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Testy Tuesday – IMF Report Back to Using the “R” Word


"The global economy risks skidding toward recession just three years after pulling out of the previous one," the International Monetary Fund warned, adding that fighting a renewed world-wide downturn will be much more complex than it was in 2009.  "Risks for a serious global slowdown are alarmingly high," said the IMF's World Economic Outlook report, which was released this morning, ahead of the fund's annual fall meeting. It was its bleakest assessment of global growth prospects since the 2009 recession.

The International Monetary Fund cut its global growth forecasts as the euro area’s debt crisis intensifies and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.

The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, the IMF said today, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013. The Washington-based lender now sees “alarmingly high” risks of a steeper slowdown, with a one-in-six chance of growth slipping below 2 percent.

The 17-country euro area economy will contract 0.4 percent this year, 0.1 percentage point worse than forecast in July, and grow 0.2 percent in 2013, less than the 0.7 percent predicted three months ago, the IMF said. The U.S. is seen expanding 2.2 percent this year, higher than an earlier forecast, and growing 2.1 percent next year, less than previously predicted. Japan’s estimate was cut to 2.2 percent this year and to 1.2 percent in 2013.

A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component,” the IMF said in its World Economic Outlook report. “The answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges.” 

The IMF’s 188 member countries convene in Tokyo this week as low growth damped by fiscal consolidation in the richest economies hurts developing counterparts from China to Brazil. As the IMF urged measures to boost confidence, uncertainties out of Europe show no sign of abating, with leaders still divided over a banking union and Spain resisting a bailout.

Confidence in the global financial system remains exceptionally fragile,” the IMF said. “Bank lending has remained sluggish across advanced economies” and increased risk aversion has damped capital flows to emerging markets, it said.

In this week's report, the IMF calculated a 17% probability that global growth falls to 2% in 2013, which would mean a recession in wealthy nations and "serious slowdown" in emerging nations. In April, the IMF put the chance of such an outcome at 4%.


Note on the chart above that these are not huge revisions – the biggest deal is the doubling of the probability of a Euro-Zone Recession to a near-certain 84.6%.  What will be key here is whether this bad news will be good news and already we have the PBOC this morning pushing another $42Bn into the banking system (about the same as last week's action), which popped the Shanghai Composite up 3% this morning.  "The central bank seems to be scrambling to bring money market rates down in order to support growth," said Dariusz Kowalczyk, a senior economist at Crédit Agricole CIB. "The large open market operation shows a pro-growth policy bias and should thus be positive for market sentiment." 

Central bank Gov. Zhou Xiaochuan says the economy faces "relatively big" pressure and that the bank will take more "pre-emptive, targeted and effective measures" according to the latest edition of bimonthly China Finance Magazine.

Plagued by an unfolding euro-zone crisis and a depressed local property market, growth in the world's second-largest economy fell to a three-year low of 7.6% in the second quarter. China is scheduled to release third-quarter economic data next week. "If the upcoming data show that economic growth continued to slow in the past quarter, Beijing is very likely to cut banks' reserve requirement ratio again later this month."

Meanwhile, the IMF is threatening to cut its financing to Greece unless Eurozone countries take haircuts worth tens of billions of euros on the country's debt, the WSJ reports. The IMF, though, can't accept a write-down, as it's a senior creditor. The Eurozone is resisting the IMF's suggestions, which include having the ESM take on Greek debt of $50B, a move that could slash the country's burden by 15%-20% of GDP.  Publicly, the IMF and EU are calling on Greece to do yet more, with the latter outlining 89 steps the government must take.

Spain's budget deficit will hit 7% of GDP in 2012 and 5.7% in 2013, thereby missing EU-agreed targets of 6.3% and 4.5% respectively as the country recapitalizes its banking sector, the IMF forecasts. The fund adds that debt will hit 90.7% this year and 96.9% next year, well above Spanish estimates. Ten-year bond yields surge 37 bps to 6.07%.   The black hole in Spain’s budget has grown faster than Prime Minister Mariano Rajoy’s attempt to cut it, portending the same dynamic that has squeezed Greece. The harshest austerity since the return to democracy in 1978 has failed to contain the deficit as the economy sinks deeper into recession.

We're still waiting patiently for earnings from AA and others and we'll see how well the markets hold up in the fact of all this bad news.  Expectations are now set nice and low for the economy and for earnings (see chart) so we'll see what the reactions to actual earnings are like, starting with AA and YUM tonight.  

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  1. Oil Lines

    R3 – 93.07
    R2 – 91.70
    R1 – 90.95
    PP – 89.58
    S1 – 88.83
    S2 – 87.46
    S3 – 86.71

    Yesterday's high and low – 90.33 / 88.21

  2. AAPL dipped to $630 in overnight trading! They have recovered, but looks like a weak open again!

  3. Interesting earnings today – after hours:

    AA – Estimate for $0.00 / Whisper is a miss at -$0.02. Not a big mover usually – on average around 3.5% either way. The weekly $9 straddle projects a 5% move but with a bias to the downside. The 9/9.5 strangle gives 5% protection to the downside and a little more to the upside and pays about 15% on regular margin.

    YUM – Estimate for $0.97 / Whisper is a beat at $1.00. They usually move about 4% either way. No weekly options. The Oct 67.5 straddle predicts a 4.8% move so not out of line but has an upside bias. The Oct 65/67.5 strangle has a bias to the downside and gives you about 4% protection on the upside and about 7% on the downside. It pays 16% on regular margin.

    Overall, these options are not really mispriced so no real play there! I would not touch any of these today.

  4. Good Morning!

  5. Some of these executives deals don't make sense:


    American Fail Lines

    The reason, as Andrew Ross Sorkin explained in July before the pilots’ situation really blew up, is that CEO Tom Horton and the rest of his executive team can earn a huge payday by keeping the company independent. During bankruptcy, Horton earns a relatively modest $660,000 salary. But “in an odd twist of the bankruptcy process, airline management teams have typically managed to extract 5 percent to 10 percent of the company’s shares for themselves upon exiting Chapter 11,” a stake that could be worth hundreds of millions of dollars. There’s no particular reason to think this outcome would be better for shareholders than seriously pursuing a merger with US Airways, but it’s easy to see why it’s appealing to Horton. And by the same token, it’s easy to see why the pilots’ union is in no mood to make concessions whose objectives are as much about executives’ pocketbooks as they are about the viability of the airline. Until that breach of trust is repaired, don’t count on American getting you where you’re going on time.

    So these guys are trying to get everybody in the company to take a pay cut while they will pocket $100's of millions when they come out of bankruptcy. And I guess they had nothing to do with the fact that the company is bankrupt to begin with. Just sick!

  6. GM Everyone
    Thanks so much St amazing the amount of work you do.

  7. Phil,
    Looking to roll GLD Oct 172 calls (1.75, paid 3.05) Would you go to Nov 172s at 3.50s ?

  8. Good Morning!    AAPL….I went to a mall in Portland, Maine over the weekend.   First, I went into the Apple store.  They had about 20 employees there helping customers.  The place was PACKED with customers.   I waited in line to talk with someone.   I got the info I wanted, then went to BBY looking for a videocam.  There was no-one there to wait on me, and very few people in the store.  I finally got an employee and he told me (I'm not making this up) " I don't know anything about these videocams, and no-one else working here does either".   Wow!   What a contrast.  

  9. Would it make sense for AA to split:

    With analysts projecting average aluminum prices during the next three years won’t surpass 2011’s level, Davenport & Co. said Alcoa could boost value by untethering its specialized products such as aerospace studs from its commodity-driven mining and smelting operations. By valuing Alcoa’s four divisions separately, the combined entity would be worth $14.82 a share, 63 percent more than yesterday, according to the average of four analysts’ estimates compiled by Bloomberg. The units that make flat-rolled aluminum sheets and engineered products are together worth more than Alcoa’s entire $9.73 billion market value, said Dahlman Rose & Co.

  10. Good morning! 

    Wow, how many times can CNBC and Fox say the unemployment number is fake?  This must be really hurting Romney for them to still be bringing it up every 15 minutes 4 days later…  

    It's not like we haven't been trending down for 2 years anyway so this chart looks perfectly natural.  Of course we always question the numbers as it's a sloppy system but the reaction to this report is amazing and it's part of the reason that we're getting sold off – the MSM is essentially telling foreign investors our economy is much worse than it looks and that the Government is lying to keep up appearances.  Meanwhile, although slow, the less controversial economic growth chart shows what would have to be called progress since 2009:

    Economic growth

    Despite complaints, industrial production has clearly improved as well:


    This is the crux of the problem:  Only $400Bn of this number is discretionary and we're only collecting $2.4Bn in taxes – where will $1Tn be cut (more if there are also tax cuts) and, even then, that's just to get balanced and we'll be carrying our deficit forever!

