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TGI Fed – Help Us O-Ben One Bernanke – You’re Our Only Hope!

This is so exciting!

The Futures are up, Europe is up, the Dollar is down – despite the fact that the last Fed Statement, the last Fed Minutes and Bernanke's last speech all said, VERY CLEARLY, that there will NOT be any more QE UNLESS the economy worsens.  We just had the new Beige Book on Wednesday and, thankfully, the economy is not worsening.   Therefore – one may conclude – no easing today.  To do so would make the Fed seem capricious and inconsistent and erode their future ability to steer the markets with rhetoric.  

Of course, this doesn't matter to the robots who are jacking up the Futures after the foolish humans sold all day yesterday – and the day before, and the day before that, and the day before that.  But not last Friday – although last Thursday was terrible too and last Wednesday wasn't so good and last Tuesday was awful – so how about that rally?  

As you can see from our Big Chart, we're getting exactly the sell-off we've expected but, as I've pointed out to Members, things are much weaker than they seem as the Dollar, at 81.50, is down 2.5% from where our levels were drawn (83.50) and that means that each set of lines on the chart – including the 50 and 200 day moving averages, need to be moved up one notch and that means the Dow failed it's 200 dma yesterday (at an adjusted 13,100), the S&P dropped below it's must hold line (adj 1,400) and needs to break back over the 50 dma (adjusted to 1,414) in order to get back momentum.  

The Nasdaq is still above it's adjusted 50 dma at 3,037 but now need to get back over the adjusted Must Hold line at 3,075.  The NYSE has failed all of it's support and has to take back 8,000 for any rally to be taken seriously and, finally, the Russell is right on the adjusted 200 dma at 804 and failing to hold 800 would be a huge sell signal.  

For now (8 am), none of that is an issue as the Dollar has fallen another full percentage point (81.18) as the Euro climbs back to $1.26 because ECB Executive Board Member, Benoit Coeure said: "ECB bond purchases in the sovereign debt market must be subject to strict conditionality."  What?  What do you mean that doesn't sound bullish to you?  The man said BOND PURCHASES!  Don't you see?  It's a code – the code means the ECB is planning to buy bonds – if someone asks for them (which Merkel is actively discouraging) and if they meet "strict conditionality."  See – IT'S IN THE BAG!  

Fortunately, as we learned yesterday, reality is only what you say it is and Mitt did a much better job than his VP in wowing the crowd yesterday with his Reaganesque vision of America and I was particularly impressed by this documentary on his life:  

With all this love in the air and the great news out of Europe, we decided to go long on the Nasdaq Futures (/NQ) in early morning Member Chat to lock in yesterday's gains on our bearish positions.  Most likely, we'll be back on the short side before the market opens as we're still just a tad skeptical of all the rhetoric but nothing that happens at the open really matters until we get Bernanke's speech from Jackson Hole at 10am.  '

We have our long hedges that we discussed Tuesday, and the Tuesday before that and the Tuesday before that (in case you missed it), but our short-term $25,000 Portfolios are skewed 70% bearish and we added more downside protection to our Income Portfolio, in anticipation of some disappointment from Bernanke this morning.  

As I said earlier this morning to Members, I don't think they can get the Dollar below 81 and it's already (8:50) at 81.05 so we're going to be cashing out our Futures longs already and shorting the Dow (/YM) at 13,100 and the S&P at 1,410 as these are both lines that should be easy to bail out of if they break but this is simply stupid at this point – erasing all of yesterday's losses in the Futures based on an optimistic interpretation of a statement made by a guy we never heard of.  You can mess around with the Futures all day long but once you begin to try to push Forex past resistance – you'd better have something more substantial than an out-of-context statement by a minor official.  

Jens Weidmann is not a minor official – he is the President of the Bundesbank and he has threatened to resign if the above-mentioned bond-buying program is put into effect by the ECB.  Sounds like strong opposition to me…  In Berlin, a government spokesman said Chancellor Angela Merkel supports Weidmann but declined to comment on the report, which lays bare a deep rift within the ECB over the bond scheme that is increasingly being played out in public.

Stepping up the pressure to attach conditions to the plan, fellow German ECB policymaker Joerg Asmussen said late on Thursday the ECB should only buy sovereign bonds if the International Monetary Fund is involved in setting the economic reform programmes that should be demanded in return.  "Opposition from Weidmann and reservations from some other Council members will mean that ECB bond purchases would be highly conditional, be focused on the short end and would not aim to bring yields down quite as much as Italy and Spain might like to see," said Berenberg Bank economist Holger Schmieding. 

Ah well, enough talk – let's see what Uncle Ben has to say….

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  1. Dollar down to 81.16 is this a pump job or does someone have insider information. Maybe the accidently released the meeting speech 14 hour early to the banker peeps

  2. Oppenheimer upgraded Corning (NYSE: GLW) from Perform to Outperform with a $16 price target.

    The firm said the stock has has limited downside – given share buybacks and a good dividend – plenty of upside potential from its current business once macro improves, and optionality with new technologies.

  3. Oil Lines

    R3 – 97.16
    R2 – 96.38
    R1 – 95.51
    PP – 94.73
    S1 – 93.86
    S2 – 93.08
    S3 – 92.21

  4. Very nice pump job this am.  PP don't even matter….

  5. Note what I just wrote in updated post:

    As I said earlier this morning to Members, I don't think they can get the Dollar below 81 and it's already (8:50) at 81.05 so we're going to be cashing out our Futures longs already and shorting the Dow (/YM) at 13,100 and the S&P at 1,410 as these are both lines that should be easy to bail out of if they break but this is simply stupid at this point – erasing all of yesterday's losses in the Futures based on an optimistic interpretation of a statement made by a guy we never hear of.  

  6. Anyone know if there is a live feed for Uncle BB's speach?

  7. Phil / For options on the DOW side, Weekly DIA Puts?  Weekly DIA 131 Puts at (bid/ask) 1.21/1.33 Delta -.51.  Ride the DOW down with a short stop?

  8. Phil/impressed   Phil, snap snap! PHIL!….DON'T LOOK AT THE LIGHT!!!

  9. Almost lost him…..
    Good Morning Everyone!

  10. You da man Phil!  Thanks for that futures note, I was in the right place at the right time for that one.  

  11. Will CNBC carry the speech or do they cut away like when the prez is on?  First time I've turned on that station in months…

  12. Quote of the day:

    "If you're jealous of those with more money, don't just sit there and complain. Do something to make more money yourself — spend less time drinking or smoking and socialising, and more time working," - Gina Rinehart , the richest woman on the planet, who inherited her family's iron-ore prospecting fortune of $30.1 billion.

    The disconnect with reality takes another turn for the worse. What an idiot….

  13. Springheel Jack: My DX 5Yr Chart showing the huge significance of the support test today … DX/US is a very good technical performer. That makes this test really very important indeed. Game changer if it breaks.

  14. Phil, the post is all messed up on the iPhone. Something is wrong with the video and it causes uncontrolled scrolling and massive amount of black screen. I can't even get it to switch to iphone view to ignore the article because of the uncontrolled scrolling.

  15. And I sent the little spinning globe thingy at the top of PSW into an uncontrolled osscillation and it became very annoyed, stopped, and disappeared.  Sounds like part of Phil's character was programmed into it somehow — fascinating.

  16. augrusot / FYI
    May be something related to your phone. Nothing happening on mine. Video works fine and no scrolling issues.

  17. 7.9 earthquake Philipines

  18. fixed now. Thanks.

  19. MoMo trade:  Bought to close the  5 LNKD Sept 22  115 calls for 1.30.  That closes out the LNKD trade completely.  Reason for trade:  If the "B" does a QE this puppy would explode upward.  So a word to the wise.  If you hold any short calls or puts in any of these MoMos you could gets your pants blown off today.  The MoMo holds only the Jan AAPL bull call spreads at the present. 

  20. SPY DAILYGood morning!

    Very exciting Futures so far and Europe is way up (1-2%) so we'll have a strong open, no matter what.  

    Adjusted bull lines are Dow 13,100, S&P 1,414, Nas 3,075, NYSE 8,000 and Russell 820 and, as I noted above, we're bearish about this open because the pre-market gains were based on shoving the Dollar down to the 81 line where we will at least get a bounce.

    FB down to $18.50 but STX making new highs at $33 so maybe it is good to actually make stuff.  

    AZMN taking another run at $250 and, olf course, it's crasy risky to short things ahead of the Fed but, at .25 for the today $245 puts – let's grab 10 in the $25KPA ($125) – just for fun, with a stop on 5 at .50.

    Another fun play if you have low trading costs is buying 10 XLF $15 puts for .01 ($10) on the off-chance we get a nice sell-off and a $14.50 finish nets $5,000.   

    Nothing matters until we get the Fed speech – keep an eye out because the text may be realeased early.  

    We had a nice drop on the Dow (/YM) and S&P (/ES) futures and now they are back up to our shorting lines at 13,100 and 1,410 but more dangerous now as the rumors are flying so I'd avoid the quick-moving Dow and use the S&P for shorting – if you are so inclined – but much more dangerous than the pre-market call.  

    Crazy day ahead – get ready!  

  21. All subject to big changes in less than 30 minutes!

  22. RUT not joining the party.

  23. MoMo trade:  Bought to open 5 AAPL THIS WEEKLY 655 puts for .26 each.    Insurance!  

  24. PHil – any FAS play just in case the "B" exudes some irrational exuberance and releases dollars bills in the air?  Both C and BAC were up big time this morn?

  25. Remember, we have the U. of Michigan in about 5 minutes and then the Factory Orders at 10:00 as Ben starts speaking!

  26. MoMo trade:  I made Phil's AMZN trade 10 of the 245 this weekly puts for .40.   

  27. FLAN – AMZN-- Buy or Sell?

  28. Gee, how many of you guys grabbed the XLF puts – volume is up to 500 and no other puts have traded so far!

  29. DUH!!!! Sorry FLAN.

  30. Buy the AMZN puts. 

  31. Reinhart/stj, She looks the part perfectly

  32. Those puts never sold at 0.01.

  33. Pump/bert – If "they" had QE3 in the bag then why would "they" want to jack the futures so high up and deprive themselves of the opportunity to buy in volume before things get very expensive?  If, on the other hand, "they" know the market is about to take a massive dive, then "they" want to spend as little as possible, driving up the market on low volume and forcing bears to capitulate (and become unwilling buyers) so "they" can sell the crap out of the market before it becomes obvious to all that QE3 is not coming.  

    AMZN .50 already – Boo Yah!  Let's set a stop on half at .45 and, once we get to .60 – it will be all stop at .50

  34. OK Ben … Bring it on for the MoMo.  You give us QE, our AAPL BCSpread goes up.  You give us none, our AMZN and AAPL puts get cashed in (probably).   I also made Phils XLF trade,not in the MOMO, just for fun.  I see some others did too. 

  35. Consumer sentiment higher, who are these people?

  36. GLW/DC – Love those guys.  

    No advance word on speech.  

    DIA/Jfaw – I don't like the fact you can get blown out of that Dollar in seconds.  I prefer the today $130 puts at .12.  

  37. Leisman looks depressed.  I like him better without the pom-poms.

  38. LOL 1020! 

    Thanks Chaser – congrats.

    Holy Cow, long speech but no immediate QE that I see in 15 seconds:  


    Chairman Ben S. Bernanke

    At the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming

    August 31, 2012


    Monetary Policy since the Onset of the Crisis


    When we convened in Jackson Hole in August 2007, the Federal Open Market Committee's (FOMC) target for the federal funds rate was 5-1/4 percent. Sixteen months later, with the financial crisis in full swing, the FOMC had lowered the target for the federal funds rate to nearly zero, thereby entering the unfamiliar territory of having to conduct monetary policy with the policy interest rate at its effective lower bound. The unusual severity of the recession and ongoing strains in financial markets made the challenges facing monetary policymakers all the greater.

    Today I will review the evolution of U.S. monetary policy since late 2007. My focus will be the Federal Reserve's experience with nontraditional policy tools, notably those based on the management of the Federal Reserve's balance sheet and on its public communications. I'll discuss what we have learned about the efficacy and drawbacks of these less familiar forms of monetary policy, and I'll talk about the implications for the Federal Reserve's ongoing efforts to promote a return to maximum employment in a context of price stability.

    Monetary Policy in 2007 and 2008
    When significant financial stresses first emerged, in August 2007, the FOMC responded quickly, first through liquidity actions--cutting the discount rate and extending term loans to banks--and then, in September, by lowering the target for the federal funds rate by 50 basis points. 1 As further indications of economic weakness appeared over subsequent months, the Committee reduced its target for the federal funds rate by a cumulative 325 basis points, leaving the target at 2 percent by the spring of 2008.

    The Committee held rates constant over the summer as it monitored economic and financial conditions. When the crisis intensified markedly in the fall, the Committee responded by cutting the target for the federal funds rate by 100 basis points in October, with half of this easing coming as part of an unprecedented coordinated interest rate cut by six major central banks. Then, in December 2008, as evidence of a dramatic slowdown mounted, the Committee reduced its target to a range of 0 to 25 basis points, effectively its lower bound. That target range remains in place today.

    Despite the easing of monetary policy, dysfunction in credit markets continued to worsen. As you know, in the latter part of 2008 and early 2009, the Federal Reserve took extraordinary steps to provide liquidity and support credit market functioning, including the establishment of a number of emergency lending facilities and the creation or extension of currency swap agreements with 14 central banks around the world.2 In its role as banking regulator, the Federal Reserve also led stress tests of the largest U.S. bank holding companies, setting the stage for the companies to raise capital. These actions--along with a host of interventions by other policymakers in the United States and throughout the world--helped stabilize global financial markets, which in turn served to check the deterioration in the real economy and the emergence of deflationary pressures.

    Unfortunately, although it is likely that even worse outcomes had been averted, the damage to the economy was severe. The unemployment rate in the United States rose from about 6 percent in September 2008 to nearly 9 percent by April 2009--it would peak at 10 percent in October--while inflation declined sharply. As the crisis crested, and with the federal funds rate at its effective lower bound, the FOMC turned to nontraditional policy approaches to support the recovery.

    As the Committee embarked on this path, we were guided by some general principles and some insightful academic work but--with the important exception of the Japanese case--limited historical experience. As a result, central bankers in the United States, and those in other advanced economies facing similar problems, have been in the process of learning by doing. I will discuss some of what we have learned, beginning with our experience conducting policy using the Federal Reserve's balance sheet, then turn to our use of communications tools.

    Balance Sheet Tools
    In using the Federal Reserve's balance sheet as a tool for achieving its mandated objectives of maximum employment and price stability, the FOMC has focused on the acquisition of longer-term securities--specifically, Treasury and agency securities, which are the principal types of securities that the Federal Reserve is permitted to buy under the Federal Reserve Act.3 One mechanism through which such purchases are believed to affect the economy is the so-called portfolio balance channel, which is based on the ideas of a number of well-known monetary economists, including James Tobin, Milton Friedman, Franco Modigliani, Karl Brunner, and Allan Meltzer. The key premise underlying this channel is that, for a variety of reasons, different classes of financial assets are not perfect substitutes in investors' portfolios.4 For example, some institutional investors face regulatory restrictions on the types of securities they can hold, retail investors may be reluctant to hold certain types of assets because of high transactions or information costs, and some assets have risk characteristics that are difficult or costly to hedge.

