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Try Again Tuesday – Three Trade Ideas That Make 300% if the Market Pops

Here we go again!

Last Tuesday we also had a big run-up in the Futures and I was skeptical, writing "Through the Roof or Smashed into a Thousand Pieces."  Two stocks we did like that morning were SBUX and ABX – and both did quite well this past week but we have generally turned more bearish since then as we languish along the top of our range (see Big Chart).

Yesterday, we adjusted our breakout levels to account for the weaker Dollar to Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816.  If we do manage to break over 3 of these 5 lines and hold them for a day – it will be time to switch off our brains and run with the bulls.  Since we are currently about 2/3 bearish – that means we'll need a few aggressive upside hedges to protect our bear positions – from Central Banksters printing money or MSM pundits promising the same….

Making money in a bull market is pretty easy.  My top trade remains FAS, which is a 3x bullish tracking index of XLF.  We are already long Financials in our FAS Money Portfolio but, as a new trade, you can play XLF to move up to $16.50 (up 10%), which should roughly give us a 30% increase in FAS (now $93) to $120 and that means that the Oct $105/115 bull call spread at $2 could return 500% at $10.  That's a nice, simple trade with no margin requirement too.  

If you do have spare margin, you can sell any put from our Twice in a Lifetime list (mentioned in yesterday's post).  One trade idea we added more recently was selling BBY 2014 $18 puts for $3.25, which is a net $14.75 entry on BBY (now $19.50) and what we really like about selling BBY is that buy-out offer on the table – if that goes through and it's over $15 (supposedly $25), then the short puts cancel like an early Christmas gift.  You can apply that cash to 1x or 2x the bull spread – if you buy 2x the spreads for $4 and sell 1x the puts for $3.25, then you are in $20 worth of FAS bullish spreads for net .75 with a 2,566% potential upside to the cash (there is about $5 of margin on the short puts).  

Another put I like selling is SHLD, who Barron's says can double to $100 a share.  We don't care if it doubles, we'll be happy if it just holds $32.50 (now $54.36) and we can keep $8 for selling the 2014 $32.50 puts (yes, really!) for a net entry at $24.50, less than 1/2 the current price.  I like that one so much, we're going to add 10 short puts to our virtual Income Portfolio and "risk" owning 1,000 shares for net $24,500 while collecting $8,000 up front.  

OK, so we have one trade that can make 2,566% if XLF takes off (pretty much a given if we actually get more QE).  Where else can we apply some leverage?  How about Japan?  I've mentioned EWJ before (last week, in fact), and the Sept $9 calls are up slightly (22%, on track for our predicted 100% gain in 38 more days) at .33 for the week but, for a QE/Stimulus/Irrational Exuberance trade – we want to go a bit further out.  The Jan $9 calls are .53 and we can sell on short BBY 2014 $18 put for $3.25, buy 6 of the EWJ Jan $9 calls for $3.18 and still have a net entry on BBY at just $17.93, which is 8% lower than the current price (which is 25% below the offer that's hanging out there).  If the Nikkei ETF makes it back to this year's high of $10.67 (last winter it was $11.28), then 6 of those calls will be worth $10.02, which is a pretty nice gain off an initial 0.07 net credit.

IWM WEEKLYI know you probably want a gold trade but I won't do that.  Gold is total BS at $1,600.  Silver at $28 – maybe, copper at $3.35 I wouldn't mind owning for 10 years but not gold, thank you.  I looked at FCX but it doesn't give a good pop and it can really get trashed in a sell-off so, for our last bullish trade idea (oh, that sounds ominous!) – how about a simple index play?  

The Russell (see Dave Fry's IWM chart) topped out at 860 last year and that's 7.5% higher than it is now and TNA is a 3x Ultra-ETF for the Russell at $53.50.  3 x 7.5% is 22.5% and 122.5% x $53.50 is $65 so that's our target for a bull run.  

Now we find a time-frame and, if we aren't rallying by October I would be in cash anyway so let's say the Oct $55/61 bull call spread at $2.50 is a nice, potential 140% gainer on it's own and, aside from the above offsetting bullish plays, we can bet that TNA doesn't fall below $42 (a 21.5% drop so RUT 745ish) and sell the Oct $42 puts for $1.90 and then we have a net .60 cost on the $6 spread and that's a lovely 900% upside potential if the Russell climbs 7.5% back to 860 – obviously, if we don't get QE and the Russell fails to hold 790 – it's going to be prudent to cut our losses there!  

Does this mean I'm flipping bullish?  Noooooooooo, not at all.  SHOW ME THE LEVELS – and then we can talk.  But, we had a big recovery yesterday and, although I still think it's BS – it's BS that's working for a whole week now so, as I said, we have to prepare to STOP THINKING and get more bullish.  Stop thinking about the drought, stop thinking about Unemployment, Housing, Iran, Gas Prices, Inflation, the Deficit, China slowing Down, the Euro breaking apart, etc.  This is the "wall of worry" the bulls say the market climbs and, gosh darn it, they were right in 2008 weren't they – we ignored a lot of the same things for months and months – until we didn't.  

But that's what our levels are for.  Once we are over them, they also tell us when to turn our brains back on and go short again but, until we break back under 3 of 5 (and we raise our stops along the way, of course) we can have lots of fun running with the bulls.   

Until we make our levels – these are just hedges for our bearish positions.  This morning we got a cumulative -0.2% GDP out of Europe and that's following a 0% print in Q1.  It takes two consecutive negative quarters to be officially considered a Recession so, please, let's not it a recession yet.  Although Germany held Europe up with a 0.3% GDP, that too was down from 0.5% in Q1 but the forward-looking ZEW Indicator fell from a terrible -19.6 in July to a HORRIBLE -23.5 in August for the fourth consecutive monthly decline.  Current conditions also fell 10% to 18.2 for July and, if I understand this quarter thing correctly, July is a month in Q3 and August is a month is Q3 and July is worse than June and August (in progress) is expected to be worse than July so I'm going to go out on a pretty sturdy limb here and say – RECESSION!!! 

And a Recession is, of course, TERRIBLE, which means, of course, it must be GREAT NEWS for the market since it brings on the QE Fairy.  So – if we're going to be investing against this data – we all need to practice saying "I do believe in fairies, I do, I do!"  It looks like Germany's top 1% may get a visit from the tax fairy as opposition leaders (who may become majority leaders soon if conditions deteriorate further) are calling for a 1% annual tax on ALL wealth and assets over $2.5M.  That's right, if you have $100M in assets, they want $1M – each year (well, just $990,000 next year if you only have the $99M left..).  This proposal is expected to raise an additional $14.25Bn a year as a tax on $1.4 Trillion in wealth from the top – now THAT's trickling down!  

Of course that's nothing compared to the 10% one-time tax proposed on all wealth exceeding $310,00, which would raise a cool $285Bn, or 9% of GDP.  Now, put yourself in a top 10% German's position and see how generous you feel about funding Greek, Spanish and Italian debt while you're figuring out which car to sell so you can send the Government and extra $30,000 this year!   

What's great about the US is – we don't have to do any of that stuff.  In fact, with the Romney Tax Plan, everyone earning over $200,000 gets a tax CUT and the suckers who earn less than $200,000 (no one we know) pay 1.2% MORE to cover it.  What could be simpler than that?  What sense does it make for our top 10% to pay $1.44Tn in additional taxes to balance the budget when we can have the bottom 90% pay it, not balance the budget and just give it to us?  Now THAT's a plan we can all get behind, right?  You silly Europeans do everything backwards!

Our plan in Member Chat this morning was to short the Russell Futures at 802.50 (/TF) and the Nasdaq at 2,732.50 (/NQ) and this opening pop should give us both.   Oil is almost at $94 and that's our normal shorting target (/CL) so it's going to be a very interesting morning as we press those bear bets right into the top of the range but today we plan to remember to go long at the EU close (11:30) as that's been a pretty reliable bottom each day. 

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  1. Oil Lines

    R3 – 96.01
    R2 – 95.07
    R1 – 93.92
    PP – 92.98
    S1 – 91.83
    S2 – 90.89
    S3 – 89.74

  2. Phil I am getting a bid of 7.25 of the Jan '14 puts for SHLD and don't see 32.50 for Feb or June?

  3. Phil – BBY.   I think you mean "puts" not calls..
     "selling BBY 2014 $18 calls for $3.25"

  4. Guys,

    How do I purchase a Bull/Call spread through Schwab (or can I?) Take Phil's suggestion of an XLF Oct $105/115 bull call spread at $2 . . Do I buy a put and a call one at the $105 strike and one at the $115 strike? Or is a Bull Call spread
     a specific trade that I'm not showing on Schwab?

  5. Bull/Call spread/marklis, It is when you buy a call on something you like and selling a higher call as protection. A bullish trade

  6. markilus –  I say this with the humblest voice.  If you don't KNOW what a bull call spread is, please please don't trade it.  You need to put in your time and effort and study and paper trade before entering positions.  If you don't understand the position, you can't manage the position when it goes wrong.  You need to understand the risk of the trade, how you would roll it, and when to close one leg and not the other. 
    Here is a bull call spread:

  7. wow gold & silver just got whacked!

  8. Cramer Home Depo Lowes
    This is the best of times for these 2. A house building surge that would help the economy wil not help them. Only want to be contractors buy there and weekend warriors. Builders need a service tha HD an L could never ramp up to, ON TIME DELIVERY! That includes masons, plumbers, electricians, and every other sub contractor. Those are the people that hire people. Basicly they are not billionairs.

  9. Phil, your advice —Looks like /CL could be a short at $93.5……

  10. Phil,
    good morning
    the FAS, BBY and SHLD ideas I'm this morning's 
    post….are you suggesting waiting until we are over our levels or go for it now?

  11. markilus:  Download Pharmboy's primer on options strategies and study the relevant sections.  It also helps to actually draw those little graphs by hand because it helps you remember the risk/return profiles.

  12. @Felipe
    The consistent error you continue to make is to presume that this is a single country. That the disUnited States is somehow a union. You've often said you don't see it becoming several countries any tiime in the next Millennium.
    Once you get past that, things will begin to make more sense as to why the top 10% don't give a damn about paying a fraction of their wealth to lower the debt and deficit.
    This is not and has never been one country in fact.  Only on paper.  And you know what you can do with paper.

  13. sorry meant OptionSage's primer on option strategies located here:
    (Pharmboy wrote the Tech. Analysis primer, my bad)

  14. Still trying to get my mind around the being bullish into a recession whether it is just Europe or possibly ours soon.  That would be the first time in the markets history that it would be going up into and during a recession.

