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Thrilling Thursday – Romney and the Markets Turn Up

What a debate last night!

One of the candidates will lower taxes for the middle class and small businesses while slamming shut loopholes on the rich and Big Business, limiting their deductions and raising taxes if needed, he will provide national health-care and concentrate on jobs, punishing outsourcers and educating US workers to get them on the path to full employment.  The other candidate is already President.  Romney now claims there will be no 20% tax cut for the rich – I assume his rich backers assume he's lying to get elected (lying doesn't bother them) and President Obama was in no way prepared to debate the guy who showed up yesterday and he lost the debate in an embarrassing fashion.  

From a market perspective, we were playing the weakness as nervousness ahead of the debates and accumulating long positions as planned yesterday.  Oil blew past the $88.50 target I set in yesterday's morning post – all the way to $87.70 before finally bouncing back and hitting our target again overnight (now $88.64).  That drop from $91.22 in the Futures was good for $3,500 per contract in the Futures but, of course, we were done being short, as planned at $88.50 and in fact made a couple of bullish trades – long on USO at $33 (as planned) and short on SCO at $44.  We'll see how they work out today but up at the open is a good sign.  

RUT WEEKLY HPQ was irresistible as it tested $15 (long-term positions) and BBY gave us a good entry again at $17.50.  We made a quick 50% on the TNA weekly $61.50 calls, which we grabbed for $1 in our $25,000 Virtual Portfolio at 10:09 in Member Chat and we caught a nice move up to $1.50 not even 30 minutes later as our 838 line (weak bounce) on the Russell continues to hold.  

Our bullish stance on AAPL finally paid off as the stock went from $660 to $672 at the close – hopefully $680 is next.  Gasoline only got to $2.75 (we were hoping for $2.70) but is back to $2.86 already in pre-market trading (/RB).  

As you can see from Dave Fry's Russell chart, we're still in a bullish consolidation – just below our breakout level and today, so far, we don't have rising Dollar headwinds to hold us back as the Yen hit goal at 78.70 to the Dollar and seems happy enough above 78.50 (the Nikkei gained 1% and is back over 8,850 goal).  

Neither the BOE or the ECB changed their rates today, that's weakening the Dollar (79.70 at 8:40) as we are now engaging in more easing relative to those currencies and the BOJ knows better than to waste their money fighting the tide today but we can expect at least an attempt to support the Dollar at 79.50, which will be 78.50 on the Yen.  Meanwhile, oil is up over $89 again and gold just hit $1,797 and silver is over $35 and that's going to be great for our long silver and gold hedges (see Friday post).  

XLF WEEKLY Spain had a bond auction that went pretty well this morning – selling $5.2Bn of 5-year's at 4.77% and 2-years at 3.28% – a huge improvement over last month so Draghi can take a victory lap this morning.  We have our own Fed Minutes this afternoon (2pm) as well as an update on the Fed's Balance Sheet after the close and a speech from Bullard (hawk) on Monetary Policy at 6:30.  So far, the Fed hawks seem to have drunk the Kool-Aid and are as doveish as the boss so it will be interesting to get Bullard's take but it won't mean much to the markets with Non-Farm Payrolls over-riding all else tomorrow morning.  

Hopefully, today will be the day XLF gets back over $16 (we're long).  You would think backing the banks would be a no-brainer with QInfinity but, so far, we're just not getting anything like the reaction we had to even operation twist last fall, which too XLF from $11 to $15.50 (up 40%).  Granted, QE3 was anticipated and we already ran from $13 to $15.50 but where's my other $2?  It won't be a real rally until the Financials participate.  JPM reports next Friday – we may have to wait for that catalyst to ease the jitters that still surround US Banking….

Responding to a question of whether an ECB rate cut is even conceivable considering the "broken transmission mechanism," Draghi says the ECB's use of non-standard measures (OMT) "speaks for itself." In other words, the bank believes a rate cut will be of little use, so don't expect one.  So the dollar will remain more favored than the euro as the borrowing currency for carry traders…

There's a lot of back and forth action now as Draghi answers questions and we're probably going to be testing our strong bounce lines once again today but I'm not looking for a major breakout without about 150,000 jobs created tomorrow.  In fact, anything over 200,000 is going to make Romney look foolish, despite he fine performance so we'll see just how much pull Obama really has at the BLS because the next debate is just two weeks away and if lack of job growth is off the table – it's going to very hard for Romney to score any points on repealing Obama Care and raising military spending by 30%.

Oh, and the funniest moment from last night's debate – Romney told Jim Lehrer he would fire him and shut down his whole network – now THAT's the Bain-Bastard Romney we all know and love because he said it with a smile too!  

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  1. GM Everyone

  2. Oil Lines

    R3 – 94.94
    R2 – 93.38
    R1 – 90.82
    PP – 89.26
    S1 – 86.70
    S2 – 85.14
    S3 – 82.58

    Yesterday's high and low – 91.82 / 87.70

    Huge gaps between the lines!

  3. Good Morning!

  4. looks like the banksters don't want $1800 gold or $36 silver…slammed back.

  5. PHIL your analysis of Romney is spot on. He is going to deek the mad right wing zealots. I was shocked at the flatness of the President.  

  6. PGNX – starting a small position in it, selling the Nov $3 puts, buying stock.  I want to wait to cover, but look at the May $3 calls for 75c or better.

  7. "Oh Superman, where are you now"?…..   Karl who?
    Phil, just learn to fly….and wear something….cool…with a cape….. :)

  8. Interesting to watch my reaction to HPQ yesterday.  Literally a week ago I was considering closing out, for a very small profit, my long-term short put position because I was doubting whether they had a strategy or decent leadership.  Then when they tanked, I found myself inclined to roll and stay in because now they looked too cheap, even though it increased my exposure to them.  Was I:
    a) smart
    b) greedy
    c) stupid
    Only time will tell but I have tended to regret investing decisions that I've made on "gut feel" like this.

  9. Good Morning.  Question..  If the markets turn in a flat boring day today, Does that mean the debate's outcome was already baked into the mix.  Should be interesting today no matter how it shakes out.

  10. Nice recovery there!

  11. Good morning!  

    "THEY"/Rebel – Well, there's bound to be resistance at major crosses like that, nothing nefarious going on.  

    Romney/Angel – Very confusing.  It's what I thought he was going to do in the beginning but he became such a convincing Conservative to get the yahoos to vote for him, I began to think he was serious.  Now he's doing what I thought he would do, which is be the most liberal Republican since Eisenhower – they're going to hate him if he gets elected and poor Paul Ryan will get to make speeches and otherwise twiddle his thumbs for 4 years.  I'd almost like to see it happen…

    Pilkington/1020 – I love that guy.  We watch Idiot Abroad but I'm not so into the cartoon show.  

    HPQ/Jet – Will probably take over a year to find out.  $14.50 now.  

    Debate/2can – I don't think the debate has that much influence.  The Dollar is down so the markets are up but, on the whole, we're drifting into NFP tomorrow morning.  I'm not even sure the Fed Minutes will do much.  

    RUT falling fast so watching 13,500 on the Dow closely for a cover point.  DIA weekly $136 puts are $1.10 with DIA at $135.02 so not much premium there (.12) and that's what we'll probably use if the RUT looks like it's failing 840 (837 in Futures) because it's been a good leading indicator.   Oops, there it goes so let's get 40 of these in the $25KP with a stop on 1/2 at $1 and then we'll decide on the rest.

    FAS Money – Let's take the money and run on the 2014 $11 calls ($5.10) as we may get rejected here and the $13s are plenty in the money for selling against moving forward.  

  12. Looking better as well. 

    AMZN – Net is probably around $10.80 as of now.
    V – Net $1.42 but not looking good!
    QQQ – Net is $0.42 and that's where we are now.
    AAPL – Net is around $24

  13. QCOR….gimme gimme gimme….

  14. fu hpq!!!!

  15. Good Morning—--
    neither the real Obama or Romney (good Houdini act by him) showed up yesterday—I tuned out

  16. Phil/ Take the money on FAS 104 OCT calls?

  17. Hey Phil- what do you think about selling the Jan 2015 NLY 15 Put at $2.75 for a long-term trade idea?

  18. $25KP – Nice pick-up from yesterday but AAPL very tricky to play.  

