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Which Way Wednesday?


What a day yesterday.  The Dow dropped over 100 points from the open but then, at 2 pm, a miracle occurred and we recovered almost all of our losses in just 30 minutes.  We had similar action on the S&P and, as TA guru Dave Fry commented:  

Our crack addicted trading desks believe in the Bernanke Put and the global central bank put. It’s quite apparent reading the news from China this morning as pundits were universally calling for more PBOC stimulus—it’s QE contagion. Moody’s cut their European outlook to negative which must be viewed two ways: Moody’s gets no respect and it means more QE.

Speaking of which the ECB is rumored to be launching “unlimited” bond buying (QE) with “conditions” (whatever those might be). The bond buying is said to be 0-3 year maturities with the implication being the problems of austerity and debt would beClouseau-like “sol-ved” during that period. Given that sort of optimism you’d not be incorrect in assuming the ECB will need a bailout itself down the road.

As you can see from Dave's SPY chart, the real volume for the day came to the downside while more volume sold off into the close than took us up in the afternoon. 

That's the beauty of the HFT algos – they punch the market up all afternoon and then dump it on the mutual funds that come in after the bell and buy (for you – you retail sucker) at the day's closing prices.  Pump and dump – that's the game the big boys get to play every day and it's clear as a bell that yesterday was dump, pump and dump with 2-3 times more volume selling that buying

That's why this chart of On Balance Volume has such a massive divergence, again, much like the one that led to a 20% drop in the market last year that "no one saw coming."  OBV measures buying and selling pressure as a cumulative indicator that adds volume on up days and subtracts volume on down days – clearly SOMEONE is fleeing this market and has been since late July.  Keep in mind it was Operation Twist that "saved" us last fall and we're up a solid 27% from 1,100 on the S&P but, when we get in on ridiculous moves like we had yesterday – how can we trust that top line?  

IWM WEEKLYOf course, at PSW, we don't care (from a trading standpoint) IF the game is rigged, as long as we know HOW the game is rigged so we can play along.  At 11:39, we grabbed the DIA weekly $128 calls for $2.15 in Member Chat for our $25,000 Portfolios and we were done with them at 2:41, nailing the top at $2.75 for a 27% gain in 3 hours and 3 minutes.  We flipped to an aggressive bearish position, grabbing the TZA Sept $15 calls at $1.24 in the same comment.  Why, because the move up was total BS and we knew it.  We kept that one overnight so we'll see how it goes this morning.  

Note how Dave's IWM chart has 82.50 on IWM (about 823 on the RUT) as the top of a long-standing channel so we have a pretty obvious line to stop out at as well as a nice target for profit-taking at 80 – especially with that 12-week moving average poking over that line and providing support.  HOWEVER – those of you paying attention already know that we believe that 81.50 on the Dollar means those lines should be moved up 2.5%, so 82 on IWM is the fail line that the RUT must hold today.  

Germany had a FAILED 10-year note auction this morning, receiving just $4.95Bn worth of bids at a $6.3Bn auction.  This is being spun POSITIVE because – get this – "the lack of demand is a sign of retreat from the "risk-off" trade in Europe."  More realistic is Luca Jellineck of Credit Agricole, who says: “The result of the auction is a reflection of how tough the market is ahead of the big event tomorrow.  We don’t know what the ECB will say and no one wants to build a huge position ahead of that.”   

XLF WEEKLYThe Futures are back to even at 8:10 am because the Dollar has been jammed down .02 in the last 10 minutes and it's down from 81.70 at 4:15 to 81.20 now, which is down 0.6% so it's masking some major market weakness (as usual).  Nonetheless – let's give Draghi the benefit of the doubt and say he comes up with a BRILLIANT plan tomorrow and Bernanke follows up next week with MORE FREE MONEY.  Do you have $1,000 you can risk?  Want to turn it into $6,000?

FAS is a 3x Ultra-ETF that tracks the XLF Financials.   FAS is currently at $97.24 with XLF at $15.16.  Last Fall, XLF was at $11.50 and Operation Twist had them at $14.50 in January, up 26%.  We can play for a 10% move up in XLF, to $16.50, which would translate into a 30% move in FAS, to $126 by picking up the FAS October $108/120 bull call spread for $2.  That spread by itself can make 500% if FAS hits the $120 target by mid-October option expiration day so 5 of those spreads for $1,000 can return up to $6,000 if we get some QE.  

We can make that trade more interesting by selling XLF 2014 $14 puts for $1.55 against the spreads.  That drops the net to .45 with a pay-off still at $12 for a potential 25,667% gain on cash and you risk owning 500 shares of XLF for $14 ($7,000) in 2014 if it's below that strike.  While we are very bearish in our positions, something like this will make a good offset today – just in case.  We can commit just $2,000 of our virtual $25,000 Portfolio to this one and there's a $10,000 upside if we are wrong and the markets rally – that's not a bad consolation prize…

UUP WEEKLYI don't think we're wrong but, as the Boy Scouts say – it's good to be prepared!  

Aside from the fact that the gist of the volume trading is clearly down, which means all moves up in the indexes are nothing more than elegant pump-jobs designed to screw retail bag-holders as the IBanksters dump their positions at the top, we're also deeply concerned that the 6% move up in the market since mid-July is nothing more than a reflection of the 3.6% drop in the Dollar over the same period.  

There's generally a 2:1 relationship between market and Dollar moves over the short run and I asked last week if you would really invest $125,000 of your Dollars to convert to Euros and put it in a safe and call that an investment strategy?  Well, you'd already be up $1,000 this week as the Euro hits $1.26 for the first time since July, when Draghi first promised to fix everything.  Now on the eve of "put up or shut up" – we're back to the extreme.  

Why would massive EU Quantitative Easing make the Dollar weaker?  Well, the bulls' theory is that the Euro is priced for a breakdown and is ready to rocket back to the $1.30s at least once things are "fixed."  That brings us to our last, but certainly not least concern (we'll worry about the Fiscal Cliff in later November), which is THE GLOBAL RECESSION THAT IS BEING IGNORED.  

Fixing the currency, making banks solvent doesn't create jobs – just ask the 26M Americans who are unemployed or under-employed 4 years and $2.5Tn Fed Dollars after the crisis began.  Goldman Sachs shares my concerns and is advising clients to cover their holdings with short-term S&P puts and equity strategists are collectively recommending their investors put just 44% of their assets into equities – the lowest allocation level for stocks since 1985.  "Market judgements that are based more upon belief than fact are subject to change without notice," writes Gen Re (Berkshire subsidiary) CIO John Gilbert,  

The New York Mets won the 1973 World Series with the slogan "You Gotta Believe" so anything CAN happen – what worries me is that so many people seem to have already bet on it….

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  1. Oil Lines

    R3 – 99.23
    R2 – 98.3
    R1 – 96.83
    PP – 95.9
    S1 – 94.43
    S2 – 93.5
    S3 – 92.03

  2. That could be big sales:

    Apple’s iPhone 5 looks set to grab a big chunk of current Android users, according to a survey by More than 20 percent of the respondents who identified themselves as Android users said they plan to dump their current handset for Apple’s next iPhone. That goes along with 38 percent of Blackberry users who said they’d also be making the jump to iOS.

    The survey of more than 1,300 people also found that most smartphone shoppers are looking for a device with longer battery life, a faster processor, and 4G LTE connectivity. A bigger screen and microSD were the fourth and fifth most popular features voters selected.

    And that's before seeing the phone…. Unless it has a bigger screen, I would not switch from my Samsung phone.

  3. Often overlooked situation:


    "The problem there is that assumes even if he wasn't doing health care, the Republicans would have been less obstructive on jobs. I'm afraid that's not the case," said the congressman, when asked if President Obama squandered too much capital on health care reform.

    "Unfortunately, from the very beginning — look, look at the contrast. George Bush came to us on the Democratic side in late '08 and said, we're in a crisis, we need your help — and we gave it to him, very openly, very fully. Then Obama comes in to try to deal with the terrible situation he inherited from bush and the republican media went into full partisan attack. [Senate Republican Leader] Mitch McConnell announcing his number one goal was to defeat the president. I don't think in the end the timing, unfortunately, would have helped a great deal." 

    I recall Hank Paulson begging Pelosi for help on his knees… Of course that bi-partisanship got lost the moment Obama got elected. So maybe passing healthcare was not such as bad idea after all.

  4. I can remember in the 1980's – that's right, nearly 30 years ago – when Time magazine ran stories about how healthcare costs (then about 13% of GDP) were growing at 3x the rate of inflation and were a threat to the middle class and the US economy. At that time, healthcare costs in other OECD nations was 7-8% of GDP. The mantra repeated by the healthcare establishment was that we were getting much better healthcare than other countries. This meme is still in play, but it is really beginning to wear thin, by most measures European nations have better outcomes while spending far less.

    We've watched as the private, for-profit healthcare and health insurance industries have continued to eat away at the middle class. Healthcare spending in the US is now about 17% of GDP – 1 dollar in 6 that Americans spend is for medical care. The rate of growth is still 3x or more the rate of inflation. In the next few years, unless something is done to control healthcare spending growth, it will grow to 1 dollar in 5. Then 1 in 4. At some point, the economy will no longer be able to support this growth rate and the entire system will collapse.

    The healthcare industry in the US quite resembles a cancer slowly consuming a patient.

    In the last 30 years, the Republican party and the conservative right have done nothing about this looming problem facing the US. Rightly, they point at the rate of growth of government debt, but they fail to reach the ultimate conclusion that the real driver of debt is the cost of medical care, and they refuse to do anything about the rising cost per citizen of care. 20 years ago, Bill Clinton (whom I voted for in that election, the first Democrat I ever voted for) tried to do something to reign in healthcare costs before it was too late. The Republican's labeled it "Hilary Care" and managed to squash the debate.

    4 years ago, Barack Obama tried to start the debate again, and we see what it has garnered. But in the last 30 years, all the Republicans have done is push the status quo; a status quo that enriches the 1%'ers who own Big Pharma and Big Medicine, but that impoverishes a nation. The Affordable Care Act is not a great piece of legislation, but it is an attempt at real leadership.

    And for that, Barack Obama will get my vote again in November. Einstein said that stupidity is doing the same thing and expecting different results. Continuing the status quo in our healthcare system, which is Romney's and the TEA Party's stated objective, fits that criterion. There's an old saying, "lead, follow, or get out of the way." Which of these will the Republicans do regarding unsustainable growth in healthcare costs? Lead, as in propose a new, better solution? Follow, as in amend and improve on Obama's gains? Or get out of the way?

    Likely, the fourth option will be observed. Sit squarely in the way of progress, and watch as our middle class is slowly destroyed by rising healthcare costs.

  5. Phil
    What keeps Bernanke from doing things just to keep his job?  Why would he not do everything in his power to support the guy that pu him in office?  Since there are reasonably supportive arguments on each side (QE yes/QE no), won't this come in to play?  He certainly can justify his position as just needing more time to finish what he started and without Obama he's out.

  6. GreenRiver….Healthcare is something I know about, so I'll voice a limited opinion.  There are many problems with our healthcare system.  I'll name one that is not glaringly obvious to most.  That  is that there are way too many bosses and too few workers in the system.  You can walk through my hospital any time of day and see rooms filled with 10 to 15 people who 'work' for the hospital.   None of them have any contact with patients during their 40 hour workweek.  They have meetings, generate 'studies', paperwork, and generally create makework for the real caregivers.  They have found a niche in the healthcare system, have labelling themselves 'managers', and suck up untold billions from the system each year, leaving a trail of paperwork to prove they did something useful, and slowing the delivery of healthcare by those who actually do it.  I could digress on this problem, or write about 100 more, but this isn''t the forum.   And I won't accept any dissenting opinions on this point for discussion, as I'm absolutely sure I'm right.  Not to mention that the markets open in 8 minutes or so and I'd rather discuss option trading than healthcare parasites. 

  7. Well said Green River.  And Obama care is really Romney care, which was Republican care from 2003, no?

  8. GreenRiver Wyoming?
    It might intest some that in my medical  is over 50%.

  9. Health/GreenRiver – well said.

  10. Phil – what's the SQQQ play of the day?

  11. Dollar hit 81.14 before bouncing but back to 81.21.  

    The desired effect was achieved with the Futures back at pre-market highs with 15 mins to the open.  

    I don't think the Euro can hold $1.26 – we'll watch that line and $1.59 on the Pound.  The Euro pump was so sudden and severe this morning (from $1.25) that EUR/CHF shot up to $1.2028 – miles above the usual $1.2009 BUT not as sure a bet today as Swiss GDP went surprisingly negative so the SNB may be repegging to a new, lower (higher EUR/CHF) level for the Franc as they are now as desperate as Japan to get their exports moving again by artificially lowering their currency.  

    That's another crazy thing about the Euro – you have the BOJ, PBOC and SNB all working REALLY HARD to float it and it's still down at $1.26 – it's incredibly artificial.  

    The Dollar is now 81.19 and oil is $95.42, gold back to $1,696 after visiting $1,688 overnight, silver tested $32 and is back to $32.38, copper went from $3.46 to $3.53 in the last hour and I doubt it can hold it but logic is out the window today and tomorrwo so I'd stay away from Futures bets – no matter how obvious they look….  Nat gas tested $2.88 yesterday and is back to $2.818 now while gasoline was $3 yesterday morning and now $2.9589 after holding the $2.95 line all night.  

