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Thursday Thoughts – To QE or Not to QE? That’s a Trillion Dollar Question

Now we have dueling Fed heads weighing in on QE talk.  

CNBC interviewed both Boston's Rosengren (dove), who said not only is QE necessary but that "it needs to be substantial enough that it off sets some of the shocks that we're getting from abroad and some of the concerns that people have with how weak the world economy has been – so we're in a Global slow-down."   Isn't that great?  He thinks the Global economy is TERRIBLE and that means we should rush out and pay 5-year highs for equities, right?  What a silly market we have.

Then CNBC brings on Richard Fisher, who said additional stimulus would have little impact, as we're already at 0.25% and that's clearly not helping and that additional Fed stimulus now would look political and it's the US lawmakers, not the Fed, that need to "get their act together" if they want to stimulate the economy.  Elsewhere, Fisher was backed up by KC's Esther George, who said that, at $3Tn on the balance sheet already, the Fed is only buying a future crisis when it comes time to unload these assets on a market that is ill-prepared to absorb them.  “It’s always easy to buy,” George said. “We’ve never had to go back into the market to sell this quantity of assets.  

Gosh that makes sense! 

She said the Fed’s bond holdings further would create a “steeper hill” once policy starts to shift in the face of a stronger recovery.  Add to that the burden imposed on savers, George said, and the pressure on pension funds, banks and insurance companies to take investment risks they normally wouldn’t take to earn a bit of income.  

She said she didn’t know how Europe’s struggle to save its common currency, the euro, would come out. “Either way they go, the results are going to be dramatic and will be painful,” she said. “I see no short-term solution.” 

The drought is likely to drive up food prices globally, if not this year then next, she said. George also noted that rising prices for food, energy and apparel were particularly hard on low-income Americans because those essentials accounted for a relatively large portion of their spending. "We know inflation can move quickly, and we’ll have to watch for that,” she said. The federal deficit and last summer’s contentious effort to raise the debt ceiling have had “a chilling effect on our economy,” George said. “We know we are on an unsustainable trajectory of debt.”

With the markets now up 25% since last August, you would think the economic news would be all wine and roses but that's not the way it works anymore.  Why are we up 25% from last August?  As we discussed on Monday, on September 21st of last year, the Fed announced Operation Twist and that, coupled with several FHA programs has allowed people to refinance their homes at 3.5-4%, shaving as much as $6,000 a year off a $300,000 mortgage.  

That's a lot of money!  That's a stimulus they don't like to talk about because it makes you realize that 70% of the mortgages we're recording are refinances and, of course, it can't last – but at least it bought us some time. 

The chart on the right, from Markettechreports, does a great job of highlighting the last 5 times the VIX was below 15 (now 14.50) and, of course, it's driven down in February, May, August and October by the S&P Futures rolling over, which means it's a good and predictable time for GS et al to herd all the sheeple into equities while they load up on cheap puts – right before they pull the rug out from the market.  '

The bulls may not be wrong – Bernanke announced QE2 at Jackson Hole on August 27th of 2010 and you can see how we popped 25% off that run.  Then we fell off a cliff and gave back 19% – BUT WE KEPT 6%!  Sept 21st was the start of Operation Twist last year and here we are – up 25% again (so now up 31% from 2 years ago) and, of course, since we got stimulus this time of year two years in a row – we have to expect it now because nothing is more scientific that two data points to determine a trend.  

As I pointed out Monday, it's not quite the same as the Fed took action when the market had dropped 20% – at the bottom – not when it was up 31% but maybe it's worth another Trillion in Fed debt to pop us another 25% from here to S&P 1,750 which would, of course, plow the p/e of the S&P to 20 – a number not seen since before the great crash of 2000, when it was trying to keep up with the Nasdaq but maybe happy days are here again.  

Maybe the S&P is simply trying to keep up with AMZN, which now has a p/e ratio of 289 to 1.  In other words, at the current level of earnings, it will take AMZN 289 years to pay back your investment – an effective rate of return of 0.34%.  We're short on AMZN because we think they may have a little trouble holding 300 for a p/e and, if we don't get QE3 to support it – they could go back to 200 very quickly.  Last October, AMZN topped out at $246 (p/e 300) and fell back to $170 by December (down 30%) – we'll be happy with a 10% pullback.

We call it the AAPLDaq because AAPL has an 19% weighting in the Nasdaq but AMZN is 4% and is up 33% this year, adding 1.32% to the Nasdaq all by itself.  AAPL, of course, is up 67% but it only started the year at 12% of the Nasdaq as it was cut back when it last went over 20% in a re--weighting of the index.  Still, AAPL this year, by itself has added almost 8% to the index, which is up 11.8% so, other than AAPL and AMZN – the rest of the index has been flat, hence – AAPLDaq!

To some extent, these two stocks also have an outsized influence on the S&P and the reweighting of the Nasdaq makes any comparisons to last year meaningless but that won't stop TA people from drawing charts and pontificating as if nothing that actually happens in the market matter except the squiggly lines that arbitrarily form on the charts.  It's BRILLIANT and it works because everyone wants to know the future and this con has been influencing men of power since the first bones were cast or the first entrails were laid out on the floor of the cave.  

Call me old fashioned but when I am about to give AMZN $240 of my hard-earned money (well, money, I don't really work that hard) – I might say to Jeff Bezos: "So, how much money can you make with $240?"  Then Jeff says "Well, last quarter we lost 8 cents but, if all goes well, we'll make 55 cents next quarter and that will bring us up to 77 cents for the year!"  No wonder people are putting money into TBills at 1.8% – 1.8% of $240 is $4.32.  

Even using the very top of AMZN's 3-year projections – assuming everything goes great and Europe doesn't collapse and China doesn't collapse and costs don't rise and the Operating Margins (currently near zero) turn around, etc – with all the best assumptions, AMZN will not pay me $4.32 on my $240 until the end of 2014 – I could have had $12.90 from the TBills by then!.  Keep in mind that that is ASSUMING that earnings rise 300% next year!  Last year they earned $1.37, this year .77 – that's DOWN 58%, not up 300%….

I don't want to pick on AMZN – QE Fever is giving us tons of companies that are grossly overvalued, maybe even sacred AAPL who, at $600Bn, only have a p/e of 15.  If AAPL had AMZN's valuation, it would be a $12 TRILLION Dollar company – more than 1/2 of the S&P all by itself!  AAPL gives you $44 for each $630 share you buy and that's projected to grow to $52.50 next year – assuming the IPhone 5 doesn't disappoint as much as the "New IPad" has.  

AAPL's problem is different than AMZN's because AMZN only has $48Bn in annual sales (which includes a lot of AAPL products) on which they make $631,000 (1.3%) while AAPL makes their $25Bn on $108Bn in sales (23%).  So what is AAPL's problem?  Well, in order to double sales, AAPL has to find $108Bn worth of new buyers.  We saw GOOG hit the "law of diminishing returns" years ago, when they hit $20Bn in sales.  While they have grown sales to $38Bn, the stock has gone nowhere for 5 years (p/e 19).  

It's nice if the Fed pumps another $1Tn into the economy, but will 10% of that money go to AAPL?  Also, keep in mind the Fed HAS been pumping $1Tn a year into the economy and maybe 10% of it does go to AAPL – what happens if they stop?  Maybe the Fed has to do QE3 just to prevent the collapse that the end of QE2/Twist is likely to cause but, if so – what the Hell is AMZN so happy about?  

 


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  1. KickStarter/ Just read the comments from yesterday. Great site, I've used it a couple times for iPad related accessories…
     
    $201K pledged for a keyboard for the iPad that lays on the screen. I just got this one and I love it. Much easier to type a long email now.
    http://www.kickstarter.com/projects/740785012/touchfire-the-screen-top-keyboard-for-ipad?ref=live
     
     
    $157K pledged for a simple clip for your iPad Smart Cover to provide different viewing angles. Ships in a couple months.
    http://www.kickstarter.com/projects/257195260/smarter-stand-for-ipad


  2. Humm, let me think about QE question….not….


  3. Good Morning!
     
    Phil – Great Darwin cartoon!….. :)


  4. In the middle of many meetings…. will update the portfolios afternoon!

    Oil lines

    R3 – 97.53
    R2 – 96.21
    R1 – 95.31
    PP – 94
    S1 – 93.09
    S2 – 91.77
    S3 – 90.87

    Later….


  5. QE or Not to QE???
     
    IMHO…..close to election….the fed will deliver an early Xmas present to the Dems.


  6. I hope someone bought those FB weekly's I spoke of yesterday.  This week 21's are up 100%.  I'm putting a trailing stop on them in case they run here.


  7. VRTX is going STRAIGHT UP.


  8. CSCO…….Cha-CHING!!!
     
    I'm glad I asked Phil


  9. Boy, someone didn't like holding S any longer, dumping 11 million shares at open.


  10. Phil/DMND
     
    I'm sold the Sept $19's at @ $3.50.  Up 33%.  Would you hold it or exit?
     
    Also, when does the premium typically become more reflective of the differential between the strike and stock value?


  11. Phil, you better quit with the analytical, rational, quantitative, analysis of Amazon, its un-American. Be at peace, go with the flow…Baaaa, Baaaa.


  12. exec – I hope not, I want this election to be a referendum on the direction of our country, though I am both concerned and pissed off at the attempt to keep fellow "Americans" from voting in November….. :(
     
     
    I'll do my best to save politics for after the close.


  13. Phil am I having patience issues?  I played 5 BAC $5/7.50 Jan 13 Bull Call Spreads selling the $7.50 puts for net $.43 on the $2.50 spread.  the spread is currently at $2.03 and the puts are down to $.57 so I am at $517.50 out of a possible $1,035 in profit, or 50%.  What are my considerations for cashing in now?  BAC is on target, and I feel it should hold $7.50 come Jan but I feel like I have an itchy trigger finger.  I know we cashed out on BAC in the portfolios a long time ago, but I have always done well with financial stocks so I got back in again after cashing the $2.50/4.00 Jan Bull Call Spread from earlier in the year.  Please help me with trader philosophy in this situation.
    TIA!


  14. rperi – you are up 50% with 5 mo to go?.  That is what we call, plain greedy here.  Why not take a different position with less risk using some of your winnings.  If the financials move against you, that 50% will go poof!


