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Which Way Wednesday – Beige Book Boogie

We have reached a profound point in economic history where the truth is unpalatable to the political class — and that truth is that the scale and magnitude of the problem is larger than their ability to respond — and it terrifies them.” – Hugh Hendry 

Hendry also says: "Bad things are going to happen and I still think the closest analogy is the 1930s."  I have said for a long time that the only thing separating us from the Great Depression is that, so far, we haven't had a massive drought.  

Well – so much for that happy thought.  The nation's widest drought in decades is spreading, with more than half of the continental United States now in some stage of drought and most of the rest enduring abnormally dry conditions.  Only in the 1930s and the 1950s has a drought covered more land, according to federal figures released Monday. So far, there's little risk of a Dust Bowl-type catastrophe, but crop losses could mount if rain doesn't come soon.

Around a third of the nation's corn crop has been hurt, with some of it so badly damaged that farmers have already cut down their withered plants to feed to cattle. As of Sunday, the U.S. Department of Agriculture said, 38 percent of the corn crop was in poor or very poor condition, compared with 30 percent a week earlier.  Climatologists have labeled this year's dry spell a "flash drought" because it developed in a matter of months, not over multiple seasons or years.

"We can't say with certainty how long this might last now. Now that we're going up against the two largest droughts in history, that's something to be wary of," Jake Crouch of the National Climate Data Center said. "The coming months are really going to be the determining factor of how big a drought it ends up being."

In northwest Kansas, Brian Baalman's cattle pastures have dried up, along with probably half of his corn crop. He desperately needs some rain to save the rest of it, and he's worried what will happen if the drought lingers into next year.  "I have never seen this type of weather before like this. A lot of old timers haven't either," Baalman said. "I just think we are seeing history in the making."

Historical droughts are, of course, no surprise to those who have accepted the idea that Global Warming is bad and was bound to have these kinds of side effects.  Now we can tally the economic cost of inaction – something the Global Obstructionist Party has been sweeping under the rug during a decade of denial.  Last week, a 46 square-mile glacier broke off Greenland and fell into the sea after having been stable for the past millennium.  "This is not part of natural variations anymore," said NASA glaciologist Eric Rignot.    

Oil is back up at $90 a barrel and gasoline prices never did come back down.  Add in spiking food prices or even food shortages as drought destroys our crops on top of already shaky conditions in many countries and we have the makings of a real disaster in the works.   

SPY DAILYWe had a big up and down day in the markets yesterday as the S&P dropped 1% at the open but then fully recovered into the day's end and added 0.78% for good measure, finishing at 1,363 but it was the only index over its 5% line for the day but the week ain't over yet.

At 9:43 yesterday morning, I called shenanigans on the move up, pointing out to our Members that the volume was very low and the opening spike looked like a bear flush.  

The NYSE fell right down to test it's 200 dma at 7,696 but held it, leading me to flip-flop at 10:55, saying to Members:  

Since Bernanke is all bad news and we're down half a point – I think we now get a relief rally when he stops talking and the MSM can gear up their spin machine this afternoon. 

That caught the day's low right on the button and it was all uphill from there but we flipped bearish again into the close, taking advantage of the S&P moving over our 1,360 target (but not in the Futures) to grab some SPY July (Friday) $136 puts at .60 – looking for a little pullback this morning as Benrnake heads back to the Hill to depress us some more.  

Anyone would be depressed reading the Fed's 55-page Monetary Policy Report with no real signs of improvement on any of them.  Lots of charts, lots of graphs but none say it better than these two charts from Zero Hedge (thanks Inkarri), which show us how the current US "recovery" is clearly not sustainable because it's not helping the working people in this country, nor is it adding to GDP – it's just top-down profit inflation paid for in declining wages for the Middle Class – an economic shell game in which the top 1% takes more from the bottom 99% at levels that are now 3 TIMES MORE than average.  

Well of course the top 1% need to extend their tax cuts – you can't expect them to pay taxes on all those profits, can you?  Let Labor pay the taxes – their compensation is hardly negative this year so it's about time they started pulling their weight, right?  

Keep that in mind before you celebrate the next Corporate Profit report – it's easy to do well when your workers are paying you for the privilege of still having a job.  We remain very cashy and cautious (and anxious to go short on oil at $90) ahead of Bernanke and ahead of the Beige Book at 2pm but keep in mind that's going to be pre-earnings and pre-drought so, for now, we watch those techincals for a break one way or the other:  

Be careful out there!  

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  1. Oil Lines

    R3 – 93.06
    R2 – 90.80
    R1 – 89.92
    PP – 88.66
    S1 – 87.78
    S2 – 86.52
    S3 – 85.64

  2. I just don't know how these guys get away with stuff like that:,0,4749635,full.column


    In simplest terms, JPMorgan submitted bids in the day-ahead market that were so low the firm was certain to be accepted onto ISO's roster of potential electricity suppliers — in fact, they were negative bids, essentially offering to pay ISO to take their electricity. The bidding is overseen by software, not human beings, and the automated program isn't smart enough to distinguish a real bid from a potentially fake one. (Implausible as it may seem, there can be legitimate reasons for a power generator to submit a negative bid, but they don't apply to JPMorgan.) ISO believes that JPMorgan never intended to make that sale, but the beauty of its low bids was that they made it eligible to collect bid cost recovery payments.

    The next step was for JPMorgan to make sure that ISO didn't actually buy its electricity, presumably because the profit margin from the bid cost recovery claim was greater than from actually selling energy. So in the real-time market, it priced its electricity so high that ISO wouldn't buy it.

    The bottom line, the ISO says, is that JPMorgan's traders never intended to sell it electricity via these bids. The scheme, it says, seems to have been designed purely to capture a bid cost recovery payment the bank didn't deserve, at a rate that was inflated anyway.

    Of course, by defunding regulators we increase chances of schemes like that!

  3. Phil/Mkt Movers-What do you expect to be the bigger catalyst today ?
    Bernanke Pt 2 at 10 or Beige Book release at 2 ?

  4. Phil -what spread roll would you recommend on a Sept 121/120 TLT put spread down 45%. Thanks 

  5. Phil:
    Crude driving towards $90 quickly.

  6. VAR – close out the rest of the calendar for 1.30 or better. 

  7. PHil, I would like to hedge out to Sept-Oct time framework, thinking that as usual during summer months there's some turbulence coming up…aside from your V and MA puts, what else would you recommend?  I am inclined to short some other Momo's, such as CMG, AMZN, etc, but would prefer to hear your advice first…thanks in advance…

  8. What is driving up the Nas?  It's not AAPL…

  9. Good Morning!   I will be on line intermittently today.  I have sold all of the QCOM 55 calls in the MOMO for 2.40.  Earnings are this evening and anything could happen, so we are out of this trade at +20%. 

  10. Lflan:
    Out of QCOM at $2.50. Nice disciplined trade. Thank you.

  11. Bernanke Part Deux: …. should be the same as part one..except smarter questions.. looks like the market is starting off the same way…shocking!
    equities opened lower yesterday… then rallied after Bernanke's testimony – because…rick santelli has decreed the market is not allowed to fall when bernanke speaks!!
    equities set to open lower today….SOMEHOW i suspect (KEYSER SOZE ) they will find a way to turn around and move higher.
    1370 ish remains the upper level of the trading zone and resistance of the "rising wedge pattern" according to charties..(and we know a rising wedgie gets everyone'!!s attention) that's tracing out on the spu charts.

  12. stj/MoMo – on 7/9 Iflan asked us to sell 5 620 calls for 20.80. Then on 7/10 he bought 10 620's for 24.60. I see the entry for buying the 10 but no entry for selling 5 on 7/9 and buying it back on 7/10.  Thank you. 

  13. Iflantheman, out at 2.56 on the QCOM MOMO, THANK YOU

  14. MoMo / Nicha – I'll have to go back and check…

  15. Restickulous.

  16. Technology not leading the pack this time:


    Still lots of OB sectors despite the losing streak last week!

  17. Good morning!

    Off to a rocket start out the gate – not sure why.  SPY puts dropping to .30 so a DD there brings it down to 2x at .45 and we see if reality kicks back in and, otherwise, just ditch at .20.  

    AAPL still being held in reserve so we could still goose the markets but I see nothing to account for this move up.

    Oil at $89.88 ahead of 10:30 inventory gives us a chance to short on the Futures (/CL) as well as picking up 20 USO July $34 puts for .66 in both $25KPs.

  18. Drought, famine, war, debt, unrest.  But VIX below 16.  What, me worry?
    What a crummy hedge.

  19. GLW – the vix is pathetically low, but even still, the 2014 $10 puts can be sold for $1.20ish

  20. mrmocha – The VIX will rise during the locust phase! ;-)

  21. dia / locust — The locusts don't have anything to eat!

  22. INTC acting like they just got a drug approved.  Wasn't how I read their earnings report but this is why we don't like to play the first two weeks – more important to see how people are reacting to news than to try to predict it so we can get a feel for how the rest of the reports will be taken. 

    Intel (INTC +1.3%) ticks higher following a mixed Q2 report (I,II) featuring slightly soft guidance, and a subdued earnings call. A stream of negative comments prior to the report, together with a low valuation, led to a lot of bad news being baked inNomura (Reduce) predicts Q4 growth will be modest, and that ASPs will decline 3% in 2012. But Williams (Hold) is raising estimates on account of healthy margins and lower-than-expected opex. AMD +0.8%NVDA +2.4%. (transcript

    SOX, which were dragging yesterday, are up 2.65% this morning – giving us a great boost up to $64 on the Qs (2,930) so let's see if that line sticks.  

    At the open: Dow -0.37% to 12759. S&P -0.31% to 1359. Nasdaq -0.15% to 2906.

    Treasurys: 30-year +0.38%. 10-yr +0.16%. 5-yr +0.08%.

    Commodities: Crude +0.05% to $89.58. Gold -1% to $1573.65.

    Currencies: Euro -0.4% vs. dollar. Yen -0.09%. Pound +0.19%.

    10:00 AM On the hour: Dow +0.14%. 10-yr +0.14%. Euro -0.39%vs. dollar. Crude +0.06% to $89.59. Gold -0.91% to $1575.05.

    Market preview: Stock futures are lower, possibly weighed down by Intel's (-0.6%sales warnings, mixed housing data, and further concerns about Spain's banks. The S&P benchmark is -0.3%. EMC is +7.3% and VMware +6.7% following a game of musical chairs amongst their management, and after earnings, while Vivus is+17% on FDA approval of Qnexa/Qsymia. Later: Bernanke Part II, Fed's Beige Book

    June Housing Starts: 760K vs. 745K expected and 711K (revised) in May. Permits 755K vs. 775K expected and 784K (revised) in May.