    Imperfect substitutability of assets implies that changes in the supplies of various assets available to private investors may affect the prices and yields of those assets. Thus, Federal Reserve purchases of mortgage-backed securities (MBS), for example, should raise the prices and lower the yields of those securities; moreover, as investors rebalance their portfolios by replacing the MBS sold to the Federal Reserve with other assets, the prices of the assets they buy should rise and their yields decline as well. Declining yields and rising asset prices ease overall financial conditions and stimulate economic activity through channels similar to those for conventional monetary policy. Following this logic, Tobin suggested that purchases of longer-term securities by the Federal Reserve during the Great Depression could have helped the U.S. economy recover despite the fact that short-term rates were close to zero, and Friedman argued for large-scale purchases of long-term bonds by the Bank of Japan to help overcome Japan's deflationary trap.5 

    Large-scale asset purchases can influence financial conditions and the broader economy through other channels as well. For instance, they can signal that the central bank intends to pursue a persistently more accommodative policy stance than previously thought, thereby lowering investors' expectations for the future path of the federal funds rate and putting additional downward pressure on long-term interest rates, particularly in real terms. Such signaling can also increase household and business confidence by helping to diminish concerns about "tail" risks such as deflation. During stressful periods, asset purchases may also improve the functioning of financial markets, thereby easing credit conditions in some sectors.

    With the space for further cuts in the target for the federal funds rate increasingly limited, in late 2008 the Federal Reserve initiated a series of large-scale asset purchases (LSAPs). In November, the FOMC announced a program to purchase a total of $600 billion in agency MBS and agency debt.6 In March 2009, the FOMC expanded this purchase program substantially, announcing that it would purchase up to $1.25 trillion of agency MBS, up to $200 billion of agency debt, and up to $300 billion of longer-term Treasury debt.7 These purchases were completed, with minor adjustments, in early 2010.8 In November 2010, the FOMC announced that it would further expand the Federal Reserve's security holdings by purchasing an additional $600 billion of longer-term Treasury securities over a period ending in mid-2011.9 

    About a year ago, the FOMC introduced a variation on its earlier purchase programs, known as the maturity extension program (MEP), under which the Federal Reserve would purchase $400 billion of long-term Treasury securities and sell an equivalent amount of shorter-term Treasury securities over the period ending in June 2012.10 The FOMC subsequently extended the MEP through the end of this year.11 By reducing the average maturity of the securities held by the public, the MEP puts additional downward pressure on longer-term interest rates and further eases overall financial conditions.

    How effective are balance sheet policies? After nearly four years of experience with large-scale asset purchases, a substantial body of empirical work on their effects has emerged. Generally, this research finds that the Federal Reserve's large-scale purchases have significantly lowered long-term Treasury yields. For example, studies have found that the $1.7 trillion in purchases of Treasury and agency securities under the first LSAP program reduced the yield on 10-year Treasury securities by between 40 and 110 basis points. The $600 billion in Treasury purchases under the second LSAP program has been credited with lowering 10-year yields by an additional 15 to 45 basis points.12Three studies considering the cumulative influence of all the Federal Reserve's asset purchases, including those made under the MEP, found total effects between 80 and 120 basis points on the 10-year Treasury yield.13 These effects are economically meaningful.

    Importantly, the effects of LSAPs do not appear to be confined to longer-term Treasury yields. Notably, LSAPs have been found to be associated with significant declines in the yields on both corporate bonds and MBS.14 The first purchase program, in particular, has been linked to substantial reductions in MBS yields and retail mortgage rates. LSAPs also appear to have boosted stock prices, presumably both by lowering discount rates and by improving the economic outlook; it is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC's decision to greatly expand securities purchases. This effect is potentially important because stock values affect both consumption and investment decisions.

    While there is substantial evidence that the Federal Reserve's asset purchases have lowered longer-term yields and eased broader financial conditions, obtaining precise estimates of the effects of these operations on the broader economy is inherently difficult, as the counterfactual--how the economy would have performed in the absence of the Federal Reserve's actions--cannot be directly observed. If we are willing to take as a working assumption that the effects of easier financial conditions on the economy are similar to those observed historically, then econometric models can be used to estimate the effects of LSAPs on the economy. Model simulations conducted at the Federal Reserve generally find that the securities purchase programs have provided significant help for the economy. For example, a study using the Board's FRB/US model of the economy found that, as of 2012, the first two rounds of LSAPs may have raised the level of output by almost 3 percent and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred.15 The Bank of England has used LSAPs in a manner similar to that of the Federal Reserve, so it is of interest that researchers have found the financial and macroeconomic effects of the British programs to be qualitatively similar to those in the United States.16 

    To be sure, these estimates of the macroeconomic effects of LSAPs should be treated with caution. It is likely that the crisis and the recession have attenuated some of the normal transmission channels of monetary policy relative to what is assumed in the models; for example, restrictive mortgage underwriting standards have reduced the effects of lower mortgage rates. Further, the estimated macroeconomic effects depend on uncertain estimates of the persistence of the effects of LSAPs on financial conditions.17 Overall, however, a balanced reading of the evidence supports the conclusion that central bank securities purchases have provided meaningful support to the economic recovery while mitigating deflationary risks.

    Now I will turn to our use of communications tools.

    Communication Tools
    Clear communication is always important in central banking, but it can be especially important when economic conditions call for further policy stimulus but the policy rate is already at its effective lower bound. In particular, forward guidance that lowers private-sector expectations regarding future short-term rates should cause longer-term interest rates to decline, leading to more accommodative financial conditions.18 

    The Federal Reserve has made considerable use of forward guidance as a policy tool.19From March 2009 through June 2011, the FOMC's postmeeting statement noted that economic conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period."20 At the August 2011 meeting, the Committee made its guidance more precise by stating that economic conditions would likely warrant that the federal funds rate remain exceptionally low "at least through mid-2013."21 At the beginning of this year, the FOMC extended the anticipated period of exceptionally low rates further, to "at least through late 2014," guidance that has been reaffirmed at subsequent meetings.22 As the language indicates, this guidance is not an unconditional promise; rather, it is a statement about the FOMC's collective judgment regarding the path of policy that is likely to prove appropriate, given the Committee's objectives and its outlook for the economy.

    The views of Committee members regarding the likely timing of policy firming represent a balance of many factors, but the current forward guidance is broadly consistent with prescriptions coming from a range of standard benchmarks, including simple policy rules and optimal control methods.23 Some of the policy rules informing the forward guidance relate policy interest rates to familiar determinants, such as inflation and the output gap. But a number of considerations also argue for planning to keep rates low for a longer time than implied by policy rules developed during more normal periods. These considerations include the need to take out insurance against the realization of downside risks, which are particularly difficult to manage when rates are close to their effective lower bound; the possibility that, because of various unusual headwinds slowing the recovery, the economy needs more policy support than usual at this stage of the cycle; and the need to compensate for limits to policy accommodation resulting from the lower bound on rates.24 

    Has the forward guidance been effective? It is certainly true that, over time, both investors and private forecasters have pushed out considerably the date at which they expect the federal funds rate to begin to rise; moreover, current policy expectations appear to align well with the FOMC's forward guidance. To be sure, the changes over time in when the private sector expects the federal funds rate to begin firming resulted in part from the same deterioration of the economic outlook that led the FOMC to introduce and then extend its forward guidance. But the private sector's revised outlook for the policy rate also appears to reflect a growing appreciation of how forceful the FOMC intends to be in supporting a sustainable recovery. For example, since 2009, forecasters participating in the Blue Chip survey have repeatedly marked down their projections of the unemployment rate they expect to prevail at the time that the FOMC begins to lift the target for the federal funds rate away from zero. Thus, the Committee's forward guidance may have conveyed a greater willingness to maintain accommodation than private forecasters had previously believed.25 The behavior of financial market prices in periods around changes in the forward guidance is also consistent with the view that the guidance has affected policy expectations.26 

    Making Policy with Nontraditional Tools: A Cost-Benefit Framework
    Making monetary policy with nontraditional tools is challenging. In particular, our experience with these tools remains limited. In this context, the FOMC carefully compares the expected benefits and costs of proposed policy actions.

    The potential benefit of policy action, of course, is the possibility of better economic outcomes--outcomes more consistent with the FOMC's dual mandate. In light of the evidence I discussed, it appears reasonable to conclude that nontraditional policy tools have been and can continue to be effective in providing financial accommodation, though we are less certain about the magnitude and persistence of these effects than we are about those of more-traditional policies.

    The possible benefits of an action, however, must be considered alongside its potential costs. I will focus now on the potential costs of LSAPs.

    One possible cost of conducting additional LSAPs is that these operations could impair the functioning of securities markets. As I noted, the Federal Reserve is limited by law mainly to the purchase of Treasury and agency securities; the supply of those securities is large but finite, and not all of the supply is actively traded. Conceivably, if the Federal Reserve became too dominant a buyer in certain segments of these markets, trading among private agents could dry up, degrading liquidity and price discovery. As the global financial system depends on deep and liquid markets for U.S. Treasury securities, significant impairment of those markets would be costly, and, in particular, could impede the transmission of monetary policy. For example, market disruptions could lead to higher liquidity premiums on Treasury securities, which would run counter to the policy goal of reducing Treasury yields. However, although market capacity could ultimately become an issue, to this point we have seen few if any problems in the markets for Treasury or agency securities, private-sector holdings of securities remain large, and trading among private market participants remains robust.

    A second potential cost of additional securities purchases is that substantial further expansions of the balance sheet could reduce public confidence in the Fed's ability to exit smoothly from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might increase the risk of a costly unanchoring of inflation expectations, leading in turn to financial and economic instability. It is noteworthy, however, that the expansion of the balance sheet to date has not materially affected inflation expectations, likely in part because of the great emphasis the Federal Reserve has placed on developing tools to ensure that we can normalize monetary policy when appropriate, even if our securities holdings remain large. In particular, the FOMC will be able to put upward pressure on short-term interest rates by raising the interest rate it pays banks for reserves they hold at the Fed. Upward pressure on rates can also be achieved by using reserve-draining tools or by selling securities from the Federal Reserve's portfolio, thus reversing the effects achieved by LSAPs. The FOMC has spent considerable effort planning and testing our exit strategy and will act decisively to execute it at the appropriate time.

    A third cost to be weighed is that of risks to financial stability. For example, some observers have raised concerns that, by driving longer-term yields lower, nontraditional policies could induce an imprudent reach for yield by some investors and thereby threaten financial stability. Of course, one objective of both traditional and nontraditional policy during recoveries is to promote a return to productive risk-taking; as always, the goal is to strike the appropriate balance. Moreover, a stronger recovery is itself clearly helpful for financial stability. In assessing this risk, it is important to note that the Federal Reserve, both on its own and in collaboration with other members of the Financial Stability Oversight Council, has substantially expanded its monitoring of the financial system and modified its supervisory approach to take a more systemic perspective. We have seen little evidence thus far of unsafe buildups of risk or leverage, but we will continue both our careful oversight and the implementation of financial regulatory reforms aimed at reducing systemic risk.

    A fourth potential cost of balance sheet policies is the possibility that the Federal Reserve could incur financial losses should interest rates rise to an unexpected extent. Extensive analyses suggest that, from a purely fiscal perspective, the odds are strong that the Fed's asset purchases will make money for the taxpayers, reducing the federal deficit and debt.27 And, of course, to the extent that monetary policy helps strengthen the economy and raise incomes, the benefits for the U.S. fiscal position would be substantial. In any case, this purely fiscal perspective is too narrow: Because Americans are workers and consumers as well as taxpayers, monetary policy can achieve the most for the country by focusing generally on improving economic performance rather than narrowly on possible gains or losses on the Federal Reserve's balance sheet.

    In sum, both the benefits and costs of nontraditional monetary policies are uncertain; in all likelihood, they will also vary over time, depending on factors such as the state of the economy and financial markets and the extent of prior Federal Reserve asset purchases. Moreover, nontraditional policies have potential costs that may be less relevant for traditional policies. For these reasons, the hurdle for using nontraditional policies should be higher than for traditional policies. At the same time, the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant.

    Economic Prospects
    The accommodative monetary policies I have reviewed today, both traditional and nontraditional, have provided important support to the economic recovery while helping to maintain price stability. As of July, the unemployment rate had fallen to 8.3 percent from its cyclical peak of 10 percent and payrolls had risen by 4 million jobs from their low point. And despite periodic concerns about deflation risks, on the one hand, and repeated warnings that excessive policy accommodation would ignite inflation, on the other hand, inflation (except for temporary deviations caused primarily by swings in commodity prices) has remained near the Committee's 2 percent objective and inflation expectations have remained stable. Key sectors such as manufacturing, housing, and international trade have strengthened, firms' investment in equipment and software has rebounded, and conditions in financial and credit markets have improved.

    Notwithstanding these positive signs, the economic situation is obviously far from satisfactory. The unemployment rate remains more than 2 percentage points above what most FOMC participants see as its longer-run normal value, and other indicators--such as the labor force participation rate and the number of people working part time for economic reasons--confirm that labor force utilization remains at very low levels. Further, the rate of improvement in the labor market has been painfully slow. I have noted on other occasions that the declines in unemployment we have seen would likely continue only if economic growth picked up to a rate above its longer-term trend.28 In fact, growth in recent quarters has been tepid, and so, not surprisingly, we have seen no net improvement in the unemployment rate since January. Unless the economy begins to grow more quickly than it has recently, the unemployment rate is likely to remain far above levels consistent with maximum employment for some time.

    In light of the policy actions the FOMC has taken to date, as well as the economy's natural recovery mechanisms, we might have hoped for greater progress by now in returning to maximum employment. Some have taken the lack of progress as evidence that the financial crisis caused structural damage to the economy, rendering the current levels of unemployment impervious to additional monetary accommodation. The literature on this issue is extensive, and I cannot fully review it today.29 However, following every previous U.S. recession since World War II, the unemployment rate has returned close to its pre-recession level, and, although the recent recession was unusually deep, I see little evidence of substantial structural change in recent years.

    Rather than attributing the slow recovery to longer-term structural factors, I see growth being held back currently by a number of headwinds. First, although the housing sector has shown signs of improvement, housing activity remains at low levels and is contributing much less to the recovery than would normally be expected at this stage of the cycle.

    Second, fiscal policy, at both the federal and state and local levels, has become an important headwind for the pace of economic growth. Notwithstanding some recent improvement in tax revenues, state and local governments still face tight budget situations and continue to cut real spending and employment. Real purchases are also declining at the federal level. Uncertainties about fiscal policy, notably about the resolution of the so-called fiscal cliff and the lifting of the debt ceiling, are probably also restraining activity, although the magnitudes of these effects are hard to judge.30 It is critical that fiscal policymakers put in place a credible plan that sets the federal budget on a sustainable trajectory in the medium and longer runs. However, policymakers should take care to avoid a sharp near-term fiscal contraction that could endanger the recovery.