  15. Phil:  V Sept 120's getting wacked this morning…. 

  16. Thanks guys – appreciate all the help and I'll take a look at the material

  17. Phil – do you like long VIX futures here? At least going into the meetings Sept 12th. Maybe long here and get out around the 10th?

  18. Phil: verticals/calendars
    Without jinxing myself I am going to say that I have found my niche selling strangles and naked puts and calls to generate the kind of income on the margin I have available.  As to vertical spreads I just always end up feeling kind of hamstrung.  I feel I need to improve how I handle these, particularly if I want to trade in an IRA with no margin. So, last month bto 5 TLT Oct 135P @ $8.45, sto 5 TLT Aug 130P @ $2.92, b/e $129.47, (my preference would have been just sell 130 calls in a margin account).  So now not sure if there is a better way to adjust this other than taking the gain and closing out, roll the aug 130 to oct 130 or roll it down to widen the spread? I anticipate TLT will continue to bob up and down over the next few months.  It is seldom that I buy an option because scaling into selling instead feels much more flexible but I know I need to improve my skills in this area.  TIA

  19. Income portfolio / Phil – I added the SHLD Jan 14 short puts to the Income Portfolio. They opened at $7.40 this morning which is the price I am using.

  20. Stjean, I believe we had a stop on SDS at .39.

  21. rustle123: positioning
    If you wouldn't mind could you share the basics of how you structure your holdings generally.  For instance do you mostly buy stock and cover with calls, sell naked premium, spreads, buy/writes with sold puts ?   I don't mean to be too specific but I would be curious what your general approach is since you obviously know what you are doing.  TIA

  22. I see two different puts at each of the strikes for SHLD, does anyone know why there are two and why they are priced differently?

  23. Good morning!  

    What lovely, lovey entries for our short positions – I hope people are taking advantage and not acting like deer in the headlights because the market  post half a point on a few million trades.  

    The FAS trade in the above post is, of course, my favorite bullish play and, if you offset it with something you really, Really, REALLY want to own – even if the market drops 40% – then you've got an upside play that pays 2,566% (25.6:1) if we have a proper rally so, no matter how bearish you are – we only need 2% of your cash in a trade like this to offset a 50% loss on the bear side.  

    Much as I hate gold (/YG), they do make a nice bounce play off that $1,600 line (now $1,600.80) – but it's very spikey – much worse than oil.  

    The Dollar is at 82.53 so bearish there, the Euro was rejected at $1.2385, now $1.2337, the Pound failed at $1.5275, now $1.568 and, of coruse, $1.57 is significant (and index bullish).  The Yen is flying (weaker) at 78.86 so I guess it's a Dollar-buying day for Japan and that's got the Nikkei at 8,995 with EWJ at $9.21.  

    I really don't know how long they can keep this game up but here we are again, up in the morning on a pre-market pump and selling off, probably until 11:30 and then we creep back up on ridiculously low volume for the rest of the day.  This will be the 6th consecutive day of doing this with a Dow range between 13,100 and 13,200 – that's a volatility-crusher right there! 

    Speaking of which, today the VIX is up 5% at $14.38 so, so far, our theory that the rollover pushed the VIX much lower than it should be is holding up.  We already have bullish VXX trades but notice the Sept $14 put on the VIX only fetches .18 but the $14 call is $4.60 so it looks like VIX $17 is a reasonable target (and the $17 puts are only $1.25 with the VIX at $14.40 – try thinking about that for a while!).  

    At the open: Dow +0.35% to 13216. S&P +0.4% to 1410. Nasdaq +0.35% to 3033.

    Treasurys: 30-year -0.75%. 10-yr -0.29%. 5-yr -0.12%.

    Commodities: Crude +0.77% to $93.44. Gold -0.7% to $1599.25.

    Currencies: Euro +0.09% vs. dollar. Yen +0.72%. Pound -0.02%

    10:00 AM On the hour: Dow +0.16%. 10-yr -0.25%. Euro +0.05%vs. dollar. Crude +0.92% to $93.58. Gold -0.75% to $1598.55.

    Market preview: Stock futures point proudly to a higher open after strong retail sales and despite the eurozone contracting. The S&P benchmark is +0.2%. Saxo Bank's Steen Jakobsen notes a major divergence in Dow industrial vs. transport, with bullishness entering "territory where complacency could mean a correction is due." Following earnings, Groupon is getting trashed 22% but Michael Kors races 12.2% higherLater: Business Inventories

    The rally hasn't shaken Morgan Stanley's Adam Parker from sticking to his projection that the S&P will end the year at 1,167; he sees earnings coming in lower than sell-side analysts expect. But he believes investors can ride out the storm through health care and energy stocks such as CAH and SLB, as well as a select group of other names including JPM and FCX. (earlier)

    A nice summary (via tradefast) of Q2 13F filings shows hedge funds riding the defensive play trend, adding to holdings in Consumer Staples, Health Care, Telecom, and Utilities, while cutting exposure to Tech, Energy, Financials, and Materials.

    Long-term Treasury yields rise to about their highest levels of the summer following speedy retail sales and PPI reports. Can slowing growth and a world beset by problems of "mega proportions" be any more baked in, asks Scott Grannis. Shorting Treasurys is a great way to play the "What if something goes right" trade.

    Below-trend economic growth and below-trend inflation is "broadly acknowledged as fact," writes tradefast upon seeing the results of BAML's global fund manager survey showing 75% of respondents in agreement on such. Just 5% see above-trend growth.

    July Producer Price Index: +0.3% vs. +0.2% expected and +0.1% prior. Core PPI +0.4% vs. +0.2% expected and +0.2% prior.

    Big Guys:  Redbook Chain Store Sales: +1.8% Y/Y vs. +2.0% last week. Redbook index is expected to be negative due to winding down of tax holidays in many states.

    Little Guys:  ICSC Retail Store Sales: -0.3% W/W, vs. 0.0% last week.+3.6% Y/Y, vs. +1.4% last week. Cautious consumer spending led to decline in sales.

    NFIB Small Business Optimism Index: -0.2 to 91.2, vs. consensus of 91.3, 91.4 in June.

    July Retail Sales: +0.8% vs. +0.2% expected, -0.7% prior (revised from -0.5%). Ex-autos +0.8% vs. +0.3% exepcted, -0.8% prior (revised down from -0.4%). - This is BS – had we heard those numbers in June, we would have gone off a cliff!

    More on Retail Sales: Helping to smooth rather large downward revisions, the Y/Y figure shows sales +4.1%, up from +3.5% last month. Ex-autos, +3.2% Y/Y,  up from +2.6% last month. With Home Depot (HD) in focus this morning, a look at sales for Building Material Suppliers shows an 11.7% annualized rise in July.

    June Business Inventories: +0.1% to $1,580.3B vs. +0.2% expected and +0.3% last month. Sales -1.1% to $1,229.7B. Inventory/sales ratio was 1.26.  - Sales down, inventories up and this is supposedly a good thing (because it adds to GDP on the assumption that all inventory gets sold).  

    Spanish banks' dependence on the ECB for their liquidity needs continues to grow, net borrowings in July rising to €375.6B from €337.2B previously. August should show continued gains as yesterday's margin hike on Spanish sovereign debt promises further shrinkage in the country's repo market.

    More on higher Spanish bank borrowing: Just to be clear, the banks are borrowing from the ECB to fund their purchases (and private investor sales) of Spanish sovereign debt. "This can only go on for so long," says Peter Chatwell, a fixed-income strategist.

    There's no such thing as bad debt, just debt at bad prices. Greece is able to sell €4.063B in 13-week Treasury bills priced to yield a whopping 4.43%. "Simply an extension of life support," says a rate strategist for TD Securities

    Bank of America downgrades Southwest Airlines (LUV) to Underperform on concerns over weak domestic travel and higher fuel costs. The economic slowdown has slowed business travel to the point that a key sector metric – passenger revenue per available seat mile - could show negative year-over-year growth for the first time since 2009 in September.

    Yawn, more oil:  Brazil's Petrobras (PBR) reportedly makes "one of the most significant oil discoveries" in the country's offshore subsalt area, potentially as big as the Lula field which holds ~8.3B barrels of oil and natural gas. PBR's Carcara prospect has shown 400 meters – a column "among the biggest ever found in the subsalt" – of continuous and connected oil reserves with excellent porosity and permeability.

    And more:  Cnooc (CEO -0.9%) says it recently appraised two wells successfully in northeastern China's Qinghuangdao, located in the central north of Bohai Bay. The area was tested to produce ~6,600 bbl/day of oil and 4.5MMcf/day of natural gas, creating the highest capacity of clastic rocks in Bohai.

    Barrick Gold (ABX) announces its new Pueblo Viejo mine in the Dominican Republic has achieved its first gold production, with commercial production anticipated in Q4. ABX's 60% share of 2012 production from the mine is projected at 100K-125K oz. at total cash costs of $400-$500/oz. 

    While speculative bets on higher silver prices have plummeted 72% since February, investor demand stays strong - silver held by ETPs has risen nearly 800 tons this year to about 18K tons (let's face it, plenty of this is speculative). Industrial demand may be bouncing back as well, with warehouse stockpiles falling last month for the first time since November.

    The Air Force is today set to test the unmanned Boeing (BA) X-51 WaveRider "scramjet," which can reach a ridiculous 4,000 miles per hour. The idea of the trial is to sustain hypersonic flight for up to five minutes, double the previous record, and take the developers another step further to revolutionizing air travel. Also involved in the project is United Tech's (UTX) Pratt & Whitney.

    Mobile phone sales -2.3% in Q2 to 419M units, says Gartner, adding that the weakeness, which is due to the economic uncertainty, could cause it to cut its 2012 outlook for sales of around 1.9B devices. (PR) - Wait a minute – there's only 7Bn people on the whole planet!

    More on Gartner/mobile phones: Samsung's (SSGFF.PK)market share increases to 21.6% from 16.3% last year, Nokia's (NOK) falls to 19.9% from 22.8%, and Apple (AAPL) rises to 6.9% from 4.6%. Smartphone sales jump 43% to 154M. Overall Android share soars to 64% from 43%, iOS 18.8% vs. 18.2%, Symbian crashes to 5.9% from 22.1%, Microsoft (MSFT) 2.7% vs. 1.6%. (PR)

  24. Rustle – bullish into a recession – I know what you mean – its really killing me – Europe is in a recession – how do we keep powering higher ??
    Part of this has to be money flows with people fleeing the Euro -
    I am getting ready to throw in the towel on my shorts – which I guess is a bearish indicator – but it all just seems insane to me.

