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Monday Mystery – What Do You Mean, Europe Still Not Fixed?

Still broken?

That's right, Chancellor Angela Merkel and President Francois Hollande underlined Franco-German disagreement over the weekend as they clashed on a timetable to introduce joint oversight of the region’s banking sector, with Merkel rebuffing Hollande’s appeal to activate it “the earlier, the better.” “Complacency seems to have affected European policy- makers,” Joachim Fels, chief economist at Morgan Stanley in London, wrote yesterday. “One case in point is the disagreement between governments about the nuts and bolts of a banking union, which remains crucial to break the negative feedback loop between banks and weak sovereigns.”

Chancellor Angela Merkel and President Francois Hollande’s appeal for German-French unity to tackle Europe’s ills lasted all of three hours as they disagreed over closer integration of the region’s banking system. The two leaders, marking Franco-German reconciliation after World War II, delivered back-to-back speeches in which they hailed their mutual ties, tried out each other’s language and pledged to work together for a more unified Europe to defeat the financial crisis. The bonhomie broke down at a subsequent press conference when they failed to mask their differences on a planned “banking union” meant to achieve that end. 

French President Francois Hollande's approval ratings have tumbled to their lowest level since he first took office in May, a new poll showed on Sunday, as France's grinding economic stagnation and record unemployment show little sign of easing.  But at least he'll still have a country to withdraw from public life to – not so much Spain – where 25% unemployment (50% for youths) has as many as 1.5M of 7.5M total Catalans protesting in the street, demanding independence.  

Barcelona protestsOut-of-money Catalonia had to ask the central government for a bailout. Catalans are frustrated. They claim that under the current fiscal setup, Catalonia transfers €16 billion annually to the central government, and that these transfers bankrupted the region. Now, in exchange for the bailout, the central government has imposed austerity measures that cut into health care, education, and other services.

On Thursday, Catalan President Artur Mas met with Prime Minister Mariano Rajoy, originally to beg him for a new tax deal. But the massive demonstration in Barcelona had added independence to the agenda. Rajoy brushed him off, with references to the constitution that didn’t allow regions to secede.  “Constitutions may or may not be modified, but they do not subjugate the will of the people,” Mas lamented after the meeting.  “Catalonia will follow its path,” he said. Parliament would meet next week to “consider the next steps.”

 “Illegal and lethal,” howled Foreign Minister José García-Margallo and threated Catalonia with exclusion from the EU if it chose independence. Decisions in Brussels as to which country will be allowed to accede to the EU have to be unanimous, and Spain’s veto would bar Catalonia “indefinitely,” he said.  This shows how little the Spanish Government understands the beef Catalonia has – they are not going to pursue independence to get under the thumb of the EU!  Colonel Francisco Alaman promised to crush the “vultures” if they chose independence. “Independence for Catalonia? Over my dead body,” he said.  Sound stable to you?

China and Japan continue to be unstable as they trade threats over the Diaoyu Islands and there are rumors that China is beginning to use drones to monitor activity on the disputed Islands.  Strained relations with Japan, a major trading partner, have sent China stocks back to their 2009 lows and China's Beige Book Survey of manufacturers and retailers shows things were already dire before this latest incident:

The dramatic and unexpected worsening of the European crisis and slowing of America’s economy brought China’s export order growth to a near-standstill,” said Craig Charney, research director for the China Beige Book.

There is nothing in the Beige Book that would definitively suggest a recovery in the Chinese economy is in the offing,” said Glenn Maguire, principal at consultant Asia Sentry Advisory Pty in North Sydney, Australia, and former Societe Generale SA chief Asia economist. “The deterioration in net hiring and sharp pickup in job shedding is consistent with the HSBC PMI figures which point to a significant weakening in domestic demand, particularly retail.” 

So China is not going to save us and Europe is not going to save us so the question that must be answered this week is – will the US economy be strong enough to save us?  As we know, it's the Appleconomy and 5M IPhones were sold this weekend, 25% more phones than the 4s sold in it's debut and the initial run is sold out.  You would think that would be good for AAPL's stock but it dropped $20 from Friday's high pre-market and is hanging around $685 – a great opportunity for us to go long on AAPL and the Nasdaq this morning.  

One thing that is very clear is that the US is looking safer than China, or Japan, or Europe or Australia (too tied to Japan and China) or the Middle East.  The WSJ ran an article this weekend indicating money managers, who are significantly underperforming the S&P this year, are heading to the sidelines to lock in what gains they have and avoid the potential of being caught up in a correction.  

While I don't disagree that the Fed's QE3 will do nothing to boost the economy and, therefore, nothing to boost S&P earnings other than by measuring them in weakened Dollars – I do think that money has to go somewhere and it's not going into TBills at 1.6% when you can get 3 times that much (4.7%) from owning T.  

While we may see a shift to some more conservative stocks in a mix, US stocks should continue to be the best of a bad bunch.  Keep in mind that if you buy a 10-year note for $10,000 and get a 1.6% interest rate and rates go up to 2%, you will lose 10-20% of your value.  

If, on the other hand, you were to buy 300 shares of T stock for $38.27 ($11,481) and sell 3 2015 $37 calls for $3.70 ($1,110) and sell 3 2015 $28 puts for $2.30 ($690), your cash outlay is net $9,681 and, if T remains over $37 through expiration, you collect $11,100 plus 10 dividend payments (assuming no change) totaling $1,320 for a total return of $12,320, a profit of $2,639 (27%), which is about a 12% annual return.  

The downside is you could be assigned 300 more shares of T if it is below $28 and your average cost on 600 shares would be $30.14, which is a 21% discount to the current price.  These are not very harsh penalties if your intent is to be a long-term blue-chip investor.  

So, contrary to the WSJ – I don't think people will be fleeing equities without a major negative catalyst.  We already know about the Fiscal Cliff, the Euro Crisis, the China Syndrome, etc – I'm really not sure what it will take but we're going to be taking silly sell-offs like today's dip in AAPL and getting a bit more bullish.  

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  1. Good morning Everyone

  2. Does any know what happens to short puts in the case of an underlying reverse stock split, as in the case of my beloved VXX?

  3. Oil Lines

    R3 – 94.32
    R2 – 93.75
    R1 – 92.92
    PP – 92.35
    S1 – 91.52
    S2 – 90.95
    S3 – 90.12

  4. Hi Aaron,
    The puts become non standarized options and then you hope you dont get assigned and you need to track when you can get assigned.

  5. Good Morning!

  6. Dollar catching a pretty good bid this morning.

  7. Amits/VXX –  Much obliged. Hope is pretty much all I have been doing with this trade.

  8. VXX / aaronc – They will still trade the old strikes separately. Look at FAS for example, they have Jan 13 options at the old strikes. But they won't be very liquid so hard to trade.

  9. StJ/VXX – Thanks for the 411. VXX… The gift that keeps on giving, and when I say giving I mean robbing me blind. :-)

  10. Anyone knows when the reverse split for VXX will take place and what the ratio is?

  11. aapl down 2% pre-market – looks like investors didn't like the 5M weekend sales figure

  12. Lotter/VXX 1:4 The reverse split will be effective on Thursday, October 5, to shareholders of record Oct. 4, the company said in a press release.

  13. The next crisis will be Japan:


    A crisis in Japan would most likely manifest as a collapse of confidence in the yen: At some point, Japanese citizens will decide that saving in any yen-­denominated asset is not worth the risk. Then interest rates will rise; the capital position of banks, insurance companies, and pension funds will worsen (because they all hold long-maturing bonds, which fall in value when rates rise); and fears of insolvency will surface.

    Japan has some buffers against calamity—­particularly, its assets held outside the country (including more than $1 trillion in foreign-exchange reserves) and its unmatched ability to export. Nevertheless, the real value of the roughly $14 trillion in government bonds will fall significantly once people fully realize that the tax base is aging and shrinking. Presumably, the yen will also depreciate, perhaps sharply.

    The fact that government debt is held mostly by Japanese citizens is not sufficiently reassuring. The same was true in Germany during the 1920s and Russia during the 1990s, yet in both cases the elderly lost their savings to high inflation. Today, Italian and other European savers who hold their own government’s debt are already nervously edging toward the exits. As in Europe, the financial system in Japan could face a wave of insolvencies, triggering a broader loss of confidence.

    The shock felt around the world will result not just from the realization that Japan is unable to meet its pension and other social obligations. Investors will also be horrified to see the disappearance of the private savings previously used to buy government debt, whether through debt defaults and bank failures or through high inflation. For ordinary Japanese, public promises about retirement benefits and price stability will be broken just as their private savings for retirement collapse.

    No one can predict the timing, but without radical political change that creates a more responsible fiscal trajectory, this will happen.

  14. Tis a great morning… Things are dying down over here (until Germany publishes their own Muhammed Cartoon) and oil dropping like a rock!!! It's a great day to be alive! lol

  15. aronc/VXX - Thanks, much appreciated.  I guess we have calls in the 25KP portfolios that will have to be dealt with.

  16. Stj/Japan –  The last line about not being able to predict the timing is key. Ask Kyle Bass about trying to get in front of the widow maker. 

  17. Might get tough in Germany as well:

    Germany business sentiment fell again in September, from 102.3 to 101.4, marking its fifth succesive month of contraction. The roughly 7,000 companies surveyed by the Ifo institute were also increasingly pessimistic about their futures… which doesn’t bode well for everyone else’s.

  18. AAPL / Gandhjo – Maybe also the little bustup at the Foxconn factories… 

  19. stjean – yes Foxconn bust could be another reason. Nevertheless, it seems like a good opportunity to buy the dip here

  20. Monday pre-market 9-24-2012
    Dr. John L. Faessel
    Commentary and Insights
    Quote of the Day
    "It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."
    ~ John F. Kennedy ~
    Different This Time!
    RED FLAG ?a MAJOR DIVERGENCE – Ignore at your own risk….
    My readers know that I follow sentiment closely and go the opposite way during extremes when it matches up with overboughtness / oversoldness ? but this time ? it looks different… Like maybe in 1932 – it looked horrible then but got much worse…
    A Hurricane is building and it?s aimed at you – in no particular order
    Iran / Israel conflict could ignite any day / hour
    Muslim nutcases world-wide are running totally amuck
    EuroLand is in a deepening recession
    China slowdown accelerating
    Japan debt at 220% GDP
    China / Japan nose to nose over some Japanese islands (oil there)
    A global economic slowing is underway
    The risky features of global monetary easing (printing) ECB / Fed / Bank of Japan yet loom 
    2nd USA Debt Downgrade 
    The USA is closing in on the Fiscal Cliff
    Tax unknowns / Obama Care plus you name it
    Unfunded pension?s tsunami of $ trillions
    Election quandary can go either way – Socialism or Free Markets 
    Regulatory situation continues to deteriorate
    Savings rates close to nothing and the middle class reels
    Add in here that the moral / ethical / spiritual compass of the USA is now close to only being but a memory…
    And throw in investors abandoning stock markets due to Flash Crashes, Naked shorting etc
    So Buy Stocks? Are you kidding me? – Actually, maybe yes – but let?s wait until the McClellan gets hyper oversold in the minus 300?s
    The key phrase will be when ?TSHTF?– Buy things…
    On Friday, after an APPLE (APPL) driven pop Stock Markets sell off, but hold near highs however… NOT SO with the Dow Transports that sold off all day long and closed right off its lows… The Dow Transports fell to 4+ month lows – very near the Stock Market?s low in June and are now well below 50 and 200-day moving averages.
    Suggesting that if the nation's largest and most powerful companies, as evidenced by the Dow Transports Index, (20 large companies that move goods plus people) that are ?faltering? and ?that index? is going opposite from the Dow Industrials it?s at least a heads up ALERT to be very concerned about… The Transports are super economically sensitive. The Transports were off 5.9% last week and off 2.2% for the year while DOW is up 11%.
    Shanghai Exchange slams to 3 ½ year lows and is now off about 66% from its highs.
    More – “Let?s pretend” in Europe as the ECB goes further in buying “manipulating” i.e. reducing the yields the bonds of the southern EuroLand PIIGS – little reform has been done - Talks with ?troika? on austerity package were inconclusive
    Riots in Spain on Saturday injure 60 – 11 arrests
    Sweden will not agree to allow taxpayers to bail out "ill-managed" banks in other European countries
    The Winds of War….Muslim / Mideast /
    Iranian commander: “Israel-Iran war inevitable”
    General Martin Dempsey, chairman of the Joint Chiefs of Staff, dismayed Israeli officials by saying that Washington did not want to be "complicit" in an Israeli attack on Iran.
    Tens of thousands protested in Kano, Nigeria, on against the anti-Islamic film that has been causing uproar in the Muslim world
    10,000 Bangladeshis took to the streets in Dhaka to protest an anti-Islamic film
    "Egan-Jones Ratings Co. downgraded its U.S. sovereign debt rating to AA- from AA on concerns that the Fed's new round of quantitative easing, or QE3, will hurt the U.S. economy.
    California unfunded pension liability is $500 billion. Also in California, the Orange County Employees Retirement System is estimated to have a $10 billion unfunded pension liability.

