1 C
New York
Thursday, March 30, 2023


TGI Fed(s) – Promises, Promises


You made me promises promises

You knew you'd never keep

Promises promises

Why do I believe

All of your promises

You knew you'd never keep – Naked Eyes

Wow – what a party!  

The former Vice-Chairman of Goldman Sachs (Draghi) says everything is fixed and the global markets go flying – what's not to trust?  Would anyone form GS ever lie to us?  Would GS be involved in manipulating the Global Markets – of course not!  

Now that I've fulfilled my obligation to get my mother back unharmed – let's get real.  Draghi said the violent spike in bond yields in recent days was hampering "the functioning of the monetary policy transmission channels" – the EXACT expression used to justify each of the ECB's previous market interventions.  

Yields on Spanish two-year debt plunged 72 basis points to 5.47% in barely an hour, with comparable moves on Italian debt – easing the pressure before a string of debt auctions in Rome over coming days. The MIB index of stocks in Milan surged by 5.6%. Madrid's IBEX rose 6%, the biggest jump in two years, led by an explosive rise in bank shares.  Mr Draghi's comments came as Spain claimed backing from France and Germany for activation of the eurozone's rescue fund (EFSF) to buy Spanish bonds, though this would require calling the Bundestag's finance committee back from holiday for a vote. Action by the EFSF would provide "political cover" for the ECB to join the fray in a two-pronged attack.  "We're firing on all cylinders: that is what has ignited the markets," said Hans Redeker, currency chief at Morgan Stanley.

Joint statements from Madrid, Paris and Berlin said market turbulence "does not reflect the fundamentals of the Spanish economy, or the sustainability of its public debt".  According to Ambrose Pritchard, "the wording seems scripted to clear the way for intervention."  Of course, now it's time to put up or shut up as the Fed meets next week and the ECB has their pre-holiday meeting next week as well so it's going to be action by next Friday or none until September.  Marc Ostwald from Monument Securities said Mr Draghi's words were "cheerleading bluster", while Gary Jenkins from Swordfish called them "a bluff to get through the summer".  

As far as bluffs go, it's a good one.  And why not, if this were a poker table, Draghi has the second biggest stack of chips at the table, next to Bernanke and then there's the BOJ, the BOE and the PBOC – and you – and Draghi just put the bears all in on the ante – he doesn't even need to bet yet!  

Needless to say, the bears quickly folded yesterday and the Global Markets took off, bringing us right back to the highs we had when we had that ridiculous rally at the end of June – that was also based on promises of more QE from our Central Banksters.  The fact that we then fell right back to the lows of July in the first 10 days of the month doesn't seem to worry traders (not "investors" at all!), who went into such a buying frenzy that EVEN JIM CRAMER thought it was overdone.  

"Mario Draghi may have given us the perfect opportunity to cash in on some gains," said Cramer.   "Every asset that investors had just given up on was suddenly roaring. But move fast, Cramer warns, because this kind of optimism never lasts. Germany’s “iron chancellor,” Angela Merkel, will always be there to “pull the rug from underneath.”"  While I find it very disturbing to have to agree with Cramer – he's making perfect sense here.  

To that end, we added a bullish spread on the Russell to take advantage of possible ACTUAL stimulus over the weekend or next week.  We're using a very aggressive bull call spread on TNA and tempering it with the sale of short puts in stocks we would like to buy anyway – my trade idea from Member Chat was:  

With the S&P over 1,360, it's time to go bullish on the RUT (playing it to catch up).  I think the Futures can be played over the 775 line (now 773.30 on /TF) but the fun play on stimulus is the TNA Aug $49/54 bull call spread at $2.20, selling something you want to own in a downturn like CHK Sept $17 puts for $1.28 for net .92 on the $5 spread.  

  • SBUX might make some good put sales today – we'll have to see.  
  • DMND is back down where we like to sell puts, the Sept $15 puts can be sold for $1.35.  
  • MCD came down nicely, Jan $85 puts can be sold for $3.05 or 2014 $80 puts can be sold for $6.  Also odd on MCD, who were around $100 until March – is the March 2013 $92.50 calls at $2.75 – that's not a bad risk for a call position, especially if you pair it with the long put sale.  

Setting ourselves up for a potential 400% winner if the markets do move higher (and we simply stop out of the spread if the S&P fails it's Must Hold line at 1,360), which then provides an upside hedge for the bearish bets we intend to make and press into any rally that isn't backed by at least $500Bn in actual cash from the Central Banksters.    

8:30 Update: GDP came in at 1.5% vs. 1.2% expected and down from 2% last Q.  We expected more of a slowdown but prices up 2% gave us a nice APPARENT boost (same goods and services produced but at 2% higher prices is a $320Bn pop to GDP, which is the entire GDP of all but the top 30 Nations on Earth!).  Q4 2011 has been revised UP to 4.1% from 3% so we are slowing drastically but it doesn't seem as bad because, instead of being down 2.6% from 3% to 0.4% – the magic of the revision has us starting from a 1.1% higher base so we "soft land" at 1.5% – isn't math fun?

