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Tuesday, February 7, 2023

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40 Point Friday – Up 2.8% Since Last Expiration Day!

Click to View2.8% – that's what QE3 has bought us so far.  

Last Options Expiration Day was August 17th and the S&P was at 1,420 and a month later we're testing 1,460 – 2.8% higher after Bernanke pledges to spend at least $600Bn and, of course, the ECB pitched in their own $600Bn and China dropped $400Bn and the BOJ added $200Bn of their own.  All that for 40 points.  

So what's the problem?  Of course there was front-running, QE2 had front-running as well, with the S&P running up from 1,040 to 1,250 (20%) ahead of the actual announcement.  That didn't stop us from heading up to 1,361 the next year – up another 9% before collapsing all the way back to 1,100 last fall (down 20%) into Operation Twist, which took us all the way to 1,422 (29%) before falling back to 1,266 this June (down 11%) when the Fed announced Twist would be extended and rumors of QE3 did the rest, running us all the way to 1,440 just ahead of the announcement (up 14%) and, as I mentioned, up to 1,460 now (up 1.4%). 

As John Lennon would say, we need to give QEs a chance but clearly this is a little disappointing so far – especially with such massive, coordinated central bank action AND, did I forget to mention, the new IPhone is here!  That's right, today is new IPhone day and, in the Appleconomy, what could possibly be more important than that?  

Lines like the one on the left are in front of almost every AAPL store on the planet as getting a new phone on the first day it's shipped is really, Really, REALLY important to some people.  We discussed the potential for upside in AAPL (we're already long) in yesterday's Member Chat and there seems little likelihood that AAPL will be holding back the Nasdaq NEXT Quarter, but this Quarter (AAPL's 4th) ends on the 29th and it remains to be seen how and when AAPL chooses to recognize these early revenues.  

Earnings are on Oct 15th so we'll see what they have to say but, of course, we'd see any dip as another buying opportunity there.  We took the dip in gasoline (/RB) to $2.80 as a buying opportunity as well and buying gas futures into the weekend is often a good bet and, at $420 per penny, per contract – an exciting one as well.  Longer-term, gold and silver are getting interesting as we're having a very bullish breakout on GLD at $172.50.  

I'm not a big fan of gold (and we have some GLL short plays on it here) but, long-term, if it runs, it can be lucrative and, rather than buying 10 ounces of gold for $17,750, you can buy 10 GLD June $145/170 bull call spread for $16.70 ($16,700) and all GLD has to do is hold $170 (now $171.50) and you make $8,300 or about 50%.  Buying physical gold, it would have to move to $2,600 an ounce for you to get the same bang for your bullion bucks.  Break-even on that trade is $161.70 so it has built-in protection as well.  

AGQ is an ultra-ETF that tracks silver and is currently at $58.91.  That one can be used as an inflation hedge by picking up the March $58/75 bull call spread for $5 and they just released 2015 options on ABX, which can be used as a bullish offset to AGQ or the above GLD play by selling the 2015 $33 puts for $5.05 which turns the AGQ spread into a .05 credit with a $17 potential upside (34,100% on cash) and the worst case is owning ABX at net $32.95, which is 22% below the current price of $42.46.

As I keep saying, there are lots of ways to make money in a bull market – so far, this week, we seem to be in one.  Notice I'm not talking about fundamentals, as they still suck, but the Central Banksters seem very intent on buying us a rally and who are we to stand in their way.  Earnings season is upon us and we have lots of fun with those bets as well so tune in next week, once we get past today's quad witching moves for lots of ways to make some quick money on those as well.

Have a nice weekend,

– Phil

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StJ – I agree, I use a Samsung Galaxy S2 and I'm quite okay with it, but I've never used an iPhone so I thought maybe there's some sort of "wow factor" involved…anyway Zaky's clearly in heaven with his iPhone 5…and AAPL has a tendency to soar…

iPhone / jerconn – My kid has an iPhone (not a 5 though) and I have a Galaxy S2 as well but I would not switch. The iPhone screen is too small and makes it hard for me to type messages (and you can't change keyboard). And reading on that small screen is not that comfortable. Making it higher and not wider doesn't seem to be a solution for me unless you are going to read in landscape. And of course, she doesn't have 4G and it's absolutely amazing to download stuff at the speed a cable connection!