    • SVU – Fine 
    • AMZN – We'll hold those longs naked over the weekend and sell more puts next week.  
    • VXX – Dead.
    • V – Dead
    • GLL – I thought we gave up on those at .40
    • AAPL – We'll most likely roll but not today.  
    • BBBY – Probably dead 
    • QQQQ – I think we'll get $1 one day 
    • FAS – Let's take $9 and run as $16 may be rejected and, if not, we have our XLF spread that will make good money.  
    • XLF – Looking good.  Notice with spreads like this, we're in the money 100% but showing just .29 out of $1 potential value.  That's another $1,400 coming if we hold up.  
    • DIA (new play) – Still at $1.10 but now I'm going to want to sell the $135 puts for .50 and roll our longs back to the Oct $135 puts (now $1.36) so we knock .14 off the basis and we're in those long puts for net .95ish into the weekend.  I'll call it when we want to execute but it will be around the stop point ($1) on the tomorrow $136 puts so we're still stopping out, technically but then we're selling the rising $135 puts and using that money plus our $1 to buy the new puts.  

  19. XLF calls.

  20. HPQ…dead cat bounce coming up….today, tomorrow? I would scale into a position in here, 1/4 buy.  Nov 13 calls…..

  21. AAPL/$25KP – I changed my mind.  Let's sell 5 next week $680 calls for $6.20 and put a stop on the 3 weekly $665s at $10 (now $8.35) so $1.65 with a delta of .70 should give us about $2.50 wriggle room on AAPL going up ($673.50) and, if they go down, we'll be glad for 8/10 cover.  

  22. DIA Puts -Still selling half at $1 stop? Then rolling the other 20?

  23. GLD weekly C 174s.  buying back 1/2. 

  24. AMZN/$25KP, StJ – Is that $10.80 AFTER the short puts expire worthless?  Either way, going to be time to DD soon but first need to sell more and roll up to $240 puts ($5.80) for $2.20 but we'll see tomorrow.  

    DIA/$25KP – OK, so we stopped out at $1 and now we're going to buy 40 of the Oct $135 puts ($1.28) and sell the tomorrow $135.50 puts for .57 (a change from above).  

  25. Wow, what did someone say?  Indexes climbing like rockets…  Not too much volume (24M on Dow at 10:11) but all of it up now.  We'll see if 13,600 breaks and a very big deal if we finally hold that.  

    Strong bounce levels are:  Dow 13,494, S&P 1,457, Nasdaq 3,128, NYSE 8,264 and Russell 843

    AMZN testing $260. AAPL $673.  

    AMZN/$25KP – Let's execute our roll up to the Nov $240 puts for $2.15.  

    FAS/$25K, Lionel – Yes, good call.  

    NLY/Japar – I like those guys (AGNC too) and that's a good net entry, selling the 2015 $15 puts for $3 you should get for a net $12 entry.  

    DIA/$25KP, David – Setting up a 40/40 spread Oct/weekly.  

  26. Well well well….up up and away…..1500 on we come.

  27. /dx – Perfect technical trading this morning as it broke down from a trend line that started at the hourly low set on 9/14. Broke down on volume and then came back and retested. Failed the retest and is now breaking down again. If this sticks today I would guess we were headed back to retest the low at 78.72 sometime next week. Only caveat is we are extremely oversold on the 5/10/15/60 min stochastics. On the daily stochs we have room to fall.

  28. Phil, 25KP AMZN roll did you mean $3.15 by any chance?

  29. AMZN – sloppy but could be a right shoulder here at 260 to pair with left shoulder from Sept 10.

  30. Phil, never mind AMZN question.

  31. Next week SDS 12.50 calls near parity.

  32. DIA 40-40 spread / Phil,
    I'm going to be away from my computer for fair periods of time today. Thoughts on how to manage this trade as DIA goes down or up…? Thanks.

  33. AMZN/$25KP, Hemas – We're in the Nov $230 puts, which have a bid/ask of $3.60/3.65 and we want to roll to the $240 puts, which have a bid/ask of $5.80/5.90 now (because AMZN is now heading down) but that's still $2.20-2.25.  If for any reason you have a broker that wants $3.15 for that roll – you need to dump that broker before you make another trade because that is not even within the realm of reason!  

    RUT got slammed back down again.  In $25KP, let's buy back those $135.50 puts for $.45 and that will leave us with 40 naked Oct $135 puts for now.  

  34. DIA/Sank – I'd keep a 1/2 cover if you're going to go away or drop exposure to 20 long puts with no cover. 

  35. Dollar 79.57 and the Yen just failed 78.50 with Euro testing $1.30 and Pound just over $1.615 so this is the point I expect the BOJ to start buying Dollars again.  

    NYSE is leading us higher – that's a good sign.  VIX 15.25, TLT 123.50 – no one seems very worried.  

    As long as XLF maintains $16 – we're probably still in rally mode and we'll re-cover our DIA puts if we break over 13,600 and the $136 puts are .70 at the moment so no worries.  

  36. Pharmboy
    Anything new you can share regarding DEPO? Thx.

  37. I'm not real happy that the RUT just busted yesterdays low.  Why the divergence?

  38. Any thgts/news re Facebook's gradual descent today?

  39. Europe close

    UK FTSE -0.1%
    German DAX -0.3%
    French CAC -0.2%
    Spain IBEX -0.4%
    Italy MIB -0.2%

  40. DEPO/dc – keep selling premium.  They continue to consolidate.  I like them long term and are a very good play for a generic player (TEVA, etc) to reform things for better premium on generics…..will they be huge, no.  But their technology is sound.

  41. Phil:
    I hold 2 short this week $670 calls looking for AAPL to pin $670. When should most of the premium drop off if the stock hovers around $670? Is it on the last day or instead an accelerating but steady drop in to the close on Friday? Just observing it today it has already dropped $2.00. I am wondering how long I will have to hold these to reach my goal of around $2.00 (currently $4.00).

  42. Pharm-- thoughts on MNTA please

  43. ae8055354

  44. Sorry, disregard previous post.

  45. RUT/Rdn – Not sure.  Not seeing the news to take it down.  Maybe Europe's red close.  

    FB/8800 – I thought they sounded good this week with good Zuckberg interview and nice growth numbers but not fast enough, I guess.  Not sure how many Chinese users will be paying to play Famville when most of them are relaxing after a hard day at work on a farm…

    Facebook (FB +1.6%) trades higher after Mark Zuckerbergannounces the company now has 1B monthly active users – it closed Q2 with 955M. A fact sheet (.doc) about the milestone notes Facebook now hosts 219B photos (up from 140B earlier this year) and has been used to play 22B songs since Open Graph was launched a year ago – should Pandora (P), which just fought off a class-action suit regarding Facebook integration, be a little worried about that last number? 

    At the open: Dow +0.33% to 13539. S&P +0.38% to 1457. Nasdaq +0.17% to 3141.

    Treasurys: 30-year -0.41%. 10-yr -0.17%. 5-yr -0.07%.

    Commodities: Crude +0.94% to $88.97. Gold +0.49% to $1788.55.

    Currencies: Euro +0.57% vs. dollar. Yen +0.13%. Pound -0.45%.

    Market preview: Stocks futures held early gains afterjobless claims rose less than expected and Mario Draghi reiterated at a news conference the “euro is irreversible" as the ECB kept key interest rates on hold. S&P +0.4%; European markets edged slightly higher. Crude oil futures +0.9% to $88.90. Still ahead: FOMC meeting minutes, factory orders.

    10:00 AM On the hour: Dow +0.3%. 10-yr -0.14%. Euro +0.54% vs. dollar. Crude +0.95% to $88.98. Gold +0.54% to $1789.35.

    11:00 AM On the hour: Dow +0.7%. 10-yr -0.14%. Euro +0.76% vs. dollar. Crude +1.41% to $89.38. Gold +0.85% to $1794.85.

    11:43 AM Europe closes lower, giving up sizable early gains as the ECB reiterates it will take no action until Spain submits to a bailout, i.e., until conditions get worse. The Spanish 10-year yield rises 10 bps to 5.90% after an auction which was labeled a success just because buyers showed up. Stoxx 50 -0.3%. The euro +0.7% to $1.2993.

    12:00 PM On the hour: Dow +0.53%. 10-yr -0.08%. Euro +0.75%vs. dollar. Crude +1.84% to $89.76. Gold +0.71% to $1792.45.

    "Diversification has not failed," says Fidelity, lining up 3 portfolios - all cash, all stocks, and a 70/25/5 mix of stocks, bonds, and short-term investments. The diversified portfolio outperformed stocks by a solid margin in the 4-plus years incorporating the financial crisis and the recovery.

    Aug Factory Orders: -5.2% vs. consensus of -6.0%, +2.8% prior. Inventories +0.6%. Shipments -2.9%. 

    Initial Jobless Claims: 367K vs. 370K consensus, 363K prior revised (prior week 359K). Continuing claims flat at 3.28M.

    Sep Challenger Job-Cut Report:33,816 up 5% from 32,239 prior. Energy sector announced highest 3,393 job cut.