    “In short, tax increases appear to have a very large, sustained, and highly significant negative impact on output.” Christina D. Romer, President Obama?s first Chair of his Council of Economic Advisers. Romer resigned less than two months after publishing the paper. Forbes goes on to say that "In his 2013 budget, President Obama proposes $103 billion in 2013 tax increases, including $83 billion of higher income taxes on those who make more than $250,000 a year, or about 0.65% of GDP. Using the Romer baseline estimate, that would reduce real GDP by 2 percentage points over the next 10 quarters.  Based on the general relationship between economic growth and unemployment, such a fall in output implies a loss of more than 800,000 jobs."
    Economic freedom in the world is near an all-time high, but in the U.S. it's been on the wane, according to the Fraser Institute. BARRONS

    EuroLand Bond Yields fade as the printing presses cranking out Euro?s roar.
    ·        Greek 10-year yields 19.26 % down from 24.41% a few weeks ago
    ·        Italy 10-year (gross) bond yield – 5.07% off cycle highs of 7.29% on 11-24.
    ·        Spanish 10-year (generic) bond yield – 5.68%. 6-Weeks ago yields ticked cycle highs of 7.41%.
    The S&P 500 (SPX) closed Friday at 1460.15
    Key channel / trendline support is at 1396
    Short term price support is at (SPX) 1450. Then at 1429
    Decent multi-point price support at 1397
    50-day moving average support is at 1404
    Longer out term price support is at 1325 /1320/1313/ 1309
    The 200-day moving average support is at (SPX) 1354
    Stronger ?Price? support in the (SPX) is at the June 4th lows of 1266 and will be the battleground zone if the market tests its lows.
    Friday?s key indicators and metrics:
    Cycle highs or lows are in red
    ·        McClellan Oscillator is in Neutral at plus 12

  21. QCOR under investigation for selling practices….should be interesting….down 30%

  22. Quote of the day / Rustle – Not applicable today as tax rates are the lowest in generations…. Remember when Kennedy took office the top rate was well over 50%!

  23. 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:

  24. quote/stjean
    I just post it, doesn't mean I agree with it.  Also the next line is "This Time Is Different!"

  25. Good morning!  

    The AAPL $695 calls opened at $12, went to $14 and are now back at $17.50, which is still $6 better than they were on Friday.  I was writing my post but I mentioned taking advantage in it and, if you are playing our $25KP position – this should be a reflex for you.  Don't wait for me to say, "let's buy back some calls for 50% of what they cost yesterday" – this needs to be a reflex!  Last time they dipped, we bought back 3 of 10 and then 2 more and it worked out to a $4 gain, which is $2K on 5 contracts so nothing to sneeze at.  Meanwhile, as I'm writing this, AAPL has already bounced $10 and the $695 caller is now $18.70.  

    If all you do is wait to follow instructions – you aren't learning anything!  

  26. Phil – What are your thoughts on INTC? The dividend yield was just raised to an annualized 3.9% and it hasn't been bid up like the telcos.  Would you recommend a similar trade to the T one mentioned above? TIA

  27. FAS Money – Selling 4 Oct $100 puts for $2.15

    $25KPs – Nice opportunity to get more bullish. 

    • SVU – Fine
    • AMZN – Nice dip this morning
    • SQQQ – That's a long now
    • VXX – Just in case
    • PCLN – Also nice dip, earnings play
    • V – Earnings
    • FAS – Let's buy back the $120s while they are cheap and leave naked long. 
    • GLL – Gold not acting like they are breaking higher
    • AAPL – Too late to chase.  That was a huge opportunity at the open to buy back the 5 calls we sold for $18.46 for a 33% discount.  If you missed it, you missed it.  
    • BBBY – Not likely to come back but no point in selling for .04.  

    Well, that was fast and easy.  Let's add 20 QQQ weekly $69 calls for .92, a .15 premium for the week.  No stop yet but remind me if we get to .75.  Intent to sell 10 at $1.12 to give us a buffer.  

  28. AAPL / Phil – These calls were at $12.30 (the low of the day) the first minute of trading and moved to $14 at $9.31. They actually fluctuated between $12.30 and $15.50 the first minute. It would have been a good idea to close some of these short calls, but it was pretty fast moving….

  29. PCLN in 25KP – I believe our average cost is now $8.17 for the 10 puts we have now.

  30. TOS – scrolling in trade tab – will be fixed when they send out an update. Seems there has been a lot of complaints about that!

  31. On the other hand, it looks like we might get another chance on the AAPL short calls!

  32. Anybody/Phil/Pharmboy…. Sell QCOR Jan 2014 18 Put for $5.80?

  33. QQQ already at .72

  34. The QQQ 69 calls just traded at $0.75

  35. Flan- Should we add to the long Oct 700's?

  36. Everything seems to be hugging those 20d MAs.  Amazon is sitting on it….OPEN, etc.

  37. Flan- Or initiate on $695's?

  38. Doug Kass's 10 Concerns about Apple:
    10 Concerns

    Quality vs. price: Apple is now selling less or equal for more money. The company used to sell a better product for more money, which is a great strategy. Its products were simply market-defining, and competitors were not close. Recently, however, things have changed, and competitors have caught up. Now Apple is selling an equal to worse product than the competition for more money (both phones and tablets). That strategy cannot work forever. This is the biggest issue.
    Delivering a more complicated product: Products are also getting more complex and Microsoft-like. Apple's challenge is to deliver ever more complicated products (with a lot of new components) in sufficient quantities. See most recent Foxconn issue. Previously, we would never have seen such a story because there were never issues and nobody would dare voice them, especially not an avowed Apple zealot like the author of this interesting article.
    The Oracle of Cupertino: Steve Jobs is no longer around to convince consumers that his products are magical. There is no longer a single visionary voice, especially with the vision of Steve Jobs. There are stories floating around about internal disagreements and power struggles given the unique void created by the loss of a single dominant figure in an unusual corporate structure that he controlled.
    Increasing product homogeneity: Apple no longer has a huge ecosystem advantage. Most if not all the apps that consumers care about are available on Android and Microsoft (MSFT), which can also run Office apps such as Excel that Apple doesn't. The first-mover advantage might be lessened or lost if Apple continues to try to do everything on a proprietary basis — for instance, maps (and who wants a smartphone with bad maps?).
    Economic headwinds: Some of the markets served by Apple are saturated, and in a worldwide economy facing strong headwinds, consumers may balk at a product that can be purchased at much lower prices from competitors. Until last quarter, Apple never missed consensus expectations during a product transition. There is more to last quarter's miss than transition.
    Poor economic proposition for Apple's partners: Apple's carrier partners do not like the economics they give to Apple. Apple's partners have shown that they can and will shift to the good alternatives that consumers seem to like (e.g., Samsung Galaxy).
    Roadblocks to new initiatives: Potential business partners in general do not like or trust Apple relative to other initiatives. The music industry and AT&T have not had great experiences with Apple, and the company might find it hard to sign deals for new initiatives.
    Product cannibalization: The iPad mini may cannibalize the higher-margin iPad — or just be a neutral at best.
    Growing size mandates delivery of more product blockbusters: An investor better believe in a huge new blockbuster product next year. TV is complex due to relationships with cable companies, set-top box manufacturers and channel guide programmers. Google may one up Apple in the space, as it owns Motorola's set-top box division and has Google Voice already. If it comes to integrating more complex solution for TVs with content, cable companies and other media partners have learned not to trust Apple given the poor outcomes other Apple partners have had (e.g., music industry, AT&T, etc.).
    Valuation: Apple's stock is cheap on a P/E basis but arguably very expensive on price/sales (4.4x) and total absolute market capitalization basis ($625 billion).

  39. Got stuck uncovered on AAPL, so Doubled down my long Oct 700 calls on the open and caught a sub$12 fill.  Sold 1/2 over $15, and liking and lower entry on the balance.  Now need a pop to re-cover.
    Whew.  And sold my DIA hedges on the open for tidy profit.  Question, where should I look to replace hedge?  Doesn't look like to market really wants to go down, barring some catalyst.  Guess I just wait?

  40. Pharm – any QCOR puts youre selling today?

  41. RIMM making new lows.  We were in the BBY Mobile store and my daughter said "Oooh a Blackberry" picked it up, played with it for about 3 seconds before putting it down and moving on.  That's about the story for RIMM…

    VXX/Aaron – Reverse split on Oct 5th will be 4:1 so, for example, the 20 Oct $14s we have in the $25KP will become 5 Oct $56s and, PROBABLY, to avoid confusion, you will be automatically adjusted as I doubt they want to carry double options through 2014, where many contracts have already been written.  If you have short puts, your bar will rise with the ETF.

    AAPL/Gandhjo – It's relatively easy to tank AAPL in pre-market trading and trigger whatever stops they can at the open, which allows whatever fund(s) is manipulating AAPL to jump in and pick up a few million shares for $15 less than they could on Friday.  This is the problem for people who play a stock without conviction – when the price drops on AAPL, it shouldn't make you nervous – it should make you excited that you can buy more cheaply!  These are the kind of moves we have to learn to take advantage of.  

    imageJapan/StJ – Another accident waiting to happen.  I found this fascinating too.  When asked what catastrophes they are most worried about – 63% of Germans said "Inflation" – Natural Disasters were 2nd with 52% and getting old and sick 50%, illness 46%, declining living standards in old age 40%, terrorism 39%, kids on drugs 34% and loneliness in old age 29%.  Very interesting insight into the German mind-set.  

    Oops, AAPL rejected at $695, back to $690 fast!  Not good for our Qs but maybe another opportunity to adjust AAPL.  

    IFO/StJ – Forgot about that one this morning.  5th consecutive decline this month.  

    "Riots" at Foxconn look a little more like thousands of young workers just taking an excuse to blow off steam.  I guess when you work day in and day out for .50 an hour on 14-hour shifts and you go home to your bunk and read in the paper that the phones you are selling are making AAPL the richest company in history – it might kind of piss you off….  Maybe AAPL will give in and raise them to .55 and hour.  

    Faessel/Rustle – Yes but the Fed is putting $85Bn into the economy this month.  That's 6% of our GDP!   Even if it's only 25% effective – that's 1.5% of our GDP!  

    Oil/Wappler – That's they typical oil trader justification for prices.  What do you want me to say?  Did he clearly predict the downturn or was he "caught by surprise"?  I don't follow the guy but he lost me when he said you can move 1M contracts (1Bn barrels) at midnight.  That's just a moronic statement as there are only 1M open contacts in the entire strip so it doesn't even sound like something an actual oil trader would say because it's so ridiculously wrong that it would be embarrassing to write it – much like if you wrote "I breathe in through my nose, mouth and butt" and then published it somewhere where you would be judged professionally.  So, either he is a moron or he thinks his readers are…

    QQQs lost a dime on the $5 dip in AAPL which was a 7-point drop in the Nas.  The AAPL $695s only fell to $15.50 that time but that seems about right and we could hit $12 again if we hit $690 but I don't think that will happen twice.  By the way, my logic with the Qs is, if AAPL doesn't pull back, we'll make a few hundred dollars but, if AAPL does pull back, we'll lose about $400 on the Qs but then we get to buy back 5 $695 calls for $12 and, if all goes well, we'll re-sell them at $17 and make $2,500 on that.