    Government spending

    If we're going to cover short – it's going to be the Dow, which is 300 points above it's 50 dma at 13,287.  The weekly $136.50 puts have very little premium at $1.10 so we'll keep an eye on those.  If the S&P blows 1,440 – down we go and we really need to watch 838 on the RUT and 3,100 on the Nas – which is all up to AAPL.

    I don't see any positive catalysts that are likely to punch us through 13,600 and, without that last Must Hold line breaking higher – the pressure on the indexes is down from here so a lot is riding on AA earnings and the mood it sets for the Dow.

  11. Roller-coaster for NFLX – yesterday upgrade, today downgrade… Up 8%, down 8%!

    Citigroup initiated coverage on DELL and HPQ with Sell ratings! BIDU, JNJ and INTC downgraded. LLY and QCOR upgraded.

  12. Phil, i have to keep reminding myself, when i lose hope for greece staying in the euro, that every time over the last couple years when i felt this way, the can kickers came out and voila, its fixed. Truly, their ingenuity so far has amazed me.

  13. Dollar zooming up to 79.93 (from 79.70 30 mins ago) so that excuses the poor open somewhat.  

    AAPL oddly going up when the market goes down – so that's the way it is now?  

    Nas right at 3,100 – they must hold that.  RUT right at 838 – ditto.  

    Euro knocked down to $1.2911, Pound $1.60008, 78.31 Yen to the Dollar.  Oil $90.31 on more Iran war talk, gold $1,774, silver $33.925, copper $3.72, nat gas $3.35 (dive from $3.42 yesterday) and gasoline back to $2.915.

    Looks like our lines are holding so far….

  14. Yesterday's trades:

    Closed the DIA Put
    Closed the AAPL BCS – First bought the short call and then sold the long when we dipped below $640 as per the 9:52 post
    Rolled the 660 calls to November
    Covered with the weekly 650

    We have only 20 QQQ left as we sold 1/2 on Friday. 

    AAPL – Net $35.95 excluding this week's sale
    AMZN – Net $11.18

  15. Let me know if I missed anything as yesterday was hectic!

  16. Phil,
    For a new AAPL trade, not anything to do with 25K portfolio:
    Earlier: Sell Nov 720Call, Sell Nov 630 Put, buy Apr 700 call, now at $3.73Debit.
    Any revised AAPL trade you may recommend around the earnings,,,,

  17. Looks like AAPL is doing some damage on all the portfolios….

  18. On the other hand, in the $25KP, 3 weekly $5.00 sales until November will recover the loss…

  19. MoMo trade:  Sold all 15 Feb AAPL 665 calls for 38.50

  20. GLD/8800 – At $1.63 with GLD at $172, I'd rather be in the Nov $166/169 bull call spread at $2.10.  If you had done that last month, you'd be up 50% now instead of worrying about where to roll and buy more premium…

    AAPL/Lflan – I think running a retail consulting firm is in their future.  

    AA/StJ – I don't like the splitting.  Don't forget, they'd be splitting sales, not production so a bit messy.  Still, good to have rumors like that floating around as it keeps the price from flooring.  

    HPQ/StJ – Sell rating having no effect – at this point what's the difference anymore?  

    Losing hope/Rpme – I think when Europe goes, it won't be with one or two countries pealing off, I think people could lose faith and the whole thing can fall apart in a week.  They have a real house of cards over there (yes we are not ones to cast the first stone there…). 

    AAPL/Jasu – Pretty ambitious targeting considering where we are.  I wouldn't do it, better off waiting for earnings and avoiding the pain until/unless they put in a firm floor.  

    AAPL/$25KP – We can buy back the $650 callers for $3 so let's do that as they have little more to give us (delta .24) so, if AAPL goes any lower, we're better off selling lower covers but, hopefully, we can sell these again for $5 on a bounce.  

  21. Phil ,
    good morning!
    i have X AAPL. Oct 2012 $705 long puts along with 2X $670 Oct short puts. 
    Given the action here, I am tempted to sell the long puts and watch….buy them back if stock continues to go down.
    as for the short puts, roll to November?  At what point? Wait a few more days or close to expiration?

  22. Lflan, 
    AAPL trade:
    What's your thinking behind last trade decision?

  23. "…. the MSM is essentially telling foreign investors our economy is much worse than it looks and that the Government is lying to keep up appearances.."
    Naw, our governors wouldn't lie to us or the rest of the world for appearance sake……to win an election…naw…..that's just impossible.
    Sometimes, Felipe……..

  24. From $704, $633.60 is a 20% drop and the 20% retrace is $649 so that's what we're hoping for.  If we can't hold $630, we need to sell 5 Oct $640 calls, now $11.10, for about $10 or $9.50 in the $25KP and then we'll see what happens.  

    AAPL/Maya – Well, since the short puts ($40) are rollable to the Nov $650 puts and those to the Jan $620 puts – as long as you are comfortable owning AAPL down there after a big earnings miss then why not?  No need to roll until next week unless AAPL breaks below $600 and the rolls begin to get away from you.  Earnings are after expirations so no worries there.  I think this is a good bounce spot at 10% off the top.  

    Ah Flips, you are such a cynic….  8)  

    10:00 AM On the hour: Dow -0.12%. 10-yr -0.15%. Euro -0.36% vs. dollar. Crude +1.2% to $90.4. Gold flat at $1775.75.


    The Conference Board Employment Trends Index™ Declined in September – The Conference Board Employment Trends Index™ (ETI) decreased again in September, following a downward revision in August. The index now stands at 107.86, down from the revised figure of 108.23 in August. The September figure is 5.4 percent higher than a year ago. “In September, the Employment Trends Index declined for the third time in four months, suggesting that employment growth will weaken further in the fourth quarter,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “The U.S. economy entered a soft patch in the spring and the result has been lackluster job growth, which is likely to continue through the first half of 2013.”

    The IBD/TIPP Economic Optimism Index rose by 2.2 points, or 4.2%, to 54.0 in Oct, vs. 51.8 in Sep. The Six-Month Economic Outlook, gained 3.9 points, or 7.1%, to 59.1. 

    Consumer spending this holiday season should improve with fewer consumers saying they will spend less this year than last, according to a survey from NPD Group. The distraction of the national election to consumers and the media is teed up as an excuse for a late start to the buying season. Also, a slightly lower percentage of shoppers say they will run to discount stores such as Wal-Mart (WMT+0.1%), Target (TGT -0.1%), and Kmart (SHLD -0.1%) – while there is a slight uptick in those indicating they will hit off-price retailers such as TJMaxx (TJX), Marshalls, and Ross Stores (ROST -0.2%).

    Shadow inventories of homes fell to 2.3M units in July, a 10.2% Y/Y decline, and representing a 6-month supply, reports CoreLogic. "The decline in shadow inventory has recently moderated, reflecting the lower outflow of distressed sales over the past year," says chief economist Mark Fleming. 

  25. PHK…pounding that one for some reason…and it is fixed income!

  26. MoMo trade:  Bought to open 50 (sic) this weekly AAPL 635 puts @ 9.50 each. 

  27. Phil/AAPL
    Selling is relentless!

  28. Oh, Barron's article on NAV and many fixed incomes being over NAV by 30-70%. 

  29. Phil -Your strategy of rolling down losing option trades,(and frequently increasing exposure) reminds me of the
    strategy of continuing to double your bets on  losing blackjack hands at a casino knowing that eventually you'll win.
    It works most of the time, but occasionally you hit the house limit and you're in trouble.  In this case the house
    limit is when you reach your pain threshold.  Problem is even if you're right about AAPL in the intermediate term
    (and I think you are), the short term can kill you.  I certainly don't understand the nuances of rolling down
    as you do,  but this strikes me as a risky way to trade.

  30. phil,
    Thanks for the gld strategy thgts; I have been to the woodshed

  31. Not looking to add to the negative here, but Springheel Jack's Chart on AAPL has a very downward take:

  32. The next Fib retracement for AAPL is (gulp) $615! That's a 50% retracement for this year's move. Then $595…. It's all up to earnings now.

  33. AAPL/DC – Hopefully it's a blow-off spike down but we have to cover at this point – again! 

    Rolling/Albo – That's why we try to only do it on trades we have conviction with stocks we don't mind sticking with long-term.  Though the intent is a short-term trade, by rolling back in time we give it more time to be right.  The trick is, unlike blackjack, to avoid making binary bets over and over again so we cover and let the covers pay for most of the rolls.  