  15. Assignments – interesting in the last week (starting last thursday) i've been running covered calls on various stocks for long time and in the last week, ASSIGNMENT, ASSIGNMENT, ASSIGNMENT…   quite ok for this to happen.. that's what covered calls are built around.. but someone is getting ahold of shares. Needing to close their shorts?


  16. Thanks, Pharm, that's all I needed to hear.


  17. Biderman's take:

    Right now the US is borrowing, printing, whatever you want to call creating $100 billion a month to pay its bills. All that borrowing is generating $20 billion per month in higher wages in salaries. To step back, the US government spends $300 billion each but collects only $200 billions in taxes per month. About $140 billion of the $200 billion comes from wages and salaries. That means it has to borrow, create $100 billion each and every month.

     You with me so far? Wages and salaries of all 133 million currently employed are about $525 billion each month. At a 3% growth rate, wages and salaries are up by about $15 billion a month this year vs. the same month last year. Other income, from capital gains, partnership, is up about $5 billion per month. That is all of a $20 billion monthly gain. Yet the US government spends $100 billion. And what do we get? Only $20 billion per month in growth!

     What the government does is the same as borrowing $100 to go to the race track or casino, having a good time, and coming back with $20. That means 80% of the borrowed money is lost. Explain that to the loan shark and then ask to borrow another $100.


  18. Good morning!  

    They have destroyed the Dollar this morning – back to 85.50 with the Euro flying to $1.2333 and the Pound at $1.573.  They Yen topped out at 79.4 and it's down to 79.16 and there is no way they are going to give up 79 now that they have it.  

    Obviously, this is not a coincidence – coming just ahead of the open and saving us from a negative open.  The fact that it happens like this keeps me bearish but, of course, the other school of thought is that if "THEY" are ready, willing and able to do this EVERY FRIGGIN' MORNING – then doesn't it make more sense to be bullish?   

    My logic is that the overhead resistance is holding and it's expensive to do this every morning and the volume is super-low so, eventually, "THEY" will either run out of ammunition or the volume will come back and engulf the manipulators in the deluge.  Wearing my fund manager's hat, I MUST see a new breakout before committing more bullish money and I'd rather be in cash and miss the first 5% of a 25% rally to the upside than get caught with my pants down if I'm overly bullish and Spain explodes overnight.  

    I know it's very tedious waiting for a resolution but there is OVERWHELMING evidence that we are in a Global Recession and the only thing the bulls are hanging their hats on is QE/Stimulus.  Well, it's a $60Tn global economy and the EU is contracting 0.2% – that's $120Bn down the tubes just to stay even BUT – Europe already kicked in over $1Tn this year and -0.2% is the result of that.  So we NEED another $1Tn just to maintain the current illusion and that's just Europe – who else needs money?  

    Volume is actually heavier this morning and, so far – it's pushing us down.  18M on the Dow at 9:42 is HUGE compared to what we've hit recently.   

    CNBC is pushing the China stimulus rumor but China wasn't buying it with the Hang Seng and the Shanghai both dropping about 1% into their close – AFTER the rumors had been vetted.  That, of course, won't matter to the pump-monkeys of the MSM but I'd urge you to ignore that nonsense.  

    Oil didn't quite make our $95 goal ($94.85) and it's already down to $94.25 so we'll see how it goes into Nat gas inventories..  Gold was rejected at $1,610 (and demand is way down), silver rejected at $28, copper at $3.37, nat gas never tried and still $2.75 and gasoline finally got smacked down at $3.10, back to $3.0575 since 8:30.  

    Philly Fed at 10 and -5 is expected, which would be an improvement of – 12.9 last month.  The Empire Mfg yesterday was also Aug and was down 5.9 from positive 7.4 in July.  If Philly confirms NY – then we should see a real volume sell-off and, if not – I'll be super impressed by the bulls.  

    At the open: Dow +0.19% to 13190. S&P +0.26% to 1409. Nasdaq +0.33% to 3041.

    Treasurys: 30-year +0.1%. 10-yr +0.05%. 5-yr -0.02%.

    Commodities: Crude +0.37% to $94.68. Gold +0.17% to $1607.35.

    Currencies: Euro +0.4% vs. dollar. Yen +0.24%. Pound -0.31%.

    Market preview: Stock futures are higher as Cisco's strong earnings report and new housing permits rising to their highest level in four years keep the juices flowing. The S&P benchmark is +0.2% and Cisco is +7.1%, while Sears is +2.5% following its results, although Wal-Mart falls 2.6% and Applied Materials 4% in the wake of their reports. EA is +11% on buyout speculation. Later: E-Commerce Retail Sales, Philly Fed Business Outlook

    "Is there anyone not borrowing today or purchasing a house because interest rates aren't low enough," asks KC Fed President Esther George, casting her doubt over the need for more Fed intervention.

    Allowing inflation over the Fed target of 2% in order to reduce unemployment "could well be part of an appropriate policy," says Minneapolis Fed President Kocherlakota. Besides proving he skipped over the 1970's chapter in his economics textbook, the comments are notable in that Kocherlakota is considered to reside in the Fed's hawkish camp

    Brazilian president Roussef launches a $65.6B stimulus package (nearly 3% of GDP) aimed at goosing the ailing economy. The money initially looks to be aimed at infrastructure spending. including highways, where the government expects to double their capacityEWZ -5% YTD.

    Spain is set to receive an emergency tranche from its €100B bailout that will be given to recently nationalized Bankia, Bloomberg reports. The payment is necessary because of limits that the ECB placed on how much it will lend against government-guaranteed bonds. That meant Spain had to abandon a scheme for Bankia to take a loan from the central bank.

     Initial Jobless Claims: 366K vs. 365K consensus, 364K prior revised (prior week 361K). Continuing claims -3K at 3.30M.

    July Housing Starts: 746K vs. 750K expected and 754K (revised) in June. Permits 812K vs. 766K expected and 760K (revised) in June.

    More on housing starts: The big print for permits suggests a pickup in starts for August, writes Bloomberg's Joe Brusuelas, but new home sales remain 48% below their long-term average. They'll need to pick up to "absorb those permits."

    Sales of 30-year corporate debt hit $86.3B YTD this week, already surpassing the $84.7B sold in all of 2011. Rubbing their eyes in disbelief over the low yields available, businesses are rushing issues to market, and pension plans – desperate for yield and shunning the Treasury market – are eager buyers. LQD +4.3% YTD while yielding 4%. 

    Eurozone CPI -0.5% M/M in July vs. -0.1% in June; +2.4% in July Y/Y, the same as in June, and above the ECB's target of just under 2%. The data is unchanged from an initial estimate and in line with expectations. Core inflation +1.7% Y/Y in July vs. +1.6% in June. (PR

    Remember Ireland? The yield on its 9-year sovereign paper has fallen to its lowest level since October 2010 (before the bailout). Lower than Spain's similar-maturity yield for a couple of weeks, the spread widens a bit more. IRL +8.2% YTD.

    If you work at a software or Internet firm in California, things are good, but life can be difficult elsewhere in the state, where huge numbers of manufacturing positions have disappeared. And while California is adding jobs at a fast pace, its unemployment rate of 10.7% is still among the highest. Meanwhile, California's tax and regulatory policies lead to low rankings in business-climate surveys.

    U.K. retail sales +0.3% M/M in July vs. consensus of flat, and +2.8% Y/Y vs. +1.6%. The Olympics doesn't seem to have had an effect on the two July trading days on which it took place. (PR)

    Foreign direct investment in China -8.7% Y/Y in July to $7.58B, the 8th drop in nine months and hitting the lowest level since July 2010. Financial institutions sold a net 3.8B yuan ($600M) of foreign currency, indicating capital is flowing out the country. In H2,  "China’s foreign trade and export situation will be more grim, there will be more difficulties, harder tasks," says a  commerce ministry spokesman

     In contrast to a Chinese commerce ministry spokesman, Premier Wen Jiabao strikes an upbeat note about the economy, saying yesterday that while downward pressure is "relatively large," there have been "some positive changes" recently, especially in July. Wen also says there's "growing room for monetary policy operation," exciting the those who hope for further easing.

    Q2 gold consumption -7% to 990 tons, the lowest since Q1 2010 and dragged down by India and China, the World Gold Council says in its latest report. Jewelry consumption -72.3 tons to 418.3 tons, investment -88.3 tons to 302 tons. The WGC's Marcus Grubb still expects demand to grow for the full year, although much depends on central banks and macro conditions, particularly India.

    Best Buy (BBY) founder Richard Schulze sends another letter to the company's board attempting to sway it that his takeover bid is the ubiquitous "win-win" scenario. Once again, Schulze asks to see Best Buy's books and to be granted permission to form an investor group that will comply with Minnesota law. Shares of BBY+1.9% premarket.

    Shares of Wal-Mart (WMT) lose 2.4% in premarket trading after the company socks out a stable, but unspectacular, Q2 report. One common theme from analysts: Buy WMT for defensiveness, but a high valuation needs more.

    More on Wal-Mart (WMT): Shows stable sales growth, but misses on its top-line. Revenue: Wal-Mart U.S. +3.8%; Wal-Mart International +6.4%; Sam's Club +3.8%. Comparable store growth up 2.2%, with ticket and traffic both positive. Expects full-year EPS of $4.83-$4.93, compared to prior guidance of $4.72-$4.92 and $4.92 consensus. Shares-3.2% premarket. (PR)

    Sears (SHLD): Q2 EPS of -$0.86 in-line. Revenue of $9.47B misses by $160M. (PR

    More on Sears (SHLDQ2: net loss from continuing ops narrows to $132M from $152M. Comparable store sales: domestic -2.9%, Kmart -4.7%, Sears Canada's -7.1%; Domestic inventory falls $512M. Liquidity $3.1B, cash balances $738M. Partial spin-off of interest in Sears Canada expected to close in H2 with distribution to shareholders. (PR)

    Facebook (FB-2.7% as its first lockup expiration gets underway. To recap: 271M shares, or roughly 10% of total outstanding shares, become eligible for sale today. Short interest has grownahead of the expiration, and shares are down 46% from IPO levels.