    INTC/JJ – They are caught in a transition to tablets but, due to the low cost of tablets, they will never make those lap-top revenues again, even if they become the dominant tablet chip maker – which they are far from.  So the growth story isn't there anymore – even if they come up with Quad/Quad processing (16) for servers, which they probably will but the problem with Moore's law is that you get a 100% increase in price/performance every 18 months and that's great as long as performance is lagging demand but now we're moving back to a kind of mainframe model where the processing power of the local terminal is no longer a bottle-neck and no one wants a $300 processor in a desktop anymore (used to be a $3,000 processor) and 18 months from now the $300 I7 processor will be $150 and then $75 (I3s are $100 already) but there's no real reason I would want an I10 that I'm currently aware of.  So, short story is I don't think INTC is a sure thing anymore.  I'm sure they'll be around and they'll adapt and survive but $22 isn't cheap enough – maybe if they dip back to $18…

  42. QCOR – no.  Holding.

  43. Faessel/Phil
    Again, just post it to show opposing views as you recommend to read at least 25% of.  Doesn't mean I agree with it.  I wrote TNA puts at 64.50 this morning which I will be covering soon since they are up almost 50% already.

  44. AAPL/StJ – I know, that's why I'm saying people need to see the opportunity and take it, not wait to see what I write about it.  I suppose now, I would buy back 2 at $15 and 3 more at $12.50 if possible so make that official in the $25KPs but not likely we'll get the chance.  

    On PCLN – Our goal is to get 1/2 out at $8

    AAPL/Rustle – New screen is gorgeous, I haven't seen any of comparable quality.  I agree on the macro issues but I think the only thing limiting IPhone sales is expiring contracts.  Pretty much everyone already has a smart-phone at this point and most contracts are 2 years so AAPL will get their market share month after month and I have no fear of that business going away so the real question with them is – what's next?  Also, it's very interesting but every phone place I went to in the mall asked me if I'm selling my IPhone4 – apparently you can get $150 for a 64Gig one.  Kass is very funny on price/sales – I've never seen a company's fantastic margins used against them like that…

    Good moves Hoss.  I think we'll pop back by the day's end – RUT already taking off and the Transports are up 1% but SOX are down 1% and dragging the Nas – I figured that would turn back up but we should have played TNA again – we'd be done already.  

    Earnings/StJ – Another reason I'm getting more bullish – expectations are now setting a very low bar.  Back in July I was bearish because I said they'd never hit those targets and, silly me, I should have known they'd just drop the targets 5% and declare victory.

    Faessel/Rustle – That's fine and I like to read it but then I have to put my opposing view to his opposing view in, right?  

  45. AAPL- BTO Oct 690 calls

  46. Faessel/Phil
    Expect it, just didn't want you thinking I agree with him.  Covered the puts at .75 after selling at 1.30 earlier.  Now to see if I can resell them again today.

  47. Germany Inflation / Phil – It's truly phenomenal that the German public still reacts to events that happened over 80 years ago in an economic environment that bears no relation to where we are today. Yes, there is little doubt that we will face inflation again, but given the interconnection between all the world economies, I doubt that it would be as damaging as was seen in the Weimar Republic! In the meantime, climate change could mean the death of millions of people and that doesn't seem to register as high as inflation! 

  48. Low bar…..LOL.  When FDX and INTC say they are having a slow down, then beat…that is how the 'game' is rigged.  There is nothing 'bullish' about that, it is just playing by the rules.

  49. Euro holding $1.29, Pound just below $1.62.  77.8 Yen held so far and the Dollar is at 79.70 (remember the 80s?).

    I think Europe is dragging us down into their close.  Hopefully we'll pick up once they are done (11:30).  

    At the open: Dow -0.41% to 13524. S&P -0.53% to 1452. Nasdaq -0.88% to 3152.

    Treasurys: 30-year +0.37%. 10-yr +0.17%. 5-yr +0.05%.

    Commodities: Crude -1.35% to $91.64. Gold -0.87% to $1762.45.

    Currencies: Euro -0.55% vs. dollar. Yen -0.18%. Pound +0.23%.

    Market preview: Shares are set to start the week lower, weighed down by concerns about the eurozone debt crisis and falling German business confidence. S&P futures are -0.4%. Peregrine Pharmaceuticals (-86%) is getting slaughtered over a botched Phase II trial, while Questcor Pharmaceuticals is 29% on a government investigation into its promotional practices. More happily, UnitedHealth is set to make its DJIA debut following Kraft's split into two. Later: Dallas Fed Manufacturing Outlook

    10:00 AM On the hour: Dow -0.32%. 10-yr +0.17%. Euro -0.53% vs. dollar. Crude -1.32% to $91.66. Gold -0.75% to $1764.75. 

    11:00 AM On the hour: Dow -0.16%. 10-yr +0.21%. Euro -0.54% vs. dollar. Crude -1.42% to $91.57. Gold -0.63% to $1766.85.

    Contrary to what the Presidential candidates have been saying, Cornell's Robert Frank says, "the nation doesn’t actually facedifficult economic choices." Inter alia, Frank advocates spending money to repair crumbling infrastructure and so create jobs, and "replacing the current income tax with a more steeply progressive consumption tax, making big-ticket spending much more expensive."

    The DJIA has gone 62 trading sessions without one single-day decline of more than 1%, according to Bespoke. During this time, the index has risen 8% and hit a multi-year high. Set for a decline? Maybe not, as further research shows 16 other similar instances since 1900, and each time the Dow was green 6 months later, with the average gain 6%.

    With the Dow off 40, the QE4 calls begin. Morgan Stanley's Adam Parker expects the Fed could augment QE3 before year's end as $40B/month in MBS purchases just won't get it done. Parker has easily been the most bearish of the major sell-side strategists this year. 

    The new owners of the DJIA are considering changes to the way the iconic index is calculated in order to be able to include [[take a guess]] without it holding too much sway on the price-weighted gauge. "Most institutional investors have moved on from the index," says UBS' Mark Haefele. YTD, the (Apple-free) DJIA +11.6% vs. the S&P 500 +16.1%. 

    Leading the bounce in the market today? It's the transports, IYT +0.9% as the S&P erases nearly all of its early loss. A dive in the transport index last week (and a general divergence from the S&P since the big rally started in June) has the Dow Theorists in a lather.

    The S&P probably deserves a multiple of 20 given the Fed is going to be holding short rates at 0% and the 10-year around 2% for many more years, writes David Kotok. Given this and a conservative earnings guess of $90, fair value for the S&P 500 would be 1800 today. As for the end of the decade? If the Fed's going to keep with this, his previous guess of 2K is far too conservative. 

    Aug Texas Fed Manufacturing Outlook: Business Activity Index -0.9 vs. consensus of +0.5, -1.6 prior. Manufacturing production 10.0 vs. 6.4 prior. New orders 5.3 vs. 0.0. Capacity utilization 9.3 vs. 1.7. Employment 5.9 vs. 14.2. 

    Aug Chicago Fed National Activity Index: -0.87 vs. -0.12 prior (revised). The index's 3-month moving average decreased to -0.47%, from a level of -0.26% in July (revised). 

    Germany's Ifo business climate index unexpectedly falls to 101.4 in September from 102.3 in August and vs. consensus of 102.5. It's the index's fifth consecutive drop. Current conditions subindex drops to 110.3 from 111.1, business expectations decline to 93.2 from 94.2. The gloom can be found across the board, including in the manufacturing, retailing, wholesaling and construction sectors. (PR)

    It doesn't take long for Germany to downplay talk of leveraging the eurozone's ESM rescue fund to €2T+, with a spokesman describing the figure as " illusory " and saying that any discussion of precise figures was "purely abstract." An earlier Reuters interview with deputy finmin Steffen Kampeter doesn't mention numbers.

    French PM Jean-Marc Ayrault says Greece should receivemore time to meet the conditions of its €174B bailout as long as the country "is sincere in its commitment to reform." Ayrault's comments are the most explicit yet from France about leniency for Greece, although the the viewpoint faces strong opposition in Germany.

    Greece's finance ministry denies a Spiegel report that the government must close a €20B budget gap in order to receive the next tranche of its bailout, saying the government is only negotiating €11.5B in savings with the Troika and looking to raise another €2B in revenues.

    Having sold €7.5B in commercial real-estate loans this year, European banks are working on divesting another €11B worth by the end of 2012, data from property services group CBRE shows. Banks are racing to sell the assets to comply with new regulations requiring them to increase the amount of capital they hold against the loans, but the rush means they often take big losses.

    Frustrated by banks' unwillingness to lend to small- and medium-sized businesses (SMB), the U.K. government plans tocreate a bank that will facilitate such loans as part of an attempt to revive the economy. The state will provide £1B and try to attract £1B of private capital, and then borrow another £8B. However, the new bank won't lend directly to SMBs, but will instead fund financial institutions that do.

    Japanese PM Yoshihiko Noda is moving finmin Jun Azumi into a senior party position, although the latter will stay in his post until Noda appoints a replacement. Despite the reshuffle, Japan's policies of fiscal discipline and attempting to weaken the yen are unlikely to change. Noda also pledges to pull Japan out of its long-running deflation within a year " at all costs," although whether he can achieve the goal is another matter.

    Sign of the times: Struggling to earn adequate returns, Japan's Teachers' Mutual Aid Co-operative Society (AUM $7.6B) plans to move some of its assets into REITs, hedge funds, and overseas bonds. "We need to have a certain level of return no matter how the market condition is," says a fund GM Toru Higuchi. Mr. Market, however, is unconcerned with the fund's needs.

    The 2012 high-yield default rate climbs back to 2.2% in August after falling to 2% previously. Thus far this year, there have been 23 defaults with the par value of bonds affected of $12.2B vs. 10 issues and $4.7B in the same period a year ago. Though funding conditions remain in great shape and corporate issuance is high, underlying economic conditions are clearly slipping, notes Fitch.

    China's Beige Book finds that China's monetary easing over the summer is having a limited effect, with banks increasing the availability of loans but companies borrowing less. Manufacturers and retailers are less bullish than they were in the previous report, while more firms are reducing staff. The findings are pretty much in line with China's worsening economic data.

    China's traditionally hot fall real estate market gets off to a slow start as sales through September's first 20 days were 4.5% less (in 54 tracked cities) than the same period in August.

    Kellogg (Kenters a joint venture with Singapore-based Wilmar to help the company expand in China. The partnership will help beef up Kellogg's infrastructure in the region as it looks to market its cereal and snack products. The bigger issue: Execs see China becoming the biggest food and beverage market within five years and would like brands such as Eggo waffles and Pringles to be part of the equation.

    Off 75% YTD and trading below $10/share, the iPath S&P VIX ETN (VXX) will get a 1-for-4 reverse split on October 5,announces Barclays. Despite the price plunge steepening in past months, the ETN has managed to draw another $900M in AUM thus far in Q3

    Warren Buffet's favorite early economic indicator:  Shares of International (IP +4%) , Rock-Tenn (RKT +6%), and Packaging Corp of America (PKG +3.7%) jet higher with more support out that containerboard price hikes in the sector are sticking. Credit Suisse is out with a positive note today after Deutsche Bank did the heavy lifting last week.