    Third, stresses in credit and financial markets continue to restrain the economy. Earlier in the recovery, limited credit availability was an important factor holding back growth, and tight borrowing conditions for some potential homebuyers and small businesses remain a problem today. More recently, however, a major source of financial strains has been uncertainty about developments in Europe. These strains are most problematic for the Europeans, of course, but through global trade and financial linkages, the effects of the European situation on the U.S. economy are significant as well. Some recent policy proposals in Europe have been quite constructive, in my view, and I urge our European colleagues to press ahead with policy initiatives to resolve the crisis.

    Early in my tenure as a member of the Board of Governors, I gave a speech that considered options for monetary policy when the short-term policy interest rate is close to its effective lower bound.31 I was reacting to common assertions at the time that monetary policymakers would be "out of ammunition" as the federal funds rate came closer to zero. I argued that, to the contrary, policy could still be effective near the lower bound. Now, with several years of experience with nontraditional policies both in the United States and in other advanced economies, we know more about how such policies work. It seems clear, based on this experience, that such policies can be effective, and that, in their absence, the 2007-09 recession would have been deeper and the current recovery would have been slower than has actually occurred.

    As I have discussed today, it is also true that nontraditional policies are relatively more difficult to apply, at least given the present state of our knowledge. Estimates of the effects of nontraditional policies on economic activity and inflation are uncertain, and the use of nontraditional policies involves costs beyond those generally associated with more-standard policies. Consequently, the bar for the use of nontraditional policies is higher than for traditional policies. In addition, in the present context, nontraditional policies share the limitations of monetary policy more generally: Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve; in particular, it cannot neutralize the fiscal and financial risks that the country faces. It certainly cannot fine-tune economic outcomes.

    As we assess the benefits and costs of alternative policy approaches, though, we must not lose sight of the daunting economic challenges that confront our nation. The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails, but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.

    Over the past five years, the Federal Reserve has acted to support economic growth and foster job creation, and it is important to achieve further progress, particularly in the labor market. Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

  39. SDS 14 calls look tasty with no premium.

  40. FAS Money – Let's sell 2 next week $97 calls for $1.65.  

  41. Thanks Phil on DIA.  Normally not off on a Friday.  Interesting day!

  42. Dive, dive, dive…..

  43. TLT Sept/Nov BCS…….selling for 1.40 or better.

  44. at the 80.40 line P/F?

  45. Damn, too much work…Been trying to follow but after reading today's post I have to say – Nicely done Phil! Impressive calls making a lot of people a lot of money!

  46. Phil,
    How low do you think we go?

  47. Turned on CNBC to hear the man but not what they want so CUT!

  48. Dollar 81.30 and climbing fast.  Euro $1.2579, Pound $1.584, 78.45 Yen to the Dollar so money is fleeing there too.  

    Rinehart/StJ – Hey, she built it, right?  Oh, no, not right at all….  Could be the "let them eat cake" last straw the bottom 99% need to wake the F up.

    Post/Aug – I see it on my IPhone.  Have you updated lately?  Maybe restart phone to clear buffers.  

    Globe/ZZ – Hmm, sounds like we're under attack.

    AMZN $245 puts at .90 – I don't feel greedy letting it ride but 1/2 stop moves to .70. 

    DIA $130 puts .30 for a 2,900% gain in 30 mins – on those I'd take 3 off the table to lock in $90 for an 800% gain and the rest are a free ride.  

  49. Out of 5 PCLN at $5 in the 25KP.

  50. Factory Orders up 2.8% against 2% expected….

  51. S&P longs off the 1,400 line (/ES) locks in bearish gains in Futures.  Tight stops, of course but better than stopping out the shorts too early.  

    All the volume in an up 100, down 50 move in the day was accomplished on 18M shares so far (10:15).  

  52. so the market has moved up on QE that never came and Euro Bonds that seem less likely every day that passes and yet we are still up for right now.  Boy these bots are good.

  53. POUNDING the dollar.

  54. Earthquake/Shadow – Was undersea so not much damage but big Tsunami threat.  

    FAS/Jerconn – That would have been my play if Ben had indicated easing but, as you can see, we went with shorting next week calls in FAS Money.  

    Dollar smacked down to 81.05 again – literally in seconds – 81.01 – if 81 breaks the bulls win. 

  55. Though provoking…


    The United States should reassess the basic premises of its China policy and seriously consider an alternative strategy, one based on the assumption of declining Chinese strength and rising probability of an unexpected democratic transition in the coming two decades. Should such a change come, the geopolitical landscape of Asia would transform beyond recognition. The North Korean regime would collapse almost overnight, and the Korean Peninsula would be reunified. A regional wave of democratic transitions would topple the communist regimes in Vietnam and Laos. The biggest and most important unknown, however, is about China itself: Can a weak or weakening country of 1.3 billion manage a peaceful transition to democracy?

    It is of course premature to completely write off the Communist Party's capacity for adaptation and renewal. China could come roaring back in a few years, and the United States should not ignore this possibility. But the party's demise can't be ruled out, and the current signs of trouble in China have provided invaluable clues to such a highly probable seismic shift. U.S. policymakers would be committing another strategic error of historic proportions if they miss or misread them.

  56. /DX @ 81 again from 81.37.

  57. Yeah, I was thinking:  I sure hope cnbs and bloomy, show talking heads instead of this irrelevant speech from ben…..

  58. AMZN stopped out, of course.  $245 puts back to .34 and let's kill them at .30 and we can get back in when the music stops.  

    Gold jumped $20 while the Dollar dove.  Oops – 80.99!

  59. Holy shmoly…..more hot air…..

    Dr. Ben said he would not rule out further bond purchases to boost growth and reduce unemployment, which he called a “grave concern.”

  60. STJ/Phil-Rinehart-the article notes that she INHERITED most of her considerable wealth.  All the examples of self-made people which she highlighted were small businesspeople who started at a time when the cards were not stacked against small businesses and they could grow.  Doubt these people could do the same thing now.

  61. So for 2.3T…he bought a 1% fall in unemployment…yeah, that is working my friend.

  62. This is why rule is ALWAYS sell into the initial excitement and, if you are not willing to do that, sell half anyway…

    Another quick 6 points on the S&P is small consolation because we can't use the Futures in the $25KPs. 

    81.05 again.  They are really pulling out all the stops! 

    10 GLD Next week $160 puts for .85 in both $25KPs. 

  63. Less than a bounce to 81.13 is weak

  64. Hot air, indeed.  But the day is not over……I will hold the AMZN and AAPL puts  for now in the MoMo.   Checking in later this afternoon, after the market has had a chance to digest this 'news' and do the appropriate sell-off.  

  65. /DX.   What the H! I rarely see it bounce around this much. A lot of Hanky-Panky going on.

  66. Phil,
    Who are the alleged 600 economists that support Romney's economic plan?

  67. Bonds….forget everything else…they are telling the real story.  Nuttin but up.

  68. Lesson learned on selling into that rally down!

  69. 14real
    Unemployment offoce

  70. shadowfax – If it is not too much trouble to ask, would you please post your IWM lines? TY

  71. TRIN…..they are buying this dip…hard.

  72. They are going to hold this up for the weekend.  Just can't end on a bad note.  Next Tuesday….

  73. And VIX is -3% ???

  74. VIX – hahahahah.  what a joke.

  75. CaFords
    major lines 82.00 81.30 80.80 80.40 79.90 79.30 Trendline support 77.85 resistance 81.90 daily chart 79.80 since Aug 6. The most significant line now is 80.40 where it bottomed today. I would call staying over 81.13 for more than 20 minutes bullish and disappointing for my TZA hold.

  76. .01/Rain – The DIAs?  Oh well, was the price when I was looking.   Certainly not the kind of option you want to chase – for obvious reasons.  

     Uh, oh – here comes the Dollar again.   81.16

    Missed the AMZN re-entry, already back to .50!  

    Sentiment/Rustle – U of M is phone survey so they only talk to people who have homes and aren't hiding from bill collectors – so generally it's a poll of the top 20%.  

    Pom-poms/Mjj – They are really on board with this spin today.  

    You're welcome Jfaw. 

    TLT flying – $126.75. 

    VIX 17.27


    Thanks Jrom.  

    How low/Danny – I thought we'd drop 2.5% between now and Tues morning off lack of QE but this is end of month dressing so they are trying to hold up the morning pump.   CNBC latching onto the standard statement that " the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."  It's the same statement that has been in their statements for a year now but it wows them every time.  Now all hopes rest on Draghi and a crappy jobs report next week. 


    PCLN/$25KP, Real – Nice job, hit $5 pretty much on the nose.  I believe that leaves us with a basis of just over $5 with 5 left so we'll want to DD again at $3 if it happens but, otherwise, our next roll would be out to Oct.  


    Stacking the deck/Seer – Good point.  Same with what Condi was saying the other day – these people think this is still the 70s – pre-Reagan, when there were regulations that restricted Corporations from getting too big and driving competitors out of business.  Now they worry when there's not enough M&A activity…

    600 Economists/L4 – I don't know who they are but if they are the ones who Bloomberg uses to predict the data – head for the hills!  

    SODA making new highs – what a joke!  

    VIX/IZega – Sure because that wasn't volatile at all, was it?  

    Holy cow, I'm exhausted – that was way too much excitement for 1 hour.  

    So next Fed meeting is Sept 13th and ECB is the 6th.  Next week we get PMI, ISM and Construction spending Tuesday (Monday holiday), Productivity Weds, ADP, Consumer Comfort and ISM Service on Thurs and NFP on Friday.  I suppose the thought is that a big prop job today will give Europe and Asia two days to look at a pretty picture before we open on Tues morning.  

  77. Phil
    GLD moving

  78. Dollaar up market up dollar down market up dollar up markete up I,m on the wrong side of this one

  79. What F#CKING planet do I live on!?!?! Why are we up 130 on NOTHING!?!?!?!

  80. Phil
    I have no idea what is going on but looks like all these piuts trades that you mentioned are getting toasted. I am already way down on GLD trade. Are you expecting the market to sell off later.

  81. Make that 150!

  82. Ahhh Pharm… liked the katy p. video huh?….
    ….not that there's anything wrong with that…. ;)

  83. jromeha…Why up on nothing…the uncertaintly has been removed.   That's my only reasonable (psychological) explanation.  It's like your date telling you the bedsheet party just ain't gonna happen.  Only then can you relax and enjoy your meal and the movie. 

  84. DIA $130 puts back to .01 and I still like 10 of them for $10.  

  85. I think Bernanke's discourse was masterful.   He placed nothing on the table but gave eveyone "hope."  Your take-away was whatever you wanted it to be. All sizzle, no steak.  And not much sizzle, by the look of it.  
     Bernanke blamed fiscal policy makers, tightwad bank lending,  uncertainty in Europe [he was polite enough not to mention China], the uncertain effects and higher costs of 'non-traditional policies" [required after rates have been lowered to Zero], the inability of monetary policy to achieve what "a broader and more balanced set of economic policies might achieve" [read: a government that isn't paralyzed by partisan infighting], the damage being created by persistent levels of structural unemployment [caused by a divided government incapable of putting labor measures in place] — and then hands over a bone:
     "the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."  
    A meatless bone.  "Blessed are the young, for they shall inherit the National Debt" — Herbert Hoover

  86. Iflan/relax  :)

  87. DIA Puts…  DD to get even for the day because I was the minnow in the shark tank and did not execute.

  88. ahhahaha Iflan!

  89. Phil
    Do you know what is being done to make the dollar crazy? Why seem simple.
    RUT is lagging?

  90. Phil, do you have the link to the upward mobility data/infographics you posted yesterday? I'd like to forward to some people. Thanks

  91. Good article in NYT today about the types of jobs being created – no surprise – low wage – with biggest loss during recession coming in jobs that pay in the middle range of income spectrum.
    Many of those middle range jobs were in construction – a job sector that was obviously also in a bubble. 

  92. I must've misread the Fed comments, how much QE3 stimulus did we get?

  93. Lady on bloomberg says "Bernanke will shoot his last load" lol!

  94. Shadow 10:40am comment,
    I believe it!

  95. At the open: Dow +0.68% to 13089. S&P +0.68% to 1409. Nasdaq +0.78% to 3073.

    Treasurys: 30-year -0.08%. 10-yr +0.02%. 5-yr +0.02%.

    Commodities: Crude +1.78% to $96.3. Gold +0.38% to $1661.05.

    Currencies: Euro +0.81% vs. dollar. Yen -0.26%. Pound -0.53%.

    Market preview: S&P futures +0.8% ahead of Bernanke's speech in the next hour. While not many expect fireworks out of Jackson Hole – that might come at the FOMC meeting in two weeks – investors have higher and perhaps unrealistic hopes of the ECB making large purchases of eurozone government bonds. Also ahead: Chicago PMI, consumer sentiment, factory orders.

    10:00 AM On the hour: Dow +0.57%. 10-yr -0.03%. Euro +0.65%vs. dollar. Crude +0.96% to $95.53. Gold -0.06% to $1653.85.

    Chicago August PMI: 53.0 vs. 53.2 expected, 53.7 prior. New orders 54.8 vs. 52.9 prior. Production 57.4 vs. 54.5. Backlogs 41.7 vs. 52.8. Employment 57.1 vs. 53.3. Supplier deliveries 49.9 vs. 53.3. 

    More on Chicago PMI: Stocks show little reaction to the slight miss as today's main event comes in about 10 minutes. Sample comment: "We are cutting spending across all areas, we are pushing suppliers out beyond 90 days payables, the single largest growth area is from compliance audit by software publishing houses … you can almost hear the herds of consultants preparing Powerpoint slides on how they will save us from ourselves."

    July Factory Orders: +2.8% vs. consensus of +2.0%, -0.5% prior. Inventories +2.5%, Shipments -1.5%. 

    Aug Reuters/UofM Consumer Sentiment74.3 vs. 73.5 expected and 73.6 prior.

    Canada's GDP grew 0.5% in Q2, 1.8% annualized, and 2.4% Y/Y, with all measures beating expectations. Already higher on the day, the loonie tacks on another 40 pips, now +0.5% and buying $1.0129. FXC +2.6% YTD. 

    Brazil's Q2 GDP rose 0.4% from Q1 and 0.5% Y/Y, lower than estimates for 0.5% and 0.7%, respectively. One wonders if the central bank – which has cut rates by 500 bps over the past year, but indicated this week's reduction would be the last - will be forced to reconsider as the economy remains sluggish.

    Everything You Think You Know About China Is Wrong (Foreign Policy)  Could the same malady have struck Americans when it comes to China? The latest news from Beijing is indicative of Chinese weakness: a persistent slowdown of economic growth, a glut of unsold goods, rising bad bank loans, a bursting real estate bubble, and a vicious power struggle at the top, coupled with unending political scandals. Many factors that have powered China's rise, such as the demographic dividend, disregard for the environment, super-cheap labor, and virtually unlimited access to external markets, are either receding or disappearing.

    Hilsenrath!!!  "(Bernanke) left little doubt that he is looking toward doing more to give the economy a lift at the Fed's next policy meeting in September," is Fed-whisperer Jon Hilsenrath's interpretation of The Chairman's speech (perhaps assisted by some off-the-record comments?). The focus on the economy's weakness not being structural is key, says Hilsenrath, for if it's not structural then the Fed can do something about it. Stocks move to session highs.

