go to sleep you ve been up all friggin night!! ;)

  131. Angel/
    Good night then :)
    Beware of the trading bots. They are begging for any counterparty …
    Asia had a small stick at the end, Europe had a bigger stick, does it mean we should hope for a huge stick?

  132. CHK/Rain – I'm just saying no harm in waiting and seeing as long as net roll doesn't get away from you.

    Hopefully we're stickable on this low volume (and hopefully someone wants to stick it!). 

    Bearish/Rpme – I think it's very dangerous to be "bearish".  Cash is bearish but at least you won't get burned by a bailout.  Dollar just failed 83.15 and it's still a constructive bottom and see the post above for my theory on how well we're actually doing – masked by a strong Dollar.  I think so much bad news is baked in – it's only a matter of when (not if) we get more bailout money to play with.  What's $1.5Tn out of a $60Tn Global GDP if it buys us another year?   Nothing wrong with some speculative hedging but I'm just not "bearish" given the current macros.  

    CHK/Obur – CHK.  

    Pong/Lionel – LOL!  

    PBR/Japar – They cut their dividend and rats are still leaving that ship.  LONG -term, I guess they are worth a poke if you hate CHK or OIH or SU or BTU or COP…

    Come on AAPL, we need $580 to turn the Nas green.  

    83.115, Euro $1.237, Pound $1.5418.  Oil back to $86.75. 

  133. XLF 2014 $11/12 bull call spread is .65, 2014 $9 puts can be sold for $.60 for net .05 on the $1 spread and worst case is you own XLF for net $9.05 (35% off) while the upside is 1,900% and TOS says margin is net 0.90 so 100% return on margin at $12 makes it a very nice way to play the Financials.  

  134. Oil going back to S1, it's your cue Lionel….

  135. That would make too much sense…


    A new study predicts that repaving US roadways with firmer surfaces could save up to 273 million barrels of crude oil each year.

    Researchers at MIT used mathematical models to examine the forces at work when a rubber tire travels over a road surface and found that cars and trucks must use slightly more energy on less-stiff streets. Just as beach sand underfoot tends to sink, the weight of a vehicle tends to tamp down softer pavement – a phenomenon known as deflection.

    The end result is that tires rolling on malleable road surfaces are constantly climbing up a very small incline, which wastes fuel. Together with rough road surfaces, pavement deflection costs American drivers in total about $15.6 billion in added fuel costs and is responsible for 46.5 million metric tons of CO2 emissions.

    We could reduce our import by close to 1 million barrel a day! And create jobs at the same time… No chance I guess.

  136. I am in at 86.42

  137. StJ – Exactly, that would make too much sense for our "elected" officials.  On with the $700B defense budget…

  138. Phil,
      I've got the June AAPL $550 call for $13 (now $33) for a fantastic gain (closed out the short $600 calls earlier). I've been holding for a run up into the developer's conference on June 11 but with this kind of gains Rules #1 and #2 are creeping into my head. With AAPL trading around $578 only about $5 of premium left so looks like a good time to sell (though the other voice in my head sees a run-up to $600 that I'd hate to miss). What do you think?

  139. That seems like a good message for long term investment:

  140. We should get a nice green day tomorrow with Ireland referendum (expected to be a YES) and the 1st day of June.
    I am thinking of doubling down on DMND 20 June calls for 1.85
    or more conservatively July call spread 20/25 same price.
    I already know what Phil would say… :)

  141. The FT takes on gold bugs:


    So while gold may be a workable underlier for a redemption option, this doesn’t change the fact that at the heart of the system it is faith and faith alone which holds everything together. Whether that faith is reflected in a sovereign’s ability to manage the economy on behalf of the group, in the sovereign’s guarantee to honour a gold option, or faith in the gold god himself… faith is the constant. Not gold.

    What’s more, while gold encourages anti-social behaviour and hoarding in individuals, a fiat-based system encourages the very opposite: sharing, distribution, collaboration and cooperation. And we’re not talking about enforced sharing and distribution a la command economics. We’re talking about innate cooperation.

    Which leaves two possible plans out of the crisis:

    1) The goldbug plan: based on encouraging everyone to hoard ever greater amounts of natural wealth for themselves and themselves in what is ultimately a commodity you might never be able to eat.

    2) The fiat plan: based on encouraging society to trust each other again, and via that storing, redeeming and returning favours until the system’s ails are eliminated.

    The entire article is worth a read….

  142. US roadways – Remember when Obama was criticized for suggesting motorists keep their tires properly inflated?……

  143. Mr Stick is here, except he is buying TLT

  144. And it looks like China might not be able rescue anyone:

    With the economic outlook deteriorating, and expectations for currency appreciation having declined notably in recent months, the one-way pressure we previously saw for a lower USD-CNY has faded. This has also shown up in there being less reserve accumulation in recent quarters, with the Q1 rise in reserves largely due to accounting methods, rather than PBoC actively buying USDs.

    Conclusion: China won’t be rescuing anyone (apart from itself perhaps) anytime soon.

  145. Oops, now Mr Stick is selling TLT.  That was just a head fake.

  146. Is there any noteworthy news coming out tomorrow?

  147. And this might turn out to be a smart acquisition by MSFT as well:

    Skype CEO Tony Bates just took the stage here on the final day of D10, and he got right into the news delivery mindset: as of now, there are 250 million monthly connected users. Said Bates, "When we closed [the Microsoft deal], we had 170 million monthly users, so haven't skipped a beat in terms of momentum." Continuing on when asked from Kara Swisher about integration with Microsoft, Bates said: "I'm not going to talk about future products, but I'll steal a line from Tim Cook. We're going to double-down on integration with Windows 8, and we're doing to double-down on secrecy."