    The Bloomberg Consumer Comfort Index hits a 3-month high of -36.9, up from last week's -40.8. 71% of respondents say now is a bad time to be buying things, the fewest since mid-July, but 7 points worse than the long-term average 84% still rate the economy as negative, 19 points more than average.

    Occupancies at U.S. shopping centers rose just 1.46M square feet in Q3, according to Reis, the slowest growth in a year, and comparing to 2.18M in Q2. The vacancy rate remained at 10.8% as just 569K square feet of new space came online, the lowest quarterly figure since Reis began keeping records in 1999. 

    Home asking prices rose 2.5% Y/Y nationally in September, according to the Trulia Price Monitor, which – by tracking asking prices – claims to be a leading indicator. Current trends would have house prices up 4% for all of 2012, ending a long string of declines. The Trulia Rent Monitor shows a 4.8% increase in rents in the largest 25 markets.

    Consumer-loan delinquencies measured across 8 categories of loans fell to 2.24% in Q2, according to the ABA, the lowest level since 2006. Delinquencies on credit card debt dropped to 2.93% – an 11-year low. The rate, however, actually rose for home equity and direct auto loans. "It gives us pause about the future," says the ABA's James Chessen. 

    The ECB leaves policy unchanged, its benchmark lending rate remaining at 0.75%, and the deposit facility at 0%.

    The Bank of England leaves policy unchanged, its benchmark rate remaining at 0.5% and the size of the QE program (now slated to end next month) at £375B.

    Draghi: Today's policy decision was unanimous. There was no discussion about cutting the benchmark lending rate. No discussion? ECB minutes are kept under lock and key for 30 years, so we'll have to take his word for it. European shares continue on both sides of unchanged as the press conference goes on. The euro remains sharply higher, buying $1.2974.

    Draghi: Responding to a question of whether a rate cut is even conceivable considering the "broken transmission mechanism," Draghi says the ECB's use of non-standard measures (OMT) "speaks for itself." In other words, the bank believes a rate cut will be of little use, so don't expect one. So the dollar will remain more favored than the euro as the borrowing currency for carry traders?

    Draghi: The tone of his remarks suggest a central bank in complete awareness of the issues facing EMU, but not able – within its mandate (the ECB is not the Fed) – to do a lot about it. The singleness of monetary policy is being questioned, he says. "The monetary fragmentation taking place in the euro area is at unacceptable levels."

    The Bank of Canada remains the only central bank of significance with any sort of hawkish attitude as Deputy Governor Macklem says modest withdrawal of stimulus may soon be appropriate. The biggest challenge for the labor market in coming years, he says, will be finding enough workers, not jobs. The loonie pops 0.3%. 

    Today's EU bailout rumor is a game-changer if true, but at this point still a rumor: Officials are considering providing first-loss insurance for buyers of Spanish debt. The move could potentially allow Spain to meet its funding needs without draining the coffers of the rescue fund. Wouldn't it be easier to just pass a law mandating all EU debt trade at par?

    Mortgage rates fell to record lows for the second straight week, Freddie Mac reports, as the 30-year fixed rate averaged 3.36% and the 15-year fixed averaged 2.69%. A week ago, the rates were 3.40% and 2.73%, respectively; a year ago, they were 3.94% and 3.26%. Freddie Mac says data showing a weaker economy and Fed buys of mortgage securities drove the move.

    The FHA will not participate in a REO-to-rental program similar to what Fannie Mae is doing, says commissioner Carol Galante. A better solution to working through the 700K delinquent mortgages on the FHA books, she says, is to sell the paper. The aim is to offload 10K mortgages per quarter (by our math, that's 70 quarters to clear things out).

    Annaly Capital (NLY -1.1%) is downgraded to Sell at Morgan Stanley. No details are yet available, but with MBS yields falling, it's crystal clear more dividend cuts are on the way for the mREIT sector (though rising MBS prices may delay that for another quarter). On absolute terms mREITs may be overpriced, but relative to other income opportunities they still look to have value. 

    Annaly (NLY) CEO Mike Farrell exercises options to purchase 112K shares of company stock at $15.61 each (current price $16.59). His stake in the company is upped 4.3% to 2.7M shares. Earlier: Annaly gets another downgrade.

    Crude oil futures (OIL +2.2%bounce off yesterday's 4% drop; traders may be betting that prices fell too hard, and Middle East tensions are escalating after Turkey fired on targets in Syria. Oil servicers such as Halliburton (HAL +2.4%) and Schlumberger (SLB+0.8%) are rising, and the move is lifting refiners: TSO +3.5%VLO+3.3%MPC +1.3%WNR +1.3%.

    Casino stocks with ties to China can't get out of the way of areport out of Macau that gambling revenue growth slipped to a 12.3% pace in September. China's national holiday week started this week, so some bullish-leaning analysts remain optimistic that there was a lull before a frenzy. Decliners: MPEL -3.8%LVS -2.2%WYNN -1.9%,MGM -1.0%.

    The potential entry of McDonald's into the bagged coffee game throws an unexpected wildcard into the mix with the space already crowded by the likes of Green Mountain Coffee Roasters (GMCR -0.8%), Starbucks (SBUX -1.1%), Kraft Foods Group (KRFT+3.1%), and Dunkin' Brands (DNKN +0.1%) to name a few. Though the competition is heated, there could be enough cups of Joe to go around as even a tiny sliver of the huge market can lead to significant profits for any of the major players. Coffee market breakdown: The $10B industry percolates at a 5% growth clip per year with a profit margin close to 30%.

    Coinstar (CSTR +1.5%) will jump into the coffee game with the its machines nearly set to dispense Seattle's Best Brand drinks. The company plans to test twelve different drinks with an ultimate aim to settle on seven. Priced at $1 to $2 a cup, Coinstar will have McDonald's and Dunkin' Brands beat on price – but will need to win over consumers on whether or not coffee dispensed from a DVD machine can be high on quality. 

    Is $300 the breaking point for Chipotle (CMG -0.3%) now that David Einhorn has rained on its parade? SA author pitches the case that a small tester short position should be taken if shares cross the psychologically-important threshold. Another point of concern, insider selling has picked up as of late.

    September retail winners and losers: With J.C. Penney and Sears Holdings bleeding customers it was Gap (GPS), Limited Brands (LTD 

  46. September retail winners and losers: With J.C. Penney and Sears Holdings bleeding customers it was Gap (
    GPS), Limited Brands (LTD -0.1%), and TJX Companies (TJX +0.9%) showing positive trends and possibly picking up some shopping refugees from the embattled department store chains. Target (TGT +0.8%) and Costco (COST +0.9%) only held serve for the month, while Kohl's (KSS -1.8%) appears to have misfired with its strategies. Alarming results continue at Wet Seal (WTSLA -0.6%) and Fred's (FRED+0.3%). (Retail sales roundup)

    The vibe flowing out of September sales reports from retailers is largely positive with big names such as Costo and Limited Brands showing brisk sales, while teen seller Zumiez (ZUMZ) knocked it out of the park with 18.6% growth. Although back-to-school season numbers look to be beating expectations, the best gift for retail investors may be when Q3 reports roll in with companies showing improved margins as clearance sales were avoided and inventory controls clicked.

    For the first time in its history Wal-Mart (WMT +0.7%faces a strike from workers at multiple stores after a pair of California stores sees organized protests crop up. Though the labor effort is still modest in scale, it's well-timed with the Wal-Mart Analyst Day on tap for next week. (webcast)

    Target (TGT) says that beginning with its 2013 fiscal year that it will no longer report monthly sales, joining Wal-Mart and other major names in ending the practice. Reuters editor Brad Dorfman has the most sarcastic take on the development: "One step closer to my dream, when our entire monthly view of retail will be set by WTSLA and SSI." 

    H-P (HPQ -3.8%) falls again today after the sell-side response to yesterday's analyst day remarks and guidance proves as harsh as you'd expect. Barclays thinks H-P's dismal Enterprise Services guidance "highlights structural issues" unique to the company, and notes FY13 free cash flow guidance is well below EPS guidance. H-P now has a market cap of just $28.3B, or a mere 0.23x estimated FY12 revenue. 

    Shares of Netflix (NFLX +5%) continue their winning ways this week to hit their highest level since mid-August. Though the old mantra that the company sits mired in an industry with low barriers to entry and high barriers to profits still pervades, it seems to be getting a second look with the Internet streaming market still in its early stages and growth estimates set high. (Fresh NFLX backers: TilsonCiti)

    Google (GOOG) now forecasts $340M worth of Q3 restructuring charges related to its efforts to downsize Motorola Mobility, up from a prior $275M. Google, which said in August it wouldcut 20% of Motorola's workforce, now says it has broadened its restructuring to include additional foreign regions. Separately, Google announces it has reached a settlement with major publishers over access to copyrighted books digitized by its Library Project. A legal dispute with the Authors Guild remains ongoing. 