    Bernanke: No new stimulus measures are outlined, but as usual, he says the Fed stands ready to act as needed. The cost of non-traditional policies (QE) "appear manageable." The economy is "far from satisfactory," and labor market stagnation creates enormous suffering.

    Stocks give up their gains as Bernanke essentially repeatswhat we have known for months: The unemployment picture remains unsatisfactory and the Fed stands ready to act. The Chairman delivers no promise for more stimulus, but he's made it clear he has no intention of doing such outside of FOMC policy meetings. S&P 500 flat after being higher by about 0.8% pre-speech.

    More Bernanke: He doesn't give in to the growing body believing structural factors are behind the unsatisfactory recovery. He continues to see stresses in credit and financial markets (someone tell that to corporate treasurers issuing billions at barely visible rates, or France selling paper at negative rates). He also notes spending constraints at the municipal level, and the "fiscal cliff" at the national.

    More Bernanke: The first two rounds of QE have lowered Treasury yields by 80-120 basis points, raised GDP by 3%, and increased payrolls by 2M. This remains a man who clearly believes in the positive effects of QE and still sees credit/financial markets as needing it. He didn't make any explicit promise for another round, but the speech comes close.

    Perhaps what's got markets in a lather is this line from late in Bernanke's speech: "Early in my tenure as a member of the (Fed), I gave a speech that considered options for monetary policy when the short-term rate (nears zero)." That 2003 talk is the famous "helicopter" speech in which Bernanke advocated dropping money from helicopters, if necessary, to combat deflation. (h/t StreetInsider).

    Gold, silver, and crude are believers – all sharply higher following what's now being interpreted as Bernanke setting the stagefor more stimulus at the September FOMC meeting. GLD +1.3%SLV+2.5%USO +1.6%.

    It was a record-setting August for junk bond issuance, as a slew of multi-billion dollar offerings pushed volume to $31.3B, with companies rushing to cash in on low interest rates and investors clamoring for income. Companies in the U.S. accounted for 96% of issuance, which saw average coupons fall to 7.02%, down nearly 100 basis points from July.

    Is the low-price retail space getting a bit too crowded with consumers starting to broaden out their spending? Shares of Gordmans Stores (GMAN -19.4%) are getting crushed after the retailer guided estimates for Q3 revenue and EPS to below the consensus mark of analysts, while yesterday it was Fred's (FRED) that was the value-oriented name that disappointed with its August sales report. On watch: Dollar General (DG), Family Dollar Stores (FDO), Five Below (FIVE), Dollar Tree (DLTR).

    Facebook (FB -4%) makes new lows after BMO and Stifel join BofA in cutting their targets. BMO, reiterating an Underperform, says its media spending checks turned up two negatives for every positive, and that many ad execs used the word "pause" when discussing Facebook campaigns. The only Facebook underwriter tostart coverage with a bearish stance, BMO now forecasts Q3 revenue of $1.2B, below a $1.24B consensus. (more from Facebook advertisers: IIIIII) 

    Zynga (ZNGA), reeling from a string of executive losses, hashired online gambling exec Maytal Ginzburg to be its chief operating officer in charge of new markets. Until recently, Ginzburg was SVP of regulated markets for real-money gaming portal Ginzburg's hiring comes as Zynga promises to would launch real-money games in international markets in 1H13, and steps up its efforts to get online gambling legalized in the U.S.

    Amazon (AMZN) is planning to launch a new touchscreen Kindle e-reader featuring a backlit "Paperwhite" e-ink display, The Verge reports. The new Kindle, which should be announced on Sep. 6,  is a response to Barnes & Noble's (BKSlatest Nook Simple Touch, whose GlowLight display tech makes it easier to read in dark environments. IDC has forecast e-reader shipments will drop this year due to tablet competition.

    State tax collectors in California plan to ramp up efforts to force Internet businesses to collect sales tax by hiring new auditors and lawyers to get the point across. Though big fish Amazon has already been reeled in, companies such as (OSTK) and Blue Nile (NILE) are swimming around unfettered at the moment.

    A Japanese court rules Samsung's (SSNLF.PK) devicesdon't infringe an Apple (AAPL) patent for synchronizing music and video content with servers, and declines Apple's request for injunctions on 8 Samsung Android phones. That helped Samsung rally 1.5% in Seoul – shares have now recouped the majority of the lossesthey saw on Monday thanks to Apple's huge California win. Google (GOOG), meanwhile, has made new 52-week highs. (more) 

    The iPad Mini (AAPL) will sport a 7.85" display, sources tell Bloomberg, backing up earlier reports that the device will have a slightly bigger display than its 7" Android rivals. AU Optronics (AUO) and LG Display (LPL) will provide LCD panels for the Mini, which is rumored to be thinner than the regular iPad.

    Mitt had a great line last night about how Americans are great because, when they lose a job that pays $22 an hour with benefits, they go right out and get two jobs that pay $9 an hour.  That's showin' them!  

  96. So basically all Bernanke has to do is keep saying that they will print if they need to.  As long as he leaves the option out there, the market stays up, and it's a win for everyone ( except me, apparently ).
    A line from Dumb and Dumber sums up the current market scenario perfectly:

  97. Hilsenrath is Hennimore !

  98. Phil--next fed meeting on thurday, sep 13th? why the change to wed-thurs?

  99. Price Stability/ZZ – I think that, in this weak-dollar, inflationary environment, price stability now means constant inflation – that must be what the bulls are so happy about.  

    FTSE turned red at the close, Spain up 2.7% despite yields back to 6.8% on the 10-year again, Italy up 2%, France up 1% and Germany up 1% but down from 1.7% so a weak close for Europe off an insane day. 

    Dollar/Shadow – I really don't understand how they can manipulate Forex.  Forex trades $4Tn a day so the only way it should be able to be affected is by a massive conspiracy of Central Bankers – they are the only ones who can move enough money to swing it and even I have trouble believing there is collusion on such a massive scale as that.  

    Mobility/Real – This was Time, WaPo and FDL a good start. 

    How much/Rustle – Imagine if we do actually get stimulus.  We'll need our Dow 20,000 hats….

    CNBC has yet to find anyone intelligent to agree with them that QE is imminent.

    LOL Villa! 

    Fed/Jabob – No change, I only care about the day they announce.  

  100. Vegas — What time do you plan to start the card game?  Looking at air fare…

  101. Phil FOREX
    Very sad situation if only central banks can do this.
    IWM held 81.13 about an hour but trouble @81.30 /TF, RUT, and IWM aligned today very unusual.

  102. My vision of the future:
    I envision that one day the United States will sell individual states to corporations.  This way there will be full transparency unlike now where politicians are just puppets for them.  It might be nice though, like I used to live in North IBM, but moved to Apple because of 10% discount on products off your taxes.  Chick Fil A would definitely be a southern state.  They can probably get Mississippi or Arkansas pretty cheap.

  103.  rustle:  I agree.  This whole "public sector" nonsense is way past it's due date.  Around 28% of the 2.27 Billion acres of land in the U.S. is owned by the Federal Government.  What's up with that?  This country is supposed to be about private enterprise, not some kind of Communist nanny state!  China would gladly trade their U.S. Treasuries for a few hundred million acres of prime farm or forest land, since it's tough to grow food for 1.5 Billion people in the Gobi Desert.  We could throw in the Hoover Dam and lease a Great Lake or two to Arab countries, they seem to have a water problem. Then China could slice it up formultinationals, and Wall Street would pick up massive syndication fees putting the deals together.  Capitalism can definitely solve the problems that capitalism creates!

  104. GLD :-( this is just  sickening. fastest money I ever lost on one trade

  105. Gandhjo – If it makes you feel better, I've got you beat, on multiple occasions.  Several of them on GLD, actually…
    Phil – thoughts on when to take profit on the DIA todays?

  106. @zero
    You know I was being sarcastic and don't actually hope that happens, right?

  107. Rustle:  Uh, was I too subtle?  

  108. On GLD- I know it hurts but you have to put your stops in- the rules. Still might reverse for u. Good Luck

  109. Wow, just picked up 175% on today's SPXW $1410s, half off, stop set, now up a mere 150% on the other half, jeez!

  110. @zero
    For a second, I got really scared.

  111. GLD -  i rolled up to 161s. i'm net long goldish things so this is an ok hedge for me. tought to bet against gold though. i may never do GLL again for a hedge. that sucker just evaporates on me every time and even when gold goes down a bit, it only ever gives a nickel.

  112.  Rustle: I used to put together syndications on Wall Street, so I got carried away with the realism, I should have used fake blood!

  113. Zero
    Great backup, hope we don't need it.

  114. I wrote of Catalunya, the most prosperous region of Spain that has contributed fully 25% of central government revenues that Madrid collects from its 17 provinces.  A Spanish colonel was quoted as saying today that Catalunya would only become an independent nation "over his dead body."  This comes in response to a Catalan city announcing that it would declare itself to be "independent Catalan territory."  This is all about revenue sharing, in which Catalunya has had to subsidize poorer regions.  European "Federalism" is not going to be as easy as the financial press mignt suggest.

  115. Phil, wanted to thank you for the heads up on the ES short this morning. Made a few shekels and after setting some aside for that Government guy- you know, the one who actually builds my business (funny how he is able to do that though since he never seems to be around when it's time to hit the bricks at 4:30 AM) – I will be making a contribution in your honor to the Romney campaign.
    Mitt and I thank you.

  116. Wheeeee!   What a fun market! 

    DIA $130 puts up 400% to .05 – gotta take half on that.

    81.30 is going to be rejected – gotta take half on day shorts at least! 

    Vegas/Rain – You're not going to make dinner?  I think dinner was 7 and then cards.   I think we should do 6 though as poker was late and then we had to be up early for seminar.  Monday is crazy early as it's 6:30 there when our markets open.  

    Corporate States – Good plan but may fall under the category of "Why buy the cow when you're getting the milk for free" politicians sold this whole country out to Corporations already – no sense in paying for what you already control.  

    New Fed Chair/Shadow – I say give it to Ron Paul.  

    GLD/Gand – It's a next week trade.  I was hoping for a cheap DD.   If you are going to stop out, then you NEED to stop out at 20%.  If you are scaling in (and it was an $850 entry with $2,500 allocations), then there's not even a reason to do anything  until you are down at least 40% and I was waiting for .45 to average .65 ($1,300 for 20).  

    DIA/Ryko – I lost track which one you mean but – now would be good! (13,060)   You have to be realistic on these day trades. 

    SPX/ZZ – Nice move. 

    Spain/ZZ – Huge mess.  Major fires there too, like California.  

  117. Thanks Pstas – Actually it's funny how, when your business fails, it's because the Government won't get off your back but, when it succeeds, the Government had nothing to do with it.  

  118. gandhjo 
    GLD well here again I did my own home work and did not play. Looks like the FAS play will work out better. Going to lose only 20$ on XLF

  119. Forming a triangle thingy now….

  120. BTW, did anyone else who watched the RNC think Clint Eastwood was going to shoot an empty chair Dirty Harry style?

  121. Phil Paul
    I am for him all the way, to bad the republicants said can't! A real chance to change to winner, only chance.

  122. Phil / Vegas — No Nobu for me thanks.  No problem getting up on Monday since it's my timezone (modulo the wife keeping me out late Sunday). 

  123. All
    thanks for the posts on GLD. Actually it is my own fault – that I went trigger happy on that trade without using my brains. I have to always remind myself not to simply copy trades and go in without a plan  - need to put a note on my laptop. I used my brains on SPY puts trade and actually made some money – not enough to cover GLD loss but what the hell – I learned the lesson here.

  124. Stjean
    Not forming flag is up in the wind!

  125. Rustle:  That "talk to the hand" thing was kinda scary.  You weren't sure if was acting or hallucinating.  And the crowd wasn't quite sure whether Obama was really sitting there and only Clint could see him.  

  126. BOTS playing todays fib lines that line up with 20 day that line up very long list and rising up with the flag. this doesn't look like a winner but the point isn't here yet.

  127. Trying to get gas (/rb ) over 3.00 for the long weekend

  128. 3 day weekend follows  through. Don't bet the farm on anything until you check IWM, up.1%.

  129. And no one can say Obama doesn't have a sense of humor:  From FT: "Mr Obama’s campaign did not have a comment, but instead a spokesman directed Politico, the political website, to refer “all questions on this to Salvador Dali”."

  130. @zero
    I love Clint Eastwood movies, but he should really save that imagination for the movies.  If he wasn't an actor, he would've been committed last night.

  131. 11:44 AM Europe closes sharply higher, the fever pitch of something "about to be done" across the pond and in the States growing to levels normally associated with the release of an iDevice. Stoxx 50 +1.4%, Germany +1.1%, France +1%, Italy +2.1%, Spain+3.1%, U.K. -0.1%. For the week, the Stoxx 50 was flat. - All depends on how you define "sharply higher": 

    12:00 PM On the hour: Dow +0.98%. 10-yr +0.38%. Euro +0.59%vs. dollar. Crude +1.74% to $96.27. Gold +1.53% to $1680.05.

    1:00 PM On the hour: Dow +0.61%. 10-yr +0.35%. Euro +0.52% vs. dollar. Crude +1.81% to $96.33. Gold +1.7% to $1682.85.

    Paul Krugman's summary of the Bernanke speech: 1) Things are really, really bad. 2) The damage is cumulative. 3) The Fed has the power to help. 4) The costs of QE are low, the benefits high. 5) The Fed will sit on its hands and think about it some more.

    The ECB has no preferred option yet for its bond-buying plans, reports Bloomberg's Jeff Black, and is set to give Governors proposals for their review on September 4 - allowing roughly 24 hours to study them ahead of the bank's policy meeting. No wonder Draghi couldn't make it to Wyoming.

    The BOE's Andrew Haldane's contribution to Jackson Hole makes the case for less financial regulation. Leading off talking about catching a frisbee – nearly anyone can do what a physicist might describe as a near-impossible task, Haldane reminds the more complex a system comes, the worse it performs. Yet the world continues to pile on new regulatory laws and bodies onto an already creaky, error-prone structure.

    The Spanish region of Catalonia is cut to junk status - BB/B from BBB-/A-3 by S&P following its bailout request earlier this week. Home to Barcelona, the region has a per capita GDP similar to the U.K., but just the 4th largest in Spain.

    Spain is forced to immediately inject capital into Bankia after the failed lender reported an H1 loss of €4.5B amidst rising bad loans (to 11% from 7.63%!) and private sector deposits falling €12.8B to €109B. Why Spanish and not EU funds? Spain does not want to force losses on junior bondholders while the EU is in favor of burden sharing.

    August auto sales preview: The tally for new light vehicles sales in the U.S. is expected to come in strong, with an estimate of 1.255M units marking a 17.2% gain from last year and a seasonally adjusted annualized rate of 14.2M. Perhaps even more relevant to auto stock investors, margins should improve with incentive spending per unit down 6% Y/Y. Japanese automakers should lead the charge again, boosted by earthquake-affected comps, while Volkwagen (VLKAY.PK) and Ford (F) are also tipped for a strong month.