    Apple (AAPL) is in talks with Time Warner Cable (TWC) and other leading cable operators about building a set-top box that allows viewers to watch live broadcast TV and other content, the WSJreports. That would be a major upgrade from Apple's existing product, which doesn't carry network TV, and represent a major breakthrough in the company's attempts to conquer the living room.

    The reign of CDs in the U.S. is set to end this year: revenue from digital music will increase to $3.4B and top the $3.38B generated by CDs and vinyl, research firm Strategy Analyticsforecasts. It will take until 2015 for the trend to occur worldwide. U.S. streaming revenues are expected to grow 28% in 2012 and downloads 6.7%,  which should benefit the likes of Spotify and Pandora (P). 


  19. Japan buying the euro today, looks like someone tied a rock to the legs of the dollar!


  20. I'm all for shorting the Nikkei (/NKD) if Philly misses.  AND THEY DO – 9,070!  


  21. Still, Philly is BETTER than NY was, so not a total catastrophe but, on the whole – how is that bullish?  

    Philly Fed Business Outlook: -7.1 vs. an expected -5.0 and July's -12.9

    The Bloomberg Consumer Comfort Index falls to -44.4 from -41.9 the previous week.

    Holding up the Nas:  Cisco (CSCO +7.6%) jumps after beating estimates, hiking its dividend, and providing guidance and commentary that suggests its demand outlook (and perhaps the broader outlook for IT spending) is neither rosy nor terrible. At Cisco's current valuation, that's good enough for a strong rally. Goldman (Conviction Buy) thinks Cisco should no longer trade at a discount to other tech large-caps, but Needham is less impressed. JNPR +2.7%APKT +3.6%FFIV+4.4%RVBD +3.4%ALU +4.8%.

    Gold demand of 990 tons in Q2 was off 9% Y/Y, reports the World Gold Council (.pdf). Demand was lower across all sectors – jewellery, technology, investment – except central banks, which doubled their net purchases to 157.5 tons in Q2. Supply? At 1,059.1 tons, its was off 6% Y/Y. 


  22. C ya FB. Nice call Burb. 


  23. Phil,
     
    Everything is bullish, bad news means QE3 even if it really doesn't, good news means QE3 too and mediocre news is good because there is nothing bad about it.  Stop trying to make sense of this, we live in a Quantastic world.  What could go wrong?


  24. Phil / balance sheet — Why does everyone assume that the Fed will reduce its balance sheet?  Is there any real reason they would HAVE to?


  25. Pharm / VRTX
    sold @ 2.80 Thanks!


  26. PHil – my picks from the long put list – MA (Jan 290 puts), V (Jan 100 puts), and DIA (Dec 117 puts) are all down around 30%, more or less…is it time to roll them up, or out, or just wait?  I go along with your more or less bearish thesis, and these are good insurance, but 30% down has me a bit worried at this point…


  27. FB lock-up ends, starting today and for the next nine months….


  28. V  Sept 120 puts at .65


  29. scottmi / assignment — On non ex-dividend days?  What are the underlyings?


  30. hurry hurry hurry buy your equities quick…you sir in the hat, you know QE is here forever…you maam in the back what are you going to earn .01% on your passbook saving…come on folks join the greatest show on earth!!!
     
     
    …ok I'll stop now.


  31. Hi Phil
    I own Jan 2013 STSI $5 calls.During this week, I have noticed that  even though the underlying price has gone up, the options have gone down (not by much but still down). Any idea why would that be?
    Thanks,
    gandhjo


  32. now the dollar matters, its all very unclear now:)


  33. Go SHLD!


  34.  once again last night bloomy headlines about rising odds for china big easing….boosting asian stocks…yet chinese stocks fall again….wow that is funny
    venezuela is up 8% today did chavez die?


  35. In the latest edition of The Gartman Letter, Dennis Gartman passes along this line from Charles Brady of the Fox Business Network:
    Since August 3 (eight sessions) the Dow has traded as high as 13,223.01 and as low as 13,094.96 for a range of 128 points, or 0.98 percent. In percentage terms that is the narrowest 8-day trading range since at least 1950. I couldn't check back any further than 1950, but I think the point is clear. No conviction, no volume, truly the dog days of summer on Wall Street!

    Read more: http://www.businessinsider.com/a-mindblowing-stat-that-shows-just-how-quiet-the-market-is-these-days-2012-8#ixzz23ihVFTPP


  36. WMT Jan13 65P from L.P.L. is up 35% from my entry price of 0.76.  Setting a trailing stop.


  37. FB at lows after lockup — there goes California's budget!


  38. Pharmboy
    Any update on Lily Sept 41 P's?


  39. Imagine that, the indexes are stuck at these levels again.


  40. Kickstarter/Real – LOL, that's funny.  It's become like a shopping channel (unitentionally).  That's what I was saying, as it's still new and has a lot more potential investors/buyers than inventors/sellers – it's a fantastic place to showcase new stuff.  

    FB/Burr – Didn't last long – I hope you weren't greedy.  

    Congrats Exec!  

    S/Den – Someone dumped all telcos.  

    DMND/Exec – I believe in the target so it's really a question of whether you are willing to risk the 33% to make the other 67%.  The market is still holding up despite the Philly Fed so I'm not sure I'd be dumping longs for no reason.  DMND is not moving with the market so much as on its own news.

    AMZN $239.1 – getting close to p/e 300.  

    Flow/Rp – You're right.  I wonder how far it will go?  I'm giving them to $246, which was last year's high, then we'll see if there's any resistance left.  

    26M on the Dow at 10:10 so much slower since the opening dump.  May have been just one big fund cashing out (wisely).  

    BAC/Rperi – At this point, if you are not going to be happy with the early gain, it's best to at least set a very tight stop (mental) at $7.60, which is the 50 dma and should not break of BAC is going to hold through Jan.  I don't really trust the markets to hold up (obviously) so I'd roll the Jan $5 calls ($2.95) to the 2014 $7 calls ($2.05) and drop .90 in my pocket with the intention of rolling the Jan $7.50 caller (.95) to the 2014 $10 calls (.80) if BAC takes off but, otherwise, the $7s will hold their value much better in a sell-off and then you can roll down to a new vertical if that happens.  On the puts, the Jan $7.50 puts (.60) can be rolled to the 2014 $5 puts (.52) if you have to and, if you don't REALLY want to own BAC at $5 – then you should be taking your money and running, right?  

    And what Pharm said!

    Assignments/Scott – That does seem strange, could be bears capitulating but very unusual for a caller to pre-pay premium.  Maybe though, with all these pre-market pumps, there's a cue they catch that something will be popping after hours so they exercise.  

    Biderman/Pharm – Good way to look at it.  

    Japan/Sage – Yep, looks like they switched horses but Dollar holding 82.50 so far.  

    What can go wrong/Rustle – I think we're less than two weeks from finding out.  

    Balance sheet/Rain – It's a credibility issue.  Don't forget the Fed FIRST creates money by writing a check for an asset, THEN they get the asset and book it as the thing that justified their ability to write a check.  That means their balance sheet if full of all sorts of crap that isn't worth what they paid for it.  The more money the Fed prints to buy assets the less all money is worth and it's a pretty big effect and, at this point, they have to be more careful because, of course, money is all based on trust – backed by nothing but your faith in the Government and the Fed NOT TO devalue it and make it worthless.   Once people begin to lose faith – they demand interest for their money or just more money for goods and services (since it now carries risk of devaluation) and that is the chaos the Fed fears above all else because they (and their member Banks) are the ones people owe money to and they don't want to get paid back in worthless currency – especially while their workers are demanding higher wages to cover inflation and their depositors are required interest to cover the inflation the Fed causes by printing money.  The money supply isn't all that big – about $11Tn in cash – $2Tn of which was created by the Fed (and multiplied electronically 10x by the banks) since 2008.  They don't know where the tipping point is but they fear hitting it.  

    VIX up to 15.04.  

    Long Puts/Jercon – V and MA are pretty much the same bet.  Think about consolidating rather than managing both.  I think we decided V was a better deal.  30% isn't much as it can snap right back in the big sell-off we expect.  If we don't get that, then it's a long, slow, grind up we worry about and that means there's no point rolling or doubling down now since it will only get cheaper if you wait.  I'd cut one so you're down 90% on 300% (210%) but now you have just 120% in play and much easier to roll or DD when you are ready.  Then you can offer a good price to roll – say $1 to roll the DIA $124 puts (now $1.30) and be happy if you get it.  Then you can offer $1 to roll the V Jan $100 puts to the $110 puts (now $1.30) and you'll be happy if you get either roll and then you'll be back to 240% having deployed just 30% more cash but now in much better positions and a 30% move back your way will have you almost back to even.  

    V/Den – Yeah they really don't believe that thing can go down, do they? 

    Meanwhile – I do hope people do have some of those upside hedges from Tuesday because we're very strong today and closing in on those levels that WILL force us to switch off our brains and flip bullish:  Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816.  No one is there yet but another day like this (assuming today holds up in the first place) and we're there.  

    /NKD only dropped 10 and now back up at 9,905 but at least that's good for the EWJ calls.  

    Dollar smashed down to 82.40 and we know that's bullish (anything below 82.50) and oil now at $95 and gold popped to $1,618 and silver over $28 and even copper is up at $3.36.  


  41. Phil / Fed — Sounds like the hyper inflation "solution" if they reach the tipping point.


  42. PHil – thanks for the V/MA/DIA advice – I"m going to cut the V or MA (I own MA common so I like the idea of direct protection), and use the proceeds to buy the FAS upside hedge – do you recommend the same as Tues – Oct 105-115 bull call spread?


  43. Pair Trade – Short V, long SWHC as Smith & Wesson is the Visa card of the future.


  44. STSI/Gandhjo – It's the VIX, your premium is washing out.  Also, premium squashes as you get closer to the money – that's why only suckers buy out of the money calls for long-term holds.  

    Dow volume 38M coming into 11 – just 20M after the first 10 mins.  

    SQQQ/Jabob – Nasdaq does nothing but go up – can't be good for SQQQ.  Guy on TV says AAPL worth 40% more ($850), that would be good for another 8% on the Nas and a 24% drop for SQQQ to about $30.  So I wonder where the $250Bn that have to go into AAPL will come from?  