    The Fed chairman doesn't have a "magic bullet" to solve the economy's problems, says Paul Volcker. "There's been too much borrowing, too much indebtedness, too much leverage … it takes years to work itself out." Bernanke is in front of the House today to deliver the Fed's Monetary Policy Report. The prepared remarks should be the same as yesterday, but the Q&A might be fun. Live

    "Do you know anyone who likes this thing? I don't," writes J.C. Parets, adding overwhelming bearish sentiment to the technical reasons he's expecting a big rally in the euro. Among them is a drying up in volume in FXE, suggesting the sellers are getting tired of selling, and a U.S. dollar (UUP) chart exhibiting signs of topping. 

    Spanish bank deposits fall to €1.327T, off slightly from 3 months ago, and down 5.75% Y/Y. Bad loans jump to €155.84B, or 8.95% of the total vs. 8.72 last quarter. The volume of credit was off 3.82% Y/Y and housing prices down 8.3%. Rajoy: The government can't decide between a good and a bad choice … this government has to choose between the bad and the even worse."

    Exports of Saudi Arabian crude oil rose to 7.668M bbl/day in May, from 7.583M bbl/day a month earlier, despite a drop in the kingdom's output, according to official data. Total Saudi oil production fell in May to 9.807M bbl/day from 10.102M April, the highest level in three decades. June output is believed to have climbed to ~10M bbl/day.

    BofA (BACconference call: One motif is the confusion of analysts who can't seem to decipher the bank's earnings. CFO Bruce Thompson blames the decline in both consumer and business loans to runoff in real estate. Total headcount is off 4% Y/Y, but down 8% if new hires in delinquent mortgage servicing are backed out. The company confirms it is being questioned by regulators over Libor. Shares -1.7%

    Mexico, long known for silver, is enjoying a new gold rush, as high gold prices compel companies to start mining more aggressively in the country's difficult terrain. Big outfits such as Goldcorp (GG) are operating in areas where gold wasn't concentrated enough for mines to make a profit. This year, GG's Peñasquito site is set to produce 500K oz. of gold, making it Mexico's biggest gold mine and GG's most prolific.

    Starbucks (SBUX -1.7%) trades weak after Cleveland Research trims estimates due to its forecast that June comparable-store sales will moderate and K-Cup sales growth will slow down.

    SodaStream (SODA +5.1%) opens strong after signing astrategic pact with Kraft Foods to co-brand Kool-Aid for its machines. The company has been showing a lot of sass as of late in PR battleswith heavyweight Coca-Cola over its claims of environmental superiority. 

    Shares of Tesla Motors (TSLA) take another leg down, nowoff 6.6% premarket, on a harsh downgrade from Wunderlich. The rationale for the cut from the investment firm is that Street estimates for Tesla factor in production run of 1K vehicles for Q3 and 5K for the year, but the actual production run will likely be lower as issues crop up.

    Bankruptcy never looked so good: American Airlines parent AMR (AAMRQ.PKposts a record high $6.45B in revenue for Q2 and improves its bottom line by $381M after stripping out one-time items. The carrier showed a net profit for the first time in 5 years for the quarter.


  24. rainman – Exactly!  That is why the VIX will rise …

  25. VXX Friday $13 puts can be sold for .50 (now $12.68) and those are rollable to the Aug $12 puts (now .67) so I like them to fund the Aug $12/14 bull call spread at .60 for net .10 on the $2 spread that's .69 in the money.  

  26. angle / vixx — You meant Vixagra right?

  27. RAINY/ sorry i am a bit dyklexic!

  28. Must have been a freudian slip, that's Angel NOT angle :)

  29. ISO/StJ – One of many little scams the IBanks run at the taxpayer's expense.  The real sickness here is that, in order for JPM to make $10M, they run a scam that ends up costing energy consumers $1Bn.  It would be so much cheaper if they just robbed us directly!  

    Speaking of energy costs, net flat on inventories should not be supportive of $90 so looks good for our short positions:

    10:30 AM EIA Petroleum Inventories: Crude -0.8M barrels vs. consensus of +0.5M. Gasoline -1.8M vs. consensus of +1.1M. Distillates +2.6M vs. consensus of +1.1M.

  30. PeterD – July opex is fast approaching and it looks like we only have 1 Aug position in play on the RUT.  The Aug SPX play is almost out of premium, which is great.  Since the VIX is so low, and today is a slight up day, would you be looking at selling any bear call spreads?  Or, how about putting on the "long" side of the spread so we don't pay too much premium, and if we assume vol will increase, put on the short part of the spread then.  Leg into it…. 
    I'd like to hear you're thoughts if you have any time.  

  31. Phil, sorry if I missed a past post on a similar situation, but I am in an SVU 2014 buy/write with $5 puts and calls at a net of $4.43, now worth (gulp) negative $1.44.  I can take my licks and close it all out now for a big loss.  I can wait until Jan 2014 for the $1.75 of premium remaining to erode which still puts me down over $4.00 for my trouble.  Is there a rolling strategy that doesn't make me invest more in this thing but could put it in a better position given all the bad news that is now out?  TIA.

  32. Get 'em Ron!

  33. Pharmboy, any suggestion on your Dec. SGEN position. Time to add?


  35. USO Puts – I'm assuming we're stopped out at -20%?  Or are we holding?  CL is at 90.08.   
    I got out at 0.53.

  36. Phil,
    What do you think of buying Aug puts on emc/vmw? This pop due to reshuffle does not make sense in the short term

  37. It doesn't look like oil is falling today…

  38. NASDAQ is impressive. S&P needs to catch up?

  39. Who is holding AAPL down?

  40. Phil,
    Assuming corn shortage and drought for next 3 – 6 months, what would be the ways to play that long and short?


  41. Sorry just need to say WTF – is this rally based on - 


  43. Today is anti-momo.  Nothing momo is moving…AMZN, AAPL, CMG are down, V and MA barely moved…what's pushing up the Nas?

  44. samz / WTF – Who cares? Four more letters: TAPE

  45. Market movers/Rookie – Unless Bernanke says something shocking this morning – it's just a re-hash of yesterday's testimony but to a much dumber audience (Congress).  The BBook should be through about the end of June and that will have a big impact but, don't forget, the drought is new information and will skew the food inflation and overall production in the midwest so we have to be careful reading through it today.  Overall, I think the outlook is fairly dim and that might get people to believe that QE is right around the corner but I'm playing for reality at this point as Uncle Ben is clearly taking hope off the table to those who are actually willing to listen.  

    TLT/Crussell – Sept is a long way away so I'd DD and average in at 72.5% and get half back out on a recovery if possible.  

    And they test $90 oil anyway.  The headline is a draw so not too much of a surprise other than the balls it takes to buy oil after that report.  Now we have a great short below the $90 line on /CL and the USO $34 puts are .57 at that line.  At .34 (if they go that low) I would want to DD on the USO puts in both $25KPs.

    AMZN/Jerconn – That's my favorite long put at the moment as they have several ways to lose.   The Oct $170 puts at $2.30 are a nice way to dip you toe in the water as a 10% drop in AMZN should pop them to the price of the $190 puts, which is $5 – so more than 100% gain on a 10% drop in AMZN is a pretty good risk/reward ratio.   

    Nas/Jercon – SOX up 2.5%.  That should be it (QQQ $64.15) without AAPL moving up over $607 so the QQQ Friday $64 puts for .30 are a fun play with a stop at .20.  

    MoMo Money – Nice way to trade Lflan!  Great timing too as AAPL has become dull.  

    Smarter/Angel – From the Reps?  

    Ron Paul lobs it in for Bernanke – when did he sell out?

    VIX/Mr M – The market is going up so the VIX goes down.  That's a normal hedge actually.  You can't hedge the news, only the market's reaction to it.  

    GLW/Scott – Their internal volatility is still very high.  

    Nothing to eat/Rain – I'm still getting lovely ears of corn at my local markets.  Expensive but good.  I guess locally we don't have an issue but I don't see how this crop in the midwest will be saved and, if that happens, even my local Whole Foods may be affected.  

    SVU/Jet – 2014 is a long way from now.  You say net $4.43, so I assume it's $4.33/4.67 with the stock at $2.32?  I'd certainly roll the $5 puts ($3.30) down to 2x the $2.50 puts ($1.25) even as the assignment is the same but you get twice as many shares so that's a no brainer.  That changes your buy/write to $4.33/3.11 and you can then, if you still believe, DD at $2.33 and buy back the $5 calls for .30 and sell 2x the $2.50 calls for .80 for a new net of $2.65/2.55 on a 2x spread which is not, on the whole, a much larger dollar commitment than you have at $4.33/4.67 but now you have twice as many shares with a worst case of 4x for $2.55 = $10.20 vs 2x at $4.67 for net $9.34 so about 10% more to double up the shares.  Of course, if called away in a buy-out – you end up even(ish) but better than losing $1.44 and, hopefully, you can do a 2015 roll and improve it a bit.  

    This is the beauty of scaling in – SVU took a devastating dip but we can still move to a 2x position for just over 10% more cash committed and now our basis is 40% lower.  When you are a real long-term investor, this strategy allows you to build long positions in companies at their cheapest points almost automatically.  

    USO/Burr – My faith in the logic of the trade is strong so I think this is a blow-off spike to get rid of us.  Since the potential reward of an oil sell-off is massive – it's worth the risk.  If you did intend to stop out, you should have done so the second the report didn't produce a big drop – that could have been done at even or better.  20% is not very much of a move in such a volatile instrument.  

    EMC/Harip – I don't like them but I wouldn't bet against them or VMW as it's a hot space with many followers.  I agree they look overbought now on not much news but they are media darlings and there's no compelling reason to short them here. 

    Impressive/Smarturn – Nas is easy to push around, S&P isn't.  SOX up 2.9% now so Nas should be doing much better.  

    Corn/Harip – I have no idea.  I don't play ag stocks, too random and requires a ton of reading I don't have time for.  

    WTF/Samz – Exactly! 

  46. vmw is up 9% on bad news.