    The war on soda: A local ballot measure in Richmond, California to tax soda drinks starts to draw national attention in advance of November's election. If the measure passes, Richmond would be the first city in the country that placed a per-ounce tax on sugary drinks and could set off a wave of copycats. Meanwhile in NYC, details on Mayor Bloomberg's anti-obesity plan will be unveiled in less than two weeks and will surely have sugary drinks in focus.

    Google (GOOG) is shutting down a TV ad business ithoped would do away with industry inefficiencies by pooling unsold inventory into a giant marketplace. The failure of the 5-year-old initiative follows the canning of Google's newspaper and radio ad efforts in '09, and is another example of how undermining old media's ancient business structures is easier said than done. Apple andMicrosoft also know a thing or two about that.

    Three lunchtime reads:
    1) Bernanke doubles down on Fed put
    2) Why are the big banks suddenly afraid?
    3) Don't look to China for economic growth

  132. gandhjo
    Day trading is strictly for gamblers it is like going to the casino you put 20§ in your pocket and be prepared to lose it.
    Invest your money in longer term plays given in the aproperate list Phil has set up for investing. I mainly set up CC plays with sometimes püts. Many on this board have there own style of trading but you have to work out for yourself if any of these plays are good for you.
    Good luck role '# 1 do not lose money

  133. "Home to Barcelona, the region has a per capita GDP similar to the U.K., but just the 4th largest in Spain."  I'm not sure what this means, but Catalunya has the largest GDP in Spain, not the 4th largest .

  134. All this sturm and drang, and here we are with IWM exactly where it was Monday am at 10

  135. Phil's "sell into intial excitement" rule certainly worked out today!

  136. Krugman/Phil
    I would disagree strongly with Krugman's 4th point.

  137. I have held FB worth under 10 since before speculation, do the P?E math

  138. FB $18!   Poor Mark – he could have given me $1Bn to short his stock and he'd have more than $100Bn now.  

    Wow deja yesterday afternoon….

    Clint/Rustle – That made me really sad.  Sucks getting old…

    Paul/Shadow – They blew him off.  He was supposed to speak Monday and they didn't reschedule him.  More important to have Clint Eastwood babble to an empty chair for 10 minutes.  I mean REALLY, can you imagine them telling you they have no time to reschedule your speech and then you have to sit through 2 days of the idiots they did have time for?  I don't think they could have possibly treated Ron Paul with less respect.  

    Trigger happy/Gand - 

    The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand. - Sun Tzu

    Yuan/Jyoti – Not sure how that's going to help them as neither one wants a stronger currency. 

    Gas/Bert – Damn, forgot about them.  5 cent pop off the open already.  

    Dow volume 47M at 1:30 – picked up a lot on the sell-off.  

    Dali/ZZ – Maybe he can figure it out. 

    Catalunya/ZZ – Yes, I was trying to figure out what 3 could possibly be bigger.  It's a cut and paste world, no one does research or even bothers thinking anymore.  

    Krugman/Rustle – It wasn't his point, it was Bernanke's.  

    FB/Shadow – Actually, my target on IPO day was $15 (about $30Bn).  Kind of hard to stick with it though as they are so pathetic but I do think that's a reasonable place to start nibbling long.  

  139. Yodi
    thx for the advice – well said. I need to resist the urge to make a quick buck – no such thing unless one can make it work. I am learning that it is definitely not for me.

  140. Another opinion on Australia potential problems:


    What happened to Australia’s counter-cyclicality? What happened to Australia’s competitive advantage? Are Australia’s banks really worth that much when you can get a Credit Suisse and a Standard Chartered for the price of a CBA?  Are Australia’s houses good value when a shack in Byron costs more than a flat in Paris? Are Australian wages reasonable when a truckie in Kalgoorlie earns more than a team in Jo’burg? Is Australia’s dollar fairly priced when it buys you an ice-cream in Brisbane for a dinner in Singapore?

    Some are seeing this sudden crescendo of negative overseas sentiment towards Australia as a crowded trade, but once the herd starts moving, those in the way better get out.

    And just like that fabled moment in time, when the grounds of the Imperial Palace in Tokyo were worth more than the entire real estate market of California, we wonder if a tipping point has been reached.

  141. Sad part of college now is that even the professors have no idea what they are talking about, not once does Professor James Hamilton, Economics Department at the University of California, San Diego, say oil is high because it's being manipulated by traders and just take all the facts that Phil lays out from time to time.

  142. ZeroXzero
    Bored I checked NTE. What happened in 2003 to go way up and why did they loose most of that before the crash?

  143. John Paulson must have a chubby right now!

  144. Phil,
    On the GLD put, are we going to DD today as per your earlier "waiting for .45 to average .65", or waiting to roll out to buy more time?

  145. Well, now back to the same ol' grind.

  146. rustle
    Girl friend's apt manager also poor pay teacher scares us both. This year he failed cutting grass, replaced in 1 month. No power to fire alarms, buy battery powered, stick wires in wall. Government housing! wise spenders?

  147. Phil, I never use hard stops. I tried 2 this week, one a stop-limit, and today a stop. Both went right through my stop, today I had a stop at .75, watched as the bid dropped to .74, then dropped to .70, (got filled at .66) and the whole time I watched the bid never dropped below .70. Time to change brokers?

  148. XLF: Looks like we're going to lose our little cab fare on those weeklies.

  149. education?
    Jeb Bush quoted Governer Butch Otter as fixing schools. He doesn't fact chech either, dropout rate or solution buy laptops, send kids home, fire teachers is the plan. good for business. On TV no link.

  150. Now that reminds me FOX owns the CBS station same local news want it at 9 instead of 10 PM? Switch to FOX. The great state of Idaho.

  151. GLD – i rolled up earlier to 161, now just DD.  heck of a range and press up today.  more bad china/australia news not to mention no QE, spain, germany etc.. there may be a pause and dip before rallies on further. ..

  152. FCX moves like a 3x ETF, but the options are more liquid – nice move today

  153. Paul / Shadow.  Ron Paul is a racist.  He is also an obstetrician who wants to make abortion illegal.  As far as I am concerned, this makes him a phony as a libertarian. 

  154. Phil – SQQQ, Sep 38's at 1.75. Would you double down at 1.50?

  155. AMZN hit 300!!!
    (p/e, that is…)

  156. Anyone else think CRM is a trifle overvalued?  I sold Jan 165 C for 815, margin cost 1650.

  157. Probably time to short again (13,100) but it's getting exhausting. 

    $25KP – 10 more GLD next week $160 puts at .30.  

  158. EEM Oct $38 Puts….yeah baby…here we go….


  159. Oil/Rustle – Can't make money teaching a course in market forces when market forces are moot. 

    Stops/Rpme – Probably.  Depends what you were trading but shouldn't happen in something liquid.  If other trades cleared ahead of you – complain to broker – they should give you some kind of credit.  

    XLF/Jbur – We'll see, I was hoping for an earlier move down but I'm pretty sure we head back to $15.  

    GLD/Scott – My next move would be to roll back 2 weeks now that we're 1/2 in.  

    FXC.Deano – Crazy today.  

    Dow volume 56M at 3pm – That's just 9M on the way up in 1:15 – no support at all to this leg up and already failing.

    SQQQ/Nicha – Yes, we were supposed to DD at $1.50 in the $25KP!   Had a whole discussion of this yesterday.   

    AMZN/BDC – Been there a while now – doesn't seem to bother people for some reason. 

    CRM/Kongen – Overvalued because people expect Job stimulus.  Romney says he has 12M jobs up his sleeve but he won't tell us how unless we elect him.

    EEM/Pharm – BRIC crash still more likely to begin Global collapse than Europe.  

  160. deano / FCX — A favorite of mine.  I have a position that buy and hold would be down 26% but my postion is up 48% using options.

  161. Phil, et al…AMZN…I can generally completely divorce myself from emotional responses to stocks, but this one is starting to irritate me.  Do you realize that if AAPL was valued the same as AMZN that AAPL would carry a price today of $13,260.00 per share?   Someone please  tell me I've done the calculation wrong, but AMZN has a P/E of 300 and AAPL 15, so the math says AAPL shares have to be 20 times what they are to be equally valued with AMZN.  

  162. AAPL, AMZN – i'd like to see them BOTH drop 3% today.

  163. Lflan/AMZN,
    I see your AMZN and I raise you an LNKD.  Priced at LNKD levels (PE = 878), AAPL shares would be worth $38,870 a piece.  How's that?

  164. IFlan – bu bu bu but this time it's different!!!!
    AMZN can have a 300 p/e and pink ponies will print 10,000 bills for all of their fairy-tale profit needs!

  165. Catalunya / Phil:  As you know, their debt was lowered to junk rating today.  This is a far bigger issue than, say, California being downgraded, even though their GDPs are comparable relative to the entire economies within which they exist.  Catalans only  threw off the shackles of Franco in 1981, and there was an attempted coup in 1983 to reimpose them.  No one in Spain would ever refer to speaking "Spanish" — it is Castilian, always.  Catalan, Basque [Euskera] and Gallego [Galicia] are the three others, and they are exclusively spoken in the street and on all signage, to the eternal frustration of tourists with their "Spanish" handbooks.  
    Paying 25% of the total 17 province revenues that flow to "Madrid," then having Catalan debt being downgraded to junk, is a serious blow, and I doubt they're kidding when they ask Madrid to fork over some serious bailout cash.  Spain, as we all know, is by far the worst off of the larger Euro countries in terms of unemployment, Catalans are famously frugal, and I would guess that the bailout request "with no further conditions attached" will prove a large fly in the ECB bailout ointment.  You already know what the Bundesbank thinks of Draghi's open checkbook pronouncements.  And the Swiss are reaching their limit on buying Euros.  It's starting to look like High Noon in Euroland to me.

  166. Just back to the US after a vacation in Montreal!  For the short strangles portfolio ($500k portfolio), let's sell some more premium:
    - Sell 5 SPX Sep 1120/1275 short strangle ($0.825 credit for the short put and $0.675 for the short call)
    - Sell 5 RUT Sep 720/870 short strangle ($0.9 & $0.35 credit respectively)

  167. HOV almost hit $3 today.  

    TLT at $127.50 – how good can things be?

    VIX 17.50. 

    AMZN/Lflan – That's my problem with them too.  Well, more to the point, that they cannot grow into that valuation over 5 years.  I plan to stay short and roll back on them for a long time until they finally slip and pay off like a slot machine.  

    2:00 PM On the hour: Dow +0.61%. 10-yr +0.38%. Euro +0.50% vs. dollar. Crude +1.93% to $96.45. Gold +1.94% to $1686.85.

    3:00 PM On the hour: Dow +0.81%. 10-yr +0.53%. Euro +0.61% vs. dollar. Crude +1.94% to $96.45. Gold +2.01% to $1688.05.

    More on ECB bond purchases: The complexity of the issue and time constraints make it unlikely Draghi will unveil any detailed plans next week, say bank-watchers at Commerzbank and JPMorgan. Toss in the Sept. 12 German Constitutional Court ruling on the legality of the ESM, and it makes even more sense for the ECB to be short on details.

    Winding down state-sponsored mortgage finance will be easier said then down as Fannie Mae purchased $81.9B mortgagesin July, nearly double the amount from a year ago. The growing business for the GSEs is another signal housing is rebounding, but exactly how do politicians expect to replace them?

    A group of Morgan Stanley Smith Barney's (MS) heaviest hitters – managing tens of billions of dollars and disgruntled with tech problems - may leave the company, according to sources. CEO Jamie Gorman is aware of the situation and has promised to work on the issue, but a Morgan spokesman plays down the idea anyone is set to walk.

    Nomura Holdings (NMR +4%) shares are surging today on aWSJ report that it’s planning to cut costs by $1B next fiscal year, in the first indication of how Japan's biggest brokerage is changing course under new management. The cuts come after another $1B in cost reductions in its wholesale business implemented earlier this year.

    Phillips 66 (PSX -2.8%) says its 247K bbl/day Alliance Refinery in Belle Chasse, La., remains shut down and without power following Hurricane Isaac. Floodwater remains in the refinery but is receding and no more than two feet high, debunking rumors it was far deeper. PSX's nearby 239K bbl/day Lake Charles Refinery remains in operation.

    AK Steel (AKS +3.8%) announces price increases for all its flat rolled stainless steel products. Barclays maintains an Overweight rating on the stock which "has become the most disliked company in an already unfavored sector," seeing the AKS story turning from cash burn and liquidity concerns to one of positive earnings in the coming months.

    A performance index tracked by the National Restaurant Association fell to its lowest level in nine months, with a reading of 100.2 for July down 1.1% M/M. Sagging optimism over future business dampened the effect of brisk same-store sales, as only 22% of restaurant operators expect economic conditions to improve in the next six months. The outlook for capital spending in the sector remained relatively stable.

    Lions Gate (LGF +3.4%) runs to the top of the charts for DVD rentals and sales for The Hunger Games. As for video-on-demand sales, the contest isn't even close with The Hunger Gamesearning a whopping $407M in two weeks, tripling up its nearest competitor. Though plenty of residual revenue from the blockbuster movie is factored into LGF's earnings estimates, analysts tip off that it's kicking in even more than forecast.

    Wal-Mart (WMT +0.7%) plans to test iPhone-powered self checkouts at select stores, according to a report aired on CNBC. Besides speeding up lines quite a bit, if the company decides to roll out the option on a national level it could cut its processing costs depending in part on the type of payment vendor it chooses to partner with.

    Pfizer (PFE) says it will give three scientific data presentations at the 2012 European Respiratory Society Congress in Vienna, Austria, starting tomorrow. One of them will be on its Spiriva handiHaler, which is expected to show statistically significant improvement over a placebo in patients with chronic obstructive pulmonary disease. Separately, the company has lost its bid to dismiss Fen-Phen suits claiming the pills caused a fatal disease years after users stopped taking them.

    Intel (INTC +1.7%) bounces in spite of receiving another estimate cut (previous), this time from Argus' Jim Kelleher. Kelleher suspects Intel's Q3 results will come at the low end of its guidance range due not only to weak PC demand, but an unfavorable CPU mix caused by soft ultrabook adoption, particularly in emerging markets. He also predicts enterprise Windows 8 (MSFT) adoption won't start in earnest until 2013 (ed: some are worried it might not happen much at all)

    Glu Mobile (GLUU +4.6%) rallies after launching a newfreemium title for its Blood & Glory mobile game franchise. Glu boastsBlood & Glory: Legend, available on iOS and Android, offers "umatched high-definition visuals." The original Blood & Glory has received over 140K reviews in the App Store, with the average reviewer giving it 5 stars. (PR)

    Rovi (ROVI +3.6%) trades higher after announcing: 1) Taiwan's MediaTek will integrate Rovi's DivX Plus streaming tech into its Blu-ray and HDTV chipsets, are used by many Asian OEMs. 2) Chinese low-end TV maker Hisense will include DivX Plus support  in an upcoming line of "Smart TVs." 3) A new retail solution for converting DVD and Blu-ray video into online copies, via Hollywood'scontroversial UltraViolet platform.