  25. SHLD/Jet- You may have your platform set to "vertical" as opposed to "single" in the spread setting?

  26. PCLN – Does anyone believe this thing's just consolidated and it will be back in the 600's in no time?

  27. WTF article of the day:  NBC’s war for fun and profit   A new reality show of soldiers and celebrities playing war games showcases our national religion: military worship

  28. Wheee – RUT 798.80 – so that's an easy stop at 799.60 (we can be wide off that entry) but really, 4 points is a huge ride to catch!  Oil $93.35 so second time's a charm there with a stop at $93.55 and if you don't take the money and run on the Nas with a couple of points – don't play it!  

    Dollar just failed 82.50 so that's it for the Futures shorts anyway.  

    AAPL $635.75 blows the Nas premise anyway and AMZN popped all the way to $236.50 before pulling back (now $234.22 – about yesterday's high).  

  29. SDS / rpme – Thanks. I'll update the portfolio as they stopped out yesterday then!

  30. Note on Home Depot / Cramer:  Historically, I hear more bad than good about their service to builders.  Delivery timing is pretty bad, and if part of the order isn't available, you won't find out until it shows up without it.  Over the last couple years, they have been trying hard to improve, and delivery timing has improved quite a bit ( still accuracy issues, though ).  However, they really are trying, and they are pushing the installation services a lot more now, too.  ( especially roofing in hail markets ).  If you need a rush hot-shot delivery to the job, forget about it.  I stopped using them for roofing jobs because the messed up orders cost me more in frustration and inefficiency than the $150-$250 per job I was saving.  They have a long way to go until they can match local supply houses across the board, but slowing closing the gap.  All just my experiences in DFW and OKC markets.

  31. Nicha – For ideas on where to stay, use these guys  You'll get opinions, insight and pricing.
    San Diego – pick a spot on the outskirts of town and drive to the attraction – the closer to the water, the more $$$$
    Las Vegas – who needs to be on the strip when you can stay off strip and take advantage of all the free parking the strip has to offer. I like these two:
    As I've stated, use tripadvisor for ideas, pricing and comments from people who have stayed at these resorts, then check back 2-3 weeks before visiting to make sure the prices have not come down. If you have a AAA card, that will save you $$$ as well……
    If not with family, I'll be staying at the southpoint in november. :)

  32. Phil / VXX – I wasn't around to do the roll yesterday.  What do you recommend at this point?

  33. Oil hit R1 (93.92) right on the button at 9:35…. Good programming on these bots!

  34. why do the VIX puts seem so mispriced?

  35. Thank you all for help with hotels in Vegas and CA!

  36. rkyroma,
    phil, moved to oct 12 put and to 14 call also in oct

  37. Stjean, if they hit .39 yesterday I missed it, i stopped out this morning at .35.

  38. Nobody else did the GRPN trade(Sold Aug $6 put and bought Sep $6/7 BCS)?  Roll the Aug $6 put or take the loss?

  39. Short Strangles portfolio,
    The bots are playing with VIX in the past couple of days, so let's sell some premium today:
    - Sell 5 RUT Sep 870/670 short strangle for $1.67 credit (0.875 credit for 670 put and 0.8 credit for 870 call)
    - Sell 5 SPX Sep 1500/1220 short strangle for $2.25 ($1 credit for call and $1.225 for put)
    These are naked short strangles and we have plenty of margin to do the rolling

  40. Anyone like arbitrage?  From Bespoke: Asset Class Correlations in 2012

  41. Peter D, thank you for the trading ideas for the Short Strangles Portfolio.  What is the portfolio size the you have in mind to sell 5 each on RUT and SPX strangles?  TIA.

  42. Hi Peter D
    When I try to execute the short strangle trades on TOS, it gives me an error saying that it is illegal trade (buying power effect – .illegal – 1 shares) Is it because I don't have enough money to cover the naked trades?

  43. bobhu,
    I did it and I am trying to take the 7 call off at 20 cents and let the trade ride for a rebound.  I was also thinking of rolling the  put to September, but its so close it might be worth waiting to see if we can get a small bounce.

  44. SHLD/Jacalyn – They dropped down to $7 now with $7.50 the best sale of the day.  I'd rather sell the 2014 $25s for $5 and, since $25 is 23% less than $32.50, you can sell 23% more puts for the same outcome BUT, for the Income Portfolio – I'd rather wait PATIENTLY for $8 to come around again on the $32.50 puts and, if it doesn't come back – then I'm sure we'll find something else to short tomorrow.  

    Oil still going down, $93.25.  

    BBY/Burr – Thanks for paying attention!  

    XLF/Markilus – I do hope your realize it's a FAS $105/115 bull call spread, not XLF.  Call your guys at Schwab, they should be able to talk you through it but I don't think Schwab is a very good options trading platform, unfortunately.  

    And what Burr said!  

    See, Carl on CNBC just said "fairy dust" – don't tell me he doesn't read my stuff….

    HD/Shadow – People can't afford new homes so there is a lot of fixing old ones going on, which is good for those guys but I think that trend is mostly in place now – it's why we had HD on our Buy List last year in the $30s – Cramer's a bit late to the party telling his sheeple to buy at $55.  I think we dipped in with LOW under $20 too but we dumped that on the crazy run they had after that.  

    Oil/Jasu – Good call.  If we're shoring at $93 and lose .05 on the cross, we can reshort at $93.50 and lose another nickel and then go 2x at $94 but, at that point, if we lose 2 more nickels – we really have to stop and re-examine our bearish premise!  

    Bullish hedges/Maya – If you need a bullish hedge, why not take a small bit of the FAS to start.  You can always add more and so what if you average in at net $1.25 on the $10 spread instead of net .75?  If you have bullish positions and these little morning pops have you neutral – I would not add more bullish positions yet because I totally don't believe in them – they are just hedges because I worry we may be too bearish but you'll notice I still haven't pulled the trigger in our $25KPs because I just don't believe in it yet.  Our Income Portfolio is already bullish so no need there either.  If we do pop our levels, you can bet I'll scramble to put a SIMILAR trade into the $25KPs (depends on the prices at the time) but, for now, I'm content with the mix.  Also, you can consider selling BBY or SHLD puts as a long-term bullish play and, if the market goes down – you be glad you didn't buy the bull spread yet and, if the market goes up – you're already making money on the short puts so you can begin scaling into the bull spread with house money.    

    Error/Flips – The constant error I make is reading past the first sentence of your rants on this topic!  Yes, the country is divided but by class/wealth, not geographically, which I write about often but I can't spend every morning going into geopolitics so we accept the status quo, as it is accepted by 99.9% of the readers, and get on with the actual economic discussions.  I don't know if you ever actually hear the words from one of my favorite songs but, to quote Marilyn Manson:  

    The beautiful people, the beautiful people
    It's all relative to the size of your steeple
    You can't see the forest for the trees

    Capitalism has made it this way,
    Old-fashioned fascism will take it away 


    Recession/Rustle – It's GLOBAL!  If Europe goes or China goes, they'll take each other down and then what's the chance we outperform the next Q?  Even if they pump another $2Tn into the economy and flip us bearish – we'll just be patiently waiting for the next time we run out of gas.  

    V/$25KP, Mjj – Excellent!  Not cheap enough to DD but paying $1 to roll them up $5 (to the $125 puts) is worth committing another $1,000.  

  45. Gingbaum/GRPN, Thanks a lot.

  46. Phil:
    Bad news, market up. Good news, market up. Dollar down, market up. Dollar up, market up. QE, market up. No QE, market up. Europe sucks, market up. CHINA sucks, market up. MARKET UP!

  47. Home depo is just too big and on a serious note they stock lower quality lower priced stuff. The only good thing they have is those guarrenteed 2X4s for interiors. In high end markets like Jackson just don't even try. Steel studs are becoming a thing because they make perfect flat walls. And were do they get those plumbing products, like Wall Mart for computers, they have the name on it but what is inside? Circuit City sold Tosheba TVs with pressed paper circuit boards, special Moen faucets that use a different cartridge than what was a standard for over 20 years, strange wire made for them only. Builder beware.
    Trickel down fairy dust, that people understand, good for you CNBC!

  48. bobhu,
    The short strangles portfolio is $500k with Portfolio Margin.  The 5 SPX short strangles requires $10k in initial PM margin and if SPX gets to the 1,500 or down to the 1,220 strikes, the margin would be $150k on PM and $300k on Reg-T (20%).
    Yes, you may have a cash only account (no margin), or not enough margin to cover the trade.

  49. What I'm reminded of when hearing "beautiful sheeple"….
    You're keeping in step
    In the line
    Got your chin held high and you feel just fine
    Because you do
    What you're told
    But inside your heart it is black and it's hollow and it's cold

    Just how deep do you believe?
    Will you bite the hand that feeds?
    Will you chew until it bleeds?
    Can you get up off your knees?
    Are you brave enough to see?
    Do you want to change it?

    What if this whole crusade's
    A charade
    And behind it all there's a price to be paid
    For the blood
    On which we dine
    Justified in the name of the holy and the divine

    Just how deep do you believe?
    Will you bite the hand that feeds?
    Will you chew until it bleeds?
    Can you get up off your knees?
    Are you brave enough to see?
    Do you want to change it?

    So naive
    I keep holding on to what I want to believe
    I can see
    But I keep holding on and on and on and on

    Will you bite the hand that feeds you?
    Will you stay down on your knees? [8X]

  50. VIX/Jrom – Yes, I do.  Didn't I say that this morning?  $17 target.  

    Verticals/Lincoln – Well they're not really appropriate for an IRA with no margin so perhaps that's the problem.  A vertical is very targeted and timed so you have to be right on both.  With a normal account, you have many ways to adjust it.  With a no-margin account, you have very few ways to adjust it.  So you are entering a knife fight, where you are bleeding premium from the moment you take the position, with one hand tied behind your back and no knife and you want to know how to win?  Don't fight is the correct answer.  You have to pick trades that are appropriate for your portfolio and that INCLUDES your ability to scale in, scale out and adjust the position.  If you can't work with naked short calls and puts – you have taken away half your possible adjustments and you have no possibility of taking advantage of premium decay and, while you may THINK you still have other ways to adjust – you lost your best way so your chance of winning the trade drops from 66% to 40% – what do you think happens if you keep pursuing that strategy?   With the calendar put spread, all you can really do (as you also have limited options) is roll the short puts ($5.70) to the Sept $128 puts ($5) for net .70 and you can roll your $135 puts ($12) to the Nov $130 puts ($8) and get $3 off the table, leaving you in the new spread at net $2.53 with a 2-month, $2-Dollar advantage over the putter – on the whole, it's a lot of hassle for not too much reward.  