  47. XOP Dec 51 Ps….Oil may creep up, but barring disaster….it is going to get crushed.

  48. AAPL/DC – Those will hold $2 if AAPL at $670 until after lunch tomorrow – then they will drop fast. Likely by the end of today, if AAPL still at $670, they'll drop to about $3.  

    Oil $90.30.  Dollar 79.48.   Dow volume at 12:07 is 48.7M

  49. Thank you Pharm and Phil.

  50. MNTA/amit – I like them, they are in bed with SNY, and have some interesting things in the pipeline.  Conservatively, I would sell the Jan $15/14 strangle ($2.50 see if you can get it for this) and buy the stock.  Small position.

  51. Sorry going political for a moment because the more I read about the debate last night (and I did watch it), the sicker I get.  I don't know why people can't hold each other up to the fire when they are lying or challenge their facts.  When Romeny cited he saw studies that had the President's tax plan raising taxes for the middle class by $3-4,000, Obama should've countered and which studies are these?  And he could've pointed out when hearing them that they are Koch funded institutions that have a deep Republican bias.  Why is Obama so afraid to ask Mitt Romney if he signed an agreement with Grover Norquist pledging under no circumstances that he would raise taxes?  Bring that corruption out in the forefront and don't know why he didn't say anything about the video or let his own zinger go referring to that.  And I don't think Romney did that well either, he didn't go into any detail about anything, he completely said the opposite of what he was saying all along and his practiced zingers seemed written and stiff like the one where he said, "you own your house and your car but you don't own your facts".  That was his big zinger?  It sucked.  Can you tell I'll be voting Obama?

  52. debates/rustle:  Well, theres two more debates left.  Obama's a lawyer and he was known for using the "rope-a-dope" strategy with Hilary during the 2008 Democratic Primary. He could just be laying the groundwork for what could be a larger strategy.  Or I could be completely wrong.  It just seems very strange. 
    Anyway, Romney is now on record on national TV completely reversing his prior stances.  A good lawyer will use that to maximum as he nears his closing arguments.

  53. The TUrkey/Syria skirmish is their excuse!?!?!!? B/c those fockers produce sooooo much oil? What a joke, not that they dont use this sh!t every month but it is really getting old.

  54. rustle123
    That is a start and adds to why I call Obama spinless wimp. Wish he could stand up to congress, as a political leader he isn't.
    I will vote for him and as far as I'm conserned Romney needs to go to jail with the banksters!

  55. GLD/ Pharm- Hi- I was following the GLD 173 dec's and selling calls- I am at 173 weekly. Can you help me with this- roll, buy back and wait till Fri, etc.? Thanks.

  56. Debates
    I too was disappointed that Obama didn't call out Romney on his lies or the Republicans on their obstruction. I am afraid that the low-information voters (likely most of them) would have taken away the  impression that Romney was "strong" and "presidential" while Obama was "weak", "hesitant" and "over his head", because he sure looked like that last night. 

  57. With all the people here does anyone have any business dealings with Romney ? 

  58. Bain/Willie
    Ask anyone from Dunkin Donuts or Kay Bee Toys how business dealings went with Bain.

  59. Phil
    Thank you for the uso call yesterday and the Dug call a few weeks ago.

  60. Seriously, WTF, oil up 3$ for NO REASON!!! FU OIL!

  61. PGNX….lifting off the floor… that all us?

  62. rustle/debate -  my understanding is that neither candidate was allowed to ask the other direct questions ,,,

    The debate rules brokered by the PDC (Presidential Debate Commission)  stretch the use of the word "debate".  There is an excellent piece from Democracy Now (h/t Jesse's Cafe Americain)  with author George Fatah about the origin of the PDC, and the degree to which it  has neutered political discourse:

  63. VRTX Oct/nov 62.5 calendar calls for 1.15.

  64. So.Cal. – Gas prices up nearly 21 cents in a week – 9 cents overnite…..

  65. Unfucking believable, all yesterday's fall gone. F#CKING OIL!

  66. bdybdy2/Debate
    You can go around those rules by stating, Mr. Romney signed a pledge to Grover Norquist.  Or saying the institutions that say my plan would raise taxes are Koch funded institutions and have a Republican agenda.  Then Romney would have to respond to that.
    BTW, are the two most annoying women in the world Arianna Huffington and Ann Coulter? 

  67. VRTX….1.25….they are moving quickly.

  68. Debate/Rustle – I fault Obama for that, that's what a debate is about.  Romney threw him by changing his stance and Obama just laid down and let him steamroll the debate – it was pathetic.  Once he didn't call Romney out for his change of stance, you could see Romney get braver and braver.  Not going into detail WAS Romney doing well because there are no details and there is no secret plan but now everyone thinks he has one.  And you could see his eyes light up and he would dance around whenever Obama left an opening for one of his "zingers."  

    How about that RUT recovery! 

    Oil recovering too – $91.50.  USO $33 calls at $1 – a nice triple!  Short SCO $44 calls up 50% too.  I'd take both and run.  

    Altitude/Rebel – Yeah, that's the ticket.  

    USO/Rhcp – You're welcome, congrats! 

    Oil/Jrom – Don't need no stinkin' reason.  Come on, we got all the sell-off we ever could have expected yesterday, you have to learn to play both ways.  

    PDC/Bdy – Yes, not a real debate at all and Lehrer let them both get away with murder.  

    Rails/Customz – That's really strange.  I'd love to know what we're shipping so much of if not coal:  

    Capture629 597x420 Rail Traffic Sets Multi Year Record

    Most annoying/Rustle – I can't think of anyone who can beat either of them….

  69. Aurianna was a total anti gay right wing fire breathing vajahjah….when did she become a liberal!!

  70. angel – One of the benefits of divorce…..  :)

  71. Amazing how well the market is doing with AAPL lagging so much behind. Something is really weird there!

  72. Mutual fund investors pulled $5.1 billion out of U.S. stock mutual funds for the week ended Sept. 26. The prior week, investors removed $4.8 billion from these funds, according to data from the Investment Company Institute.

  73. Phil
    thanks for the USO call, helped with the HPQ body blow from yesterday.

  74. CSX – coming up off a channel low. vix is down and the 2014 12.5 calls are going for just a couple pennies of premium.

  75. AAPL/ Phil:  what do you think about purchasing the $680's weekly back?

  76. AAPL back at good old $666. 

    Dollar bottomed out finally at 79.40, now 79.45.  Yen went down to 78.30, now 78.43 and Nikkei (/NKD) stopped deal at 8,850, down from 8,900 at close.  Euro $1.3014, Pound $1,6182, oil $91.78, gold $1,793, silver $35.01, copper $3.78, nat gas $3.412, gasoline flying at $2.94.  

    USO/Jyoti – You're welcome.  You can use the money to DCA HPQ…

    AAPL/$25KP, Newt – Very tempting here as $666 holds up well.  As things look strong at 2:15 – I think we could risk going back to naked on AAPL for an hour so let's buy back the 5 next week $680 calls, now $5.30.  

  77. Kustomz Phil Rail!
    If you will admit that rail mostly connects the east and west most of commerce coasts, has to go through the middle, and those rail lines go though my neck of the woods? The trains are backed up 24 hours a day, lets say the rails are at 100% usage. I have asked others as to the Northern line through Montana also, people in Wyoming think coal is 98 to 99%, Montana 95%. What else is on the trains? New cars, trucks, lumber, piping, and long bridge support beams in about the volume of each decreasing. Too large and or heavy for roads.

  78. Cars and trucks are in protected/ inclosed flat beds, much less chance of damage than over the roads.

  79. Volume is in spurts of down, the late rise is on NOTHING!

  80. HPQ – for IRA accts the Jan 2014 $15 puts sold at $3 or better give a 20% return on cash-secured trade (or ~16% annualized). 

  81. Trains….don't forget oil!  Buffett's call on Burlington Northern because Obama would 86 Keystone pipeline…….
    Pretty quiet now, just have Nov 655 AAPL calls naked, some QQQ Oct 70s…..just waiting, probably cover AAPL below 665(close there, not dip), and looking to recover if it gets back to 680.  Probably sell weekly calls and pick up nickels/dimes while waiting for iMini and earnings…….

  82. Shadow- Others- I have seen those long coal trains while driving through MT.. Do you it takes one of those to power a Coal plant for only one day..

  83. Phil,
    Value/pricing question re AAPL call options: if I wanted to take advantage of 4Q earnings (10/25 + 3mths = 2/25 +/-) that would mean Apr 20 which are 65 for ITM vs 53 for Feb 16 (which might be  early for announcement). Would there be any benefit to going deeper ITM?
    Thanks in advance

  84. OMG.. there goes the t party….

  85. Pharm, O NO MY EYES!!!


  86. I am going long NFLX into Oct 23 earnings.   BTO Oct 20 Bull Call Spreads 65/70  for 2.15.   This is NOT a MoMo trade.   Why am I going long NFLX?   Because it's going up……….    