    250 million users is a lot of eyeballs!

  148. I just saw Corning's "Day Made of Glass" youtube video and it looks pretty cool. 

  149. News / Exec – Besides the monthly job numbers that can move the market up or down 1%, nothing much   ;-)

  150. Here is the calendar Exec – tomorrow is full of news!

  151. Mini weak stealth rally!
    Looks like only the "Bots" are invited as I don't see very much volume!

  152. Today's TLT chart will make you seasick! And look at that $1 drop at 2:55…

  153. FB green … say what????

  154. Phil and Pharm: TLT
    Since you two seem to have different views on TLT I'll pose this to either or both of you.  Can the big investors, ie pension funds, insurance co's, really park money in T bills at these rates for more than a very short time before they have to do something else to make a return?  I'm feeling like selling longer term calls at this level, scaling and not trying to pick a top, makes a lot of sense since there is a cap to how high it can go.  TIA 

  155. TWIL – X has a big down (5.5%) stick.

  156. 25c and out

  157. Lincoln/TLT
    TBT is a 21 RSI, I bought some weekly calls on it for next week, the 14's so I don't pay more than a nickel in premium.

  158. Mr Stick!

  159. rustle123: TBT
    I'm not as nimble a trader as you so am selling TLT 125 calls for Jan 13 and 14. fwiw

  160. FTR up ~5% today.

  161. Intelligent Infrastucture/StJ – No chance at all…

    AAPL/Japar – They problem is, as you get close to expiration, something can go wrong and screw up your trade with no time to recover.  You're getting $583 now so your bet is AAPL is over $580 if you intend to stick with it and the AAPL July $575/610 bull call spread is $14.70 so then you are taking $19 off the table and you can set a stop at $7 to lock in a double on the trade and you still have $20 more potential upside if AAPL hits $610 which is only $7 less than if you risk it all. 

    DMND/Lionel – June too risky.

    Gold/StJ – I like that. 

    China/StJ – I thought that fantasy ship had sunk a while ago. 

    Tomorrow/Exec – Non Farm Payrolls!!!  Also Personal Income/Spending, Auto Sales and ISM.   Plenty to keep us busy. 

    FB with a big comeback.  SOCL still dead in the water.  If you want to play FB to the upside, I'd say that's the way to go.  Sept $13 calls are just $1.10 (stock at $12.90) and SOCL was $15.50 before FB tanked the group. 

    TLT/Lincoln – I just don't feel negative rates or return (to inflation) can be sustained over any period of time.  For one thing, there's a completely false premise that US Notes are safe in the first place.  TLT is up because the Dollars they are priced in are up so the effective rate of return is far better than 1.7% but if the Dollar pulls back again, then aside from inflation of 2%, you have to deduct the declining value of the currency the notes are priced in and then you are literally better off putting your money in a mattress.  $125+ is where I've been comfortable selling TLT short.  It can go higher – just like BA can go back to $40 if a plane crashes – but that doesn't mean that's what they're worth long-term, does it?  

    X/Jfaw – $18.75 was their spike low last year. 

    All green now – what a friggin' joke this market is – good thing we get the joke!  

  162. See what I meant about XLF, StJ?

  163. Lincoln/TLT
    Nice premium, can't see rates going much lower than now, but we're in a new economy so who knows.  Maybe we'll be like Sweden and have -.10 rates.

  164. MSCI rebalance today.

  165. It is truly sinful the games the bots play on everyone! I guess as Phil says it gives one something to try and trade against but the 20 minute whims and games make it difficult to trade anything from a fundamental or common sense standpoint. A sad commentary as to what the capital markets have become. I hope one day the all get facebooked to death! :)

  166. XLF / Phil – Indeed. Who knows what happens tomorrow with all that data.

    Would it make sense then to wait until after the dust settle for sell more premium then? It's kind of shame to tie up all that margin with the put side and not try to squeeze some more on the call side.

  167. Egg Mcmuffins are all one can try and trade for!

  168. Somebody selling into the stick. 

    Dow volume 80M, really died since the morning. Dollar 83.13 – remember when we wondered if we'd hold $78?  Ah, April – good times…

    FB $29 – Back in the twilight zone and FB continues to make the market do the opposite.

    2:00 PM On the hour: Dow +0.01%. 10-yr +0.07%. Euro +0.05% vs. dollar. Crude -1.05% to $86.89. Gold -0.12% to $1563.75.

    3:00 PM On the hour: Dow +0.12%. 10-yr +0.12%. Euro +0.01% vs. dollar. Crude -1.39% to $86.6. Gold -0.15% to $1563.35.

    Its finger raised to the wind, Goldman sharply cuts its forecast for the high yield on the 10-year Treasury to 2% from 2.5% this year and to 2.5% from 3.25% in 2013. It's a nice bookend to the firm's famous March recommendation of a big shift out of bonds and into equities, timing beautifully the bottom in Treasurys/top in stocks this year.

    QE3 Hits European Iceberg (WSJ)

    Interesting ETF fund flows this week shows money both following the trend (Dollar bull UUP gains 4.26% AUM) and fading it (Materials XLB gaining 4.49%). The 1-3 month T-bill fund (BIL) proves a place to hide, gaining 4.93% in AUM. A big loser of assets (4.67%) is a real estate ETF (IYR).

    Having lost their jobs during the financial crisis and seen their savings whittled away, thousands of Americans aged 55 and over are retraining in order to get work and rebuild their nest eggs. As their salaries tend to be much lower, though, they'll have to work until well after they're 65.

    Continuing with the regional bank theme, Sterne Agee remains short the large broker/dealers and long quality regionals, even while sounding a note of caution about valuations. Favorite names: PNC and WFC. Momentum plays (those trading at premium multiples): BB&T(BBT) and PacWest (PACW). Ones to avoid: Zions (ZION) and First Horizon (FNH).