    You're welcome 8800.  

    Thanks Deano:  

    Note last time stochastics, MACD and RSI were this low was the May bottom at $519 – that worked out pretty well for people who stuck with it…  Note that there was a 20% pullback there before they bounced.  

    S&P not even failing $1,450 – don't know what everyone is whining about..

  34. Man, those investors that started chasing yield in fixed income are losing their arses…..

  35. MoMo trade:  The 50 AAPL  635 puts (weeklies) sold for 13.00.   Now in cash again.  As you can see, I'm daytrading the thing.  

  36. Damn, there goes 1,450!  

    DIA Oct $134 puts at .70 – 40 in $25KP

  37. At the open: Dow -0.16% to 13562. S&P -0.16% to 1454. Nasdaq -0.33% to 3102.

    Treasurys: 30-year -0.34%. 10-yr -0.2%. 5-yr -0.14%.

    Commodities: Crude +1.02% to $90.24. Gold -0.09% to $1774.15.

    Currencies: Euro -0.42% vs. dollar. Yen -0.01%. Pound +0.08%.

    Market preview: Futures are flat-to-higher after the IMF cuts its global outlook and ahead of the start of earnings season later with Alcoa, with the S&P benchmark almost unchanged. However, oil is+1.1% on increasing tension between Turkey and Syria. In corporate news, Spectrum Brands is +11.6% after agreeing to buy a Black & Decker unit for $1.4B, although Edwards Lifesciences is -17% and Owens Cornings is -7.2% following earnings warnings. Later: Employment Trends Index, IBD/TIPP Economic Optimism

    10:00 AM On the hour: Dow -0.12%. 10-yr -0.15%. Euro -0.36% vs. dollar. Crude +1.2% to $90.4. Gold flat at $1775.75.

    11:00 AM On the hour: Dow -0.52%. 10-yr -0.11%. Euro -0.56% vs. dollar. Crude +1.43% to $90.61. Gold -0.28% to $1770.65.

    The dollar will strengthen despite the Fed's best efforts to debase it, according to a Bloomberg survey of currency forecasters who have recently had the lowest margin of error in their calls. The dollar index weakened during QEs I and II but this time will be different, they say, thanks to an outperforming U.S. economy. UUP -2.9% 

    The sorts of things that happen when algorithms rule the market and assets trade with a correlation of 1: The euro dove nearly 80 pips in minutes about 5 hours ago, with the most convincing reason being Bloomberg mistakenly posting Spain's January 2024 bond as the nation's benchmark (rather than the Jan. 2022). The resultant 40 basis pop in yields forced sell orders in the euro (which has retraced much of the loss).

    A chart "that should scare every bond investor," the yield on the 10-year Treasury has slipped below the S&P 500 dividend yield. The last time it happened – for a brief period during the financial crisis – Treasury yields were about 100 basis points higher a few weeks later. 

    Companies are not only exploiting rock-bottom interest rates to issue more debt, but are also taking advantage by offering long-term paper. Companies have sold $91.9B of 30-year bonds in 166 deals this year, up from $73.2B in 145 offerings in 2011 and the most in any full year since 1995. Those feasting include GE, Comcast (CMCSA) and UPS.

    Redbook Chain Store Sales: +1.6% Y/Y vs. +2.3% last week. The report expects decrease in sales for October as a whole due to timing of Halloween falling this year on a Wednesday vs Monday last year resulting in some related sales into November

    ICSC Retail Store Sales: +0.2% W/W, vs. -0.3% last week.+2.8% Y/Y, vs. +2.4% last week. Southern California sales was hurt by gas shortages while cold weather boosted seasonal demand in the Midwest.

    NFIB Small Business Optimism Index: -0.1 to 92.8, vs. consensus of 93.3, 92.9 in Aug.

    Optimism about the housing recovery continues to climb, according to Fannie Mae's September survey. A full 37% expect prices to rise over the next year, the highest percentage since the survey started in 2010. One for contrarian bond bears: With mortgage rates at all-time lows, those expecting higher rates over the coming year declined 7 points to 33%. 

    "Those who bet on Greece collapsing and the EU being seriously wounded will lose," says Greek PM Samaras, following a meeting with Angela Merkel (whose visit to Athens unleashed a majorprotest). The Greek people are bleeding, he says, but determined to stay in the euro.

    Frightening that policymakers don't seem to recognize it, but Spain finds itself in the same dynamic as Greece where more austerity – by squeezing the economy – actually worsens the country's fiscal position, which just draws calls for even greater austerity. Talk about a negative feedback loop. Earlier, the IMF put on paper what everybody already knew – Spain will miss its budget targets for the next 2 years. 

    "We see three reasons for optimism in Q3 and beyond," says Goldman Sachs in a positive note about banks. The market has failed to price into shares how just a small gain in the housing market can deliver a big gain to banks' bottom lines. Top ideas: CWFCRF,EVER. The XLF is the top-performing sector ETF YTD. Something is priced in.

    "Running in place," banks are going to need to make more substantial cost reductions if they want to bring ROEs back to palatable levels, according to McKinsey's annual review of the industry. Look at industries like autos or telecoms that have had to go through this, says McKinsey's Toos Daruvala, and they managed to cut costs by more than 30%.

    Be wary of stocks with exposure to capital markets, says KBWs Joel Jeffrey, downgrading Lazard (LAZ -2.1%) to Market Perform. Given reasonable valuations, strong balance sheets, and easy credit, M&A activity should be way up, but it isn't. In fact, activity is declining, leaving companies depending on advisory fees sucking wind.

    West Texas crude pushes past $90/bbl. on rising tension between Turkey and Syria, as yesterday's pipeline blast raises concerns about supply disruptions. Meanwhile, Brent and WTI crude see its largest spread in a year, widening to nearly $23/barrel, largely due to Mideast tension which gives Brent price support; WTI crude supplies remain at multi-month highs.

    Iraq’s oil production is on track to more than double to 6.1M bbl/day by 2020, a shift that could alter the dynamics of global crude markets because it would supply almost half the growth in world oil output and make Iraq a key driver of future crude prices, the IEA reports. But the country will need substantial investment in oil storage, transportation, electricity and other infrastructure.

    Alcoa (AA) is set to get earnings season underway later today, with analysts predicting that Q3 EPS sank to $0.01 from $0.15 a year ago and that revenue slumped 13.2% to $5.57B. While Alcoa is seen as a barometer for global manufacturing, FactSet says it's not a good indicator of how S&P 500 results will turn out. Since 2009, when Alcoa has missed consensus, 72.4% of component companies beat profit estimates 

    The territorial dispute between China and Japan that sparked anti-Japan sentiment in China (previous) doesn't look like a short-term blip to auto sales, according to analysts. A new study from JPMorgan predicts auto exports to China from Japanese automakers such as Toyota (TM), Honda (HMC), Nissan (NSANY.OB) will crash 70% during Q4 and could stay low through 2013. Waiting in the wings: The flareup occurs with General Motors (GM) just coming off a record month in the nation and ramping up production plans. 

    September sales for major Japanese car makers in China confirm that the East China Sea islands dispute is bad for business. Toyota's (TM) sales in the country plunged 48.9% Y/Y, Honda's (HMC) skidded 40.5% and Nissan's dropped 35.3%, while Suzuki's shipments to dealers plummeted 42.5%. (previous) 

    Buffalo Wild Wings (BWLDfalls back into favor with investors after the company implemented a series of price hikes across its menu since July without any discernible pushback from diners. In one of its more interesting tactics, the company is also now testing at selection locations charging customers by weight for their intake of chicken wings.

    Sears Holdings (SHLD) says it expects to haul in $346.5M from the separation of Sears Hometown and Outlet Stores after the rights offering came in fully subscribed. Another $100M will be paid to Sears Holdings in the form of a special cash dividend prior to the separation. The new company, to trade on the Nasdaq under the symbol SHOS, is set to operate 944 Sears Hometown Stores, 96 Sears Hardware Stores, and 76 Sears Home Appliance Showrooms.

    Berkshire Hathaway (BRK.A) will earn $2,133/share in FQ3, says Stifel Nicolaus, up from an earlier estimate of $1,974 and vs consensus of $2,009. Better-than-expected results from Berkshire's insurance units – thanks in part to a small number of global catastrophes – are behind the raised forecast.

    Wal-Mart (WMT -0.1%) plans to continue testing same-day delivery of items purchased online in selected markets through the end of the year. Consumers in the markets selected can pay a $10 flat fee for an unlimited number of items ordered by noon. Interestingly, one of the markets seeing the service rolled out is Minneapolis – also known as the home turf of Target.