  47. Burrben,
    Yup, they are really squeezing the premium sellers today, aren't they?  Looking at the current August option chains, there doesn't seem to have any good vertical or naked sells.  Bear call spreads are also risky as we might still have a short squeeze.  Thinking of buying the longs now and waiting to sell the shorts later is a nice idea, but it's a bit of a gambling and we can get crushed if it's flatlining or moving in the wrong direction.  Alternatively, we can sell Ratio spreads (more longs than shorts) and be contend with a lower return. 
    With that, let's sell 10 RUT AUg 700 puts ($1.15), and buy 12 Aug 670 puts ($0.55).  This is only 13% OTM, so a bit risky if you don't have Portfolio Margin.


  49. Peter- that spread filled instantly. should have asked for more.

  50. So they are driving up the market and driving down the VIX into options expiration.  That indicates they are probably loading up on Aug puts, maybe ahead of a big dump.  Last OPEX we were right about here (1,363 on S&P) and the one before that we were at 1,295 and April was a big spike down to 1,358 from 1,380 the day before, then we went flying up to 1,415 to burn all the shorts and then we were down to 1,291 on the next expiration day (May 18th) and then up 70 into June 15th (1,363) and the range has been 1,309 to 1,375 since then but, on the whole, we're flat for the period.  

    Sarcasm/Angel – Oh, sorry, you'll have to go easy on me – I just got back from the left coast, where sarcasm is met with blank stares so I'm out of practice.  

  51. Speaking of left coast – my kids could not believe the Surf Shop in Mission Beach.  No one in particular seemed to work there, the register was a drawer full of cash and they had no schedules for lessons – we asked if the kids could get a lesson so the girl who was there made about 3 phone calls and got two nos and a yes and then we were told he'd come by in 10 mins and we could get started.  The girl took our money and that's the last time we saw her.  The guy shows up and asks if we want pictures of the lesson and we say yes and now he makes a phone call and his friend says they'll meet on the beach.  No one is in the wet suit shop next door but they just go in and take a couple plus a couple of boards with no note or paperwork at all.  Also, no waivers were signed at any time.  I thought it was great but Jackie was flabbergasted as it went against everything I've been pointing out to her about how businesses function (all East Coast).  Lesson for all of us is that about 5-8 people seemed to make their living off this little surf shop that is run like a commune but seems to function just fine as whoever is there last seems to be "stuck" there until the next customer cycle and then they all go off to play again until the next person gets stuck minding the store.  


  53. Ken Block – for anyone who's bored waiting for oil to plunge, check out Block's Gymkhana Five!

  54. Ken Block – Notice the tracks.  Lucky bastard go to do that twice!

  55. Low volume, expiration week BS going on here today….they sure like running it up and then pulling the rug out from under the uneducated, huh?  But, I don't see AAPL participating either, so interesting…could we see a continued ramp through the end of the week?

  56. GTHP….thar she blows….that is a move for a penny stock.

  57. Pharm—-i missed your adj on TEVA—would you roll the short july 40s today? Thanks

  58. Big finish in Europe giving us a nice boost as well:  

    11:00 AM On the hour: Dow +0.6%. 10-yr +0.14%. Euro -0.24% vs. dollar. Crude +0.77% to $90.22. Gold -0.66% to $1578.95

    11:37 AM Europe closes sharply higher, though the periphery lags asbond yields rise anew. Stoxx 50 +1.5%, Germany +1.7%, France+1.8%, Italy +0.5%, Spain +0.3%, U.K. +1%. The euro -0.3% to $1.2257. 

    Bernanke Q&A: A smug Chairman refers to his collection of editorials from 2008 and 2009 warning of Fed policies causing hyperinflation and a collapse in the dollar. Others keep a collection of Bernanke's predictions, including those of 5 years ago to the day: "The U.S. economy appears likely to expand at a moderate pace … with growth strengthening a bit in 2008." The Fed was slashing rates a month later.

    Cautious on Growth, Bernanke Offers No Hint of New Action (NYT)

    Stocks Shake Off Fed’s Dour View (WSJgee, I wonder why?

    The Stock Market, QE3 and Voodoo Finance (Spellman Report)

    Idle cash piles up (Reuters)

    Germany’s Leading Role in Weakening the Euro (

    Shocking statistic of the day: The six heirs to the Wal-Mart (WMT +0.1%) fortune are as wealthy as the bottom 41.5% of U.S. families combined, according to analysis from the Economic Policy Institute. The Walton clan, known for speaking soft and carrying a big stick, are also trending higher at a faster pace than the masses with Wal-Mart on a resilient 22% YTD run. (Previous: WMT, investment or deflation hedge?)

    backdoor play on investing in housing and banking, according to Josh Brown, Berkshire Hathaway (BRK.B) is handily beating the S&P YTD, and with far lower volatility. More than one-fifth of Buffett's portfolio is invested in Wells Fargo (WFC), which pretty much owns the mortgage market, and don't forget a long list of Berkshire subsidiaries tied to homebuilding or remodeling.

    Volcker Report Sees U.S. Cuts as Threatening States (Bloomberg)

    Gloomy Forecast for States, Even if Economy Rebounds (NYT)

    A protracted slump in coal demand could continue to hit results for railroad companies as power plants increasingly shift to natural gas in the U.S. A warm winter already left stockpiles high before low natural gas prices reinforced the trend away from coal. In the line of fire: CSX (CSX -0.1%), Kansas City Southern (KSU -0.5%), Union Pacific (UNP +0.3%), Norfolk Southern (NSC -0.1%) – and to a lesser degree Berkshire Hathaway (BRK.ABRK.A) with its Burlington Northern holding. 

    The U.S. is at risk of relying too much on natural gas as transportation, manufacturing and electric power industries vie for the cheap fuel, top execs of Southern Co. (SO) and others say. "An important lesson learned in our industry over many decades is the importance of fuel diversity,” NextEra Energy's (NEE) Lewis Hay says. “Any time you get too dependent on any one fuel, we’ll live to regret it."

    Argentina's recently nationalized oil and gas company YPF (YPF +2.6%will pay out just 5.7% of 2011's profits as dividends, in contrast with recent years when payouts surpassed 80%. YPF plans to invest ~$7B/year during 2013-17 in an ambitious plan to boost declining output.

    Lockheed Martin CEO Robert Stevens warns that his company may cut 10,000 jobs if the automatic defense cuts are implemented from 2013. Stevens makes the doom-laden prediction in prepared testimony to the House Armed Services Committee, where he is appearing today. 

    “Everyone Only Wants Temps” (MoJo)

    Public Sector Jobs Beget Private Sector Ones (Jared Bernstein)

    Shares of a number of auto suppliers move higher with sector upgrades tipping sentiment. A rating boost by Jefferies on Oshkosh Truck (OSK +5.1%) to Buy from Hold and JPMorgan's initiation of TRW Automotive (TRW +3.7%) at Overweight leads the charge. A common theme with analysts is that improvement in commercial and construction markets will help offset defense-industry sluggishness. Sector gainers: BWA +2.5%NAV +1.9%FSYS+3.2%FDML +2.6%SMP +2.5%GNTX +2.3%.

    The corn crop is gone, says Dennis Gartman, and despite already high prices, corn and corn-related shares should be bought on any weakness. Stay away from fertilizer stocks, however tempting as they may be as a proxy to corn. Buying them on the premise that laying more fertilizer will save the crop is just a "silly idea," Gartman quips. Fertilizer may be needed next year, but right now, anybody who's laid some down already wishes they hadn't because the crop is completely destroyed. (video)

    Shares of StemCells (STEM -19.4%) give back some of yesterday's +100% move on a spate of profit-taking this morning. Yesterday, the stock rocketed higher after the  company announcedpositive results from its Alzheimer's preclinical trials, which showed memory restoration and enhanced synaptic function after transplanting human neural stem cells into animal models. 

    Investors show no mercy to Rovi (ROVI -40.6%) over its huge Q2/2012 warning, which had much to do with delayed patent licenses. Shares are now at levels last seen in 2008. Cowen and Barrington have downgraded shares to Neutral in response. Brean Murray is reiterating a Buy on a belief shares are oversold, but has cut its PT nearly in half, and claims Rovi "has been a slow moving train wreck" ever since its acquisition of Sonic Solutions, which closed early last year.

    Apple (AAPL -0.2%) underperforms after Pac Crest's Andy Hargreaves cautions the company could deliver an FQ3 miss on Tuesday due to slowing iPhone sales, and that FQ4 estimates appear too high. Like most analysts voicing such concerns, Hargreaves still expects a huge December quarter thanks to the next iPhone's launch. Multiple analysts defended Apple yesterday. 

     Soak Wealth, Not Income? (Bruce Krasting)

    Friends of a Certain Age: Why you don’t form many friendships after 30: (NYT)

    And wheeee on oil – we need $89.50 to break.  Dollar 83.20 needs to hold too.  

  59. They will probably use AAPL towards weeks end to move this up so 'they' can sell the underlying in the 'dark pools'.  TRIN is above 1, so they are selling something, but propping up the markets.  CAT is at 83, and the SPX is 1371.  Last time SPX was 1371 in April, CAT was 110.  Go figure that one out.  I thought we were in a recovery….?

  60. Phil- if you think they are loading up aug puts do you have any Tza or edz plays you like? 

  61. Lockheed Martin News / Phil – Funny, apparently it's not the government's role to create jobs except when it's related to defense! In this case, government can't go wrong and should spend as much money as possible. The hypocrisy is just so fustrating…

  62. Pharm
    Just heard Dr. Alverez give a less than glorious report on the newly approved weight loss drug. He agrees with you and concludes that the risks far outweigh the benefits.

  63. dclark – it just don't matter…

    They are really squeezing the shucks out of everything. 

  64. SPY – 136 Weekly puts approaching .20 stop…let it ride or stop out?

  65. and that 'don't' was not a mistake….dumb it down, so everyone can comprehend (um, understand)…..I almost feel this market is a fight between Repubs and Democrats…and right now, the Dems are winning…they are the 'richer' ones right?

  66. look at that candle on SMH…..

  67. AAPL showing some signs of life…

    On my signal, unleash hell -

  68. 1376 /ES possible today…thats the wall.

  69. Why are the financials not participating?  Why, oh why?

  70. Gymkhana/Scott – SF is by far, the best city to speed in.  

    83.15 on the Dollar is helping keep things higher.  

    LULU flying – they often do that when we have a pump job.  

    TZA/Jrom – I'm not that confident yet.  Want to see the BBook.  Nas up 1.5% today, RUT up 1.2%, SOX now up 4% in a day – craziness.  Either there's some rumor floating around we have no clue about or this is a massive blow-off top. 