    Facing Down the Bankers (NYT)

    Markets and Morals (NYT)

    Psychology Of Fraud: Why Good People Do Bad Things (npr)

    Coffee prices head for their longest streak of monthly declines in 31 years with global supplies outpacing demand. The consensus forecast calls for even lower prices, as a weak real is viewed as stoking more output from Brazil. Coffee sellers Starbucks (SBUX -0.1%) and Dunkin' Brands (DNKN +0.6%) could benefit from lower costs, while Kraft and J.M Smucker have already passed on lower prices to consumers.


    Hyenas still putting out a new negative on CHK every hour or so:  Working capital deficits aren't necessarily alarming if a company is growing rapidly and can access the necessary financing, but Chesapeake's (CHK) deficit sets it apart and bears watching given its turmoil. CHK has enjoyed positive net working capital on a rolling basis in six out of 38 quarters; its peer group has, on average, had positive net working capital for 25 quarters. 

    Royal Dutch Shell (RDS.ARDS.B) is "progressing very well" toward its goal of drilling for oil offshore Alaska by the summer, CEO Peter Voser says. Shell isn't likely to buy assets from Chesapeake's (CHK) Permian Basin oil fields, he says, and warns that Europe's chaos may cause global energy prices to soften in the short term before rebounding in late 2013.

    IDC backs up Gartner's downbeat Q1 server data, estimating industry revenue fell 2.4% Y/Y. However, in a positive forRHT, it believes Linux revenue rose 16%, and now accounts for 20.7% of the market. UNIX revenue fell 17% (a negative for ORCL and IBM), while Windows (MSFT) revenue rose 1% and made up 50% of the market. Cisco (CSCO) saw a 49% increase in blade server revenue, though its 12.8% share of the market remains a fraction of H-P's (HPQ) 46.1%.

    Is Twitter's growth slowing down? Only 15% of respondents to a February Pew survey of U.S. adults claimed they use Twitter – that's up just slightly from 13% in May 2011, and well below the 50%+ penetration Facebook had reached at a similar point in its history. A slowdown, together with the recent slump in social networking valuations, could make Twitter more amenable to an offer from Google (GOOG) or another party. However, its international growth appears to be healthier.

    Matching my target:  A Safe Price to Pay for Facebook: $15  (Smart Money)

    Daddy, What Were Compact Discs? (NYT)

  169. Hmmm… IWM and Dow down 6.66% since close on may 1st.

  170. jthoma/
    All agreed. But it has some advantages too.
    On a no volume day like today big funds and big banks cant go on a shopping spree incognito.
    They have to move the market -
    What is interesting is to see what they buy and at what price.
    For example someone really liked IWM between 76 and 76.5…

  171. Oh, they blew it, my spread sheet just ticked again removing that "perfect score".

  172. Phil
    roll June DMND $20 calls?

  173. 135M at the close, nice 55M in last 15 mins (adding 70% of days volume stuffed into 15 mins).  Bad news it it was pretty much all negative into the close so likely they just teased the markets higher on low volume so they could dump those 80M into the close at better than today's lows.  Not too encouraging for tomorrow.  

    XLF/StJ – I have faith in a bottom but not in a top on XLF.  I think if they "fix" Europe, we'll be at $15.50 very fast while I also think $13.50 should hold so, when we're under $15, I'm really not comfortable selling both sides.  Had we hit $14.20, I would have sold a couple but we fell just short of that target.  Hopefully we get a pop tomorrow with a better chance.  

    DMND/Crussell – We should tomorrow, not worth risking the weekend.  

  174. XLF / Phil – When you say "fix" Europe, you mean "kick the can a bit further" I am sure….

  175. Yes, kicking the can.  They are a long, long way from fixing anything.  

  176. TLT – well, my premise is based upon what I am told, in part, buy my bond junkie and also the way I understand how the bond market works.  The T-bill market is much bigger than the stock market, and if you stay in them for the long(er) term, you get your money back – right?  Can the stock market guarantee that?  I don't think so.  We are the printer's of our own currency, so you WILL be paid back.  Sure they will go up and down, but what is Japan paying now on their 10 yr debt?  Much less than us last time I checked, and I think their debt is much higher than ours.  So, I ask again, is inflation really in the cards for our short term (5 yrs) foreseeable future?  When will it hit now that oil is going down, as are wages – where is it going to come from?  Ok, food is up…for how long, esp. if we stop selling it to everyone else, or using it for ethanol production…  We are becoming Japan, and maybe, just maybe, our 'workforce' will go back to making things….wishful thinking, but there is a labor force out there that IS willing to work IF we would allow them to have a few green cards, or make them citizens…..


    OK, enough……

  177. Phil / Commentary – This mornings post was an informative commentary.  Thanks!

  178. Hi Phil,
    Sent you a note and some attachments about the newsletter to admin/philstockworld/dotcom.
    Hope they're of some use.

  179. Pharm, Todd Harrison over at Minyanville had some nice charts today about our road to Japan.

  180. phil, the one year S&P chart is showing a bear flag, which looks like it just broke out ( down ) today. What’s does it look like to you?

  181. Windows 8 preview – Check out that extra large (Nokia?) tablet towards the end of the video…..

  182. Thanks Jfaw! 

    Thank you Zip, I'll check it out later. 

    S&P/53787 – I agree, technically very bearish and if we don't get EU action next week down we go, most likely.  As I said above, I'd be very bearish now if I wasn't fairly sure the G8 isn't suicidal and ready to let the whole thing collapse.  

    I need that giant tablet.  I trademarked to term "Flat Top" for a laptop that's just a big tablet!   Get "Come Together" for a soudtrack and add some cool images like that MSFT thing and you'll sell millions….