    The FedEx (FDX +0.8%) annual shareholder meeting is in full swing in Memphis, Tennessee. After a bit of housekeeping, CEO Fred Smith highlights the company's focus on streamlining its costs and says he expects customers to continue to trade speed for cost. Citing "lackluser" economic drivers, the company's economic forecast is for 1.9% GDP growth in the U.S. for 2013 and 2.4% global growth. In a developing program, FedEx will offer voluntary buyout to employees in order to lower costs. (webcast) 

    More on Lennar (LEN): Deliveries +28% Y/Y, New Orders +44%, Backlogs +79%. Gross margin of 23.2%, +210 basis points. "The housing market has stabilized and the recovery is well underway," says a clearly excited CEO Stuart Miller, who – other than noting rising materials and labor costs – can't find even a slightly cautious thing to say. Shares +6.2% premarket. (PR)

    Investors have been voracious buyers of silver and silver miner ETFs on QE-infinity, and when silver is outperforming gold, it is usually a bullish sign for the entire precious metals complex. Physically backed silver ETFs (SLVSIVRDBS) have jumped 23% in three months; silver miners (SILSLVP) are up 22%-plus. Physical gold (GLD) added ~10% and gold miners (GDX) ~15%.

    In another blow to coal stocks, BAML lowers its forecast for 2013 coking coal prices to $185/metric ton from $220/metric ton; demand is down, supply is up, and the pressure doesn’t look like it’s abating, the firm says. BTU and WLT are downgraded, and ACI andCNX are maintained at Underperform, but ANR remains at Buy as "the risk/reward looks favorable and cash flows [are] OK.”

    Bastards!  The EPA reportedly is conducting a criminal investigation of Chevron (CVX) after learning the company had been routing pollutants around monitoring equipment at its Richmond refinery and burning them off into the atmosphere. The probe is unrelated to the Aug. 6 fire that shut the central refining unit at the 245K bbl/day plant. CVX -0.6%premarket.

    Shares of Tesla Motors (TSLA +2.3%) trade higher with news that Toyota is de-emphasizing its pure electric vehicle program making for an interesting backdrop. Tesla isn't shy about stating its own conviction on the EV market and is in the midst of setting up retail stores across the U.S. At the moment it has the auto industry press on its side as more extensive reviews of the Model S come out withWired's 4-day test drive concluding

  50. Inflation/StJ – I think that is the 'excuse'. I would not want to carry the heavy load of my neighbors debt just because they are in the pre-forclosure process….yes, it hurts me in the short run, but in the long run I have a roof over my head, and when I die, I cannot take it with me…but paying for my neighbors problems…no thanks.  I have enough of my own.

    As to climate change…that is something we all need to get our heads around sooner rather than later.  In Angelcur's type:  I WILL HAVE BEACHFRONT PROPERTY FOR SALE SOON!

  51. Shares of Tesla Motors (
    TSLA +2.3%) trade higher with news that Toyota is de-emphasizing its pure electric vehicle program making for an interesting backdrop. Tesla isn't shy about stating its own conviction on the EV market and is in the midst of setting up retail stores across the U.S. At the moment it has the auto industry press on its side as more extensive reviews of the Model S come out withWired's 4-day test drive concluding the vehicle's large battery and charging potential should keep "range anxiety" in check.

    BioLineRx (BLRXsurges 18.5% after receiving a U.S. patent for its BL-1020 treatment for schizophrenia, which is in Phase II/III trials. The new patent will be valid until 2031, adding nine years to the drug's protection. BioLineRx says BL-1020's market potential has strengthened over the past several months following the failure of rival drugs in late-stage trials. (PR) 

    Cell Therapeutics' (CTIC +5.9%) pacritinib drug showedencouraging anti-tumor activity and good tolerability in 34 patients with relapsed or refractory lymphoma in a Phase I trial. Pacritinib has already performed well in Phase II studies for patients with myelofibrosis, and the company intends to carry out Phase III trials for this bone-marrow illness. (PR)

    The end of GMCR?  A price war could be developing in the K-Cup market, according to retail analyst Howard Penney. The buzz is that Kroger (KR) is selling its store brand product at $6, an entry point that could pressure Green Mountain Coffee Roasters (GMCR), Supervalu (SVU), and Safeway (SWY) to trim prices on their single serve offerings.

    Hulu (DISCMCSANWSnabs content from World Wresting Entertainment in one of it largest streaming deals to date. Starting today, subscribers will have access to popular wrestling shows only a day after they air on cable networks. The pesky Hulu continues to make its presence felt with its original programming and new content plays, leading some analysts to scratch their heads over the ultimate goal that co-owners Disney, Comcast, and News Corp. have in mind for the upstart. 

    Netflix (NFLXdrops content from the A&E and History channels after talks between the company and A&E Networks broke down. The pulled content could be the biggest loss for the streaming service since Starz yanked Disney and Sony movies earlier this year.

    TiVO (TIVO) notches a big legal win as Verizon (VZ) agrees to pay it $250.4M to settle their patent dispute. Shares +9.5%premarket. (PR)

    AAPL "disappointment" is killing the SOX:  Apple component suppliers trade lower in response to the company's iPhone 5 sales dataCRUS -3.8%SWKS -2%AVGO-2.7%BRCM -1.5%QCOM -1.5%TQNT -1.7%. The broader chip sector, which depends a lot on Apple these days, is also underperforming (SOXX -1.3%).

    Micron (MU -3%) slumps in response to a downgrade to Sector Perform from Pac Crest's Monika Garg, who's worried about poor PC demand and DRAM pricing. Garg notes DRAM prices are down 21% over the last 3 months, and expects Micron to "post losses for a couple more quarters." Shares could also be getting hurt by Apple's iPhone 5 data , given acquisition target Elpida is supplying DRAM for the device.

    Pandora (P +5%) is rallying following the Friday introduction of the Internet Radio Fairness Act, a Congressional bill that would allow federal judges to determine Internet radio royalty rates based on their judgement of the value of the covered music – an approach similar to how satellite radio royalties (much lower on average) are determined. Pandora, whose royalty payments made up roughly half of its 2011 revenue, is praising the bill.

    Facebook (FBslides 4.4% to $21.85 premarket following aBarron's cover story suggesting the shares could be deemed expensive even at $15.

    Facebook (FB) may have found a way to prove its value to advertisers by working with data-mining company Datalogix to track how many users buy a firm's products after seeing its ads on the social network. Of 45 campaigns measured, advertisers earned an extra $3 in incremental sales for every dollar spent on Facebook in 70% of cases. However, Datalogix's techniques have raised the usual privacy concerns. 

    cautious Goldman note could be adding to Facebook's (FB -6.7%) losses this morning. The firm expects shares to "remain volatile over the next few months" due to the giant Nov. 15 lockup expiration and "the market's allergy to supply." Nonetheless, Goldman is maintaining a Buy, and is encouraged by the higher ad ratesassociated with new ad products. (Barron's column) 

    Apple (AAPL -0.9%) pares the losses it saw after announcing it sold over 5M iPhone 5 units during opening weekend, less than some were forecasting. Horace Dediu observes the sales rate for the 5 was even with the 4S when normalized for countries supported – a little disappointing given the growth in Apple's base, and the fact the 5 is a bigger upgrade. On the other hand, initial 4S sales were likely boosted by the outpouring of emotion following Steve Jobs' death. One unanswered question: did the Maps controversy affect weekend sales?

    Foxconn shuts one of its Chinese factories after a dormitory brawl escalates into a violent riot involving maybe 2K workers. About 79K work at the Tiayuan plant, which may make the back plate for the new iPhone 5. However, others say Apple has little exposure there. Foxconn falls 2.6% in Hong Kong. Parent Hon Hai falls 1% in Taiwan. AAPL -0.7% premarket.

    "If Steve Jobs were still alive, would the new map application on the iPhone 5 be such an unmitigated disaster?" asks Joe Nocera. It's a question many others are also asking, given the huge backlashto iOS 6 Maps. But to Nocera, a potentially bigger concern is that Jobs' absence will limit the risk-taking that drove Apple's (AAPL) meteoric rise. Joshua Topolsky: "The iPhone 5 is unquestionably the best iPhone ever made … but right now Apple seems to be in a holding pattern, too comfortable or too scared to take real chances." (also: III) 

    Former Clinton economic adviser Laura D’Andrea Tyson describes how the "vicious circle" of income inequality leads to educational inequality, which then perpetuates the wealth gaps in the U.S. Tyson also notes how poverty is much higher in single-parent families than in those with married parents. But while she wants to increase taxes for the rich and pour money into education, she stops short of advocating policies to strengthen marriage.

  52. Worries/ St H & Rustle – yes, it's odd that global warming wasn't mentioned – same thing with Faessel – global warming should be on top as both the biggest worry and the biggest opportunity. The Korean Peace Corps (KOICA) volunteers have as part of their mission helping other countries move into ways of either halting or dealing with global warming.

  53. Hmm, maybe Europe was holding us up.  Been all downhill since they closed but volume much slower to the downside on a generally heavy day (42M on Dow at 11:45) so I still have faith.  

    Remember when I was trying to buy FNF (the whole company) at $8 in 2008?  They just hit $21 again but still below the $22 they rocketed to on QE1.   Too bad Opesbridge (BBBW) wasn't around then!  

    Climate Change/StJ, Snow – I guess that was kind of in #2 (natural disasters).  In the US, I doubt it would even make the list of things people are concerned with.  

    Rigged/Pharm – Yes, it's how the game is played but at what point do we actually re-price an index, rather than continually celebrate lower achievements?  

    Oil barely holding $91 – must be the contango fairy….  8)  

  54. Phil, would you bless selling a Sep weekly 3-7 call spread on RIMM for $3.16 ahead of earnings?

  55. Oh no – it's Kudlow!  That guy is like nails on a chalkboard to me.  Good time for a lunch break…

  56. PPHM…going to nibble on a few shares….

  57. What took down FB?

  58. Hello All – PPHM?  I remember when it was in the 20 cent range and now they're back to $1 something after the reverse split?  Oh man!

  59. Pharm—do you still like ZLCS?

  60. FB/Shadow: Big Barron's front page article on FB that states, it's now worth more than $15.00


  62. Opesbridge/Phil,
    What amount of assets does the new BBBW have, how many members etc…..? and have you all made any investments….
    Thanks for the update in advance

  63. StJ: Income Portfolio – fyi, in your spreadsheet update yesterday you missed Phil's Friday trade (2:11 pm) selling 10 CLF 2015 $25 puts for $6.50.

  64. Lagarde saying that the world needs to help fund the european bailouts.

  65. Phil,
    What do you think of ZAGG?  I've heard good things about its waterproof, shockproof case for the I-phone 5, especially from people who hang out on boats a lot. The case costs  $70- much less than the $50 per year for Applecare. There is a class action suit pending, and some insider sales have gone on.  If you like ZAGG, what option play would you make?

  66. RIMM/Stocks – They report Thursday.  You want to short the weekly $3 ($3.35)/7 (.24) bull call spread that's net $3.11 with RIMM at $6.34 so your net is $6.11 so you gain a .23 advantage doing it that way but hardly seems with it.  Your risk is RIMM hitting $7 and you pay back $4 and lose .89 and you have no chance of escape if you are wrong so why not just BUY the $7/6 bear put spread for .56 and you are in the money to start and make .44 (78%) if RIMM simply fails to hold $6.  You could also do the Oct $7/6 bear put spread for .56 and at least on that one – you should hold some value on your short if you are wrong.  Now, overall, I think expectations for RIMM are so low – it will be hard for them to miss and, if they announce a sale, a merger, a licensing agreement (people still love them in India, Africa and where there is no 3G), etc. – then you will be totally screwed.  

    A fun way to short RIMM is to buy 4 Nov $5 puts for .30 ($120) and sell 5 weekly $5.50 puts for .17 ($85) for net $35 on the assumption RIMM doesn't drop 20% on earnings and that the Nov $5 puts will hold more than .11 in value after earnings.  

    FB/Shadow – See weekend comments.  Cover of Barrons' had $15 target for them – which just happens to be my initial valuation when they first IPO'd but now I think $20 is fair.  

    PPHM/Ink – They are determined to get back under $1.   Thanks for video.  