    Pizza/Jabob – Seems to me it shows the system works.  That guy should have the sprouts.  

    Hypocricy/StJ – I think that's officially our form of Government. 

    SPY/Cdel – I'm inclined to wait for BBook but 1,375 breaking is probably game over.  

    Not getting much action from the Financials on this big market rally.  Gold not moving.  Nor is silver or copper but Nat gas ($2.91) and gasoline ($2.90) doing well.  

    And what Pharm said! 

    Wow, that CNBC conference sounds like a funeral.  

  71. TSLA – commentary re their journey through the Valley of Death.

  72. Pharmboy/ Cody Willard is short MS and JPM due to LIBOR scandal. Thinks this may be the beginning of a little unraveling in the financials.

  73. AVEO – rolling the July $12.5 Calls to the $15 Calls for 10c credit.  About even on the calls, up on AVEO.  Waiting on selling the puts.

  74. MS/Amalfi – I have been short MS for 2 months.  Their balance sheet is down right scary.

  75. This set up is nearly identical to what happened this time last year.  I was well net short this week last year and capitulated only to have the market fall off a cliff starting on July 21.  Just for kicks I overlayed a chart of the S&P500 from 2011 over a chart of 2012 by trading day.  The pattern is creepy.

  76. Morning All – Ben just said that 3% inflation would not be acceptable to the Fed and neither would 1%.  So he does not expect to inflate ouselves out of the debt it seems. 
    Jjennings – Would you mind sharing that chart?  TIA



  79. AAPL 605 calls, July.  4.75 or better.  Let's see if they use AAPL to move this up again.  Out at 4

  80. actually changing the stop at 606 on AAPL, not 4. 

  81. AAPL refuses to cooperate with the plan though….



  84. Left coast sarcasm/Phil – that's hilarious, Phil – and I'm in that culture since I don't get sarcasm either. Your cross-coast adventures, including the surf shop, are really funny.

  85. S&P chart – I just downloaded closing prices from yahoo finance and plotted on a chart in excel.  Not sure how to get it to post here as when i paste it into the comment box it doesn't show up when I submit.

  86. Pharm—I missed your adj call on TEVA—would you roll the short July 40s today?


  88. jjennings – try pasting it into the word editor

  89. VIX remains my biggest concern insane complacency SPU flirts with the top of its trading range..vix shrugs… hard to believe things can unfold as they did last year – even though 2011 has provided an excellent roadmap to 2012… so far seems to be shaping up that way…ITS EERILY performance is even tracking last years!


  91. Angel:  Sunnis & Jews against Shi'ites?  Not that Israel doesn't hold a grudge against Assad, I suppose. But Hezbollah [of Lebanon] is Shi'a – why would Iran be attacking Assad, who supports Hezbollah, in favor of Sunnis?.  I dunno, Angel, seems Turkey would be more likely to help out on that one.

  92. Oil/Phil – are they getting contracts rolled at these prices?

  93. Good point JJ – Those who forget the past are condemned to repeat it.  

    Unacceptable/Ink – I love how everyone has a thing they won't accept but no one has an actual plan that takes into account everyone else's various concerns.  Europe's had a 2% inflation target for a decade – fat lot of good it did them…

    Oil does not want to let go of $90.  

    BHP/Angel – I thought that was strange too.  

    1:00 PM On the hour: Dow +0.84%. 10-yr +0.14%. Euro -0.23% vs. dollar. Crude +0.47% to $89.97. Gold -0.88% to $1575.45

    Bernanke Q&A: The Chairman admits to a "theoretical limit" on QE, noting if the Fed owns too much Treasury and agency debt, it would "greatly reduce market functioning." The Fed has yet to hit that point, he adds. There's always stocks!

    Chinese June home prices rose in 25 of 70 tracked cities falling in 21, the best result in 11 months, according to the government. The data matches private surveys which are also showing a turnaround in the housing slowdown. The news wasn't enough to help property shares, which fell 3.3% in Shanghai. TAO -1.3%.

    Property sales surge in China, buyers ignoring talk from Premier Wen Jiabao that Beijing will continue "unswervingly" with real estate controls. Sounding a bit too close for comfort to knife-catchers in Phoenix circa 2008, one buyer in Beijing jumps in, "afraid home prices would rise again." (see also)

    Harvard is taking a shine to natural resources - particularly timber (WOODCUT) – maybe at the expense of private equity and hedge funds, according to the normally secretive endowment chief Jane Mendillo. Of distressed credit in Europe, she's interested, but notes it's the hot new investment area and will take a pass for now.

    Dolby (DLB -1.4%) slumps after receiving a downgrade to Underweight from JPMorgan's Paul Coster, who thinks business will be ugly through 2013. Coster notes sales are weak for PCs, TVs, and other consumer electronics products Dolby collects royalties on, with smartphones the only major exception. Eric Savitz notes the downgrade follows warnings from Rovi and DTS, who also license their technology to electronics OEMs. Goldman is also bearish on Dolby.

    Google (GOOG) has sent out invitations for a July 26 Kansas City event that will likely feature the launch of its last-mile fiber network, which will deliver 1 Gbps connections to homes and businesses. Speculation has grown that Google, unhappy with thehigh cost of U.S. broadband relative to many other nations, plans to leverage its nationwide fiber backbone to offer services in other metro areas.

    Three lunchtime reads:

    1) Four reasons record dividends may not be so great for investors

    2) Consider 40-50% long-term equity portfolio allocation towards emerging markets

    3) Whither China?


  95. TEVA/Savi – I am doing nothing at this time.  A few days ago I noted to sell 1/2, or get out.  I am currently still in the position.

  96. beige book in 5 minutes?


  98. Oil/Scott – Down from 85Mb on order for Aug to 68Mb since yesterday with 3 trading days left to get down to about 15Mb so on track, I guess but after nat gas tomorrow is usually when we get the big drop.  


    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Aug'12 89.13 89.98 88.59 89.66 13:34
    Jul 18


    0.44 137850 89.22 68840 Call Put
    Sep'12 89.49 90.30 88.91 89.96 13:34
    Jul 18


    0.42 103287 89.54 287002 Call Put
    Oct'12 89.73 90.59 89.24 90.26 13:34
    Jul 18


    0.39 25502 89.87 88316 Call Put
    Nov'12 89.87 90.94 89.59 90.63 13:34
    Jul 18


    0.38 18640 90.25 69867 Call Put

    Beige Book sounds about the same as last time

  99. Pharm—--thanks—-yes, I missed your adj of a few days ago and am still in the short July—long Aug 40s

  100. jean-luc / ETF cheat sheet – Thank you! Very useful.

  101. Amazing (and profitable) kangaroo tail on CATY today. Amazing how they clean out the stops.

  102. Summary of Commentary on Current Economic Conditions by Federal Reserve District

    Prepared at the Federal Reserve Bank of Atlanta and based on information collected before July 9, 2012. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.

    Reports from most of the twelve Federal Reserve Districts indicated that overall economic activity continued to expand at a modest to moderate pace in June and early July. The Atlanta, St. Louis, and San Francisco Districts reported modest growth, while Boston, Chicago, Minneapolis, Kansas City, and Dallas described economic activity as advancing moderately. The New York, Philadelphia, and Cleveland Districts noted that activity continued to expand, but at a slower pace since the last report, while Richmond cited mixed activity.

    Retail sales increased slightly in all reporting Districts except Boston and Cleveland, where sales were categorized as flat, and New York, where sales softened. Of the Districts that saw an increase in activity, most noted strength in auto sales. In particular, auto dealers noted that demand for fuel-efficient vehicles continued to support sales. Tourism activity remained strong according to contacts in the New York, Richmond, Atlanta, Minneapolis, and San Francisco Districts.

    All District housing market reports were largely positive as sales and construction levels increased and home inventories declined. Rental markets continued to strengthen with rising rents being reported in Boston, New York, Atlanta, Chicago, and Dallas. Commercial real estate leasing and construction continued to improve as demand for multifamily units increased in Atlanta, Chicago, and San Francisco. However, both New York and Richmond noted a slowdown in commercial activity, while Philadelphia and Dallas held steady.

    Manufacturing activity continued to expand slowly in most Districts, and Cleveland, Atlanta, Chicago, and Kansas City cited slight increases in production levels. However, several Districts reported a deceleration in new orders, and the Philadelphia and Richmond Districts reported declines in shipments and orders. Demand for nonfinancial services remained generally stable in most regions. Richmond noted strong sales among professional, scientific, and technical firms, while Dallas noted strength in energy, legal, and audit-related services.Transportation reports were generally positive, with Kansas City noting an uptick in trucking activity, while Richmond reported increased port activity.

    Demand for loans, particularly those related to real estate, grew modestly in most Districts. However, both Cleveland and Richmond noted some weakness in loan activity. Credit standards remained unchanged in New York, Richmond, and Kansas City, while credit quality improved in Philadelphia, Kansas City, Dallas, and San Francisco. Agricultural production and pricing reports were mixed. While drought conditions have affected production in some Districts,others noted favorable conditionsChicago and Kansas City reported a significant deterioration of corn crops, which has pushed up prices since the end of June.

    All Districts conveyed that input prices had stabilized in recent months. Price pressures were described as easing in New York, Philadelphia, Atlanta, and San Francisco as energy costs declined. Wage pressures remained modest, except for highly skilled workers in information technology, health care, transportation, and manufacturing. Employment levels improved at a tepid pace for most Districts. Overall, Districts reported that their contacts remained cautiously optimistic about future business conditions.

    Not much change here other than less enthusiastic language.  The last BBook was a bit more optimistic with most outlook spun upwards.  This report has more of the tone of "hopefully we'll survive."  Not terribly encouraging…

  103. PhilI Will Survive

  104. DIA/Phil – what do you think of DIA puts for a hedge or downside play here?

  105. Long Put List – pumped up markets and low vix.. good time to shop long puts…

  106. My signals are giving a very clear signal: MM – Mixed Mess. Time for lunch and golf.

  107. I will survive…revisited…

  108. Pharmboy – The disco ball is a metaphor for what/who? :-)

  109. Pharm – are you holding your MS puts through earnings?

  110. Summary of Commentary on Current Economic Conditions by Federal Reserve District

    Prepared at the Federal Reserve Bank of Atlanta and based on information collected before July 9, 2012. This document summarizes comments received from businesses and other contacts outside the Federal Reserve and is not a commentary on the views of Federal Reserve officials.