    EUR/CHF now $1.2032!  

    CNBC saying we should not pay attention to FDX's gloomy outlook because they don't realize how many IPhones they will be shipping.  Yeah, I'm sure FDX doesn't understand their business better than the idiots on CNBC….

    9:01 AM On the hour: S&P -0.04%. 10-yr -0.04%. Euro +0.30% vs. dollar. Crude +0.29% to $95.58. Gold -0.05% to $1692.75.

    At the open: Dow +0.16% to 13057. S&P +0.04% to 1405. Nasdaq -0.07% to 3073.

    Treasurys: 30-year -0.13%. 10-yr -0.01%. 5-yr 0%.

    Commodities: Crude +0.04% to $95.34. Gold 0% to $1693.65.

    Currencies: Euro +0.27% vs. dollar. Yen -0.06%. Pound -0.24%.

    Market Preview: Stock futures are flat-to-lower, with sentiment boosted by better-than-expected productivity data but weakened by a profit warning from bellwether FedEx, which is -3.1%. Rival UPS is -2.2% and the S&P benchmark is -0.2%. Meanwhile, skepticism exists about the ECB's expected "sterilized" bond buying.

    Waiting for a rally in small caps as a sign the broader market is ready to break out to new highs? You've gotten it - the Russell 2000 (IWM) is  up 6.6% since August 1 vs. SPY +2.2%. Small caps are often viewed as needing to outperform during uptrends to confirm investor appetite to take on risk.

    Good report:  Q2 Productivity and Costs: +2.2% vs. +1.9% expected, +1.6% prior. Unit labor costs +1.5% vs. +1.4% expected, +1.7% prior.

    MBA Mortgage Applications: -2.5% vs. -4.3% last week. Thirty-year fixed mortgage rate with conforming loan balances ($417,500 or less) decreased to 3.78% from 3.80% 

    ICSC Retail Store Sales: -0.4% W/W, vs. +0.5% last week.+3.7% Y/Y, vs. +3.4% last week

    Redbook Chain Store Sales: +2.5% Y/Y vs. +1.5% last week. The rise in sales is attributed to labor Day promotions and back-to-school shopping offset by regionally weak sales in the Gulf Coast region hit by Hurricane Isaac.

    Is the ECB bazooka a dud? The bank's bond purchases will be unlimited, but sterilized, with the Orwellian name "Monetary Outright Transactions" given to the program, reports Bloomberg. "Sterilization" suggests any securities purchased are offset with the sale of other securities, meaning no net change in the central bank balance sheet, i.e., no QE.

    Whatever one thinks of the floated ECB bond purchase plan, it has lit a fire under euro/Swiss franc, the cross rocketing 15 pips to CHF 1.2025 (this has more or less flatlined for months at 1.2010, so 15 pips = rocket). This crisis will have truly passed when this pair moves and remains substantially higher. 

    Saying upward pressure has eased on the franc, Swiss economic minister Johann Schneider-Ammann says the odds of emergency measures (capital controls or negative rates) have fallen. All this time we thought the setting of a floor on euro/franc was an emergency measure. Traders will have to await the next SNB report on reserves to find out if pressure on the franc has truly lifted.

    European shares and the euro fire and fall back on the ECB news. The bond purchase program - sterilized intervention in paper of less than 3 years maturity – sounds like a warmed-over version of the SMP and may not have too much of an impact. The Stoxx 50 and the euro are about flat.

    china!!!  Beijing's approval in one day of 25 urban rail transit plan and feasibility studies at first glance appears to show the government's focus on stimulus spending, but the question remains as to how the local governments can get these projects funded. Also, the total investment of all the plans just foots to about ¥600B vs. a ¥46T economy.

    The amount of money that China's Wanda Group hassocked away to put into acquisitions and investments in the entertainment business certainly isn't anything to sneeze at with reports out that the number could run as high as $30B. Wanda's Chairman is currently in L.A. meeting with execs from five major movie companies. The likely suspects: DISCMCSATWXVIABLGF. (Previous: Wanda Group looks for theater chains to buy) - Don't you think people would freak out if China buys DIS?

    The Hang Seng, -1.5%, suffers its worst loss in 6 weeks, led by a 4% decline in China Minsheng Bank after a JPMorgan downgrade. Also hammered are coal producers amidst reports of sky-high inventories and a 10% dive in Shandong coking coal prices last week. Yanzhou Coal (YZCfell 6.2%.

    Capital One (COF) announces the pricing of a secondary offering as ING unloads its 54M share stake in the company. The deal is expected to close on September 10 and Capital One reiterates it is not selling any shares in the offering. Shares -1.2% premarket. (PR) - That's 10% of the company ($3Bn) and they are saying "Don't Panic!"

    MEMC (WFR+3.4% after agreeing to pay Germany's Evonik Industries €70M ($88.2M) to resolve a dispute over the supply of trichlorosilane (TCS) to an Italian MEMC solar wafer plant that has been idled. As part of the agreement, MEMC will acquire an Evonik TCS facility at its Italian plant. The company expects to "recognize a material benefit to operating income" in Q3 from the deal.

  12. Seems to me that the bots etc are trying to shake, rattle and squeeze all shorts out of even their littlest positions…

  13. Excellent posts GreenRiver and Pharm!

  14. Phil/deano—thx for the info on Quebec city--did all that and had a great time
    Pharm—wow thx for MRX—nice gift to get back to
    Joel--dinner and cards should not be a problem in Vegas --let me know

  15. phil/ecb annc time-what time does draghi roll out his " sterilized bond buying"  tomorrow ?

  16. Good post GreenRiver and lflan! 

    Lflan – your post does outline one of the biggest problems – administration costs. Why do we need such high overhead when other countries (or even Medicare for example) do with much less:


    One thing Americans do buy with this extra spending is an administrative overhead load that is huge by international standards. The McKinsey Global Institute estimated that excess spending on “health administration and insurance” accounted for as much as 21 percent of the estimated total excess spending ($477 billion in 2003). Brought forward, that 21 percent of excess spending on administration would amount to about $120 billion in 2006 and about $150 billion in 2008. It would have been more than enough to finance universal health insurance this year.

    The McKinsey team estimated that about 85 percent of this excess administrative overhead can be attributed to the highly complex private health insurance system in the United States. Product design, underwriting and marketing account for about two-thirds of that total. The remaining 15 percent was attributed to public payers that are not saddled with the high cost of product design, medical underwriting and marketing, and that therefore spend a far smaller fraction of their total spending on administration.

    My dentist who is very conservative told me the other day that it didn't make sense that health insurance were not non-profit ventures. Maybe that would help.

  17. Anybody going long into inventories?

  18. Phil:
    Time to roll out PCLN puts?

  19. If I recall correctly, oil inventories are only tomorrow at 11:00 AM this week!

  20. While most bearish ETF's have not done well, EDZ is holding pretty well and moved up nicely in last few days.   Wonder if that's because emerging markets don't get any kind of stimulus and have to deal with commodities going higher.

  21. Good conversation on Health Care but let's save it for after hours, please.  

    Bernanke/DC – That's like saying why doesn't Biden do things to keep his job.  It doesn't matter what Bernanke does, if Romney gets elected (throwing salt over my shoulder to banish the evil thought) he's going to want "his guy" in there.  Obama, and many Dems make the mistake of keeping people just because they do a good job, regardless of party affiliation but not the Republicans – the choose people who follow orders without question – whether they are qualified or not is an afterthought (see Michael "Brownie" Brown, for example, the lawyer who Bush put in charge of FEMA).   

    SQQQ/Jercon – The one we made yesterday (DD Sept $38s at $1.50) is still today's play.  We'll see if we can get a proper sell-off.  Oil already dropping fast despite this complete BS:  

    Skyrocketing domestic consumption – helped along by subsidies masking the true cost – is key to Saudi Arabia maybe becoming a net importer of oil by 2030, far sooner than previously thought. The country already consumes the entirety of its gas production and is likely to imminently need new sources for that. Might this concentrate the Saudi mind on nuclear and solar energy? (previous)

    They export 8Mbd – this article is insulting to our intelligence!  If Saudi Arabia, with 28M people, begins to consume 8MBd, then I'd say the rest of the World would have already ended a decade earlier…

    No changes to Income Portfolio or $25KPs yet but I'll want to clean up a bit later.  

    Glad you had a good time Savi. 

    ECB/Rich – I believe it's 7am our time for the BOE and then 7:45 for the ECB but, if the above news item is true and it's just this "sterilization" BS – then it's already a disappointment and I don't see how we can sustain these levels.  

    Inventories/Jrom – Not until tomorrow (10:30 nat gas, 11 oil) and expectations are so high that more likely they disappoint than raise prices but I wouldn't want to be on either side of that one intra-day.

    PCLN/DC – Sadly, we will have to.  

    $25KPs – 10 FAS Oct $108/120 bull call spreads for $2 ($2,000).  In the $25KPA, also selling 5 GS Oct $97.50 puts for $1.50 ($750) to knock the net down to $1,250.  

  22. FAS Money – Let's buy back the 5 short 2014 $16 calls.  

  23. And tomorrow is heavy with data again:

    Europe GDP
    Germany Factory Orders
    ECB Rate Decision
    BoE Rate Decision
    ADP Job Number
    ISM Non-Manufacturing

    Of course, we'll keep on ignoring the bad news so it will be only good news overall…

  24. Shit, you're right St Jean!!! Forgot about the holiday weekend since we don't celebrate it in Afghanistan! 

  25. Phil / GLD – not much left of those puts, and I personally don't think it's a trade I feel good about extending.  Hold and Hope till Fri, or sell while there's enough left to pay for some Egg McMuffins?

  26. FAS Money/Phil- we have 10 of the short $16 calls. Did you mean buy back all 10, or just 5?

  27. Phil / Would like to hear ur thoughts on EXC. They're trading at 52 week lows w a 5% yield. 

  28. Mark Hulbert:
    Septembers analyzed

    Average Dow gain since 1896 All -1.24%
    When stock market rises in August-1.52%
    When stock market rises from Jul. 1 through Aug. 31-0.48%
    When stock market rises from Jun. 1 through Aug. 31-0.91%
    When stock market rises year to date through Aug. 31-0.15%
    In Presidential election years-0.28%

  29. Nothing we didn't already know, good graphic: Majority of New Jobs Pay Low Wages, Study Finds

  30.  draghi plan is for sterilized… unlimited bond buying…merkel just said no unlimited bond we go again…

  31.  i wonder when the markets realize that everything being discussed as "solutions" by global central banks wont boost economic growth.

  32. Just how they like it:  Investors lack basic financial literacy, study finds

  33. I think the bots in this market are doing some unlimited stock pumping.

  34. RAINER those are are you gaining an edge with those if i might ask?

  35. Pharm – do we need to check the vital signs on PLX? I just added some NOV $5 puts but it doesn't seem to be helping.

  36. I like the way FDX is almost back to where they were before they warned.  Are we now rewarding companies for being honest?

  37. Bounce Zones:  

    We topped out on the 21st (Tues) and the next day was a big, bearish engulfing candle that wiped out Monday and Tuesday's gains and we dropped hard from there.  For the most part, our indexes are back to the bottoms of that Friday, which were Dow 13,030, S&P 1,400, Nas 3,050, NYSE 7,980 and RUT 805 with the RUT pulling off the big beat at 822. 

    For this 10-session drop (through yesterday):

    • Dow fell from 13,320 to 12,980 (340) so weak bounce (20%) is 13,048, strong (40%) is 13,116
    • S&P fell from 1,425 to 1,397 (28) so weak bounce (20%) is 1,402, strong (40%) is 1,407 
    • Nas fell from 3,093 to 3,040 (47) so weak bounce (20%) is 3,049, strong (40%) is 3,058
    • NYSE fell from 8,155 to 7,955 (200) so weak bounce (20%) is 7,995, strong (40%) is 8,035
    • RUT fell from 825 to 805 (20) so weak bounce (20%) is 809, strong (40%) is 813 

    So, using the 3 of 5 rule we should still be a bit bearish but the S&P is about to cross and that means the Dow, at 13,071 is going to be our best upside play to look for some catching up (same as yesterday) and I'm looking at the DIA weekly $130 calls at $1 but the volume is so lame (20M on Dow in first hour) that I want to confirm with the Transports, now 4,990, getting over 5,000 first.  They were 5,020 at the close yesterday so it shouldn't be a problem, FDX is only down 0.6% (because they are wrong about their lowered guidance, of course).  

    FedEx, a barometer for the economy because it delivers goods from mobile phones to pharmaceuticals, slid 1.9 percent after projecting its first decline in quarterly earnings in almost three years.

    The operator of the world’s largest cargo airline said profit for the quarter that ended Aug. 31 will range from $1.37 to $1.43 a share. That was less than its June 19 forecast of $1.45 to $1.60 a share and year-earlier earnings of $1.46. It would mark the first drop in adjusted earnings per share since the quarter that ended November 2009. 

    Here's another upside hedge for the $25KPs:  

    $25KPs – 10 EDC Oct $97 calls for .80 ($800).  Thats a 3x ultra on Emerging Markets and it's down from 200 last summer.  Currently trading at $75, a 5% move up in Emerging Markets will take us to $86 and a 10% move up will go over goal.  We'll likely lose $400 but it's good insurance.  