But Apple will sell tons of these new iPhone as they have a very loyal customer base. No doubt a well run business…

The difference between the Fed and the ECB:

http://www.businessinsider.com/the-ecbs-breakthrough-2012-9

 

But to say that the ECB "eased" policy at its last meeting is actually a gigantic understatement. What Mario Draghi did is almost nothing like what Bernanke did.

Sure, both are using the central banks' unlimited balance sheet to buy bonds, but whereas the Fed is buying up bonds in order to (in part) push money into riskier areas of the market, the ECB is hoping to buy up bonds to bring a bid back into the peripheral sovereign bond market.

More broadly, as stated above, the Fed is trying to influence the market and the economy through fairly technical channels (reduce yields, hope money then goes into riskier areas), whereas the ECB is offering to backstop weak European governments, so that they can keep spending without fear of completely busto.

Speaking of Apple:

http://www.nytimes.com/2012/09/22/opinion/nocera-has-apple-peaked.html?_r=0

 

And you can see it in the decision to replace Google’s map application. Once an ally, Google is now a rival, and the thought of allowing Google to promote its maps on Apple’s platform had become anathema. More to the point, Apple wants to force its customers to use its own products, even when they are not as good as those from rivals. Once companies start acting that way, they become vulnerable to newer, nimbler competitors that are trying to create something new, instead of milking the old. Just ask BlackBerry, which once reigned supreme in the smartphone market but is now roadkill for Apple and Samsung.

Even before Jobs died, Apple was becoming a company whose main goal was to defend its business model. Yes, he would never have allowed his minions to ship such an embarrassing application. But despite his genius, it is unlikely he could have kept Apple from eventually lapsing into the ordinary. It is the nature of capitalism that big companies become defensive, while newer rivals emerge with better, smarter ideas.

“Oh my god,” read one Twitter message I saw. “Apple maps is the worst ever. It is like using MapQuest on a BlackBerry.”

MapQuest and BlackBerry.

Exactly.

A little too pessimistic though…

For Phil:  "Square" founder was also founder of "Twitter" – still not clear if his 2.75% per swipe is in addition to the credit cards…http://online.wsj.com/article/SB10000872396390444433504577652134241536696.html?mod=WSJ_Tech_MIDDLETopNews

zeroxzero,
Very interesting commends on Muslims. I must admit not having the background knowledge you presented above.
I can only say that all the violent  actions presented by mostly Muslims on a daily basis are all contrary to what you say the religion presents. I personally can not understand the fanatic outburst of anger and killer instinct these people have in their blood. And this comes from a German who's past country's history is much to be said about. Again one should give these raving mops of people, Muslims or no Muslims, shovels instead of food and money.

Zero and Yodi, the claims of Islamic contributions to general culture may or may not be accurate, but Obama's claims that Islam contributed to America and American culture ring hollow.  Here's some food for thought: http://www.jpost.com/Opinion/Columnists/Article.aspx?id=285736

jerconn \ thanks for the typical Likud propaganda

eah, thanks for the Likud propaganda jerconn. Jerconn, isn't Israel an apartheid state?
 
http://www.youtube.com/watch?v=Ns2Fi2Jesg0

lvmoda – u still around?  If so, can you send me an email plz.  Thx. 

pharmboy123 gmail.

Phil/Last week's oil drop,
On EliteTrader I ran across a guy who strongly disagrees with your explanation of last week's drop in oil.  Since he seems to be a fairly seasoned trader, I was wondering if you could comment on his statement (and maybe translate it into plain English for the benefit of people like myself, LOL!):
 
" 09-20-12 06:06 AM
Alright let's walk through this, conspiracy theories aside. All the monthly strips are trading at .30 to the tick through the end of the year. The calendars trade at a significant liquidity to the outright market. You can move all the size in the world right now by selling the Sept/Oct strip for .30.

Next, all the 2011 strips are in contango!!!!! When specs are getting squeezed the market is not in contango, it goes into backwardation and they blow out the front end of the curve. This is NOT happening. In fact, the curve is very smooth and quiet and trading in perfect alignment. If someone wanted to move 1 million contracts right this minute at midnight, they could execute the trade in one second with Phibro giving them a tick or two in edge on the strip. Nobody is "trapped".