    $25KP: AAPL Oct $595s just passed $15 but no hurry to buy back first two when it's going our way, let's call $15 a stop on 2 and, if they pass $14 – that will be the stop, etc…  

  67. MoMo portfolio:  Just sold all AAPL 700s for 12.50.  I think this downdraft continues. 

  68. Logic on that, by the way, is that I'd rather lose .25 and end up paying $15.25 than miss the opportunity to buy back at $14, $13, $12….  

    Once we do sell, we have to pay attention to our net and we won't have much tolerance for a failure of $685 or $680 (depending on where we buy 5 back).  What we'd do next is sell lower calls.  The $680s, for example, are $22.40 and if we re-cover with 5 of those, then we look to spend the net $8 or whatever we gain on the transaction to roll our $685s down.  The $685s are currently $19.50 and the $670s are $28.50 so adding $1 puts us into a $15 spread that's $15 deeper in the money.  

  69. $15 buy back of 2 of our AAPL $595 callers just triggered in the $25KP.  We now look to re-cover at $18 (making $600) or to buy back the other 3 at $12.  

  70. AAPL – rolled Oct 700s down to Oct 690s for 4.50

  71. Hi Lflan 
    Any thoughts on how much AAPL will correct here? 

  72. Reggie Middleton on BoomBust Blog just trashed Apple i5, saying that Samsung Note is a way better product….Go figure? AApl back to 686….

  73. VXX down again as usual.. Will this MF ever go up for a few days?
    FU VXX!!!!

  74. Phil FB
    Seems silly that someone has that much power. I still think your both high, my value way before the IPO $10.
    Blackberry still selling to those that like a keyboard, not cool but the feel factor. What if they do better than expected?
    Local verizon store sells to those with less money, get one free.

  75. grandjho…don't know how much AAPL will correct…….but cash for me till it settles.  Just for the hey of it, I'll say we see 675 before we leg up again.  

  76. Thanks Ceegee… I'll update the portfolio!

  77. SLW traders – this is one of those quick dips that you can Crazy Play.  I've been buying the weekly 38.50 C for .75, with a stop at .60.  Day trade only.

  78. Opesbridge/Jasu – You have to talk to Ron off-line about that.  

    LaGarde/Ink – She's right but she shouldn't say it!  

    CLF/Ceegee – Thanks for reminding us. 

    ZAAG/Sparky – Shareholder lawsuits don't matter much with bigger companies but ZAGG's total income is $18M.  In the time period in question on the lawsuit, the company lost more than it's current market cap ($250M) as it fell from $14 to $6.40 – even a settlement would take a big chunk out of earnings and it's a Mormon law firm suing them in Utah:

    The complaint alleges that ZAGG made false and/or misleading statements and/or failed to disclose that: (a) the Company's founder and Chief Executive Officer, Robert G. Pedersen, had placed more than 50% of his ZAGG ownership as collateral on margin, jeopardizing his future with the Company; (b) as a result of Pedersen's actions, the Company began a secret succession plan to replace him; and (c) as a result of the aforementioned, the Company's financial statements were materially false and misleading at all relevant times. On December 21, 2011, Pedersen sold nearly $2.6 million worth of ZAGG stock. Then on August 17, 2012, it was announced that Pedersen had resigned. It was further disclosed that Pedersen sold 515,000 shares of ZAGG stock only three days prior, and that a substantial number of these shares were sold to meet margin calls. If you suffered a loss in ZAGG you have until November 5, 2012 to request that the Court appoint you as lead plaintiff. Your ability to share in any recovery doesn't require that you serve as a lead plaintiff.

    A lot of times these things end up being nothing but it's certainly enough to keep me away.  Clearly someone already did decide to go long on them as they are up 50% since Aug but I'd want to see them prove they can break $10 before going long.  

    FB/Shadow – I changed my mind as I looked at their last earnings and saw a clear path to monetizing ad revenues.  Also, they have withstood several challenges and remain deeply embedded in our culture – that can become a deep moat over time (look how pissed people are at AAPL that they changed GOOG maps).  As I said re. RIMM above, I wouldn't bet too heavily against them at this price. 

    SLW/MrM – Yep, silver took a nice bounce off $33.75 and got right back over $34 and is holding it.  

  79. Phil—did you get my e-mail?

  80. AAPL/scottmi – with you on the roll from 700's to 690's. 

  81. TNA options are almost the same price at where I sold them this morning, but holding off reselling them.  Market doesn't look like it wants to snap back before getting worse.  I'm content in leaving the casino a winner today.

  82. I guess you are stuck having to pay $30 for that Apple adapter:

    If you bought yourself an iPhone 5, and are looking for a cheap, third-party lightning adapter to save a couple of bucks, you might want to hold off. There's an authenticator chip in the official adapters, and third-party adapters probably won't work without it.

    This might be pushing the "closed" eco-system a bit far! Unreal….

  83. Still ways to go in Europe:

    A great deal has been accomplished in the Eurozone in terms of easing the financial strain (see discussion) since the summit back in June. But as these recent developments show, this progress has been mostly due to the ECB providing an unlimited backstop to the periphery governments. Without this (what is turning out to be long-term) "bridge" financing, the actual progress on restructuring the Eurozone's financial and fiscal union/institutions has been painfully slow.

  84. Would an XLU play make sense, given potential Euro/Sino capital flight?  Dividend 4.6% at the moment.

  85. SLW - stopped out, too early on this one.  We'll try again when it shows some strength.

  86. Hi Phil,
    EWJ JAN 9 callers – does it still make sense to hold them now that BOJ has done its thing……

  87. Dear jasu1, is under "construction."

    Please write to me at

    Thank you.

    Ron Resnick

  88. Income Portfolio:  50 TIVO 2014 $7/12 bull call spreads at $2.40, selling 30 $10 puts for $2.10 – we'll sell front-month calls later.  

  89. Ron – that computer you are using is logged in as me from last week.  Please log out and log back in as you.  Thanks!  

  90. ZLCS/Savi – yes.  Small position. Their pain stuff is very interesting.

  91. phil – the qqq's have hit .70. What is the next move? Thanks

  92. FLan- Good call on selling the AAPL 700's . painful, but good.  Thanks.

  93. Phil – Why do you think LaGarde is right in asking the entire planet to help with the Euro bailout?
    Do you mean that we should all buy Euro bonds?  I'm not even sure I would use your money to do that……. ;)

  94. Phil/Pharn--thanks

  95. EMail/Savi – I did thanks.

    Quitting while ahead/Rustle – Good plan in this craziness.  

    AAPL/StJ – Starting to remind me of when MSFT morphed into the Borg Collective once they got big.  

    AAPL $695s hanging tough – still $13.80.  

    QQQ weekly $69s can and should be rolled to Oct 70s even in $25KPs.  

    XLU/ZZ – Good inflation hedge and lagging the markets at the moment but do you mean the Utilities?  Doesn't sound right in the context of Euro/Sino capital….  

    EWJ/Jyoti – No, that was a sell into the excitement of the announcement play.   I think $9.50 was where they topped out.  

    LaGarde/1020 – Because it ends up being everyone's problem anyway and it would be easier to spread the risk by all contributing instead of saying Europe is Europe's problem and then US will be US problem and China is China's problem, etc. She's looking down the road at the likely perpetual cycle of sovereign defaults down the road and an International sign of goodwill here (don't forget, she's the IMF) would go a long way to calming things down.  You say you wouldn't buy Euro bonds and, pragmatically, that's a good idea but, realistically, where will you be with your bonds if Europe goes?  Like it or not, we're all very connected these days.  

  96. Pharm – still holding?

  97. I logged out immediately after I saw my computer was still logged in as you.

  98. Guess the market did have snap in it.

  99. What,s up with /cl right at the close of the oil market? back to 92

  100. Phil – I get that we're connected – I'm just feeling selfish.
    With all of our trouble here in the U.S., it is hard to fathom helping anyone but ourselves…..

  101. Wow, just wow….

    “I appreciate the fact that she is on the ground, safe and sound. And I don’t think she knows just how worried some of us were,” Romney said. “When you have a fire in an aircraft, there’s no place to go, exactly, there’s no — and you can’t find any oxygen from outside the aircraft to get in the aircraft, because the windows don’t open. I don’t know why they don’t do that. It’s a real problem. So it’s very dangerous. And she was choking and rubbing her eyes. Fortunately, there was enough oxygen for the pilot and copilot to make a safe landing in Denver. But she’s safe and sound.”

    That's taking dumb to a brand new level here…. 

  102. Ask most aircraft engineers and they will tell you that having a window on an aircraft is something they would prefer to avoid as it weakens the structure (that's why they are the shape they are) …. sadly people like the view.

    Where did this guy go to college?

  103. VXX new low.

  104. Phil … Star Trek investing analogies might rock!  Marketwatch (Rupet?) seem to be putting the knife into Apple.

  105. malsg – high school will teach you that!

  106. Go AAPL you sexy beast!

  107. AAPL flying with the market….

  108. malsg,
    the guy went to Harvard…his vp pick (the budget guru) went to miami university of ohio,,,,,,,,They want to govern the country…no wonder the numbers don't add up…………schmucks!!!

  109. Phil:  I did mean utilities, didn't mean to be obscure, just figured that European and Chinese capital flight, which is being bruited in the press although perhaps wrongly, would look for a safe harbor, and, yes, U.S. utilities with 4%+ dividends [XLU 4.6%] would get its fair share of the money.

  110. The QE float is easing into the market…

  111. Looking at AAPL's 2-year I'd say 2012 is the froth. The 400 line is about right and puts their 16 P/E at a more reasonable 9. Simply the fact they are worth almost 700B (more than the next two largest companies combined) is an inertia killer. Plus they face commoditization of their products and everything else. In 10 years, their will be a new gadget leader (one we should be trying to predict now for investment purposes!), and AAPL will be another big company. They'll still be huge, relevant and all of that, but not $700B relevant.
    I like long term puts on them. The real danger is how Bernanke's money flows into stocks. We're only seeing the beginning of this and it's a tide that floats all boats. To that end though you can diversify with any number of positions that do much better than AAPL given inflationary forces and not lose any sleep about being wrong.
    Plus, if AAPL declares a huge dividend or makes some unforeseen big blunder you've got all this downside room in the stock a solid OTM put option can capture.

  112. avg stock is up 1% since 4/23/2010!!! aapl…aapl…aapl
    aapl +154% since then
    signs china is in hard landing scenario continue to mount…continue to be mostly ignored
    outside of china that is
    this japan island dispute is so ridiculous and is indicative of the govt trying to take people's anger off them

  113. i don't think adding o2 to a fire retards it much…just saying

  114. O i meant O really i did

  115. AAPL / BDC – Betting against Apple seems dangerous to me but at the same time they are now a 2 product company – iPhone and iPad. That's over 75% of their business and probably growing. Computers are only 10% of their business now.

    And I recall that 20 years ago Sony was the big cheese when it came to music and TV – they basically invented mobile music and when you had the money you bought a Sony television. Then they dominated the market with their game consoles. And yet, where are they know? That's the problem with consumer products – loyalty takes you only as far as the next fad…. Look at Motorola and RIMM as victim of that problem. Now, Apple users seem to be more loyal than average, but what happens when someone comes out with something that so cool that you have to be seen with it? And by Apple fighting everybody with patent, they might actually be forcing more innovation. And that nickel and diming for everything might wear thin as well. We'll see.

  116. Nope Angel, Oxygen is not a fire retardant….

  117. Pharm, I don't see any news for PLX but it's enjoying a nice day…

  118. AAPL/StJean
    Most companies are around for years on just one product but the fact that AAPL has those two plus a growing share of their computers is enormous for the fact that how many other products do they sell associated with the IPAD alone?  Plus their ITunes store, piece of the apps, accessories, etc.  So those two main products alone spawn hundreds of other products that Apple has a piece of and also helps grow it's core computer business.