  38. Is VXX just a broken POS fund or is there something that could make it jump 25-50% like a market correction?
    The VIX has gone from 13 to 17 and VXX is at a year low?

  39. Pharmboy
     Did you roll (or close) your Dec BCS 25 /30 to Mar 13 25/30 BCS   ?

  40. Emerging markets/Rustle – Thanks for reminding me on EDC, I thought of that last night but forgot it.  Don't forget the BRICs, other than China, SELL commodities so their companies get a nice, quick boost from rising prices and THEN the rest suffer along with the consumers but the initial move is up if commodities rally.  

    Keep in mind we are just protecting our bearish positions, which we will be ADDING to as we put money into rolling our Sept shorts to Oct shorts.  That will prevent us from being burned to a crisp if the market rallies tomorrow morning on EU news but I'm expecting/hoping to lose 50% on both of the new upside plays. 

    Gold/Rkyro – Gold is up (from $155 on GLD 2 weeks ago and $160 last Thursday) on expectations of a massive devaluing of currency by the Fed (strike one) and the ECB (tomorrow).  So far, the fact that the Fed hasn't eased and the ECB might has done nothing for the Dollar because people still think the Fed will do something at the next meeting but, without the ECB coming through tomorrow – people may begin to feel a bit silly holding $1,700 gold.  

    FAS Money/Aussie – Damn, sorry, I did mean to buy out all 10 of the short calls!  

  41. jabo / VXX — broken POS.

  42. IWM 82.45 should be the high line today.
    Going back a year this is the strongest confluence line. Over that last sustained over a week, before the chrisis.

  43. CEO of Starlight Capital is on Bloomberg and mimics Phil on politics – he is investing in high end stuff and also the lower end – for the haves and have nots

  44. angel / retro — no edge, just supporting stats for a drop. 

  45. He says they should tax the internet as it is ruining the bricks and morters that pay property tax

  46. thanks rainman…
    I guess my question is will the VXX always be a broken POS or is there a reason the contango problem could change?

  47. EXC/Amalfi – I do like them as a very long-term play.  I also think they can go a bit lower, maybe $34 so not a bad entry at $36 in any event.  You can sell the 2014 $35 puts for $4 for a nice net $31 entry and that's a lot more than 5% over 16 months – especially on margin.  If you want to pay more upside, I'd go for the $30/35 bull call spread at $3.40 and you still have a net .60 credit on the spread with a $4.40 upside (2x the dividend) and your worst case is you own 1x at net $34.60.  Since EXC is a pretty slow mover, you can also sell the Oct $37s for .40 and that's a 66% return on net cash in 6 weeks – also not a bad dividend!  

    Jobs/Rain – Yes, very pathetic.  

    LOL Angel – round and round she goes…  As with 2008, they'll realize it about 6 months after we crash and then use that revelation to keep people out of the market while it's going back up.  

    Investors illiterate/Rain – That's the only thing that explains this market! 

    American investors lack basic financial literacy. For example, studies have found that investors do not understand the most elementary financial concepts, such as compound interest and inflation. Studies have also found that many investors do not understand other key financial concepts, such as diversification or the differences between stocks and bonds, and are not fully aware of investment costs and their impact on investment returns. 

    Thank goodness Cramer is there to "educate" them…  

    POMO/Deano – Holy crap, that's more than I thought.  Last summer it was $15Bn a month and they jammed it up to $45Bn with twist – still a far cry from the $100Bn+ they stuffed in every month in early 2011 to take us up to 1,350 the first time.  The Fed took their foot off the gas in July and the market promptly collapsed.  Then twist began in Oct at $45Bn and that's been put in every month since.  I guess we should keep a sharp eye out for any deviations, one way or the other here.  

    FDX/Rdn – We should reward companies for being honest.  The spin is that FDX doesn't understand the impact IPhones will have on their business next month.  If I were the CEO of FDX, I'd get on TV and say we DO know how to forecast and we HAVE heard of IPhones but let them take it back to $90 and we'll add it to the long put list as investors will be "shocked" when earnings come out and FDX calls it right – for the 20th consecutive time.  

    VXX/Jabob – Like TBT, it takes an event to get it to go VOOOOM!  

    Starlight/Jomp – Damned copy-cats!  8-)  

  48. jabo / POS — Recognition of the global recession might do it (i.e. a market crash) but as I understand it, it'll have to be a down trend for more than a month so rolling the futures makes money instead of losing it (backwardation).

  49. MEANWHILE:  governments in europe and banks are like “a couple of drunks standing on the street corner holding each other up,” according to one observer: “highly regulated, highly taxed, and much more socially unstable,” and it’s going to be “the epicenter of the coming storm…DOH

  50. If we tax the internet.
    Sales tax is the most regressive of all taxes. How many rich people shop on the net. Is not being seen buying at the right places important. Last, all but high end brick and mortor stores are suffering from purchasing power, people like to shop! 
    They can't afford to.

  51. PHIL.
    I have VXX Sept $12 Calls – Cost Basis $0.57  (Now $0.44)
    -- with 16 days left till OpX I'm wonder if I should roll now or wait till after Jackson Hole
    $0.56 to roll to OCT now…

  52. Costa Rica 7.9
    When will someone other than me say we might be getting these big ones in the ocean because of the excess weight of the big ice melt? The earth has a belly fat problem.

  53. Phil / FAS – Trying to get a grip on your FAS moves.  I believe I understand the selling of the short leg of the BCS as an Bullish hedge.  Why not gather in some additional premium by selling $95 or $94 Puts?  Finally, at what point do you reestablish the BCS?  It seems the portfolio is decidedly bullish for the present. Thanks.

  54. Those are big numbers – Boeing estimates that in the next 20 years there is a market for 34,000 airliners. And China will be about 15% of that market with 5260 planes (who came up with that exact number?). That would bode well for the future of BA although Airbus will probably capture a big share as well and China has a manufacturer ready to compete as well. And we can't forget Embraer in Brazil.

  55. Hour #2 volume has dropped in half, 32M coming up on 11:30.  

    Europe closing mixed with FTSE down 0.3%, Spain flat, France up 0.2%, Greece up 0.5%, Italy down 0.6% and Germany up 0.5%

    10:00 AM On the hour: Dow +0.17%. 10-yr +0.04%. Euro +0.38%vs. dollar. Crude -0.69% to $94.64. Gold -0.07% to $1692.35.

    11:00 AM On the hour: Dow +0.11%. 10-yr +0.06%. Euro +0.29%vs. dollar. Crude -0.77% to $94.57. Gold +0.01% to $1693.85.

    11:41 AM Europe closes marginally higher as a leak of ECB bond purchase plans show them at first glance to be something less than a QE-like bazooka. Stoxx 50 +0.1%, Germany +0.5%, France +0.2%, Spain flat, Italy -0.6%. Switzerland (EWL) storms higher by 1.1% onrumors the SNB may try to further weaken the franc. The ECB policy meeting and Draghi press conference is tomorrow

    The Good News and the (Very) Bad News about Bernanke’s Speech (Uneasy Money)

    Kinsley: Don’t blame the deficit (LA Times)

    The euro/Swiss franc cross continues a big move higher, touching CHF 1.2046 as the SNB declines to comment on speculation it is considering raising the CHF 1.20 floor. These occasional rumors are helpful to the SNB, perhaps allowing the bank to unload some of its vast stash of euros at prices higher than it bought them for.

    "The complacency is staggering," says an asset manager of the corporate bond market (specifically Europe). When France is able to sell debt at negative rates, just about any corporate issue with a plus sign in front of the yield is going to look good to fund managers. "We are facing quite binary outcomes; investors should be concerned."

    In euro crisis, U.S. lessons unlearned (Washington Post)

    "(The) ability of government to quickly induce changes in behavior of large intermediaries through financial incentives is quite limited," concludes an academic study of why the full force of the federal government has resulted in only 900K mortgage modifications in 3 years. Is that PhD-speak for "central planning doesn't work?"

    The Bank of Spain brushes aside as insignificant reports it has activated an emergency lending program (ELA) to fund thedeposit-losing banking system. Under an ELA, banks can borrow directly from their national central bank, bypassing the ECB and its (already loose) collateral requirements. Previously, Greece, Ireland, and Portugal have used the ELA. 

    Canada is affirmed a AAA at Fitch. "The 2012 budget bolsters the country's fiscal position as it delivered on previous commitments to rein in expenditure and withdraw the stimuli in a timely manner … fiscal discipline has won a strong mandate from the electorate."

    The FDA's attempts to expedite drug approval may haveundermined safety, an article in the Journal of the American Medical Association says. The authors, Thomas Moore and Curt Furberg, point to problems with Novartis' (NVS) Gilenya drug for multiple sclerosis, AstraZeneca's (AZN) Caprelsa for thyroid cancer and Boehringer Ingelheim's Pradaxa for stroke prevention.

    Cliffs Natural Resources (CLF +1.9%) turns around after opening sharply lower on Credit Suisse's downgrade of the stock and reduction in its target price to $30 from $50. The firm cited CLF's massive exposure to iron ore, which has seen prices fall 35% in the last two months.  - Why should that matter, nothing else does?  

    UBS maintains its Buy rating on FedEx (FDX -1.1%) despite the company lopping off a sizable portion of its estimate for FQ1 profits. Analysts took some consolation that FDX left its forecast for full year EPS alone. With a reduced price target of $110, UBS still sees significant upside potential.

    Office Depot (ODP +14.9%) soars after execs tip off at the Goldman Sachs Global Retailing Conference that they will stick by the company's full-year 2012 outlook. Management also says pensioners are being offered a lump sum buyout so that the firm can simplify its balance sheet. (webcast)

    A quick check on sales numbers on electric vehicles for August seems to lead to more questions than answers. Though GMsold an August record of 2,813 Chevy Volts, a push by dealers to clear vehicles ASAP could be a foreboding sign. Sales of Nissan (NSANY.OB) Leafs moved back higher, up 75% M/M, but are still are a just a shadow of their high-flying days from a year ago. Meanwhile, Toyota (TM) moved a solid 750 plug-in Prius vehicles in August, while Mitsubishi's (MMTOY.PK) EV sales lagged. As for Tesla Motors (TSLA), the focus is still on supply instead of demand. 

    A123 Systems (AONE -7.3%) has plunged to new lows in the absence of major news. Shares have triggered short-sale curbs, but given they now trade at a paltry $0.224, brokers are probably reluctant to lend shares regardless. 19.6% of A123's float was shorted as of Aug. 15. A123 was hurt last week by news GM is temporarilyhalting production of the Chevy Volt.

    Shares of Monster Worldwide (MWW +9.1%) break higher after M&A rumors help spur a bit of a short squeeze. Despite the lack of clarity on the buyout chatter, volume is sky-high on the heavily shorted name.

    Zynga (ZNGA +2.1%) takes another step towards embracing online gambling by partnering with game developer RocketPlay to bring the latter's Sports Casino game to Facebook and For now, Sports Casino merely allows users to place "virtual bets" based on real-life sports odds, but Zynga has made its intentions to support real-money gambling quite clear. (more)

    LinkedIn (LNKD +3.4%) trades higher after Jefferies starts coverage at Buy as part of a broader launch for the Internet sector. The firm sees LinkedIn delivering a "beat and raise" Q3 report thanks to conservative guidance, and touts its ability to keep taking share in all 3 of its business segments (job postings, ad sales, and subscriptions) via differentiated solutions.

    Facebook Falls to Record Low After Morgan Stanley Report (Bloomberg

    Nokia (NOK -8.1%) dives as it unveils the Lumia 920 at an NYC event. As expected, the Windows Phone 8-based 920 has a 4.5" display, supports wireless charging, and (perhaps critically) contains a PureView camera less impressive than the one in the Symbian-based808. Also included is an augmented reality app called City Lens. Will this be enough for Nokia to gain significant ground against the iPhone 5 and Samsung's high-end lineup? (live blog)

    Nokia (NOK -10.3%) continues to bleed as its Lumia 920 unveiling fails to impress; shares are now down 24% from their Aug. 27 highs. In addition to disappointment over the specs for the 920's PureView camera, the Street might not like the fact Nokia is only promising the phone will be available in "select markets" in Q4 (no date is provided). All signs point to the iPhone 5 going on sale on or around Sep. 21. Nokia also declined to make any promises about tablet releases. (live blog)

    iPhone Price Cuts Send Bond Inflation Bets to 11-Year Low (Bloomberg)

     12 Scary Signs That It’s Time to Leave Your Company (Yahoo Finance)

  56. I was being a little facetious about FDX; Yeah, when a Logistics company like FEDx guides down, it's going down.

  57. BP / deep oil — It appears that Isaac did in fact draw attention to BP's bottom-of-the-Gulf-of-Mexico legacy.

  58. Buying BP October puts; oil may decline, news may multiply; the hurricane season ain't over: "BP Plc (BP/) dropped the most in a month after a court filing showed the U.S. Department of Justice will pursue gross negligence charges for the oil producer’s role in the world’s worst accidental spill."