  183. This Chart Detailing How Many iTunes Downloads, Spotify Streams, And So Forth It Takes For A Musician To Make Minimum Wage Is Pretty Dispiriting

    Well, this is unpleasant. Based largely on data collected here, somebody went and found a very pretty way to illuminate a very ugly reality: how many CDs, or downloads, or streams (via Rhapsody and Spotify — this chart also includes, but they've sinceaxed that part of their service) to make minimum wage. ($13,920 a year.) Highlights: 143 self-pressed CDs. 1,161 retail CDs with a label deal. 12,399 track downloads on iTunes or Amazon. 849,817 Rhapsody track streams. 4,549,020 Spotify streams. (Spotify is a little wacky, based on the "Lady Gaga made $167 for one million "Poker Face" streams story, which Spotify hascontested before.) In any event, look at those dots for awhile, and, if you have not yet made the decision to be a professional musician… don't do that.

  184. At the close: Dow -0.21% to 12394. S&P -0.29% to 1310. Nasdaq -0.35% to 2827.

    Treasurys: 30-year +0.5%. 10-yr +0.19%. 5-yr +0.07%.

    Commodities: Crude -1.49% to $86.52. Gold -0.14% to $1563.55.

    Currencies: Euro -0.02% vs. dollar. Yen -0.91%. Pound +0.45%.

    Market recap: Stocks clawed back from early losses but still finished lower, as all three major averages closed their worst month in two years. Stocks, weighed by a raft of weak U.S. economic data (IIIIII) that sent Treasury yields to new record lows, bounced after a story (later clarified) suggesting the IMF is working on a “rescue loan” for Spain. NYSE decliners led gainers seven to six.

    When in doubt – give 'em platitudes!  June promises to be a volatile month for stocks, to be sure. Going forward, how should you position? Will the markets get worse or will they bounce? CNBC's Fast Money traders say that until a significant development gives the bulls or the bears a foothold – just buy the dips and sell into the rips.

    Americans owed $904B in student loans at the end of Q1, nearly 8% higher Y/Y, with 8.7% of the loans more than 90 days past due, according to the NY Federal Reserve. And with many loans in deferment or grace periods, the actual situation could be even worse. The rise in student loan delinquencies comes as the share of people falling behind on all other types of debt is stabilizing.

    The financial crisis and policy responses to it have so degraded both the quality and value of formerly "sacrosanct" debt that the 40-year old monetary system is near a "potential breaking point,"writes Bill Gross. He continues to favor the "clean dirty shirts" – sovereign debt of the U.S., Mexico (yes, Mexico), and Brazil.

    Dividend yields look increasingly attractive vs. record low Treasury yields, and Morgan Stanley argues the payout ratio of dividend stocks is near an all-time low and could increase substantially. The firm adds T to its dividend portfolio while removingXOM and UNP; "fundamentally and quantitatively attractive" are CVXMETFCXBENCAHFITBSTJSPLS.

    Canadian regulators approve plans by a consortium led by ExxonMobil (XOM) to develop the Hebron oil field offshore Newfoundland. The cost of the project, which will use a heavy gravity-based structure sitting on the seabed because of icebergs in the area, is estimated at C$5B-C$7B; it will produce up to 150,000 bbl/day.

    The Windows 8 (MSFT) release preview is out, and it's laden with a slew of features not found in February's consumer preview. Among the highlights are new Bing and digital media apps that have generally earned positive reviews. The release preview "feels very close to a finished product," says The Verge's David Pierce. (earlier)

    Do no evil but take the payola?  Google (GOOG) could soon have another search controversy (previous) on its hands. Starting this fall, results shown by the company's product search engine will be influenced by how much retailers and advertisers pay. Currently, the search engine only generates revenue from ads that are clearly distinct from the search results. Meanwhile, Danny Sullivan notes Google's hotel and flight search results are now also influenced by ad purchases. The FTC might not be thrilled. 

    As rumors of a Facebook (FB) bid for Opera Software swirl, the social networking colossus has removed Google Chrome (GOOG) from its list of recommended browsers in favor of Opera. Interestingly, the change is uncovered on a day when Chrome chief Sundar Pichaiboasts Google's browser is "#1 in most countries," and 1/3 of Internet users are relying on Chrome. That's basically in-line with recent datafrom StatCounter.

    Facebook (FB +5.1%) rallied in afternoon trading, and closed at $29.63. Topeka Capital's bullish call echoes a common argument among Facebook bulls: that the company will ultimately justify its lofty valuation by finding ways to leverage its giant user base and volumes of data to open up major untapped revenue streams. Those streams, in Topeka's view, include e-commerceonline paymentssearch ads, and classifieds, and are collectively worth over $1T.

    Google (GOOG) has filed a complaint with the EU accusing Nokia (NOK) and Microsoft (MSFT) of transferring 1,200 patents to Canadian patent troll MOSAID (MBTHF.PK), with the goal of driving up prices for rival (i.e. Android) devices. The move comes as the EUinvestigates complaints from Microsoft and Apple that Motorola Mobility is making unfair use of its standards-essential patents in IP disputes. 

    Though Mac shipments fell Y/Y in the Americas and Europe in Apple's (AAPL) March quarter, as buyers waited ahead of a major refresh widely expected to arrive in June, its Asia-Pac Mac shipmentsrose 40%, according to Needham's Charlie Wolf. China, where Apple's total sales rose 3x to $7.9B, likely had much to do with the surge. Wolf adds global Mac sales to businesses rose 10% Y/Y.

  185. Better late than never… Appointments!

    Volume is still about 10-15% lower than average!

    Tonight might be interesting as there is a lot of data coming out of Europe early morning. And tomorrow the big one (jobs) in the US!