  119. I don't disagree Rustle, but they don't have a huge moat around their products – everybody makes phones and tablets now. And margins are bound to drop… 

  120. AAPL is worth a lot, but it has EARNINGS!  LNKD on the other hand…how deep is that moat? and how much filthy lucre can be squeezed out of the LNKD model..ever?

  121. Oil/Jasu – Just the normanl nonsense into the NYMEX close.  Now that we're back at the beginning of a contract cycle, they have room to play again – no more forced selling.  

    Help/1020 – We all hang together or, most assuredly, we will all hang separately….

    Romney/StJ – I guess he wants to put screen doors on submarines too!  Of course, if the windows on airplanes did open, dogs would probably like flying a whole lot more….

    Structure/Malsg – Yeah but the new 787s have huge windows.  I assume it's because of advances in glass.  If only they could be rolled down…

    AAPL/Malsg – That's what we call a hyena attack.  When a stock like AAPL gets hard to buy and funds want to get in – they start sending out their people to downgrade the stock and cast dispersions and they have their attack dogs in the press and media start digging up any dirt they can to spin the stock negative – anything to drive retailers out of  the stock so they can load up before a big move (like earnings on the 15th). 

    High school/Nicha – My kids ask a lot of questions but neither one of them ever asked me why the airplane widow doesn't open – something that seems obvious to a toddler, I'd think….

    Obscure/ZZ – Oh, that makes more sense then!  I think we're in for a cycle where good news will be very good news but let's see if we actually get any good news this month (Oct).  

    This week we have Case-Shiller (which should be better) and Consumer Confidence tomorrow, New Home Sales (already good from builder earnings) Weds, Thurs is iffy with Durable Goods, which might suck and yet another GDP estimate for Q2, which is unlikely to change from 1.7% and Pending Home Sales.  Friday we finish with Personal Income, which is probably flat and Spending, which is probably flat too and that will be disappointing.  The Chicago PMI needs to break the negative PMI cycle the whole World is in and the last data point is Michigan Sentiment but it's also a revision so who cares?  

    At least the Fed shuts up this week but 5 & 7-year notes Weds and Thurs often come with dips to encourage buyers.  Other than that – Consumer Confidence and CPI Reports dominate the International scene:  

    Joke/Angel – I love the translation:  


    Said the government official to his secretary, "What Japanese products do I have on me? Run a check." The secretary reported, "Check complete. Not a single item. Your car is from Germany, your watch is from Switzerland, your clothes are from France, your mobile phone is Apple, your child is in the United States, your property is in Australia, and your bank account is in Hong Kong. And your mistresses — they're all made in China."

    "Great," said the official, "Then let's unite the people and let's all boycott Japanese products!"

    Kind of makes you realize why there's no Chinese comedy shows…  But this guy rocks (Korean)!  

    AAPL/BDC – 9?  You really think they should be trading at 9?  IBM's p/e is 15 and they've been doing this for 100 years now.  GE is 19.  I think 15-20 is about right for AAPL. 

    AAPL/Angel – What if you take AAPL out of the mix?  Avg stock may be flat.   Good point on oxygen – maybe another reason opening the windows is not encouraged – not to mention how gross it is to see fat people sucked through those tiny windows when a cabin depressurizes.  

    AAPL/StJ – It took a very long time for Sony to die and they massively screwed up starting with BetaMax.  I don't think there are options long enough to short AAPL with on that premise.  As to margins – they haven't dropped margins since I sold Macs in the 80s – hasn't stunted their growth yet.  The company runs on the premise of let's come up with products that are so good that we can mark them up 35% and it would be a very long time before that attitude gets weeded out – even if management wanted them to.  They push GLW to make the lighter Gorilla Glass, they ride their suppliers to come up with better stuff – you have to go to a store and hold an IPhone 5 – it's amazing how light it is – that indicates how hard they pushed every single supplier to go further and you don't do that by cutting corners.  

    Corporal punishment/Angel – It's SUPPOSED to hurt!  

  122. AAPL/StJean
    But the fact is that they create their own industries so far.  They brought the IPOD to market and then made a ton with that and ITunes, they revolutionized the phone, they came out with the tablet that everyone is trying to copy.  So without Steve Jobs we'll see how creative they remain, but Apple will probably come out with an entirely new product and monopolize that too as everyone will try to copy it.  BTW, in full disclosure, I have no Apple shares or options.

  123. I also don't own AMZN or short it even thought that is the stock that should be under attack for the sheer basis of the fact that everyone forgets stocks should be trading based on a p/e and that one is average for the year 1999 but I've been smart enough to stay out of the way of it's ascent even though I thought it was wildly overvalued at 125.

  124. Next thing you know, Mitt will wonder why windows don't open on space shuttles.

  125. A solution for mr. romney:

  126. Airplanes/Mitt
    I guess he never saw the end of "Goldfinger".

  127. Airplane – i can't believe Romney never saw GOLDFINGER.. 

  128. Woops, big selling into the close.  

    Volume died since this morning, now 78M on Dow with 8 minutes left.  

    Goldfinger/Rustle – That's because Mitt said "What, just the finger?"  

  129. HA – i feel so late to the party. ;-)

  130. Even as a kid, I knew Goldfinger's "girth" could not fit thru the window – though everything else was believable…. :)

  131. Goldfinger/Phil

  132. Airplane/Ink – Still one of my favorite movies.  

    Lot of buying volume into close – very different pattern than before QE.  

    Looks like we'll finish over 100M but a very slow day. 

  133. Pharm,
    What do you make of the headlines today about PPHM? Is it as bad as they report or do you think there's an opportunity here?  If so, what kind of a position would you take? Thanks.

  134. Romney Goldfinger
    Mormons don't watch movies, news, TV shows, or anything not changed and approved by the council. The internet has proven to be a huge problem because you limit that and their kids go nowhere. They don't approve of all normal intertainment as mind control. What they do isn't mind control in their opinion. Seriously they have a different library system. That is why I feel sorry for females dragged into that church.

  135. I'm looking forward to my first trip on the A380 …. I'm just waiting for them to sort the wings out and its got 4 years flying under its belt.  i'm still a 747 man. Those babies are all hydraulics and can take a hell of a hammering. 

  136. cat

  137. Airplane – LOL. I always loved the propellor sound even though it's a jet.
    Phil  -Yes AAPL at 9! Or an earnings miss that makes 16 = 400 per share

  138. Phil – bear with me, an economic theory of sorts here – as you move up in market cap you need to offer a lower p/e. XOM is 11. Granted oil is a sunset industry and AAPL's obviously is not, but just in terms of economics, the bigger you get the more others will attempt to take market share (more incentives to do so).
    StJean had a good point around how AAPL is stifling patents with the possible opposite consequence of driving innovation faster. And AAPL has two big products which can be copied, but more importantly they showed the world their secret on HOW to become a great company. So while I agree AAPL can innovate and deliver new products, they also need to innovate at this derivative level which is more abstract, and  in my opinion, where they've run out of gas.

  139. Way to drive your latinos favorable…


    The Mitt Romney campaign demanded that Spanish-language television network Univision allow them to bus in their own supporters from around the state to fill seats for last week's forum, according to one of the network's anchors. The forums were hosted by the University of Miami. Univision anchor and forum moderator Maria Elena Salinas told the website BuzzFeed  that both campaigns initially agreed to keep the audience comprised mostly of students. But when the campaign realized there weren't enough "enthusiastic" and "sympathetic" students to fill the seats – they made tough demands, Salinas said. The Romney camp told the network and university that if they weren't given the exemption they may have to "reschedule." The concessions were made, and Romney enthusiasts were bussed in. 

    But even after that, according to Salinas, Romney himself almost cancelled the forum minutes before it was scheduled to begin because he had an issue with the introduction made by one of the anchors. Salinas's co-anchor, Jorge Ramos, said in the introduction to the broadcast that Romney had agreed to sit with Univision for 35 minutes and Obama agreed to give the network a full hour. Romney allegedly became furious and refused to appear onstage. After negotiating with the Republican candidate, the anchors agreed to make the statement at the end of the broadcast.

    I guess presidents of all the Americans that agree with him. What a tool!

  140. Pretty pathetic volume….

  141. Income Portfolio:  Let's Review (chart is from Friday's close):

    RIG – Basic covered call.  Likely to be called away at $40 as RIG is $47.42.  Since we're about 20% covered, no need to hedge and expect max profit of $8.19 ($8,190), now showing $4,060 profit so we're tying up $24,280 in cash and margin to make $258.13 a month for 16 months, which works out to a bit over 12% a year – not terrible but not great so we may want to move on.  Mitigating factor is it's almost a sure thing so we'd have to have a reasonable chance of making 25% with no more than medium risk to blow off this bird in the hand in a conservative portfolio where our goal is only 10%.

    SVU – Artificial buy/write.  We have an $8,000 cash credit on this one and $11,000 tied up in margin so net $3,000 used on this trade is not bad.  Max profit at $3 is $28,000 and SVU is at $2.40 and our break-even is $2.20.  It's a very narrow band to work with and currently the spread cashes at -$4,800 so profit of $3,200 (we pay back $4,800 of the $8,000 we "borrowed") and $24,800 more to make over 16 months = $1,550 a month if "on track".  SVU has dropped to $1.68 on spike down so, realistically, we have to imagine we could lose $10,000 at $2 and that's what needs hedging here.  

    CSCO – Artificial buy/write.  The spread is using $2,670 in cash and the short puts use $1,325 in margin so $3,995 tied up to make $3,850 at $18. Currently, the position cashes at $2,740 off our net $1,150 entry so up 100% on net with another 100% left to make in 16 months but it's only 50% more than what we already have.  Still obviously worth keeping and a small position with a net entry on CSCO at $14.15 ($14,150 for 1,000) and, since we would be THRILLED to own CSCO for that price and to DD and DD again at $7 – there's no need to hedge this.  

    GT – Short put.  Using $2,100 of net margin.  Do we want to own 2,000 shares of GT at net $7.90?  Then no need to hedge but, if we go up more than 50% (and we probably were last week), with 16 months to wait for the other 50% – it's prudent to take the money and run. 

    X – Short put.  Using $4,000 of net margin.  Do we want to own 2,000 shares of X at net $14.10?  I'm not sure – I think I do but wow, they are sucking in this economy.  $17.50 is X's multi-year low and if we fail that, then we'll be taking a small loss, maybe .50 so not worth a hedge.  Position is up about $1,000 out of $5,900 potential so "on track" for an expected $306/month.  

    HPQ – Short put.  Using $7,000 in net margin to make $11,600.  Down $2K and potential to lose $6K before giving up so need to hedge that.  HPQ is at $17.50 so we need a 50% gain to make our money.  Not tying up much margin but possibly not worth keeping if they don't move up with the market.  

    F – Aggressive short put with call.  Using $5,247 in margin and $5,760 in cash to control 3,000 shares of F at $10 with no upside limit.  F currently at $10.32 so "up" $960 if expiring today and net of trade is currently $660.  F just got their contract with the CAW and there is still a huge back-log of demand from 3 slow years of car buying so happy with this one and figure we could lose $1 before giving up (F back below $10) so need to hedge $3,000 loss.  

    JRCC – Short put.  Tying up net $1,200 in margin to make $3,200 and pricing on $2.50 puts is outrageous with JRCC at $2.98 so not only don't need to hedge this with our net .90 entry but tempting to add more.  

    ABX – Artificial buy/write.  Tying up net $3,035 in margin and $11,115 in cash to make up to $13,710 at $40 and ABX is at $41.31 so feeling good about this one.  Current cash out is $13,540 out of $22,500 so miles and miles from goal still.  2015 $33 puts are $5.25 so good to know if we want to drop a quick $3K into the account by rolling the puts but no need to do anything here and no need to hedge.  