    SHLD/StJ – OK.  I would have waited but $7.40 not bad. 

    SHLD/Jet – Stay away from the ones with less strikes (and almost no open interest – another good clue) – they are old and carry some obligation from something – I have no idea what but it's not usually a good idea to mess around with those.  

    PCLN/Lolo – See downgrade of LUV in news above.  Travel sector is weakening, I sure wouldn't go bullish on PCLN now.  

    War/Rain – I have that on my Tivo to watch!

    Check out the front page of the on-line WSJ:


    Euro Zone Economy Shrinks, Darkening Outlook

    The resilience of Germany and France, the euro zone's two largest economies wasn't enough to prevent the currency bloc as a whole from falling back into contraction. 8 min ago

  51. Phil—why is the VIX Sep 16 put trading at 75c with the VIX at 14.30???
    Am I seeing things??

  52. Peter D
    I haven't put any of your trades on in your short strangle portfolio.  If one was to start today, which trades would you put on right now?

  53. Phil,
    I understand completely the concept of hyperinflation but what I don't understand is if we have more stimulus, it has already been shown that stimulus to the banks does not help the job market that much at all, the markets will rise but most people don't have large or even somewhat significant investments in the markets anymore so it won't spur spending, housing will most likely stay flat, low interest rates will affect most senior citizens who need the interest they are not receiving on their money to keep up with inflationary food and oil prices, not to mention that people who put money away in an annuity and decide to annuitize it now are receiving about 40% less than they thought they would be receiving with the same amount 10 years ago (imagine you thought you would be receiving $150,000 with your planning 10 years ago to find out you're receiving say $100,000 a year, big difference in your life plan), so hyperinflation without inflating salaries or housing seems like it can't come close to working and will do much more harm than good from the negative implications of keeping interest rates so low.  It seems like the way out is still to create jobs by spending money not on stimulus but on construction projects (bridges, roads, airports, hi speed rail, as you have said before) since you will be putting many of the people skilled for this type of labor but not skilled to work for Apple back to work and then you can start hyperinflation.  Just seems like we're skipping a step.

  54. VIX / Jabo – Please keep in mind that VIX options do not trade like other options! 

    Check that article:



    Yes, you are reading that right. The VIX options derive their value from the VIX futures, which may be much higher or lower than where the VIX is actually trading.

  55. Jabo – VIX examples:


    The figure below lists all the calls and puts offered for the VIX. It's called an option chain. Looking at the option chain, let's say you think volatility is going to rise, so you buy the VIX June 18 call for $2.95. It's circled in blue below.

    You may think the VIX is $15.77 (yellow highlight at the top of the figure), but in actuality the options are priced based on the future value of $19.57 (red highlight at the top of the outlined column). So tomorrow, if the stated value of the VIX goes up to 18, but the future drops to $18.50, you will actually LOSE money!

    I can't tell you how many traders (retail and professionals) have fallen into this trap. In fact, just Friday, a friend of mine bought the June 17 calls and lost money today when the VIX was up almost 8%!

    Just look at how EVERY call option was down (orange highlighted column) today, with the VIX up $1.08 — That would not happen under normal circumstances.

  56. thank you stjean!

  57. rustle
    You are catching on, we didn't stimulate anything, we bailed out the banks who went right back to the same dirty tricks. Now what will stimulating the rich again do? Give the seniors a raise, they will spend it, and velocity will pay the bill. Cut the susidizing if you believe in free enterprise, wheels aren't squeaking and don't need more new grease. We just did that. ON and on. Even George Bush gave out money to stem the slide, yes too little too late and it didn't save his mess.

  58. @Felipe
    Neither the geographical division nor the class division or any others are remotely relevant.  Tjhe rich live in Texas, New York, Chicago, or out of the country.  Their geography has no boundaries.  Their disdain, and contempt for the 90% is pervasive straddling all state and country borders. The globe is their home for now and eventually the space stations.
    99% may agree with your conclusion that this is one country geographically ( without agreeing that the power doesn't care about borders)  but when has the majority ever been right?  If everyone believes it, it's a virtual certainty that it is wrong.
    Look to how you conclude what is a great move or not in the options markets. e.g.everyone buying CMG while you go short and reap a windfall.
    The VIRTUAL division is what guides policy in this 'country';   one set of laws for the 10%, another yet for the 1% and yet another for the 90%. And it's actual enacted policy that is paramount, not the Constitution, or the Bill of Rights. Or the United States, united in nearly nothing with near 50% right down the middle split.
    Until one understands THAT, it is impossible to grasp WHY the tax laws will forever favor the rich, no matter if its a democrat or a republican in power.

  59. VXX/Rkyroma – I like the same roll as yesterday in the $25KP, shouldn't be that different.  

    VIX/Jabob – 3-day discussing to look over.  Short story is S&P Futures rollover messing with VIX and will be corrected before VIX or VXX options expire so pricing looks crazy but you are betting on where the VIX will be in 38 days, not where it is today. 

    GRPN/Bob – It's only a loss if you take it today.  GRPN still $5.76, earnings were not that terrible so maybe they recover by Friday or THEN you roll but not when 50% of the price is premium.  On the vertical, you can pull the calls (.55) and leave the naked caller (have to cover by buying GRPN if they cross $6) or you can roll your call out to the Jan $7s for .25 and let the caller expire and then you have a cheap Jan call and you can sell Oct $8 calls (still .25) to make money while you wait. 

    Arb/Rain – Along with Greeks, one of the things I learned to stop worrying about.  Fun stuff though.  

    By George, I think you've got it DC! 

    Very similar 1020, never noticed.  

    Hyperinflation/Rustle – Yes, top down inflation is not a good thing, which is what I object to more so than the stimulus itself.  From the Fed's point of view (and how quickly we forget) the banks still have multi-Trillion Dollar holes in their balance sheets that need to be filled and, once they are overflowing and the money has nowhere else to go – THEN it will trickle out of the vaults again and find it's way into the economy.   That makes the rich people as rich as possible – especially when they get to confiscate people's homes and businesses for 10 cents on the Dollar while the economy stagnates and no one has money.  Once they have grabbed all the land/assets, THEN they are happy to see a bit of inflation but, while the banks are lenders of money that was valued an average of 7 years ago, they don't want the inflationary possibility of being paid back with less valuable dollars.  

    There go the EU markets – up about 0.6% in France, 0.8% in Germany, 0.75% in Italy, 0.87% in Spain and UK up 0.5%. Should somewhat encourage US traders.  

  60. 2can/ AAPL; do you still have the Aug 610 calls?

  61. SHLD -Phil is right (as usual). The other SHLD options have an OSH component.
    This was the result of a spin off of Orchard Supply. Once the options have something
    like that imbedded into them, they become very illiquid. I learned that from holding some
    of the 3X ETF’s thru reverse splits. It was really nasty to hold them to maturity. Get out of them
    after the announcement and do not buy them after the corporate action.

  62. ….oh and Marilyn Manson doesn't know anything about economics since Capitalism is emphatically not what made things this way. Good lyrics that rhyme but in error.
    It was and is as you have stated, Corporatocracy Oligarchy and Cronyism, and as I have stated several times, Mercantilism, an obscure and greatly underappreciated and underused term that perfectly describes our and the global economy.
    Capitalism, if given a try, might save the world, but no one is about to let that happen.

  63. Stjean – VIX options – it is only half true that the VIX trades based on the price of the VIX futures -
    The settlement price for VIX options (as well as futures) is actually based on a calculation of the spot VIX. 
    VIX options are priced based on the futures but as expiration approaches they begin to trade off the spot - 
    From the CBO
     How is the exercise settlement value for VIX options calculated?
    The exercise settlement value for VIX options (Ticker: VRO) is a Special Opening Quotation (SOQ) of VIX calculated from the sequence of opening prices of the SPX options used to calculate VIX at settlement. Most of the SPX option opening prices typically reflect actual trades. The opening price for any series in which there is no trade is deemed to be the mid-quote price, the average of that option's bid and ask prices. Only series with non-zero bid prices upon completion of the special SPX opening procedures are used in the SOQ calculation.

    7. How is the calculation of the VIX SOQ different than the calculation of other VIX values? What can this mean for VIX options settlement?
    It is important to note that the VIX SOQ is the only VIX calculation that uses traded prices. Every other reported VIX value uses mid-quote prices of SPX option series. Typically, the theoretical VIX bid/ask spread (i.e., the difference between VIX calculated using bid prices and VIX calculated using ask prices) is 0.8 to 1.2 VIX points. If the VIX SOQ is calculated using predominantly bid prices, or predominantly ask prices, there may be a significant difference between the exercise settlement value for VIX options and the reported VIX values (based on mid-quote prices) on expiration day as well as at the close on the day before expiration.

  64. Pharm? flint hill person, if you have a moment, are you still in CLDX and if so, what is your stradigy? I still have some $4 calls, thinking of rolling the Augs to Nov 4s.

  65. Peter D:  Trying to follow your portfolio:  Why not do a 889/870/670/660 IC in lieu of the strangle?  It requires half the margin for roughly the same premium.

  66. Oppss…. 880 not 889.  The 889 trade is a bit exotic…

  67. Phil:
    :) !

  68. Gingbaum,
    These two are basically the only active trades as the existing positions are pretty much out of premium.  If you hadn't trade in this short strangles portfolios, you should wait and not initiate new trades due to the low VIX.  We added these two trades to use some of our available margin, but they are more risky than our usual trades.

  69. No no 1020…..

    I know I have posted this before….but it is so appropriate.

  70. CLDX/morx – Feb $5 calls.  Sold same strike/month puts.

  71. rustle – just read about Japan as we are now them….we are in year 3 or 4 (and they are in year 22 or so?).  I have said it on this board for 3 years. 

  72. Knight Trading Loss Said to Be Linked to Dormant Software
    The company was updating software in preparation for an NYSE plan aimed at luring more individual investors to the exchange, Joyce said in the Aug. 2 interview, without offering details. The Big Board’s so-called retail liquidity program, designed to attract smaller investors by giving them superior prices, was being implemented that day.
    First, WTF?
    Second, oh yeah, that'll get retail back on board.