    Reports from most of the twelve Federal Reserve Districts indicated that overall economic activity continued to expand at a modest to moderate pace in June and early July. The Atlanta, St. Louis, and San Francisco Districts reported modest growth, while Boston, Chicago, Minneapolis, Kansas City, and Dallas described economic activity as advancing moderately. The New York, Philadelphia, and Cleveland Districts noted that activity continued to expand, but at a slower pace since the last report, while Richmond cited mixed activity.

    Retail sales increased slightly in all reporting Districts except Boston and Cleveland, where sales were categorized as flat, and New York, where sales softened. Of the Districts that saw an increase in activity, most noted strength in auto sales. In particular, auto dealers noted that demand for fuel-efficient vehicles continued to support sales. Tourism activity remained strong according to contacts in the New York, Richmond, Atlanta, Minneapolis, and San Francisco Districts.

    All District housing market reports were largely positive as sales and construction levels increased and home inventories declined. Rental markets continued to strengthen with rising rents being reported in Boston, New York, Atlanta, Chicago, and Dallas. Commercial real estate leasing and construction continued to improve as demand for multifamily units increased in Atlanta, Chicago, and San Francisco. However, both New York and Richmond noted a slowdown in commercial activity, while Philadelphia and Dallas held steady.

    Manufacturing activity continued to expand slowly in most Districts, and Cleveland, Atlanta, Chicago, and Kansas City cited slight increases in production levels. However, several Districts reported a deceleration in new orders, and the Philadelphia and Richmond Districts reported declines in shipments and orders. Demand for nonfinancial services remained generally stable in most regions. Richmond noted strong sales among professional, scientific, and technical firms, while Dallas noted strength in energy, legal, and audit-related services. Transportation reports were generally positive, with Kansas City noting an uptick in trucking activity, while Richmond reported increased port activity.

    Demand for loans, particularly those related to real estate, grew modestly in most Districts. However, both Cleveland and Richmond noted some weakness in loan activity. Credit standards remained unchanged in New York, Richmond, and Kansas City, while credit quality improved in Philadelphia, Kansas City, Dallas, and San Francisco. Agricultural production and pricing reports were mixed. While drought conditions have affected production in some Districts, others noted favorable conditions. Chicago and Kansas City reported a significant deterioration of corn crops, which has pushed up prices since the end of June.

    All Districts conveyed that input prices had stabilized in recent months. Price pressures were described as easing in New York, Philadelphia, Atlanta, and San Francisco as energy costs declined. Wage pressures remained modest, except for highly skilled workers in information technology, health care, transportation, and manufacturing. Employment levels improved at a tepid pace for most Districts. Overall, Districts reported that their contacts remained cautiously optimistic about future business conditions.

    Not much change here other than less enthusiastic language.  The last BBook was a bit more optimistic with most outlook spun upwards.  This report has more of the tone of "hopefully we'll survive."  Not terribly encouraging

    Consumer Spending and Tourism

    Most Districts reported modest increases in retail spending on a year-over-year basis, but many reported slower growth in recent months compared with earlier in the year; however, Boston and Cleveland reported sales as flat, and New York cited softer sales. There were a few reports that high summer temperatures negatively affected sales. Sales of big-ticket household goods were strong in the Richmond, Chicago, Kansas City, and Dallas Districts, while sales were reportedly flat for home furnishings and major appliances in the San Francisco District. Boston reported that sales for furniture and electronics had slowed, and retailers in the New York District reported that home goods sales were weak. Reports from luxury-goods retailers were mixed. Firms in the Philadelphia, Atlanta, and Chicago Districts reported that sales of high-end goods remained strong, while retailers in the Kansas City and San Francisco Districts indicated demand had softened, and those in the Cleveland District noted that sales of luxury goods had slowed. Most Districts reported that vehicle sales remained robust. Demand was high for fuel-efficient vehicles in particular. Looking forward, merchants in the Boston and Philadelphia Districts were concerned that economic uncertainty could result in restrained sales growth, while retailers in the Cleveland District anticipated that the third quarter will be higher compared with year-ago levels. Kansas City noted that merchants there expected further strengthening in the coming months.

    Travel and tourism activity was reported as strong across several Districts. Hotel occupancy rates and revenue per room were robust in many areas according to reports from New York, Richmond, Atlanta, Chicago, and San Francisco. Attendance numbers were solid at attractions in various Districts, including theme parks in Florida and New York's Broadway theaters. Richmond, Minneapolis, and San Francisco reported that natural disasters had negatively affected bookings in some parts of their Districts. Dallas reported that demand for international travel was strongest for South America and Mexico destinations. Atlanta shared their contacts' concerns about the potential impact of economic and financial stress abroad and the effect it could have on international travel. That said, several Districts reported that the outlook among the majority of hospitality contacts for the remainder of the summer is good as hotel and convention bookings continued to exceed last year's pace.

    So much for betting against PCLN!   Interesting that day-to-day retail spending is poor but people are treating themselves to trips and shows.  

    Real Estate and Construction
    Reports on residential housing markets remained largely positive. Sales were characterized as improving in Philadelphia, New York, Richmond, Chicago, St. Louis, and Minneapolis, while home sales increased in Boston, Cleveland, Atlanta, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. However, reports on sales were mixed in the New York District, and gains in the Boston District eased from earlier in the year. New home sales were described as disappointing in the Philadelphia District. Construction increased in the New York, Atlanta, St. Louis, Minneapolis, Dallas, and San Francisco Districts, while reports from the Cleveland District said construction slowed. Most Districts reported declines in home inventories. Homes prices have begun to stabilize in some markets and price increases were noted in select markets. Boston and Atlanta noted that appraisals were coming in below market prices.

    Rental markets continued to strengthen by most accounts. Rising apartment rents were reported in the Boston, New York, Atlanta, Chicago, and Dallas Districts. Strong demand for rental units spurred increases in multifamily construction in the San Francisco District. Multifamily construction was described as strong in the Atlanta and Chicago Districts. Apartment construction is expected to pick up over the next several months in the Dallas District.

    Recent activity in commercial real estate markets has been mixed. Modest improvements were noted in Boston, Atlanta, and St. Louis and demand strengthened in the San Francisco District. Softer conditions were reported in the New York and Richmond Districts, while demand held steady in the Philadelphia and Dallas Districts. Nonresidential construction activity varied as well. Construction activity increased modestly in the Minneapolis and Kansas City Districts, while construction continued to gain momentum in the Boston District. Demand for commercial construction rose in Chicago, while activity was described as much improved from a year earlier in the Cleveland District. Construction was flat in the Atlanta District on a year-over-year basis, while activity had softened in recent months in the Richmond District. Overall, the outlook among commercial real estate contacts and contractors was slightly positive.

    About what we expected.  

    Manufacturing continued to expand in June and early July in most Districts, but at a more modest pace compared with earlier in the year. Several Districts reported that new orders had moderated since the last report, but the Philadelphia, St. Louis, and Kansas City Districts were more optimistic that new orders would rebound. The Philadelphia and Richmond Districts however, reported declines in shipments and orders. The passing of a transportation bill through Congress led contacts in the Philadelphia District to express interest in increasing their capital spending. Capacity utilization rates at refineries and petrochemical manufacturing facilities held steady in the San Francisco District, with weaker domestic demand being offset by growing exports. Meanwhile, manufacturers in the Dallas District reported operating at above 90 percent utilization rates to catch up with below-normal inventory levels.

    The San Francisco District noted continued strength in semiconductor production, while the Dallas District said sales at high-tech manufacturing had decreased since the last report. Expectations from high-tech manufacturers in the Dallas District were that growth would remain flat to slightly weaker through year's end, a change from earlier in the year when most contacts anticipated a pick-up in the second half. Overall, most Districts reported a moderation of expectations among their manufacturing contacts.

    Hiring at manufacturing firms continued to vary by District. Kansas City said that fewer plant managers were planning to hire, while the St. Louis District reported plans for plant expansions later in the year. The Dallas District cited particular strength in food production, citing contacts who said they planned to add several new workers. However, makers of food products in the Philadelphia District noted a falloff in demand. Cleveland and Chicago noted that automobile production remained a source of strength, with contacts from the Chicago District reporting that there was an increase in research and development activity.

    This has turned worse and should be a very big concern that optimism about 2nd half has faded away.  We're very near the market tops we had when people were much more optimistic – that's just fundamentally unsound….

    Nonfinancial Services
    Demand for nonfinancial services was generally stable to slightly stronger since the previous report. Richmond noted that revenue improvement was strong among professional, scientific, and technical firms. Strength in energy, legal, and audit-related services was noted in the Dallas District. Advertisers in the Philadelphia and San Francisco Districts reported strong revenues, and consulting and advertising contacts in the Boston District noted steady activity. Richmond and San Francisco reported that restaurants were busy, while food service contacts in Atlanta reported that demand had softened a bit.

    Transportation contacts reported that activity was generally positive. In the Atlanta and Dallas Districts, rail contacts reported strong shipments of petroleum and motor vehicles and equipment. The Richmond District reported increases in port activity with container volumes and tonnage at or near record levels. Input from logistics and trucking contacts was mixed. The Cleveland and Atlanta Districts noted softening volumes and less-robust forecasts for the remainder of the year. Kansas City's report cited an uptick in trucking activity, while San Francisco's report cited moderating growth in trucking.

    Banking and Financial Services
    Overall loan demand grew modestly in most Districts. New York indicated no change, while Richmond observed flat-to-weakening loan demand. Chicago, Kansas City, Dallas, and San Francisco noted increased commercial and industrial lending, but lending in that sector decreased somewhat in the New York District and was characterized as soft in Cleveland and Atlanta. Most Districts reported an increase in mortgage lending, with Dallas noting especially strong demand and a healthy backlog of loans. Refinancing of mortgage loans was steady or increasing in New York, Cleveland, Richmond, and Chicago, but Philadelphia noted a recent slowdown. Kansas City and Dallas noted some improvement in lending for agriculture and commercial real estate. The Atlanta, Chicago, Dallas, and San Francisco Districts observed steady-to-increasing demand for consumer credit, especially for auto loans, while consumer loan demand was somewhat weaker in Kansas City and little changed in Cleveland.