    ALU – Buy/write.  Tying up $1,000 in cash and $5,250 in margin to make up to $7,300 so not very margin efficient but still a 100% ROI and nothing to complain about.  ALU at $1.15 so safe enough and we don't mind owning 20,000 shares at net .64 because we can sell the Jan $1 calls for .30 and that's 46% in 4 months so we'd almost rather have the stock than wait…  Of course the difference is, if you buy the stock now it's $1.15, not net .64 and then you sell the Jan $1 for .30 and your net drops to .85 and the .15 you make in 4 months is "only" 17% in 4 months – which most people consider pretty damned good but we're better than those people.  Still, a nice little play here as well.  No need to hedge this.  

    BTU – Short put.  Tying up $3,430 in margin.  We got such a good entry on this we got lazy and didn't cash it at .70 and now back to .85 serves us right for not following rules – especially as we know coal is suffering from poor Global demand and we were just lucky we caught them so low in July.  Upside potential is $4,000 and it would cost us $1,700 of it to get out now and I really don't mind owning 2,000 shares of BTU for net $15 ($30,000) long-term since we can sell Jan $22 calls for $2.85 and that's 19% in 4 months.  So, let's hope it holds the 50 dma at $22.50 and take our lumps otherwise.  If it fails and we get out with about $1 then I'll be thrilled to sell 2015 puts when it stops falling (none printed yet).  No need to hedge

    SBUX – Short put.  Tying up $8,080 in net margin to make $10,660 at $40 with SBUX currently $51.16.  The "Now" price is wrong on the spreadsheet as the 2014 $40 puts are $2.90, not $5.30 because, if it were, I'd sell another 20.  The 2015 $40 puts are $5.30 so that's probably the mix-up but we have no need to roll or hedge these

    BBY – Aggressive short put with call.  Tying up $4,725 in margin and $18,000 in cash with a net entry of $18.84 and BBY is at $17.61.  Our gamble here is that BBY does get bought for $25 and then we make $18,480 but AAPL just screwed BBY by delivering 10 IPhones per store while AAPL stores got thousands.  By Christmas there will be plenty to sell but BBY missed the initial sales craze.  There is no indication that Shulze is not serious about the buy/out – last I heard, he was in due diligence as of 2 weeks ago and that usually takes 6 weeks.  Earnings are 11/19 so probably an announcement then one way or another but our position here needs general hedging against a $9,000 loss if deal falls apart.  The problem is, you can't hedge a deal failing but a general Nas hedge at least protects something.  

    SHLD – Short put.  SHLD is currently at $56.84 but our puts are burdened from a restructuring, which is why they are still $5.28 but subtract $15 from the current price ($56.84) and you get $42 and that's about right so no worries and we're tying up just $3,610 in margin to make $7,400 and generally on track.  Need to hedge potential $2,500 loss ($10) before we stop out.  

    CLF – Short put (10 2015 $25 puts for $6.50 from Friday, not on chart).  Tying up $2,625 in net margin to make $6,500 is very margin efficient and CLF is at $40.77 so this is just a silly trade not to make as CLF can drop 53% before you hit your net of $18.50.  We'll look for more of these to add as we're using much less buying power than I thought and we're well-hedged.  No need to hedge this one – I'd love to own 1,000 shares of CLF at net $18.50 – it will almost be disappointing to only get the $6,500…

    TZA – Hedge.  20 Oct $14 calls cost $5,440 and down to $1,420 already.  TZA at $14.15 and would go up 15% to $16.27 if the RUT dropped 5% so "protection" at this point is recovering our $5,440 (or most of it).  Have to look at protection in conjunction with others before deciding but this one needs a roll. 

    SQQQ – Hedge. 20 Dec 37/53 bull call spreads cost us $6,400 and down to $3,460 so far.  With SQQQ at $35.  Needs adjusting before we're down 50%.  

    TZA – Hedge,  50 Jan $15/22 bull call spreads cost $8,400 and down to $4,550 and now I can see we're way overhedged as we really have very little to protect and very much protection so let's cash the Oct TZAs and the Dec SQQQs and roll our Jan $15 calls to the April $15 calls for .70 ($3,500) and that can be our one hedge.  No need to adjust the caller as we are $7 in the money to it ($35,000) and that's way more than we need to hedge so – time to go shopping!  

    So, in summary, we're using roughly $117,500 in cash and margin (out of $1M margin on $500K cash) on our long plays and, once we ditch our extra spreads, $11,900 on the TZA hedge that will last us until April.  If all goes well, we should make well over $100,000 more on the current positions so almost 100% return on cash and margin over 16 months is pretty good since our goal is $4,000 a month.  

    It's been 3 months and we would be on track if we hadn't taken a $20,000 hit from our initial SVU position (and HPQ was no help either).  We haven't been aggressive at all so far, barely selling any front-month puts or even buying dividend-paying stocks so we'll begin spending another $100,000 in cash and margin and we'll still be only about 20% invested – and that's the way I like it!  

  142. AAPL// im more worried that every fund manager in the world is long…likely significantly overweight in the stock…and thinks it can only go higher no matter what…i still like it to outperform over intermediate-term, but i doubt serious appreciation next year

  143. Shadowfax – TNA turned down at 11:00am,turned up at 1:30 and down again at 2:51pm. I could not find indicators for the changes(euro stayed around 128.30 -126.40 plus or minus). I wish I could have caught the turns. Seems like TNA and TZA are acting differently than 2011. Any ideas?

  144. shadowfax
    September 24th, 2012 at 4:03 pm | PermalinkIgnore this user Romney Goldfinger
    Mormons don't watch movies,
    Just occurred to me – take one letter out of Mittney Mormon,
    we have Mittney Moron...  just saying.

  145. Phil/VXX & UVXY –
    when these dogs eventually spike, would they be good candidates for bear put spreads, or straight out put purchases to take advantage of the decay?

  146. Hello All – If anyone knows of a lawyer specializing in setting up a hedge fund, please let me know.  Thank you.

  147. Income Portfolio / Phil – The problem right now is that with this latest rally a lot of potential targets are not that cheap anymore and we might want to look at more "distressed" operations. And wait for companies to have their earning reports before we jump in (HPQ's issues jump to mind). Someone like BBBY for example – they got clobbered after earnings but they are not that expensive anymore (relative to peers). Most price ratios still look decent. The only problem is that they have been killed over the last 2 earning reports but recovered. Still a bit scary. In any case, you can sell the Jan 14 55 Puts for $5.50 and that gets you in at $50 (a decent support line going back to last August) or about 20% below where they are today. That ties up about $5500 in margin to make $5500. Nothing fancy there… 

  148. Inkarri19 / hedge fund lawyer
    I know a wide variety of hedge fund lawyers and firms.  I recently engaged a firm to set up Opesbridge.  I would be happy to recommend someone appropriate for your project.
    Feel free to call me at 310-275-3300.

  149. Futures back to the day's highs on Dollar moving to 79.50.  

    Movies/Shadow – They may be on to something.  The quality of TV and movies is really low these days.  It would be nice to live in a community that actually still reads books.  

    A380/Malsg – Once they go for a year, I'm OK with them.  I accidentally took one of the first 777 flights – it was first class on Virgin from Japan – made for a nice day on a plane.  Was so modern and cool – like being in the space shuttle – or the sci-fi version of the space shuttle – I'm sure the actual space shuttle is nowhere near as nice.  

    Market cap & p/e/Bdc – Maybe it's more a function of age than simply size.  XOM is a cyclical that sells a commodity that fluctuates in price.  XOM sold $500Bn worth of product last year to make $41Bn, AAPL sold $108Bn worth of product to make $25Bn.  AMZN sells $50Bn and makes less than $1Bn, BBY sells $50Bn and makes $1Bn, SNE sells $78Bn and loses $5.5Bn doing it.  IBM sold $107Bn and made $15Bn – that's the closest comp…  Point being that AAPL is clearly worth more than all those companies combined and clearly there is room for sales growth because Mac sales are still just about 15% of all PCs and Acer is 10% and Dell is 23% and HP is 24% so if AAPL steals about 1/4 from each, they can double.  Tablet sales are new and growing fast:

    And 160M IPhones may sound like a lot but there's still 6.75Bn people in the World who don't even have their first one yet and not only does Samsung ship almost twice as many phones as AAPL but obviously – EVERYONE has been waiting for the 5 and if you figure it will be 18 more months until the 40M 4 users can switch to 5s – AAPL doesn't even need new customers to hit some amazing numbers there too. 

    So I don't dispute your theory but it's years too early to say they have peaked out.  

    Romney/StJ – Sounds like they should set us a reality show and just follow him around.  

    Big Chart – Watch those 5% lines.  We are down 2 of 5.  3 of 5 = Bad.  S&P 1,440.  

    TNA/Silent – Remind me tomorrow, we can watch it.  Can't expect same as a year ago with so many things changing.  

    VXX/Canuck – The decay on this ETF makes it ridiculous to play.  You have to catch it when it spikes but not before as it's too expensive to sit on them.  If you want to see something strange, check out VIX Feb $20 puts.  With VIX at $14.15, they are selling for $2.35 for net $17.65 so, if you are bearish on the VIX, you have $3.50 of free leeway.  You would think this could somehow be used to your advantage but not really with the insane decay of the ETFs.  On the call side, VIX is so ridiculous you can't make money there either.  

    Earnings/StJ – That is the plan but there are some 2015 long puts that are just silly, like the CLF's and we don't want to give them too much of a chance to change their minds.  BBBY is a good call but you might want to wait for the 15s.  

  150. All right, broke down and went to the Apple store at the Century City Mall to check out the iPhone 5.  It does have a much improved screen and definition, and it is way lighter.   And I've learned my lesson about switching from one platform to another, so I'm still going to order one.  But gosh dang it, I am Not Happy about the screen not being wider even though it is longer.  Also, the live traffic feature didn't work in Maps app  on the one I was looking at, and I heard some buzz that it wasn't working yet.  Hopefully that's not true. My bet is that they put off making the screen a decent size until next year, well after the iPad mini is launched.  
    On my way back to the parking garage I passed the Sony store and the Windows Store (could the Windows store look any more like an Apple store knockoff?) The Windows store has a sign in the window that says "Bing it On" – that's just sad.  The Bose store windows were full of merchandise with docks no longer compatible with the new iPhones.   There's plenty of room for all these mobile device stores because there are tons of vacancies, especially in the high-end food court.
    We are definitely living in the Appleconomy.

  151. Phil or anyone else for that matter,  I went to the new Air and space museum out near dulles airport in virginia.  I was absolutely blown away.  Most aircraft museums you go to have replicas or cool pictures.  Here is a list of some of actual aircraft they have, in my own arbitrary order of awesomeness.  You can walk right up next to them and damn near touch them!

    1.  Space shuttle discovery.

    2.  The Enola Gay

    3.  sr-71 blackbird

    4.  the concorde.

    To stare at the actual plane that dropped the atomic bomb had a really profound effect on me.  I can't possibly recomend this place to highly.

  152. Phil / KLAC – What do you think about selling Jan 14 40 Puts on KLAC for 4.50.  Nets in at 35.50.  25% discount.

  153. X is also looking attractive for another entry.

  154. X Jan 29015 18 Short Puts at 5.20. Net in at 12.80, 34% discount.

  155. Its not just Smartphone makers. There's some innovation coming from GT too.  A self-inflating tire that can cut down on fuel costs:
    Self-inflating tire tech saves you at the pump
    "When was the last time you checked your tire pressure? If you’re scratching your head, you might want to put a set of Goodyear’s new self-inflating tires on your ride.

    The company’s Air Maintenance Technology was rolled out of the lab this week for debut at a car show in Germany. Commercial truckers will be the first to put the rubber to test, but a consumer version is in the works.

    As illustrated in the graphic above, a regulator in the tire senses when tire-inflation pressure drops below a pre-set point and opens to allow air flow into the pumping tube. As the tire rolls, deformation flattens the tube, pushing air through the tire to the inlet valve and then into the tire cavity.

    All this technology, in Goodyear’s words, eliminates the need for “external inflation pressure intervention.”"