    SDS / stjeanluc / rpme – this is from phils yesturday "SDS/Cdel – 39 days to go – it's a bit early to take action"


    so SDS stays in the 25KPs no change no stopping out ? and i wronge ? phil ?






  74. VIX / Samsz – Thanks for the additional information. I still think that this hybrid system makes it hard to make rational decisions when looking at options on VIX.

  75. VIX – its probably better to leave VIX to the Pros – but clearly its really tempting to buy a lottery ticket! 

  76. I just exited the F OCT.$9 calls we had in the 25K for .81(.49 entry). Their debt is worrisome, but as you say, at times, what is wrong with a company that invests in its future? It seems like F is doing just that. Hopefully, there will be someone to buy their cars down the road.
    Interesting (F) tidbit I found:
    While Ford is not ignoring the demand for better Hybrid Vehicles they appear to be charting a different course than their competitors with a major effort with their EcoBoost engines.  Cutting through the tech jargon, an EcoBoost engine utilizes some new technologies to make gasoline engines up to 20% more fuel efficient while reducing those nasty greenhouse gases by 15%.  In a world supposedly going green, we all salute fuel efficiency and lowered emissions until we see the price tag of the vehicles that can get the job done.  Ford’s new 1.0-liter EcoBoost engine supposedly delivers a jaw-dropping 58.9 Mpg.  The 1.0 Liter EcoBoost could be a game–changer, having already won international acclaim by receiving the award for 2012′s “International Engine of the Year”.This is the one anybody who is bullish on Ford needs to think about.  Ford’s debt to equity ratio is 6.03 or 603.54% when you see it expressed as a percentage.  While auto manufacturers typically have higher debt to equity ratios due to their large capital expenditures (Capex), Ford’s position here should make all potential investors stop and take a deep breath.  Global expansion may be a sound long term strategy, but it is alarmingly expensive and the wait to realize some profit from those new plants adds a lot of risk to the stock as profits can be a long time in coming.
    To put things in a little perspective for average folks like you and me, Ford right now has cash on hand of around $15 Billion with another roughly $34 Billion sitting in short term investments.  But their total liabilities are around $165 Billion.  Even if you take out pension liabilities which come due gradually over time, you are still looking at around $120 Billion in long and short term debt.
    If you have been in the game awhile you know what happened when Lehman Brothers went belly-up.  Credit markets froze and should that happen again, a company like Ford would be in big trouble.

  77. VIX / Samz – In the meantime you can always short VXX… Seems to work most of the time!

  78. VRTX calls are now flying.  Buyout????

  79. From Russ Winter at WSE:

    Basically in my bones I feel a trap has been sprung.  The market now is textbook example of an Irrational Market. Rational agents are MIA.  It is gutted, dead inside, and completely soulless. A good name for it would be “the serial killer market”.  It definitely has that rogue trader feel to it too   And my sentiment is pretty widespread among veteran observers.  Once you peel away the veneer, the parade of money managers that come on Bloomberg look like and talk like deer in the headlights, and they know something is wrong.  The charts look exactly like the summer of 2008.   Coke addicts and what remains of Wall Street traders are looking more and more alike every day.  Both need a bigger hit of something deadly to avoid depression.  Both believe somehow getting more hits will kick them of the habit. Both will die relying on that which kills them.

  80. Newt / AAPL 610's,  no I closed them a week ago.  Oh well, it's hard to time the market, but I'm happy with the price I got.  You still have them?

  81. 2can- yeah. Still have them… trying to not be greedy though….

  82. WSE/Pharm – "Coke addicts and what remains of Wall Street traders are looking more and more alike every day…Both will die relying on that which kills them." Ouch!

  83. 99%/Flips – I'm not saying it's right, I'm saying I'm not going to get into the nuances every time I want to talk about America – it's not worth it.  I know it's your pet subject and, if you were to write a book or publish an article on the subject, I'd be happy to link to it but I'm not here to tilt at your windmills.  As Aristotle said: "It is simplicity that makes the uneducated more effective than the educated when addressing popular audiences."  As to Capitalism, Kleptocracy (same as your term) is the end game of Capitalism – Marx taught us that 150 years ago – too bad he was maligned by the MSM over here.  As much as Communism is an idealistic system that fails in practice due to the inherently flawed nature of people – so is Capitalism.  

    Fiscal cliff/Rain – 85% favor extend and pretend – no wonder it's the G20s primary policy. 

    Japan/Pharm – It is my theory that Japan can't happen again because they had a healthy global economy to feed off along with EEM neighbors that were constantly ratcheting up demand.  How will that be similar for US or Europe or China?  Japan to the 4th power is a complete Global Collapse.  

    F/DC – I like them long-term but short-term I was thrilled to get out.  There was an article today about how auto lending is at a sub-prime-like frenzy and that can't last very long.  

    Never made it back to the morning highs and fading out again.  Is it even possible to have less bullish conviction today than in the past week?  

    Great Russ Winter quote, Pharm but isn't that why the Bulls say we should be buying – "because no one likes the rally"  Truly I have not heard such utter BS since 2008.  

  84. Oh, that was US temperature, by the way – heading didn't come out. 

  85. Pharm / VRTX – Take the 50% gain or sell half and hold the remainder? Thx for the heads up on that one!

  86. Pharm/BMRN – nice move past 2 days but nothing to justify the upside call volume from last week…are sticking with it, or, take a small gain while you have it?
    VXX – read article last night here on website about rumor of VXX reverse split – anyone hear any truth on the matter?

  87.  steve jobs' house burglarized by accident – cnn…that is a funny headline


  89. Phil/Auto Subprime – I've been seeing the DriveTime subprime auto loan commercials a lot lately here in CA. 

  90. Speaking of reversion to the mean: Rep. Jesse Jackson Being Treated For Bipolar Disorder

  91. As seen on the big chart:

    The chart below shows the year to date performance of the S&P 500 versus the Russell 1000.  While the two indices seemed to track each other pretty closely for the first half of the year, so far in the second half they have gone their separate ways.  For much of the month of July, the Russell 2000 was declining (-1.45%) while the S&P 500 rose (1.26%).  While both indices are up this month, the S&P 500 is still outperforming the Russell 2000 (2.15% vs 1.78%).  So far during this rally, instead of focusing on undiscovered or little followed small cap stocks, investors focusing on mega-caps like Chevron (CVX), Google (GOOG), Exxon Mobil (XOM), Apple (AAPL), General Electric (GE), and Wal-Mart (WMT) have outperformed.

  92. In Entertainment news, Ron Palillo "Horseshack" died of a heart attack, 63.

  93. Very interesting charts:

    Below we have updated our asset class correlation matrices for 2012 and over the last ten years.  The correlations are based on daily percentage moves.  A correlation of 1 means the two asset classes move exactly inline with each other, while a correlation of -1 means they move in the exact opposite direction.  A correlation of zero means there is no correlation between the two.  We also created a matrix that subtracts the correlations over the past ten years from the correlations in 2012 so you can see whether relationships between the various asset classes have gotten stronger or weaker in 2012.

    Much greater correlation with oil and gold with S&P than in the past. But smaller correlation with the dollar and bonds.

  94. 11:00 AM On the hour: Dow +0.21%. 10-yr -0.27%. Euro -0.08% vs. dollar. Crude +0.78% to $93.45. Gold -0.56% to $1601.65

    12:00 PM On the hour: Dow +0.33%. 10-yr -0.31%. Euro -0.02% vs. dollar. Crude +0.57% to $93.26. Gold -0.41% to $1604.05.

    12:10 PM European shares post decent gains in another sleepy session, interrupted only by the expected news that the EU GDP contracted in Q2. Stoxx 50 +0.7%, Germany +0.9%, France +0.8%, Italy +0.9%, Spain +0.7%, U.K. +0.5%. The euro flat and buying $1.2330.

    Central Banks Have Conditioned Equity Investors (Alhambra Partners)

    Troubles Abroad Keep Cash Flowing to U.S. (WSJ)

    Rising spending among U.S. consumers isn't matched by companies stocking up on goods, which suggests the dial hasn’t moved much for businesses: They still don’t expect a big bump in sales in coming months, or are too worried about economic volatility to really stock up. Given global concerns and the U.S. election, it’s too early for businesses to be in anything other than “wait-and-see” mode.

    With the overwhelming consensus pricing in continued sluggish growth, Citigroup's Economic Surprise Index - trending lower throughout most of 2012 – has turned decidedly higher in the past several weeks

    Housing's got 99 problems, but shadow inventory isn't one, writes Nick Timiraos. The issue is limited to certain pockets within the country, but is far from a national issue. "Like the Wizard of Oz, shadow inventory is not very intimidating once you pull back the curtain," adds Ivy Zelman. (see also)

    Just Call Us Generation Rent (Bloomberg)

    5 Graphs That Show How Crazy It Is to Compare California to Greece (The Atlantic)

    On Wall Street, the Rising Cost of Faster Trades (NYT)

    Ow, my wrist!  Wells Fargo (WFC) agrees to pay more than $6.5M to settle SEC charges it sold investments tied to MBS without understanding their complexity or disclosing the risks to investors. $6.5M? Is that a typo?

    Now, who can we screw next?  Already dominating in mortgages, Wells Fargo (WFC) sets its sights on auto-lending and Ally Financial (formerly GMAC), aiming to increase the portion of the country in which it gets a leg up on providing financing for GM sales. Well's auto loans rose 18% Y/Y in Q2 to $6.6B, making it #2 in the nation. 

    Breakup chatter surrounding Barclays (BCS) heats up with the bank trading at a 59% discount to book, cheaper than 93% of its global peers. New Chairman David Walker has indicated his belief Barclays should remain a "universal bank," but Gareth Hunt says new management and the Libor scandal could lead to a breakup and a double in the stock price.

    Zhongdan Investment – one of China's notorious Credit Guarantee firms – is close to going under, regulators giving it until August 20 to come up with a restrucutruing plan. The company stands behind circular guarantee arrangements for ¥3B in outstanding loans. Trouble is, the loans were not used for business, but often plowed into the country's Ponzi-like wealth management schemes.

    Nouriel Roubini on Threats to the Global Economy (Businessweek)

    Gold stocks are looking better than the metal for the first time in more than two years, which bodes well for both, Barron'sMichael Kahn writes. Significant recent one-day price reversals in major gold stocks Barrick (ABX), Newmont (NEM) and Goldcorp (GG) suggests that after a long decline the bears have used up all of their energy, he says, improving their risk/reward profiles. 