Of course, with an established 1.1% margin of error between revisions, it's very possible that our actual GDP is 0.4%.  Residential fixed investments (durables) were weak and Federal, State and Local Government spending were once again negatives as even our Government begins to run out of money.  As we expected, inventories increased substantially and added 0.32% to the GDP as the calculation is based on the assumption that everything in a warehouse eventually gets sold at the full price.  This is the kind of thinking that leads to nasty downward revisions in GDP later on! 

Today, however, the futures are loving it, as well as more positive noises about potential stimulus from the G20 so hopefully another nice rally this morning to add some shorts into but, as I said to our Members yesterday – you have to have a good mix of upside plays as well since this market can move 5% in either direction very quickly. 

So be careful out there and have a great weekend. 

– Phil


Notify of
Inline Feedbacks
View all comments

Oil Lines

R3 – 93.05
R2 – 91.76
R1 – 90.65
PP – 89.36
S1 – 88.25
S2 – 86.96
S3 – 85.85

Good Morning—–
Phil—-agreeing with Cramer!!!—I might have to leave earth   🙂

Phil—-do you like USG?—-I was thinking of selling some long dated puts as an offset to the TNA spread above as I have a relatively sizable position in CHK

Phil: thx for the who

Happy Friday!


Savi, we clearly woke up in a parallel universe this morning of Phil agrees with Cramer. Maybe we should try getting out of the other side of the bed. 

Savi: go back to phils musical interlude, start your day with a smile

Happy Friday! More iced coffee and another Who video. Great way to start the weekend!!

Loved the musical interlude. So how the heck did Townsend manage to walk and leap through that dancing crowd with his guitar cord intact?  

TLT – never got the roll to 129, anybody??

TLT / Edro – Didn't happen yesterday. The closest was $1.20 or so.

FLAN/ EXPE:  WOW! Thank You!

Star- Thanks for strategy- Walking away.

Phil – Yesterday I assumed you meant next week's 88 FAS Calls as the prices matched. You said $2.00 but that was good only at the open. They dropped right after that.

AMZN – Just got the roll from Oct 185s to Oct 200s for 1.80

AMZN /   P/E 269…right right… thats a big leap of faith for future earnings.  Well i bough back the 240$ Calls so at least i made some pocket change

DMND: I have a Sept 16/21 BCS that is getting close to the 50% shut it down rule.  Can i get some advice on how to roll this out?

The TLT roll to 129 for $1.00 was never there yesterday but the 126 are up 20% this morning. Is it worth risking over the weekend?

How about a roll to Oct 195 for 1.10?

PHil – looks like you mean DIA 127 puts, not calls…

PCLN wow – anyone selling calls on this pop?

I'm assuming DIA should be puts? We already have 20 Aug 126s, are we leaving those alone and adding 127s?

Wow, saved by the bell (well EXPE) for the PCLN puts. They will need to be rolled, but could have been a lot worse…

On a day like today where with so much time to go the FAS 76s are trading below half their original value, do you take them back and wait for the next breakdown to sell again, or just be patient and happy that all is on track? BTW it's been great fun so far

So what's the impetus for this BS rally #1042? Gold not reacting well if the stimulus talk is real. And they can't really think that we are back with that GDP number even though it beat the lame expectations?????

Stjeanluc.    Looks like you missed the momo trade I posted yesterday afternoon, a paired AMZN/EXPE earnings trade

Cmon Ford for gods sake..rally like the rest of them..

Newt–nice work! 

Momo / Lflan – I did miss that trade lflan! I'll update the portfolio now!

SQQQ – the Sept 60 call is 1.40, not .30 now.

well if you told me to short aapl and go long AMZN I would have called you crazy, but here we are…the market is very good at humbling us professionals…and the pundits are saying buy more AMZN now??? I just do not understand, oh well next trade:)

Update MoMo portfolio:

Great call on EXPE lflan… but join the club on AMZN!

FAS Money / Phil – This week's 88 were around $0.60 then… 

I think Romney is starting to unravel.  First he criticized London's security and questioned how prepared they were, London got pissed, Mitt quickly backtracked.  Then he came out and said that the firearms used in Aurora were illegally obtained and they weren't and there was no report that they were.  He just making up anything right now with the assumption that no one in the world is going to check on it.

Phil: AMZN short calls
I am in 1X Aug 335 C sold short and am ready to either roll to 2X the AUG 240's or keep the 235's and add  1X the 240's., which makes more sense from a premium sold perspective?  I love AMZN services and have 2 kindles but am perfectly willing to work this longer term with another DD to higher prices and rolling to later months as needed.  TIA

Phil: s/b Aug 235's

phil – "(/TF now 778.5 and, of course, we're done with the longs from this morning!).  "
I bought the TNA Aug BCS 49/54 based on your  call. Not sure what you mean by the above statement. Should I hold TNA or get out.

scottmi / Cramer is buying WY as well

Just what the world needed – more unrest:


Twice in the last five years, rising food prices triggered global waves of social unrest. With drought baking U.S. crops, another round of soaring, society-straining price spikes may happen in coming months.

But let's not worry about climate change….

With a chart about possible scenarii in food prices:

StJean — SQQQ — It looks like you have the Aug 50/60 prices on your chart, not the Sept. prices…I'm showing $2.95/1.30…

1 2 3 6

Stay Connected


Latest Articles

Would love your thoughts, please comment.x