  87. Then it's a MoMo trade lflan   :-)

  88. stjeanluc /NFLX….I thought all funds in the MoMo portfolio were used up on AAPL.  If your calculations say no, then add this to the MoMo port.  Thanks.   

  89. I have had these on for way too long…..

  90. AAPL/$25KP – Our goal is now to sell 3 next week $775 calls (now $7.20) for $9 or better by the close.  If the $680s hit that, we'll sell those instead.  

    Dow volume just under 70M at 2:45.  Very stickable.  Yesterday's stick came after 3 and AAPL hit $672 into the close but Nas is already over yesterday's high so we're still watching the RUT, which needs to break over 844 to confirm a rally.  

    Rail/Shadow – I would love a breakdown on what's being shipped.  

    AAPL having trouble with $670, RUT stuck at 843. 

    AAPL/8800 – Not sure what strike you are talking about but with earnings, you have to have the assumption they might miss and be prepared to roll down.  April options put you well behind the Jan earnings with plenty of time to recover.  The $620s are $90 and capture 2/3 of a move up or down and your net is $710 but it depends what your goal is.  As an earnings play, I'd sell the AAPL Nov $720 calls for $10.50 and the $630 puts for $15.20 and buy the April $700s for $50 which have a .46 delta so you hopefully stay in range and you're in for net $25, which covers you for a $50 move in either direction and, if AAPL goes sharply down, $25 should pay for you to roll down $75 (because the April $75s are $25) and then you can roll the $630 puts to the April $515 puts (now $15) and then you'd be in the AAPL April $625 calls with the short $515 puts for net $25 after AAPL had some sort of earnings disaster.  If you're not comfortable with that, obviously you shouldn't be in it at all.  To the upside, the $700s are $20 in the money to the short Nov calls for net $25 so that's a non-issue as it will be easy to roll.  

    LOL Pharm. 

    Speaking of AAPL, change of plans as we can get $3.50 for 3 tomorrow $670 calls so let's do that and still look to sell 3 next weekly $675s for 9 but, failing that, then we sell 3 $670s (now $9.70) for no less than $8.50 in the $25KP.

  91. Forgot to highlight this from above:

    As an earnings play, I'd sell the AAPL Nov $720 calls for $10.50 and the $630 puts for $15.20 and buy the April $700s for $50 which have a .46 delta so you hopefully stay in range and you're in for net $25, which covers you for a $50 move in either direction and, if AAPL goes sharply down, $25 should pay for you to roll down $75 (because the April $775s are $25) and then you can roll the $630 puts to the April $515 puts (now $15) and then you'd be in the AAPL April $625 calls with the short $515 puts for net $25 after AAPL had some sort of earnings disaster.  If you're not comfortable with that, obviously you shouldn't be in it at all.  To the upside, the $700s are $20 in the money to the short Nov calls for net $25 so that's a non-issue as it will be easy to roll.  

  92. MoMo / lflan – Sorry, I was just joking as you are making a momentum trade and saying it's not a MoMo trade! We'll stay with the AAPL trade now!

  93. What happened on FTR, all the Cramer folks buy it back?

  94. stjeanluc….Well, I'm kind of sheepish about advertising a long NFLX trade,  but gosh, I have to call 'em as I see 'em.  And yes, I think we are tapped out in the MoMo portfolio to AAPL, so we'll leave it where it is.    I see Phil is massaging those AAPL covers to good advantage, which I love to do when trading time allows.  I'm more interested right now in going to a futbol game (soccer).   See you guys tomorrow.   

  95. Phil – Do you still recommend holding FTR long?  TIA

  96. AMZN – looks like they want to pin 260.. but max pain calculators show 250 as the peg. what will happen tomorrow?

  97. According to Bloomberg, FB users spent 314B minutes on Facebook in August alone.  Wow! 

  98. randers1 hoss18
    Those tank cars, oil have all but disappeared, what we see is only tar for making asphalt. Buffet will take a huge hit if natural gas takes over coal power plants.

  99. LNKD - exercising options and selling stock by CEO, VPs. 

  100. Since they just reported that they have 1B active users, that translates to over five hours per user per month.

  101. did i miss your fed minutes opinion?

  102. Phil rails
    If you watch trains all day you see coal and empty coal cars as fast as they can jam them through and maybe 1 of everything else per day. Most coal is east bound but in Montana, a lot goes west. So much hydro electricity in the north west I wonder if the west coal is loaded on ships to China.

  103. FTR/Rpme – Cramer chased the sheeple out of it and then his fund buddies swooped in and bought it up at the 50 dma.  Same as usual.  

    Have fun Lflan!  

    FTR/Ink – I like them but the fun part is over and it's likely a long slog forward unless they get bought (very possible).  Dividend is lovely (8.5%) and you can own the stock at $4.75 and sell the 2014 $4 puts and calls for $1.70 so net $3.05/3.53 and the .40 dividend is 13% and you have 25% downside protection built in and a 33% bonus if called away at $4 so, under those conditions – how can you not like them but there will be a much more attractive play when the 2015s come out.  

    AAPL $666 again.  Good thing we had a plan! 

    FB/Ink – That's about 5 hours per user – I can believe that.  I'll bet I spent 2 or 3 hours and I don't even like it.  Tina more than makes up for my shortfall…

    Fed minutes/Jabob – I forgot all about them!  No effect at all on the market but that makes sense as it's just QE Forever – what else is there to say?  

    China/Shadow – I do think we export a lot of it.  

    Big spike up after the close.  Very strong day overall.  VIX 14.84 – no worries  there.  TLT 122.75 so people cashing those TBills getting ready to buy more stock.  

    Dow volume 105M at close – very light.  

  104. FTR
    According to the schedule that Diamond posted yesterday, FTR 2015's come out Oct 15th.

  105. " Intensifying sanctions against the country have sent the Iran's rial into an unprecedented free-fall, causing it to plummet in value by 75 per cent since the start of the year; and, stunningly, almost 60 per cent in the past week alone.….If, as many US officials have publically said, the goal of sanctions are to forcibly coerce Iranians to rise up and overthrow their government, the decimation of the Iranian middle class through the collapse of the economy will have only the opposite effect. The people of Iran will suffer potentially catastrophic harm as Iraqis did a decade earlier, while their state grows increasingly repressive and empowered relative to a poor and destitute population – a natural outcome within a command economy such as Iran's."
    As I commented yesterday, this will require a response from Iran's leadership, and their only obvious weapon against international sanctions is to double the price of oil.  I don't know how, but closing the Shatt al Arab is the quickest way.  A couple of explosive-laden suicide boats slamming into tankers would work — and Iran could disavow it as the action of "terrorists."
    It's not as if the Iranians haven't had time to think about this.  What's the West going to do, bomb Tehran?  The Russians will be delighted with any rise in the price of oil, so running and crying to the U.N. will accomplish zilch.  Armed escorts for tankers?  Not cheap, and for how long?    The opinion piece cited above points out the massive inhmanitry of economic sanctions, which hurt the poorest, those in the least powerful position to influence their governments. Iran will likely mount a two-pronged attack [or defense, as they would see it], citing the inhumanity of sanctions in the forum of the UN, and "standing idly by" as Jihadists spontaneously start blowing up oil tankers.
    I have no information to support this, beyond one can read in any newspaper, but that Iran, astride the two largest oil-producing regions in the world and arguably in possession of nuclear weapons technology, finds itself impotent and to imainge that the collapse of their economy and currency will elicit no reaction worth mentioning is not a thesis on which I would take a short oil position.

  106. Scottmi, the 250 peg for AMZN is for Oct 20 expiry. Max pain for tomorrow's option expiry based on today's OI would be 255. Guess that suggests AMZN will drop 5 tomorrow. Not an accurate science and works sometimes. Off course, would be great for 25KP if it drops 5 tomorrow :-(

  107. Pharm……….Whats you current take on SVNT? Thanks

  108. SVNT…dead….dead….dead.  AZN has the drug as they just bought Ardea.

  109. Really close to a breakout – tomorrow's job number will be crucial if we want to punch through the lines or bounce down!

  110. What Doug Short calls the best indicator is still quite bullish:

  111. If it was not for the fact that people are tapped out and the real estate market is in the dump, it would be a great time to buy:

    f3270ed6a026c9315065e25c862564df Thursday links:  the wrong reason

    Refinancing is also a way to put more money in people's pocket but they seem to require actual income and more paperwork these days!