    SHLD/Amalfi – And that's the reaction to a top-line miss! 

    Venezuela/Angel – Funny as MS just downgraded emerging markets this morning.  

    Morgan Stanley(MS) Cuts Emerging-Market Stocks Target, Raises Cash. Morgan Stanley cut its 2012 forecast for emerging-market stocks amid concern the global economy will grow less than estimated and after the benchmark gauge rallied as much as 11% from this year's low in June. Morgan Stanley reduced its year-end estimate for the MSCI Emerging Markets Index by 7 percent to 1,130, compared with 1,210 previously. The brokerage also cut its targets for the MSCI Asia Pacific excluding Japan Index by 6% to 500, and the Hang Seng China Enterprises Index by 9% to 12,200. "We take some profits after the recent rally and scale back our fully invested overweight equities position, raising cash from zero to 4%," Morgan Stanley analysts led by Jonathan Garner wrote today. The brokerage recently cuts its 2012 and 2013 growth estimates for China and South Korea along with major advanced and emerging economies.

    Gartman/Rain – I'm glad he agrees because it's the damndest thing I've seen in my lifetime.  

    WMT/Burr – Not great numbers today, I don't know if I'd wait for the stop to trigger.  If you were going to ride it out regardless, that would be different as $65 seems safe enough for a bottom but if the stock drops a tiny bit and/or the VIX pops – then you trigger and lose .05 you could have cashed now.  

    LOL Rain.  As to the Fed, they are willing to have a "managed" inflationary default over time (as opposed to the catastrophic cascading default we'll get otherwise) but what they don't want is sudden inflation that doubles your house value in 3 years and lets you pay off your mortgage with money that's worth half of what it was when the bank gave it to you – that's a worst-case scenario for the banks as they wouldn't have time to sell 20% mortgages yet to cover their cash flow and nobody new would borrow as you can rent with your cash.  For example, I could buy a $300,000 house with $60,000 and pay a $2,000 mortgage or I can rent a $3,000 house for about $3,000 a month and my salary is $60,000.  After 3 years of 20% inflation – I'm making $120,0000, rent on a $300,000 house is LESS than $6,000 because most people who are renting bought the house longer than 3 years ago so it's relatively cheaper for me to rent, PLUS my house is now worth $600,000 and I owe the bank $240,000 so I cash out and have $360,000 to supplement my $4,500 rent and I only need $120,000 to put on a new house – that's how the bank's business quickly evaporates in steep inflation.  

    FAS/Jerconn – It's about the same price so yes.  The logic was a 10% move up in XLF to $16.50 would put that in the money.  


  45. STSI/Pharmboy,gandhjo,Anyone
     
    I've had my eye on Star Scientific for some time as well.  I seem to remember Pharmboy mentioning something about their "nutritional supplement" a while back?  Would appreciate any input … thanks! 


  46. LLY puts…what is there to say.  They are dead even.


  47. Pharm/YMI
     
    Are you still selling puts, or buying calls as you were a while back?


  48. RIG going for $50.  CAT at 87.5….IF we are in a recovery, should it not be at the ATH?


  49. YMI/sage – I have the stock, Oct 2.5 calls (BTO), Oct 2.5 P (STO) and Jan 2.5 P (STO).  I have plenty, and no covers on anything.  I think they pop in September.


  50. Pharmboy      DEPO is up pretty good today.  Any news?  I can't find any.


  51. Laddo – I don't invest in nutritional supplements.  They are a fad.  AMRN is a nutritional supplement that we did invest in b'c they did the proper clinical trial.  Star…has not.  Play at UR own risk.  They could do very well.


  52. Phil,
    Realizing it is essentially a judgment call but as we near the revised bullish brkout levels what would you counsel re the SQQQ Sep 47/55 bcs (in @ 1.60)? sell the 47s and ride out the 55s, roll the 47s down (the 40s are 1.75= roll cost $1)? With AAPL looking strgr, I'm not as confident being sht the NAS as I was.
    Thanks


  53. Assignment – MSFT, PFE, i think div driven, but that never took on any of these before..


  54. Sold all of my puts at the opening today – flat, all cash. I'm going to concentrate on my vintage Porsche parts business for a while. I need to do something tangible. Good trading everyone!


  55. scottmi / assignment — The lower the VIX the better chance of a dividend driven assignment. They usually happen the day before or eve of ex-dividend.  I was assigned on MSFT and JBL this week. Both on the eve of ex-dividend (JBL on Friday night, dividend on Monday).  If you don't want assignement, watch that the time premium doesn't drop below the dividend payout and roll if it comes close.


  56. Homebuilding goes in the dumps, the builders go up to ATH? Yeap, we are now officially in the Las Vegas Sands Casino.  I am exiting stage left, as this is a frickin' joke.


  57. Spain loving their $100Bn gift today – up 4% at the close.  Bankia, who needed the bailout, are up 15% today – would be BK without the money but up 15% – nuts!  Germany up 0.7%, Italy up 1.9% (Spain got $100Bn so they must be next and Merkel meeting with PM next Weds), France up 0.8%.  Volume in Europe was very light.  

    11:00 AM On the hour: Dow +0.25%. 10-yr flat. Euro +0.59% vs. dollar. Crude +0.56% to $94.86. Gold +0.77% to $1616.95.

    11:37 AM Europe quietly puts in a solid rally. Stoxx 50 +1%, Germany+0.7%, France +0.9%, Italy +1.9%, Spain +4.2% (EWP +30% since Draghi's "whatever it takes" remarks), U.K. flat. Spain's 10-year bond rate fell 11 bps to 6.53%. The euro +0.5% to $1.2355.

    Q2 E-Commerce Retail Sales: +3.3% from Q2 to $54.8BB. Total retail sales estimated to be -0.4% to $1.076.9. E-commerce sales +13.6% E-commerce sales accounted for 5.1% of all sales in the quarter.

    Another fluky stat exposed: July retail sales (NY Post)

    The Inventory-Sales Ratio Is Sending An Ominous Signal For The Economy.

    Mortgage rates creep higher for a third straight week, as Freddie Mac says the 30-year fixed-rate averaged 3.62% for the week ending Aug. 16, up from 3.59% last week and 3.55% the prior week. Recent data pointing to low inflation but gradually stronger economic activity have pushed long-term Treasury yields higher and, in turn, fixed mortgage rates. 

    More on Philly Fed: Though missing expectations and remaining negative, the index did increase nearly 6 points from July's -12.9. The 6-month forecast, however, deteriorated from July – falling to 12.5 from 19.3 – led by steep drops in expected new orders and shipments. (full report

    Inflation Deflation (Economix)

    Though the share price is down 67% YTD, the number of shares issued for the VIX ETN (VXX) has soared sixfold to 142M. Trading volatility is the equivalent of competing in the deep end of the pool - unless you're Mark Spitz (showing our age, let's make it Michael Phelps), you may want to avoid. 

    Data mining the speeches of Chinese Premier Wen Jiabao shows "confidence," when it becomes a key focus, could be code for imminent stimulus. Yesterday: "We must increase our confidence. Leaders at every level of government must have confidence. Companies in every industry must have confidence. All of society must have confidence."

    Sliding Investment in China Signals Confidence WaningForeign direct investment in China fell to the lowest level in two years in July, fueling concern that waning confidence in the nation’s growth prospects may restrain any economic rebound. Investment declined 8.7 percent from a year earlier to $7.58 billion, the eighth drop in nine months and the smallest inflow since July 2010. The Ministry of Commerce released the data at a briefing in Beijing today. Chinese financial institutions sold a net 3.8 billion yuan ($600 million) of foreign currency last month, indicating capital is flowing out as property curbs and weakness in exports slow growth and the yuan weakens.

    Mountain of bad debt in banksNon-performing loans at mainland lenders rise for a third quarter, by 4.15pc, as growing number of struggling firms default in 'biggest financial risk' to economy.

    Chinese Stocks Swing Between Gains, Losses on Wen Comments, FDIChina’s stocks swung between gains and losses as concern the economic slowdown is deepening after a report showed foreign direct investment dropped offset comments from Premier Wen Jiabao that there is more room to adjust monetary policy. Tsingtao Brewery Co. (600600), China’s second-biggest brewery by volume, declined 2.3 percent after earnings missed analysts’ estimates. Citic Securities Co. led gains for brokerages after the China Securities Journal said China will expand margin financing for equities. Wen said that while easing inflation allows more room to alter monetary policy, downward pressure on the economy remained “relatively large.”

    China Bets Sour for Heavy Equipment FirmsConstruction-equipment makers that pinned much of their hopes for sales growth on China this year have been left high and dry. Investment from companies including Caterpillar Inc., CAT -0.30% Volvo AB and Komatsu Ltd., 6301.TO +3.32% has poured into China in recent years. But the country has cut back on infrastructure projects, leading to weak demand for new equipment. Slowing economic gains, reduced government spending on construction and higher interest rates have all hurt sales.

    China Mobile (CHL -5.5%) slumps after its Q2 earnings miss estimates, and the company promises to continue investing heavily in phone subsidies. Much like the U.S. mobile industry (previous), ramping sales of subsidized smartphones appear to be hurting the margins of Chinese carriers. Another challenge is the growing mobile adoption of instant messaging and social networking services such as Tencent QQ and Sina Weibo, which is impacting voice and text-messaging activity.

    The most important factor driving oil prices higher recently has been changing assessments of how strong the world economy will perform over the next six months, James Hamilton writes. Markets seem to be betting that favorable economic trends in the U.S. and China are enough to outweigh weakness in Europe, but "whether markets have [it] right remains to be seen."

    Will Nothing Slay the Ethanol Dragon? (Reason)

    Amidst the news Jon Corzine will apparently avoid criminal charges over MF Global are his future plans: They may include starting a hedge fund. With no firm to run over the past months, he has been spending his time trading his own considerable wealth. Anthony Scaramucci - who worked under Corzine at Goldman – wants in.