    UnitedHealth's (UNH$4.9B acquisition of Brazilian peer Amil "is a big deal" that will boost UNH's "growth profile for years to come," says SA author Robert Broens. Amil will add $5B in annual revenues and gives the U.S. giant "access to the enormous Brazilian market." Although the stock rose just 0.8% yesterday, Broens expects "shares to take out all time highs in the next year."

    Ahead of a biotech forum in San Francisco today, Forbes contributor Nathan Sadeghi-Nejad examines the progress of cancer stem cells (CSC) in fighting tumors. Bulls think CSC therapies will "dramatically improve patient outcomes," while bears say that the data is "inconclusive or that expectations are unreasonably high." Sadeghi-Nejad is "somewhere in the middle." One listed player is Verastem (VSTM).

    Glu Mobile (GLUU -19.9%) crashes following a critical notefrom Northland Securities. The firm says conversations with management lead it to believe the company is disappointed with itsQ3 game launches, and sees this limiting smartphone revenueupside. Glu fell on Friday in sympathy with Zynga. 

    Baidu (BIDU -3.8%) falls after receiving yet another downgrade, this time from Credit Suisse. The firm, which now rates Baidu an Underperform, expects estimates to move lower thanks to stronger competition (no doubt from Qihoo), a weaker-than-expected ad market, and mobile monetization challenges. (prior downgrades: I,II)

    Google (GOOG) is partnering with Samsung (SSNLF.PK) on a 

  38. Phil

    DIA Oct $134 puts in $25KP – Let's take the quick .80 and run.

    AAPL short Oct $640 calls – let's buy those back for $9.50 – I don't like the action anyway, did better with the weeklies.  

  39. TNA weekly $58 calls at $2.50 – 10 in the $25KP with a stop at $2.  

    AMZN weekly $250 puts – selling 10 for $1.55 in $25KP with a stop at $2.  

  40. Phil/AAPL:
    "I don't like the action anyway, did better with the weeklies."
    What exactly did you see? 

  41. IRA Portfolio update!

    BUY 1 CLF OCT 42 CALL $1.42

    SELL 1 CLF DEC 42 CALL $3.50

    collect $2.08

  42. Volume just 32M on the Dow at 11:13 shows no real conviction to the selling and I'm thinking when Europe closes we should move up.  Also, Dollar at 80.05 is responsible for at least 0.5% of the loss this morning.

    $25KP – Let's hold off on stopping out until after 11:30.  

  43. Cool maps articles Nicha. 

    AAPL/DC – Just the fact that we got better movement out of the $5 weeklies we sold than we did on the $10 Oct calls for a similar move.  Shows people don't think the downtrend will last a week. 

    11:05 AM Stocks slide to session lows 90 minutes into the day, the S&P 500 -0.8%, led by a 1.8% fall in Apple. It's hard to believe, but the reliable Bespoke says the Nasdaq, down just 1.4%, would have its worst session since June 21 were the decline to hold. 

  44. AAPL 25kp / Phil,
    With the trades today, we just have the 10 Nov $660 Long Calls with no cover. Just want to be sure I'm on the same page.

  45. CLDX/Pharm     Big trade in the Dec 5 puts.

  46. Phil
    Is there a  guideline for closing out the long side of a spread.  ?
    Like 30 % etc

  47. Phil; what's your feel as to what happens to SVU?

  48. Does anyone know the date that Facebook's employees stock options come up.  Apparently it is in October now and not November. Does anyone know the exact date?

  49. As always, I don't have time to post these rapid day trades, but I'm moving in and out of the AAPL weeklies with very good results…..this morning in the puts, now in the calls.  I'm using at-the-money options. 

  50. Good Afternoon
    wow missed the whole /RB run up
    VEGAS--we will go with menu A (no beverage package) but need a consensus as to option 1 or 2—-if there is none we will just have to pick one and trade sushi at the table   :-0—I have asked lvmoda if he can handle setting up the poker game 

  51. They take advantage that everyone is obsessed with AAPL BS head and shoulder to jack up CL to R3 in one day against a strengthening dollar. Incredible manipulation!

  52. SQQQ BCS: Can you help me with rolling this? Oct 39/40 .

  53. Phil,
    Nice Call on the turn at the European close.  thank You!

  54. lflantheman, 
    Please post your day trade setting  more often. Thanks.

  55. FB Lockup/Gingbaum – I don't know if anything has changed but this is what I am aware of:
    (from )
    Aug. 16: Original investors aside from Mark Zuckerberg were allowed to start trading 271 million shares.
    Oct. 16 to Nov. 14: Directors and employees can start selling some stock and options that could total 247 million shares.
    Nov. 14: The Big Kahuna. Almost 1.2 billion in shares become available, plus for the first time Zuckerberg will be allowed to trade 60 million shares.
    Dec. 14: Another 149.43 million shares are free to trade.
    May 18, 2013: Facebook investors Mail.Ru Group and Digital Sky Technologies will be able to trade their remaining 47.32 million shares.

  56. Phil:
    Do you see a price where you would begin to think about covering AAPL? It's getting a nice run now. Is this the push before earnings that we have been waiting for, or just a normal retrace before we go even lower? I am trying to keep up with this thing even though I am at a convention in Chicago and not able to follow as closely as it has required lately.

  57. USO – I was long; 1/2 out up 36%, stop set on second 1/2 as per SOP, breathing easy, thank you Phil!

  58. neetcorp…OK, you have to do this daytrading to your own tune.  I'm using at the money calls right now, weeklies.  Just got out of 100 block of Oct 630 weekly for 11.00 which I entered at 10.10.  Now I wait for a pullback to 10.30 or below, then get back in.  Large blocks, quick trades, back and forth.  You don't have to use 100 block, but you have to use more than 5 or 10 to make it work for you. 

  59. neetcorp….see those 630s are already back to 9.70    I'm about ready to load up again.  

  60. Buffalo Wild Wings-- the company is also now testing at selection locations charging customers by weight for their intake of chicken wings.
    I weigh 175 with my earbuds in, and a hanky in my back pocket.   I presume they have a dozen scales to weigh us before we eat and after.
    Seems cumbersome, but how many wings do I get for that? 

  61. Thanks bdybdy2

  62. neetcorp….look at AAPL one hour bar chart.   volume and down.  So now you DON'T load up on these calls again.  We have to wait. 

  63. Flan- Thanks.

  64. neetcorp….See the DOW and AAPL retracing together?    Now is NOT the time to buy AAPL calls for a daytrade.  You have to wait till you see the reversal back upward. 

  65. flip/BWLD  …and if you have a couple of tall, cold ones?…… :)

  66. weekly retail sales +1.6%, ties lowest since 2/2/10…australian new castle coal shipment vessels off port = 1…lowest since bloomy records began in July 06.
    china stocks up big last night …bidu gaps down on volume…that stock trades terribly

  67. Iflan – Do you hold and Apple calls a few months out?  TIA

  68. Lflan- Looking at the hourly. Would you be kind enough to share your set up for the same. What do you watch in terms of MA's etc. Thanks.

  69. That little bounce is fading fast.

    AAPL/Sank – Yes, just the 10 open calls but we'll need to cover again if we can't get anything going.

    Guideline/QC – Not really but when you do make 30%, 50%, 70%, you need to really think of the risk/reward of going for the rest vs. locking in profits.  

    SVU/Dflam – I'll be watching SWY closely this week but I think they are way underpriced.  

    APPL/Lflan – I'm trying not to but much better to make all those quick little trades.  

    Menu A/Savi – Sounds good to me!  Not sure what option 1 or two was but I don't think we should add automatic drinks – we didn't drink that much last time.

    Oil on quite a run but $92.50 should be tough to cross. 

    SQQQ/Newt – I'd just spend $1 to roll the $39s to the Nov $40s and, once the Oct caller expires, then you can sell again and pick up another $1 if you want.  

    You're welcome button – too bad it's not lasting.  

    AAPL/DC – Yes, I think $635 would have been smart, now back to $631 – too greedy I guess but selling no longer relentless and I want to give them a chance.  I really don't want to be covered because tomorrow may be the day they put out the IPad Mini announcement (or the event announcement) and that could pop them nicely. 

    Nicely done ZZ!  

    LOL Flips, that would cost me a fortune!  

    Of all the days for AMZN to finally fall but I think $250 will hold and, if not, I intend to roll the short puts in the $25KP. 

    China/Angel – Up on more stimulus, not sure if that should count.  Only lasted a day last week (weed before actually). 