  186. This is looking ugly!
    Spain reveals €100bn capital flight (from FT)
    Madrid was dealt a double blow on Thursday after it emerged that almost €100bn in capital had left the country in the first three months of the year and the head of the European Central Bank lambasted its handling of Bankia, the troubled Spanish lender.
    Data published by Spain’s central bank showed €97bn had been pulled out in the first quarter – around a 10th of the country’s GDP – as concerns mounted over Madrid’s ability to contain its twin economic and financial crises, which have forced government borrowing costs to euro-era highs.
    The data appeared to corroborate earlier assessments from economists that foreign investors were selling Spanish assets, while Spanish banks were increasing their holdings of domestic bonds, helped by cash accessed through the ECB’s three-year liquidity operations.
    “My concern is that we haven’t yet seen the most recent numbers, which could be far worse,” said Raj Badiani, an economist at IHS Global Insight. “We are seeing a perfect storm.”

  187. This is not going to help…


    Mercedes-Benz, Brazil’s No. 2 maker of trucks and buses, announced early Wednesday morning that it would be laying off 1,500 workers in Latin America’s largest market. Volvo AB has also announced a temporary halt to Brazilian truck production. The first half of May saw a staggering 22 percent year-on-year drop in Brazilian heavy vehicle purchases. Overall economic growth slowed last year to a bit under 3 percent, and Brazil’s finance minister recently had to cut the 2012 growth forecast to a number many private forecasters think is still too high.  And problems for Brazil aren’t just problems for Brazil, as neighboring Argentina (and other smaller countries like Uruguay and Paraguay) rely on Brazil to buy their exports.

    More alarmingly, both China and India are running into trouble. Catch-up growth, in which a poor country improves its public policy, begins importing foreign production techniques, and gets rapidly richer is a time-honored Asian tradition. We saw it in Japan, then South Korea, then Taiwan and other Asian “tiger” economies in the 1980s and ’90s. China and India are so large that their catch-up growth was able to raise the entire worldwide rate of economic growth. That’s why the world economy kept growing through the 2008-09 financial calamity.


    The slowdown in India, which remains a much poorer country than China, is very alarming. Even as its economy surged recently, the country did little to raise the productivity of the agricultural sector in which most Indians work. The Indian government had a promising idea on that score: to open the retail sector to foreign firms such as Wal-Mart and Carrefour. Large international chains have experience working with farmers in more productive countries and could be the mechanism for transferring better methods to Indian growers. That could have meant higher agricultural wages and better living standards for India’s urban poor. But faced with pressure from incumbent retailing interests, the government backed down from the plan. That was both a lost opportunity and a blow to the confidence of foreign investors.

  188. And Matt's conclusion:

    The Chinese growth dynamo that rescued the world economy after the financial crisis isn’t going to reappear this time around. That means the stakes as Europe confronts the ongoing meltdown of its banks and America faces the prospect of a new debt ceiling standoff are higher than ever. The bad economic news of 2008-09 came with the major silver lining that growth continued in the places that needed it most. This time around, if the rich countries can’t get our act together, the whole world will spiral into recession. 

  189. Oops… China HSBC PMI lower than expected! I guess we will need more stimulus then.

  190. and Hong Kong stocks turn positive!

  191. Phil
    what are your thoughts on shorting NFLX if it does not hold support at $62 and also shorting GOOG which is imploding? Thanks

  192. While this is a incredibly hard and frustrating market to trade, if you step back a bit and realize that we are living through history right now.  This is stuff that our kids kids will be learning and talking about.    
    I was at a party tonight here in Nica, and the amount of confusion was just amazing.  Everyone is so scared to make a move…  I hope there is light at the end of the tunnel and we get some type of significant intervention.   

  193. Perhaps Divine Intervention … ;-)

  194. Good morning!

    Oil $85! 

    Dollar 83.44 and you know that's not good.  Futures off 1% with Europe off about 1.5%.  Asia wasn't so bad in China, with the Hang Seng down 0.4% and the Shanghai flat but India and Japan were off 1.2%.

    It's all data and most of it's bad today and, of course, lack of action by the EU, IMF, ECB is turning a problem into a catastrophe the same way Congress' initial rejection of TARP led to a total loss of confidence in the US.  Since people are panicking – rumors are being floated that the US NFP will miss badly and, of course, leaderless sheeple will believe anything and they are freaking out.  Even CNBC is now repeating 120,000 jobs over and over again when over 150,000 was expected.  

    I was just reviewing the last NFP day, which was a miss at 115K but we expected the miss and the title of that Friday's post (May 4th) was "The Blow Jobs Deal to the Market Could be Huge".  I'll be talking about it in the morning post as that was 10% ago and the question now is do we drop another 10% or is this just the same stuff we were worried about 10% ago?  This is why began to keep a blog in the first place – to be able to go back in time and see what I was thinking…

    Friday's economic calendar:

    Auto sales

    Monster Employment Index

    8:30 Personal Income and Outlays

    8:30 Nonfarm payrolls

    9:00 PMI Manufacturing Index

    10:00 ISM Manufacturing Index

    10:00 Construction Spending

    2:34 AM A mixed performance for Asian markets, with some heavy losses interspersed with minimal stock movement. Earlier: somedisappointing Chinese manufacturing data. Japan -1.2% to 8440. Hong Kong flat at 18634. China -0.2% to 2368. India -0.9% to 16072.

    5:07 AM EU shares fall further after economic data provides continued woe, whether it PMI (III) or unemployment (III). Euro STOXX 50 -1%, London -0.2%, Paris -1.2%, Frankfurt -1.5%, Madrid-0.3%, Milan -0.7%.