    Freddie-Fannie Push Bank Bad Debt Cost to $84 BillionFannie Mae and Freddie Mac have expanded efforts to get refunds on soured mortgages, boosting the cost of faulty home loans and foreclosures at the biggest U.S. banks since 2007 to at least $84 billion. Bank of America Corp. (BAC), Wells Fargo & Co. (WFC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C) and Ally Financial Inc. (ALLY), set aside almost $3 billion to buy back bad home loans in the first half of 2012, according to data compiled by Bloomberg. Regional lenders including SunTrust Banks Inc. (STI) disclosed at least $1.3 billion of added costs, exceeding their total for all of 2011.

    'Taxmageddon' May Wallop Home SellersBischoff: The tax bill from selling a home could jump more than 50% next year for some sellers.

    Early Reviews Of Microsoft's Windows 8 Are Not Good.

    Well, that was quick: Facebook (FB -6.2%) has crashed through the $20 level on the day of its first lockup expiration, and is near its post-IPO lows. Other recent consumer Internet IPOs are also feeling the pain: GRPN -6%ZNGA -2.6%YELP -1.4%. (earlier)

    Apple's(AAPL) New Front in Battle for TVApple Inc. is in talks with some of the biggest U.S. cable operators about letting consumers use an Apple device as a set-top box for live television and other content, according to people familiar with the matter. The talks represent Apple's most ambitious crack at infiltrating the living room after years of trying. Apple doesn't appear to have reached a deal with any cable operators. One obstacle may be the reluctance of operators to let Apple establish a foothold in the television business.

    More on Apple's (AAPLset-top box: though Apple is in talks with cable providers, no deals have been reached. One issue: cable operators have been obsessed with controlling set-top interfaces. Moreover, unlike music studios, they haven't suffered enough from online distribution to upend their business models. Sources claim Apple's tech could eventually go into in a TV set, and prototype sets have been developed - past rumors have suggested pay-TV providers are testing them. But squabbles over control andcontent deals could get in the way here as well.

    Gunmen Have Attacked And Entered A Pakistani Air Force Base Thought To House Nuclear Weapons.


  58. Phil
    Are you shorting oil  ?
    Thanks


  59. /CL rejected at R1.  Short 2 @ 95.29


  60. Phil / FB Puts  -  I cashed out at 1.15, but the Aug17 FB 21 Puts still 1.15 x 1.25, for around a 118% gain.  That was a nice easy play on news for sure!  Paid for my plane tickets home to SF and the PSW LV.


  61. 'Sharpie Parties' Fuel Rampage on Foreclosed US Homes
    http://www.cnbc.com/id/48688084


  62. Hello All – Found this article interesting…
    "The latest edition of the institute's annual Executive Excess compensation study found that in 2011, 26 CEOs received more in compensation than their companies paid in taxes, and that the four major tax loopholes contributing to excessive executive pay cost taxpayers about $14.4 billion a year."
    http://news.yahoo.com/report-taxpayers-subsidize-ceo-pay-040124133--abc-news-deals.html


  63. Good idea Birdman – I'm about to throw in the towel on this market as well.  I'm completely unbalanced lately.  Just getting bled out on this slow melt up.  Irronically when I'm net long I wake up constantly throughout the night to check the futures, but when I'm short I sleep like a baby…….despite the recent losses I've sustained.  Over the last month my YTD gain of over 30% has dropped to around 5%.  Think I'm ready to sit the rest of 2012 out.


  64. STSI/Thanks Pharm!


  65. Pharmboy
    What do you think is moving PDLI?
    Think we should cover?
     Thanks


  66. terrapin / sharpie parties — That kind of event is the reason for Obama's "internet off switch".  Should social media be used for an uprising against the government, they will flip the switch on that media and start rounding up offenders under the NDAA.


  67. By the way, Ron has asked me to remind you that the BBW/Opesbridge project kicks off in two weeks.  If we do get a big sell-off, it's going to be a fantastic time to initiate new entries and the next opportunity to get in will be another 6 months down the line.  You can read about it and contact Ron over at the main post.  I'll be heading out to CA in Sept to meet with Ron in case anyone's out there.   

    FAS Money – Finally the next weeklies are out!  Let's sell 2 Next Week $96 calls for $2.05.  No fun selling puts yet.  

    $25KPs – Nicely balanced.  

    • EDZ – Looks good with EDZ at $12.76.  If we weren't already very bearish, I'd add a vertical.  
    • SVU – Our net is $2.40 with SVU at $2.39 so no worries there.  
    • JRCC – $2.58!  $2.50 is our max gain in Sept and our Jan covers are holding up great – this thing has been a great income producer!  
    • AMZN – Rolling to Oct $215 puts ($3.25) for $1.25.
    • SQQQ – Rolling to Sept $38 calls ($2.55) for $1.10 and doubling down at $2.55. (Nas testing 3,060)  
    • VXX – Down to $11.58.  Oct $12 puts are even roll to Dec $11 puts so no worries yet.  Oct $14 calls are still .88 so SOMEONE thinks the VIX is a bit low here.  Unfortunately, that means we can't DD.  
    • BBY – Looking good (see, we're bullish!) 
    • SCO – Tempting but let's be happy for now.  
    • V – Sept $120 puts (.66) are crazy cheap but let's see if they hit .50 before we pull the trigger to DD.  V was $118 on July 13th and we have 36 days going forward to fall back there.  

    SVU, JRCC and BBY are our bull plays with BBY being a big one but we will need something to play in case we break out, probably the FAS bull call spread.  The Oct $105/115 bull call spread is $2.50 and the $115/125 bull call spread is $1 so risk $1.50 on a $10 drop to make $1.50 on a $10 move the other way or, of course, $7.50 if we make it to $1.25) so 10 of those risks $1,500 with a $7,500 upside – we can live with that but not until/unless we break a couple of our levels as it's not like these are getting away from us.  


  68. This is insane.  I think they're searching for the bot's definition of "breakout on volume".  They already know Phil's lines. Are they fishing for us?  Are we the only ones left?  Excuse me while I sharpen my pencil in preparation for it to meet my eye…


  69. CELG Calendars – we rolled yesterday to the Sept 72.5s for ~ 20c credit.  IF they fail the 200d MA, I am out of the spread.  I may buy a double diagonal and play this baby both ways. 


  70. Sharpie Parties – some people are really idiots, but if you want to try to find the bright side in this story – it's the only bit of bail-out money that has trickled down to contractors like me that fix up the REO properties for the banks.  One thing I don't understand is why people always take the appliances that, based on the condition of the rest of the house, I wouldn't even want to touch.  A lot of the properties really need a fresh coat of paint and some new carpet anyways – helps them sell faster.  That said, I am definitely NOT condoning these idiots.


  71. PDLI/qc – it is called the 'search for yield'.  There are some expanded revenues from Roche on the forthcoming data, but all PDLI is, is a royalty stream from its patents.


  72. FYI – Yelp lock-up ends Aug. 29.


  73. Phil / JRCC – the search button is not working (i get error message) so can't look up JRCC income trade you are referencing above.  I have sold the Jan '14 2.5 puts as of July 10th for $1.50 and am down a smidge and looking okay.  just wondering what the other trade was.   Thx. 


  74. Phil / Hedge fund – I heard Corzine is going to start one.  I think I'll put my money there instead ;)


  75. what a circle jerk this is…I too am done


  76. SQQQ/8800 – If this top stays firm resistance, we can still fall very sharply (not sure when).  Those calls are down to .55 – you never want to wait that long, you should be making a decision to pull your calls when they hit your net.  I'd sell the $41s for $1.50 (net $1.70 if you buy back the $55s) and roll down to the $38s ($2.55) for $2 and then you are in the new $3 spread for net $2.30 (your original $1.60 plus the net .70 on the rolls).  IF the $38s drop down to $2, THEN you will want to take additional action, like rolling to the Dec $44s (now $3.60) for another $1 and netting you into what is currently a $3.60 call for $3.30 – not a bad escape plan…

    Capitulation/Bird – That's the signal we were waiting for!  Cash is good, it's a crazy market.  If you end up with enough parts to make an extra 918 – let me know!  8)  

    Oil/QC – On a cross below $95, I like the futures shorts (/CL) but the Dollar is below 82.50 so very dangerous at the moment.  Next week we move into the end of the monthly cycle and they seem to have this month under control but next month they hit a wall as they already have 100Mb worth of contracts backed up in Dec so it's going to be much harder for them to roll out of trouble:  

     

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Sep'12 94.21 95.38 93.93 95.28 12:29
    Aug 16

    -

    0.95 131663 94.33 107469 Call Put
    Oct'12 94.56 95.65 94.21 95.56 12:29
    Aug 16

    -

    0.94 54915 94.62 236361 Call Put
    Nov'12 94.94 95.90 94.58 95.82 12:29
    Aug 16

    -

    0.91 17521 94.91 137770 Call Put
    Dec'12 95.17 96.23 94.95 96.17 12:29
    Aug 16

    -

    0.90 30120 95.27 203118 Call Put
    Jan'13 95.66 96.63 95.40 96.61 12:29
    Aug 16

    -

    0.87 9523 95.74 102580 Call Put

    As a rule of thumb – if they have over 550,000 open contracts (1,000 barrel contracts) in the front 4 months, there's going to be a lot of selling pressure as the current month comes to a close.  They're at 650,000 already and it won't get better in Jan because, usually, the 4th and 5th month combined don't add up to 100,000.  Last year, they held it up through Aug around $90 but crashed to $75 in Sept so I don't mind initiating shorts here, like the SCO trade in the $25KPs, and working them into next month.  

    FB/Burr – Very nice.  I do feel bad for Mark Z – Not sure if "better to have loved and lost" applies to $50Bn….

    Taxes/Ink – Sickening stuff.  Would be interesting to know how many of their employees lost their homes that year.  

    Towel/JJ – If you're going to capitulate – why not wait until we actually cross our levels.  Not much point in having levels if you're not going to use them.  JMHO. 

    Only ones/Rain – Feels like it, doesn't it?  

    JRCC/Terra – It's the trade in the $25KP, we bought the long puts just to anchor the sale of the short puts and we already collected one month and now our 2nd sale is up .25 and we've only lost .10 in the long puts – that's how you make a monthly income with a spread.  

    Corzine/Rkyrom – Will be interesting to see who ends up with a better year….


  77. Much like JNJ, COV launched a voluntary recall of its Shiley tracheostomy devices. Now the FDA has slapped a Class I tag on the affair, warning that the leaky cannulae could result in injury or death.  And up they go.  I guess it is good that they can kill people, it means less to pay for in the long run, no?