  59. Lagistics rural end of line
    After they pass my house maybe 100 more houses before they return to depo 50 miles away. UPS here by 2 PM, Fed Ex last week 10:30 AM portal to portal 4 hours for him with no Saturday delivery. Last year sometimes 5 PM. FWIW

  60. Here's my view on the market and why I will be more bearish in the upcoming months.
    1 We moved up in anticipation of all this QE and ECB stimulus, none of which has come to fruition yet so it's possible we sell on the news or sell off if nothing happens at all.
    2  If the stimulus is large enough to move the markets, it won't be for long, couple months at most because oil will go past 105 and probably towards 110 a barrel will boost gas which is already at levels not far off when oil was at 105-110 a barrel.  Can you say over $4.50 a gallon on gas.  We know what that does to the whole economy which brings up point….
    3  If gas gets very high or even maintains the price it is, consumer spending will continue to drop in an already fragile economy, more damage will actually be done from stimulus, and as pointed out before, high oil always (100% of the time) led to a market correction or crash.

  61. Drunks/Angel – Good description.  

    Tax/Shadow – It's unfair to retailers that AMZN, etc. pay no taxes.  Perhaps people wouldn't be so poor if millions of local retail jobs didn't disappear because people shop on-line to beat the tax.  It's the same thing as shopping at WMT – sure it's cheaper but all the money just flies out of the community and destroys it so the money saved by consumers is an illusion as it used to circulate back in their community and create jobs and opportunity locally, rather than in Bentonville and Beijing.

    VXX/Itrade – We went to Oct ages ago in the $25KP but, if we don't get a nice drop in the market tomorrow and a pop in the VIX, we'll likely give up on those anyway.  

    Earthquakes/Shadow – And don't forget all those planets lining up!  

    FAS Money/Mjj – If XLF goes down, we are more than happy to DD on the long side and sell twice as many short calls going forward.  Tomorrow is a huge event day that can completely blow out short puts or calls on either side of FAS so why play it?  I'd cash out the whole thing but it's just 10 contracts worth about $3,500 and we're up $3,800 for 60 days so no tragedly if we give a bit back and have the opportunity to roll but, on the other hand, if XLF flies up, we will be hard-pressed to buy more longs so, on the whole, I'm happy with that position at the moment.  

    BA/StJ – I bet in 20 years, China has half the market.  I still like BA for the next 10 though and they are trading cheap to the opportunity but I'd rather catch a nice dip first.  

    FDX/Rdn – Totally ridiculous that their guidance isn't being taken seriously.  

    BP/ZZ – Gross negligence very hard to prove but that's no help in the fear stage.  Hopefully they give us another chance to buy in below $30. 

    Bearish/Rustle – Can't argue with the logic.  Markets can remain irrational… though.

  62. rustle123 / view — I think they just keep kicking the anticipation can down the road and we keep on keepin' on.

  63. PLX/morx – Time.  Sell premium.  Just waiting.

  64. SGEN – holding Sept 20/25s, Dec 25/30 and Mar 30/35 BCS.  Also sold Sept 22.5 and 25P, Dec 25P and waiting for the Mar 25 or 30P.

  65. SGEN – also have the stock.

  66. LNKD -what is so exciting about LNKD today?

  67. Phil / FAS –  Then why maintain the short Calls on FAS?   Since it is roughly even, why not cash out in advance of tomorrows uphevel?  Oh, and thanks for putting up with my Options 101 level questions.  BTW the DD premise on the long calls was a V8 moment for me.  I knew that or should have, I just didn't think of it.  

  68. kickin' can/rainman
    My premise is oil stops the can.  It stops spending.  Now it might take another 3 months and it doesn't mean I won't have bullish positions also, but the party stops quickly and the cops kick everyone out.  No money, no spending, job cuts, bad earnings.  Don't you remember last years when oil was high for 5-6  months how numbers and GDP dropped quickly.  Happens every time.  We've been back at high levels of gas for 2 months again so 3-4 months at these levels or higher at most.

  69. rainman / view – agreed.  Tomorrow it will be the Sept 12th meeting that will "save the world", or the German court ruling on the constitutionality of the ECB bailout…or whatever.  With the MSM paid to paint a rosy picture, and the politicians (effectively) paid to paint a rosy picture…what kind of picture are we starting to see…Obviously the market will go down, it's just the question of WHEN that keeps us moving higher…bots don't contemplate, they just manipulate…and how much risk can there be when their time horizon is mere milliseconds

  70. FAS Money / Phil – Given your comments on short FAS positions in your last post, what is the plan for the 2 short FAS 97 weekly calls in the FAS Money portfolio? Thanks.
    "Tomorrow is a huge event day that can completely blow out short puts or calls on either side of FAS so why play it?"

  71. A telling fact from the Kinsley column:
    "During the Bill Clinton years, temporary agreement between the parties, with help from the economy, actually did wipe out the deficit briefly. Then came George W. Bush and his war in Iraq. Vice President Dick Cheney, concerned that alarm about the return of huge deficits might spoil the fun, declared that "deficits don't matter." Republicans began dismissing concern about the national debt as "Rubinomics," a reference to Clinton's Treasury secretary, Robert Rubin."

  72. EDC/Phil – my first look at EDC…as an upside hedge here, does it usually trade directionally with our market?  I see correlation in their charts (w/SPY) but any idea why down 2% today?  Foreshadowing perhaps

  73. And then, the obvious conclusion:
    "And now, in the latest chapter so far, Republicans have decided that deficits are heinous once again. No doubt they will continue to believe that for as long as there is a Democrat in the White House."……

  74. Phil
    You have me completely wrong. Nobody hates internet shopping more than me. I have bought exactly 2 products on Amazon ever, RAM memory unusable 6 weeks to settle and that book 2 weeks ago that I tried to buy from the author. I believe people need to socialize including shopping. It also lowers fears that build through introversion. 2 days ago I saw a mom and dad waiting for their kids to get off the bus, house about 200 feet away. Keep those fat kids inside and scared to death. I am against sales taxes the lowest form of stealing from the poor.
    I shop in Driggs Idaho, classified a resort community with a resort tax " born by the tourists" 200 motel room maybe 10 eateries. 5,000 residents. The only grocrey store inside the city limits, less than 1 square mile, population about 900. Even changing to a city is a lie! I am so sick of this shit, I had a store in town, no city then 865 people.

  75. Would this be an INSIDER TIP?????
    Office Depot (ODP +14.9%) soars after execs tip off at the Goldman Sachs Global Retailing Conference that they will stick by the company's full-year 2012 outlook

  76. LinkedIn Corporation (NYSE: LNKD) raised to Buy at Jefferies.

  77. Tax/Phil – 'unfair'..hmm.  I'd say goes to show how distorting tax policy is, not to mention disenfranchising, disaffecting, and in general, how despsied. 

  78. Shadow,
    That one large store in Driggs is owned by Mormons and closed on Sundays!  Nice place to visit as it has beautiful views of the Tetons, low cost of living, close to Wyoming and lots of snow in the winter. I have a niece that resides in Driggs.

  79. LNKD/deano – yeah i saw that. can't believe jeffries swings THAT big a bat.

  80. The crush on options premium for Sep and Sep Quarterly finally happened today, 2 days after Jackson Hole!

  81. rustle / cdel / can — Yes, there will be a sell off at some point and perhaps sharp in nature but I think it will be short lived and we'll go right back to playing the game (perhaps with QE).  If you look at chart of the S&P against crude we have:

    1 year:  S&P +20% crude +10%
    2 years:  you have both up about 28%
    3 years: 37% vs 40%,
    4 years: 13 vs 10% (includes the crash)
    5 years you start to see the divergence: 4.5% vs 26% that includes the ghastly run up to $147
    10 years: The s&p only gained 60% while oil gained 228%.  
    15 years: 51 vs 385%
    20 years: 239% vs 334%

    So, the inverse correlation with oil doesn't bear out over the past 4 years or even in the longer time spans. In fact, there seems to be a close correlation in 2 of the past 3 years (no surprise, right? Everything is correlated in this fakery) but to keep that correlation oil would have to rise 10% or the S&P drop 10%.  That might well happen in the blink of an eye with the s&p but I suspect oil would follow and of course open the opportunity anticipate more QE.

  82. What's the deal with the ECB? Are they trying to kill Europe?


    For the loose money crowd, he's offering potentially "unlimited" ECB purchases of peripheral government bonds. But on the other hand, he's promising that these purchases will be "sterilized" (which I don't believe can actually be done in unlimited quantities). He's also saying that the bond purchases will be limited to government bonds, which turns it into a kind of subsidy for peripheral governments rather than a general monetary easing. Last but by no means least, there's no firm target for what the bond purchases are supposed to accomplish and the purchases are stipulated to be "conditional."

    The last point is the most important one. As monetary policy, this doesn't make sense. But as power politics it makes a ton of sense.

    What the ECB is doing, in essence, is setting itself up as the shadow government of Italy, Spain, Portugal, and perhaps Ireland. If the governments of those countries do what Draghi wants, Draghi will provide them with generous subsidy. If the governments of those countries don't do what Draghi wants, he'll use a monetary laser to destroy their budgets. Fear will keep the peripheral states in line.



    The biggest catch of all, though, is that Draghi won’t buy up debt from countries that don’t abide by the euro zone’s new budget rules, which limit deficits to 3 percent of GDP, and “structural” deficits (that is, those not caused by lackluster growth) to 0.5 percent, or 1 percent for countries with a small debt burden. If states don’t meet those standards after he’s bought their debt, he’ll sell it. To be blunt: Spain is not going to meet those standards. This year, it’s on track for a 6.3 percent of GDP deficit, almost double the target. It must either start growing much faster, or institute draconian austerity measures that will cripple growth, to meet the 3 percent figure. So it’s unclear whether this new policy means Draghi will buy up Spanish bonds at all. By contrast, Italy is on target, but even then, its fiscal consolidation risks hurting growth which in turn grows future deficits, which could endanger its fiscal standing going forward. And with the ECB committed to not printing new money to finance its bond purchases, Spain and Italy won’t be getting a growth boost from the bank.

    So Draghi’s latest plan gets closer to a policy that can avert disaster. But it probably doesn’t get close enough.

  83. LNKD / Scott 
    Linkedin (NASDAQ: LNKD)‘s stock had its “positive” rating reiterated by equities research analysts at Susquehanna in a research note issued to investors on Wednesday. They currently have a $140.00 price target on the stock.

  84. LNKD/2can,deano – thanks.  $140…  They really do just make this stuff up.

  85. Scottmi/LNKD,
    How can you say such a thing, these are smart analyst and certainly trustworthy!  LNKD's market for headhunters in Outer Mongolia is mostly untapped, so their price target should really be $200+! ;-)

  86. LNKD/Scott – Jeffries upgrade. 

    FAS/Mjj – Because they are almost all premium and expire on Friday and we now have 10 open long XLFs to cover an upside move.  Figure 5% in one day would be a big XLF move and that's $15 on FAS to $112, so a loss of $13 ($2,600) but we roll it to 2x the Oct $110s or so and, meanwhile, XLF is at $16 and we picked up about $1,000 on the longs and then we add some more and we're ready for a 4x roll – we can live with that.  Of course, if XLF sells off this afternoon and we can get out for a good price – I'll be happy to do that too.  I would rather have the naked longs but not so badly that I'm willing to pay $260 of premium to get out of the short puts.  

    FAS/Aussie – As above, I wish we didn't have them but we do and they are $350 and I don't think they are likely to go more than $1,600 against us and, if they do, our longs will be up $1,000 so probable risk is net $600 against the $350 downside coverage.  Just doesn't seem worth paying $350 to avoid.  

    EDC/Cdel – Here's why EDC is a disaster:  





    The thing that is out of synch is SPY, not EDC.  50% of SPY's earnings come from overseas in countries like these.  We are simply ignoring a collapse of the Global Economy on the other side of the planet and it's especially silly of us to ignore what is supposed to be the growth engine that drives the Planet's GDP gains.  So I picked EDC because, if we take off and Europe takes off, these markets should follow us up – even if for dumb reasons.   On the other hand, EDC is so beaten down already that disappointment tomorrow might not kill our hedged positions too quickly to yank them.  

    Taxes/Shadow – Sales taxes are fair enough if they can't be avoided.  Most places exempt food at least and sometimes other basics but a person who can afford $800 for an IPad can also afford to contribute $65 toward the upkeep of the town and state.   Same goes for restaurants although I agree it's BS hitting you with a resort rate but what can you do?   The formula was changed under Reagan when the Federal Government cut the states loose and forced them to deal with most programs on their own.  That was the great lie of the plan because it shifted a lot of costs from the progressively taxed Federal budget to the flat-taxed state and local budgets which shifted a very disproportionate burden onto the bottom 50%. 

    Insider/Jacalyn – You would think but as long as it's "public" it's not considered GS's fault that they were there first.  

    VIX fell fast to 17.31

    FB up 5% on buyback.  

    GS up again today.  

    HOV $3.20 baby!  

    WFR actually over $3.

    YRCW even closing in on $6. 

    Oil/Rain – I imagine the whole thing can be explained by the changes in rules on the CTFC back in 1999 (13 years) – that allowed speculators to take oil up from $15 to $150 over the next 8 years.  The only other blip in 150 years of industrialization before then was the Iran crisis that took oil from $5 to $35 but it was back at $15 in a few years and stayed there until the rule change.  

    It's nothing but a gigantic con.  Check out this chart, monthly use of Petroleum Products since 2000 is LOWER now.   It's barely more than it was in 1981 yet the prices are up 5 times!  If we weren't such a brain-washed, complacent society, we would have dragged those oil executives out of their towers years ago and shown them a real old-fashioned use for their product – tarring and feathering!  