  156. Income Review/Phil – that was one of the most helpful and instructive reviews i've seen to date, Phil. Thank you!

  157. Apparently Google maps are NOT perfect after all …
    Apple’s Mapgate vs. Google's imperfect maps

  158. GO SEAHAWKS!!!!!!!!!!!!!!!!!!!!!!!!!!! HAHAHAHAHA We got shafted 15 years ago when Testaverde and the Jets got a goal line touchdown on a play that ended up being the rallying call for Instant Replay and then there was the Superbowl against the Steelers which was the worst officiated game in history….FINALLY MY HAWKS GOT A CALL!!!!!!!!!!!! Im walking on air over here… Nothing like Tuesday morning football in Afghanistan! lol

  159. Air and Space / Craigzooka – Went out there with the kids in july…fascinating!  Well worth the trip out there…

  160. And what Scottmi said!!!

  161. Good morning!  

    Crazy end to that game last night.  Congrats to Jrom and other Hawks fans and condolences to Cap, who's a huge GB fan.

    New England also lost on a last-second call (FG) but not much to be done about that although it's silly they don't have some sort of electronic grid that's absolute for field goals.  

    Markets back to flat, almost globally so up to us to set some direction at the open.  I think Case-Shiller will pop us into the open.  We're still long on the Qs but Nas futures (/NQ) are a fun bullish play off the 2,840 line with tight stops.  

    Air and space/Craig – Sounds like a field trip to me!  

    KLAC/Jfaw – It's not a bad idea, they would seem to be a good way to play semis since they don't care about price and margins on chips – just whether or not chips are getting made.  A bit of a falling knife at the moment but AAPL is moving away from Samsung as a supplier and that's good for KLAC as their customers then have a lot of capacity to ramp up.  Still, if the market collapses, they will too so make sure you REALLY want to own the stock at the net strike for the long haul.  

    X/Jfaw – As you're close to the money, those will look ugly if X dips further so be prepared to ride out a painful loss.  I'm pretty sure X will re-test $17.50 but hopefully it holds that and that shouldn't be a reason not to scale in here.  

    GT/Kinki – That's cool. 

    You're welcome Scott. 

    Maps/Diamond – Article makes a great point as to why AAPL needed to move forward:


    Q: Then why did Apple kick Google Maps off the iOS platform? Wouldn’t Apple have been better off offering Google Maps even while it was building its own map app? Shouldn’t Apple have waited?

    A: Waited for what? For Google to strengthen its chokehold on a key iOS service? Apple has recognized the significance of mobile mapping and acquired several mapping companies, IP assets and talent in the last few years. Mapping is indeed one of the hardest of mobile services, involving physical terrestrial and aerial surveying, data acquisition, correction, tile making and layer upon layer of contextual info married to underlying data, all optimized to serve often under trying network conditions. Unfortunately, like dialect recognition or speech synthesis (think Siri), mapping is one of those technologies that can’t be fully incubated in a lab for a few years and unleashed on several hundred million users in more than a 100 countries in a “mature” state. Thousands of reports from individuals around the world, for example, have helped Google correct countless mapping failures over the last half decade. Without this public exposure and help in the field, a mobile mapping solution like Apple’s stands no chance.

    GOOG has a huge edge over everyone and they released a really crappy product 8 years ago but called it Beta and it was all there was so we all used it anyway and fed back tons of info to the company, who were able to improve it.  AAPL has to go through the same cycle and I'm sure it's better for their Siri integration strategy to use their own maps.  Article also makes a good point about how AAPL didn't use Flash and everyone freaked out but now no one uses flash for mobile for all the reasons Steve Jobs said he didn't like it.  To this day, most of my desktop crashes are caused by Flash.  

    Testaverde/Jrom – Looked like a good call to me.  8-)  

  162. Tuesday's economic calendar:

    7:45 ICSC Retail Store Sales

    8:55 Redbook Chain Store Sales

    9:00 S&P Case-Shiller Home Price Index

    10:00 Consumer Confidence

    10:00 State Street Investor Confidence Index

    10:00 FHFA House Price Index

    10:00 Richmond Fed Mfg.

    12:00 PM Fed's Plosser: Economic Outlook

    1:00 PM Results of $35B, 2-Year Note Auction

    3:21 AM Asian shares are mixed after choppy trading, with concerns about global growth and the eurozone's dysfunctionality again weighing on sentiment, and particularly on cyclical stocks as resources underperform in China. Japan +0.3%, Hong Kong flat, China -0.2%, India +0.2%.

    6:00 AM Overseas: Japan +0.25%. Hong Kong +0.02%. China-0.19%. India +0.09%. London -0.02%. Paris -0.45%. Frankfurt-0.38%.

    7:00 AM On the hour: S&P +0.01%. 10-yr +0.09%. Euro -0.17% vs. dollar. Crude +0.53% to $92.42. Gold +0.13% to $1766.85.

    Fade Mondays in 2012. When the first trading session of the week has been down this year, the rest of the week averaged a+0.52% return, according to Bespoke. When the first session was green, the rest of the week averaged a -0.14% return.

    "(QE3) is explicitly linked to what happens with the economy," says San Francisco Fed President Williams. The MBS purchases will continue or even expand to include other assets "until the job market looks substantially healthier." Sounding like he believes what he is saying, Williams calls the program an "automatic stabilizer," able to be tweaked depending on the fickle statistics-based surveys of the BLS each month. 

    QE3 may be "QEternal" to some, but perhaps not "QEnough" for others, quips CNBC's Jeff Cox. Morgan Stanley's Adam Parker agrees, saying that "although QE3 is open-ended, the currently announced pace and program of purchases is much smaller than previous QE programs," and "will likely be insufficient to significantly boost equity markets." Parker says he wouldn’t be at all surprised to see the Fed dramatically augment this program before year-end.

    The dollar drops below ¥78 as the BOJ's launch of QE8 (by some calculations) last week succeeded in weakening the yen for only a few minutes. The BOJ is ready to take further steps, says Deputy Governor Yamaguchi. He takes care to note the yen's value is not part of the BOJ mandate, but the bank is keeping a close eye on it. 

    The SNB's setting of a floor for the euro is much of the force behind ridiculously low French and German bond yields this year, says S&P. Forced to buy up euros by the billions, the SNB must then do something with them, and it's been buying core EU paper. "I don't want to belittle the concerns of individual investors," says S&P's Moritz Kramer, but it's the Swiss bank, not them driving EU bond spreads.

    Prepare for another cut in the IMF's official growth forecast for 2013, as agency chief Lagarde – speaking in Tokyo – says global growth would "likely be a bit weaker than anticipated." The IMF has been steadily lowering estimates, with the last cut coming in July. Pretty soon, it won't be a forecast anymore, just a reporting of the news.

    Germany has a particular interest in helping Spain through its crisis, as the exposure of German lenders to the Mediterranean country is $139.9B, of which $45.9B is to banks. German institutions are particularly exposed to covered bonds, which are often backed by the collateral of consumer mortgages, whose values may have been affected by the cratering of the residential market.

    Caterpillar (CAT) – presenting at the MINExpo analyst meeting – lowers its 2015 EPS forecast to $12-18/share from $15-20 previously. The guidance assumes no worldwide recession and continued modest economic growth. Shares -1.4% AH after a late slide left the price -0.9% in the regular session. (webcast) (presentation materials)

    An interesting survey from Zillow shows even the housing bears aren't that bearish any more. The most pessimistic group still sees home prices rising this year and continuing to do so into the future.

    High-end Real Estate (worth a look this morning):  Vail Resorts (MTN): FQ4 EPS of -$1.50 beats by $0.06. Revenue of $1.02B (+4.4% Y/Y). (PR)

    International regulators have withdrawn proposals for tougher oversight of the physical oil market after opposition from the IEA, OPEC and major oil companies, the FT reports. Regulators had wanted to use only completed deals to set benchmarks and enforce mandatory reporting of transaction data, but will settle for the current system of bids and offers despite acknowledging the potential for manipulation. 

    Iron ore prices in Asia continue to come under pressure due to an uncertain outlook for steel demand. Prices rebounded from a near three-year low earlier this month on optimism that China's pending infrastructure projects would boost steel demand, but the recovery has been unconvincing. Amidst the slump, Australian miner Fortescue Metal (FSUMY.PK) says its taken draconian measures to shore its bottom line – by halting all future funding for employee barbecues at its facility in Port Hedland, Western Australia.

    After the 2011 disaster at Japan's Fukushima power plant turned public opinion sharply against nuclear power, owners of the plant are hoping to take advantage of an easing of the environmental approval process to build a coal plant. It's been nearly three years since the island nation approved a coal-fired power plant, and Tokyo officials are hoping to draft guidelines by the end of the year for implementation in 2013 that would speed up the approval process for coal, as well as wind and geothermal projects.

    Tesla Motors (TSLAwarns due to a "slower ramp in production" 2012 revenue will come in at $400M to $440M and Q3 margins will be negatively affected. The company says it still expects to meet its production goal of 20K Model S deliveries for 2013.

    Shares of Tesla Motors (TSLAfall 7.5% premarket after the company warns that Model S deliveries will be lower than anticipated. Though higher labor costs and manufacturing inefficiencies are cited as drags on Q3 margins with production slowed, Tesla says in Q4 margins will turn positive as cost efficiencies register with Model S volume back on track.

    Forgot we added TIVO in Income Portfolio!  Now that Verizon has joined AT&T and Dish Network in giving TiVo (TIVO) a hefty patent payoff, the odds of the company's remaining legal adversaries – set-top box giants Motorola Mobility and Cisco, along with Time Warner Cable – winning favorable rulings are pretty slim, argues Janney's Tony Wible. Wible considers the settlement odds for these cases to be lower due to their higher stakes (a combined $1B-$2B), but thinks TiVo's IP could make it an M&A target.

    AT&T (T), Verizon (VZ), Comcast (CMCSA) and Time Warner Cable (TWC) are looking to provide heavy duty video games - such as those from EA - to TVs over their cable infrastructure, Bloomberg reports. The move would provide another major threat to console makers such as Sony (SNE) and Microsoft (MSFT), adding to that from smartphone games. However, operators still need to get the technology right.

    Intel (INTC -1.7%), AMD (AMD -2.9%), Dell (DELL -1.9%), and H-P (HPQ -2.2%) underperform after Evercore's Rob Chiraslashes his estimates on (what else?) concerns about PC demand. Chira now predicts 2012 PC unit sales will fall 4% Y/Y, worse thanIDC's forecast, and expects flat sales next year. "We estimate Q3 units fall year-over-year across every major market: Consumer, corporate, desktop, notebook, U.S., Europe, and APAC," he writes. AMD is also getting hit by an estimate cut from JMP.

    Research In Motion (RIMM -2.3%) made new lows today ahead of Thursday's FQ2 report, during which the company is expected to announce its first-ever decline for its BlackBerry subscriber base. Along with the subscriber losses and declining phone sales, RIM is seeing falling ASPs: Canaccord's checks indicate that even in markets where low-end BlackBerrys continue selling well, high-end Bold and Torch models are selling poorly. RIM's annual developer conference starts tomorrow.

    Apple's (AAPL) use of in-cell screen technology in the iPhone 5 may have contributed to a shortfall in supply when the device debuted at the weekend. In-cell screens, which combine the display and touch sensor, are harder to produce, with Sharp, one of Apple's three screen suppliers, in particular experiencing difficulties. 

    If you can't beat 'em, hire 'em. Apple (AAPL), stung by the flare-up over iOS 6 Maps, is reportedly aggressively recruiting ex-Google Maps (GOOG) employees who helped build up the product's giant data libraries. Meanwhile, a Google product manager tells TechCrunch the company relies on 1,300 data sources to make Google Maps, and integrates them all using a proprietary system called Atlas. 

  163. jromeha – As a Packer fan, I feel a bit better about the Seahawk win knowing you are in Afghanistan with little to put a smile on your face…Congrats…..
    ….Who am I kidding?  THAT WAS BULLSH*T!!!!!!  ;)

  164. anyone know the symbol for RUT minis