    Facebook (FB -4.9%) continues its strategy of creating a bunch of new ad options and seeing what sticks. The company's latest idea is to allow businesses to target potential customers based on e-mail addresses, phone numbers, and user IDs already in their possession. Millions of businesses have set up Facebook pages to promote themselves, but getting them to buy ads hasn't always been easy. (new ad formats: IIIIIIIV) (price target cuts: III) 

  168. MoMo portfolio:   AMZN…….Sold to open 3 September 7  250 puts for 4.45.  

  169. Basis for trade on AMZN….They will slip, sometime, but probably not next week…..  September 6 event in California and expectation of same should hold it up. 

  170. Phil, September is" buying GOLD" season in Asia.

  171. LNKD – TDA screen tells me LNKD is now 918 P/E. i have to sell a collar.

  172. Kongen
    Never got to the abortion issue with Paul but if Romey is a morman he lies or should find another church before they don't want his money. I remember before, RvW, has little chance of going away it has swayed way off but like everything it will go back. Bottom line is it expands welfare or creates new need, prison with a maturnity ward.

  173. neet/gold – agreed. Big gold buying in India, although people are pretty stretched so I am not sure this time around.

  174. Phil,
    September starts with a double-buy operation on Tuesday

  175. angel
    I think my NTE question should have been to you instead of ZZ. What caused 2003 to the crash?

  176. AMZN/Lflan:  Annoying and unfortunately you are 100% correct. I really don't like that stock.

  177. Well, that was an extremely exciting day.  Glad I wasted that time for a big

  178. angelcur
    FYI. Never got the NTE/ MIL research email. I would love to see it, but certainly don't want to be a pest.

  179. INFI….keeps on giving.  I wish I may… I wish I might… have remained in that stock for longer than a few night(s)….

  180. Wow, gold going nuts, pretty much the second we DD'd.  All I'm looking at is .30 more to roll to the Sept $158s (not yet) and if they can hold $1,700 for 3 weeks – God bless 'em.  

    63M at 3:45 – volume died so not getting a sell-off.  No stick either.  

    Dollar 81.26 – 81.30 tough barrier.   Oil way up at $96.35 and that may be all for oil this year now that summer driving season winds down.  Next week's inventory will be a huge draw but the week after that, all the backed up ships come in and we have a build so good play next week if they test $100.  

    LNKD/Wappler – At least it's physically possible for them to grow with just $522M in sales and $12M in profits.  AMZN already has $50Bn in sales ($631M in profits) so they need to grow 15x to $750Bn in sales and maintain their margins to grow into that value.  WMT "only" has $450Bn in sales so AMZN has to steal 100% of WMT's business AND deliver and warehouse it and then steal the next 10 biggest retailers AND deliver and warehouse that – all within 5 years to justify being valued at $245Bn.  Let's say they magically double their margins while growing that fast – then they only have to do half of that….  I'm not saying LNKD is much better – only that it's POSSIBLE for LNKD to grow into it.  There's just no way AMZN pulls it off.   Of course, I used to say this about CMG from $300 to $440 so I could be wrong on AMZN all the way to $300 before it pulls back to $200!  

    3:45 stick!  

    High noon/ZZ – That's going to get ugly too.  I can't see this all not blowing up by October.  

    Gold/Neet – That held up last Aug but starting Sept 1st gold popped from $1,923 to $1,535 (20%) later in the month.  Same kind of blow-off spike up at the end of last Aug. 

    AAPL back to $666.

  181. …and another killer day for volume. Barely 70 million shares.

  182. sell into close below 81.13

  183. Good weekend all!

  184. I'm very surprised – there was no volume on the last day of the month.  It was 72M at the bell and jumped 25M right after we closed and the futures popped back down but they got the print they wanted and Asia will wake up to the US Bernanke Rally on Monday and then the plan is they rally and Europe sees us and Asia and they go higher and then Europe goes up on ECB favor and the Asia Rally, then Asia rallies again the next day and Europe rallies because they rallied and then, finally, we open and we're way behind them.  That's the plan – we'll see if it works out…

    Have a great weekend. 

    - Phil

  185. Woops, volume now 119M on the Dow, half the day's volume after the bell and it's all been down in the futures, erasing the whole stick.  People buying mutual funds just get hosed like this every day…

  186. All – Have a great Labor Day Weekend.  Today was certainly an education for me.  One to learn from!  Nothing expensive and in reality, I was up a few bucks as X was stopped out early today for a nice gain.  All in all, not a bad day considering a learned a ton.

  187. stjeanluc,

    I spotted a typos in my earlier post, it's the Sep 1475 short calls (instead of 1275!)
    - Sell 5 SPX Sep 1120/1475 short strangle ($0.825 credit for the short put and $0.675 for the short call)

  188. All – A pleasure spending bernanke day with you all. Have a good labor day too.

  189. Thanks for a great week Phil.  I also learned a lot and I want to thank for DMND, which I finally cashed out with almost full gains on the spread.  Have a good holiday weekend.   

  190. Phil,
    I hear what you're saying on LNKD, but which market do they serve?  It's mostly geared towards headhunters and I'm sure that by now all the Korn & Ferry dudes and all the other HR professionals have LNKD premium accounts, so I'm not sure where the growth would come from.  Of course I may be wrong, there's always CHINA!!!  Have a wonderful weekend!

  191. AMZN/ Phil – So, based on this idea…"There's just no way AMZN pulls it off.   Of course, I used to say this about CMG from $300 to $440 so I could be wrong on AMZN all the way to $300 before it pulls back to $200!" 
    Will rolling and chasing this another 20% or so to $300 ever pay off for the 25K account even if/when it pulls back to $200?   I am in a different, longer term short AMZN trade, but I figure you are in for around $8 (BE $222) including all rolls and DDs so far.  Why not wait and look for some/any sign of weakness (Like with the CMG trade – 10% sell off before the big earnings drop).  Obviously their disastrous quarter wasn't…I know that each trade stands on its own, but I think tracking the entirety of a trade thesis is also useful…I get the AMZN numbers problem, just not really the actual "pay the premium" trades
    …trying to get the most out of the "learning portfolio"

  192. Interesting look at the Dow:

  193. Strangle / Peter – I'll post an update to your portfolio this weekend!

  194. They just dropped the dollar to support line on springhill jacks chart that was posted earlier today

  195. You’re welcome Joel.  Congrats on DMND – I forgot that was a Sept spread, seemed really far away at the time.  

    LNKD/Wappler – In no way am I saying LNKD is good or arguing against shorting them.  Just pointing out that sales are small enough and earnings minute enough that they can easily double or triple them, relatively easily compared to a company that's already been working 20 years to be 100 times bigger than they are already.  It's that law of large numbers and AMZN is being priced to take over all of retail in the near future – despite the fact that, after 20 years, they only have 12% of WMT's sales despite running at 1/3 the profit margin.  I, like you, don't THINK LNKD is worth that value but with AMZN I KNOW it's a mathematical impossibility.  

    AMZN/Cdel – We did roll CMG up from about $300 to $440.  Maybe $350.  Anyway, the point is we don't know WHEN AMZN will drop – just that it will.  $8 sounds about right and we did just buy back a short put for a nice profit so maybe less.  I just don't see the price as some random thing that can so easily be $50 higher (p/e 360?) but I am allowing for the possibility.  Just because I have a worst-case scenario doesn't mean I should panic out of a position.  I also have a best-case scenario in which AMZN warns and drops 20% to $200 and we make $25,000 but that doesn't mean I'm going to triple down to make $75,000 because NEITHER are likely.  

    We just try to tread water at the extremes until value is realized and we get a nice payday.  You say we need $222 but that's not true because what we NEED is $8 to get 1/2 out even between now and mid October and the $245 puts are $8.85, even with the low VIX so a $15 drop to $230 is all we need to get back to a very manageable amount that we will be then THRILLED to roll up another $30 and DD again to net in the Jan $280 puts at about $8.  At the moment, AMZN has been up all month without a significant drop.  How often does that happen for two straight months?  Three?  We're only looking for a 6% pullback at the moment.  

  196. Phil, file under learn something new everyday…Lately I have been having a lot of problems with fills at OH. I see people here getting filled but my orders stay open. Followed up on my erroneous stop, the OH guy's answer did not make sense, so I called the Schwab guys and they found it was a routing issue. The trade went through BATS as the only trade of the day, at the lowest price. While we were watching, BATS was quoting a price .50 less than the other exchanges. I did not think was possible but evidently NBBO is not guaranteed….there is a reason for the low trade costs, switching soon.

  197. AMZN/CMG – Ok, well I was not a member for the CMG rolls and DDs, but I was when they had their big earnings miss, and thought most of us played it well.  Personally I went along with the earnings trade due to their guide down/10% pullback/trend break of the previous month, which set up nicely for the run-up then a really big drop on earnings.  I see something similar happening here…eventually…also no idea when, but I will get much more aggressive when I get some type of sell signal.  If we repeat last year's AMZN action, that should be very soon

  198. PS – I do very much like the DD and 1/2 out even strategy for keeping costs manageable.  That is something very valuable I have learned from this chat.  Thanks!

  199. AMZN/AAPL / FLAN – There has to be a pair trade there somewhere: short AMZN, long AAPL.

  200. Bird:  On the long side, maybe Texas Instruments.

  201. Sat at the kitchen table this morning. Saw the five empty chairs around the table. Felt a bit outnumbered, but like Eastwood, threw caution to the wind and debated the whole damn lot.

  202. McDonalds
    I just got back the the US from Nicaragua and went out to run some errands and I couldn't believe how packed MCD was.  The drive through line stretched around the parking lot and this was the case with the 3 of them I passed.  I was really shocked.  I went there last night around 11pm after some drinks, and again there were 20people in there getting late night food.    
    I think I'm going to start selling puts on them as I think they will be around for a long long time and would make a good 20yr hold.  Just my 2c.  

  203. MCD- this is a very , very well run company. I have been doing business with them off and on for years and have said so before- i have been always been impressed with not only the quality of people but their mgmt. systems and training are excellent. That said, I don't find the stock at current levels particularly cheap. In fact, I would put it in the fairly valued category. Personally, I would not be a buyer here primarily because of market conditions which may offer better entries but this one continues to be on my radar on a significant correction. It remains an excellent long term holding.
    Have you considered ARCO? They are the Latin American master franchisor. Certainly riskier but worth a look. Would be interested in your take on McDonalds in your neck of the woods as I believe you are a full tme resident in Central America?

  204. Well, such a week full of drama, anticipation and excitement. No, not the Republican Convention although I am sure you all will agree it was a stunning success. The Dems now will get their dog and pony show on the road and I look forward to the same snarky and breathless punditry herein. Much fun to be had the next few months.
    I have not had time to scour the news as is my want since I have been rather busy building my business. I apologize if that violates the new groupthink as I now know it was not me but after years of  slugging out 80 hour weeks, month after month, old thinking habits are hard to break. I cannot tell you how grateful I am to have been put straight with the "you didn't build that" lecture. Indeed, it opened my eyes wide along with many of my fellow travelers.
    No, the really big shew was Mr. B.  and the congnescenti now seem convinced QE is in the offing but is already fully baked in. It is a long holiday weekend and my plans have been rained out so I am hoping to hear from others on their take of the great QE question and the outlook for next and coming weeks?

  205. pstas/80 hours   Congrats * pat pat pat * on your success! *pat pat pat*……
    Now about this "groupthink"  You think like a "conservative" (not groupthink?) I think more like a "liberal". We don't agree on many things. That does not make….well me, part of a "groupthink"  Again, we just don't agree on MANY things…..
    To me, "groupthink" is when you have to "sign up" with others, to a belief…..
    Have a restful weekend.  :)

  206. Phil / Otherworldly:  Since it's the weekend, I figured we would be back to scouting out alternative places to warehouse billions of Earth's resource-profligate population.  You'll be glad to know that the Chinese has come up with a new candidate — as well they should.  Now if people could only afford the gas to get there:  
    BEIJING — A potentially habitable planet has been discovered orbiting the star Gliese 163, 50 light-years away. The planet is bigger than Earth — roughly seven times as massive — and resides near the inner edge of the star’s habitable zone, Thierry Forveille of France’s Observatoire de Grenoble reported on August 30 at the International Astronomical Union’s general assembly meeting. Depending on its composition and how insulating its atmosphere is, the planet could be capable of supporting life."

  207. "pat, pat, pat* Ah, much better. A little to to the left now……………

  208. pstas – I do live in Nica full time (although I'm back for a few months for business in CA).  We don't have any franchises where I live other than Pali and MaxiPali, both grocery stores and both I hear owned by Costco partially.  Other than TipTop Chicken, which is really awful, street chicken is so much better, I don't have a take.  I hear you about MCD valuation, I'm just going to start selling puts for a small stake, maybe 5% to keep it in front of my face.  Then continue to add on the way down.  

  209. As I find politics the most abhorrent and least interesting form of addiction extant in the deli menu  columns of potential fucked up human choices.. ..I seldom discuss them BUT as I have derived a modest living the last 30 years defining risks ( the rationale is boredom!!) I am gong to make a prediction: Willard Romney in a romp. I can't believe that in my adopted home state CT that the President leads by only 7% points. That Linda MacMahon is leading in the Senate polls. That my friends who were such fervent supporters of the President no longer go to bake sales or town party meetings to get out the vote. I doubt the result will even be close. I watch Axelrod and Plouffe and wonder why they are continuing to direct such a horrid campaign. Unless something changes fast its over. Maybe we need a less polished persona in the white house I am not sure but I do know Mitt didn't hire me when i was looking for a job at BCG in 78 so I clearly question his judgement (lol) people who were transfixed four years ago are leaning apathetic. I told Phil last year I was looking for a reason NOT to vote to re elect. I am begginning to actually have a strong conviction that Romney might be no worse than GWB or BO. My Euro short at 1.46 and China short 24 months ago felt dreadful for a while. I am hoping I am wrong but doubt it. The C team is running the world. SIGH

  210. Angel- while I appreciate your political commentary – since you are experienced at risk mgmt., I am much more interested in your current take on the great QE question how you may see it playing out near term?
    BTW, thanks for the NTE info- watching for a pullback to add and I am still holding MIL- a good story- will add short puts further out as appropriate (now short 13-Jan 7.5's).

  211. QE sounds like soooooieeee to me. It has had none of the desired effects and done nothing to broadly resolve the credit needs of small business borrowers; it has a direct correlation to inflated gas and commodity pricing (FOOD) and has been used almost exclusively to the benefit of providing more liquidity to hidious risk on bets by the i banks…last year when Board Royalty and others were certain that QE was directly around the corner I was attempting to chasten that view with the thought that bernanke would never launch qe from such lofty ES i believe Romney wins easily Bernanke may be less interested in attempting to assuage Axelrod's impression management techniques by continuing to spray the economy with a fire cannon of liquidity..i think the chances are 30%..its going to seem pretty tendentious if it happens…what a wasted four years..both parties should be scourged..where are the Borgias when you need em!

  212. Here we go!

    The French government has been forced to rescue a distressed domestic mortgage lender, the latest example of a European state stepping in to prop up a bank brought to its knees by the financial crisis.