  70. Phil- Thank you!

  71. Look at the bar graph on AAPL.    See the turn?   Back in the 630s at  9.20

  72. And out at 10.   That's a 100 block, so the trade makes 8k right there.  Now I'm cash again.   I have to be off line now for an hour or so.  Good luck!  

  73. A comment from the web on austerity:
    "Frightening that policymakers don't seem to recognize it, but Spain finds itself in the same dynamic as Greece where more austerity – by squeezing the economy – actually worsens the country's fiscal position, which just draws calls for even greater austerity. Talk about a negative feedback loop. Earlier, the IMF put on paper what everybody already knew – Spain will miss its budget targets for the next 2 years."

  74. Did you guys catch that spike in XLF this morning – $16.49!   Happened so fast FAS wasn't even affected but I'll bet it flushed out some shorts.  

    You're welcome Newt. 

    Euro $1.2874, Pound $1.58997, Dollar 80.11 and you need 78.21 Yen to buy one.  Nikkei doesn't like that at all and is down to 8,695 but BOJ is asleep at the wheel today.  

    Nat gas with a mighty spike from $3.35 back to $3.439.

    OK, this will be attempt #2 to turn back up – hopefully they won't blow it..

  75. Not too many days like this where TLT stays red…

  76. lflantheman,
    Thank you very much.

  77. Phil – XLF spike – I saw that, it looks like the Phantom Bars that some people's platform's are able to view.  They tend to play out a couple of days later.  Is there maybe a FAS play for a bounce you could suggest?

  78. Phil – Do you see any value with DELL, MRVL,CY?
    They're all trading at multi year lows…. Thanks

  79. Phil- just FYI, rolled nov 645 down to 635 on dip to 624….rolled for $3.55 plus covered short for bigger offset.  I used bought weekly AAPL puts to hedge instead of covering today.  Got the 625s earlier for 4.75 and sold for 7.00(when we went from 629 to 624)…it a way to protect cheap without having to cover, as I think announcement could attract buyers.

  80. Lflan/neet – isn't that cool? And he does surgery while day-trading. "Catch that bleeder! Get out of those AAPL 670s now"

  81. (no offense, Lflan)

  82. 1020 – Spanish austerity is all about Germany and the price it will exact for Euro "membership."  The threat --"Return to the Peseta with all your debts denominated in Euros, and good luck with that." support.  No economist in the history of our planet would suggest that a government reduce fiscal measures during a private sector contraction.  Germany is an exporter, is suffering its own contraction, and would be quite pleased to see 1.10-1.15 on the Euro before this all shakes out, I would guess.
    Here's an analysis by two German indepent reseachers/academics.  Whether accurate or not in its predictions, it does indicate that Germany has any number of paths from which it can extricate its own economy from the economic consequences of bailouts.

  83. AAPL – option pain calculators are reading 660 for THIS week…and 645 for the monthly

  84. Anyone care to watch a "live" suicide attempt….. ;)

  85. Abort, ABORT!!!!   No attempts today….

  86. Too Much Wind?!!!  This guy was only going to be dropping at the speed of sound…….

  87. AAPL = green!  What me worry? ;-)

  88. Well … nevermind!

  89. Any idea why zlcs in down 13% suddenly and hit as low as.37?

  90. Looks like that 637 line that was support for AAPL yesterday is now resistance… Gotta punch through it!

  91. ZLCS – Pharm must have sold his position…. ;)
    I have a low of .58 on TOS – back to .67

  92. 80.20 seems to be the top for the Dollar (at the moment).

    FAS/Rdn – With JPM on Friday it's risky but the Oct $117s at $1.10 can double on a fairly small 2.5% move up (not even 1% on XLF).  

    DELL/1020 – Not really.  I used to like CY but once they spun off WFR, I lost interest and MRVL is always a crap shoot.  HPQ is my tech value play. 

    Good moves Hoss – I'm glad we don't have covers at the moment but don't think I want to risk it overnight. 

    Germany/ZZ – Really, and they don't contemplate these guys just defaulting on them?  

    $660/Scott – That's a long way away. 

    AAPL/$25KP – I'm looking at covering with 8 weekly $640s, now $7 so let's say no less than $6 but I'd rather cover with the $645s, now $5 at $7 or better.  This is not much different than yesterday and we ended up covering with the $650s for $5 – now $3.20. 

  93. Yea, think I have to be covered tonight as it may be a sell on the news tomorrow, like the idea of 645s @ $7 or better…..but will wait and see if we ramp last hour.  Probably something I do in the last 15 min of the day if strength continues.

  94. LNKD taking a little dip today. SBUX and EMC too.

  95. BSDM up 75% today – an old Pharmboy pick.  

    11:36 AM After rebounding from big early losses, apparently caused by algos gone amok when Bloomberg erroneously reported higher Spanish bond yields, European stocks end solidly lower anyway, thanks to a morning sell-off in the States. Stoxx 50 -1.1%, led by Spain-2%. The euro -0.6% to $1.2887.

    12:00 PM On the hour: Dow -0.66%. 10-yr -0.05%. Euro -0.72% vs. dollar. Crude +2.56% to $91.62. Gold -0.49% to $1766.95.

    1:00 PM On the hour: Dow -0.67%. 10-yr -0.07%. Euro -0.71% vs. dollar. Crude +3.16% to $92.15. Gold -0.45% to $1767.75.

    2:00 PM On the hour: Dow -0.62%. 10-yr -0.08%. Euro -0.79% vs. dollar. Crude +3.35% to $92.32. Gold -0.5% to $1766.75.

    The Treasury sells $32B in three-year notes at 0.346%. Bid-to-cover ratio of 3.96, an all-time high vs. last month's 3.94; indirect bidders take 28.8%. Direct bidders take 22.5%.

    A "year-end storm" lies ahead for the Treasury market, says JPMorgan's Terry Belton, expecting yields to rise to 2% ("rise to 2%" – feels funny typing that). Another well-regarded fixed income shop, Barclays continues to like Treasurys, and suggests balancing those low yields with purchases in the riskier high-grade sector. 

    Understanding the Decline in the Labor Participation Rate (Calculated Risk)

    Today is a market anniversary of sorts, with stocks beginning a bull run on Oct. 9, 2002 and then peaking on Oct. 9, 2007. Performance since the 2007 top (dividends included): Staples (XLP) and Consumer Discretionary (XLY) lead the way, gaining 47.1% and34.6%, respectively. The outlier on the downside is the financial sector (XLF-49.9%. (via)

    As stocks run higher, analysts continue to get more bearish (charts here), notes Schaeffer's Ryan Detrick, believing this bodes well for a continuation of the bull market. Pretty fair contrarian indicators, analysts remained relatively bearish throughout the entire 2002-07 bull run.

    Investors Appear Deaf to Earnings Alarms (WSJ)

    Investors’ Biggest Mistake: Excessive Caution (Systematic Relative Strenth)

    The financial and small-cap ETF sectors – with inflows amounting to nearly 10% of AUM – led the way during the risk-on month of September, according to a State Street report. Not far behind were the materials, REIT, and discretionary sectors. Notably seeing outflows during September were the industrials and microcaps. 

    Ease up on the housing recovery chatter, advises Amherst's Laurie Goodman, who reminds similar calls in 2009, 2010, and 2011 all faded by the winter. Take away seasonal factors, she says, and headlines touting recovery are far more dramatic than any housing improvement. Earlier: Fannie MaeCoreLogic

    Earnings Growth Disappears as Spending Cuts Hit Limit (Bloomberg)

    Maxim Group takes a swipe at the airline sector, slashing its estimate for Q3 profits to $2B from a previous level seen as coming in closer to $3B. While much of the focus has been the passenger market with its modest increase in demand, the cargo side of the business remains a drag. 

    Arch Coal (ACI +2.6%) pushes higher even after Goldman Sachs downgrades shares to Sell, expecting ACI will be forced to cut met coal growth guidance. Coal, iron ore and steel stocks are strong for a second straight day following news that iron ore prices in China rose 6% to $110.40/ton. ANR +5.3%AKS +3.9%WLT +3.7%BTU+3.6%X +3.1%CLF +2.7%.

    Prepping for Obamacare requirements to provide health care insurance to full-time employees by 2014, Darden Restaurants (DRI) tests putting more workers on 30-hour schedules. Previous: Darden looks to save costs by giving employees cash instead of insurance. 

    Starbucks (SBUX -2.1%) plans to ignite one its largest marketing campaigns ever to back the launch of the Verismo coffee/espresso machine. Though Green Mountain Coffee Roasters (GMCR +1.1%) backers cling to hopes the market is big enough for Keurig and Verismo brewers to both carve out profits, early reports from retailers suggest the tremendous demand for the new SBUX machine could create a "disruptive force." In addition to more intense marketing, Starbucks will also add demonstrations and sampling efforts at many U.S. stores leading up to Christmas, as well as 10K Verismo events at specialty retail stores selling the product.