    Euro Swap Curve Flattest Since Lehman Collapse. The gap between short- and long-term euro-denominated interest-rate swaps is the narrowest since the months following the collapse of Lehman Brothers Holdings as Europe's debt and banking system crisis worsens. The difference between rates on two- and 10-year euro-denominated interest rate swaps fell last month to the least since December 2008. "The euro yield curve has found itself between a rock and a hard place," said Julien Turc, head of cross-asset quantitative strategy at SocGen in Paris. "Short-term rates have gone up because of funding concerns while long term rates are being driven down by the flight-to-quality of German bunds. There is risk of more sovereign and bank stress."

    ECB, EU Officials Warn Euro's Survival at RiskThe European Central Bank stepped up pressure on Thursday for a joint guarantee on bank deposits across the euro zone, saying Europe needed new tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.

    Eurozone is 'unsustainable' warns Mario Draghi. The head of the European Central Bank hit out at the political paralysis gripping the region as he warned the eurozone's set-up was "unsustainable".

    Only ECB Can Save The Euro Now.

    Eurozone May Manufacturing PMI comes in at a final 45.1, just above the 45.0 flash reading but down from 45.9 in April. It's near a three-year low as weakness spreads from non-core to core nations.

    U.K. PMI plunges to 45.9 in May from 50.2 in April, hitting its lowest level in three years and experiencing the second-sharpest drop in the index's 20-year history. Manufacturers cut output, employment and the purchasing of inventories in response to the recession and the eurozone crisis. (PR

    Germany May Manufacturing PMI comes in at a final 45.2, up slightly from the flash 45.0 reading but still the fastest contraction rate in three years. - I know – How about some more austerity?!?  Heck, it's a total, massive disaster in Europe but let's vote Republican and try it here!  

    Eurozone unemployment was 11% in April, unchanged from March and in-line with expectations. Austria had the lowest unemployment rate (3.9%). Spain had the highest (24.3%), followed by Greece (21.7%).

    Business Braces for Europe's WorstAs European officials race to quell fears that Greece may exit the euro, many companies doing business in the troubled country are preparing for the worst.

    Italian unemployment jumps to 9.8% for the first quarter vs. 9.6% expected and 9.1% prior. For April, unemployment rose to 10.2% vs. 9.9% expected and 10.1% prior

    So bad it might be good?  The U.K.'s GDP will probably rise just 0.1% this year, according to the British Chambers of Commerce (BCC), as renewed eurozone turmoil crimps demand. The BCC, which had previously forecast 0.6% growth, is joining calls for increased fiscal-stimulus measures.

    Three of Spain's top economists call for a new government, penning an op-ed in El Pais to warn current reforms are taking the country in the wrong direction and are failing to address underlying economic problems. Spain needs to stop battling the ECB and commit to saving its position in the eurozone.

    Spain's Guindos: Future of Euro at StakeSpanish Economy Minister Luis de Guindos said the future of the euro is at stake in Italy and Spain, as data showed a net 66 billion euros ($82 billion) of capital left the country in March. “The future of the euro is going to be at play in the next weeks in Spain and Italy,” he told a conference in Sitges, Spain yesterday. “I don’t know if we’re on the edge of the precipice, but we’re in a very, very, very difficult situation.” The euro region needs to integrate further in order to overcome the crisis and de Guindos said he expected “signals” in the coming days and weeks on integrating deposit-guarantee funds and banking supervision. “We all agree” on the need to move toward a “banking union,” he said. Spanish borrowing costs compared with Germany’s rose to the highest in the euro’s history this week and the nation’s 10-year bond yields approached the 7 percent level that pushed Greece, Ireland and Portugal into bailouts. As the International Monetary Fund denied it was preparing financial aid for Spain, data showed that a record 66.2 billion euros of net capital flows left the country in March.

    Merkel’s Isolation Deepens as Draghi Criticzes StrategyGerman Chancellor Angela Merkel was besieged by critics for letting the euro crisis smolder, with the leaders of Italy and the European Central Bank demanding bolder steps to stabilize the 17-nation economy. Italian Prime Minister Mario Monti and ECB President Mario Draghi pushed Germany to give up its opposition to direct euro- area aid for struggling banks. Monti further antagonized Germany by urging a roadmap to common borrowing.

    Greek Exit Contagion Impossible to Predict, Zoellick Says in FT. A Greek exit from the euro region would hurt confidence in other sovereign euro assets, World Bank President Robert Zoellick wrote in the Financial Times.Different views among ECB board members “raise doubts about its ability to respond fast, fully and forcefully,” Zoellick said. Euro-area leaders must be prepared to recapitalize banks, he wrote. “Massive” ECB liquidity injections may not be enough, Zoellick wrote.

    Debt Strains Hit Big Greek LendersGreece's deepening crisis has dealt a further blow to the country's four largest lenders, as bad debts ballooned and they struggled to hold onto nervous savers worried over the country's future inside the euro zone.

    As expected, the Irish look to have voted in favor of the EU fiscal compact by 60% to 40%, Reuters reports, citing sources that have access to polling data. The official results are due later today.

    Asia Strains Under Euro Crisis. The economies of Asia, both the emerging markets and the more developed countries, are being hit by a double whammy of slowing domestic growth and the impact of the European debt crisis on Asian exports and finance. Signs of distress are proliferating.

    Australia's May Manufacturing PMI falls to a 9-month low of 42.4 from 43.9 previously. Production declined to 38.7 from 43.9, New Orders to 40.6 from 42.0. Input prices rose to 64.1 while selling prices declined to 41.4, indicating a further profit squeeze on manufacturers. Sydney -0.4%, the aussie -0.3% to $0.9708.