    Contacts in the New York, Richmond and Kansas City Districts reported that credit standards remained largely unchanged. Cleveland reported some loosening of auto lending guidelines, while San Francisco indicated credit standards were somewhat restrictive for businesses and consumer loans. Philadelphia, Kansas City, Dallas, and San Francisco noted general improvements in credit quality. Delinquency rates held steady or declined in the New York and Cleveland Districts. Banking contacts in the Cleveland, Atlanta, Dallas, and San Francisco Districts noted stiff competition for quality loan customers. The Chicago District noted uncertainty over the effects of U.S. fiscal policy actions was reducing their customers' demand for credit. Likewise, Dallas reported a slightly more pessimistic outlook than the previous Beige Book due in part to European debt issues and regulatory and political uncertainty.

    Not much here, pretty dull.  Dull is not really good but nothing bad either.  

    Agriculture and Natural Resources
    Agricultural conditions were mixed since the previous report. Several Districts noted areas of increased drought resulting in stress to crops and livestock, while rainfall provided needed moisture to parts of the Atlanta District. With high heat and drought cited as the cause, the Chicago and Kansas City Districts reported concerns for their corn and soybean crops, while the Minneapolis District reported that favorable weather conditions contributed to their corn and soybean crops doing well. The Kansas City and Dallas Districts reported drought-stressed pasture conditions, although the Dallas District noted much better crop conditions than this time last year. The St. Louis and Kansas City Districts reported better-than-expected yields for the winter wheat crop nearing completion. The San Francisco District noted further sales growth for many crop and livestock products, attributed in part to overseas growth, but suggested that this source of growth was decreasing. The Kansas City District cited rising export demand as the reason some hog producers expanded production. Agricultural price reports were mixed. While June corn prices were reported down on a year-over-year basis, reports of corn crop deterioration was noted by the Chicago and Kansas City Districts as having pushed corn prices sharply higher since the end of June.

    Several Districts reported that energy exploration activity had increased, with offshore prospects being aided by recent lease sales. Regions where coal production is prevalent noted that extraction had decreased over the last year with electricity generation shifting to natural gas. Contacts in many Districts shared expectations that natural gas prices will remain low in the near future. Corn producing regions reported that ethanol processing had decreased in response to the higher corn prices.

    Employment, Wages, and Prices
    Employment levels grew at a tepid pace for most Districts since the last report. The Boston, Cleveland, Atlanta, Chicago, and Dallas Districts said employment levels were flat to up slightly, with most contacts citing U.S. fiscal policy uncertainty or weak demand for their conservative approach to hiring. Kansas City said employers were reluctant to increase wages or hire full-time staff until economic uncertainty diminishes. A Richmond District employment agency contact noted an increase in temporary employment turning into permanent positions since the last report. The Atlanta District noted some smaller chain stores with low price points were expanding and hiring at a significant pace. Several Districts noted that employers were having difficulty filling highly skilled positions.

    Many Districts noted that wage pressures were minimal since the last report. Wage increases were mostly concentrated in highly skilled workers in information technology, health care, transportation, some professional services, and highly skilled manufacturing workers, according to reports from the Atlanta, Chicago, Minneapolis, Kansas City, and Dallas Districts.

    Price inflation was modest across most areas of the country. Lower input prices for various commodities were mentioned across most Districts and resulted in expectations of stable input prices in the coming months. Retailers and manufacturers in the Richmond, Chicago, and Dallas Districts noted a decline in cotton prices. Manufacturers in the Cleveland, Chicago, Kansas City, and Dallas Districts mentioned that steel and scrap metal prices have moderated. The decline in energy prices was mentioned in the Atlanta, Chicago, and Dallas reports as contributing to lower cost expectations. However, contractors and building contacts in the Philadelphia, Richmond, and Kansas City Districts noted increases in the cost of building supply materials. Richmond contractors said they were able to pass these costs through, but homebuilders in Philadelphia mentioned limited ability to do so.

    It does sound as though housing has finally bottomed but at such low levels that it's not going to help anyone. There's nothing at all bullish in this BBook but it does take a while for the commentary to sink in.  It's also not bad enough to require Fed intervention – a big problem for the bulls.  



  111. LLY/Pharm – i recall you were not overly impressed with LLY.. how come so strong?

  112. DIA/Scott – I always like DIA puts.  Long Put list worth looking over too (you are dead right – conditions are perfect) but usual suspects of AMZN, V, WYNN, MA….  

    Metaphor/Diamond – As the great Dr. Feud used to say: "Sometimes a disco ball is just a disco ball."  

  113. Phil/USO/QQQ/SPY
    Are we still on for your USO, QQQ and SPY trades from above or some adjustment required? I guess we are going to have an anti-stick.

  114. VZ – trying to go to the moon?

  115. Phil / BB Analysis – Thank you!


  117. LLY – strong because people are chasing the dividend….and don't realize of the patent cliff.

    Disco ball…..all things that 'appear' glittery…will come crashing down.

  118. Holding shorts on MS…damn straight.  Sept 13s.  I have been adding to them. 

  119. 2 pm power hour.  Sheesh.

  120. Has anyone made reservations for Vegas Hotel in November

  121. buying DIA puts, FB puts, and holding a goodly portion USO puts..

  122. Bonds don't care…FWIW.  TLT is up.  VIX has been crushed, yet again.

  123. Oops, my whole town seems to have lost power.  

    Lost my house and ran to SBUX and they are out too.   Not good situational 100 degrees.  

  124. Phil,
    Re long put list, what would be your top choices? If folks are broke wouldn't they be inclined to use their cc to get by, thus boosting rev for V/MA – at least in sht run before defaults hit?

  125. We need to all get Phil a back-up generator directly linked to his command center for situations just like these.

  126. CLDX – Feb $5 Cs – 1.30.  Buying a few more.

  127. He needs that Hotspot generator someone posted yesterday!

  128. Long puts/8800 – I mentioned above, MA, V, AMZN, WYNN.  CMG always interesting with rising food costs and high expectations.  Have to look for some others. 

    Back-up/Ink – Funny how I'm finally home after two weeks and now have less than I had on the road.  

    Hotspot generator doesn't help much if tower is down.  I only have 3G – 8(

  129. Just bought SPY July 37 puts for .48 and USO july 34 puts for .55 seeing if we get our dip tomm

  130. Those were 137 puts on the SPY

  131. Phil
    The sun is being violent and may have knocked your power out. My TV lost all channels today and also had to reboot right after the TV memory loss. Hope they fix it soon 100##########!

  132. damn power failure!!
    could be the big boys!!!

  133. Fix it soon/Shadow – what, the sun?

    Well our town has been knocked back to a pre-industrialized society. Guess its a good time to finally go see Spider Man…

    As to short positions.   Risky to keep overnight, rolling to next week is safer.   

    Ill catch up on things later.  

  134. Power / Phil – There was just an article this morning on how our power grid will soon not be able to cope with the demand… You are one of the victims now. 

    But I am sure a privately financed solution is right around the corner… to make sure the Hamptons are not affected!

  135. They ran QCOM up, no?

  136. Phil
    I have a sun fix but the cost is a tad high, $1,000,000,000,000, not undoable in today's market! I assume it is a little too high for you.

  137. From Between the Hedges – "The major averages continue to power higher off their recent lows, however the rally remains poor in quality. Volume, breadth, leadership, big volume/gainers are all lacking. Some stocks that reported disappointing results are rising today, which is a noteworthy change. There is a growing disconnect between US equity action and the deteriorating macro environment that is eerily similar to last July, in my opinion. The macro likely must begin improving very soon for equities to avoid a similar fate into the fall."
    Pretty much on par with my post earlier today.

  138. I feel like being long right now is like driving 10/10's on the track when I'm only capable of 8/10's. Feels good while it lasts but sooner or later the divergence catches up with you and you spin out – or worse. I'm spending a lot of time, especially overnight when it's dark, in the pits. Scary market. 

  139. Bird,
    It's not just the market that's scary. It's how little of reality the people in charge can handle. I mean look at Congress asking BB if there will be a "double dip recession".  Can they possibly be that niave? Did anyone in 2005 really expect BB to say that housing prices were about to have a "major reset down"?  

  140. sparky / congress – Yep. To stay with my analogy it's like a driver on the track maintaining full speed through a red flag. And there's just not the U.S. Europe is out the news right now not because they're out of the woods – they're all on vacation.

  141. And the uptrend channel stays intact. To keep it up, we'll need Dow 13,000, S&P at 1400 and Nasdaq at around 3000. That would be remarkable given the macro background!

  142. FAS Money – will we be closing/rolling the 90 calls tomorrow, or waiting until Friday?

  143. boltdude  –  We'll always have Friday …

  144. jean-luc / charts – Thanks very much for posting these every day. Looking at my charts the highs are accompanied by decreasing momentum and the lows by increasing momentum. We're going to have a lot of field day when this thing blows.

  145. Delete "…lot of…" in the preceding post. It's cocktail hour. :)

  146. Thank god for cocktail hour !

  147. PeterD / Q on Strange trade on RUT
    I just want to make sure the trade you listed today is the correct one.
    We had already sold 10 of the Aug -670/+640 Bull Put spread.  The trade you posted today:
    "With that, let's sell 10 RUT AUg 700 puts ($1.15), and buy 12 Aug 670 puts ($0.55).  This is only 13% OTM, so a bit risky if you don't have Portfolio Margin."
    This would actually close out the -10 670P and leave us +2 670P.  Leaving the a really wide bull put spread, -700/+640, with 2 670long puts in the middle.  Is that what you were going for?    

  148. I really hate that I can't edit my own posts.  

  149. Sunspots
    Last night I had an experience I've never had with my cell phone (10 years / T-Mobile).
    I got an onscreen message saying :

    "Auto update of time and date are not available".
    We were having an electrical storm at the time (flash lighting, no rain or wind), what some people refer to as "heat lightning".
    Go figure.

  150. My power just came back on.  

    Man this infrastructure is falling to pieces.  I can't believe they wasted half that Spider-Man movie telling yet another origin story – what BS!  I guess they like origins because they are cheaper to shoot than the action but give me a break – 20 minutes of IMAX 3D of Peter Parker's high school and another 20 minutes of his home in Queens for what, the 3rd time in 5 pictures?  Will the new Superman tell us how a baby came from Krypton again?  It was $65 for 4 tickets to IMAX (empty at 4:45 show) – makes me feel very good about my 80" TV as that has caused me to cut my movie-going by 50% this year.  

    Dollar down below 83 now and Futures are up 0.24%.  Good for our still-bullish Income Portfolio but not so much for the short-term ones with their bearish bets.  If tomorrow is an up day – it's not too likely Friday will be down for expirations.  