    It said it would seek approval from the European Commission for its bailout of Crédit Immobilier de France, which follows the €90bn joint rescue with the Belgian and Luxembourg governments of the collapsed lender Dexia, which is still under negotiation with Brussels.

    More here.

  213. FRENCH "BAILOUT"  Nut watch for Hollande is on…Already nuts: DSK is chasing his Japanese chin around with a tin of le lube in his hairy mitts and: Ready nuts: Sarkozy is trying to fait d'amour avec his brother's girlfriend MK Olsen while Well waffled nut: Carla B is trying to get back to Mick J..'you can't always get what you want…"..meanwhile Les Invalides looks like Jim Morrison is buried there rather than France's greatest hero.
    Time to get back to West Peru Maine…AYUH!

  214. Option House/Rpme – I do not like the discount brokers.   To me, poor execution ruins any possible discounts you can get very quickly.  I went from MS to MER to Options Express to TOS and TOS has been head and shoulders above the rest for exectution.  This stuff doesn't matter as much for stock trading but, for options it's life and death. 

    LOL Rev.  Gotta watch out for those recliners, they can get a little testy when cornered.  

    MCD/Burr – Great company and economic conditions are perfect for them.  The only problem is, if the economy improves, their comps will be tough.  Also, cost of food issue hit their margins.  That certainly doesn't mean they're not worth owning long, long term but it's not impossible you'll get a chance to DD at $60 one day so I wouldn't over-commit.  You can sell 2014 $77.50 puts for $4.70 and buy the $70/87.50 for $12.70 for net $8 on the $17.50 spread and, of you have margin, you can sell 1/2 the Oct $90s for $1.65 so you make a nice income while you wait. 

    Big Chart – Interesting how same exact action as last Friday on Dow and S&P with all day rally to get back to Thursday's high.  

    Convention/Pstas – Best summary I read was "Cruel Conservatives Throw a Masquerade Ball":


    Republicans care deeply. They really do. They care deeply about making us think that they care deeply. That’s why they knocked themselves out producing a convention that was a colossal hoax…
    Koch leads the Orwellian movement of oil billionaires playing grass-roots activists. The industrialist ideologue wants to use his money to shrink government the way those vacuum sealers on infomercials suck the air out of plastic bags stuffed with clothes until they’re a mere sliver — shriveling all the social services, environmental regulations and taxes on the wealthy.
    Koch, who infuses gazillions to build up the Tea Party and tear down the president, was a member of the New York delegation. On Tuesday, he was in the hall, sitting in what had to be one of the most expensive single seats that anyone ever bought.

    Mauldin great as always.  
    Groupthink/1020 – That's the Conservative shtick, if you don't think like they do then you are just part of a brainwashed group.  It also happens to be the fascism shtick…  Of course, this is kind of the problem with liberals as, by nature, we feel other people's opinions have validity, therefore we have problems uniting against common enemies because we don't always agree on who the common enemy may be.  It would be nice and easy to just go Republican and get a list of who to hate.  All this thinking can be so tedious…
    Why Aren’t Conservatives Funny? (Washington Monthly)
    The Romney campaign says stimulus doesn’t work. Here are the studies they left out. (Washington Post)
    Gliese/ZZ – Doesn't 7x as massive mean we'll weigh over 1,000 pounds?  I'm not sure if that qualifies as habitable.  
    Touch/Burr – Very cool. 


    Romnwy/Angel – No worse then GWB?  I don't see how you can put him and Obama in the same league.  I will be truly saddened if Mitt wins, this county can't spend 4 more years going down that path.  It took Roosevelt a lot longer than 4 years to get this country back on track and, despite all the pretense, we're still in very bad shape.  In fact, that's what the Reps are running on, the country is still in terrible shape but blaming Obama for that is like blaming the first firefighers on the scene for not putting out an inferno right away.  They said they would put the fire out, they promised to save the building – let's get rid of them because it's still burning and give the job back to the kids with the gasoline and matches…

    Immobilier/Pharm – See, how good can things be if this kind of stuff is still happening?

    WSJ asks: Are Entitlements Corrupting Us?

    …..-Yes, American Character Is at Stake

    …..-No, They’re Part of the Civic Compact

    The Fed will likely kick off its next round of monetary stimulusin a couple weeks, says Pimco's Bill Gross, but it won’t do much to improve the country’s job market. The Fed is looking for improvement in "sustained" employment, so until we see a few consistent quarters of around 7% unemployment, look for QE. Regardless, Gross feels it's becoming increasingly impotent anyway. It's "reached a dead end," he says. “Once you get down to zero percent on interest rates, there’s not much left to stimulate.”

    Count Doug Kass among the doubters who think the Fed isheading down a dangerous path by continually trying to prop up the economy: "We don’t need any more bond buying or QE, which is no longer positively impacting the real economy; we need pro-growth fiscal policy that addresses fundamental economic issues that have been several decades in the making." 

    More on ECB bond purchases: The complexity of the issue and time constraints make it unlikely Draghi will unveil any detailed plans next week, say bank-watchers at Commerzbank and JPMorgan. Toss in the Sept. 12 German Constitutional Court ruling on the legality of the ESM, and it makes even more sense for the ECB to be short on details. 

    The Dow Jones Economic Sentiment Indicator – measuring the tenor of newspaper coverage of the economy - rose in August to 45.8 from 42.8 previously. It's the indicator's first rise since March, and the ESI's creators claim such a move – especially if sustained – tends to be a leading indicator of economic activity. 

    With trading volumes at five-year lows, do you think thismarket lacks conviction? It doesn't mean you shouldn't be preparing for either scenario, Ben Levisohn suggests; the calm's unlikely to last, which makes options a good tool for hedging.

    The days of economic prosperity may well be behind us, warns Northwestern University's Robert Gordon. The robust economic growth over the past 250 years may be a unique success tale for the history books, but it's not sustainable for the future. Productivity and innovation, Gordon says will eventually succumb to the headwinds of declining demographic trends, gaps in the education system, rising income inequality, globalization, declining energy/environment resources, and of course, debt.

    China's official PMI 49.2 in August vs. 50.1 in July and consensus of 50. It's the first time since November that the gauge has fallen below 50 and indicated contraction. "It shows the economy is moving downward," says the China Federation of Logistics & Purchasing, which produces the figures, "but is bottoming out considering changes in the major subindexes."

    Another sign of the crunch in China: It's tougher to get paid. Machinery makers report accounts receivable up 17.3% Y/Y (double the rate of sales growth). Coal miners up 48.7%. The steel industry up 20%. No need to worry though as Beijing is on the case. A full 7 state agencies have been asked by an 8th to research the problem and draft appropriate responses (see Beijing's mandarins).

    It's always stuck as curious the way capitalists (at least nominally so) put their faith in a group of Beijing Mandarins to guide the Chinese economy into just the right spot. Goldman's Paul O'Neill describes the government's muted response to the severe growth slowdown as maybe a clever way of achieving the vaunted rebalancing of the economy. (latest PMI data) 

    Gulf Coast energy producers are expected to bring significant production back online by the end of the long weekend. BP, still the Gulf's top producer, says it is redeploying staff to offshore facilities and will start producing in the coming days. Among others restaffing: RDS.ACVXAPC. As of midday, 83% of platforms werestill empty; 95% of oil production and 68% of gas were shut in.

    The sweet spot for retail is on the low-end with companies selling merchandise that doesn't compare directly to products on Amazon or other online sellers, according to Citi's Deborah Weinswig. The analyst cites breaking data that shows more back-to-school shopping is being done online by scrappy consumers willing to switch their shopping habits for discounts as low 2.5%. Wal-Mart (WMT) is on an island by itself with its pricing advantage and popular compare-the-receipt advertising campaign – but other back-to-school top retail picks include TJXROST, and JWN.

    Those rumors about a bigger Kindle Fire are off, says CNET: a source claims Amazon (AMZN) will introduce two 7" Fires on Sep. 6 – a brand-new tablet and a revamped version of the existing Fire – but nothing larger. If CNET is right, it could be a sign Amazon is worried a bigger/costlier Fire won't dent the regular iPad's high-end dominance, and the company is better off fighting it out with the iPad Mini and Nexus 7 on the low-end. Or it could just be Amazon thinks 7" tablets are better for reading (and thus selling e-books). (e-ink Kindle)

    More on Amazon's (AMZNKindle Fire plans: the WSJ is now reporting one of Amazon's upcoming Kindle Fires will be an ad-supported model sold at a discount. An ad would be shown to users whenever the devices is activated from sleep mode. Amazon's ad-supported e-ink Kindles have seen modest success, with the majority of buyers opting for slightly costlier ad-free models. The company has already begun selling ads for the current Fire.

    Google (GOOG) roundup: 1) Samsung has added supportfor Google Chrome, YouTube, and Google Play to its Smart TV lineup. It's not quite the same as a fully-fledged Google TV implementation, but right now, Google will take what it can get. 2) The 4G phone Motorola and Verizon are announcing on Sep. 5 will reportedly feature an edge-to-edge display. 3) Google Fiber has only reached its sign-up goals in 50% of covered neighborhoods, something that has led Google to lower its targets.

    Apple (AAPL) has added 4 more Samsung (SSNLF.PK) products, including the hit Galaxy S III and the Note 10.1 tablet, to a U.S. patent suit that's separate from the one that delivered a favorable jury verdict last week. The suit, which is related to 4 software patents and now involves 21 devices, is also being filed on Apple's home turf, via the U.S. District Court of Northern California. The S III and Note 10.1 arrived too late to be among the devices Apple could request bans for in response to its jury win.

    KGI Securities' Ming-Chi Kuo, who yesterday reported the next-gen iPhone and iPad Mini are dealing with component yield issues, today writes the Mini's issues are due to Apple's (AAPL) use of a new touchscreen technology called GF2, which will allow the Mini to be thinner than the regular iPad (at least until the latter gets a refresh), and lighter than rival tablets. Kuo believes Mini shipments will begin in 1H October, and that the device will go on sale in late October. (earlier) (AllThingsD report)

    Apple (AAPL) roundup: 1) A French blog delivers pictures of an assembled next-gen iPhone. 2) Apple and publishers Simon & Schuster (CBS), HarperCollins (NWS), and Macmillan have reportedly offered to allow Amazon (AMZN) and others to set their own e-book prices for two years, in an attempt to end an EU investigation. 3) iOS 6's App Store provides an improved search algorithm and a new interface meant to show more info. It's the product of Apple's purchase of app discovery service Chomp. 

  215. QE3 Pastas
    It will not happen before the election. That is short term and I have issues with anything happening in January when operation twist ends.
    Even after twist ends prudence is waiting for effects to set in.
    QE is proving to be worse than all extend and pretend by increasing the BET with a bad hand.
    The solution as it was before is equality. Banks must start making money by charging interest that makes a profit on all customers and the most on the biggest customer borrowing the most money. The money being attracted by offering an attractive return to savers as well as investors
    Presently banks are a function of a disfunctional goverment. The Fed is not blind or unable to do math. This is not compicated, banks are no longer a business based on profits. Bonuses are based on accuring funds from the goverment and its financial entities includiing the Fed and treasury. Money must come by profitable ppractices.
    Those who preach set the markets free must start with the megabanks. Some have to fail and it will not end mankind.
    Those wanting to be unregulated have to get off the welfare rolls, Banks and Corporations first.
    I believe more QE is unlikely but by neccessity can''t be. Bernanke has been saying for over a year the government must start doing their part. Balance requires priming the pump and collecting more of the flow. If most flow is at the top that is where it must be collected. The Fed knows but has no power to do the obvious. That is raise the burden on those that can best bear it and stop cutting the pump priming. Raise taxwes and cut waste, the biggest waste is all wars foreign and domestic.

  216. Tons of data next week:

    PMI from around the word – China, Euro-Zone, Great Britain, Canada and the US. All showing contraction except for the US. We will also get GDP indication from Europe and Great Britain. And on Friday, the job numbers. Could be an interesting week!

  217. Romney / Angel – Just like Phil, I can't believe that you could put Obama in the same league as Bush. I understand the disappointment from many (I am as well), but when you look at the overall situation, who has done better with the hand they were dealt? Private employment is actually up under Obama and it was down under Bush. What saved Bush and is killing Obama is the public sector. Bush inherited a much sounder fiscal situation and made it much worse. Yes, the deficit is up but what is the overwhelming factor – tax cuts and wars (as well as the crisis)! Whose fault is that? And how many countries did Obama invade needlessly? How many catastrophic terrorist attacks have we suffered – Al Qaida is arguably much weaker now than 4 years ago. Companies are sitting on tons of cash and the market is up (a lot). Overall unemployment is still bad, but look around the world – it's a disaster everywhere and as Phil pointed out it will take some time to get resolved. We gave Bush 8 years to mess it up, would it make sense to give Obama 8 years as well? Read the Paul Ryan plan (I have) and tell me how it can make this country better – it's great for the top 1% but a disaster for the middle class and I can't see how you can have a strong country without a strong middle class which is why we are in the bind we are now.

    Here is PM Carpenter on the Roosevelt/Romney comparison made by Douhat:


    That has to be the most inept, inapt comparison it has ever been my horror to read. No two politicos could ever have been more philosophically divergent. While Roosevelt was a profoundly non-ideological pragmatist on behalf of the greatest good--a personable pragmatist who abhorred his own party's extremists from an elegant distance--Romney is an utterly charmless opportunist from the economic-royalty class who is willing to sleep with the devil and lie with the rankest of self-serving ideologues.

    Romney is being vague because he knows precisely what he wants do as president--which is whatever the far right wants him to do--and he knows "that something" is scarcely anything most voters would want. Roosevelt was vague when running in '32 precisely because by "bold, persistent experimentation," he meant it. Roosevelt stood on two powerful legs of principled leadership and genuine concern for the strong  middle class he was about to build; Romney is a crippled kowtower to whoever might do him some good.     

    Next time, Mr. Douthat, you'll find more suitable Romneyesque examples in the presidencies of, say, James Buchanan or Franklin Pierce.

  218. Angel:  Well, I'm a betting man.  Romney ain't gonna win, so we're on for a bottle of wine or champagne.  This has nothing to do with political sympathies; my guess [which is was it is] is based on:1/ incumbents are always hard to beat, 2/ Romney is stiff, from a "likeability" standpoint, and not half the speaker Obama is [strange he doesn't do more of it], and:
    3/ — now this is not even a stretch — 99% of the people, more or less, would not benefit from Romney's election, and it strains even my active imagination to believe that all the less well off, or young, or unemployed, or poor, or Black, or "Hispanic/ Latino" [read: brown; nothing to do with speaking a Latin-based language, since Spaniards and Italians don't call themselves "Latinos"] are going to vote for a White Upper Class Venture Capitalist.
    For me, the surprising Fox Critique of the Ryan speech was the clincher.  If even Fox's gorge is starting to rise at the thought of their great majority of their viewers getting shafted by cuts in social programs and even lower taxes for the very few [trust me, very few of the 1% tear themselves away from the WSJ, FT or Forbes to spend much time watching Fox], my bet is that  that at least 51.5% of the 99% go for Obama.  This bet, Angel,  will like taking a bottle from a baby, [albeit one filled with an excellent European or California  vintage, none of that Oriental Nam Tai rotgut].  Are we on?