    South Korea's May PMI falls to 51.0 from 51.9 previously. It's the 4th consecutive decline for the index. "We maintain our view that Korean fundamentals have strengthened significantly over the past few years, which will help the economy stay on track for a gradual recovery," says HSBC's Ronald Man.

    China' official May PMI falls to 50.4 vs. 52.2 expected and from 53.3 previously. It's the biggest drop in 28 months and marks a bit of catching up for the official measure, which came in substantially higher than the HSBC read in March and April.

    China's Economic Slowdown Ripples Through Hong Kong RetailChina's economic slowdown is rippling through Hong Kong, with the city's retail sales rising at the slowest pace since 2009 as shoppers visiting from the mainland trim their spending.

    China's home prices fell to a 16-month low in May as officials pledged to keep property curbs that have sapped buyer demand, according to SouFun Holdings Ltd., the nation's biggest real estate website owner. Home prices declined .3% from April to $1,364 per square meter, SouFun said. That's the lowest since January 2011 and the ninth month-on-month drop, the longest stretch since it started compiling data in July 2010.

    Japan Q1 capital spending excluding software +3.5% on year vs. consensus of -0.1% and 4.9% in Q4. "Shipments to the U.S. are staying solid and it’s clear that Japan's major companies are recovering" from last year’s earthquake, says RBS economist Junko Nishioka. - That was 5am, then they had another earthquake!

    Nikkei heads for worst weekly losing run in 20 years.

    Property Taxes And State Aid Drop, Pinching Local Governments -PewWhile states are beginning to slowly recover from the recession, a nonpartisan policy group said Thursday that local governments are getting "hit with a one-two punch," with two major revenue sources--property taxes and state aid--declining together for the first time since 1980.

    Optimism Among Wealthy Americans Is Down, Economy Worries Are Up. (graph) After two consecutive months of positive improvement, optimism of America’s wealthiest has dipped due to continued concerns about the economy and the job market.

    Copper Bears Rise to Eight-Month High as Hedge Funds Bet on Drop. Copper traders are the most bearish since September and hedge funds are betting on price declines as concern that Europe’s debt crisis is deepening drove the metal to the lowest this year. Eighteen of 33 analysts surveyed by Bloomberg expect the metal to drop next week and six were neutral, the highest proportion since Sept. 23. Fund managers and other speculators held a net short position of 2,808 U.S. futures and options in the week ended May 22, from net-long holdings of 4,833 a week earlier, Commodity Futures Trading Commission data show. That’s the first bearish bet since January.

    Facebook(FB) Fiasco Coupled With European Crunch Freezes IPO PlansFacebook Inc. led U.S. initial public offerings to their worst monthly performance since Lehman Brothers Holdings Inc. collapsed, as Europe’s debt crisis scuttled IPO plans from New York to Hong Kong. The Bloomberg IPO Index (BIPO), which tracks U.S. equities in the first year after their IPOs, sank 15 percent last month, with Facebook posting the worst one-week performance among the 30 largest U.S. IPOs since 2011. The IPO index’s decline is in line with the drop in October 2008, the month after Lehman’s bankruptcy triggered the worst financial crisis since the Great Depression.

    Facebook(FB) Buyers Expecting Surge Were Naive, Gorman Says. Investors who bought Facebook Inc. (FB) shares expecting a large short-term increase in the stock price were “naive,” Morgan Stanley (MS) Chief Executive Officer James Gorman said. 

    So Google is just going to pervert the whole concept of a search engine now?  Google(GOOG) to Require Retailers to PayGoogle Inc., in a move to squeeze more cash out of its lucrative Web-search engine, is converting its free product-search service into a paid one. Online retailers will now have to bid to display their products on Google's Shopping site. Currently, retailers include their products for free by providing Google with certain data about the products. Google then ranks those products, such as cameras, by popularity and price.

    Big Brother News:  U.S. Argues to Preserve GPS TrackingThe U.S. government told a federal appeals court Thursday that it still has the right to place Global Positioning System tracking devices on cars without obtaining a search warrant—despite a January Supreme Court ruling that the warrantless installation of such a device violated the Constitution.

  195. I like playing oil for a bounce, of course off $85 (/CL) and the Nas (/NQ) can be played bullish off the 2,500 line as well and the Dow when/if it gets back over 13,000 (/YM).  

  196. Big Chart – I don't think it looks like we're consolidating for a move down but the Dollar skews everything so it's hard to say.  

    Spain/Deano – Spain's GDP is $1.5Tn so I kind of object to calling $97Bn 1/10th and, of course, that has nothing to do with what's on deposit but let's say it's 1/10th – that's really not a panic considering the general level of panic that's out there.  Everyone is extrapolating for the worst – it's kind of a theme now.  

    Speaking of which, my niece is getting married this weekend so I won't be around much.

    Chinese dynamo/StJ – Amazing how that myth persists when it's now fairly clear that China simply used their massive reserves and surplus to fun massive stimulus spending "that rescued the World economy" but the failure of the rest of the World to pick up the slack has led to a massive blow-back that is now snapping back on China.  The reason nobody talks about this is it doesn't make austerity look very clever and we certainly can't even hint to the sheeple that stimulus works or they might want some…

    PCLN/Jabob – I do still like them for a long-term collapse but you have to be very patient!   If the broad markets go – no way do they hold up.  

    NFLX/Crussell – Way to flaky at these levels.  GOOG I like so no interest in shorting them.  MA will still be a good short if the economy fails and PCLN above and V too.  

    Government debt/Diamond – Imagine what happens to the World when the US, Japan and Germany finally default?  

    Confusion/Burr – Good point, this is a very scary market.  Having been burned in 2008 – just bad news is now enough to keep people away and we've got PLENTY of bad news.  Another problem people have is that they feel the NEED to invest – because that's been marketed to them since the day they were born.  Being in CASH and watching PATIENTLY for market clarity is a valid investing strategy – one Buffett has used most of his life! 