    The U.S. added ~6,800 MW of new wind power generationin 2011, 31% more than was added in 2010, a new Energy Department report says; U.S. wind generation now totals nearly 47K MW. Federal incentives, which have driven new wind installations, are set to expire at the end of 2012; the White House says as many as 37K U.S. jobs could be lost if the tax credits are not renewed.

    UN urges US to cut ethanol production (

    Lenders in search of a reasonable yield – and still wary of mortgages – are easing standards for auto loans, leading to a resurgence in ABS backed by the paper. A surge in lending, the average age of autos on the road of 11 years (a record), and beaten-down shares of GM and F? Something doesn't add up. 

    Tesla Motors (TSLA -3.3%) CEO Elon Musk concedes the next six months are "crucial" for the automaker as it scales up production to meet expectations. The typically highly-optimistic exec becomes a bit more grounded with his statement that if the company doesn't become cash flow positive it will join the graveyard of car company startups.

    The next domino to fall: Eddie Lampert has met with investors interested in snapping up the Lands' End business of Sears Holdings (SHLD +2.5%), according to The New York Post. (Previous:SHLD to $100 on a sum-of-the-parts valuation?)

    A committee of legislators in Maryland votes to expandgambling in the state and the Washington D.C.-area, setting up a wider vote for the full House this week. Naturally, working out how much in taxes the state will rake in was one of the biggest hurdles to clear. Waiting it out: MGM Resorts (MGM +0.7%) with a $800M complex in the works for a suburban Maryland site about ten miles from the Capitol.

    Author Hewitt Heiserman views the financials of any company that carries more than 20% of its assets in goodwill and other intangibles as a bit alarming, a clear sign he may not favor Green Mountain Coffee Roasters (GMCR -2.2%). Though the company actually reduced its percentage of goodwill/intangigles over the last year (FQ3 report), at $1.3B it still holds a formidable level that reps 39% of total assets. If not a red flag for investors, perhaps a yellow flag.

    Facebook (FB -3.8%) and Yelp (YELP -2.9%) sell off following Groupon's Q2 debacle. Yelp could also be affected by Angie's List's underwhelming Q2 report, and ongoing concerns aboutGoogle/Frommer's. Facebook's first lock-up expiration arrives in two days

    Groupon (GRPN -23.2%) crashes to $5.80 after missingQ2 revenue forecasts and posting soft billings due to international weakness. Four firms are downgrading, including Benchmark, which notes gross billings/subscriber fell and argues "the daily deal business has run into a wall." Groupon's blaming of sub-par technology in areas such as deal personalization and mobile for some of its European woes isn't going over well. (transcript

    The Windows RT version of Microsoft Surface will sell for a mere $199, claims an Engadget source provided launch details at a Microsoft (MSFT) conference. If this rumor pans out (a big if), Microsoft would be undercutting every quality ~10" tablet on the tablet, and no doubt further alienating OEMs already upset about the company's emergence as a competitor, as well as Windows RT'slicense fees.

    Apple (AAPL) has been laying off recently-hired staff at retail stores, particularly in the U.K., and has also reportedly been making long-term cutbacks in hours given to part-time staff. The moves could represent efforts by John Browett, the former Dixons CEO hired in January to run Apple's retail ops, to improve profitability. Browett has a reputation for cost-cutting, and Apple maintains an exceptionally large number of employees per store.

    David Stockman: Paul Ryan’s Fairy-Tale Budget Plan (NYT)

    Bruce Bartlett: Blaming Obama for George W. Bush’s Policies (Economix)

    Three lunchtime reads:

    1) The consequences of financial repression

    2) Gross folly: Is Bill wrong again?

    3) Oil price inflates as speculators bet on stimulus

  95. Looks like many options are starting to have ex past Jan14.  For example SHLD has Feb14 and Jun14.  Just a side note.  I sold the SHLD Jan14 25's for 5.25 with no problem.  1/3 position.

  96. Burrben/SHLD
    my tos is showing shld jan 25p 2014 high is 5.00 did you sell 27.5's?

  97. Hi Guys,
    This feels like a 'top' and I reckon the long fabled pull back is going to begin now, what do you reckon?

  98. Pharm/Russ/addicts/wall street

    I hurt myself today
    To see if I still feel
    I focus on the pain
    The only thing that's real
    The needle tears a hole
    The old familiar sting
    Try to kill it all away
    But I remember everything

    What have I become?
    My sweetest friend
    Everyone I know
    Goes away in the end
    You could have it all
    My empire of dirt
    I will let you down
    I will make you hurt

    I wear this crown of shit
    Upon my liar's chair
    Full of broken thoughts
    I cannot repair
    Beneath the stains of time
    The feelings disappear
    You are someone else
    I am still right here

    What have I become?
    My sweetest friend
    Everyone I know
    Goes away in the end

    You could have it all
    My empire of dirt
    I will let you down
    I will make you hurt
    If I could start again
    A million miles away
    I would keep myself
    I would find a way

    Shivers Anyone?…..

  99. I must be an optimist, I sold the SHLD 6/14 35p’s for 9.80.

  100. unfortunately I am still in the <$200k Phil, so you do know one person anyway …. :(

  101. Phil,
    Thoughts on a bullish play on GLW?

  102. FCourtesy of ZH – "New York settles probe of Standard Chartered for $340M…and the $250B if "laundering" transactions…are settled for a 0.14% transaction fee(that'll teach them!)" 
    Crime sure does pay when you're at the top of the hill.

  103. BIO
    I am back to the <200k club and seemingly fading fast but as I always say money ebbs and flows…now you guys know 2 of us:)

  104. <$220k  now, two people…. :)
    Chin Up BDC!

  105. …3 people….

  106. 1020 - how the hell does that JC song have 1800 dislikes??
    Bitcoin up 10% ($1.09) since I wrote about it.

  107. I find it interesting that we spend so much on resources chasing drugs and south american/mexican drug cartels when they make chump change compared to international bankers. 

  108. Phil
    Would like to get your take on the following:
    buy BAS
    Sell the jan 10 puts and the 12.50 calls

  109. BDC – yeah, I thought so as well….

  110. Cartel / lnk – I guess the bankers cartel has better lawyers and lobbyists…. Even though they are also much more dangerous!

  111. sagemm1/shld – I sold them for $5…my mistake.  I have a open order to sell at 5.25 that didn't fill.  I got them confused.
    SBUX – The short Jan13 45 SBUX put finally got back to even today.  It was closed out in the income port for -45%, but I held onto it.  Getting out of it for a very small gain today.

  112. Hallelujah
    it took me awhile to find a version of this song I like but here it is. Enjoy!

  113. hmmm…holding SDS Sep 15C and was just poking around looking at calls a few months out on SDS and there are no OCT/NOV choices under the "month" drop box. You get Sep12 then it skips to Dec12. Same on SQQQ as well. I use OX. Am I missing something?

  114. Looks like GOOG is now the symbol of choice for "goos(g)ing" the Q

  115. VRTX – sell 1/2.  May buy back at the EOD.  Using Opt rules here.

    BMRN – holding steady.

  116. ARNA takeover chatter….

  117. OH how I love the smell of capitulation, and of course, take overs in my sector…..come to Papa!!!!

  118. More proof the banks are in power: CNBC: Goldman executives and directors win dismissal of shareholder lawsuit involving TARP, robosigning & mortgage securitization – court ruling

  119. Inkarri – it's the oldest trick in the book, and the one that all good magicians perfect in order to succeed.  Deception….watch this hand, while the other hand does the dirty work…..drug cartels, ponzi schemes, wars…lots of stuff falls into that category…."Hey look!" while they steal you blind…..
    What I don't get is the failure of justice that continues to occur.  The punishment for Wall Street crimes in no way fits the crime, so those of us taken advantage of leave the system because we see the inherent inequality.  In liability suits, not only do you have to pay a penalty, but many times you have to pay treble damages on top of it, which can be a huge deterrent.  In Wall St, they just figure a few hundred million is less than 5% of the billions in gains, and they don't have to cop to anything, so why not…..the risk/reward is distorted.
    Either the people get it and simply don't care…or they don't understand because they feel it doesn't affect them so why bother.  The problem I see is this erosion of justice undermines our very system of liberty for all and corrupts our morality.  Then, like an infection it spreads….from Wall St, to Corporate boardrooms, to banks, lending agencies, elected officials, governments…and on down the line.
    I don't know the solution, nor how it will end, but I have the feeling it won't end well.  If history is any example, there's ALOT of pigs who will get slaughtered….and if they aren't careful a number of them may come from Wall Street itself.

  120. Bernanke should open with this trick in the next Fed meeting:

  121. August 3rd Put List still good?

  122. BIO I am sure you know the Jeff Buckley version, IMHO the best bar none

  123. Top/Markilus – I've been feeling that way since the end of July, this is bonus month as far as I'm concerned.  

    Hurt/1020 – I like NIN (original) better on that one.  

    Under $200K/BDC – Oh good – I do so like to stay in touch with the little people!  ;)  

    GLW/Ging – I love those guys but they don't love us – a serial disappointer.    You can take advantage of the low VIX buy buying the 2014 $10 calls for $2.45 (.95 premium) and selling the $10 puts for $1.25 for net $1.20 on the $10 calls ($11.20) which is effectively buying the stock with a .30 net discount and, in a regular margin account, it should only cost about $2.25 in margin so better than buying the stock and only 1x put to with no upside cover.  That way, if we get a nice run-up, then you can sell front-month puts without fear (since you are 100%+ in the money).  

    Standard/Ink – My understanding is that 99.9% of the $250Bn in transactions were done properly.  It's not that banks can't do business with Iran (they sell $82Bn worth of oil a year – the money goes somewhere), it's that they must properly report the transactions and the issue is the improper reporting of "some" transactions – maybe $250M worth out of $250Bn.  I wonder how many banks will stand up to that kind of scrutiny…

    3/Sage, 1020 – Oh this is good, I feel so in touch with the common man! 

    International Bankers/Ink – Actually, you want to know what's worse?  Since money is generally electronic and, even when it's not, it goes in a bank at some point – it would be a very easy matter for governments to certify money as "declared".  In other words – I earn $1M and it goes into my accounts as "tax pending" and once I declare the income and pay my taxes THEN the government flips an ID on the money and that becomes certified money that can then be transferred or whatever outside the country.  All it would take is G20 cooperation on something like this and the entire mechanism for international crime would grind to a halt without a single policeman having to make an arrest.  The question is – why don't they?  The main reason is that International Corporations steal far more money (through tax dodges) than all the drug cartels in the World and THEY don't want that much oversight.  