The oil market is driven by the physicals, not the futures. The physical market dwarfs the futures by magnitudes. There is more then enough liquidty in the cash market to accommodate any spec. This is not the Hunt brothers corner of silver in 1979. The physical supply of oil currently around the world is huge. The physical players will lay off anything in the futures market in a second with the slightest bit of edge.

The main driver in oil right now is Brent, not WTI and the Brent/WTI spread is very heavily traded as well. The oil market is probably one of the hardest markets in the world to manipulate because of the liquidity in the cash market and the fact that nobody has a monopoly on supply. There are a lot of factors driving crude. QE, geo-poltical risks, the dollar, and the distillates."
Here's the link:
http://www.elitetrader.com/vb/showthread.php?s=a027e5a8d3d78c9247efd5f9d99b833b&threadid=170318&perpage=40&pagenumber=165

I guess having to work 12 hours a day, 6 days a week for $192 a month is not making everybody happy at Foxconn:

http://www.engadget.com/2012/09/23/foxconn-taiyuan-riot/

 

News just came in that workers at Foxconn's Taiyuan plant have started a riot in the wee hours in China, and that police forces are on site to control the crowd. While the motive isn't clear, Sina Weibo user Li Tian reports that the riot isn't related to the recent anti-Japan protests, though judging by his photos, much damage has been done in the process. The same site suffered from a strike back in March over salary dispute — the front-line workers failed to receive the promised pay rise. On a similar note,Foxconn's Chengdu plant also had a riot in June, but that was apparently due to an argument between some workers and a local restaurant owner.

Update: We are seeing unofficial reports claiming the "2,000-people" riot was triggered by security guards hitting a worker at 10pm local time.

Update 2: According to a provincial website, Foxconn's Taiyuan industrial park focuses on magnesium alloy components for consumer electronics, heat conduction products, LED lighting products, mobile phone products and magnesium alloy automotive components.

Update 3: An undercover report from August mentioned that the Taiyuan plant processed the back casing of the iPhone 5. It also highlighted the company's harsh management as well as "practically compulsory" over-time work. We don't doubt that this riot escalated due to dissatisfaction over working conditions.

As with last week, not much data until Friday but then we get GDP numbers from Great Britain, the US and France as well as PMI numbers from China and Japan. Not of these numbers are supposed to be very good, but who cares, we got ourselves a rally….

WOW AAPL
Anyone but me saying a question on apple but Phil, WOW!!!!!!!!!!

shadow – I'm waiting for his final decision because I'm trying to make the same one

Good Morning—-anyone around

Phil,
Reposting from yesterday, this may be something for after hours:
Phil/Last week's oil drop,
On EliteTrader I ran across a guy who strongly disagrees with your explanation of last week's drop in oil.  Since he seems to be a fairly seasoned trader, I was wondering if you could comment on his statement (and maybe translate it into plain English for the benefit of people like myself, LOL!):
 
" 09-20-12 06:06 AM
Alright let's walk through this, conspiracy theories aside. All the monthly strips are trading at .30 to the tick through the end of the year. The calendars trade at a significant liquidity to the outright market. You can move all the size in the world right now by selling the Sept/Oct strip for .30.
Next, all the 2011 strips are in contango!!!!! When specs are getting squeezed the market is not in contango, it goes into backwardation and they blow out the front end of the curve. This is NOT happening. In fact, the curve is very smooth and quiet and trading in perfect alignment. If someone wanted to move 1 million contracts right this minute at midnight, they could execute the trade in one second with Phibro giving them a tick or two in edge on the strip. Nobody is "trapped".
The oil market is driven by the physicals, not the futures. The physical market dwarfs the futures by magnitudes. There is more then enough liquidty in the cash market to accommodate any spec. This is not the Hunt brothers corner of silver in 1979. The physical supply of oil currently around the world is huge. The physical players will lay off anything in the futures market in a second with the slightest bit of edge.
The main driver in oil right now is Brent, not WTI and the Brent/WTI spread is very heavily traded as well. The oil market is probably one of the hardest markets in the world to manipulate because of the liquidity in the cash market and the fact that nobody has a monopoly on supply. There are a lot of factors driving crude. QE, geo-poltical risks, the dollar, and the distillates."

Here's the link:
http://www.elitetrader.com/vb/showthread.php?s=a027e5a8d3d78c9247efd5f9d99b833b&threadid=170318&perpage=40&pagenumber=165

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