    Shares of Supervalu (SVU -7.7%) trade lower in what could be a reaction to chatter that Wal-Mart will unveil more details about a plan to expand its small stores concept at an investor meeting tomorrow. Although Wal-Mart's ambitions for mini-stores in large metropolitan areas appears to be only small in scope at the moment, it could still be of concern to grocery stores in the future. Watching the trend: KRSWYWFMDEG. 

    More on BofA's bullish take on RadioShack (RSH +10.6%) (previous): Analyst Denise Chai sees a lackluster Q3 for the retailer already baked into its stock price, as she jumps back on the name as a buying opportunity. She says a bright spot for RadioShack is the large number of leases coming up for renewal each year which could free up cash and help it stay nimble, while a point of concern is landing an effective CEO before too much time passes.

    IBM and AT&T (T) are partnering to offer a solution that includes the former's cloud storage and IT services, and the latter's telecom network. Bloomberg calls the deal the "closest relationship" IBM, whose offerings sometimes compete with the value-added services provided by telcos, has ever formed with a phone carrier. Cloud storage spending is taking off, and IBM is hoping to generate $7B in cloud-related revenue in 2015.

    Lexmark (LXK -5.2%) and Dell (DELL -2.6%) underperform after Citi starts each company at a Sell as part of a broader IT hardware coverage launch. Citi is worried about the impact of thebring-your-own-device trend (favors Macs over Windows systems) on Dell, which is near multi-year lows once again. 

    AMD has released its Z-60 notebook/tablet CPU, formerly code-named Hondo. AMD boasts systems based on the Z-60, which will compete with Intel's (INTCClover Trail (Z2760) Atom CPU, can deliver 10+ hours of battery life in tablet mode. However, the Z-60's max power consumption (TDP) is pegged at 4.5W, above the Z2760's 1.7W.

    The Twitter account that leaked Nokia's (NOK) Lumia 920 and 820 has posted an image of the Nokia Atlas, a Windows Phone device said to be meant for Verizon Wireless. The Atlas' design appears closer to that of the mid-range Lumia 610 than that of the 920 (an AT&T exclusive) or 820. The leak comes a day after T-Mobile USA announced it would sell the Lumia 810, a phone closely resembling the 820, but lacking a 4G radio.

    Amazon's (AMZNstreaming deal with Epix, which did a number on Netflix (NFLX -9.9%) shares, apparently featuredinteresting terms. An exec involved in talks tells Reuters Epix will receive a payout above its fixed up-front fee if Amazon's streaming subs pass a certain threshold. A shift from fixed to variable licensing fees is arguably a negative for Netflix, since it could make it easier for smaller streaming providers to gain access to valuable content. (earlier)

    Shares of Monster Worldwide (MWW -6.3%) give back more ground as trading on the name continues to be dominated byspeculation on whether or not a buyer will finally emerge to snap up the online postings company.

    Sterne Agee's Shaw Wu does his best to defend Apple (AAPL -0.2%) in the face of its recent selloff. Supply chain checks indicate iPhone 5 demand remains strong and production appears to be improving, though Wu thinks lead times remain fixed at 3-4 weeks. He believes a consensus for 17M-18M FQ1 (Sep. quarter) iPad sales could prove high, but argues there could be upside to FQ2 estimates thanks to the iPad Mini. (Nomura)

    The iPhone 5 Is a Miracle: Hold Apple’s latest gadget for just a few minutes and you’ll marvel at the existence of such a remarkable object. (Slate)

    Obama and Romney on the issues: Economy (WaPo)

  96. $25KP:  Well, AAPL $15 off the bottom and $640 may be a tough nut to crack so let's keep an eye on selling 6 of the $640 calls for no less than $7 (now $8) as we can always roll them up to 10 $650s (now $3.75) and we'll be happy enough at $660 that we won't mind the loss.   

  97. BBBW/Opesbridge
    The Opesbridge LP September 2012 Comment Letter — the first letter from the fund — was released last night.  If you would like a copy please write to
    Thank you.

  98. $25KP – Covers triggered on AAPL and done with TNA calls at $2.40.  Just no strength here. 

  99. lflan/AAPL – can you elaborate on your chart setup for executing these day trades?  Do you use specific triggers or indicators, or just a "feel thing".  Also, how did you decide to use AAPL today vs. other MoMos?

  100. I'm home with the kids this week and watching CNBC for the first time in a while.  Just painful listening to some of this.  And not one host can uphold dignity by not interrupting their guest after asking them to answer a question.  In my humble opinion it is a simple lack of respect.  How do you learn anything?

  101. lots of hits today. GRMN down to 50ma. LNKD with a pleasing swoon, AMZN, MSFT, {your core long here}….

  102. CNBC/Rperi – Also, have you checked out the commercials for Kudlow.  Obama should get equal time!   Guests are not there to learn anything, they want "experts" who back up their scripted opinions.  

    By the way, Daily show was great yesterday:

  103. This is supposed to be major flows back into stocks/ETFs?

  104. I guess people are terrified of AA earnings…

  105. I'll try to consolidate some of the questions from today……..I'm using AAPL for daytrades.  I hardly use anything else.  This morning I sold the waning Feb 665 calls and rolled later in the morning to Jan 620 calls, in larger amounts.  I  then daytraded the weekly 635 and 620 puts on the way down, then daytraded the weekly 630 calls on the way back up.   I still hold the Jan 620s.  Those are not daytrades.   Setup?    I just try to catch the AAPL wave with large option blocks.  I can generally see the move coming by watching volume and direction on the bar charts, and correlating that with general market movement.   I like to take small profit increments in large blocks rather than looking for a big move with small amounts.  For AAPL right now, it's the perfect way to trade (for me).  Stjeanluc…..I don't know about recording any of this stuff in the MoMo portfolio.  I can hardly execute the trades in a timely fashion, let alone record and post.   Not to mention that the only MoMo I really care about is AAPL.   Any time I have to think of something else, then I'm not concentrating on AAPL.  I think I'd rather just discuss trading techniques with members as we go along, rather than trying to keep track of a portfolio.  Let me know your thoughts on this.   Gotta go.   See you tomorrow!

  106. rperi:  In the U.K. they call them "newsreaders."  In the U.S. we call them "celebrities."  If it's all about you, by definition you must do most of the talking, and always appear better informed than the person you are presumably interviewing for their knowledge.  Why the difference?  As Gekko pointed out, "Follow the money." 

  107. Flan- thanks for the hand holding through the daytrading- the calls of: vol & down, see the turn, etc. are great.  Would you please keep them coming?

  108. hi Phi

  109. Pharm – Biotechs getting killed today. At what price would you double down on AVEO?

  110. AAPL –  Just a FYI, the the Jan15 AAPL 340 puts can be sold for 25, making the net entry on AAPL 315.  I'm just scaling in here as a long term allocation.  

  111. this is painful

  112. Yes.  As Jimi pointed out, "Ain't no love nowhere."

  113. Nat gas/Hero – I don't think it goes much higher than $3.50 and Oct/Nov is usually a weak period but you should be thrilled if you get out at $3.20.  March and April are usually the lows as winter draws end and Nov is often good if you get through hurricane season without too much fuss.  

    AAPL/Burr – $315?  That's crazy low. 

    Well that finish sucked, now we'll see how AA and YUM do.  

    Dow volume finished at lame 102M.  

  114. AA beats… EPS and revenues. 

  115. Mixed bag for AA as they revise demand growth from 7% to 6% for the year. But they see demand for aluminum double between now and 2020! I guess it's a keeper…

  116. Pharm
    did you make any changes on SGEN
    still in he dec 25/30 BCS and the Mar 30/35 BCS  

  117. Hedge Fund Humor from David Einhorn:
    “What do you call a stock that’s down 90%? A stock that was down 80% and then got cut in half.”

  118. Looks like YUM is at the whisper of $1.00. Guidance also seems to be positive.They are up after hours!

  119. AA and YUM both did well but not budging the Futures.  

  120. AA & YUM – No blowout but not bad…. Is the market too pessimistic and will it move up on so-so earnings and safe outlooks?…..

  121. At the close: Dow -0.8% to 13476. S&P -0.98% to 1442. Nasdaq -1.52% to 3065.
    Treasurys: 30-year -0.11%. 10-yr -0.11%. 5-yr -0.11%.
    Commodities: Crude +3.17% to $92.17. Gold -0.56% to $1765.75.
    Currencies: Euro -0.74% vs. dollar. Yen -0.12%. Pound +0.22%.