    BAS/Willie – I like these service companies but these guys don't make much money, even though they are growing fast.  I think, on the whole, I'd rather have RIG but I do see how this is appealing if you know something more about them that's good (I'm just looking at the numbers).  

    Dow volume 48M coming up to 3pm – more than yesterday but not much.  Certainly stickable.  

    Hallelujah/1020 – I like this one.  

    SDS/Rebel – Not all months have contracts in advance.  

    Solution/Hoss = Revolution.  

    Bernanke/Rustle – Unfortunately, it's more likely to be this one.  

  124. Phi/Trick
    I can only hope he pulls a bear out of the hat.  A big bear that likes to run for months.

  125. Phil/NIN   I don't know if I'd say "better" – just different, with way more emotion than the original…..

  126. EXEL – selling Dec $4 Ps.  Start small, b'c they could take another leg down, but the $4.25 offering should give us a good floor to work off of.

  127. As a matter of fact, EXEL…..buying stock in here as well and selling the Sept $5s.  Can also sell the Dec 5, 6 or 7s depending upon risk tolerance. 

  128. Hallelujah – I'll take a heartwarming story with my version…… :)

  129. EEM- Phil or anyone- any comment one way or the other on this ETF. Don't recall your trading/using this previously? Seems to mimic SPX the past few months and looks toppy.

  130. 30 TZA Call 22/09 $1.27

  131. Ssssay it ain't so joe, why do you send us low?  Bounced right off that pivot point…to the penny (see my chart above – SPY 140.55).  IF that ain't a bot trading?

  132. 1020/Hurt  I'm with you. Love the Johnny Cash version!

  133. 15 FAZ Call $22 $1.01 22/09

  134. VIX 14.76, up 7.75% on a day that's been flatter than the last 8, when it dropped from 16.  

    Long Put List/Bird – Yep, that's why they are long!  

    Different/1020 – I tend to have favorite versions and then I don't want to hear the others – makes for a lot of work when making mixed tapes (well MP3s – gosh I'm old!).  That Wainright version is also excellent.  

    EEM/Pstas – Sure we do, we buy EDZ, which is it's opposite.

    Say it ain't so/Pharm:  

  135. 500 UVXY @ $5.47

  136. For A/H if/when time permits – Does anyone that has been to Maui and Lanai have any recs for places and restaurants to visit?  Also, is it worth heading to Molokai for a day or two?  TIA

  137. 10 x EDZ Sept 22 Calls @ $1.58

  138. Hawaii / Inky – I've had a place in Maui (Wailea) for many years. I can provide a lot of information if you'd like to email me. john at 406strategies dot com. Aloha.

  139. ink
    when i was at maui i would rec the haliakokala anyway the volcano as a must……they will try to get you on the "road to hana"
    you might like it ……i passed……….theres also a plantation somewhere but definitely the volcano watch the sun come up…
    cant help on the others…….

  140. They did it! Dow green. "Continuing its rally, the market was up slightly today…"  :)

  141. Volume 59M with 8 mins to go.  

    Dollar 82.55 so don't blame it for the sell-off.  Euro $1.2324, Pound $1.5682, 78.73 Yen but the Nikkei dropped 50 points – back to 8,945.  EUR/CHF jumped up to 1.2011 (stronger Franc) and then jammed right back to 1.2009, which means there's very heavy support by Swiss to keep Euro here.  

    Oil frozen around $93.50, gold $1,601, silver $27.73, copper $3.34, nat gas had a hell of a good day, popping from $2.73 back to $2.83 (4%) and gasoline is back over $3 (barely).  

    Assuming no sudden move up in the last 5 mins (61.66M) – this is very dispiriting for the bulls as there hasn't really been any support on super-light volume (ie NO buyers).  

    Oddly enough TLT back to $123.88 at the same time.  

    Getting a bit bearish Markilus?  

    Maui/Ink – I never left the hotel (Maui).  ;)  It was our honeymoon and we stopped in Hawaii on the way to Japan and we were at the Waikiki Hilton for one night and then Maui for 3 or 4.  We took a drive around the island to a waterfall beach and a helicopter ride but the hotel was so nice we didn't even feel like exploring.  

    Wow, super-stick in those last 5 mins – looks like we'll hit 80M, but another new low and they actually jammed the Dow green – what a joke!  

    The biggest joke is CNBC reporting the closing numbers without comment.  40 points on the Dow in 3 mins to prop it up.  This is getting kind of expensive to maintain the charade.  

  142. Now CNBC is playing the "let's say DRAGHI over and over game" – such fun!  

    And what Bird said.  

    Gotta run to a meeting – later all.  

  143. They're failing Birdman – really failing now. They leave it to the last minute as the selling pressure would make it to expensive to move in earlier. On a day like today which started so positively and ended (really) on a down for the second day, the cards are marked. They're just holding it up so GS and the other twats can offload their warez on the unsuspecting sheeple and buy into nice cheap shorts before folding us all . . . watch :-)

    End of this week they'll be more red on the table than in a surgery where it's all gone badly wrong
    Take care

  144. Maui – Thanks Birdman, just emailed you.  Thanks Mill and Phil.

  145. Oh, and tomorrow CNBC is doing a special on the drought – NOW it will suddenly be a problem.  

  146. More red anyone?

  147. Red/Mark – I've been steadily building a portfolio of puts from Phil's list and added several today. I usually try not to have have a bias, but this thing looks so red and dead.

  148. Good man :-)
    If there's a little pop tomorrow I shall add to the positions too . . it's not a question of if but when now and we are so close!
     If you look at it the markets been more or less flat lining since Thursday/Friday give or take some pathetic shifts, whats new this week is we're ending down not up and given the status quo the market can either rise or fall – based on whats we've seen since the big D opened his big mouth . . . it's time for a swinging party – the other way!
    That or we're both about to lose a lot of money :-)

    Take care

  149. Like the Birdman I have been adding puts as well. We are going down hard at some point and I'll keep rolling until it blows. I'm actually hoping for a fake pop tomorrow to scale in some more. Maybe super Mario-3-card-Monti will help me out and run his mouth. :D

  150. Long Puts / Red  - I tend to agree with you guys, and it's seem's like a very rational bias to have…  but always remember  "The market can stay irrational longer than you can stay solvent"
    I bought about $500-$600 of each put and as they get cheaper I'll add to that position until mid-2013 or the breakout levels Phil posted are hit and held.

  151. Soros' fund is buying FB! Quick, everyone rush to buy, buy, buy!!!! LMAO.

  152. Irrational / Ben – You are so right – trees don't grow to the sky, but where is the sky? I'm scaling and my position size is also a modest $500-$600 per put and my limit is 12 positions. I suppose it's about 50% at risk as I would close the positions if we got some bullish confirmation.
    I'm still fooling around with swing trading individual stocks with the main portion of my portfolio but it's getting tougher and tougher given the ever increasing correlation out there. There used to be little backwaters, such as small and micro caps, where the bots didn't venture, but I think they go pretty much everywhere now. There's certainly manipulation just about everywhere. For example, did everyone see the monster kangaroo tail on Pharmboy's EXEL prior to its precipitous drop? That's becoming common and it's the second time they've done it to that stock this year. Take out the short stops then drop the hammer. Kind of reminds me of the market…

  153. Army working on domestic suppression
    Pretty scary stuff and we're paying for it

  154. Soros/Amalfi:  He also dumped all his Financials positions. C, JPM and GS

  155. Getting Bearish? But isn't it so obviously time to go short that really we're all being setup? 
    There are no main street retail customers left.
    The hedgies are getting all short. 
    Who is still in the market.. pension funds? 401K accounts?
    Got your money in cash (money market funds)?  
    Foreign "Sovereign Wealth Funds"?
    Just who is going to get slaughtered next? The above? Or the clever ones who are getting heavy short?

  156. Phil – I appreciate the honesty David Stockman and Bruce Bartlett showed in their article(s) you posted earlier today.
    Too bad these "Reagan Republicans" have no sway with the current party of bullsh*ters……

  157. Slaughtered / Scott – The only way to get slaughtered is with an unbalanced portfolio. Maybe the Euros and others hold our stocks as a safe haven (cleanest shirt in the hamper and all that), who knows? Personally, I have to have some balance because I hocked my crystal ball at Pawn Stars (didn't get much for it but it was worthless). Balance to me right now includes a lot of cash, in addition to being hedged.

  158. Well, ain't that a stat for the conservatives out there….and it ain't pretty either.
    Romney? 100% Chance of Recession!

    Every newly-elected Republican President has brought a first-term recession.  All of them.  "Always and only" as we hear from a popular data-mining pundit.

  159. Kinky – Soros dropped his financials….Berkshire bought them…..go figure.

  160. I have been short for two years…one day I will learn.  Or maybe not.

  161. Bertl- they are not working on plans,  just analyzing scenarios. There are only so many times you can war game N Korea, Iran, or China invading Taiwan. 

  162. Pharm- me too and I've been decimated. Hopefully your awesome calls in the biotech sector has helped cushion your portfolio a bit. 

  163. Good morning!

    Still trending down. Dollar popped to 82.78 with the Euro falling hard to $1.225.  Pound $1.568, failing that critical $1.57 again.  The Yen, though is up to 78.96 so I'd say we have a little Yentervention going on.  The Nikkei Futures had given up 8,950, down to 8,875 and that seems to have triggered the Yen dump.  EUR/CHF hit 1.2012 and, of course, that's a short as we wait for the SNB to push us back to 1.2009.

    Oil $93.17 – holding $93 so far.  Gold $1,597 and that's good timing because I was arguing with gold bugs last night that a fall in the Euro will not be bullish for gold and it only took 12 hours for me to be right.  Silver $27.65 with a good bounce off $27.50, copper is a good long at $3.34 (/HG) with tight stops, Nat gas $2.80 is backing off from $2.84 and gasoline, of course, doesn't care and is still $3.01.  