  112. A good comparison of CMG against the competition – lots of different charts at the link:

    CMG PE Ratio Chart

    At this place, it could be that everything’s a bit pricey.

  113. Josh is  no big fan if HPQ:


    I have no respect for any market participant who cannot accept that there is value to be had from considering aspects of other disciplines when making investments and trades. I spent the first seven years of my career blowing myself up in so-called "cheap" stocks with "good" fundamentals and "smart" management teams. Often, I had a great company but no risk management and a poorly timed buy or sell. it wasn't until I began incorporating technical analysis that I started to really feel like I was making progress as an investor.

    They say "Fundamentals tell you what to buy, Technicals tell you when to buy it."  I like that, even if it may be oversimplified.  In the case of Hewlett-Packard, the fundamentals and valuation have trapped millions of investors. If only they'd respected the money-flow and supply/demand picture of the stock, they'd have saved themselves billions of dollars and a ton of embarrassment. [...]

    But those who pay attention to both fundamentals and technicals probably missed the horror show of HPQ, despite its status as a "good" company and a "blue chip" stock. In the below screenshot, the downtrend in HPQ is so obvious that a child could be taught to spot it with a 30 minute classroom lesson. Funamental analysts would be doing themselves a huge favor by incorporating some of this stuff while they still have a solvent firm client left.

    There is always a risk when you are looking for cheap value!

  114. iPad access,
    Not sure if anyone else is facing this issue. I'm unable to access any content on this site after 8:45 am on my iPad. The entire comment list appears fine on my Windows 7 laptop. And I'm trying to access the site now (7:30 pm EDT) on both devices. Using Chrome browser on both. Have upgraded to ios 6 on the iPad a few days back.

  115. Nicarauga
    Anyone want to invest in a Modern Balinese style Yoga retreat with me down in Nicaragua?  I'm going to build it on some ocean front property I picked up.  It's awesome that it's cheap to build 90/sqft but it's all cash up front…….  I'm thinking that we'll invest around 500K.  

  116. burrben: yoga
    Once established let me know how the LULU sales are going down there ;)

  117. HPQ
    Another (negative) take in the video.
    As a side note, watching the Morning Call videos and the videos after the close are really helpful to me, to establish Tier1 stocks to trade, and what to stay away from.

  118. burrben,
    do you live down in nicaragua full time or are you planning part time…….? 
    are you familiar with rancho santana……..are you close to the property………
    ive read about some innovation city thing they are doing ………….are you involved with that………

  119. Daniel Gross is being optimistic about the job numbers:

    That said, the trends in September would seem to point toward a positive number, if not a hugely impressive one. First-time unemployment claims were generally down for the month. On Wednesday, ADP, the payroll-processing company that produces its own estimate of jobs growth each month, said the private sector added 162,000 positions in September – a solid number. And as the blogger/investor/columnist/analyst Barry Ritholtz points out, federal tax withholdings on wages have been growing strongly in recent months. The flow of data would seem to point to continued jobs growth. If I had to go out on a limb, I’d project that September’s jobs report will show a more-than-decent gain – of up to 200,000. (If this prediction comes true, I’ll tell you about the super-secret source I relied on. If it falters, I’ll tell you who to blame.)

  120. You know, I didn't watch the debate last night because I can't stand watching that stuff, but when I see the clips from last night; my completely uneducated guess is that somehow he got an overdose of the beta-blockers (like propranolol) that a lot of the politicians are rumored to take before giving big speeches to quell the symptoms of stage fright. I've seen it in action and it can make one sluggish and slow.  Maybe he was given too much for the altitude.  I'm willing to bet a lot of money that he won't seem anything like that at the next debate.

  121. Jobs numbers…both Lee Adler of WSE and Charles Biderman of Trim Tabs expect a beat…..this will be that 'last let up' to SPX 1500-1550 that is needed…before the great fall of 2013…if it is horrible, then the dark side has begun and I wanna go back……

    As for Vegas….well, drinks are on me…pre-party b'f dinner, although I will not be attending dinner…I owe everyone for LLY… :)

  122. rdn – Interesting take on the beta blockers.  No way it was just "the altitude", as rumored — my house in Utah sits at 8,600 ft., I had only been there for four days [little acclimatization] and my experience is that low oxygen is harder on your muscles and lungs than on your brain, until you get above 15-20k.  Obama didn't appear torpid, just unprepared.  It might have been drugs, but my money would be on hubris.  Confidence and natural glibness will seldom overcome the Six P Principle — Proper Preparation Prevents Piss Poor Performance.  Obama had the deer-in-the-headlights look of someone who took a knife to a gunfight.  

  123. Best tweet of the debate: "This campaign to re-elect Bill Clinton is going really well."

  124. LOL I just googled "beta blockers" and "altitude" and came up with a study where they tested the effects of beta-blockers on "elderly" mountain climbers and found adverse effects on performance- "elderly" being defined as over 35 years old!  And here I was just finally getting resigned to being Middle Aged…

  125. Iran/ZZ – Or they could capitulate and end the sanctions.  Go to war and make things worse, likely insuring the end of the regime, along with probably the lives of the leaders or negotiate – I find it interesting that so many people think suicide is option number 1 for Iran.  After all, it went so well for Saddam, Mubarak, Ben Ali, Gaddafi, Saleh, and the Taliban…

    Big Chart – What's up with the Russell?  Others looking strong but now we have to be very concerned about the dreaded double-top "M" pattern forming.  Gotta get over 13,600 on the Dow but look how long that last consolidation line was before failing – about 6 sessions.  That could take us to next Friday and we still won't know which way things will break.  Of course tomorrow (6 hours) will be a helpful data point. 

    And what StJ said! 

    Real estate/StJ – Borrowing $500,000 at 3.5% is $2,245.22 per month.  Borrowing $400,000 at  5% is $2,147,29 a month so, unless you feel real estate will drop 20% more – now is the time to buy.  $500,000 at 2.5% is $1,975.60 a  month so even if you think rates are still going lower – it's not worth passing up a good property to wait.  

    CMG/StJ – They were such an easy short with a p/e of 55, probably still overpriced but QE3 takes the fun out of it.  I'd like to see that chart with AMZN and others.  

    HPQ/StJ – If your time-frame is a year or two years, it's a bad trade.  If your time-frame is the decade, it's a good investment.  Here's another tech company that "obviously" shouldn't be bought because it's in technical hell, despite what you think it's fundamental value is:  

    Relentless downtrend, not a singly buy signal or explicable entry point along the way…

    I agree that TA tells you WHEN to buy something but not for long-term investing – that's a different game.  If you bought AAPL at $200 and bailed at $100 then it was a crappy trade but if you bought AAPL for $200, doubled down at $100 and planned to DD again at $50 – then you were disappointed that you only had a 2x position – but not for another year after you DD and AAPL finally gets back over your $150 average.  

    It's not complicated – buy 1/4 of your allocation on a first entry.  Use buy/writes to lower your basis 20%.  Even if I want to buy something dumb like PCLN at $635 if I have a $600,000 allocation to buy 1,000 shares then I buy 300 shares for $190,500 and I sell 3 2015 $550 puts and call for $290 ($87,000) and I'm in for net $103,500 cash of my $600,000 allocation and my downside case is I own 600 shares for net $268,500 (50% of allocation) at an average of $447.50, which is 29.5% off the current price.  If PCLN goes up and up and I never get a chance for a new entry, then I get called away for $165,000 and I make $61,500 on the $103,500 initial allocation (59%) and it's still 10% of the entire planned allocation but I still had $496,500 to play with the whole time.  

    If PCLN falls 50% to $320 then we have a 6 x $127.50 loss ($76,500) or about 12.5% of our full allocation.  At that point, should we feel the FUNDAMENTALS of owning PCLN are still holding up, then we buy 600 more for $320 ($192,000) and now we have 12 PCLN that we paid $460,500.  But then we can sell 12 2017 $250 puts and calls for let's say $150 ($180,000) and that drives our net cash positing back down to just $280,500 so we're only half invested with 12,000 shares of PCLN at an average of $233.75 and, if we get called away at $300 – we make 12 x 66.25 = $79,500, which is not bad considering it's 53% below where we entered.  If you can make 13% on things that go 53% against you – you'll probably be OK in the long run.  

    Even if PCLN falls another 50% to $160, your loss is "only" 2,400 x $73.75 or $177,000, which sucks but it's 29.5% of your $600,000 original allocation and, had you bought 1,000 shares of PCLN at $635 for $635,000, at $160 you would have lost $475,000 so the buy/write strategy has a pretty clear advantage there.  