  219. Phil /habitable:  As more and more Americans approach 1,000 pounds, having more room to spread out on Gliese will look better and better.

  220. Politics QE3
    It is too bad all the money that will be spent on a non-race. I agree with zero' on the outcome simply because  Romney Ryan is so bad for so many.
    I came back hoping to read about other QE views and not even Pastas has logged a word.

  221. Shadow:  My QE view is this:  the last thing people tend to lose is hope.  The prospect of QE gives it to them.  Actual QE will likely dash that hope, given that banks will not lend to the people who need it most at any rate of interest right now.  They've got their bailout, dammit, they intend to keep it, and their jobs along with it.  So Bernanke's going to run that mechanical rabbit in front of the hounds for as long as he can get away with it,  perhaps only when he's fired and someone else put in to take the inevitable fall.

  222. Incumbent / Zero – I think that there is something to that. When undecided voters get into the booth they are more likely to pull for the incumbent than the challenger because "the devil you know…". It happened in the last elections in France where Sarkozy was down 6 points in the last polls and lost by about 3 points! And he was not well liked!

  223. QE3 – I find the answer to question 12 from House Rep Issa to Bernanke telling, specifically:
    Maintaining credibility and confidence is critically important to the maintenance of the Federal Reserve's effectiveness.  To that end, the Federal Reserve acts in ways that are transparent, predictable, and readily understandable in light of the duel mandate given by the Congress--to promote price stability and maximum sustainable employment.
    If "The Bernank" wants to be predictable…he will QE3 sooner than later.  Not only is it the only thing he knows…it is the only thing left to give us "hope" by giving the top 10% a 5% stock boost.  If he doesn't, the market goes down barring any open ended Euro Bond surprises.  His window is closing fast, and "maximum employment" is the ultimate excuse to keep both his job (by ensuring an Obama win via a temporary strong stock market and economy boost ) and his self absorbed legacy/ego (QE God who saved the planet…..temporarily…)  What is exciting for me is we will finally know if Obama is in bed with the Bernank…as Obama will need to talk the oil markets down with oil reserve release chatter (due to Iran sanctions, honest!).
    Should he…or course not, and he even knows that.  But desperate times call for desperate measures…and the most powerful man in the world is going to play God with our global economy a little longer.  Unfortunately that leaves no bazooka for a black swan event, like Iran getting bombed after Obama wins the election (or perhaps right before the election as Israel would rather have Mitt in office).
    Exciting times indeed! 
    P.S.  Is JR still providing his levels and pivots?  His last "yellow post" seemed to end in mid April…
    P.S.S.  Where is the Mad Matt-er..the "red post" guy?  =)

  224. Zeroxzero
    I am going to town and will return tomorrow as I plan on drinking whatever but not koolaid. I will be back tomorrow to check in. What do you think about getting QE, if you checked my post I give it slim chances until 2013. Anyone else? Nothing bad about being wrong not placing an opinion is simple chicken and it doesn't make you right. A big consensious may be perfect and will effect your investments.

  225. QE- from a trading perspective I don't care if it comes or not- only interested in likely market impact and how to play it.
    From a policy/political perspective I vote no as it is more market meddling which is having and will have many unintended negative consequences. Left alone, markets tend toward supply / demand equilibrium. For too long, we have had marketplace tinkering and manipulation across the board with predictable results  Imbalances and inequities exist everywhere- stocks; bonds; commodities; housing; health care; autos; banking and on and on. The central planners and Lords on High have forever thought their wisdom superior to billions of daily individual decisions and it always ends in weeping and gnashing of teeth.

  226. Greed and Debt: The True Story of Mitt Romney and Bain Capital

    Read more:
    Take a typical Bain transaction involving an Indiana-based company called American Pad and Paper. Bain bought Ampad in 1992 for just $5 million, financing the rest of the deal with borrowed cash. Within three years, Ampad was paying $60 million in annual debt payments, plus an additional $7 million in management fees. A year later, Bain led Ampad to go public, cashed out about $50 million in stock for itself and its investors, charged the firm $2 million for arranging the IPO and pocketed another $5 million in "management" fees. Ampad wound up going bankrupt, and hundreds of workers lost their jobs, but Bain and Romney weren't crying: They'd made more than $100 million on a $5 million investment.
    To recap: Romney, who has compared the devilish federal debt to a "nightmare" home mortgage that is "adjustable, no-money down and assigned to our children," took over Ampad with essentially no money down, saddled the firm with a nightmare debt and assigned the crushing interest payments not to Bain but to the children of Ampad's workers, who would be left holding the note long after Romney fled the scene. The mortgage analogy is so obvious, in fact, that even Romney himself has made it. He once described Bain's debt-fueled strategy as "using the equivalent of a mortgage to leverage up our investment."
    Romney has always kept his distance from the real-life consequences of his profiteering. At one point during Bain's looting of Ampad, a worker named Randy Johnson sent a handwritten letter to Romney, asking him to intervene to save an Ampad factory in Marion, Indiana. In a sterling demonstration of manliness and willingness to face a difficult conversation, Romney, who had just lost his race for the Senate in Massachusetts, wrote Johnson that he was "sorry," but his lawyers had advised him not to get involved. (So much for the candidate who insists that his way is always to "fight to save every job.")

    Read more:

  227. pstas: The impact of QE or no-QE at any given point in time will largely be a function of what the Germans and the ECB do, and when they do it, because if there is a European slip-and-fall on the Spanish [or other] bailout — and the head of Bundesbank is already threatening to resign over "foreign" bond purchases — the Dollar will soar [Yuan, anyone?] and it's anybody's guess what happens next.  
    A massive flight to the dollar could boost, or trash, equities, since most of the money will be directed at the U.S. long bond.  Phil's general approach — "don't bet on the event, wait for it, then bet" is the only sane approach, given the potential magnitude of the moves.  Only my two cents, obviously.

  228. Lightweights ALL..maybe i should have said that..i don't want to get into a harangue about whether bush was worse than the president..i am a professional view is the president is woefully inadequate as a manager..of both perception and the operation of the government..i  certainly appreciate people's views and more importantly i respect them..i will take your bet zero or 100 dollars the wine or champagne of my choosing will exceed that number so i am going easy on you..i may take up to 50 bets of 100 dollars that romney wins..its sad but i believe the president is going to lose..PHILon second thought i agree bush was worse..but seriously when you describe mediocrity who cares what the shading is..not quite ready to put the president up there with FDR..but of course he won the NOBLE PRIZE and FDR didn't cousin teddy did completely strange our world has become..i am not sure who is going to win i am quite certain the american people will get screwed whoever it is

  229. Phil or Savi – I can't attend the PSW conference for the allotted time, but I will be in Phoenix for some work related things the week prior and would like to do dinner and cards or at least cards if you guys don't mind.  I would have to fly out of vegas on sunday depending on what flights are going back to hawaii that day but would be willing to chip in some cash if I can make a little of the sunday morning meeting.  If you guys don't mind though at least I would like to play cards.  Let me know so I can change my departing flight plan if it's ok.  I

  230. Angel:   Dead right, Obama is a woeful manager, and it's quite possible that Romney is better at it.  But how many voters can assess that aspect of a candidate?  It's all about symbolism and icons, and Romney is a wealth icon, which won't play to a larger percentage of the votes.

  231. Good morning!  

    Another round of terrible PMI data gives people QE Fever – again.   Also the supposed ECB bond program is a big theoretical hit and the less details the better because, like Superman, it can do anything:

    2:13 AM Asian shares are mostly higher following the fairly poor PMI data out of China (III) as markets start to salivate with intensified hope for more government stimulus. Sentiment is also apparently being boosted by Ben Bernanke repeating what he's repeated before about providing "additional policy accommodation as needed." Japan+0.1%, Hong Kong +0.5%, China +0.6%, India -0.1%

    3:52 AM It's a sea of a green in Europe as markets begin to get excited about a possible ECB bond-buying announcement on Thursday and stimulus from China after poor PMI data (III). Of the ECB, "I rather fear that we're not going to get clarity," says ETX's Joe Rundle. He must be a veteran. EU Stoxx 50 +0.5%, London +0.4%, Paris +0.8%, Frankfurt +0.2%, Milan +0.6%, Madrid +0.1%. Japan reverses earlier gains to close 0.6% lower.

    Eurozone final manufacturing PMI 45.1 in August vs. flash estimate of 45.3 and 44 in July. Manufacturing contracted in most countries, although not Ireland, where the pace of expansion fell. The slowing rate of decline provides "some heart that the manufacturing downturn may be easing" says Markit, but the sector is set to "act as a drag" on GDP in Q3. (PR) - Keep in mind Q2 was already negative.  

    German final manufacturing PMI 44.7 in August vs. 43 in July and flash estimate of 45.1. "Output, new orders and employment all drop at slower rates, but the export downturn continues to gather pace," says Markit. (PR)

    U.K. manufacturing PMI rises to 49.5 in August, still in a downturn but a substantial improvement from July's 45.2. The "marrying of a downturn in our largest export market to the onset of softer global economic growth" means the sector's performance is "likely to remain subdued and volatile until underlying structural imbalances are resolved.” (PR .pdf)

    French final manufacturing PMI 46 vs. 43.4 in July and flash estimate of 46.2. "Weak domestic demand (was) primarily responsible for dragging new orders lower. With employment also continuing to decline, there is little to be too positive about in the latest survey," says Markit. (PR)

    Japanese Q2 capital spending +6.6% Y/Y vs. -8.2% in 2011 and consensus of +7.8%, with the latest figures boosted by comparison with the earthquake last year. Company sales -2.5% Q/Q, the first fall in four quarters. Itochu's Yoshimasa Maruyama believes that firms will continue to slow their business spending in the coming months. - So up 6.6% after down 8.2% last year = -1.6% from 2010.

    China's August HSBC PMI declines to 47.6 from 49.3 in July, and from the flash estimate of 47.8. It's the lowest print since the dark days of March 2009. The number falls into the "so bad it's good" category, with Shanghai, Hong Kong, and Sydney all reversing early losses to turn higher as thoughts turn to stimulus out of Beijing. S&P 500 futures, -0.5% earlier, now off 0.2%.

    Australia's August PMI rises 5 points, but remains firmly in contraction territory at 45.3. Separately, retail sales for July fell 0.8% against expectations for a gain of 0.2%. It's the sharpest decline in nearly 2 years. The domestic news combines with weak Chinese data to put pressure on the aussie, -0.6% to $1.0262. Perhaps liking the weaker currency, the ASX 200 +0.3%.

    South Korea's August PMI inches up to 47.5 from 47.2 previously as the country's export industry continues to be hit by the slowdown in China and Europe. In a separate report, the country's inflation rate fell to 1.2% in August, the lowest read in more than 12 years. "We expect the BOK to deliver one more 25 basis point rate cut in September," says HSBC's Ronald Man.

    German Economy Minister Philipp Roesler throws his weight behind the opposition of Bundesbank chief Jens Weidmann to the ECB buying eurozone government bonds, warning that they "drive the danger of inflation." With ECB board member Joerg Asmussen supporting the debt purchases and Angela Merkel tacitly approving them, Germany is experiencing a profound split at the heart of its government.

    Oil and gas producers in the Gulf of Mexico, as well as refineries on the mainland, are ramping up their operations after shutting down because of Hurricane Isaac. Almost 30% of oil production was back on line by the early hours of today, up from 6% on Saturday, and 44% of gas output, up from 35%. As of yesterday, only two refineries remained closed. 

    The United Steelworkers union reached a tentative new three-year labor agreement for 16,000 workers with U.S. Steel (X) late yesterday after the existing contract ran out on Saturday night. The union is also continuing to carry out talks with ArcelorMittal (MT) over a new deal, and while the existing contract has expired as well, employees are continuing to work.

  232. Carpenter/StJ – I love that.  

    Romney/Angel – My only actual fear of Obama losing is based on this voter registration nonsense that's disenfranchising people in key states.  Republicans are actively threatening likely Democratic voters and 30 states now have laws requiring voters to present Government-issued photo ID's to vote, which doesn't sound unreasonable since we don't know people like that but 11% of the population, almost entirely poor people with no cars – don't have one.  We already know how hard it is just to get these people to the polls on election day – now there's first a hurdle of getting them IDs, which is a very sneaky way of rolling a massive campaign expense onto the Dems, since I very much doubt the GOP will be sending people door to door trying to get their voters to get Government photo IDs (and what are those anyway if not a license – where do you get one, is there a fee?).  

    Numbers Overview:  


    • At least 180 restrictive bills introduced since the beginning of 2011 in 41 states.
    • 27 restrictive bills currently pending in 6 states.
    • 25 laws and 2 executive actions passed since the beginning of 2011 in 19 states (Alabama, Florida, Georgia, Illinois, Iowa, Kansas, Maine, Mississippi, New Hampshire, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, Wisconsin).
    • 16 states have passed restrictive voting laws that have the potential to impact the 2012 election (Florida, Georgia, Illinois, Iowa, Kansas, Mississippi, New Hampshire, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin, and West Virginia). These states account for 214 electoral votes, or nearly 79 percent of the total needed to win the presidency.
    • Of these, 15 laws and executive actions are currently in effect in 11 states (Florida, Georgia, Iowa, Illinois, Kansas, Ohio, Pennsylvania, South Dakota, Tennessee, Virginia, West Virginia).

    Elections are won by a couple of million popular votes and, in some of the key states, it's less than 100,000 between the candidates so in Florida, for example, with 20M people, just knocking 200,000 (1%) off the voting rolls can easily swing the election to Romney.  So Angel has you at a disadvantage on your bet – be careful! 

    Room to spread/ZZ – Literally as they'd weigh 7,000 pounds there and would likely mush to the floor with their bones all crushed to dust so they'd just have to ooze around but, as you say, at least there is more room to roll…

    QE/Rogue – If you want to assume the Fed is political, it would be terrible for Obama to do QE now because, even if he wins the election, he's set up for a massive market collapse as the Fed blows a clearly unsustainable bubble at S&P 1,500.  So, if the Fed's goal is to screw Romney, they wait until Obama is defeated and then, while he is still President, goose the markets so Romney inherits an impossible market to maintain with massive run-away inflation that will all be blamed on the "market enthusiasm" leading up to his Presidency, which would then become a total failure with one of the worst crashes in history and maybe, just maybe, if it happens two times in a row under a Republican President, that voters FINALLY get the message that Republicans are TERRIBLE for the markets.  


    Weeping and gnashing/Pstas – I agree.  Complete waste of money.  We need jobs – that's not the kind of stimulus QE provides.  

    Bain/Rogue – That's in Romney's future.  You don't destroy thousands of people's lives without providing some fantastic commercial material for your competitors.  Check out "When Mitt Romney Came to Town." 

    Screwed/Angel – Well that ship has already sailed and is coming around for another pass.  

    Dinner/Joel – I don't mind but you have to check with Savi, who's organizing. 

  233. IRA strategies- I seem to recall some write ups on covered calls, etc. in IRA's but no luck finding them. Anyone have links?