    Sun/Shadow – Just have Bernanke cut you a check.  I hear he takes IOUs as assets.  

    Last year/JJ – Yep, very hard to enjoy the rally when it seems so baseless.  

    Big Chart looking bullish with all these break-outs.  Maybe another test of our early-month highs.  

    FAS Money/Bolt – We'll see how XLF looks tomorrow but usually there's too much premium to roll early.  

    Editing/Burr – You need to do that BEFORE you hit submit.  If everyone could edit posts – it would be chaos since we all read linearly.  Also, to maintain integrity, I almost never edit anything I've submitted other than, at times, a numerical error that I catch in time to prevent people from reading a trade incorrectly.  Other than that, I just never feel right about editing a comment that's been posted already.  I certainly don't want people thinking they have to be re-reading my comments in case they changed!  

    At the close: Dow +0.8% to 12909. S&P +0.67% to 1373. Nasdaq +1.12% to 2943.

    Treasurys: 30-year +0.13%. 10-yr +0.1%. 5-yr +0.1%.

    Commodities: Crude +0.72% to $90.19. Gold -0.78% to $1577.05.

    Currencies: Euro -0.1% vs. dollar. Yen -0.34%. Pound +0.01%.

    Market recap: Stocks added to yesterday's gains, sparked by a rally in tech stocks after Intel's better-than-feared report andBernanke's reiteration of the Fed's readiness to inject more stimulus while saying the U.S. economy likely won't slip into recession. Oil rosefor a sixth straight day after supply data; Treasury prices inched up. NYSE advancers led decliners three to two. 

    The sector ETFs most above their 200-day moving average are all defensive plays, notes Reuters' John Kozey. Health Care (XLV) is 8% above, Consumer Staples (XLP) 7% above, and Utilities (XLU) 6% above. YTD performance vs. SPY, which is right at its 200-day moving average. 

    Leon Cooperman doesn't expect a U.S. recession and corresponding bear market in stocks; in fact, he thinks stocks in general are underpriced and will climb. He especially likes these 10:COFESRXGCIHALKMIMETQCOMWPIWU and non-U.S. pick AIA Group. Better take notice: His Delivering Alpha picks a year ago look prescient now.

    Former Treasury secretaries (and Goldman co-heads) Henry Paulson and Robert Rubin may have served under separate political parties, but they both agree on one thing: Politicians have to, and likely will, avoid the fiscal cliff. If not, the consequences will be dire. Economists estimate damage to the U.S. economy would exceed more than $500T and shave several points off domestic GDP if nothing gets done. This is a fiscal crisis this time, not a financial one, says Rubin, and it needs a policy response.

    Europe is in the "most critical stage" of the deleveraging process, according to Bridgewater's Quarterly Report, with debt implosion one possibility or monetization and currency collapse the other. A "beautiful deleveraging" - a combination of default, redistribution, and monetization (a la the U.S.) is still possible, but steps taken so far remain well short of what's necessary.

    A nice in move higher in the broad averages leaves the big banks behind. Hit particularly hard is Bank of America (BAC -4.4%), which delivered a nice headline number, but the particulars of itsunderlying business (and future liabilities) leave less to be excited about. Reporting tomorrow is Morgan Stanley (MS -2.7%)

    Regulators are focusing on HSBC (HBC), Deutsche Bank (DB), Societe Generale (SCGLY.PK), and Credit Agricole (CRARY.PK) in their Libor investigation reports the FT. Investigators are checking the links between traders at those 4 banks and a Barclays trader who apparently orchestrated the manipulation effort.

    General Motors (GM +2.4%) shares were strong after J.P. Morgan initiated coverage of GM and Ford (F) at Overweight (III). "Our positive outlook balances a challenging environment in Europe with the healthiest North American automotive industry in decades and significant opportunity in emerging markets," the firm said in setting price targets of $29 for GM and $13 for Ford.

    Analysts are slashing predictions of a copper glut as producers from Chile to Indonesia contend with aging mines and strikes at a time of record demand. The global surplus will total 18.5K metric tons, according to a Bloomberg survey, 85% less than a January forecast of 124K tons; the survey also says prices will rally as much as 14% to $8,700/ton by year's end. 

    Chesapeake Energy's (CHK -0.1%) largest shareholder declares the company's leadership controversy "moot" and praises its revamped board as "one of the best and most vested independent boards we have seen." On Aubrey McClendon, Southeastern Asset "arrived at a different conclusion than the image currently portrayed by short sellers and much of the media."

    Kinder Morgan Energy Partners (KMP): Q2 EPS of $0.37 misses by $0.10. Revenue of $1.85B (-4.4% Y/Y) misses by $350M. (PR

    More on Kinder Morgan Energy Partners (KMP): Q2 net earnings fell 33% Y/Y as the company posted losses related to fair value impacts related to discontinued operations. However, the company raised its quarterly dividend by 17% to $0.35 per share from $0.30, reflecting the benefits from a rush into U.S. alternative-shale fields and increasing demand in Asia for coal used in steel making at its coal export terminals. Shares -0.2% AH. 

    Kinder Morgan Energy Partners (KMP) ups its quarterly cash distribution per common unit to $1.23, a 7% increase over Q211, and up from $1.20 per unit for Q1. This marks the 44th distribution increase since current management took over in February 1997.

    Royal Dutch Shell (RDS.ARDS.B) has spent $4.5B since 2005 preparing to explore for oil off Alaska’s north coast, and U.S. taxpayers may end up paying almost as much to supervise future operations in the region. As companies move, so must the Coast Guard, but it is ill equipped for the Arctic and may need at least $3B in icebreakers and other equipment.

    Syria's civil war escalates in the wake of today's bombing deaths of three top military and security officials including Pres. Assad's brother-in-law, and analysts say the fighting could spill into the oil market. The fall of Assad could increase ally Iran's sense of isolation and encirclement, prompting it to test a nuclear device and lead to skyrocketing oil prices.

    CHINA!!! New Oriental Education (EDU -19.1%) slumps again after Goldman Sachs suspends its rating due to a previously-announcedSEC investigation and Muddy Water sets it short-selling sights on the financials of the company.

    A bevy of Street analysts weigh in on Vivus' (VVUS +11%): Cowen says Qsymia has "considerably better" efficacy over Arena's (ARNA -7.5%) Belviq. Brean Murray says the approval came clean, without any harsh restrictions. Jefferies – after initially being negative on the stock – calls the FDA decision a "major win" for the company and upgrades the shares to Underperform. Wells Fargo is a bit more cautious, saying that despite the big win, the company still faces reimbursement challenges, a restrictive distribution network, and patient compliance.

    American Express (AXP): Q2 EPS of $1.15 beats by $0.05. Revenue of $8B (+5% Y/Y) misses by $80M. Shares -0.6% AH. (PR

    More on American Express (AXP): Net income of $1.3B +1% Y/Y. Cardmember spending +9%, below the double-digit levels of recent quarters. Managing expenses remains a focus "given the uncertain economic outlook." Marketing, rewards, and employee pay were all lower than a year ago, but offset by higher "occupancy and equipment" costs, leaving total expenses +2% Y/Y. (PR)

    Capital One (COF): Q2 EPS of $0.16 may not be comparable to consensus of $1.42. Revenue of $5.1B (+26.6% Y/Y) in-line. Shares -0.7% AH. (PR)

    eBay (EBAY): Q2 EPS of $0.56 beats by $0.01. Revenue of $3.4B (+23% Y/Y) beats by $40M. Shares +1.1% AH. (PR)

    More on eBay's Q2: Marketplaces business organic growth rate up 15% Y/Y, excluding effect of foreign exchange. PayPal saw revenue increase 26% Y/Y and active registered accounts rise 13% to 113.2M. Merchant Services revenue 23% higher Y/Y to $23.1M. Expects Q3 net revenue of $3.30B-$3.40B and full-year net revenue of $13.80B-$14.10B, largely in-line with analyst estimates. Shares+4.1% AH. Earnings conference call upcoming (webcast). (PR)

  151. IBM (IBM):
     Q2 EPS of $3.51 beats by $0.09. Revenue of $25.78B (-3% Y/Y) misses by $500M. Expects 2012 EPS of at least $15.10, above consensus of $15.06 and prior guidance of at least $15. Shares +1% AH. (PR)

    More on IBM's Q2Forex impacted revenue by $1B. Free cash flow was $3.7B, below net income of $4.1B. Services backlog closed at $136B, down from $139B at end of Q1. Software revenue growth flat Y/Y (+5% in Q1), services -3%, and hardware -9%, with server, storage, and chip sales all declining. EMEA revenue -9%, offsetting slight growth in Americas and Asia-Pac. EPS beat fueled by 120 bps Y/Y increase in gross margin to 47.6%, and $3B worth of stock buybacks. IBM +1.7% AH.

    Sallie Mae (SLM): Q2 EPS of $0.59 beats by $0.05. (PR)

    Yum! Brands (YUM): Q2 EPS of $0.67 misses by $0.03. Revenue of $3.17B (+12.5% Y/Y) beats by $50M. (PR)

    Chip stocks are staging a big rally (SOXX +3.5%) thanks to Intel's (INTC +3.7%better-than-feared Q2 report and guidance. Deutsche and Credit Suisse think Intel is setting the bar low for 2H12, and UBS expects rising server CPU and ultrabook sales to keep margins healthy. However, other firms express worries about macro conditions, a strong dollar, and slowing emerging markets growth. (more) (transcript

    Wireless chipmakers are moving higher after Qualcommand Skyworks post earnings and guidance that were better than many expected, given widespread reports of slowing smartphone growthand component order cutsTQNT +3.5%RFMD +2.6%CRUS+1.6%OVTI +1.5%INVN +1.6%.

    Qualcomm (QCOM): FQ3 EPS of $0.85 misses by $0.01. Revenue of $4.63B (+28% Y/Y) misses by $50M. Expects FQ4 revenue of $4.45B-$4.85B and EPS of $0.78-$0.84, below consensus of $4.9B and $0.89. Shares -1.7% AH. (PR)

    More on Qualcomm's FQ3: 141M MSM baseband chips shipped, below guidance of 144M-152M. Only 134M-142M shipments expected in FQ4. ASP for royalty-bearing devices was $226-$232, above FQ2's $207-$217 (due to strong iPhone/Samsung sales in March quarter). Slightly lowering 2012 guidance for royalty-bearing devices to 875M-935M.  Free cash flow $658M vs. net income of $1.49B. $617M of shares repurchased. QCOM +2.5% AH, investors clearly priced in weak guidance. (PR)

     Verizon Wireless (VZVOD) has added 4G LTE coveragefor 33 new markets, and has expanded coverage for 32 existing markets, including some big ones. Verizon says it's on track to provide LTE to 400 markets by year's end, up from a current 337. By contrast, AT&T currently offers LTE in just 47 markets. Sprint, which until now has been relying on Clearwire's WiMAX 4G network, just began providing LTE in 15 markets. 