    Power play/StJ – Yes but Draghi is a dictator without an army and people will not put up with his reforms if they have no fear of him.  While government officials may worry about their credit ratings – the people don't give a crap.  

    LNKD/Scott – At least that projected p/e of 1,200 makes AMZN look reasonable!  ;)

  87. Sept 29th Full Moon…great time to bomb Iran?  3 carriers will be there by 3rd week of September according to ZH article below.  Perhaps Bernanke knows something we do not…like Israel bombing Iran???

  88. zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
    Stj:  Revolution is not unknown to Europeans.  "Debt" is an abstraction, not a foreign army crossing your borders.  Germany isn't going to invade anyone to ensure repayment of debts, because Germany has not actually lent anyone anything — they are way ahead on the input/output chart of revenues over the dozen years of the Euro''s existence.  Private sector bondholders — uh, do they have an army to seize the Velazquez paintings in the Prado?
    What is happening in Europe is really an orderly and protracted process of  implicit debt default, in which Euros will simply be printed in numbers equal to the aggregate repayment shortfall, and life [on bicycles] will go on.  It just has to be done slowly and subtly enough to keep anyone from firing a weapon, and since the Germans are in good shape, that would seem unlikely.
    And, if closely coordinated with an identical and arguably [Phil's debt chart] even more necessary U.S. procedure, the Omnibus Unpayable Debts of the Planet will simply melt away, and the stiffed and irritated commodity and labor suppliers holding Euro-American paper will simply raise prices to compensate. But since there is less income to go around, bicycle lanes and walking paths will come back into fashion, the excess housing inventory will be marked to market, and foreign labor and commodity prices will come down, leaving everything more or less the same as before in another five years.  Although with wealth somewhat redistributed, but I'll leave that touchy topic to PSW.

  89. Headhunters/Wappler – In outer Mongolia that could be a literal job description!  

  90. rainman/oil
    Doesn't really work that way on the charts.  More of a short term crash or correction when oil gets high for close to 6 months.  Go back to 2000 when oil went from $18 to $50 a barrel and it was the precursor to internet crash.  Go to 2008 when it went to $145 and we know what happened then, go to last year twice when it went to 100's and we fell about 1000 points the first time then 2000 points again.  Then this year, we went to $115 and fell back a little over 1000.  Now we are not there yet again, but getting close, like I said, at most 3 -4 months.

  91. Bernanke.. so where is larry summers today? i would not be suprised if the obama campaign has those two in a closed room with Larry assuring Ben that all will be ok with Ben's family…"just read over these proposals again…"  

  92. 14real
    I am aware ot the only store in Driggs, I wasted considerable time bidding on the project but I go to the wrong churh so they paid higher than my bid. I had a steel supplier from Colorado come in, trying cost me about $6,500 and that was the last time I bid on anything known morman, I felt robbed, never been misled so far. A M0 Hotel in Jackson tried the same thing only wasted 30 or 40 hours of my time on them but I assume the same church. After that I charged for a consultation or let them go. Never ran out of work, accident ended everything  a drunk guess what? I came here to ski power!

  93. 14real
    I live in Wyoming cost of living not so low. Property tax is out of control $190 for tags on a 1994 PU.

  94. rustle / oil — We're just looking at it in different time frames. I find it too difficult to time the drop when Uncle Ben and the ECB haven't shown me what's up their sleeves so I play longer term.  I will hedge when I start seeing the market reacting (logically) to the numbers though.

  95. Euro tanking,  not that happy with the Draghi plan, apparently: "Draghi propondrá la compra ilimitada de deuda."    We're on our way, Stj.  I would guess U.S. equities will have their feeling hurt today, thinking that Uncle Ben was going to keep the U.S. dollar weaker than the Euro with his infinite free money gambit. Sounds like the ECB has caught on.

  96. rainman/oil
    If you look at the charts and see where oil got to extended prices, you will see it's a 4.5 – 6 month lag time.
    In the meantime as much as the RUT has gone up, I love playing (writing naked)  TNA calls on a Mon or Tue and covering them on Thurs.  Seem to always pop up on Friday, not worth risk to hold.

  97. Phil
    Sales tax on every gug of milk etc. WY exempt but 100mile round trip over the only 10% grade highway in the US, Teton pass. closses weekly in winter, long around back if caught 150 miles and they closed that also one time for me. BTW did the math 58% of income not counting 3 hospital visits on medical because the disabled can most afford it. Romney 13% bet he doesn't pay sales tax on the rest of his income!!!!!

  98. Shadow- Does Wyoming have personal income tax?

  99. lflantheman
    I suspect you have a better handle on medical issues than most of us so I wondered if you have an opinion on Intuitive Surgical  ISRG.  I'm thinking for 2014 the $400 – $500  Bull Call Spread with a $390 Put "Kicker" requiring cash in around $20 would make an attractive risk/reward proposition?
    Thanks for any thoughts

  100. Hmmmmmmmmmmmmmmmmm……

  101. HOV/ Go HOV! Phil, I've been in the 2.5/5 spread we set up in 2010 and it's finally coming back to life.

  102. I'm an IPhone person but the new Nokia looks pretty cool.  This is capitalism at its best, competition bringing better products to market.

  103. Europe / Zero – I would agree on the conclusion. What worries me are the chapters in between…

  104. Rustle:  I've not seen one, but reaction seems mixed: "Nokia Oyj (NOK) shares tumbled the most in almost three months after the introduction of two Lumia smartphones with Microsoft Corp.’s (MSFT) new Windows Phone software failed to impress investors. The stock fell 13 percent to 1.99 euros in Helsinki, the biggest one-day decline since June 14."

  105. Stj:  It's been impressively well managed up to now.  But I admit the potential for at least a modicum of chaos.

  106. Interesting, Dow futures down 22 points but Dow Index up 2 points.  

    Dow volume at 2 is 48M.  

    HOV/Ajay – Wow, way to ride it out!  

    NOK/Rustle – I don't like that windows system from looking at it.  Going to be very hard to give up my IPhone (and I probably won't in the end).  I was just using my daughter's IPad, which used to be my IPad and it really made me appreciate the massive improvements AAPL made in just one generation.  I've been hearing expectations of 10M phones shipped and sold the first week – that would be crazy.  Seems like it will be 4", up 14% from current 3.5 which is disappointing to me.  Samsung at 5.3" is about 30% bigger still so I hope the new IPad Mini can be used as a phone.  

  107. VAR calendar 60 Sept/Nov for $1.60.  Small position, may add to it.  I know, I know…but I need som up side, and yesterday's candle makes me thing that there is sniffing around them.

  108. FU VXX!!!

  109. When central banks want equity markets higher, that is exactly where they go.

    Thank you for NTE Angel.

  110. Managed / Zero – The can kicking is always easier to manager than the can cleaning… We'll see.

  111. $25KP adjustments:

    • SVU – Holding on there
    • JRCC – $2.45 a bit disappointing after topping out at $3.08.  I think it's prudent to take our .45 profit off the table ($900) and buy back the short puts for .30.
    • AMZN – I still think these will pay big.  
    • SQQQ – We're well-covered now but I don't understand why these are in for the new 12 at $1.60 when we hit $1.50 yesterday more than once and people confirmed they were filled there.  From $1.50, 12 should be cashed at $1.75 and the original 12 then have a .25 lower basis ($2.30) and we spend .75 to roll those 12 to the Oct $39s ($2.50) which puts us in 12 of those at net $3.05 and we'll be happy to roll and DD again. 
    • VXX – The Oct calls are holding up well but let's reduce our risk and buy back the short $12 puts ($1.85) for a tiny profit which drops the basis on the $14 calls to .65ish.  
    • SCO – We're happy to roll those up and DD if they spike on inventory/stimulus tomorrow.  
    • PCLN – Let's sell 4 Sept $560 puts for $3.20 and spend an extra $1.20 to roll to the Oct $545 puts ($8).  
    • V – Fine 
    • GLD – Let's just buy 20 more for .11 ($220) for 40 at .3425 and see what happens tomorrow.  
    • TZA – We can keep these as is.  
    • FAS – We just added that spread and we almost hope QE comes through with that play.  
    • GS – Short offset to the FAS in the $25KPA only.  
    • EDC – Just a gamble to offset potential losses on TZA, V, AMZN, PCLN, SCO, VXX….

    On the whole, we're pretty balanced and the key is we have very high-leverage plays on the bull side that shouldn't lose too much money if our bearish plays do work out.  

  112. Relative performance between VXX and the VIX since August 21! VIX is up close to 30% and VXX down 3.32%. This is extreme and the divergence has been accentuated over the last couple of weeks. This could be telling us something on the medium term VIX futures but I would not know…

  113. Phil,
    With many respected people coming out and almost all of them in agreement that more stimulus would do more harm than good and pointing out that the last stimulus had a very short term effect and much less than the first one, that the Fed actually hears this and thinks twice before doing something that could harm the economy?  As far as Congress, the only person who understands the damage seems to be Ron Paul.

  114. villashaka Wyoming
    Who owns all the maga buck homes in Jackson? NY wall street. Why? Not only no state income tax but no inheritance tax and the highest in the country allowed asset level to get state aid. Jackson is blue the rest of WY is red. Wy is about the most law inforced state with severe punisments for about anything. Nobody unless murder gets a trial and somehow even less by jury. Jackson makes money by arresting those who come to party, don't even have to drive, miss a step go to jail. The Teton County Sheriffs office is known for the best weed in the rockies at the highest prices, billionairs only apply never arrested. Greatest place if you have the money, join the wally world kids and lots of looters, just like the old days a hideout for todays outlaws, money talks and then you walk. UNREAL SKIING!!!!

  115. SQQQ / Phil – I try to base the prices on the trades that follow your comments. You mentioned the DD at 3:02 yesterday and the next trades were at 3:05 at $1.65. They traded at $1.60 again later which I what I used if people were a little patient. There was 14 total contracts traded at 2:38 when the prices was at $1.50 the only time yesterday. Just trying to be fair…. 

  116. IWM not a single volume pillar to day!
    Continuous Zig rue for the JRW followers and about where we opened.
    The few who showed up wasted a day.

  117. Phil I must be bat s*&t crazy.  I'm on Options First and their ask on the Sept GLD 160 puts is .84.  Where is it currently trading at .11? 

  118. After hours course for today? How to apply oil based paint drying to market activity. Tomorrrow? Secrets to cement curing in cooler weather or waiting for the FED.

  119. stjean—that is why I was asking earlier about VXX..
    I was wondering if they could actually outperform anywhere close to how badly they underperformed (contango reason I guess)..
    Is backwardation the only way?
    I guess if the market tanks it might go to 13 or higher..
    What a POS!

  120. Phil,
    In the quiet before the storm, any thgts as to why V is down with retail sales up (along with mkt -until 30  in ago)?

  121. It would be correct to assume a correction in gold and silver:

  122. Fed/Rustle – There's no logic in them doing more QE here, not only is the market too high and commodities too high (which means they will be massively DE-stabilizing prices – against their mandate) but they will use up what little ammunition they have left which will prevent them from dealing with an actual crash.  So there is no logical way we get more QE – if only logic mattered these days…

    Wow Shadow, you should be in charge of the tourist board out there!  8)  

    The entire monetary system is based on positive carry, writes Bill Gross, and when banks, insurance companies, and investment management firms can no longer depend on enough of it, the system will "stall, list, or perhaps even tip over." Banks may not want to lend to a bad credit, but they also won't lend when the carry or interest margin is too low. It's better to either take on crazy risk or pull in the horns to preserve equity and the franchise.

    More on ICSC Retail Store Sales: Though sales held up quite well at grocery stores, department stores, and wholesale clubs – the overall trend heading into September appears to tip toward a more moderate pace to sales growth with ICSC predicting a gain of 3%-4%. On the positive side for retail stocks, discounting and promotional activity has been lighter than a year ago.

    SQQQ/$25KP, StJ – I mentioned the DD for a week straight, you had it on your notes in the morning.  I would not have made the trade at $1.60, $1.50 was already an adjustment up from $1.45.  I'll let a lot of things slide there but not paying more than 10% over a target for a position – what are we teaching people if we accept that – better to not execute than to flush money down the tubes like that.  Even today, had you not filled yesterday, we had $1.50 all morning.  

    GLD/Jacalyn – Those are the regular Septembers, we have the weeklies.  

  123. Phil – looks like LOGI has approved their dividend – and no market reaction so far – suggestion on how to play this one? Thx
     (Nasdaq: LOGI) announced that at its annual general meeting held here today, the Company's shareholders approved a one-time dividend, to be distributed out of capital contribution reserves, in the amount of CHF 125,650,814. Logitech shareholders eligible for the estimated CHF 0.80 per share dividend must own shares at the close of trading on Sept. 12, 2012 on the SIX Swiss Exchange or the Nasdaq Global Select Market. The dividend will be distributed on Sept. 18, 2012. Shareholders will find information about the dividend on the Logitech corporate website at

  124. jacalynm
     Phil will tell you in options bargin brokers are not worth th saings but the order desc is not filling orders. it is more than options I see bids not filling at ask and today buying puts looks impossable. the calls are filling. My bet is no short shares anywhere. When the Bots are holding back something must be on deck. WHAT? WHAT? is it??