    I will re-enter shorts at SPX 1420ish. 


  78. Duration advice- I am noticing that my shorts are going further out than in the past and when we market moves like today I am wondering- what's the best way to manage them? HOw much effort should a person place on something that expires in 519 days? PS My crystal ball is broken.


  79. Phil, on AMZN, we rolled to the 210p yesterday.


  80. V /Phil- we rolled to the 125 Puts on Tuesday.  The portfolios have not been updated yet.


  81. RIG is en fuego……


  82. The only indicator that doesn't indicate a sell off of this surge is the dollar. FWIW


  83. Birdman – I have a 1983 928S sitting around that needs a new owner.  Know anyone?   


  84. USO has broken through upper resistance. I would not short IMHO until it his the 200d MA ($37).


  85. Mid-day update for the portfolios. I am back to my regular schedule next week finally… All these meetings are killing me.


  86. IWM was about 81 on july 18 and 19 and 76 on the 24th. I think it was a Thursday Friday top, sell off Monday to Wednesday.
    But this time it is different!


  87. Phil/income portfolio
    Are you also rolling down those SQQQ calls ?


  88. rkyroma
    Where is it and does it need work?


  89. Shadowfax, phil already mentioned it this morning, but you should definitely look into kickstarter. I've bought into one or two products there myself. The last one was an indoor grill that seemed innovative and something I'd easily spend $300 or more for to try out.


  90. I'm feeling a big negative hockey stick this afternoon.


  91. APC – 5 Sept 72.5.  In a wedge and will break out with USO.  Could sell next weeks 72.5s.


  92. This is an updated spreadsheet – on Tuesday we rolled the V puts to 125 and yesterday we rolled the AMZN puts to 210 at 10:30 or so. Hopefully I got everything now.



  93. 25KPs / StJean – Are we keeping Phil's update to roll the AMZN Puts?
    "AMZN – Rolling to Oct $215 puts ($3.25) for $1.25."


  94. Phil,
    Help me analyze this correctly:
    TNA Oct 55/61 BCS for $2.47 with an Oct 42 Put for $1.92:   net$ .55 Debit--    10 Contracts
    Currently : net 1.40……
    Do I take the profit and Walk, or please explain how I work this issue….Thank you. 



  95. It's time to …. defy gravity...yes, I have posted this before, but why not…they do it over and over again.


  96. Aussie – that price is if you are still in the 205s.  You can roll from the 210s to the 215s for another 68c or so.


  97. Phil – you said yesterday you wouldn't want to be long PCLN in response to someone's comment that it might consolidate and push higher. Consider the fact though of inflated M3 and the corresponding, (probably) inevitable inflation floats all boats.
     
    I'm up 23% in a week on bitcoin. Hell, they even have their own boarse.


  98. Capitulation/Phil – Yep. Probably the best short signal ever. I'm spending my time here: http://www.audettecollection.com – I know vintage Porsche parts are in a bull market, and I have a lot of them.  Good trading everyone! See you at the track.


  99. sold PCLN front month calls. The gamble paid off so gambling on AAPL 645's for 19 cents….


  100. I didn't know Powerball is $2. It's like Miller High Life — the expensive white trash lotto! 
     
    Someone in Michigan is happy though.


  101. Looking at the CSCO Jan 14 $13 Calls at $6.15, there is very little premium.  I'm thinking of buying 20 and selling the monthly near-the-money calls for $.50.  Seems like a great way to make $1000/mo for the next 18 months and I don't think CSCO is going bankrupt any time soon.


  102. AMZN/Pharm – Thanks, yes have rolled to the 215s, just checking to see how StJean will reflect the roll/s in the 25KPs.


  103. Anyone looking for rooms for the LV trip – Vdara – on HotWire (the name is not revealed – but 5 start – South Strip) – was available at $139/day (taxes extra …)


  104. And – for the PCLN fans out there – the Negotiator couldnt get me that deal – HotWire did … fwiw ..


  105. SQQQ is a fun gamble. aug $39 call is $0.15


  106. Kwan
    I am considering it. I actually sold the usual show and demo at dealer, but that is too hard, can't carry things, and expensive.
    Before I can take pictures I need first class inclosures. Was going to have the parts made because now its parts on a desk.
    Actually I am checking on getting them made up in china right now. Waiting for a reply early there still. the 1 peice price is too expensive because shipping about doubles the cost. I have a good deal out of KY but that is for quite a few, local guy needs a reality check. Did any of you actually buy anything on kickstart? I want to sell this, get money that way. Untill I run out of parts I can build them for little more than the chassis. Audiogon works well after you have some customers, sold all but 1 Naim CD player there when I closed the store for good prices quick. Ebay sold the CD but they charge too much.


  107. Pharm/TLT $130 calendar – I joined you in this trade a couple a weeks ago.  Any thought is rolling it down.  I was thinking of rolling the short call to the Sept. $127.


  108. AONE was bailed out by a Chinese company…lol.


  109. rev – I am still in it, just waiting for a time to roll the Septs up.  Wait.  If it continues down, then it is not worth spending the money on, so get out or just sit.


  110. I faintly remember 3000 being a resistance level for the Nas???
     
    FU SQQQ!!!!


  111. SPY hitting 52 wk high, so high…so so high.


  112. Don't look down on China, 3 parts coming and sending 1 to Hong Kong. Indonesia, UK, and Israel are still in business, USA is the sore spot for me. Shippers are doing well by me.


  113. Looks like they want to close at a new 52 week high.  They sure are relentless in the face of a global slowdown. 


  114. How much effort/Newt – Depends on the position and what your goal is.  

    AMZN/$25KP, Rpme – Well good – I didn't have a new sheet so the same move looked good today! 

    V/$25KP, Ausssie – Good, $125s are much better.  I was just running through the list with what I see based on the last spreadsheet entry. 

    USO/Pharm – Can't short anything at the moment – nutty moves.  AMZN $242!  PCLN $586 – bringing back Shatner adds $1.5Bn in market cap in 2 days – boy that guy is good!  

    SQQQ/Income Portflio, RJ – In that portfolio, since they are only insurance and we're generally bullish – we will roll out for time as a preference – we're not really looking to score in any particular time-frame.  

    AMZN/$25KPs – Still want to roll up but, since it's $1.50 to roll to $220 puts – that's the move off the $210 puts.  Keep in mind we are up 40% and 60% in the two portfolios so this is a gamble we can afford but we will take the loss if they break $246.  

    TNA/Jasu- TNA is at $56 and you are up $1 out of a possible $6 and $1.17 in the money.  This is merely "on target" but, with such a huge, early win and the RUT coming into resistance, you may want to take the quick money and run and simply pick another set-up if we do break over our levels.  If you are a daredevil, you could take most of your full $6 off the table by cashing the $55 calls at $5.30 and then leave the naked calls and puts as a short strangle.  If TNA pops $57.50, you would have to re-cover with something, but it could be the $60s (now $3.40) and that would put you back in the $1 spread for a $1.35 credit so still possible $2.35 of upside and no chance to lose the $1.35 on the spread side. 

    Defying gravity/Pharm – Yes you did it last time we were at a silly top and people were capitulating:

     

    Defying Gravity….I know I have put this up before, but it is still, so so appropriate.

    Of course that was a very good top and we did get a huge drop at the end of March but then back up in April and then REALLY far down (about 15%) during May.  But that's ancient history (3 months ago) – this time, I'm sure it's different…

    PCLN/BDC – I think I said I wanted to wait for $650 to short them – this little pop was expected and I just hope it becomes overdone.  Good call on BitCoin.  

    VIX back to 14.35.  

    Parts/Bird – Good call, anything that caters to the top 1% is a solid business model.  

    TLT hit $120.52 – Wow, people are flying out of bonds.  Fed can't want that….

    AONE/Bob – That Chinese company just bought themselves America's best battery company and it was handed to them by the Reps, who blocked additional funding for this great technology.  Where's the logic to not extending them more credit when clearly they have orders?  We forced AONE into the arms of China – this country is run by idiots.  

    Resistance/Jabob – We adjusted for the weak (82.50) Dollar, now 82.38 so should have no trouble breaking these levels:

    Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816.

    We're almost there – I recommend keeping a bottle of tequila handy tomorrow because we may have to drink the whole thing and go on a buying binge if the RUT and the NYSE turn green!  


  115. Phil,
    General question re: Long-term Buy-Writes.   When building a portfolio of longer-term investments – starting with Buy-Writes around a dividend payer – do you ever buy back the Calls/Puts when conditions are favorable. That is – with decreased volatility – and not much movement on the underlying – both my Calls and Puts are up 20%+ and most premium is worked off the Call.
    Bought RRD at $12.95 and sold the 2013 $12.50 puts and 10 calls for $5.75. 
    Now, RRD at 12.46 and Puts/Calls are $4.50 – down $1.25  ~22%.
    I too am bearish and have to believe we'll see a return of higher vol and better premiums.  So how do you work these longer term positions in this situation.
    BTW – thanks too for the extended discussion on XLF roll in the FAS Money portfolio last week – very helpful and much appreciated.


  116. Weren't there a high number of XLF calls bought yesterday into the close?  I am sure today was just a coincidence as will tomorrow.


  117. DIA tomorrow $132 puts for .20 very tempting.  $133 calls are only .10 and with DIA at $132.69, seems like you have a good chance of one side paying for the other.  

    Dow volume a huge (for this market) 75M at 2:55.  


  118. VRTX – buying back the Sept 55 calls, selling the Aug 55 Cs.  3/4 cover.


  119. Keep in mind, by the way – we had $166Bn of G20 stimulus this morning (Brazil and Spain) and, per our rule of thumb – that buys16 S&P points.  We're only up 11 so far. 


  120. If 'they' start to ramp VRTX…then sell the 55 Aug Ps.  'They' will have to make a decision.


  121. Saw Crosby, Stills & Nash yesterday.  They are beginner septuagenarians, and played passionately for 2 1/2 hrs.  Great concert from a group of true 'first responders' that are still trying to wake America up…


  122. Pharm    Whats with DEPO?


  123. Wednesday, Paul Day chief strategist at Market Securities told CNBC that Greece will likely leave the eurozone within a month.