  197. Heres a nice chart of Long-Term U.S. Treasury Yield going back to 1790:

    The lowest we"ve every been was in 1946 at around 2.1% after World War II when the entire developed world was a complete bombed out shambles and we here in North America (with exception to Pearl Harbor) were the last man standing on the pile of rubble and poised to grasp the torch to become the next superpower for the coming 6 decades.
    Dow Jones Industrial Average chart from 1940-1960:

    Here we are again with the world falling apart and the U.S. stands again as the safe haven of last resort (or the cleanest pair of underwear in the dirty laundry) and rates are less than a percent away from the all-time lows.  Market goes up, market goes down — the real question is who is going to be in the best position to take the lead when the dust all settles?

  198. Germany down 2.5% – not good!  

    6:00 AM Overseas: Japan -1.2%. Hong Kong -0.4%. China +0.1%. India -1.6%. London -0.7%. Paris -1.5%. Frankfurt -2.2%.

    6:38 AM U.S. stock futures fall lower with a focus on weak manufacturing numbers out of Europe. S&P -1.1%, Dow -0.9%.

    Formula One may or will delay its $2.5B-$3B Singapore listing, becoming the latest victim of the IPO crunch as volatile markets and Facebook's troubles scare off investors and companies alike. Formula One would join three other firms that pulled Asian IPOs this week, including Graff Diamonds, while Kayak may back off from its U.S. offering.

  199. Phil – I won't debate the size of the Spanish Economy, however the figure as just for the first quarter – notwithstanding your extrapolation cartoon – what do you tink has happened since? 

  200. Oil hit that $84.50 line we expected yesterday, maybe this time we get a proper bounce.  

  201. Spain/Deano – I'm sure money is continuing to come out of the banks but no more so than came out of Greece or Ireland before them and the banks did not collapse (but they said they would then too).  I just don't understand how many times they can spin the same story to spook investors on essentially the same thing.  

    I do have a flaw in that I tend to over-estimate the intelligence of the investing public.  Numbers and events that are very obvious to us sometimes take many, many months before even "top analysts" figure out the same thing so timing is tricky – especially with macro events like this but all it will take is a kind word out of the EU and all this stuff will vanish in a puff of smoke – which is why the hyenas are in full attack mode now – looking to drive prices as low as possible while the big boys accumulate ahead of the inevitable QE.  

    Let's look at a few Dow components:  

    • XOM:   3/31 2010 = $87Bn rev/6.3Bn profit ($67).  3/31/11 = $109Bn/10.6Bn ($85), 3/31/12 = $119Bn/9.5Bn ($78.75) 
    • AA   :   3/31 2010 = $4.8Bn rev/-.2Bn profit ($15).  3/31/11 = $    6Bn/00.3Bn ($17), 3/31/12 = $    6Bn/00.1Bn ($8.55) 
    • JPM:    3/31 2010 = $17Bn rev/3.3Bn profit ($45).  3/31/11 = $15.4Bn/05.5Bn ($46), 3/31/12 = $14.7Bn/5.4Bn ($33) 
    • X:         3/31 2010 = $3.9Bn rev/-0.2Bn profit ($65).  3/31/11 = $4.9Bn/-0.1Bn ($54), 3/31/12 = $5.2Bn/-0.2Bn ($20) 
    • HPQ:   3/31 2010 = $31Bn rev/2.2Bn profit ($35).  3/31/11 = $32Bn/2.6Bn ($53), 3/31/12 = $31Bn/1.5Bn ($23) 

    Things are just getting silly down here.  Keep in mind this doesn't account for stock buy-backs.  In HP's case, even on lower earnings, their current p/e is 9, which is much lower than it was in the last two years.   That's what panic is – when investors extrapolate worst-case scenarios down the road and price stocks for them today.  

    This is not to say that the worst-case scenario cannot happen – just that, if it doesn't happen, a lot of people who sold HPQ for $23 or X for $20 or AA for $8.50 will look like idiots – but only in retrospect and, fortunately, this country has the attention-span of a toddler and neither remembers how wrong the average analyst was last time nor holds them accountable when they are.  Instead the sheeple stampede in when they say BUY and stampede out when they say SELL and they can never figure out why the markets are so tricky to predict.



    Get ready for loosing even more jobs this time thanks to robots.

  203. EC meeting 28/29 June, they better prepare something really good for this one.
    Merkel and Barroso are meeting next Monday (24 days prior). Finally our Euro leaders start feeling the heat.
    Dax down 2.6% today and getting closer to 6000 seems to do the trick.
    Last time in November 5700 triggered some positive response from our German leader (6% below)
    Let s hope she is getting better at it and today should be enough of a wakeup call!

  204. Phil – thanks for the nice reminder – I love HP, AA and XOM down here – and I love the TWIL list. JPM is not my cup of tea though – as I don't like banks in general, and the TBTF – I think they're the biggest part of the problem!

  205. Today Euro financials are up — someone is buying the dip under the cover of a sea of red
    Good call Phil on Oil
    We should move up back to 85.5 and more if Yentervention (they announce it this morning) later.

  206. S2 on oil is 84.36 so getting close.

  207. Well done StJean

  208. Well, then S3 is at 82.87…

    Don't forget the job numbers at 8:30 AM EST… that could move oil big time!

  209. European indices are taking another leg down!

  210. oil lionel its under 84…or were you busting phils balls..speaking of euro zoning..the swiss 10 years is 30bps below japan's

  211. "The Blow Jobs Deal to the Market Could be Huge"
    …and a clever title it was…..  ;)

  212. oh lord i just noticed the 'premature to swallow…" i missed that the first time!