    User discontent with Facebook's (FB +2%) Timeline feature has led to declining customer satisfaction, claims research firm ACSI. Its latest consumer survey gives Facebook a score of 61, down 760 bps from the year-ago period. Of course, customer satisfaction andcustomer usage aren't the same things - Google+ scored a 78, and AOL a 74. But data has emerged recently suggesting Facebook's U.S. consumption has hit a plateau.

  152. Tesla
    couple weeks ago my brother and I were stopped at a light on a "sorta" highway" (occasional stoplights, but lots of 50mph zomes.
    I see a somewhat "exotic" car coming up on my left (I was stopped in the right lane).
    I'm always interested in exotics, so as it was coming up, I was trying to make it..   Lambo? No. Ferrari? No. What could it be? Kit car? no way.
    So even as it is sitting next to me, I still couldn't figure it.
    I had just read about the Tesla Roadster a week or so before, as it turns out…..
    So, the light changes and this little white car does a nearly neck-snapping acceleration. As it was blowing away I looked and saw "Tesla" on the rear.
    I have a 1999 Chrysler Sebring 2.5 V-6, mildly hopped up. I felt like I was in neutral, as I floored it, trying to keep up. He doubled my distance within well less than an eighth of a mile.
    I mention to my brother that it was an electric only car. Not only could he not believe it, "I" couldn't believe it. So he says "If that's an electric car, why isn't everybody making cars like that"?  I turn and say "because it costs 90 grand, dude".
    I STILL can't believe the acceleration that thing had.

  153. "Ken Block" gymkhana
    I hate to be the one always asking all the stupid questions, but…………..
    Is that video real? Or is it some kind of video game? Phil, sounds like you know about it, any insight you can shed to this midwesterner who is a little behind the times?
    Very hard to believe. Is it  all CGI? Or is it all real? Or a mix of the two?
    The "inside of the car" shots look mostly real, as does a lot of the "driving", but come on……..
    And the car had to be fitter with like at least a dozen camera's.
    But the credits at the end make it "look" like it was real (City of S.F. , etc.)
    And those "sideways" aerials where the car is high in the air and landing nearly sideways? Really? And the front suspension TOTALLY bottoms out on a lot of the "jumping" scenes. How many shocks / struts / steering components did they replace?
    I mean, I know there are some awesome drift drivers out there, but he missed so many of those barriers by INCHES. Hard to believe anybody is that good.
    I'm not really up on pop culture, but I've never heard / seen anything like this. If it's real, it seems like he could be the star of a remake of a full blown hollywood feature movie like "The Italian Job", (great movie, with three genuine hopped up Mini's). The special feature on the DVD showed the actors actually learning how to drive (and crash) Mini's (including Charlize Theron, woo hoo!).  If memory serves, they crashed several (unintentionally) and by the time shooting started, they had only the three left..
    If that was real, they had like 100 camera's set up to get all those "side shots".
    Oh, and at least one helicopter.
    And how do you fit 650 HP in a car that size? Supercharger? Nitrous?
    And how much insurance did it take for him to scream around downtown past all those glass storefronts? Buffet doesn't have that much insurance.
    Please, if anybody knows if that was real or not, please let me know. I can't believe I didn't know about this.
    I'm going to hit the "Google machine" to see if I can learn more about it.
    Thanks much.

    Sorry, i should have said rykroma sounds like he knows something about it, not Phil.

  155. Well, according to Wiki, it's all legit.

  156. Burrben,
    That's correct.  We'll sell more later, so not too worry about the large gap.  TOS did close out some of my 670 short puts when I put on the trade.

  157. TESLA – TSLA 
    I can say after test driving the Tesla Roadster and the Model S Performance. Both cars are incredibly quick (0-60mph in 3.9 or 4.4sec). It's an instant on acceleration that brings a smile to your face and catches you by surprise the first time you floor it!
    Elon Musk stated we will likely see a battery tech improvement when they launch the Gen III car (BMW 3-series competitor) in 2015. This car should be better priced for the masses. But between now and then they are selling their powertrain to Mercedes. Lots of fun cars in store for the future!

  158. selling the powertrain to Mercedes
    That bodes well for the future
    I think I read that they need a lot of money to implement further production and resarch

  159. resarch=research

  160. Yikes big ugly miss by MS $0.16 (ex. accounting BS)  vs. $0.43 expected.  Pharmboy shoots, he scores!

  161. Good morning!

    Up and up the markets go – where they stop, no one knows.  

    QE fever is gripping the World again as Bernanke's comments (that the Fed has "some room" for more QE) are being spun to Asia and Europe that QE3 is right around the corner and bad news is good news again.  

    I guess we underestimated how many times Global investors can be fooled by the same old song and dance.  

    While I'd love to join in, I'm reading a very different song list:  

    • Spain and Italy are not participating in the recent equity rally, falling -3.2% and -1.9%, respectively, over the last week.
    • The Bloomberg European Bank/Financial Services Index is is -1.9% lower over the last 5 days.
    • Telecom, Bank, I-Banking, Homebuilding, REIT, Education and Airline shares are under mild pressure, falling more than -.5%.
    • The UBS-Bloomerg Ag Spot Index is up +26.0% in about 6 weeks.
    • The 10Y T-Note Yld is falling another -2 bps to 1.49%.
    • The Shanghai Property Stock Index is down -7.0% in 9 days despite China stimulus hopes.
    • The China benchmark Iron/Ore Spot Price Index has broken down again technically, falling -14.1% since April 13th.
    • China Hot Rolled Steel Sheet Spot Index is also picking up downside steam, falling -19.1% since Sept. 14 of last year. 
    • The Germany sovereign cds is rising +.8% to 75.16 bps, the France soverein cds is jumping 4.8% to 168.91 bps, the Spain sovereign cds is up +2.1% to 576.67 bps, the Italy sovereign cds is gaining +1.3% to 511.33 bps, the UK sovereign cds is gaining +2.2% and the Israeli sovereign cds is jumping +5.0% to 159.0 bps. Italian/German 10Y Yld Spread is rising +1.3% to 487.45 bps and the Spain 10Y Yld is rising +2.0% to 6.96%. 
    • US weekly retail sales have decelerated to a sluggish rate at +2.0%, which is the slowest since the week of April 5th of last year.
    • US Trucking Traffic continues to soften. 
    • Citi US Economic Surprise Index has fallen back to late-Aug. levels.
    • Lumber is -4.0% since its March 1st high despite improving sentiment towards homebuilders and the broad equity rally.
    • MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season.
    • The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. 
    • China Iron Ore Spot has plunged -29.0% since Sept. 7th of last year. 
    • Shanghai Copper Inventories have risen +165.0% ytd. 
    • Oil tanker rates have plunged recently, with the benchmark Middle East-to-US voyage down to 25.0 industry-standard worldscale points, which is the lowest since Oct. 2009
    • The CRB Commodities Index is now down -18.8% since May 2nd (and testing the 50 dma) of last year despite the recent surge in food prices.
    • Spanish and Italian yields are back in the danger zone.
    • Copper, lumber and the euro currency remain in intermediate-term downtrends.
    • The 10Y T-Note continues to trade too well, which remains a big red flag. 
    • Complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. 
    • The European Investment Grade CDS Index, European Financial Sector CDS Index, Spain sovereign cds and Italian cds, among others, have given back little of their April/May gains and appear to be consolidating before another push higher.
    • The Citi Eurozone Economic Surprise Index is at -68.90 points, which is near the lowest since mid-Sept. of last year, when the Dow was below 11,000. 
    • Massive tax hikes and spending cuts are still yet to hit in several key eurozone countries that are already in recession.
    • The European debt crisis is also really beginning to bite emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades.

    There is a growing disconnect between US equity action and the deteriorating macro environment that is eerily similar to last July.

    Still plenty of laggards to grab if we keep going up but I'm not ready to commit cash to this mess just yet.

    Oil $91.50 this morning, though – that's amazing but gold still $1,587 is a big disconnect.  GDX still very cheap and, if the rally is real, that's a play we should look at.  

  162. OIL up almost 2.50 since that little drop after inventories.

  163. Phil/Wall of worry
    Europe has disappeared from the media landscape; the US is the most attractive and SAFEST destination and we are in a pro-cyclical election campaign. The last several weeks has the wall victorious.

  164. Ooooo…would have been a REALLY nice day if the market broke down after MS earnings.  Those 30 Sept13 puts would have been a ripe juicy peach!  Lot's of time to ripen though…
    Thanks Pharm!!!

  165. PHil is it worthwhile to DD on the USO puts, or roll to August…I know you mentioned to DD at .34 but with expiry tomorrow and oil going up…wondering what's the best plan…TIA

  166. Jerconn  / USO – I still have them, too, but with more conflict news coming out ( in Phil's comment above, and talk like this: I'm thinking it's time to cover and lick my wounds.  There are probably safer shorts to switch to.  Any thoughts?  It's going to be a relatively painful open for me.
    Newbie / Ken Block – Yep.  That's all real.  Find 1-4 on youtube, too.  His car is easily a million dollar Fiesta.  He founded DC shoes, and apparently has some good management in place so he can spend his time on other things.  Big turbo and minimal restriction in the engine.  Cram enough fuel and air into the cylinder, light it on fire, and it will move!  It's amazing how inexpensive big HP is these days.  You can buy anything with a V8, install a $5000 supercharger kit on it, and bam – 600 HP.  Then you'll learn what the weakest link in the drivetrain is.

  167. PHil – if GDX is cheap, then so is GDXJ, and it packs a more powerful wallop, the juniors really zoom when they go…would it make more sense to play them? 

  168. rykroma – yeah me also, I've got DIA puts expiring tomorrow that aren't going to look good today unless the market reverses course, which could happen…and you are correct about more conflict news, tho exactly the theory we all have (oil up if Iran attacked, right?) is the one that could prove to be false…the Saudis and others have workarounds if Iranian oil isn't available…like to get Phil's take on that…

  169. Wow, check out MLNX, up 42%…