  125. Phil / FAS   Thanks for the explanation.

  126. VXX / Jabo – There has been period of times when VXX has outperformed the VIX. For example, between August and May this year, there were times when VXX was up twice as much as the VIX. After May this year, VXX started suffering from decay again (contango I guess). But looking historically, since November 2009 the VIX is down 27% and VXX is down 93% so not the ideal tracking instrument.

  127. Pharmboy
    What do think of ACTELION   ALIOF?  
    Or Macitentan and Selexpag  two of their drugs in phase 3

  128. Phil, the GLD puts are up to 0.13, do you think it's worth an extra 0.02 to DD before tomorrow's excitement?

  129. VXX/Jabob – I think part of the problem is VXX is some sort of rolling average of the VIX so it takes it a bit longer to improve but, as you say, a POS overall.

    V/8800 – More numbers oriented than hope-oriented plus more international, which really sucks.  

    LOGI/Deano – If you like the stock, buy it and get the dividend but it WILL adjust down on ex-dividend day.  You can buy the stock for $9.27, sell the $9 calls for .45 and collect your .80 dividend and just hope they stay over your net $8 price.  

  130. VXX uses 3 front months futures
    and rolls it.
    So when we have long term expectations of volatility  higher then current (which happens when VIX is low) – VXX decays
    When we have panic and current VIX is high, but longer term expectations of volatility is lower – VXX pops much faster then VIX and tends to keep staying higher (even when VIX is already falling)

    So trading wise, the best strategy is wait until panic, then when VIX starts to fall, sell long term ITM VXX calls and short term OTM puts.

  131. GLD/Real – I think it's most likely flushing an extra $40 down the toilet (along with the $220) – it's just a fun play now on whatever the ECB does disappointing gold bugs tomorrow. 

  132. thx lol730!

  133. FAS Hedge / Phil – Just curious if there was any particular reason why you changed the original short put XLF offset to the FAS 108/120 hedge outlined in this morning's main post to the GS short put offset later executed in the $25KPA? Thanks.

  134. SQQQ / Phil – I didn't want to get into an argument, but before yesterday these options were at $1.50 once last Wednesday a 1:45 PM when 14 contracts traded. And yes, they traded again at $1.50 today but I could not guess that when I updated the portfoIio at 9:30 and they traded at $1.80. I really try to track these portfolio the best I can and sometimes it will go the other way when I just use your price in the post without checking the trades since they are just learning portfolios and we get the benefit of the doubt. You are basically asking me to make judgment calls on entry and exits. So I'll get some and miss some others.

  135. SQQQ/$25KP, StJ – I appreciate the fairness…but anyway…I am actually wondering if this is a time when paying the extra 5-10% (or settling for less) is actually justified because the trade needs to get done in the next 20 minutes (or before Draghi's speech I guess).  If it doesn't get done, the the vol crush of a positive outcome will send those SQQQs down fast and hard tomorrow, which I assume is the reason for the roll…still trying to get out at $1.75 before buying Oct…
    What time is the big moment anyway?  I found an ECB schedule that said 6PM EU time (12PM EST)…but wanted some confirmation

  136. OK, nice boring finish – I have to run to a meeting – later all.

    XLF/Aussie – I liked the price and rollability and shorter collection period of the GS's.  XLF's still very nice if you want to build a position.  

    SQQQ/StJ – That's fine but then don't make the trade if it doesn't fill.  Adding .10 to a $1.50 trade is a very bad practice and also, keep in mind you did not offer $1.50 for the fill – perhaps if you had it would have filled, you can't know one way or the other because the offer itself affects the action.  I am simply saying it wasn't worth doubling down at $1.60 – especially as the entire point of the DD was to reduce the basis and get 1/2 out again on Friday (see 3pm comment yesterday) so paying + .10 when we're only trying to hit $2 is a 20% handicap at the entry.  

    Oh well, whatever you decide.  I just don't want to be teaching bad habits in the learning portfolio.  

  137. SQQQ – for about 2-weeks I had an order for $1.45… never filling and bouncing off of $1.55 a couple times, I figured I'd split my order 1/2 at $1.45 and 1/2 at $1.50… it's been good as I've caught almost all the bounces off of $1.50 an been exiting $1.75, $2 and $2.25 for the last week.  The other day when StJ said 14 filled, i think 10 of them were mine… got lucky! It usually works out the other way for me (no fill).
    SQQQ has helped balance this miserable VXX!

  138. If the bernanke doesn't give any QE, don't you think the markets reaction will be, ok well then it's definitely coming 6 weeks from now! Therefor we might not get the big crash people are thinking? 

  139. SQQQ/StJ – did anyone get filled at $1.75 for that roll?…I didn't…funny enough my platform (TradeStation) says last $1.72, but will only let me enter orders in increments of $.05.  What's up with that?

  140. IWM green up 1 penny!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  141. Crash/jrom – Crash? What Crash? We ain't gonna get no CRASH.  WE DON'T NEED NO STINKIN' CRASH! 
    (We have an incumbent president to reelect.)

  142. Portfolio / Phil – To make it simpler on everybody (including myself) I'll just enter the trades as you call them. I can't track fill prices for everybody I guess… They are "virtual"portfolios after all.

  143. PHil, – I never got into the SQQQ trade at all, so I'm assuming at this point I should buy the Oct 39's rather than the Sept. 38's – is that correct?

  144.  Wow, my Sept. 14 SPX calls just popped after the bell!

  145. Phil

    Check this out.  This is very interesting…..and not good.

  146. SQQQ / Cdel – SQQQ trades in nickel increment. The $1.72 you are seeing is a moving average. The theoretical price (mark) is at 1.76 also.

  147. Econoday says the ECB announcement is at 7:45am ET tomorrow.

  148. StJ – THANK YOU for all of your EFFORT tracking these portfolios!!!!
    I REALLY APPRECIATE IT! Because I don't have time usually during the day to watch and read… so I scan your summary and do bottom fishing orders after a trade goes the wrong direction initially.

  149. StJ/Portfolio – As a newish member I really wish you wouldn't do that…I only maybe do 20% of the trades with real money but do watch them all pretty closely.  The ones I have done regularly take a few days for actual execution and some I have liked have never gotten filled, especially the best ones (see GS Oct 97.5 P $1.50, now $1.10 trade this AM) So, if the fills in the portfolio are regularly 10% better then anyone else can get, that skews the results quite a bit.  It seems pretty fair the way you do it now, of course there will always be exceptions, but doesn't seem like a reason to change…your call, just my 2 cents…or 5, or 10, I guess

  150. Ditto on the thanks for all the work you're dong tracking the portfolios.  It's made a huge difference in the value of this teaching forum, at least for a beginner like me.

  151. StJ – Thanks a lot for all the effort…being able to refer back to the updated portfolio is invaluable to the learning process

  152. Stjean, I like the way you track the portfolios. Quite often Phil will call a price that cannot get filled and I see people posting other prices which are close to the original price.  Maybe we could do an all or nothing on some of the more important price points.

  153. Stj/cdel, what about using the posted price and only adjusting if the majority of people proactively mention they didn't get filled? That way it's hopefully less effort for you to manage and it's up to the group to confirm fill prices.

  154. Phil/FAS – FWI, in my personal version of FAS Money, I decided to close the short Calls when FAS dipped.  I ended up +$200 on those Calls, which represented 30% or so of the potential value.   I'll take the win, anytime.  Besides, if FAS dramatically rises tomorrow, I will still get the pop on the long XLF calls with out the FAS rolls.  What's not to like.  Jumping out of a position early has been a difficult lesson to learn, but perhaps it is starting to sink in.  A couple years back I would have waited until my winning position had eroded.  

  155. Tourist Notes 2015 
    o  Miami Beach announces its annexation to John Pennekamp Coral Reef State Park;
    o  Disneyworld has changed it's name to Waterworld;
    o  Canadian Tourist Bureau launches it's "Canada, the New Caribbean" campaign;
    o  Baja California to be renamed "Debajo Pacifico";
    o  Seattle tourism expected to surge on wave of summer sunseekers;
    o  Sea & Ski sun lotion to be re-branded "Sea & Sand";
    o  Hawaii will change it's name to "Tres Picos" — Mauna Kea, Mauna Loa and Haleakala;
    o  Toll Brothers has accepted a contract to relocate Wall Street to it's new "Appalachian Village" development;
    o  Insensiitve wags have nicknamed New Orleans "No Orleans"
    Canada, the new Caribbean. .  

  156. Portfolios / iTrade and others – Thanks. Ideally an average fill price would be the best, but at the same time we can't turn the comments section into a fill price forum… Note though that it is usually an issue with instruments that are less liquid and SQQQ is now very liquid to begin with. There is no perfect solution and it's the main drawback of the system – we only have approximation in the profits for example. But we should all keep in mind that these are mainly for learning. And sometimes the teacher (Phil) and the scribe (me) will make mistakes! We just have to live with it…

  157. Looks like I forgot the line chart yesterday but hey, it was my birthday (last one in the 40's) and I had plans and then I got caught in the DNC frenzy…. Sounds like a good excuse anyway!

  158. I have never seen DNC and frenzy used in the same sentence.

  159. There is a first time for everything rpme….

  160. Late Happy Birthday stjeanluc!!  Do what you want to do fast before you hit the 50 club!

  161. Happy Birthday, stj!

  162. Happy Birthday sjeanluc.  I really appreciate the work you do, including these summary graphs and portfolios.

  163. Thanks to all…. and I am working on it Peter!

  164. stjeanluc,
    Alles Gute zum Geburtstag!

  165. st. jean luc,
    keep up the great work and
    joyeux anniversaire

  166. Question:  What time (EST) does Draghi announce the Euro plan?

  167. stj—--je te souhaite un merveilleux anniversaire, plein de bonheur, de joie et de rires—-I hope I did not butcher  that

  168. Did I miss anything?  

    Doesn't look like it.  

    SQQQ/Itrade – Nicely played – take those quarters and run when it's in a channel like that! 

    No big crash/Jrom – Especially if jobs numbers are bad, there will be high expectations of QE and the ECB nonsense SOUNDS like they are doing something so we may just drift along but I don't see how we can sustain this level for 6 entire weeks in any case.  

    EUR/CHF finished at $1.2041.  Now we'll have to wait and see if they are establishing a new level or not.  Euro failed to hold $1.26 (just under) and Pound right on $1.5900.  78.42 Yen to the Dollar.  

    Transports fell 1.14% and never recovered.  Don't blame YRCW – $6.19!  

    Trade Station/Cdel – Rolls tend to have a lot of trouble executing if you don't break them up.  Keep in mind that 5% over (.08 in this case) is fine for an execution, especially one you want to make because of event risk (like Draghi tomorrow) that jeopardizes the position.  Sounds like the $1.72 is some kind of average as I don't think SQQQ trades in pennies.  

    Portfolios/StJ – I would like to know there was a realistic fill but my point is, otherwise just say didn't execute – don't make fills at the wrong prices – that's what I have a problem with.  

    SQQQ/Jerconn – I'd skip that completely and go with TZA, much more fun if it works.  

    Video/Exec – I can't get past the annoying audio.  

    Entering wrong trades/ITrade – I haven't said this lately so I will say it now (thanks for reminding me) – The BEST way to follow these portfolios is to wait for a trade to go wrong on us and then, when we decide to roll or DD – that's when you can start a position and you'll be outperforming us on those by 20% or more!  

    Fills/StJ – As you can see, we do need to track fills properly.  Also, if something doesn't fill, then I might make a different call so that's useful too.  

    FAS Money/MJJ – I would have done the same thing if I caught that.  My objection was solely to paying the premium, as I mentioned earlier but much, MUCH better to get clean out and not have the risk.  That was EXACTLY the right thing to do – good job!  

    Ice melt/ZZ – That kind of stuff always makes me think of the Star Trek where Picard lives an alternate life on a doomed planet that's running out of water.  They way they futilely try to do something and the way he, and his children, and their children resign themselves to their very near fate.  It makes me cry for the World we are leaving to our children…

    Big Chart – Not sure why there's no RUT line at 820 but that's 4 of 5 really obeying the 5% Rule and don't forget, with the Dollar still at 81.25, all those lines and moving averages should be shifted up one bracket which means the Dow is resting on the 200 dma BELOW the -5% line and the NYSE is right on the 200 dma at -2.5% and the RUT is right on the 50 dma at the Must Hold, etc – if we don't bounce – we'll looking at a really ugly breakdown.  The only 50s that are holding so far are the RUT (barely) and the Nas (3,050).  

    Last Bday/StJ – Had mine in March – clearly all downhill from here….  Have a good one, next year we'll go get drunk! 

    Euro plan/Rogue – Technically, it's just an ECB rate announcement.  Not really the proper forum for bailout talks but I don't think they will stand on ceremony.  

    French/Savi – I think you offered him a good hour with a happy ending…  ;)

  169. I think I found a video of the ECB buying Peripheral bonds…..Bernanke didn't have much luck with it, so I guess we shouldn't be surprised.