  124. I thought Crosby died, I know he was very sick but I guess still truckin'


  125. Crosby/jomptien
     
    That was Bing Crosby.


  126. Insiders buying a good company.  This is another one to sell premium against. 


  127. RRD/Gbase – As always, it's not a rule, it depends on your outlook and goals.  In general, unless we're up 50% way ahead of schedule, we don't tend to mess with Buy/Writes but that's because we do our day-trading in the small portfolios and leave the long-term stuff alone from month to month.  If you want to be active, you are right that you can and should take advantage of things like that but then you do need to monitor the position as it wasn't your original intention to leave it uncovered.  Don't forget, the goal is to make money on premium decay – the minute you buy back the short positions, you stop that process and now you are a simple RRD stockholder, hoping it outperforms the market.  Glad the other discussion was helpful.  

    XLF/Ink – It's all just coincidence.  

    “For existential mathematics, which does not exist, would probably propose this equation: the value of coincidence equals the degree of its improbability.”  – Milun Kundera 

    “So it's a coincidence. Just like you said. Two rich parents with two rich kids at the same school. They're both killed in accidents. Why are you so interested?"  "Because I don't like coincidence," Blunt replied. "In fact, I don't believe in coincidence. Where some people see coincidence, I see conspiracy. That's my job.” - Point Blank

    Oh sorry, Spain was $123Bn and Brazil $65 so $188Bn in stimulus this morning to get us 100 Dow points.  Not really something I'd capitulate into.  

    CSN&Y/Hemas – I saw them a couple of years ago in AC – surprisingly good for old guys.  

    Crosby/Jomp – I think he got a new liver.  


  128. Phil/CSCO, jelutuck has a great trading idea(I like it, thx jelutuck) for CSCO at 2:04PM, what do you think?  TIA.


  129. When americans are getting F*ed it doesn't matter, but if we want to F*ck Iran, well that's another story: Exclusive: White House dusting off plan for potential oil release
     
    And how can this be "exclusive"?


  130. CSCO/Bob, Jet – Why spend so much on the long side.  If you want to sell front-months, you can do so against the 2014 $20 calls ($1.93) and, if CSCO goes much higher, you can DD and then buy another 1x before you spend $6.15 for your long position.  You can sell the same Oct $19 calls for .81 and you've dropped you initial net to $1.12 and two more sales like that and your longs are free. As I said, if CSCO pops to $21, then you have your $2.90 (apx) longs and you owe the caller $2 so, even without rolling the caller you only lose about .22 – that's not much risk to the reward and, of course, if CSCO drops $2, then your caller is worthless and you have your net $1.12 $20s and you can spend .70 (apx) to roll them down to the $18s and you're back in business with a net $1.82 entry less whatever you sell the next puts for.  

    Reserves/Rain – That's a good thing on the whole.  Didn't stop gasoline from being jacked up to $3.07 today (was $3 yesterday morning).  

    PCLN moving in on $590 – Does anyone have Shatner's number – I want him to do some commercials for me…


  131.  

    2012 Election Map: The Race for the Presidency

     
    By Barry Ritholtz – August 16th, 2012, 2:30PM

    Click for interactive chart:

    Source: Washington Post


  132. Phil / reserves — I agree that it's a good thing overall but I question the motivation.  Gas is $4 around here.


  133. Phil/DIA – Thanks for the DIA strangle idea.


  134. Everyone but the cast of Star Trek loves William Shatner.


  135. Boy, how annoyed is Florida going to be with these guys over the next 3 months.  FL is 29 points and, once again will decide the Presidency.  That's good for Obama, of course, as Seniors rule there – if, of course, they fill out the correct entries on the ballots.   



  136. CSCO/Bob – so didn't you guys do this last month when CSCO dropped to $15 and i was pounding the table ;) ?


  137. Good Afternoon!   I've been vacationing, and it ain't over yet.  But I've made a MoMo portfolio trade:  Sold to open 10 October EXPE 50 puts for 2.40.   Margin on this is 10k.  Thanks stjeanluc!   And yes, AAPL goes higher.  :) 


  138. Phil,
    Thanks for the advanced tutorial on the 47/55 Sep SQQQ bcs. I need a few more of those 10K hrs to digest the nuances, but the point about making a decision when the spread gets to the net diff is well taken and a guideline that I shall try to remember.
    Thanks


  139. Reserves/Rain – That's what the reserves are supposed to be for.  Only Bush refused to use them (despite filling them to the brim at $100+ per barrel) and tried to redefine and narrow the use.  

    You're welcome Aaron – hopefully we get a 50-point move in the morning.  Either way is fine.  

    Welcome back Lflan!  

    Looks like another anti-stick into the close.  Dow volume up to 90M at 3:54.  

    Dollar back to 82.45, Euro $1.235 (who wants to be long over a weekend?), Pound $1.5737, 79.27 Yen to the Dollar with the Nikkei at 9,125.  


  140. Hi Phil…..I'm not staying long.  I've got 2 more weeks of vacation and lots to do.  Have fun guys.  I'll check in when I can.  


  141. Phil, how do you make money on the DIA trades you suggested if one just offsets the other?  Curious how this particular strategy works.  Thx.


  142. Phil,
    Thanks, took the money and walked for a gain. will look for the next play from you…..


  143. microflux/CSCO/pounding the table, I guess I wasn't in the room. :-(


  144. what an exciting day..


  145. lucky1/DIA – You would hopefully make more money on one than you lose on the other. 


  146. rustle123
    Bing Crosby passed away???  When?


  147. DIA and Effort/ PHIL – Thanks


  148. You're welcome 8800!  

    Have fun Lflan.  

    DIA/Lucky – A 50-point move either way tomorrow puts one side or the other in the money and a 100-point move would be hugely profitable, so it's just a gamble that we get a big move.  Also, if we get a big spike up in the morning and we can cash one side or another for more than .30 – then the other side becomes a free trade in case we snap back.  This morning, we were down about 40 and then up 100 (plus the 40 we lost) later in the day so we could have cashed both sides with nice profits.  

    Good man Jasu – Cash remains King.  

    Dow volume finishing at 114M – blowing away past 10 sessions.  Good sign for the bulls as it was an up day but we know that the first 10 mins were 18M of selling and we continued down until 10 so about 25M of selling and then 40M since 3pm has been pretty much all selling so 65M of 114M was selling today – yet we're up 0.5-1% – aren't the markets great!  

    And don't forget – it cost $188Bn to buy this rally – we'll see how long it lasts us for $20Bn per S&P point.   


  149. CSCO / BOB – don't worry if i have leaned nothing else i have learned (from Phil ofcoarse :P ) that there are always good deals to be had. just need to wait a bit.


  150. Phil, 25kp pretty resilient considering. I love the smell of capitulation in the afternoon, it smells like….Victory!


  151. microflux, thanks a lot, have great night.


  152. Phil/Election Map.   Nate Silver's map at http://www.fivethirtyeight.com is much different from Barry's.  No one knows at this point, but the polling in many of those yellow states on Barry's map is well onto Obama's side.


  153. As far as that bottle of Tequila goes, I was already into it at 2 this afternoon. Well, actually Vodka, but you get the idea.

    I sold a triple load of next week SPX 1440 calls at $1.60. I just ran out of patience. I just stood in the street and waved the red cape at the beast.


  154. Phil
    You are so smart on oil trades! Why don't you get that Bush bought all that oil to save the oil companies by buying at the highest prices at the time. Now they will bankrupt every oil producing country in the world if they use it. Simple!


  155. That 188 billion will buy 1 more day and that will be sideways. Half a 3:59 stick.


  156. barfinger You maybe the smartest person here!


  157. I suspect not, shadowfax. However, I have the highest blood alcohol.



  158. Alcohol / Barf – Is that the source of your handle bar finger?


  159. Are states TBTF? California Sales Tax Revenues Nosedive By 33.5%
    barfinger/ LMAO 


  160. I do have a serious question, though. If the euro begins to actually crumble, greece leaving, spain leaving or germany leaving.  Our markets have already been boosted by capital flight, but what do we think will happen in the event of an actual, well, event?
     
    I am convinced there will be such an event, possibly preceded by an attempted bailout, but moving past that, is this bullish for our markets?


  161. Lots of overbought sectors and maybe a sector rotation in progress:

    http://www.bespokeinvest.com/thinkbig/2012/8/16/significant-rotation-out-of-defensives.html

     

    While the Dow is up nearly 100 points today, the four main defensive sectors — Health Care, Utilities, Telecom, Consumer Staples — are either flat or down on the day.  This rotation out of defensives has been going on for about two weeks now, and it's indicative of an investor class willing to take on more risk.  As the 10-year Treasury yield has spiked this week, high dividend paying stocks have been hit especially hard.  With such significant rotation out of defensives, the market is at least set up to make another nice leg higher.  

    The rotation out of defensives can be seen in our sector trading range table below.  As shown, Consumer Staples, Health Care and Telecom are the least overbought of the bunch, while the Utilities sector has actually moved well below its 50-day moving average!   


  162. Euro / Barf – The biggest question would be "Where does the capital fly to?". My first guess would be US treasuries and I don't know that it would be bullish for the markets as long bonds are inversely correlated to the market (see the tables I posted Tuesday).


  163. stjean/sector rotation
    With Utilities being the least desirable currently, that would seem to be significant until you see XLU is only about 3% off its high.



  164. Phil/cash remains king 
    good evening!
    are you going to capitulate if go over our lines?
    I didnt quite get what you guys did with the AMZN puts.
    i followed you in with 100 at $3 when you did the DD.
    so, now the Oct 205's are $1.95, so a loss of $1.05
    The roll to 215's at $3.23 still leaves me short $0.78 or so. 
    So, question: why not roll to the 220's for $4.09 and you gain $.04 on the whole transaction from the beginning when I bought them for $3 ?
    please explain the flaw in that?


  165. Phil/AMZN
    Or, is it better for me to DD at $1.95 for a net $2.42 on the entire transaction after DD?


  166. Phil or anyone,
    could someone explain when it makes more sense to sell a bear put spread versus buy a bull call spread? Thanks very much for the help


  167. India, South Africa, Lebanon, Pakistan, Syria, Egypt, with Turkey, Qatar and Saudi Arabia in lesser roles all appear to be going off.  It's likely that economics have a lot to do with it, and, if true, that one can expect far worse going forward.  Not good.


  168. Platinum revisited / Thanks for yesterday's comments on platinum/gold/PPLT, Phil.  The South African mine strike couple with the dollar dump seems to have sent PPLT up 3.5%+ today.  There is much press blather of a[nother] Euro crisis sending foreign money fleeing into Treasuries.  Hard to believe that gold would get  some of it.  As you say, chasing it with PPLT would make sense.  Feel free to ring the bell if or when the time comes.


  169. Correction, "wouldn't"


  170. Phil/GE,
    I did a B/W on GE sometime back buying 200 shares @ 16.23 and selling 2 2013 15 calls for 2.71 (now 6.08) and 4 15 puts for 1.62 (now .18). should I just let it be called away or roll the puts to 2014 15 puts for .94? Greedy bastard or maybe better use of the $ in other ways? Thanks


  171. Phil,
      I have some AMZN Oct 160, 180, and 210 puts. I've missed the rolls you've suggested b/c work got busy. Down big on the 160s and 180s. What would you suggest? I still believe AMZN goes down


  172. Good morning!  

    Futures pretty flat, which is not so great after such a big day.  Merkel said something that might have been meant to be supportive but wasn't really but the spin in the MSM is BUYBUYBUY – it's really amazing and, sadly, the same thing that happened in 2008, when they tried to convince the bears they were crazy – even while the markets were in the early stages of collapsing.  

    2:47 AM Asian shares mostly rise, supported by Angela Merkel saying Germany is "committed to doing everything we can" to maintain the euro, and more decent economic data from the U.S. That's causing the dollar to strengthen against the yen, thereby boosting Japanese exporters. Japan +0.8%, Hong Kong +0.6%, China -0.4%, India +0.6%

    3:51 AM  EU stocks track Wall St. and Asia and open higher, buoyed by Angela Merkel's "everything we can" to save the euro spiel, although Alpari's James Hughes isn't convinced. "The markets are always very quick to react to comments made by Merkel and it's regularly followed quickly by a reversal once the details…emerge." EU Stoxx 50 +0.4%, London +0.3%, Paris +0.2%, Frankfurt +0.4%, Madrid +1.5%, Milan +0.75%.

    Again, don't forget – $188Bn of stimulus dropped just yesterday.  You would think you would get more than a day out of it. Spain got $123Bn, at least they are still happy after yesterday's 4% but 5.5% for $123Bn dropped on a $1.5Tn economy is almost 10% – don't you think they should be a little more excited than that.  That's like us getting $1.6Tn….

    Good point made by Hughes as Merkel is in Canada and while she did sayEuro-area policy makers “feel committed to do everything we can to maintain the common currency.” - she also said: recent ECB decisions “have made it clear that the European Central Bank is counting on political action in the form of conditionality as the precondition for a positive development of the euro.”

    Conditional is pretty much saying no, or at least, not yet.  What she's saying is yes, we're all for helping out, if Spain and Italy SUBMIT to German authority.  Who wants to be the PM that finally hands control of their nation to Germany?  By September?  Not likely….    And, from the same article:  

    Even so, Greece, on its second rescue program after triggering the crisis in late 2009, may run out of road at the end of the year. Samaras’s government probably can’t come up with enough austerity measures even if creditors extend the time line as his coalition wants, according to the Citigroup note. That means an end to international funding “looks very likely” after the next audit set for December, it said.

    The Dollar is still lame at 82.43 but 82.40 is hanging tough so far.  Only the Nasdaq closed above our level but 2 points above our level (3,060) is really less than the .10 drop in the Dollar if we did the additional 3-point adjustment.  See, TA would be a real pain in the ass if people did it correctly – which is why they don't bother.  Well, the people who deal with the general public don't bother but you can be damned sure the trade-bots are adjusting their lines for the Dollar every second and that's why our adjusted lines still work – we're just doing what the Bots do and that's 90% of the trading.  

    Euro encouraged by Merkel is up up at $1.2379, about 1% since yesterday morning.  The Pound is barely holding $1.57, at $1.5719 and the Yen is powering up to 79.44 with the Nikkei touching 9,200 into the close and now 9,190.  We got stopped out of the short quickly yesterday but 9,200 is a good line to short on /NKD if you are willing to risk another 10-point loss ($50 per contract).  I think it's worth it because the Nikkei can drop a quick 50 and the Yen is close to likely rejection at 79.50 and what Merkel said was not that supportive really, etc.  

    Of course, if the Yen goes lower (stronger) then the Dollar may get weaker (weaker) and that might boost the US markets and the /NKD may like that so very, very tight stop at 9,206 ($76 loss per contract) for sure.  

    Oil is flatlining $95.50 and I will like shorting it with USO into the weekend, gold $1,621.70, silver $28.245, copper $3.401, Nat gas still dead at $2.72 and gasoline rejected at $3.10 and now $3.0541 but never a good idea to short into the weekend.  


  173. Wow, EBAY banning the sale of Magic!  Not even books on spells and potions and they threw in psychic stuff as well as tarrot cards (I wonder if scrying is OK?).   WTF – will we be back to burning witches under Romney/Ryan?  


  174. $25KP/Rpme – At the moment, we're risking about 1/3 of the profits to press our shorts and, hopefully, we catch it right next week (before the decay takes us down too far).  Hopefully, yesterday was a blow-off top – I can't believe how LITTLE we went up on a $188Bn day but it doesn't seem to concern anyone else…

    Election/Jet – I think that one is a bit optimistic (or pessimistic if you're a Romney guy) but, ideally, I do see that as the likely final with Nevada and Iowa most questionable.  I don't think Florida will be a toss-up once the SS stuff gains traction.  That's a critical mistake for the Romney as there is an endless supply of Paul Ryan quotes that will have Florida voters reaching for their oxygen.  Also, imagine either one of those tools reaching for the Hispanic vote!  

    Yen going for it at 79.48, /NKD at 9,195.  

    Red cape/Barf – Better get another bottle for the weekend, I'm sure the rumors will be flying.  

    Bush/Shadow – Who says I don't get that?   I used to bitch about it all the time.  Oil under the bridge now, about $35Bn worth that Bush bought to help drive prices to $140 – while also running two wars that used another 1Mbd or, really, about 500Kbd as 500Kbd is normal military activities.  

    ROFL Barf!  

    Big Chart – What we don't want to see (bears) is the Nas popping that 2.5% line at 3,075 (and the S&P is already over) and what we NEED to see is no more than a spinning top today – the kind of candle that has lines on each side and a fairly narrow center – like the tops of July 5th and 19th that you can see on the Nasdaq or the Russell and NYSE on July 5th.  For the Nas (which is our crucial index at the moment), we have a very neat 7.5% run and there was a very strong pullback at the halfway point so it does seem a retest of 3,000 is more likely than a breakout BUT, if we do get the breakout – we're well on our way to another 2.5% move up.

    /NKD 9,200, 79.47 Yen, Dollar 82.44.  

    California/Rebel – Whoa!  That can't be right.  Actually, when I was in California I felt like I was getting raped with taxes.  Some insane tax on food, hotels, rental cars – I forget what it was but I'm thinking 10% at least.  They are really sticking it to the tourists out there.  These numbers are deep into a recession from the looks of them with only the money made by the top 1%, in the form of Income Tax and Corporate Tax, keeping this from being a total disaster.  

    The state has avoided default by temporarily borrowing from state trust funds, but those accounts will soon need their cash back to continue operating. Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on. With tax revenue plummeting and the state already the second lowest rated credit in the country, if the independent credit rating agencies downgrade the state to “junk bond”, California will be short up to $18 billion and default.

    Thanks Rebel – That's going to be a major point I make this morning! 

    /NKD 9,205 – going to be close….  Moves in 5s so 9,210 is going to be it (down $100 per contract).  

    Crumble/Barf – I think the Dollar pops and brings the market down faster than capital flows in.  Think about what you do when your market crashes – FIRST you cash out, then you step back and assess the damage and then, maybe, you go shopping but, by that time, the Global markets may be in free fall and the cash will likely look safer (not in Euros, of course).  So the main flight will be converting Euros to Dollars or Yen or Marks or Pounds or Swiss Francs (if you assume the Euro collapses, you have to assume there will be Marks a day later).  After that, we'll probably look a lot like the fall of 2008 and we can model our buys accordingly.  

    Damn, there goes the Nikkei!  Now I'll be really pissed if it's down later.  


  175. Crop protection cos/ Phil
    Wht


  176. Crop protection cos/ Phil
    What is your view of the crop prtection sector (pestcides/ fertilizer etc) generally?  Is it a good sector to look at?


  177. 82.50 taken back. 

    Good time to hit the /CL oil Futures short below $95.50 as long as the Dollar is over.  

    Nikkei topped out at 9,215, now back below at 9,195 – oh well.  

    As expected, Dollar back over 82.50 and Euro and Pound pulling back. 

    Capitulate/Maya – Not on the first day and not on a day like yesterday when the pop is due to $188Bn in stimulus.  Not sure how you become profitable by rolling to the $220 puts but, if so, of course do that!  It's better, on the whole to be patient.  In the context of the $25KP, we deployed cash to buy it and cash to roll it, deploying cash to DD is a pretty drastic step as we'd really rather not be $7,500 into a position when we have no way of being sure AMZN won't pop to $260 on some stimulus this weekend.  We're about $4,500 into the position in the $215 puts, which are currently worth $3,200 and we'd be THRILLED to get back to $4,500 and take 1/2 off the table.  Doubling down here is really drastic and rolling is not appealing but we'd do it if necessary as we can spend maybe $3 to roll up to the $235 puts, which are currently $8.30 and, with 63 days left, it's not unrealistic to think we may get a $10 pullback before AMZN goes up another $20.  

    Bear put/Crussell – Remind me later but I'm not a fan of short spreads – hard enough managing long ones.  

    Platinum/ZZ – South Africa mine thing happens to be driving platinum higher right now.  

    GE/Jomp – Remind me in new post.  

    AMZN/Japar – Remind me in new post and be specific with amounts and entries.