    The biggest problem with this kind of investing is the lack of patience most people have.  Look at all this hand-wringing over HPQ when it's "only" down 33% from that initial drop to $22, where we became interested in it.  It was never a day-trade but no one is EXCITED that it's down to $15 and I'll bet no one will be excited when if it gets to $8 because it's going to look terrible on those charts – almost as bad as AAPL…  

    IPad/Sank – Please talk to Greg (admin at philstockworld dot com) about that, I have an IPad running 5 and an IPhone running 6 and Tina's Droid and the kids' IPads running whatever and an IMac and an HPQ and another HPQ and a Dell running various OS's but I'm not seeing it.  

    From Sterne Agee:  


    Hewlett-Packard guided its fiscal 2013 EPS to $3.40-$3.60 versus consensus at $4.18, assuming worsening macroeconomic conditions, year-over-year revenue declines across all segments except software, profit declines, increased investments, and continued-cost reductions.

    Beyond fiscal 2013, the company looks to achieve "recovery and expansion" in fiscal 2014, "acceleration" in fiscal 2015, and become an "industry-leading company" in fiscal 2016.

    While the initiatives laid out make sense, it remains to be seen how well execution will be given its mixed track record.

    As a result, we are lowering our estimates. For fiscal 2013, we are now at $112.5 billion and $3.60 in EPS, from $120 billion and $4.40 in EPS, versus consensus at $120.1 billion and $4.18 in EPS.

    Sounds fine to me for a $15 stock!   What's wrong with HPQ?  Laptops have been killed by pads.  Computers and printers have been killed by lack of Corporate Investment.  The second will not go on forever though laptops are probably never going to recover but THIS is the bad part of the cycle for them.  

    Jobs/StJ – I think the jobs will be over 150K and, as I said the other day, over 200K is a big problem for Romney so if there's any way to shove the numbers around (like having tanked the last report and pulling forward from the next report, which doesn't publish until after the election), then I'm sure we'll get a pretty number this morning. 

    Beta-blockers/Rdn – LOL, you should hang out with Gore at the excuse factory.  He blew it.  The last DNC convention was in Denver and he rocked it in a stadium – the man is a lawyer (not to mention POTUS) – there's just no excuse for what happened yesterday, it was a shameful performance and that's that.  I think Obama just got thrown completely off his game when the Anti-Romney showed up, his notes were all useless and he made the very bad decision not to go on the attack and call Mitt a liar.  It's possible Obama wanted to let Mitt hang himself because the more he let Mitt win talking points, the more the Anti-Mitt took over and he may be alienating his own base.  Also, it could be a bit of a rope-a-dope, as it's one of 3 debates and NOW expectations are all for Mitt to mop the floor with Obama and there will be much higher ratings for the next one and, also, pressure is off Joe Biden because all he has to do is not be as inept as his boss.  It's possible but it's not a strategy I would have chosen and I hate to give Obama the benefit of the doubt after that embarrassing spectacle.  

    And what ZZ said!  

    Speaking of the debate:  Romney told 27 lies in 38 minutes of speaking.  

  126. Friday's economic calendar:
    Monster Employment Index
    8:30 Nonfarm Payrolls
    1:00 PM Fed's Duke: 'Distressed residential real estate'
    3:00 PM Consumer Credit

    At the close: Dow +0.63% to 13579. S&P +0.79% to 1462. Nasdaq +0.45% to 3149.

    Treasurys: 30-year -0.73%. 10-yr -0.28%. 5-yr -0.11%.

    Commodities: Crude +3.85% to $91.53. Gold +0.73% to $1792.85.

    Currencies: Euro +0.86% vs. dollar. Yen -0.06%. Pound -0.7%.

    Market recap: Materials, financials and energy shares pushed the S&P 500 to its fourth straight day of gains as weekly jobless claims and factory orders came in a bit better than expected and a Spanish bond auction saw a strong response. Crude oilrebounded 4% to nearly $92/bbl.; gold neared $1,800/oz. NYSE advancers topped decliners two to one.

    3:39 AM Asian and European shares are mostly higher after positive data in the U.S. yesterday and ahead of the all-important U.S. job numbers. Japan +0.4%, Hong Kong +0.4%, China closed, India-0.7%; EU Stoxx 50 +0.4%, London +0.3%, Paris +0.4%, Frankfurt+0.3%, Madrid +0.3%, Milan +0.3%.

    Jobs Report May Show a Big Surprise (WSJ)

    Good News for the Unemployed (Slate)

    Why do Health Care price increases count as wage gains for the Poor? (NYT)

    The BOJ holds off on more easing despite fears that the economy is contracting and in the face of increased political pressure, with Seiji Maehara becoming the first Economy Minister in nine years to attend the bank's policy meeting. As expected, the BOJ left its asset-purchase fund at ¥55T ($700B), as well as its benchmark interest rate at 0%-0.1% and monthly bond purchases at ¥1.8T.

    FOMC Minutes: "Asset purchases should not adversely affect the ability of the Committee to tighten the stance of policy when doing so becomes appropriate," is the conclusion of the Fed staff. Most participants, according to the minutes, believe the risks of "adverse effects" from asset purchases "could be managed." Dissenting from the vote on QE∞ was the Richmond Fed's Jeff Lacker. 

    More from the FOMC minutes: The group considered, but did not yet implement a trigger rule such as a level of unemployment that would automatically prompt an increase in rates. Currently, rate guidance is done by the calender, with the Fed promising (for now) to hold rates low into 2015. 

    QE3 Misconceptions And How To Profit (A Dash Of Insight)

    Why QE will fail, dissonant voices edition (Credit Writedowns)

    Is unlimited growth a thing of the past? (

    With the Fed more or less in complete control of the yield curve, nobody really talks about this anymore, but the 2/10 spread (the 10-year Treasury yield minus the 2-year) is at about 140 basis points – far above the flat to negative reads typical ahead of a recession, writes Eddy Elfenbein. With the 2-year at 0.25%, does this indicator still matter?

    Ultra-bear Marc Faber continues to warn about an imminent downturn in equities markets, saying that investors should brace for a major market drop ahead that will present a buying opportunity. "Within the next six to nine months we can buy just about anything 20 percent lower than it is now," Faber says. Jim Rogers shares that sentiment, with the exception of China, where he says the collapse has already occurred.

    "Diversification has not failed," says Fidelity, lining up 3 portfolios - all cash, all stocks, and a 70/25/5 mix of stocks, bonds, and short-term investments. The diversified portfolio outperformed stocks by a solid margin in the 4-plus years incorporating the financial crisis and the recovery.

    Leveraged loan volume climbed to $114B in Q3 from $88B previously, the third highest Q3 figure on record. For the first 9 months of the year, volume is about equal with 2011, but where 2011 slowed in Q4 amid financial jitters, issuance is set to soar this  year. Yields slid, spreads declined, and returns were great. What planet is the Fed living on? 

    The U.S. fertility rate has dropped to its lowest level since the government began keeping track of the data – a troubling trend that likely will force the U.S. to rethink how to financially support the elderly and fund programs like Social Security and Medicare, ongoing economic debates that will take on even more weight as the country ages.

    Drawing "full-on" laughter, Spanish finmin Luis de Guindos tells a London audience Spain doesn't need a bailout at all. His attitude illustrates the point that the ECB bazooka in pocket has calmed markets enough for Spanish politicians to reject taking on a rescue. It also means this isn't over – at some point markets will force the issue.

    Chinese spending in Hong Kong during this year's (currently ongoing) Golden Week holiday is expected to fall at least 10% Y/Y, according to the Travel Industry Council. "The macroeconomic situation is dreadful," an analyst. "The number of big-ticket transactions has shrunk." 

    On the other hand:  A 59% monthly jump (34% Y/Y) in BMW's (BAMXY.PK+4.8%) auto sales in China in September eases at least some concerns about the slowdown in the world's largest auto market. Volkswagen and Daimler's Mercedes-Benz also posted good numbers last month. "This strength has legs to it," says Credit Suisse's David Arnold. 

    China, Robots/Automation and Unemployment (Econ Future)

    Apartment Demand Ebbs as ‘Avalanche’ of New Units Open (CNBC)

    Warehouses, strip malls, motels, and now suburban offices. Blackstone's (BX) tastes have clearly shifted from trophy properties. Its latest deal is an $85M investment in a portfolio of suburban California office buildings previously controlled by SL Green. The move values the assets at $850M, a bit more than half of what they sold for in 2007.

    Romney Rally: Banks, Health Care, Coal Stocks Big Winners (WSJ)

    Is it a Romney rally? "I like coal… people in the coal industry feel like it's getting crushed by your policies," Mitt Romney said in last night's debate. Arch Coal (ACI +8.7%), which Brean Murray analyst Lucas Pipes says has more leverage to the domestic thermal coal market, continues to push higher (earlier). Also: JRCC +10.8%ANR+6.2%CNX +5.8%WLT +5.1%BTU +4.4%.