  170. Phil—- you are kidding right?—I better check the dictionary and keep to English from now on

  171. French'/Savi – I was totally kidding, you had it right.  


  172. SPY DAILY


  174. Phil—-neenga nallah pillai illai   ;-)

  175. So the grand sterilized Euro bond  buying plan is to watch the country fade into anarchy if they either refuse to admit guilt and/or follow conditional reformation procedures?  And they expect the citizens and politicians of Spain and Italy to sign up to such terms voluntarily?  Admit guilt, do what we say, or die…
    Draghi will stress conditionality of the program tomorrow, with the ECB likely to stop buying the bonds of any government that fails to meet the conditions it agrees to when it signs up for aid from Europe’s rescue fund — a precondition for ECB action — two of the people said. Another proposal is for the ECB to sell the bonds it has bought if a country doesn’t comply with the conditions, two of the officials said.

  176. Phil,
    "The Good News and the (Very) Bad News about Bernanke's Speach" was truly a gem. The only reason that Bernanke can even think about doing more QE is because the first 2 QE's were failures!!!!!!  It's so clear. The only way that QE could EVER be effective is if it overcame the lack of DEMAND by actually creating inflation. Balance sheets are still impaired, households are still underwater on their homes, quailty borrowers still don't want to  borrow. Against a backdrop of deflation, we've had drought inflated food prices, and Iran war threat inspired oil price increases, and monkeys may have chased other commodity prices higher, but QE itself is baloney. 

  177. Savi – I did not know you spoke Tamil. We can talk more in Vegas. 

  178. Nicha—-I speak Tamil and Sinhalese —--also some questionable French as you can see—-would be fun to try out my Tamil in Vegas

  179. Bob Woodward Book: Debt Deal Collapse Led to 'Pure Fury' From President Obama

  180. French / Savi – Was very good actually… Thank you! Better than my Tamil.

  181. Portfolios / Phil – OK, lets see what we can do moving forward then. I might need to post more notes that might require more feedback though…

    Birthday – Great, I say we get drunk for both birthdays then!

  182. stjean:
    Happy Birthday!

  183. Stj:  A very happy birthday, and thanks for all your hard work, zxz

  184. Springheel Jack: Thought for the night on SPX

  185. Stj:  Or perhaps I should have said "Pirandha naal vazhthu!," given the polyglot spirit of the evening.

  186. Gee Zero, are we switching to Tamil on this board… Thanks!


  188. Happy Birthday, StJ – thanks for all that you do!

  189. Where did this sudden burst of Tamil sprout from … I guess Savi will get a lot of practice …

  190. Jean-Luc/
    Joyeux anniversaire et merci pour ton travail et tes commentaires sur ce board.

  191. Oil being pumped up towards $97 for a good short with Euro maxing out at 1.2635
    Come to daddy!

  192. SHoulda kept my oil long play :( .

  193. Good morning!  

    Futures up about half a point ahead of ECB with Dollar at 81.19 and Euro back over $1.26 and Pound $1.5903 – not too impressive on the whole.  

    EU indices up about 1% while waiting for their magic beans.  

    Oil $96.50 is still a good short (/CL), gold popped to $1,715 before being rejected but held $1,710 so far.  Silver hit $33 and still $32.86, copper $3.51, nat gas still lame at $2.76 and gasoline $2.975 – petroleum sector not showing the enthusiasm we'd expect from QE.  

    Nothing matters until 7:45 and, even then, it will be more about the reaction to whatever the ECB does or does not do.  

    Bollywood Savi?  

    Anarchy/Rogue – Obviously, that can't happen – which means the entire "plan" is just more BS can-kicking until the next crisis.  Germany is 25% of the ECB so all this really does is transfer debt and risk from the PIIGS to Germany, whose borrowing costs will rise while the PIIGS fall.  That's all this is, a way to tie the risk together but it also means that Germany can no longer talk about kicking people out of the EU as they'll be taking 25% of the losses.  Obviously this whole plan is unsustainable since it requires everyone to suffer in silence and for nothing to go wrong. 

    Creating inflation/Sparky – In the long run, that's kind of the point.  We are never going to cut our way out of debt and neither is the rest of the World – only inflating everyone out of debt will avoid actual defaults at some point.  The supply of money is alarmingly large at this point – it's the velocity that's near zero but, once the money starts to move again, we'll get some very serious inflation.  

    SVU/Diamond – Actually that's a good thing.  Don't forget, they have 4,400 stores so it shouldn't even be news – it's the fact that they are focusing more on performance that will make people happy.

    Supervalu (SVU) says it will close approximately 60 under-performing or non-strategic stores this fiscal year. The majority of the stores are expected to close before December 1, the end of the company’s FY13 Q3. As a result, it expects to record a pre-tax charge of $80M-$90M.

    Struggling Supervalu (SVU) says it will shut down 60 underperforming/non-strategic stores – 38 regular grocery stores, and 22 Save-A-Lot stores – by the end of this fiscal year (ends Feb. '13). The company expects to record an $80M-$90M pre-tax charge (mostly non-cash) related to the move, and a gain of $10M on asset sales. Cash savings are expected to total $35M within 12 months, and $80M-$90M over the next 3 years. Shares +3.1% AH. (labor issues)

    Debt deal/Pstas – Cool article, I'll read that book.  

    Birthdays/StJ – Well there probably won't be any point to getting sober in between then….  ;) 

    Jack chart/Diamond – Now if you apply .975 to that chart (adjusting for weak Dollar) we are EXACTLY at the spot that red arrow falls to (1,370) and we now need to get back to 1.025% of 1,396.50, which is 1,431.40 just to make it back to that dotted support line.  These charts take on a very different tone if you take the changes in the Dollar into account:  

    Think how silly it is not to take the Dollar into account when it's what we price things in.  Imagine running a science experiment to see how long it takes to boil various amounts of water but the amount of heat applied is not constant – you can graph the times all you want but the results would be completely meaningless because you're treating a huge variable as if it's a constant.  That's what TA people do when they ignore changes in the Dollar….

  194. @Felipe
     "once the money starts to move again, we'll get some very serious inflation'".
    Your thoughts on what would cause this to happen?
    Without salary and wage increases, that exceed productivity increases, without benefits increases—they are gradually being eliminated or severely reduced, (other than our brothers who belong to AFSCME) and other money leaking into the system, what would the banks begin with?
    Where would the spending begin?  Infrastructure projects of immense proportions?

  195. Stjeanluc / Happy belated birthday!! And thanks again for keeping track of portfolios and all your posts, cheers!!

  196. Oil/Jrom – Could have just as easily gone $1 the other way.  

    Thursday's economic calendar:
    7:30 Challenger Job-Cut Report
    8:15 ADP Jobs Report
    8:30 Initial Jobless Claims
    9:45 Bloomberg Consumer Comfort Index
    10:00 ISM Non-Manufacturing Index
    10:00 Quarterly Services Report
    10:30 EIA Natural Gas Inventory
    11:00 EIA Petroleum Inventories
    4:30 PM Money Supply
    4:30 PM Fed Balance Sheet

    2:57 AM Asian shares are flat-to-higher ahead of Draghi today. "It appears there is a realistic chance that something will happen. The market thinks Draghi could be the man to pull it off," CMC Markets Michael McCarthy says. If he's not, things could go to awry. Japan flat, Hong Kong +0.1%, China +0.4%, India flat. 

    3:48 AM European shares open solidly higher as markets wait for Mario Draghi to announce the bond-buying plan that will save the universe, or the euro at least. Lost in the hype is that the ECB will also announce an interest-rate decision, with Credit Agricole expecting the bank to cut rates to 0.5% from 0.75%. EU Stoxx 50 +0.2%, London+0.4%. Paris +0.6%. Frankfurt +0.6%, Milan +0.6%, Madrid +1.1%.

    6:00 AM Overseas: Japan +0.01%;. Hong Kong +0.34%. China+0.70%. India +0.21%. London +0.58%. Paris +0.95%. Frankfurt+1.19%.

    6:37 AM U.S. stock futures follow global markets higher in advance of the ECB policy meeting. S&P +0.5%, Dow +0.6%

    7:00 AM On the hour: S&P +0.58%. 10-yr -0.07%. Euro +0.14% vs. dollar. Crude +1.13% to $96.44. Gold +1.06% to $1709.55.

    It's a tie in the latest AAII Investor Sentiment Survey as the bulls, bears, and neutrals all clock in at 33%. The numbers are little changed from last week, though bulls remain below their long-term average of 39%. 

    The OECD's chief economist, Carlo Padoan, warns of a worldwide recession unless policy makers in the U.S. and Europe act, with the global economy having deteriorated from a few months ago. Padoan describes the eurozone as being "at the epicenter of the crisis" but notes that a "new development" is a fall in confidence in the U.S. manufacturing sector.

    Presumably Mario Draghi will lay out details of the ECB bond purchase plan tomorrow, but what will the bank do if EU states fail to live up to their pledges (like Greece)? Any threat to halt purchases (or even to sell) would carry little weight as the central bank would too far in at that point. What follows could be a German nightmare – the ECB financing governments who no longer feel the need to reform.

    The ECB is unlikely to insist on preferred status among bondholders as part of its widely expected program to purchase eurozone government debt, the WSB reports. The assumption that the ECB would have seniority in previous bond-buying efforts was seen as limiting their effectiveness.

    The Bank of England leaves policy unchanged, its benchmark lending rate remaining at 0.5% and the size of its asset purchase program still at £375B.

    Sweden's Riksbank unexpectedly cuts rates 25 basis pointsto 1.25%, citing weakness in the eurozone as lowering its expectations for exports and economic growth. The bank also notes a quick appreciation in the krona and nobody seems to want a strong currency these days. The rate decision wasn't unanimous – one member wanted a 50 bp cut. 

    France's unemployment rate hit a 13-year high in Q2, rising to 10.2% from 10% in Q1. Excluding France's overseas territories, the figure was 9.7% vs. consensus of 9.8%. (PR) 

    Spain sells €3.5B worth of 2-4 year notes ahead of a widely expected ECB bond-buying announcement today. Two-year debt attracts a rate of 2.8% vs. 4.71% in June's auction, while the yield on 3-year paper drops to 3.68% from 5.09% in July, and that for 4-year bonds slides to 4.6% from 5.97% in August. 

    Not working already?  Spanish yields turn higher on the short end after sluggish demand at its €3.5B auction of short-term notes. This despite the expected announcement of ECB bond buys at the short end later this morning. The 2-year +17 bps to 3.26%. The 10-year – not expected to be a target of the ECB – falls 8 bps in yield to 6.32%. Go figure.

    Senior Italian officials have warned that the country might have to ask the EU to buy its government bonds at the end of the year due to its deteriorating economy and high debt costs, the FT reports. In return, the government would have to carry out even more tough austerity, with Germany especially wanting to ensure that any government that comes in after elections next year would implement reform.

    Australian unemployment falls to 5.1% in August from 5.2% in July vs. consensus of 5.3%. The number of employed -8,800 to 11.5M, number of unemployed -10,600 to 622,600. Participation rate drops to 65% – the lowest level since March 2007 – from 65.2%. While there are signs that miners are still hiring despite fears about the sector, it seems the jobless rate is falling because participation is. (PR)

    Online advertising for jobs fell 108.7K in August, reports The Conference Board. Combined with July's drop, it's the biggest 2-month decline since the recession, says Jonathan Basile from Credit Suisse. Of more import, he says, were new ads, off 325.7K over the two months. As of yet, the weak data has yet to be reflected in jobless claims.

    Sad:  The U.S. slips from fifth to seventh in the World Economic Forum's newest Global Competitiveness Report, dragged down by "low public trust in politicians and a perceived lack of government efficiency." Switzerland, Singapore, Finland, Sweden, The Netherlands and Germany ranked ahead of the U.S. - And drugs are legal in The Netherlands, who have no natural resources, universal health care, a massive welfare system and collect 47% of their GDP in taxes (52% top rate and 2.35% for low income with progressions in between and that INCLUDES SS payments).  They also have a VAT of 6% on essentials and 19% on non.   Most importantly, they have a 1.2% wealth tax on EVERYTHING over $25,000 but not capital gains so it's a "use it or lose it" system.  Nonetheless, they have the 14th highest percentage of millionaire households in the World (2.3% of population vs. 4.5% in US at #7.  Singapore is #1 with 15.5% of the people millionaires!).   

    It's not just equities, the cult of bonds is also dying, declares Pimco's Bill Gross. “The age of credit expansion which led to double-digit portfolio returns is over,” Gross says. “The age of inflation is upon us, which typically provides a headwind, not a tailwind, to securities price – both stocks and bonds.” We have to adapt to a “new normal,” which means no more “super-size" market returns.

    Companies sold $28.9B in bonds in the first two trading days this week, the busiest two-day period since March 6 and more than doubling the $13.4B issued in the past two weeks. Issuers have been eager to take advantage of sub-3% rates on investment grade bonds; this week, Wellpoint (WLP) and Principal Financial (PFG) are two of the largest.

    China shows what happens to stocks in a true bear market, writes Doug Kass, as near-relentless selling since early this year has stocks trading at 7.8X forward earnings, and with a 3.9% dividend yield. "If China is the growth driver of the (world economy)," asks Kass, "doesn't this highlight how cheap stocks can get when growth is called into question?" 

    South Korean GDP rises a seasonally-adjusted 0.3% in Q2, below economists estimates of 0.4%. On an annual basis, the economy expanded 2.3%, which was also weaker than consensus expectations of 2.4% made in July.

    Atlantic City has become so desperate to keep gambling dollars from flowing to casinos in neighboring states that it will nowallow outdoor gambling at casinos. The new trend in the city is to blur the lines of where the casino floor ends with more gambling soon to be seen at casino bars, pools, and in shopping areas. Major Atlantic city players: BYDCZR, and privately-held Landry's Restaurants.