    Market recap: Stocks slipped after a soft economic growth outlook from the IMF put investors on the defensive as the corporate earnings season kicks off. The S&P has been mired in the 1,440-1,460 range for three weeks, perhaps a sign of a tiring market. Crude oil climbed on escalating Middle East tension, overshadowing the IMF forecast. NYSE losers led winners nearly four to one. 

    Breaking news: Twenty percent of companies legally"manage" the numbers to alter the outcome of their earnings, according to a report by two finance professors. It begs the question: What do the other 80% do? "Lie about it," says Jeff Macke.

    Alcoa (AA): FQ3 EPS of $0.03 beats by $0.03. Revenue of $5.8B beats by $200M. Shares +1% AH. (PR)

    Copper consumption in China is expected to drop 8.5% to 5.6M metric tons this year, contracting for the first time since 2008 before rebounding in 2013, Simon Hunt says: "The safety valve of exports has gone, the domestic economy is slowing down, they have a problem of surplus capacity and cash is extraordinarily tight… There are no signals of a recovery in heavy industry and manufacturing."

    Iraq is expected to contribute almost half of increased world oil production between now and 2035, says the IEA. and the country would leap over Iran and Venezuela to sit behind Saudi Arabia as the second most influential member of OPEC. Of late though, the country has been missing production targets thanks to insecurity and a lack of infrastructure. That's where U.S. oil service firms come in. 

    Goldman Sachs is bullish on Consol Energy (CNX +5.2%) and Peabody Energy (BTU +6.4%) even as it downgrades Arch Coal (ACI +4.3%), giving a boost to coal mining stocks (KOL +1.8%). The firm says the duo are set to benefit from a rebound in spot prices, which it thinks are currently at "unsustainable" levels. Also: ANR+7.3%WLT +7.9%JRCC +9.1%.

    The DOJ asks a federal appeals court to rehear a case over a FDA requirement that would force tobacco companies to place large graphic health warnings on cigarette packages. Previously, a three-judge panel in Washington backed the ruling of a lower court by finding the mandate infringed on First Amendment free speech protection. The bigger issue: At last count, 46M Americans still smoked despite stepped-up efforts by health organizations to cut into the number and reduced marketing spending by tobacco companies. Has the anti-smoking crusade now cut to the bone?

    The Fed publishes final rules for the latest round of bank stress tests. "Stress testing is a key tool to ensure that financial companies have enough capital to weather a severe economic downturn," says the Fed's Daniel Tarullo, not realizing stress tests wouldn't have flagged a single institution in 2006. George Soros' explanation of reflexivity in The Alchemy of Finance should be required reading for these regulators.

    The U.S Attorney for the Southern District of New York files a civil mortgage fraud lawsuit against Wells Fargo (WFC -2%) for hundreds of millions of dollars over allegations of reckless underwriting and fraudulent loan certification by the bank. An investigation conducted with assistance from HUD found over 6K Wells Fargo mortgage loans with material violations.

    Comcast's (CMCSA -1.6%) NBC network starts to place its bets as it looks to put a charge into its sluggish ratings. Salary cuts for on-air personalities and staffs are hitting just as the networks bids on the rights to future sports events and invests in promising shows. Though complaints from high-profile stars are grabbing the headlines, analysts quietly back the network's strategic direction. 

    Amazon's (AMZNstreaming deal with Epix, which did a number on Netflix (NFLX -9.9%) shares last month, apparently featured interesting terms. An exec involved in talks tells Reuters Epix will receive a payout above its fixed up-front fee if Amazon's streaming subs pass a certain threshold. A shift from fixed to variable licensing fees is arguably a negative for Netflix, since it could make it easier for smaller streaming providers to gain access to valuable content. (earlier)

  122. Looks like Amazon might not be trying to beat Netflix:


    “This offering only works if keeps Prime Instant Video tethered to Prime,” Devitt writes. “Once they offer a standalone product, they will face the Netflix content gap, which will cost an incremental $1 to $1.2 billion to close.” In other words, if Amazon wants to catch up to Netflix, it’s going to cost a huge amount, and Devitt thinks Amazon has other initiatives on which it would rather spend its money.

    As with every new business Amazon decides to go after, whether it is tablets or high-end fashion, there is reason to be scared if you are a competitor having to face them down. After a series of missteps, Wall Street took every opportunity to hammer away on Neftlix’s prospects and share price – Netflix stock (NFLX) is down almost 75 percent since its July 2011 peak – increasing competition from Amazon was just another reason for the battering to continue.

    Devitt is saying the Amazon threat seems to be over. And with its expansion outside the United States, and entrenched customer base at home, Netflix, not Amazon seems poised to be the largest player in streaming video. “Netflix remains the only pure-play streaming service with global ambitions,” Devitt writes. “If anyone wins on a global scale, it will be Netflix.”

    Of course, they could pour another $1 billion down the drain and the stock would go higher…

  123. LOL Savi…. what a jackass!

    On Tuesday, ran a story detailing Welch's record as a job destroyer. GE lost nearly 100,000 jobs during the 20 years in which Welch ran the company. "I never put myself out there as an employment agency," Welch told Fortune.

    So making fun of the job numbers was really ironic!

  124. Demographics will eventually take care of unemployment I guess:


    Here is a graph of the actual overall participation rate and a few projections through 2040. The participation rate might increase a little over the next year or two, but in the longer term, the overall participation rate will probably continue to decline until 2040.

  125. AA earnings
    I hate bto report the not so good but AA had a beat based on $.oo earnings but it was a miss by the average and mean. estimates.

  126. These guys are really funny:,29845/


    For weeks many Beltway insiders had written off the Romney campaign as dead, saying the candidate had dug himself into too deep a hole with too little time to recover. However, with a month to go before ballots are cast, Romney has pulled even with President Obama, and the former Massachusetts governor credits his rejuvenated campaign to one, singular tactic: lying a lot.

    “I’m lying a lot more, and my lies are far more egregious than they’ve ever been,” a smiling Romney told reporters while sitting in the back of his campaign bus, adding that when faced with a choice to either lie or tell the truth, he will more than likely lie. “It’s a strategy that works because when I lie, I’m essentially telling people what they want to hear, and people really like hearing things they want to hear. Even if they sort of know that nothing I’m saying is true.”

    “It’s a freeing strategy, really, because I don’t have to worry about facts or being accurate or having any concrete positions of any kind,” Romney added.

    Romney said he is telling at least 80 percent more lies now than he was two months ago. Buoyed by his strong debate performance, which by his own admission included 40 or 50 instances of lying in one 90-minute period, the candidate said he will continue to “just openly lie [his] ass off” until the Nov. 6 election.

  127. International revenues percentages in the Russell 1000:

    With the Technology sector getting crushed lately, many are wondering why.  One reason may be the fact that it has so much international revenue exposure.  

    It does really explain the chart that we had yesterday showing the underperformance of tech compared to the market.

    The problem is that the US economy is the only major consumer growth engine (albeit somewhat anemic) in the world again (China is still mostly an export market). So if you rely on the rest of the world for over 50% of your revenues, it's going to be painful. 

  128. SGEN/qcmike – not from my view.  I think it is profit taking, and $25 is a floor.  I always (and PSW members should know) taking some profits at reasonable levels, and two weeks or so ago, I entered newer positions (recommended), slowly exiting the older ones (Dec)…..the past week should have given some pause about SGEN as they went up, but then fizzled.

    Now, Roche just gave milestones to SGEN…and my write up from yesterday also shows how many different things this company is in on (Roche, PGLX, CLDX, SNY, etc)…and the technology is stellar for fighting cancer.  So, like AAPL, this is one I will be in for the long haul…as I believe they are take over material in the end.

    Apologies, as I have not been around a bunch as I am trying to get two different biotech start ups going….and things are starting to materialize…

  129. CMI pooped..again.

    Congrats Pharm, you're the hardest working man I know.

  130. Phil – some time ago I established an AMZN BCS, buying the Jan 14 120's and selling the 160's for net 23 on the $40 spread. I am up nicely, but given the run up in AMZN, I am considering turning it into a back spread – what would you think of rolling to -3 Apr 235's and 2 Jan 14 235's – allowing me to take my full profit on the deal early and perhaps even more if we get a pullback? Thanks for your opinion on this.

  131. Kevin Marder to holders of AAPL: Get out!  This is because of the decisive break below the 50 dma, which will cause many institutions to sell over the next few months.  He is actually quite good.  I have been looking at this pullback as a rare buying opportunity.  Now, not so sure.  (Obviously this doesn't apply to the daytrading nicely described by iflan).