    The real reason coal is rallying:  Coal is now cost competitive with natural gas for power generation, and the industry has seen utilities switching back to coal, which Global Hunter says points to a sooner than expected recovery in fundamentals. JRCC +9.8%, ACI +7.1%, WLT +5.9%, CNX +5.3%,ANR +5.2%, BTU +4.3%.

    MLPs as a group remain relatively undervalued and several names are attractively priced, Credit Suisse says, suggesting investors pursue a conservative posture of focusing on names with large asset footprints, diverse cash flows and limited direct commodity price exposure. The firm's favorites: PAAMMPEEP,EPDGELKMRKMPKMI. 

    Valero Energy (VLOsuspends gasoline sales into the California spot market because of a product shortage resulting from a spate of refinery outages in the state. The unusual move from the largest U.S. refiner comes after accidents and maintenance have caused shutdowns at several California refineries, sending pump prices soaring. VLO -3.2% AH.

    California Gas Stations Begin to Shut on Record-High Prices (Bloomberg)

    A consortium of energy companies says it is moving forward with a $45B project to build an 800-mile natural gas pipeline from Alaska's North Slope that will export liquefied natural gas to Asia.XOMCOPBP and TRP agree on a plan to combine what were once two competing projects destined for the continental U.S. into one project aiming at overseas markets. 

    Great article on Cushing:  The Oil Hub Where Traders Are Making Millions

    Broker Sent Oil Prices to Eight Month High in a Drunken Stupor (Oil Price)

    The proposed Alaska gas pipeline is unlikely to have a direct impact on natural gas prices in the lower 48 U.S. states which are driven mainly by expectations about shale gas supplies in places like Texas, the Gulf Coast states and Pennsylvania. Increasing supplies of liquefied nat gas on the global market could in theory put downward pressure on LNG shipped from other ports. 

    Boeing (BA) updates new orders on its website, reporting 172 new orders since its last weekly post. The new orders include 85 737s from GECAS, 60 737s from GOL Airlines, one 737 from Turkmenistan Airlines, plus 22 737s, one 777 and three 787s from unidentified customers. In the Changes category, the company reduced 737 net orders by 12. The company also reports Q4 commercial airplane deliveries totaling 149, while YTD commercial airplane deliveries were 436.

    Boeing (BA +0.1%) takes another hit to it

  127. Boeing (
    BA +0.1%) takes another hit to its troubled Dreamliner program, this time over more fallout from the plane's flawed General Electric (GE -0.1%) GEnx engine. There appears to be a material defect in the midfan shaft of the engine, and Qatar Airways is refusing to take delivery until the defects are sorted out. The Government-owned airline has 30 firm Dreamliner orders and was expected to take five deliveries this year

    Dave & Buster's Entertainment scraps plans for an IPO, the latest in a string of companies to defer or cancel IPOs due to dicey market conditions. The restaurant, bar and arcade game operator originally filed IPO plans in July 2011. Just last month, the company said it expected to offer 7.69M shares, priced between $12 and $14.

    Moody's responds to H-P's (HPQpoor FY13 guidance by placing the IT giant's debt ratings, which vary based on debt type, under review for possible downgrade. Though noting H-P is still producing healthy free cash flow, Moody's is on edge over whether the company can stabilize its business and pay down debt while improving its "competitive profile." UBS recently noted CDS prices for H-P's debt have risen sharply, and suggested H-P split off its financial services arm to lower its $20B debt load.

    More on Cisco: The company shows it's serious about software-defined networking (SDN) by acquiring vCider, a developer of a software-based controller for managing switches that span multiple data centers. Cisco plans to use vCider's tech in SDN solutions that supports the OpenStack cloud infrastructure platform. The threat posed by SDN has been weighing on the Street since VMware (VMW) bought Nicira. GigaOm notes vCider's software bears a resemblance to VMware's VXLAN. (also)

    Zynga (ZNGAwarns it expects 2012 bookings of $1.085B-$1.1B, below already lowered guidance of $1.15B-$1.225B. The company expects Q3 revenue to reach $300M-$305M (above a $275.9M consensus), but forecasts bookings will amount to just $250M-$255M. Zynga blames weakness in games within its web "invest and express" category (e.g. FarmVilleCityVille). Also, an $85M-$95M write-down is being taken on the OMGPOP acquisition. Shares are halted, and will resume trading at 5.05PM ET.

    Zynga (ZNGA) has resumed trading following its Q3/2012 warning. Shares are down 16.5% AH to a new post-IPO low of $2.35, leaving the company with a market cap of less than $2B. Facebook (FB-1.6%. Groupon (GRPN-0.6%.

    In a Bloomberg Businessweek interview, Mark Zuckerbergsays he's confident Facebook (FB) will eventually "make more money per amount of time" from mobile use than PC use, due to mobile's immersive nature (ed: but time spent might not catch up). Zuck also expresses hope Facebook will one day enter China, where its services are blocked, but cautions the company needs to show "we can do it in a way that’s going to make everyone happy, including ourselves." (1B users)

    More on Facebook: An in-depth column accompanying the interview shines a light on Facebook's "break things and move fast" culture, which leads new and often unpolished products to launch at adizzying pace. A restaurant review service could be among the products on tap - YELP can't be pleased with that. Long-term, Facebook wants to "record every book, film, and song a person has ever consumed, then build a spectacular model of other things that person could enjoy." Will consumers go along, and if they do, should Google be worried?

    Microsoft's (MSFT) Surface tablets will go on sale on Oct. 26, at the same time as Windows 8. A "reception" has been scheduled for the night of Oct. 25 to mark the launch, but pricingremains a mystery for both the Nvidia-based Windows RT model and the Intel-based Windows 8 Pro model. (more)

    AT&T (T), fresh off announcing Nokia's Lumia 920 will be an exclusive, is growing its lineup of non-smartphone devices. Samsung's (SSNLF.PK) hyped Galaxy Camera, an Android point-and-shoot with a 21x optical zoom, will go on sale in the coming weeks. And so will two Windows 8 tablets: the Samsung Ativ and the Asus Vivo. As with the Lumia 920, AT&T is staying tight-lipped about pricing.

    Backing up a May rumor, Digitimes claims Google (GOOG) wants to launch Nexus smartphones in partnership with with several Android OEMs at once – Samsung, LG, Sony, and HTC are named as likely candidates. Expanding the size of the Nexus line both helps Google promote an unmodified version of Android (most sales involve phones with custom UIs), and keep partners from worrying if Motorola Mobility is getting preferential treatment.

    Ramping iPad Mini production is proving just as tough as ramping iPhone 5 production, claims Apple (AAPL) uber-bull Brian White. White thinks yield issues (ed: this could be related to the Mini's reported touchscreen tech) have put the tablet 4-6 weeks behind Apple's original launch schedule, but still thinks December quartersales of 5M-7M units are possible.

    "Based on our checks for in-store pickup at 100 U.S. Apple retail locations over the past week, we believe [iPhone 5] supply remains extremely limited," writes Gene Munster. That leads him to cuthis FQ4 (September quarter) iPhone (AAPL -0.7%) forecast to 25M units from a prior 27.2M. He's keeping his FQ1 target of 49M units unchanged, but cautions some of those sales could shift into FQ2 if supply constraints last for more than 3-4 weeks. (previous: III) 

    Taking Stock of Some of the Debate Claims and Counterclaims (NYT)

  128. Oil bouncing of yesterday R1/ long off 90.75

  129. Phil/PCLN Example
    Your example illustrates the point your are making but unless you make your DD decisions correctly, it can still blow up in your face?   Having bought PCLN at $635, when do you know to DD?  If you can't predict the future, you might be tempted to DD when the stock is down 30%, then again at another 30%.  At this point with PCLN at $311, if you had the guts to DD again, you'd still get killed as it dropped to $150.  I know it is all about patience and your strategy is WAY better than buy and hold, but there are still more ways to get burned on a bad trade due to bad decisions….or good decisions made early or late!   To me the biggest lessons I've learned from you are conservative position size and patience (I'm making progress on the first but the second is a REAL challenge for me).

  130. Oil Lines today Lionel:

    R3 – 96.64
    R2 – 94.24
    R1 – 92.82
    PP – 90.42
    S1 – 89
    S2 – 86.60
    S3 – 85.15

    Yesterday's high and low – 91.84 / 88.02. I also have a Fib line at 91.02.

  131. Maybe some of you have used this, but I was trying to find a place where historical P/E could be easily displayed. There are many more metrics that can be charted. Select the Data Tab and then click on the box "View over 70 metrics" and choose the one you want, P/E in this case.

  132. Stjeanluc/ Good morning and thank you.
    Let see if we can go through the Fib line today…

  133. Rejected…

  134. Good Morning—wow