    Shares of Disney (DIS +2.5%) trace out a new all-time high with the Street still firmly backing the House of Mouse to see even further gains. Though theme parks, ESPN, and Marvel Studios continue to be the rock stars behind the company's consistent revenue growth – clever deals in new areas also keep the Disney pipeline fresh. The latest is a venture to supply Nokia with edgy content and apps for its smartphones as the Finnish company trails far behind Apple and Google. 

    Boeing (BAupwardly revises its predictions for growth in the Chinese aviation market, despite China's recent economic weakness, projecting the country will need 5,260 new commercial airplanes valued at $670B over the next 20 years. Also, UBS believes large structural suppliers are now in line to push Boeing’s current 3.5/month Dreamliner assembly rate to 5/month earlier than expected.

    The Chinese government will make preliminary findings on an anti-dumping complaint levied by local solar firms against U.S. polysilicon makers such as MEMC (WFR) as soon as November, 8 months ahead of a deadline. The probe, which is backed by LDK Solar (LDK) and Suntech (STP), appears to be retailiation for anti-dumping tariffs placed by the U.S. on Chinese solar modules. Tariffs or not, polysilicon vendors aren't faring well on either side of the Pacific.

    Alcatel-Lucent's (ALU -3.2%) board will reportedly hammer out the details of the company's restructuring plan at a meeting next week. Items for discussion include which businesses will be affected by the planned layoff of 5K workers, and how to monetize 29K patents, given a deal with RPX (RPXC) has fallen short of expectations. French unions are worried about the job cuts, which will trim the cash-burning and debt-laden telecom equipment vendor's workforce by less than 7%

    Crude oil exports from Iran have fallen below 1M bbl/day, according to an oil shipping tracker, a monthly drop of ~200K bbl/day and its lowest level in more than two decades as the impact of sanctions deepens. The news comes after Iran President Ahmadinejad for the first time admitted that the country is facing problems in selling its oil.

    Pres. Obama may authorize the release of oil from the Strategic Petroleum Reserve in a pre-emptive move to head off $100 prices, according to a new Citi report. Even so, an SPR release could be like pushing on a string: It may not matter how much oil authorities release, since the problem is that the “oil multiplier” isn’t working because crude isn’t being converted to product inventory.

    Barclays says it's channel checks over the past few weeks have led to the conclusion that the metallurgical coal markets are in worse condition than most investors expect. The firm says there's a real risk of yet another round of significant downward estimate revisions, and CONSOL Energy's (CNX +0.4%closing of its Buchanan mine yesterday is yet another reminder of the severe pain facing the US coal producers. The firm recommends staying awayfrom the coal producers until prices stabilize. 

    We checked and found that we are beyond reproach:  Encana (ECA) says an independent internal investigation cleared the company of collusion with Chesapeake (CHK) tosuppress land prices in Michigan two years ago. ECA does not say how it reached its conclusions and will not release its report; in any case, the U.S. Justice Department and Michigan AG are looking into the allegations.

    Sears Holdings (SHLD) CEO Eddie Lampert purchased ~2.4M shares at $52.75 earlier this week, according to a SEC filing. While bulls continue to show their unflappable faith in the Eddie Plan for Sears, shares are still feeling the sting from getting booted from the S&P 500 Index.

  197. Maybe a boon for Amazon's (
    AMZN) Q3 earnings report (at the expense of Q4?), Californians are rushing to order items from the retailer ahead of September 15 when the company will begin collecting sales taxes of 7.25-9.75%.

    Amazon (AMZN) news/rumors pour in ahead of its 1:30PM ET event. 1) A TV ad depicts Amazon's "Paperwhite" backlit Kindle e-reader, a ~7" Kindle Fire, and (most intriguingly) a bigger Fire. 2) The Verge reports Amazon might show off its rumored smartphone, but it remains an unfinished product. 3) As speculation continues about its set-top box plans, Peter Kafka reports Amazon offered to buy Rokuearlier this year. 4) Verizon will be pre-installing Amazon's apps on most of its Android phones.

    Yelp (YELP +6.5%) has registered big gains for the second day in a row (previous); shares are now up 41% since the reviews site's lockup expiration ended last Wednesday. Today's gains follow an upbeat presentation from CEO Jeremy Stoppelman at a Citi conference (webcast). Stoppelman reiterated the strong performanceof ads on Yelp's mobile site, and estimated 25% of unique users come from mobile devices (ed: that's actually lower than some other Web services).

    Motorola Mobility (GOOG) and Verizon Wireless (VZVOD) introduce 3 new Android phones: the Droid RAZR HD (4.7" display), the RAZR MAXX HD (similar, but with bigger battery/more storage), and the Droid M (4.3" display). None of the phones have edge-to-edge displays, as was rumored, though Motorola is boasting the RAZR HD offers almost twice the talk time of Samsung's Galaxy S III. Samsung has been rapidly taking high-end Android share from Motorola and everyone else. (live blog)

    Nokia (NOKlops 15% off the price of its midrange Lumia 800 Windows phones and makes smaller cuts to other models that run the OS. It's not a total surprise given that Nokia introduced two devices yesterday that run on Windows 8, including the "budget-friendly" Lumia 820 – the successor to the 800.

    More on Google: Eric Schmidt claims 1.3M Android devicesare now activated daily, up sharply from the 1M reported in late June. However, only 70K consist of tablets – this translates into a quarterly run rate of 6.3M. By contrast, Apple shipped 17M iPads in the June quarter. That's a big reason why iOS continues to wield an edge on Android in Web traffic, an edge that translates into large search revenue-sharing payments for Google. The arrival of Windows RT tablets stands to further pressure Android.

    Apple's (AAPL) TV and set-top ambitions remain bogged in a morass of pay-TV industry intransigence, Bloomberg reports. Points of disagreement include Apple's control of the user interface; its ability to sell directly to consumers rather than leasing hardware; and (of course) the striking of new content deals. However, Apple has reportedly compromised some on the content issue, and is said to be "furthest along" in its talks with Time Warner Cable (TWC). (Eddy Cue) (WSJ reports: IIIIII)

  198. Spending/Flips – It has to be infrastructure and jobs.  So, if the Reps get elected, you won't have to worry about inflation as we spiral down the economic toilet but if the Dems take control of Congress, you'll see some targeted spending that will unleash the beast the Fed has created. 

    At some point, no matter who's in power, our electrical grid will begin failing and become a Trillion Dollar emergency.  Most of the transformers were installed in the 60s (the last time we spent money on infrastructure) and are expected to have a 40-year life-span.  Each time one blows, it puts strain on the others so it's possible for us to have a catastrophic black-out that we are in now way prepared to deal with.  It's more of a when thing than an if thing.  After that, we have huge aqueduct issues and that's ignoring the dams and bridges we've been neglecting…

    Speaking of dams:  

    This is an actual letter sent to a man named Ryan DeVries by the Pennsylvania Department of Environmental Quality, State of Pennsylvania. The recipient's response is hilarious, but read the State's letter before you get to the response letter.

    SUBJECT: DEQ File No.97-59-0023; T11N; R10W, Sec. 20; Lycoming County

    Dear Mr. DeVries:

    It has come to the attention of the Department of Environmental Quality that there has been recent unauthorized activity on the above referenced parcel of property. You have been certified as the legal landowner and/or contractor who did the following unauthorized activity :

    Construction and maintenance of two wood debris dams across the outlet stream of Spring Pond.

    A permit must be issued prior to the start of this type of activity.

    A review of the Department's files shows that no permits have been issued. Therefore, the Department has determined that this activity is in violation of Part 301, Inland Lakes and Streams, of the Natural Resource and Environmental Protection Act, Act 451 of the Public Acts of 1994, being sections 324.30101 to 324.30113 of the Pennsylvania Compiled Laws, annotated.

    The Department has been informed that one or both of the dams partially failed during a recent rain event, causing debris and flooding at downstream locations. We find that dams of this nature are inherently hazardous and cannot be permitted. The Department therefore orders you to cease and desist all activities at this location, and to restore the stream to a free-flow condition by removing all wood and brush forming the dams from the stream channel. All restoration work shall be completed no later than January 31, 2006.

    Please notify this office when the restoration has been completed so that a follow-up site inspection may be scheduled by our staff.

    Failure to comply with this request or any further unauthorized activity on the site may result in this case being referred for elevated enforcement action.

    We anticipate and would appreciate your full cooperation in this matter. Please feel free to contact me at this office if you have any questions.


    David L. Price

    District Representative and Water Management Division.

    Here is the actual response sent back by Mr. DeVries:

    Re: DEQ File No. 97-59-0023; T11N; R10W, Sec. 20; Lycoming County

    Dear Mr. Price,

    Your certified letter dated 12/17/06 has been handed to me to respond to. I am the legal landowner but not the Contractor at 2088 Dagget Lane , Trout Run, Pennsylvania .

    A couple of beavers are in the (State unauthorized) process of constructing and maintaining two wood "debris" dams across the outlet stream of my Spring Pond. While I did not pay for, authorize, nor supervise their dam project, I think they would be highly offended that you call their skillful use of natures building materials "debris." I would like to challenge your department to attempt to emulate their dam project any time and/or any place you choose. I believe I can safely state there is no way you could ever match their dam skills, their dam resourcefulness, their dam ingenuity, their dam persistence, their dam determination and/or their dam work ethic.

    As to your request, I do not think the beavers are aware that they must first fill out a dam permit prior to the start of this type of dam activity.

    My first dam question to you is:

    (1) Are you trying to discriminate against my Spring Pond Beavers, or

    (2) do you require all beavers throughout this State to conform to said dam request?

    If you are not discriminating against these particular beavers, through the Freedom of Information Act, I request completed copies of all those other applicable beaver dam permits that have been issued. Perhaps we will see if there really is a dam violation of Part 301, Inland Lakes and Streams, of the Natural Resource and Environmental Protection Act, Act 451 of the Public Acts of 1994, being sections 324.30101 to 324.30113 of the Pennsylvania Compiled Laws, annotated.

    I have several concerns. My first concern is, aren't the beavers entitled to legal representation? The Spring Pond Beavers are financially destitute and are unable to pay for said representation — so the State will have to provide them with a dam lawyer. The Department's dam concern that either one or both of the dams failed during a recent rain event, causing flooding, is proof that this is a natural occurrence, which the Department is required to protect. In other words, we should leave the Spring Pond Beavers alone rather than harassing them and calling their dam names.

    If you want the stream "restored" to a dam free-flow condition please contact the beavers — but if you are going to arrest them, they obviously did not pay any attention to your dam letter, they being unable to read English.

    In my humble opinion, the Spring Pond Beavers have a right to build their unauthorized dams as long as the sky is blue, the grass is green and water flows downstream. They have more dam rights than I do to live and enjoy Spring Pond. If the Department of Natural Resources and Environmental Protection lives up to its name, it should protect the natural resources (Beavers) and the environment (Beavers' Dams).

    So, as far as the beavers and I are concerned, this dam case can be referred for more elevated enforcement action right now. Why wait until 1/31/2006 ? The Spring Pond Beavers may be under the dam ice then: and there will be no way for you or your dam staff to contact/harass them then.

    In conclusion, I would like to bring to your attention to a real environmental quality, health, problem in the area. It is the bears! Bears are actually defecating in our woods. I definitely believe you should be persecuting the defecating bears and leave the beavers alone.

    If you are going to investigate the beaver dam, watch your step! The bears are not careful where they dump!

    Being unable to comply with your dam request, and being unable to contact you on your dam answering machine, I am sending this response to your dam office



  199. @Felipe
    So the contracts are let to begin a long and enduring process, lasting many decades,  to "repair america". 
    The brand new jobs generated gradually, over that time begin to emerge, they are productive jobs, they are well paid, and the money flows into the economy in the form of new spending by the newly employed.
    The trickle effect kicks in and the new dollar velocity causes a spending to increase, the likes of which hasn't been seen in 40 years.  HOW will this translate to uncontrolled inflation if we have so much unused capacity in our manufacturing plants?  OR build the new plants that are required?? Hyperinflation would only occur IF 'too much money chases too few goods and services, and we already have too much of practically everything, imported and domestic. 
    I'm missing the inflation bogey man. The one that would appear should the velocity of money increase, faster than we can producd the goods and services demanded by  the new spending.  Some, yes, but unleash a huge increase in prices (which is the real damage that could be done) why would that necessarily happen?

  200. That's a dam good response.  

  201. I'm not talking Zimbabwe hyper-inflation, I'm talking about good old-fashioned sustained levels of 8-12%, which will double our GDP in about 7 years.  Once confidence is restored and banks relax their lending standards again, it's possible that at least some of the 10% decline in household debt ($1.5Tn) will begin to reverse and that's a huge thing.  Also, note the effect that a proper mortgage modification program would have on consumer spending.  

    Something as simple as refinancing all mortgages to 3% would put about $3,000 a year into the pockets of the average ($200,000) homeowner.  There's no reason not to do it – they already have mortgages so you are not increasing the net risk and you are lowering payments by about 25% so you are increasing their ability to pay.  The government borrows 30-year money at 2.75% so they are just passing it along to the homeowners and the banks trade old mortgages for cash so they have nothing to complain about.  

  202. Phil – beaver letter pretty dam funny!