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    8:30 Consumer Price Index

    8:30 Empire State Mfg Survey

    9:00 Treasury International Capital

    9:15 Industrial Production

    10:00 NAHB Housing Market Index

    10:30 EIA Petroleum Inventories

    8:00 PM Fed's Kocherlakota: Federal Reserve Overview and the Role of the Board of Directors

    2:42 AM Asian shares are mostly lower, possibly on earnings results, possibly on scaled-back expectations for central bank action. U.S. economic expansion is "at a sufficient pace for the Fed to hold fire," says one economist, while talk that the PBOC will again cut the reserve requirement is "rampant," says an investment manager. Japan -0.1%, Hong Kong -1%, China -0.8%, India +0.5%

    3:26 AM European shares track Asia and open mostly lower, with tobacco stock falling after cigarette companies lose a ruling in Australia over packaging. BAT -3.25% in London, Imperial Tobacco-1.6%. Euro STOXX 50 -0.4%, London -0.4%, Paris -0.5%, Frankfurt-0.3% and Madrid -0.1%, although Milan is +0.85%

    6:00 AM Overseas: Japan -0.05%;. Hong Kong -1.18%. China-1.10%. India Closed. London -0.35%. Paris -0.27%. Frankfurt-0.42%.

    6:35 AM U.S. stock futures point lower in front of economic releases covering consumer prices, manufacturing, and industrial production. S&P -0.2%, Dow -0.2%.

    MBA Mortgage Applications: -4.5% vs. +1.8% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) flat at 3.76% - This bad news just gave us a boost (7am) in hopes of Fed action.

    How's that real estate recovery going?  The mREIT sector gets another downgrade – American Capital Agency (AGNC) is cut to Neutral at Macquarie which cites its high valuation amidst a weakening reinvestment environment (high MBS prices) and increased interest rate risk. Shares -0.5%

    A Market Recovery False Dawn (Bloomberg)

    Skeptics say the ravenous demand for corporate bonds has pushed yields down too far to compensate investors for their risk. U.S. corporate bonds are a flight-to-quality asset, for now. But when interest rates eventually rise, prices of recently issued bonds will fall, they warn: "The guy buying a [new] bond today is a guy buying a certain loss," says an investment banker.

    Yet another CB fails to act:  Members of the Bank of England's Monetary Policy Committee voted 9-0 earlier this month to leave its key lending rate unchanged at a record low 0.5% and to maintain its asset-purchase program at £375B, the minutes of the MPC's meeting show. For most policy makers, the decision was straightforward, although some thought a case could be made for more bond-buying. (Minutes)

     Investors Prepare for Euro Collapse (Spiegel Online)

    The U.K. unemployment rate falls to 8% in Q2, down 0.2 percentage point Q/Q. Consensus was for 8.1%. The number of people claiming unemployment benefits falls by 5,900 in July to 1.59M, but is up by 35,600 on year. (PR)

    Extend and Pretend, Part VIII - Greek PM Antonis Samaras will next week ask Angela Merkel and Francois Hollande for a two-year extension to the country's latest austerity program, the FT reports. Greece wants to spread the cuts until 2016, with the budget deficit falling 1.5 percentage point a year rather than 2.5 points. The plan would require another €20B, although Greece wouldn't ask the eurozone for the cash.

    Bloomberg gets hold of – or is given – some of the options being considered for turning the ECB into the eurozone's banking regulator. The ECB backs a "light touch"  approach, and one idea favored by the U.K. is for the central bank to receive a core set of powers but to delegate some tasks to individual nations. However, some EU officials want the bank to take major oversight decisions.

    Chinese non-performing loans rose by 18.2B yuan ($2.86B) in Q2 to 456.4B yuan – the third consecutive quarter of increases. The data comes as Caixin Online describes how local governments have been attempting to stimulate the real-estate market, in direct contravention of the central government's desire to cool it. Who said China was  totalitarian?

    Chinese companies are beginning to feel the pinch from listing their shares on U.S. bourses. Rife with accounting scandals and clashes about oversight, some are now looking to pull out and head for home, and with the blessing of Chinese authorities. One Chinese state bank has reportedly provided $1B in loans just to help companies with listings abroad move them to Chinese domestic exchanges.

    The ground is literally cracking under the weight of copper inventories in China, write 2 analysts from SCB, surprised at the speed with which a downtrend of stocks has reversed, and the ability of warehouse operators to somehow pack even more of the metal in.JJC hangs in there, -3.3% YTD.

    And more oil:  Oil production in North Dakota hit 660K bbl/day in June, another record high, after average production in H1 jumped 67% higher than a year earlier. Oil companies drilled a record 7,100-plus wells in the state during the month. North Dakota recently passed California and Alaska to become no. 2 U.S. producer behind Texas (1.24M bbl/day).

    Warren Buffett's new positions, according to Berkshire's (BRK.ABRK.Blatest 13-F, include 27.1M shares of Phillips 66 (PSX) and 2.8M shares of National Oilwell Varco (NOV), but he dumped his entire 7.7M-share position in Intel (INTC) and sold two-thirds of his 29M shares in Johnson & Johnson (JNJ).

    David Einhorn's Greenlight Capital bailed out of Dell (DELL) and Research In Motion (RIMM) in Q2, and pared its Apple (AAPL) position. On the flip side, the firm increased its position in Microsoft (MSFT). David Tepper's Appaloosa Management also sold Apple shares, and also lowered its stake in Nuance (NUAN) and QQQ. However, Dan Loeb's Third Point bought 63K Apple shares. (13-Fs:GreenlightAppaloosaThird Point

    David Einhorn's Greenlight Capital levers up on healthcare issues this quarter, adding new positions in Aetna. (AET), Cigna Corp (CI), Humana (HUM), UnitedHealth Group (UNH) and WellPoint (WLP).

    Bill Ackman's Pershing Square owned 90.3M shares of Procter & Gamble (PG) at the end of Q2 – that translates into a 3.3% stake in the consumer goods giant, which Ackman has made anactivist target of. Perhaps to make room for its P&G investment, Pershing dissolved its stakes in Kraft (KFT), Family Dollar (FDO), Burger King (BKC), and Fortune Brands (FBHS), and lowered its stake in Citigroup (C) (13-F)

    Louis Bacon's Moore Capital – recently making headlines forreturning $2B to investors as it can't figure out how to create alpha anymore - sells $700M worth of stocks, including all of its holdings of JPMorgan, Wells Fargo, U.S. Bancorp, an Emerging Market ETF (VWO), and Williams Companies (WMB). The fund took new positions in HYGJNJAGO, and troubled Diamond Foods (DMND).

  164. More on Dan Loeb's 
    Third Point: The fund opened up a 5M share stake in Chesapeake Energy (CHK) in Q2. Other companies in which new stakes were taken: AIG - 2.25M shares. LINTA - 3.25M.NWSA - 4M. Companies in which Loeb liquidated his positions include ANFCSCOGOOG, and MCK. (13-F)

    Stephen Mandel's Lone Pine Capital takes up new positions: Cooper Cos. (COO), Walt Disney (DIS), eBay (EBAY), Google (GOOG), HCA Holdings (HCA), Kohls (KSS), Liberty Global (LBTYA), Monsanto (MON), News Corp, (NWSA), Qualcomm (QCOM).

    Lone Pine raises a few bets this quarter, upping its stakes in Gap (GPS) from 11.2M to 21.5M shares, Kinder Morgan Energy Partners (KMP) from 4.2M shares to 17.6M shares and Michael Kors from 5.2M to 9.2M shares. It cuts postitions in Dollar General (DG) from 13.4M to 3.7M and Owens Corning from 2.5M to 940K, and liquidates positions in Ariba (ARBA), El Paso (EP), Green Mountain Coffee (GMCR), Medco Health (MHS), TripAdvisor (TRIP) and Wynn Resorts (WYNN). 

    Fourteen leading retailers are expected to today unveil the Merchant Customer Exchange (MCX), an initiative to jointly develop amobile-payments network that will compete with those from Google (GOOG) and cellular carriers, the WSJ reports. The retailers include Wal-Mart (WMT), Target (TGT), Best Buy (BBY) and Lowe's (LOW).

    Not a good sign for the economy:  Staples (SPLS): Q2 EPS of $0.22 in-line. Revenue of $5.5B (-6% Y/Y) misses by $230M. (PR)

    More on Staples (SPLS): Sales fell lower y/Y at North American Delivery, North American Retail, and International Operations segments. Adopts an even more conservative outlook, seeing flat sales growth and EPS increasing in the low single-digits. Shares -5.2% premarket. (PR)

    Deere (DE): FQ3 EPS of $1.98 misses by $0.33. Revenue of $9.59B (+15% Y/Y) in-line. (PR)

    Abercrombie & Fitch (ANF): Q2 EPS of $0.19 beats by $0.02. Revenue of $951M (+4% Y/Y) misses by $42M. (PR)

    Liberty Media (LMCA) edges nearer to taking control of Sirius XM (SIRI) by increasing its stake to 48% from 46.2%. Last week, Liberty CEO Greg Maffei said he wants to recoup some the cash his firm has spent on buying Sirius shares, saying that the latter should borrow money to repurchase stock or pay dividends.

    Groupon (GRPN -27%) had its defenders on this dark day.Barrington praised Groupon's market share and brand, and estimates it trades at just a 7.1x 2012 EV/free cash flow multiple. And SA's Drew Handy is impressed with the rapid growth of Groupon's e-commerce business. Critics, meanwhile, focused not only on slowing growth, but also Groupon's people issues. Namely, that it may have too many, and is having problems managing them. (more) (transcript)

    Nokia (NOK) shares jump 5.6% premarket after CEO Stephen Elop says the phone maker will launch a Windows 8 smartphone "relatively near term," and doesn't deny that it could be at the company's trade show in Helsinki on Sept. 5-6. That's a week before an Apple event on Sept. 12, when it could unveil a new iPhone.

    Research In Motion (RIMM) is readying two BlackBerry 10 phones for early 2013, CEO Thorsten Heins tells AllThingsD. One is a touchscreen-only device similar to a prototype shown at an uninspiringconference, and the other has a keyboard. Heins also calls RIM's data network, the subject of IBM buyout rumors, a "key strategic asset," and says he isn't worried about missing the holiday season since carriers tell him most of their Q4 business is prepaid. Apple and Samsung would beg to differ.

    We've seen plenty of leaked pictures of components going into the next iPhone (AAPL). But as Jay Yarow points outwe haven't seen any yet of the widely-rumored iPad Mini. That's leading Yarow and others to think the Mini hasn't entered production and won't launch next month, as many rumors indicate the next iPhone will. Schematics indicate Apple is looking to make the Mini thinner than the regular iPad.

    Developers dish on iCloud’s challenges (Mac World)

    2012 Presidential Election Fundraising Race (OpenSecrets)

  165. Better late than never: