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World of Worries Wednesday – How Many Ways Can We Say Recession?

Wheeee, this is fun!

As you can see from our Big Chart, we flopped right back to support lines on the Dow (13,200) and the Nasdaq (3,075) with AAPL dragging the Nasdaq down for a change, all the way to 3,067 but our dollar-adjusted support (at 82.50) was 3,060 so still strong despite the sell-off.  

Our other watch levels are Dow 13,464, S&P 1,428, NYSE 8,160 and Russell 816 and the NYSE and the Russell were both over our lines yesterday – morning – briefly – before crashing back down to Earth.  

Of course we were EXTREMELY skeptical of the morning rally, something I noted in the morning post as well as my 9:31 chat note, where I urged Members not to let themselves get scared out of position by a currency-driven rally, saying:

Step one before capitulating is getting yourself neutral with the aggressive longs – then you can decide what to cash out and what to press without panicking.  Often we have blow-off spikes at the tops and bottoms and this sure feels like one but we'll have to respect our levels if they break over – although I'm tempted to adjust again for this BS 0.5% drop in the Dollar but, so far – we still haven't had one whole day of even holding 3 of 5.  

We followed up in Member Chat at 9:57 with aggressively bearish adjustments to our $25,000 Portfolio, which had been up to almost $40,000 on Friday but dropped back to just under $34,000 into the morning rally as we were poised about 70/30 bearish in our short-term positions.  Although we did look at another 3 bullish plays that can make us 300% in the morning post – we were not moved to add any of them on that ridiculous morning pump job and we instead took the opportunity to press those bear bets.  

While we may be forced to capitulate if our levels do get broken and hold – the good news is those capitulation points are now so close that it will be a small loss to take if we do have to flip bullish.  Also, looking at our index charts priced in Euros gives us some very different views of resistance indicating BIG TROUBLE for our markets if the Euro weakens and the Dollar rebounds:  

Any way you slice it – that's a pretty toppy-looking pattern, supported by a 2.5% drop in the Dollar since July 26th and note the effect the rising Dollar had on the markets in the beginning of July – it's deja vu all over again if things start falling apart in Europe – again.    

That brings us to our brief overview of the Global Recession that nobody seems to want to talk about:

"As budget deficit targets look unachievable, the risk of a potential full bailout of the Spanish economy is still there," Jaime Becerril and Axel J. Finsterbusch, analysts at JPMorgan Chase & Co. in London, wrote in a note. "Further measures must be taken to restore market confidence."

“The recent collapse in steel and iron ore prices suggests to us that we have reached the point in the cycle where a major destock is required,” Nomura said. “If production is not cut voluntarily, imbalances will continue to build, increasing the risk of a large, involuntary cut in steel production.”

“The Chinese economy is only at the beginning of a harsh winter,” Zhang Hongxia, chairman of China’s largest cotton- textile maker, said in an interview in Hong Kong on Aug. 20. “China now is facing a situation where everything from coal to steel inventories are piling up.”

There is, of course, more – but you get the idea.  No one disputes that things are bad, what we have in the market is this fairly irrational concept that things are SO BAD that our Central Banksters have no choice but to ride to the rescue and shower us (the top 1%, not you little people) with MORE FREE MONEY that we can use to foreclose on more homes and businesses as the real economy collapses which will set us up to become phenomenally rich(er) when the cycle finally does turn around.  

This should not come as a real surprise, it's the same game that has been played by the "job creators" since the Magna Carta was signed and we figured out we can make more money getting the peasants to buy our land from us at the top of the market and then buying it back from them at the bottom of the market than we ever could make by just taxing them.  

Even better, by letting the peasants in the bottom 99% own property, we get to lend them money (even if we have to print it ourselves) to buy our land from us and then charge them interest that causes them to pay $432,000 over 30 years on a $200,000 loan.  Should they, at any point during that 30 years, default on their payments – we get our land back and sell it to the next sucker.  If too many peasants are making their payments – we crash the markets, put them underwater, take away their jobs, retirement savings, raise the price of necessities – whatever it takes until we push them under and we get our land back!  

AFTER that, then we "fix" the economy and re-inflate the property prices so we can create a new batch of wage slaves who are willing to indenture themselves for life in order to get that piece of that "American Dream" we drum into their heads via the various propaganda outlets we control.   

As a top 1%'er, giving my market outlook to other top 1%'ers – I think the question we have to ask ourselves is: "Are we done yet?"  Don't be confused by the suffering of the masses – they still have more to give us!  Housing prices could go lower, unemployment can go higher – no one is revolting yet.  While we may be near the end game for this cycle – this isn't it yet.  Don't fall for our own hype – the markets are still very dangerous, the economy is still very shaky and we make A LOT more money swooping in and deploying our ample capital after a collapse than chasing a hyped up market now.  

The top 1% play a long game – patience is key. 

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  1. Interesting chart on the shift of where our fuel for electric power is coming from:
    It shows how dramatic the move to natural gas has been in recent years.

  2. Oil Lines

    R3 – 99.39
    R2 – 98.62
    R1 – 97.71
    PP – 96.94
    S1 – 96.03
    S2 – 95.26
    S3 – 94.35

    PP has been a good shorting point so far today!

  3. Natural gas – anyone else feeling like getting long in this sector?  I'm holding some CHK short puts, thinking of adding something else.

  4. Phil- Thanks for the explanations behind the trades yesterday.  Its helps with the tutelage part of this wacky money making stuff.

  5. Revtodd,
    From Phil's news posts this morning
    Continued weakness in natural gas prices fuels a Sell downgrade of Encana (ECA -0.7%) by Société Générale, which says the gas producer destroyed capital and asset value by selling international assets prematurely and spinning off Cenovus, ECA's Canadian onshore oil business. The firm expects a swoon in prices in the fall months between air conditioning and heating season.

  6. Good Morning!

  7. TLT getting right up there…..from SHJ

  8. Good morning!  

    Done with my post early – not much new to say – the economy sucks and the bulls expect that means stimulus even though, as I pointed out a week or two ago – it would be kind of ridiculous to stimulate the economy with near record-high stock and commodity prices.  Actually, it would be flat out irrational and insane and the only reason we even THINK it will happen is because we've had several massive bailouts already.  

    China is doing stimulus (and we're falling anyway) BECAUSE their markets are in free-fall.  Since 2010 – they are DOWN 40% while we are up 40% – that's 80% worse than us.  THAT is a reason to add stimulus, not S&P 1,400.  

    Don't get sucked in to the gross over-simplification of the MSM.  The ENTIRE Global Economy rose and crashed in the '00s but that was almost 5 years ago and, since then, we have gone our separate ways.  That means that our interests are NOT aligned and what's good for China may not be good for the US or Europe.  Coming into Jackson hole next weekend – QE3 is considered to be "in the bag" but, if The Bernanke doesn't print MORE money than Draghi – the Dollar will bounce and that will be a huge drag on the markets.  

    If we do get easing/stimulus – of course we're going to go up.  But we'll have plenty of time to make bets that will return huge amounts of money and it really won't matter if we miss the first week of the rally (see 2009, 2010, 2011 stimulus events).  It's the crashes that tend to catch us with our pants down, not the rallies and this great consolidation (if it is that) we are having below our breakout levels will create a tremendously solid floor that we can bet on once we break over it (IF we break over it).  

    For example – let's say they announce QE3 tomorrow and XLF pops 5% to $15.90.  That would send FAS to about $110 .  Did we miss anything?  Sure, the first pop but very likely we go up 10%, 15%, 20% from there as Operation Twist, which was barely QE – sent us up 36% from $11 to $15 on XLF.  Even if you assume we're pre-rallying from $13.50 – 25% over that is still $17.  Of course, we don't need something to go up to make money – we just need it not to go down.  With FAS now at $97.41, we can sell the Sept $97 calls for $5 and buy the $90 calls for $9.60 for net $4.60 on the $7 spread and all FAS has to do is NOT GO DOWN for 30 days and we make 52%.  Isn't that sort of play extremely obvious if we get QE?  

    SPY WEEKLYThere are tons of trade like that we can make AFTER we get QE so there's no need to gamble that there will be QE – especially if it's tying up your buying power and will prevent you from making 50% in 30 days in post QE trading.  The more you believe QE is coming, the MORE reason you have to keep cash on the side to take advantage of these obvious trades. 

    If I felt that we were going to get QE and the S&P was going to 1,550 – I would be as gung-ho bullish as anyone.  Last year, in September, when EVERYONE thought we were going off the cliffs again – I DID think the Fed would step in because it was logical for the Fed to do so and I put out our September's Dozen list (on Aug 27th, actually).    

    Look at that chart from last year – it certainly wasn't obvious we were going higher and it was a pretty rough fall but we stuck with our list and our PATIENCE was rewarded in October.

    Like the Long Put List, our time-frames in August were mostly for Oct and January because you have to let these things play out over time.   I feel the same way about the Long Put List now as I did about the September's Dozen then – it's only a matter of time.  We hedged those bets with some aggressive short plays just like we're hedging our short plays with aggressive longs because – as always – I could be totally wrong but I URGE YOU to consider remaining cashy and cautious here – no matter how many promises the Banksters make.  

    Until we see actual capital committed – it's all just hot air fueling a bubble that's already blown the S&P up 12% since June and now up 30% since last September.  30% in a year is a lot.  That's more than doubling a $60Tn Global Market every 3 years in a $60Tn global economy where they tell you there is no inflation.  

    The math simply does not work – it's easy to drop 50% and then rise 30% – that's all in a range and the money was SOMEWHERE to flow back in.  Making the next 30% requires $18Tn of new money that didn't exist before – that's a lot harder to accomplish!  

  9. Good Morning Phil
    If I were to open position into SQQQ calls now, would you recommend it? If yes, what would be a good trade.

  10. Dollar over 82, need to go under for us to get green.  No change in Euro or Pound but Yen down (stronger) to 79.21 is sending the Nikkei Futures (/NKD) back to 9,095, which is about 50 off the close.  

    It's been a while since we haven't had a pre-market pop.  

    AAPL still heading down, $648 is our key support and then $636 but blowing $648 would be a very bad sign.   

    Home sales at 10 need to be 4.5M although a strong (relatively) number like that kind of pushes back the Fed so maybe a weak number will get people excited – who know?  Let's just see what happens.  Then we have oil inventories at 10:30  but the main event is the Fed Minutes at 2pm but we do have doevish Fed Gov Williams speaking on the economy at 11:30 so maybe some spin from him on the need for more QE.  

    At the moment, the SOX are falling hard and fast and failed 400 so nothing to be bullish about here.  Let's see if AAPL holds the line (and even breaking psychological $650 will not be good but failing $648 is a good que to short the Nas (we already are!).  

    Watching and waiting for now.  

  11. CNBC says home sales out early (???) at 4.7M – that's better than last month and worse than expected – a non-event overall. 

  12. Pharm/SGEN – I entered your SGEN play on paper, to learn, and wondered what your take was if a downdraft is due?  
    My feeling is that we might say it's 'on target'?  But the sold puts are at 52% profit already (seems greedy not to lighten up perhaps?)
    It was the December suggestion you made, I sold Dec $20 puts for $1.32 (52% up now) and BCS of Dec $25 / -$30 calls for $1.50.  (Now $1.97).  Appreciate any thoughts.  Thanks.

  13. RJ – Thanks, I missed that post on Encana.  I'm thinking a longer term play,and I'm not sure I agree with that analysis.  The larger dynamics of utilities switching to natural gas are in play too.

  14. SOX with a huge gap to fill if they fail 398 but that's been very solid as a floor since the 7th.  That day they gapped up from 392 and only 2 days before that they gapped from 380 to 388 so very, very little proper support below 398.  That doesn't mean it's going to fail, of course – it just means it's key support now.  

    $25KPs – Let's play the AAPL bounce off $650 again with 20 of those QQQ $67 calls at $1.10 with a stop at $1.  Both $25KPs. 

  15. SGEN/scot – well, lightening up on the puts is wise (50% is a good profit for somthing 5 mo out), and keeping the BCS is how I would do it.  If the VIX goes up, the puts will again go up in value, and they can be resold and the BCS should hold its value, even if SGEN sells off.  So, yes, lighten up on the puts.

  16. Phil – The roll from 220 to 230 on AMZN was never close to $2.00 yesterday. Was closer to $2.50 most of the time.

  17. As I noted in last nights chat…buying more CRIS stock.

  18. I see the fairys still boosting AMZN with their magic pixie dust???

  19. Another secret HACK job!
    A spokesman for the National Association of Realtors on Wednesday said the early release of data came after a computer with Bloomberg News found unpublished data on the NAR site and then sent the information out. The NAR said they will work to make sure the early release isn't repeated.

  20. Well, with mortgage apps down…and sales up….someone is buying with Cash….

  21. Wow, 10% in 10 minutes – not a bad start.  

    Kind of funny – the bots were set to react to the home sales numbers at 10 and it didn't matter that they got released early (or, of course, what the numbers actually were) but we got a sudden surge of buying at the time they were supposed to be released – what a crock!  

    $1.25 already – tempting to call it a day right there.  


  22. Pharmboy
    CRIS  has a P/E ratio of 425, above the average drugs industry P/E ratio of 215.5. What's the reason to buy?

  23. HPQ  -   If anyone bought the HPQ Sept ATM puts I was talking about yesterday, they are up 43% today.  I'm finding that these "common sense" trades are working out very well.  

  24. $25KPs – That was way too fake – let's take $1.25 and run on the QQQs and no less than $1.20 – better than losing!  

  25. The MO Jan 31Put is up 40% from the LPL.
    The MRK Oct 40Put is up 28%% from the LPL.

  26. Phil:
    Nice exit out of those QQQ's!

  27. PP was a good spot to short oil again….

  28. Pharm – LLY / CRIS
    If you have time and dont mind, what the the calendar trade you like for LLY?  I'm guessing it's a Sept/Oct ATM Put calendar, but I'd like to confirm.  The LLY puts I own are down, but no worries.
    I think I'm allergic to holding stock.  How about a buy write play, or a sold put with a long call spread?  Any ideas?
    PS: Sorry I can't do the research, I'm on a 56K modem today in the middle of the jungle.

  29. Dollar jammed down to 81.85 but that's holding – another reason I didn't trust that pop in the Qs.  

    By the way – if you didn't get a BBBW notice this morning – contact Ron.  Launch is in 10 days!!!    See comments at the bottom of the post for Ron's contact info.  If we get a nice market downturn here – the timing could not possibly be better to launch a fund!  

    At the open: Dow -0.15% to 13184. S&P -0.22% to 1410. Nasdaq -0.18% to 3062.

    Treasurys: 30-year +0.57%. 10-yr +0.31%. 5-yr +0.15%.

    Commodities: Crude -0.23% to $96.62. Gold +0.04% to $1641.35.

    Currencies: Euro -0.22% vs. dollar. Yen -0.07%. Pound 0.%.

    Market preview: It's a down day so far for global equities following a rather ungainly fall in Japanese exports and Dell's rather poor earnings report, and ahead of the FOMC minutes, which are likely to be parsed to death. Not to mention Greece returning to the agenda. S&P futures -0.2%. Dell is -5.6%, but Toll Brothers is +5%after its results and is taking its home-building buddies up with it, while retailer Williams-Sonoma is +8.8%.

    July Existing Home Sales+2.3% to 4.47M vs. 4.50M expected., 4.37M prior revised.

    MBA Mortgage Applications: -7.4% vs. -4.5% last week- Gee, isn't that down 11.9% in two weeks at a time when we're supposed to be very busy? 

    Chances of QE3 Diminishing (Tim Duy’s Fed Watch)

     Is The “Bad News” Really Good? (Alhambra Partners)

    SP 500 – Telling Action (Jesse’s Café Américain)

    U.S. corporate earnings point to further gloom (Reuters)

    Canada's retail sales unexpectedly declined 0.4% in June (vs. forecasts for a 0.1% gain). Sales were higher by 1.7% Y/Y. The loonie briefly adds to losses on the news before rebounding as traders realize the report is for June and the calender is about to turn to September.

    Europe Pressures Intensify (WSJ)

    Bank of England deputy governor Paul Tucker warned banks they could collapse ‘before Christmas’ (Telegraph)

    Germany sells €4.1B euros of 2-year Schatz priced to yield 0.00% (anybody get an Animal House flashback). The yield isactually higher than the last sale, which came in at -0.06%. Implicit in the price of German paper is a convertibility premium. To a Spanish investor, it potentially makes up several times over for the non-existent yield.

    A check into Iceland finds its central bank putting on hold interest rate hikes after raising its forecast for the value of the krona. It seems the country – which heaped losses on investors, not taxpayers following the financial crisis – has the enviable problems of stronger-than-expected growth and capital inflows.

    Prices of Chinese steel and its key ingredient – iron ore – continue to fall, now at their lowest levels since 2009. The combination of steel mills ramping up production in the face of a slowing economy is proving toxic. One report says the mills are beginning to default on supply contracts or have deferred shipment of up to 4M tons of iron ore this month. It's a start.

    Lower rates aren't ruled out by PBOC Governor Zhou, who was asked whether recent injections of cash into the system through reverse-repo transactions means the tools of rate cuts and reserve requirement reductions are not on the table anymore. Just yesterday, the bank bought up $34.6B in notes with freshly printed yuan.

    Rich Chinese leaving the country, and why that matters to the economy (Also Sprach Analyst)

    Hong Kong Fear Index 41% Above VIX on Slowdown: China Overnight (Bloomberg)

    Deleveraging skips South Korea, where household debt has grown to 164% of disposable income – far higher than the U.S. pre-2007. The banks seem well-capitalized enough to not worry about systemic risk, but how do policymakers stimulate demand for the slowing economy without stoking further debt growth?

    Good call by ZZ last week:  Platinum prices jump to four-month highs as spreading labor unrest in South Africa raises the possibility that a further 40% of world production of the metal could be affected. Fears that a two-week standoff at Lonmin's Marikana mine could spread to top platinum producer Anglo-American grow, as Amplats workers have become the latest group of platinum miners to demand higher wages.

    Take profits (for now) in the gold miners, says Weeden's longtime bull on the sector, Michael Purves, who sees the GDX's 8.8% August rally topping out around $47/share. This is strictly a trading call as Purves remains "structurally bullish" on the sector, saying the miners having a new attitude about "sharing the wealth" with investors.

    More on Toll Brothers (TOL +3.7%FQ3: net profit +46% to $61.6M, net signed contracts +57%, backlog +59%. Reservation deposits +59% in first three weeks of FQ4. For 2012, expects home-sale revenue of $1.71B-$1.84B. "We are enjoying the most sustained demand we have experienced in over five years," says CEO Douglas Yearly.

    Toll Brothers' ([[TOL] +4.4%) sterling FQ3 results and bright outlook is boosting shares of its peer companies, with Lennar (LEN)+1.8%, PulteGroup (PHM+2.5% and D.R. Horton (DHI+1.6%.

    Huge deal for EBay:  Discover (DFS +5%) and PayPal ink a deal giving the eBAY (EBAY +3.9%) unit access to Discover's network (7M+ retailers). Under the agreement, PayPal will issue payment cards to its 50M users allowing them to make payments anywhere Discover is accepted. PayPal will charge merchants a small fee, of which Discover will get a cut.

    Las Vegas Sands (LVS) will run full steam ahead in Macau, according to a statement from Sheldon Adelson. Brushing aside the talk of ongoing investigations that continues to swirl around, the exec says the next facility to roll out will be the luxurious Sheraton Macao Hotel as part of the Sands Cotai Central complex.

    Top 1% continue to shop:  The right recipe: Shares of Williams-Sonoma (WSM) roar to a 10.5% gain premarket after the retailer's Q2 report (III) hits all the right notes. Not only are comparable-store sales and margins improving as organic growth remains strong, but catalog sales are also marching higher for the first time in two years.

    With Dell's earnings out yesterday, it's the turn of H-P (HPQ) after the bell today, with analysts estimating that the latter's FQ3 adjusted EPS fell to $0.98 from $1.10 and that revenue slipped 3.5% to $30.1B. H-P is also expected to make a net loss of up to $8.9B following a massive writedown of its 2008 acquisition of EDS, and due to a $1.5B-$1.7B charge because of job cuts.

    Zynga (ZNGApops 3.7% premarket as both Bloomberg and JMP Securities note the stock is trading at only a slightly higher level than the cash and investments on the company balance sheet. The firm remains cash-flow positive and could be worth $4.75-$7.30/share if valued along the lines of other game developers.

    Nokia (NOK) shares +4.35% following a couple of positive Bloomberg articles, one of which highlights the success in emerging markets of the handset maker's cheap Asha features phones. Bloomberg also reports that Verizon (VZplans to sell a Windows 8 Nokia phone later this year as it seeks to lower its dependance on the iPhone (AAPL) and Android (GOOG). 

    From Citizens United to Super PACs: A Campaign Finance Reading Guide (ProPublica)

  30. Yodi / ECA
    Anything new with "our" ECA trade?  Are you still holding the stock and selling calls, or accumulating more stock to sell additional calls?  I've been calling this my "beer money" trade.  
    Any other stocks you like to do this with?  I tried with WMT and SVU….didn't work out well.

  31. Wow, we could have round-triped that QQQ trade already.  

    Big draw in oil (again) on low imports and high exports, I'm sure but it doesn't matter, we'll still pop on this and that will boost the Dow and S&P so we'll see where we end up.  

    10:30 AM EIA Petroleum Inventories: Crude -5.4M barrels vs. consensus of +0.2M. Gasoline -1.0M barrels vs. +0.8M. Distillates +1.0M barrels vs. +1.3M. Crude -0.12% to $96.72.

    SOX recovered back to down 0.33%, watch that 400 line for bull/bear indication but it's AAPL back to $660 that is driving the Nas on this leg.  

    Dow volume 22M at 10:30.  

    Oops, oil having trouble at $97 – what's up with that?  


  32. Phil:
    What do we do with this? Pretty big draw.
    10:30 AM EIA Petroleum Inventories: Crude -5.4M barrels vs. consensus of +0.2M. Gasoline -1.0M barrels vs. +0.8M. Distillates +1.0M barrels vs. +1.3M. Crude -0.12% to $96.72. [Energy] Comment!

  33. CRIS – it is about the pipeline, and the potential expansion of their hedgehog inhibitor.  With a market cap of 320M, and a very robust pipeline…I like them.


    LLY – noted last night.  Sept/Oct 41 calendar for 30c.

  34. Nat gas/Rev – Bad time of year for it.  Inventories still at record highs and you are in-between air-conditioning and heating demand.  

    And what RJ said.  

    You're welcome Newt – it's been a good week for pontificating.  

    TLT on fire!  $123.40 – who was going to capitulate yesterday?  

    SQQQ/Gandhjo – I like the Oct $38/44 bull call spread for $1.50 as that can go 4x on a 16% pop, which means you are VERY well-covered for a 5% drop in the Nasdaq.  You can pair that with one of the short puts I suggested yesterday like the BBY 2014 $13 puts at $2.10 and you net into BBY at $12.50 worst case with the free hedge.  TOS says I can sell 50 of those contracts ($10,500) for net $14,000 in margin which obligates me to buy 5,000 shares of TOS for $13 ($65,000) for $32,500 in ordinary margin and I'm buying $46,000 in downside protection and I can put a stop at $1.20 and all I lose on a bull move is $6K and then we can buy $46,000 worth of Jan insurance and risk another $6K and if we lose that too – it's EXTREMELY unlikely we'll end up having the BBY's put to us, right?  

    Cash/Pharm – Lots of that going on.  Banks have made borrowing a nightmare, even for people who have credit.  Also, you can knock quite a bit off the purchase price by coming up with a cash offer as many sellers have already seen deals fall apart after months under contract.  

    HPQ/Burr – Fantastic call!  

    Exits/DC – You just have to keep perspective.  Just because we hope to make 20% in a day doesn't mean we shouldn't be thrilled to make 15% in an hour.  Cash the 15% and maybe we find something later that makes 10% and we're already ahead.  

    Oil/StJ – Resistance seems to have moved to the whole numbers now.  $97 became a good shorting line with support at $96.   

    Oil/DC – Big draw but was expected so not too much effect and, as we noticed last week in the full report – they have simply stopped importing oil and are shipping over 1Mbd of products out of the country – so anything less than a 5Mb draw would be ridiculous.   Also, these are the last two weeks of summer driving and "THEY" are pulling out all the stops to keep prices jammed up through the holiday weekend – after that, I don't see what can possibly support $98 oil other than Iran and Israel actually going to war.  

  35. FAS Money – Nice recovery from yesterday!  I love the $15 pin on XLF, we'll just ride it out and see what happens.  Notice how little movement we have on the long calls – just good insurance.  

    $25KPs – Sea sickness watching the P&L!  -$4K yesterday on open positions and up $1K today is crazy volatile, which is why you have to learn to ignore it if you are going to trade aggressively.  What does matter is we closed $12,000 worth of winners and we have at least 30 days to work out our losers except USO so let's adjust it!  

    • USO – I was right yesterday, we held .28, even after inventory but now we MUST move or the price will drop soon.  Let's just roll over to the Sept $36 puts ($1.13) for .85 and that nets us in there at $1.60 and we'll DD and roll when and if those hit .80.  We only started with 5 because we intended to DD and roll for next month and we only started with the first 5 in case we missed a big sell-off this week.   Turns out we didn't….
    • No other changes – dull day….

  36. Pharm – Put calendar, not call calendar right.

  37. Dull day = good day for prospecting…

  38. Burrden ECA Sorry have a hell of a time with internet connections here at the RV side in South Baveria.
    Rolled the short call 23 to Jan13 for 1.80 Doing well on this one up 1,650 $

  39. BBBW Fund / Opesbridge LP
    I changed my PSW username from RonResnick to Opesbridge to reflect the commencement of trading of Opesbridge LP on September 3.
    My colleague and Opesbridge trader, Derek Devore, will be available here in the PSW chat room every minute of the trading day to answer any questions you may have about the fund's trading activities.
    I will be available here, as well, to answer any questions about the fund and its strategies and plans.  You also are always welcome to write to me at or to call me at 310-275-3300.
    We want to afford PSW members access to this hedge fund, and the ability to communicate and interact with Derek and me, in a way which is unprecedented for a hedge fund.

  40. Hmm, I wonder if letting AAPL open at $650 and taking it back to $660 once again allows them to mask a lot of selling on the Nas?  There certainly wasn't any news to merit the move down or up…


    Long Put List – Last update was 8/3.  Always keep that in mind, these puts are defense against a major collapse, not really a minor one.  On the whole, these are stocks that A) should move down with the market but B) Are already toppy and not likely to move much higher on their own.   Net pricing reflects rolling costs from original position.  Bold positions still seem like good deals:    

    • AMZN (was $37 at crash lows, was $222 on 7/29, now $241) Oct $195 puts at $2.25, now $1.15 rolled up to $220 puts at $3.75 for net $4.85.
    • CMG (was $40, was $400, now $297) Sept $350 puts at $5, now $52.50 – done with those.  
    • DIA (was $66, was $130, now $131) Dec $122 puts at net $3.85, now $2.50
    • DIS (was $15, were $50, now $50) Oct $47 puts at net $1.05, now .54 
    • GE (was $7, were $20, now $21) Oct $20 puts at net .70, now .41
    • HD (was $18, were $51, now $57) Nov $46 puts at net $2.30, now .30 – dead
    • IBM (was $70, were $195, now $197) Jan $160 puts at net $2, now $1.70
    • ISRG (was $80, were $550, now $494) Jan $350 puts at $1.70, now $4 –  done with these. 
    • JNJ (was $35, were $69, now $67) Oct $65 puts at .51, now .43
    • KO  (was $20, were $38, now $39) Jan $36.25 puts at net .69, now .73
    • MA (was $120, were $432, now $420) Jan $320 puts at $5, now $4.10
    • MMM (was $42, were $91, now $93) Jan $75 puts at net $1.21, now $1.75
    • MO (was $15, were $36, now $34) Jan $34 puts at net $1.05, now $1.75
    • MON (was $45, were $86, now $86) Oct $77.50 puts at net $1.53, now .85
    • MRK (was $20, were $44, now $43) Oct $40 puts at .53, now a great deal at .32
    • PCLN (was $150, then $30, were $666, now $585) Oct $510 puts at $5, now $5.50
    • SPY (was $69, were $137, now $141) Oct $125 puts at net $1.39, now .57 – $1 more to roll to $134 puts at $1.57 makes a nice, new entry.  
    • T (was $22, were $35, now $37) Jan $35 puts at net $1.38, now $1.25
    • V (was $42, were $127, now $127) Jan $105 puts at net $2.55, now $1.80 – worth .80 more to roll up to $110 puts
    • WMT was $42, were $72, now $72) Jan $65 puts at $1.20, now $1.01 
    • XRT (was $15, were $60, now $61) Jan $53 puts at $2, now $1.40 – worth .95 to roll up to $57 puts ($2.35)

    Keep in mind the main reason we like these is because they are overbought, liquid and rollable.  Our goal is to buy the ones that get cheaper, take quick profits and move to the next ones that haven't fallen yet (fresh horses).  In an up market, this is a sell the pops kind of exercise but, if you don't take profits on the dips – it will be a losing strategy. 

    Scale in, scale out.  We'll watch the list and add to it over time but, primarily, this is a good way to guard against a big crash – not a small pullback.

    It's nice to note that, for the most part, despite a 5% S&P rally since the 8/3 update (and a much bigger rally during the list) the losses are, for the most part small (and stops are a big help there if you use them!) and there are still some very nice opportunities.   Also note, the most you can lose is 100% and that should never be more than 50%, of course, while there's no such limit to your upside.  


  41. Burr – Put calendar for 30c or so. Currently 31c.

  42. Opesbridge
    Excited for the beginning of the BBBW Hedge Fund! Good work Ron!

  43. I like this guy on CNBC – They ask him what his trick is to being known as Wall Street's valuation expert and he says it's no trick – the state of the art of valuation on Wall Street is just terrible.  Very, very true!  

    BBY/Jabob – A bit simplistic, isn't it?  "Same store sales are collapsing" – Aside from the fact that down 3.2% isn't really a collapse, BBY has been renovating and also opening a ton of Best Buy Mobile shops in the malls which, of course, cannibalize some of their big store sales.  I was at the Palisade Plaza mall and they have both in the same mall.  Also, didn't AAPL tell us sales were "collapsing" by more than that (they missed by 4.6%) – what does Karl think BBY sells?  Anyway, it's very easy to say retail is dead based on on-line selling now zooming up to 5% of all retail sales after 20 years (and BBY sells on-line too but the margins are lower so they can't win) but until one of my aunts tells me she just bought a new big-screen TV or a washer, dryer, refrigerator or even a vacuum cleaner on-line – I'll keep thinking it's just a question of BBY adjusting their product mix to fit the demand that is being co-opted by on-line sellers. 

    See – Add a chart and that could have been a whole article on SA!  

    Dull/Scott – Boy it really is.  A very slow-motion pullback so far, not the face-ripping move down we were hoping for….

    11:00 AM On the hour: Dow -0.34%. 10-yr +0.26%. Euro -0.04% vs. dollar. Crude +0.29% to $97.12. Gold flat at $1640.65.

    11:40 AM European shares put an end to a super run, posting real losses for the first time this month. Stoxx 50 -1.5%, Germany -1%, France -1.4%, Italy -1.2%, Spain -2.8%, The euro -0.1% to $1.2460. Thus far through August, the Stoxx 50 +8.4%.

    Don't look for any decisions to come out of Friday's meeting with Greek PM Samaras, says Germany's Angela Merkel, who adds she will wait for a Troika report in October. Samaras, meanwhile, launches a PR offensive with a German newspaper interview, asking for "breathing space," and saying he "personally guarantees" repayment of rescue funds. Personally?

    Up next on the scandal agenda for U.K. banks are swap products marketed aggressively to average-Joe borrowers from 2005-08. Rate swaps were designed to protect against rising rates. Trouble is, rates plummeted, forcing heavy charges onto the clients who signed up. Thus far, the banks have provisioned only small sums for possible legal remedies. 

    The CBO, in likely its last official forecast ahead of the November elections, says the U.S. economy will quickly go into recession if Congress fails to address the fiscal cliff of spending cuts and tax increases set to kick in next year. Even if the cliff is averted, the economy is expected to grow at only 1.7% in 2013

    Last week's big decline in mortgage applications was allabout refinancing as the hiccup in interest rates slowed business. The overall decline of 7.9% was led by a 9% drop in the refi index, which fell to its lowest level since early July. Strangely, the mortgage REITs are lit up bright red today. Aren't prepayments a key leg of the bear case against them?

    No bad news is good new for the homebuilders today, as the July Existing Home Sales report comes in largely as expected. Still, today's data shows that existing home sales are sharply underperforming the new home market, as seen in the contrast between today's small sales rise and last Thursday's 6.8% housing permits jump to a cycle-high 812k rate. TOL +4.7%, NVR +0.5%DHI+5.1%MDC +5.2%LEN +4.9%HOV +4,2%RYL +4.8%BZH+3.8%. ETFs: XHB +2%, ITB +2.8%.

  44. "The General" is going….long.  Na short….this is absurd.

  45. $68 has hung really tough on the Qs so far – not good if they lose that.  DIA $131 at the same time, IWM just failed $81, SPY $141.15 – all close to major lines and Fed Minutes in just over an hour – very interesting.  

    Dow volume 40M at 12:45.

  46. phil,
    im in uso 36 p….that said can oil really go down with the israeli hit on iran put on the table thru oct. ?

  47. SPY sitting right on S1 – 141.11.

  48. Millcreek….full moons are Sept 15, Oct. 15, and Nov. 13….gotta be one of those times.

  49. Everyone

  50. QE/Phil – is there anything you can think of that we can play (other than the dollar) that is going down now, and would go down more if more QE is announced?

  51. ARNA…nice on those $8 puts…let's get  a bit more out of them…..

  52. Pharm—would you dd on the sept 40 BMRN calls?

  53. Savi – no, waiting to get out even or with a small profit.

  54. Hi Phil
    LuLu – I'm long 3 Sept $57.50 C for $10.50 now @ $6.40 with stock @ $61.40.
    Earnings due 9/7 and I'm although I think they'll meet expec. of .31/sh and $282m rev., I'm not as sure they get to my b/e of $67.50.
    Would appreciate suggestions on possible adjustment at this point.
    ps  did the V Sept. 125 long put  @ $1.4 which is now $1.9. Would you stick with this till next week?

  55. Phil
    speaking of margins for on line sales.  Amazon is cutting deals with states for sales tax.  I think Illinois is going after the last 2 years of sales for their residents

  56. One set of my LLY calendar puts filled at 34c.  So, I will use that as the basis….

  57. id they just announce 500 billion in QE3

  58. fed minutes === mr stick ;-)

  59. Sorry had to go out and it took longer than I thought.  

    Hints of easing having the expected effect, now we see how high they can take it.  

    Dow volume not at all impressive at 50M at 2pm, and, most importantly, Dollar falling to 81.67 (down 0.3%) having very little actual effect on the indexes – who were hanging on in anticipation of this.  

  60. FOMC Minutes: Support is growing for additional action "fairly soon," unless there is clear strengthening of the economic recovery. QE3 is among possible actions, but other options discussed included extending the announced period of ZIRP, or raising interest rates on reserves. 

  61. Intra-day, we're double-topping the bounce from this morning so far – that's not impressive at all.  

  62. SRZ - wow, over $14.  Phil, remember when we were playing that one under a dollar in 2009?  I got out years ago with a meager double 8) , should have stuck with it…

  63. USO/Mill – Is that weekly, Sept?  Not sure what the question is….

    QE/Scott – On QE we play FAS to go up – that's pretty simple.  

    Seems to me there were plenty of sellers waiting to dump into this pop.  The volume could not possibly have been enough to satisfy them so we'll see what happens but maybe new lows if they keep dumping.  

    LULU/Ban – I'm not a big fan but they are way too scary to short.  Expectations seem realistic after 4 consecutive 5-10% beats but no – I doubt they hit your number as, when you think about it,  $1.60 a year for a $62 stock is already a pretty high p/e and even if the jump 25% next year to $2, you're still at 36 – how on earth do you compare that to other clothing stores (ANF 11, GPS 15, URBN 19).  If you want to make your $4 back and you insist on doing it with this stock, why not sell Oct $60 puts for $4 because you're pretty damned screwed with your calls if they can't hold $4 anyway.   Or you can take 2x the Jan $50/57.50 bull call spread for $5.20 and $10.20 there pays you back $15 and all they have to do is hold $57.50 because some other dummy is paying the premium for you.  If you don't have faith in that – why the Hell would you be in the $57.50 calls for $10 into earnings?  

    AMZN/Willie – Going backwards?  I don't see how they can do that.  

    See. they should have saved AAPL for now.  Not enough gas in the tank to get us anywhere.  

  64. Man these swings in Oil are wild…Its not pennies, it's like 6 cent jumps back and forth for the last 10 minutes

  65. Phil,
    The FAS Oct 107/117 BCS from yesterday still on for a trade ?
    Thank you

  66. Go JRCC!

  67. Dollar getting murdered.

  68. FU OIL!

  69. I'll second the FU OIL and throw in a FU euro

  70. now green on the nasdappl…nice bots

  71. and the VIX twiddles it's thumbs..

  72. What's up with ZNGA? (up 8.5%)

  73. 81.50 on the Dollar.  Euro $1.253 – when's the last time you saw that?  Pound $1.586 and that's so confusing that the EUR/CHF dropped to 1.2008 (stronger Euro, weaker Franc)  before recovering  back the normal 1.2009.  Worst of all, the Yen dove (got stronger) to 78.39 and that sent the Nikkei down to 9,050 – over 100 points down from the close and Asia was bad this morning so a gap lower in Japan is not likely to help overnight.  

    Dollar, however, is bouncing us back for the third attempt at the morning highs and AAPL is back to $664 so we're waiting to see if the SOX can re-take 400 and we can take this bounce seriously.  AMZN flying too, $244 is up 2% already.  

    Will be surprising if this is not it (again) for the move up because 81.50 is a bit too low for the Dollar unless we're going to always drop 1% a day in which case we should put on our Dow 20,000 caps soon.  

    Oil tapped $97.50 and failed to hold it and I like the short there (/CL) as I don't think the Dollar fails 81.50 and, if it does, it's an obvious stop.  Gold (/YG) is a good short too at $1,655. 

    Here comes the SOX, pushing the Nas over 3,070 for a new day's high and now S&P and NYSE over too so a tricky spot to short until they stop going up – be very careful.    

    Dow volume 59M at 2:45

    FAS/Jasu – Sure, great hedge against a move up but keep in mind the Fed minutes indicate nothing likely until Sept.  

    JRCC/Jbak – Too much for our $25KP spread but great for Income Portfolio position, which was a straight-up long.  

    ZNGA/Jbak – Was just too cheap at $2.50.  We took the $3 calls for .34 back on the 9th and they are finally back to .34 (great if you DD'd along the way) but I still like my target for them to get to at least $3.50 by then.  

  74. Sharing a few trades that I currently have in my account, comments appreciated.
    Selling FFIV Jan 92.5P for $8.45 (x1) to raise some cash.  FFIV likely trades on both sides of $100 and a range of 80-120 is likely.  If it drops to $80, will roll and DD, so it will be good practice of those skills, though still in early stages of "learning".  Hopefully (not a good strategy -:), it will work out.
    Currently short RVBD Jan 17.5P ($2.1) and sold some Sept 21C (roll from Aug 20C, a loss, so looking for 21C to expire and break even). 

  75. TLT is flying off the shelf.  THAT is not good.

  76. AMZN - like many of you, I'm short, and amazed by the strength, but as a non-stop user of their site this article makes sense to me regarding some of their long-term appeal:
    Forget Apple, Forget Facebook: Here's The One Company That Actually Terrifies Google Execs

  77. Interesting article diamond! I guess we short AAPL on Fridays morning then and go long at the end of the day

  78. So we are going to end the day positive…lol…. What can you say about this market?

  79. Reading through the Fed minutes (7/31 meeting) – oil was $87.50 and they were concerned about inflation – now up 11.5% to $97.50 a month later.  Obviously, food prices have become catastrophic since then as well.  Housing prices have ticked up, unemployment steady.  From the Fed:  


    Participants discussed a number of policy tools that the Committee might employ if it decided to provide additional monetary accommodation to support a stronger economic recovery in a context of price stability. One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to 1/4 percent. It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed. Given the uncertainty attending the economic outlook, a few participants questioned whether the conditionality of the forward guidance was sufficiently clear, and they suggested that the Committee should consider replacing the calendar date with guidance that was linked more directly to the economic factors that the Committee would consider in deciding to raise its target for the federal funds rate, or omit the forward guidance language entirely.

    Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. In addition, some participants noted that a new program might boost business and consumer confidence and reinforce the Committee's commitment to making sustained progress toward its mandated objectives. Participants also discussed the merits of purchases of Treasury securities relative to agency MBS. However, others questioned the possible efficacy of such a program under present circumstances, and a couple suggested that the effects on economic activity might be transitory. In reviewing the costs that such a program might entail, some participants expressed concerns about the effects of additional asset purchases on trading conditions in markets related to Treasury securities and agency MBS, but others agreed with the staff's analysis showing substantial capacity for additional purchases without disrupting market functioning. Several worried that additional purchases might alter the process of normalizing the Federal Reserve's balance sheet when the time came to begin removing accommodation. A few participants were concerned that an extended period of accommodation or an additional large-scale asset purchase program could increase the risks to financial stability or lead to a rise in longer-term inflation expectations. Many participants indicated that any new purchase program should be sufficiently flexible to allow adjustments, as needed, in response to economic developments or to changes in the Committee's assessment of the efficacy and costs of the program.

    Some participants commented on other possible tools for adding policy accommodation, including a reduction in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets. It was noted that the ECB's recent cut in its deposit rate to zero provided an opportunity to learn more about the possible consequences for market functioning of such a move. In light of the Bank of England's Funding for Lending Scheme, a couple of participants expressed interest in exploring possible programs aimed at encouraging bank lending to households and firms, although the importance of institutional differences between the two countries was noted.

    So it's all in how you read it but I don't see anything in the Fed minute to get so excited about.  There have been 13M shares traded on the Dow since 2pm and that's been good for about 50 points – very impressive.  

    Interesting combination of TLT flying while the Dollar dives since the notes are priced in Dollars so shaving 1% off the Dollar is like knocking 1% off the return (which is zero).  If I have to pick who's right – I'll go with the people panicking into TBills over the people paying $244 for AMZN.  

  80. What a crock of crap.  Those Fed Gov.'s should be fired.  How do they think that 'further easing' is going to stimulate the economy?  Has it worked thus far? 

  81. Pharm – doesnt that show more about the anticipation of QE fear in the market?
    Well, I hope these AHOLES jack up oil overnight…Phil Ill be looking for some good 3 AM trades tomorrow at 12 pm my time :)

  82. TIBX - this is a momo that I made money shorting earlier in the summer, but now it's broken out of its "triangle squeezy thingy" pattern (as Phil calls them), so am going to play it on the long side now and see what happens.

  83. mrm – it's called an f'in funnel, ok!



  84. "Within my power" , "Fairly Soon".   I'm going to give these answers to Fannie Mae when they are looking for my next mortgage payment on a house that's underwater by 40%.  "I'll pay within my power, fairly soon".  Gotta love the power!

  85. $TRIN is under 1….they are buying this….not selling.

  86. Phil - what is Lloyd trying to tell us?  PCLN has been replaced by AAPL as the stock that hovers at 666.

  87. "What a crock of crap.  Those Fed Gov.'s should be fired.  How do they think that 'further easing' is going to stimulate the economy?  Has it worked thus far? "

    Your too nice Pharm, I would do much more than fire the bastages!

  88. mrm—I have been looking at TIBX—how are you playing them long? TIA

  89. drmtv10 – I like the lesser networking stocks as well, some nice volatility to sell and I know the industry so occasionally nice to take something where the tech knowledge advantage helps. I don't like FFIV due to the margin requirements though. I'd rather play with something like JNPR/RVBD where the price is lower and I can adjust with ratios – which have helped me greatly. I have been successful doing bull call spreads on these and selling some monthlies against them. Currently you could do JNPR 13/18 bull call spread with the 13 puts sold for about $1 net on the $5 spread, and its 100% in the money. Sell a few monthly callers and it can be very nice.

  90. LOL – They didn't get the pop they wanted off inventories so, of course, they bring out a guy (reporter) who talks about Israel's battle plan to attack Iran.   Still can't get oil over $97.50 and notice how we're timing our CNBC feature into the NYMEX close at 2:35.  

    Inventories/StJ – Over 10% above normal is a lot.  

    FFIV/DrM – As long as you REALLY want to own them for net $84ish – no problem but, in a collapse, it's very hard to say how far stocks like this can fall.  RVBD not too different – these are just stocks that can drop 10% overnight – it's not a problem if you would be happy to own them but, if that's going to make you panic out of the short puts – at least keep very tight stops.  

    AAPL Guide/Diamond – Oh, I thought it was going to be a joke.  That guy is serious!?!  

    AMZN/MrM – No doubt they are a great company.  Living Social is a fantastic service no one ever talks about.  Great companies can be over-priced too.  If AAPL were $2,000 or GOOG $1,500 – they'd be overpriced – it doesn't make them less great, just too expensive.   I love my house but if it wasn't my house and someone asked me for $2M for it – I'd say no and wait for the price to come down.  Doesn't make it a bad house – just a bad price…

    Has it worked so far/Pharm – What kind of benchmark is that?  

    3am/Jrom – No need to wait, oil already picked up .25 and gold coming back to our line.  

    TIBX/MrM – Textbook triangle squeezy thingy.  Good support from that rising 50dma as long as it gets over $28.50 and crossed above the 200dma.  

    Power/Jacalyn – Gotta FIGHT the power!  

    $666/MrM – It is funny how often that comes up.  It was the Must Hold level on the RUT at one time.  

  91. Revolution Calling….kust….Revolution Calling.

  92. I was just looking at SQQQ to see if it was worth another DD and it struck me that the range of Sept strikes bottoms out at $32.  The top is $80 – kind of shows you how far to one end of the range we have moved already.  

    And, tempting though it may be – we'll hold off on doubling down the Sept $38 calls (now $1.75) but I really do like them.  

  93. Nas is finishing green thanks to 2% AAPL pop (well played) that added 0.4% to the index (up 0.3%) all by itself.  Dow barely down but doesn't look like they can get green here.  75M shares traded with 5 mins to go means a good 40M coming in at the last minutes.  

    Oil just stopped dead at $97.30 and now flat.  

    Gold still up at $1,657.  TLT $124.50!  VIX 15, Dollar 81.55.  

    CNBC can't understand why the sheeple didn't stampede in when they just told you how great the Fed minutes were.   Don't worry, I'm sure the WSJ will straighten them out overnight…  


    Fed Minutes Signal Action Likely

    The Fed sent its strongest signal yet that it is preparing to take new steps to bolster the recovery, saying that measures would be needed fairly soon unless economic growth picks up substantially.


    U.S. Stocks Pare Losses

    U.S. blue-chip stocks pared the day's declines, propelled by hopes that the Federal Reserve may act again to stimulate the economy. 

    Hey, guest on CNBC says not enough retail (ie. stupid) investors in the market.  

    I love this picture – a Chinese swimming pool.  Yep, China will be the answer to everything:  


    There's the bell – Just the Nas makes green and here comes HPQ earnings, which better be good but they already fell $1 from the top this morning (down 4% officially).  

    Lame volume – 106M for the day.  

  94. Pharmboy – I'll take the contrarian view here. "Where's the stimulus you ask". So as much as I think not even people were arrested over the 2008/09 debacle, i think the Fed has done all it can to do the right thing since then.  They have limited power.  And certainly the banks have gotten a lot of cheap money.
    The two key things holding the US economy back are falling median wages and falling home values.  Its up to the do-nothing Congress to create jobs to stimulate median wages. (They won't now – maybe Obama should have pushed harder in 09 but he had too many wall st economist and not enough real economist).  And maybe Congress could be more pro-active in doing a giant workout on the housing market.
    (The health care bill will really help keep medical costs down – 50 million non-insureds cost a great deal more than 50 million insureds over the long run since they wait too long to get checkups.  Though too bad the Insurance companies will continue getting 20% for taking no risk.  Still this should help the deficit in the long run),
    By pushing rates down all along the curve, the Fed has tried to make home financing as cheap as possible and business investment as cheap as possible.  It really is all they can do. Unemployment now at 8% versus 11% when Obama took office.  And U6 unemployment is down to 14% from almost 20%.
    This is the worst economy since 1940 – and then we had rearmament – they drafted 2 million guys out of 135 million population (probably 4% of workforce) before we were even at war. That certainly marked  the end of the depression with a giant Keynesian rush and instant hiring binge.

  95. Pharm & Co.:  Just picked this up on Al Jazeera, posted 38 minutes ago, don't see it in the U.S. press — yet.  I cannot opine on the economic implications, but it's hard to believe there won't be any, given this statement within the article: "Given that the Gulf of Mexico provides more than 40 per cent of all the seafood caught in the continental US, this phenomenon does not bode well for the region, or the country."  At the very least, I wouldn't be loading up on BP stock right now.

  96. Gulf of Mexico / Zero – I just don't know why we should be surprised! They leaked millions of gallon of oil, tried to clean it up by spraying more chemicals into the ocean (I would like to read the MSDS sheets on those) and somehow the seafood should not be affected! Right… 

  97. Deano/RVBD/FFIV/JNPR – I trade with very small quantity (1-3 contracts) to avoid getting into "trouble".   Like your suggestion on JNPR trade, will look into it, though I follow csco more closely (and overweight and long).
    Phil/ RVBD/ FFIV – I traded FFIV last year (short calls and puts) and had the stock jump 10 pts "wrong" way (in both direction while I had both short calls and puts)!!   Thanks for your comment, seems very appropriate.  Hence the very small position.

  98. St. Jean:  Maybe we're not surprised, but shareholders who rode BP from its spill-priced $28 to its current $42+ level might be.

  99. I hope so Zero…. Someone has to pay for that. I am just worried that the taxpayers will be left holding the bag once again!

  100. Stj:  On a different topic, I have happened on a graphic representation of what happens when an amateur like myself attempts to reproduce some of Phil's more subtle option strategies:

  101. P.S. – The Spaniards immediately dubbed it "Ecce Mono." ["Behold the Monkey"]

  102. Gvt has to get people off the teet somehow so they let us eat contaminated fish and steroid meat.  That's one way to save social security.  God help the Japanese (yeah right their stuff is safe too!)

  103. Zero – She did better that I would anyway! but LOL!

  104. Phil / ABX – $0.20 Dividend on on 8/29.  If you have short puts, you pay the dividend….correct? Income portfolio has a BCS and 10 short puts.  If the short puts are required to pay the dividend that is $200.00.  Any adjustments?

  105. jfawcett – you only pay dividend if you hold short stock.
    It only can happen if you either 1. shorted it 2. sold (have short) calls and got assigned.
    In case of short puts – it doesn't apply

  106. Phil / ABX – Thinking about this I am wrong.  We are long the stock, not short.  So if you have a Long Put, you pay the dividend, right?  TIA… Many hours of education to go!

  107. Thanks lol730

  108. How could people believe that the economy is just fine now? The rising food and gas costs will kill the poor and middle class. So sad. We need a miracle.

  109. Federal Reserve/rexx – I commend you, but rescuing the banks in the beginning of the process is NOT something that the Feds should have done.  By choosing who to rescue, and others not, then they overstepped their bounds.  As far as they having done a good job, I am skeptical.  They Fed is controlled by the big banks, and their mandate is clear…

    The Congress established the statutory objectives for monetary policy--maximum employment, stable prices, and moderate long-term interest rates--in the Federal Reserve Act.

    What is maximum employment?  Well, most of our 'jobs' are service jobs, as we are a service economy.  So, check.

    Stable prices – well, they have failed there, b'c the prices they have affected are the ones that 100% of Americans (and other currencies as well) are commodities….food, gas, etc.  Are your monthly bills less or more now?  My food bill, water, gas, etc are all up.  Yeap, they succeeded there.

    Interest rates…well, buying your own back will win that game every time.  Especially when the primary dealers are all in on the skinny.

    So, yes, they did do a good job (not).  Sorry to be sarcasic, but they are a failure to me.  We needed a reset button, and let the chips fall where they may.  We would have been better off now, and in the future.

    As for Obama et al.  Well, I think Deano and I had an agreement many eons ago that he failed with the health care bill being more important than infrastructure.  Just think, if Obama had gone after infrastructure, solar (Phil has pointed this out many times), our electric grid, etc, many more 'skilled' labor would be working.  He would be a saviour and the Tea Party would be crawling back in their dark hole.  Obama could then have passed anything he wanted….and be elected without any notable problems this year.  My wife and I have discussed this many times, and I cannot budge on this one.  He is a failure to me in many ways, but I cannot choose the other side, as they scare the crap out of me in more ways than one. 

  110. No shoot…

    HSBC's preliminary reading of Chinese manufacturing activity dropped to 47.8 for the current month from a final print of 49.3 in July, the bank said Thursday, marking the worst result in nine months. The flash version of the China manufacturing Purchasing Managers' Index remained below 50 for the 10th month in a row. The flash result is based on 85% to 90% of the total responses to the survey.

  111. Narration is terrible but the message is about the US Budget Dilemma.

  112. Pharm/ I agree on more stimulus vs health care – if that was a choice, then Obama chose wrong. I tend to think Obama was misled by wall st economists/ Rahm Emanuel saying what was needed and what could be done – they all missed the wealth effect – or rather negative wealth effect -  of something like $10 Trillion of National Wealth destroyed.
    And all the little weenies crying about the deficit that Bush-Cheney had set us up for scared the bluedog Senators not doubt make adding to stimulus harder/
    Still health care was needed.

    And they should have extracted more from the banks – should've fired management clawed back all unvested bonuses, etc.. but Paulson caved immediately on that.
    But I think just letting all the banks go under would've really set off an even worse depression.  Maybe I'm wrong but – ATMs wouldn't have worked – businesses would've been shutting down left and right.  Instantaneous collapse of money supply and credit lines. I just think it would've been a much more brutal deflationary event than it was – 30-40% drop in GNP. – who knows?  And Globally as well – Europe, China, Brazil.
    But they would've done that if the 1% could've figured out how to foreclose on everyone at once.


  113. Hungry – Get out and help or scratch a check. This is who we chose, to donate time and $$$$……

  114. Stimulus/Health care - Why couldn't we've done both? With 3+ years of infrastucture stimulus (immeadiate $$$) and health care ($$$ later)  things could be looking better by now, but our politicians lack the gravitas to do the right thing. Anything.
    What we need is another good war.
    I don't wish for that, but if we can't learn any lessons from 2008, then we as a nation, are screwed…..  :(

  115. Interesting digital stress infographic.

  116. Oil/Gas refiners distributors/Phil – do you have an opinion on the category like DK (Delek US Holdings).. smaller refiner/distributor/retail operators?  Too small to bother with/trust/be liquid? Or a good place to plant some seeds? Any standouts?

  117. Some comfort for those of us in SVU, HPQ, BBY etc. a study in 2004 that shows that "falling knife" stocks tend to outperform the S&P 500.  They outperform the S&P by 6.6% on a 3 year basis.  Also interesting is the bankruptcy rate for falling knives.  Except for telecom at 35% and financials at 13% its mostly under 10% and even lower for non-U.S. falling knife stocks.:
    Falling Knives Around the World

  118. Good morning! 

    It's like a broken record, really bad data from China (PMI at 9-month low and declining faster than last month) sparks stimulus rumors that boost the market.  I simply can't believe that there are people who are actually this stupid.  Once, sure.  Two, three, maybe even four times – maybe.  But two or three times a week for three straight months – there is no way human beings can keep reacting like this to the same news over and over and over – it's just manipulated BS. 

    The August preliminary HSBC PMI for China falls to a 9-month low of 47.8 from July's final read of 49.3. New orders and new export orders both contracted at a faster rate than July, while inventories rose at a speedier pace.

    More on China PMI: New Orders fell to 46.6 from 48.7, while New Export Orders slumped to 44.7 - the lowest read since the depths of the financial crisis. Inventories rose to 53.6, the highest level in the 8 year history of the series. "Beijing must step up policy easing to lift infrastructure investment in the coming months," says HSBC.

    "The resources boom is over," says Australian Resources and Energy Minister Martin Ferguson. "We've done well … the envy of the world. It has got tougher in the last 6-12 months." His comments come as BHP and other miners put the brakes on capital spending amidst high costs in Oz and slowing demand abroad (chiefly China).

    Oh well, that manipulated BS has our Futures up 0.25% and it all came in one mighty shot at 9pm, just in time to save the Nikkei open.

    8:41 PM Japanese stocks open lower, extending losses from the previous session on a rising yen overnight. The Nikkei Average dipped 0.7% to 9,071, with exporter shares hardest hit: Hitachi (HTHIY-1.3% ), Pioneer (PNCOF.PK -4.1% ), Mitsubishi Motors (MMTOF.PK-2.6% ) and Panasonic (PC -1.4% %).

    2:41 AM Asian markets are higher following the FOMC's strong indication that more easing is on the way and China's depressing PMI reading, which may also have increased the chances of stimulus in the country. Japan +0.5%, Hong Kong +1%, China +0.3%, India +0.5%.

    4:10 AM EU shares are higher in early trading as markets think happy thoughts about Fed easing after the FOMC minutes yesterday and from China following its PMI data. And could the Europeans make it triple-play stimulus after their PMI shows continued contraction? Euro Stoxx 50 +0.5%, London +0.4%, Paris +0.5%, Frankfurt +0.6%, Madrid +0.3%, Milan +0.4%.

    6:00 AM Overseas: Japan +0.51%;. Hong Kong +1.23%. China+0.25%. India +0.08%. London +037%. Paris +0.13%. Frankfurt+0.19%.

    6:30 AM The ECB may set a yield target for buying sovereign debt but not say what it would be, Reuters reports. By keeping the level private, the bank hopes to avoid a debate with governments about what it should be, says former ECB economist Christian Schulz. However, it's also an invitation to markets to…sell, sell, sell to see where you would intervene."

    6:36 AM U.S. stock futures point up with China's weak factory data in the background. S&P +0.3%, Dow +0.3%

    7:00 AM On the hour: S&P +0.24%. 10-yr +0.07%. Euro +0.19% vs. dollar. Crude +0.52% to $97.77. Gold +1.45% to $1662.05.

    Isn't this totally insane?  The funniest thing is media crowd just go on TV and read and discuss this nonsense with a straight face.  It's like saying to a parent – "Your kid is so bad in school we're going to leave him back, isn't that great – he'll be much bigger than the other kids."  That would be, of course, after they try giving him As to make him smarter and that didn't work and after spending huge amounts of time and effort tutoring him and that didn't work and now they are giving up entirely – so we're gonna have a party!!!  

    The middle class suffered its "worst decade in modern history" in the 10 years ending in 2010, falling backward in income for the first time since World War II, a new Pew Research study says. In 1970, the share of U.S. income going to the middle class was 62%, while the wealthy received 29%; by 2010, the middle class took 45% of total income, vs. 46% for upper-income Americans. 

    The Dollar is 81.43 after hitting 81.30 overnight and the Yen fell (got stronger) all the way to 78.4 and is now 78.6 but that's down from 79.2 yesterday but they RAMMED the Nikkei back from 9,050 to 9,200 into the close and now drifting around 9,175.   Do you really think INVESTORS are the ones leaping into the market into every close to jam indexes back to these levels?  What would the point be and, more importantly, how could they possibly coordinate it – day after day, over and over again….

    Clearly it's fake and when you see something fake you have to assume the opposite is real.  In other words, if I see a magician levitating a girl and I know it's fake – just because he does it every night and just because I can't see the wire or whatever doesn't mean levitation is real – it just means he's a good fake.  It's one thing for me to enjoy the show but if I go home and insist on trying to levitate my children – they will eventually arrest me for child abuse.  There's a big difference between observing a Ponzi scheme and participating in it.  Be very, very careful about being caught up in this one…

    CNBC – S&P 500 Facing 25% Drop Before US Election: Janjuah

    The S&P 500 is likely to fall by 20-25 percent over the next three months according to Nomura strategist Bob Janjuah. In a research note published on Tuesday, the long-term bear who called the recent rally for U.S. stocks said he expects investors to be back in risk-off mode until the U.S. election is over. “I now think the correct thing to do — as I also said in April and June — is to prepare for a serious risk-off phase between August and November…over the August to November period I am looking for the S&P 500 [.SPX 1413.17 --- UNCH ] to trade off down from around 1400…by 20 to 25 percent…to trade at or below the lows of 2011.” Janjuah expects the dollar to be a big beneficiary if the S&P 500 does fall as sharply as he predicts. “This coming major risk-off phase will, in my view, also be very dollar bullish and bullish core government bonds,” said Janjuah, who thinks 10-year debt in the U.S., Germany and the U.K. could hit just one percent, and who is predicting more quantitative easing from the Federal Reserve in December. Those hoping for a big bazooka from the Fed or the European Central Bank before December will be disappointed, he said.

  – May-June correction was a failure
    Surprised by the Dow’s continued inability to close above its early-May highs? You’re not alone: Tuesday was the 11th day in a row in which the Dow was less than a percentage point away from eclipsing its May 1 closing high of 13,279. And it was the 11th day in a row in which it failed. Contrarians, however, have not been surprised by the Dow’s difficulties. For a number of weeks now, contrarian analysis has suggested that the rally is living on borrowed time. (Read my Aug. 8 column. ) And recent developments have only reinforced the contrarians’ concern. Consider the average recommended stock market exposure among a subset of short-term stock market timers (as measured by the Hulbert Stock Newsletter Sentiment Index, or HSNSI). On Tuesday, when the Dow Jones Industrial Average DJIA -0.51% rose above its early-May high on an intra-day basis but ended up closing well below it, this average stood at 53.1%. On May 1, in contrast, the day on which the Dow closed at what so far has been its bull market high, the HSNSI stood at 42.1%. This 11-percentage-point difference is one measure of how much more optimism there is today than at the May market peak. And contrarians do not consider excessive optimism to be a good sign.

    Business Insider – RICHARD RUSSELL: ‘Something Evil And Bearish Is Bubbling In The Guts Of This Market’
    Richard Russell, author of the Dow Theory Letters, is just as bearish as ever. In his latest commentary on King World News, Russell talks about the the sell-off we saw in the stock markets today. I’ve dealt with a lot of strange and difficult markets over the last half/century, but this one may deserve a prize. Today, instead of rallying above its May 1st peak, the D-J Industrial Average sold off an hour before the close. The sell-off left the Dow around 70 points below its May 1st peak.

    Oil touched $98.29 but back to $97.76 and we do want to DD on our USO puts and $97.50 (and $98) are still good short lines in the Futures (/CL) with tight stops (obviously).  Gold went crazy overnight and hit $1,669 with silver (good for our AGU play) hitting $30.54 but they fell back to $1,664 on gold and $30.24 on silver.  Copper flew back to $3.50, where it's currently being rejected and makes a fantastic short below that line (/HG), Nat gas (inventories at 10:30) tested $2.85 before pulling back to $2.82 and gasoline is running up as a little holiday present for consumers at $3.15, this is up from $2.44 in June (30%) but still below the post 2008 double top of $3.43 – so we have that to look forward to if we get QE3.  

    We get our own PMI pre-market and Housing news at 10 so should be interesting today.  Merkel and Hollande make a statement around 1pm our time.  

    Thursday's economic calendar:

    8:30 Initial Jobless Claims

    9:00 PMI Manufacturing Index

    9:45 Bloomberg Consumer Comfort Index

    10:00 New Home Sales

    10:00 FHFA House Price Index

    10:30 EIA Natural Gas Inventory

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet

    Greek Crisis Evasion to Fore as Merkel Hosts Hollande in BerlinChancellor Angela Merkel hosts President Francois Hollande today as officials look for ways to stave off an immediate crisis after a report due next month from Greece’s international creditors on the health of its finances. Options raised in Germany in recent days include front- loading aid payments to Greece to help it over liquidity hurdles; lowering the interest rate or extending maturities on loans; and pushing for a second debt writedown, this time focusing on bonds held by public institutions, notably the European Central Bank. With the leaders of Europe’s two biggest economies still at the confidence-building stage, Merkel and Hollande are seeking common ground on Greece and the wider euro-area debt crisis almost three years after its inception. While Merkel publicly stresses meeting targets, France sees them as too harsh given the state of the Greek economy, a French government official said on condition of anonymity because the talks are private. Merkel and Hollande will give statements at 7 p.m. in Berlin.

    Citi Sees Greek Exit As Soon As September.

    Chinese Vice Premier Li Keqiang called for local governments to continue property market tightening measures and speculation curbs, citing the official. (that's all that was translated) 

    CITI: 5 Reasons India's GDP Growth Is Heading To A 10-Year Low.

    There Are Signs India's State-Owned Banks Are In Trouble.

    U.S. Budget Deficit to Reach $1.1 Trillion in 2012, CBO Says.

    Oil Gains a Third Day on Falling U.S. Stockpiles, Fed Stimulus Hopes

    Gold Climbs to 16-Week High on U.S. Stimulus Bets.

    Gold continues to party as the weak Chinese PMI printovernight combines with yesterday's FOMC minutes to give rise to the idea of a lot more fiat paper chasing the same level of goods. The yellow metal (along with silver) has clearly broken through keytechnical levels as well. GLD +0.5%SLV +1.6% premarket.

    Beef Herd Tumbles to 40-Year Low on Feed Cost Surge: CommoditiesThe worst U.S. drought in a half century and record feed prices are spurring farmers to shrink cattle herds to the smallest in two generations, driving beef prices higher. Beef output will slump to a nine-year low in 2013 after drought damaged pastures from Missouri to Montana, the U.S. Department of Agriculture estimates. The domestic herd is now the smallest since at least 1973, and retail prices reached a record last month, USDA data show. Cattle futures may rise 8.5 percent to an all-time high of $1.35 a pound in Chicago in the next 12 months, said Rich Nelson, the chief strategist at Allendale Inc. who has tracked the market for 15 years.

    DRAM chip prices reported falling faster in August. Prices for DRAM chips are falling at a faster rate amid a lack of recovery for personal-computer sales, with Japan's Nikkei business daily Thursday quoting an unnamed official at a major DRAM maker as saying buyers drastically cut their procurement plans this month.

    Best Buy (BBY) reportedly restarts negotiations with founder Richard Schulze about letting him carry out due diligence with a view to acquiring the retailer. Schulze has already rejected one offer. Meanwhile, the pay package of new Best Buy CEO Hubert Joly is worth up to $32M over three years, and he's guaranteed over $6.25M if he can't obtain a work visa by the end of September and the deal collapses.

    While Richard Schulze bickers with Best Buy (BBY) over the terms of due diligence talks, another option he has on the table is to appeal to shareholders directly with a special meeting of shareholders. Schulze only need the support of 25% of shareholders to call the meeting, only 5% more than what he carries around in his back pocket. (Previous: negotiations restart)

  119. Pharm – yes we agreed on that score. I'd like to attribute it in part to Obama's lack of experience/maturity – but I think its unfortunately just another bought politician.

  120. Good overview Rexx.  

    Made up crap/Pharm – Right out of their asses come those numbers.  That's a way bigger disparity than usual thanks to GS and MS dragging things down.  At least the consensus is we're too high – almost makes you think they are rational.  

    Gulf shrimp – This is why Jews don't eat bottom feeders!  Yuch!  My question is, how do they live to grow with no eyes?  Are eyes not actually necessary for shrimp?  

    You're welcome DrM and, of course, with a small position – nothing wrong with having fun.  

    Big Chart – Dow needs to take back 13,200 in a big way, Nas still holding 3,060 but 3,075 is the goal for the +2.5% line (unadjusted for Dollar dip).   The way it's obeying both those lines is a great example of how some Bots dynamically adjust for the Dollar and others don't.  

    Fresco/ZZ – OH MY GOD – that is tragic!!!  That seriously made me sick to my stomach…

    Japan fish/Jacalyn - They are hitting new records of cesium in their fish indicating it's pretty deeply infused into the ecosystem now.  Once again – it's the bottom feeders that kill you:  

    The finding comes after the federation once more started fishing for some octopus and shellfish in waters off Soma, in the northern part of the prefecture, between June and early August of this year on a trial basis — but only in areas more than 31 mi from the plant. Those fish were distributed to markets, including Tokyo, and sold to the public for consumption.

    Puts/Jfaw – No, dividends are priced in to the puts – or, actually, the anticipated target takes the dividends into consideration but the dividends themselves have no effect on a put (or call) buyer or seller other than the fact that the underlying stock will tend to move down on ex-dividend days but it's no different from any other kind of move it might make to the option holder.   The reason you pay it when you short a stock is because you are physically (in theory) borrowing the stock so you get the dividend and have to turn it over to the owner.  This is why I never understand why people would want to go through the hassle of shorting a stock when a put does the same trick.  

    Food banks/Jabob – That's a nation-wide problem.  We're luck in NY because we have so many busy restaurants still but some cities are very slow and donations are down at the same time as needs are way up.  

    Fed/Pharm – I think they did the best they could given the circumstances (the Global Economy was about to collapse) but the fine-tuning since then has been a disaster for the bottom 90% who, on the whole, would have been better off if the whole thing had collapsed and we just re-started from scratch.  

    Both/1020 – I agree.  The worst thing Obama did was squander what was essentially a mandate to do whatever it took to kick-start the economy.  He could have rammed through a multi-Trillion Dollar stimulus package if he had the balls to stick to his guns but he folded like a cheap Washington suit, lost his momentum and then fumbled the ball to the Reps before anything got accomplished.  Very sad.  

    Currency chart/Diamond – That's a cool chart but what does the color-coding mean?  

    Digital Stress/Scott – LOL, all I saw was 4 tabs average and I'm thinking "is that per window or per computer?"  People who don't multi-task well simply don't understand people who do.  Tina and Madeline need to be more focused but Jackie is like me and can never do one thing at once as it's just way too dull.  I think kids are simply developing the ability to multitask now that they are born with an IPad in the crib – I'm sure I'll have plenty of trouble keeping up with my grandchildren – especially Jackie's kids!  

    Refiners/Scott – I like VLO but they are too expensive.  SUN is my ONLY other refiner I like but they are being bought by ETP and I'm not sure how I feel about the combined company yet so I prefer to just wait for VLO to get cheap again.  

    Oops, 8 o'clock – better get writing!