  132. The more worrisome technical signal on AAPL is the OBV chart. It has been making lower lows and lower highs. Volume is indicating some selling pressure here. Could be some profit taking or some "people" trying to get better entry points for their earning plays!

  133. deano/AMZN  AMZN has been grossly overvalued for some time, and it may drop by Apr, 2013.  But what if we have a booming market in the next few months, as some predict?  This may delay paying the piper.

  134. AAPL- geez , I hope everyone who owns AAPL stock panics and listens to all the doom and gloom and "get sout" and the price drops a whole bunch more. It is kind of funny to read some of the nonsense.
    Here is a company that sells at a 15 PE; growing earnings by several times that; virtually no debt; great cash flow; fashionable products with people lining up at stores to buy them. Plus you get paid a dividend.
    Be greedy when others are fearful.

  135. AAPL – geez pstas, you've almost talked me into buying actual shares! ;-)   after the close, the option pain calculators are now pegging 650 (down from 660 intraday) for THIS week's weeklies. Monthly is still at 640.

  136. AAPL / Pstas – I would not be worried for the long term, but even good companies go through rough patches. If you do short term trades like the 25KP portfolio for example, we need to take that into account.

  137. Portfolio / lflan – In the end, it's up to you. If you want to concentrate on education while putting up some AAPL day trades during the day or longer term trades, no one will be upset. We can all learn from you. We don't have to track them (although we could easily do that in a more informal setting). 

  138. Hi Phil-I'm late to the AAPL game but would like to start tomorrow. What do you suggest if it opens around $635?  Thanks

  139. Stj / Demographics:  If demographics don't take care of unemployment all by itself [normal attrition], the fact cited above that 46 Million Americans still still smoke cigarettes certainly will.  It will also tend to raise the median intelligence of the survivors: it's always a plus to have Darwin on you're side!

  140. From UBS, Oct. 5 / 2012, FWIW:  "S&P 500 Sectors – The 4th quarter is shaping up a pivotal quarter as we suspect many professional investors are currently lagging benchmark US indexes as evident by SPX gains of 16% year-to-date and COMP.Q gains of 20% year-to-date. In fact, all 10 major S&P Sectors are positive from a year to date basis with greatest strengths coming from S&P Financials (23.8%), Communication Services (22.34%), Consumer Discretionary (22.10%) and Technology (20.4%).   We believe many active money managers may be forced to increase beta in their portfolios in an attempt to catch a rising market trend. Small caps, Mid-caps, Emerging Markets and higher beta, economically sensitive S&P Sectors/stocks may benefit the most into the end of the year."

  141. Lots of support at today's low on AAPL, daily/weekly/monthly. If we lose $620 there's a long way to fall. $750 here we come!

  142. Smoking / Zero – That might help unemployment but will kill our healthcare system! I wonder if Romney would consider smoking as a pre-existing condition. That would reduce our costs.

  143. Stj:  Well, stupidity is certainly a pre-existing condition, I dunno…..     It looks like American have tired of politics in general, seeing that very little of use seems to have emerged from Tea Parties, Occupy movements, birthism, welfare-ism, anti-welfare-ism, health care debates, bailouts and anti-bailout sentiment, health care hysteria, anti-gay restaurant chains and anti-immigrant Arizonans and seem to prefer some anodyne, middle-of-the-road, dull white man to just get on with letting Americans do what they do best, which is largely govern themselves without getting tripped up by the latest political "initiatives."  Given that U.S. private debt reduction has dramatically outstripped U.S. public debt reduction, they may have a point.

  144. pstas / AAPL  I reported someone's hypothesis – I don't think it's nonsense.  Interesting, the emotional response to suggestions apple may go through a correction – very much like gold bugs.  (i.e., seeking alpha.  One newsletter writer says he gets hate mail whenever he suggests APPL may go down).  

  145. AAPL- i suppose not posting comments late when tired is a good idea. Did not intend to cast aspersions. I apologize if anyone takes offense. As an investment, AAPL is about as good as it gets. Presently, a good value- not great but good. A lot cheaper would be great. Short term, it is just another trade. If it works fine, if not, get out and try again for a better set up.
    I don't get married to trades. Trades gone wrong can often be salvaged but can also eat up a lot of time and capital otherwise more usefully deployed.
    As to any "rough patch" aside from a few labor unrest news reports, about all I hear negative on AAPL is rumor and conjecture. I will wait for some actual data to form an investment opinion.

  146. Good morning!  

    Futures pretty flat, which is pretty good considering the 2% dive the Nikkei took (8,596).  I mentioned yesterday that the BOJ was asleep at the wheel – letting the Yen hit 78 again and they were punished for it in trading.  Chinese car sales are way off – people in China are turning over Japanese cars in the streets in a Nationalistic frenzy over these islands.  Also, the IMF is still on the warpath:


    IMF Warns U.S., Japan on Risks of Safe-Haven Status

    The world's two largest advanced economies, the U.S. and Japan, face growing long-term risks from investors fleeing trouble spots around the world, the International Monetary Fund warned.


    Chinese Purchases of Japan Brands Fall

    While the anti-Tokyo protests in major Chinese cities have ended, Japanese brands in the country are continuing to suffer, as auto sales plunge and travel between the two countries slows sharply.

    Beijing snubs Tokyo: PBOC Governor Zhou Xiaochuan will skip this week's IMF annual meeting in Japan where he was scheduled to give a keynote speech. The two countries remain embroiled in a territorial dispute that's gone way beyond a war of words – see Japan's plummeting Chinese auto sales.

    And TM has terrible news all by themselves:

    In the biggest recall since one involving 8M Ford vehicles in 1996, Toyota (TM) is recalling 7.43M cars worldwide due to a possible fire risk with power window switches that can melt if lubricants are misapplied. The recall includes 2.47M vehicles sold in the U.S., and takes in Toyota's Camry, Corolla and RAV4 SUV models. (PR)

    3:48 AM European shares broadly follow Asian stocks lower on concerns about the global economy, Greece and Spain. Euro Stoxx 50 -0.1%, London -0.2%, Paris -0.1%, Frankfurt flat, Madrid -0.1%, Milan flat.

    IMF is just relentless this week: The European banking system may have to deleverage to the tune of $4.5T by the end of 2013, says the IMF (full report), upping its "weak policies" asset sale scenario from $3.8T at April's forecast. The result would knock 4 percentage points off GDP growth in the periphery next year. "Intensification of the crisis has manifested itself in capital outflows … at a pace typically associated with currency crises or sudden stops."


    IMF Warns on Euro-Zone Targets

    France, Spain and other euro-zone governments won't hit budget deficit targets agreed to with European authorities, the IMF said, setting the stage for debate over more cuts

    Dollar is at 80.12, oil $92.02 with inventories at 10:30, gold $1,765, silver $33.88, copper even weaker at $3.705, nat gas $3.486 and gasoline $2.969

    Euro $1.2864 and we can assume $1.285 will hold.  Pound back over at $1.6008 and Yen still 78.27 to the Dollar.


  147. PragCap confirming Phil's thesis for why those new 2015 option premiums are so fat and juicy:
    Is The Volatility Index Really That Low?

    "Without getting bogged down in the details, that basically means traders are complacent in the near-term, but extremely cautious in the long-term.  So you kind of have a mixed reading here from a sentiment perspective."

  148. International Revenues/StJ – That's very interesting, I wonder what AAPL's percentage is?  

    AMZN/Deano – That was a good deal but, so far, the spread is only net $35 out of $40.  I take it you have one of each but, if not, then it's X but $13,500 on the 2014 $120s can be rolled to 3 2015 $220/290 bull call spreads at $30 each ($9,000) and the short 2014 $160 at $10,100 can be rolled to -3 April $240 calls at $30.50 each ($9,150) for about net $3,550 off the table, which is your current spread and then you have $70 to go in the money to your short callers as you roll them along for bonus profits.  As long as you are willing to buy 3 more 2015 spreads if AMZN goes nuts, like the 2015 $300/350s (now $14) – there's not much chance you'll get burned to the upside.  

    AAPL/Kongen – Yes, Marder is correct.  This is possibly the worst stock catastrophe since the Hindenberg! 

    Oh THE HORROR!!!  Quick, everyone get out while you still can – clearly this is a technically weak stock that must have serious problems or the chart wouldn't look this terrible.  This is even worse than April earnings, when they dropped 20% ahead of earnings and then gapped up 10% – BUT THEN THEY WENT DOWN AGAIN over the next month and were EVEN LOWER in May – when my buy target was $555 and we fell as far as $520!  So don't say you haven't been warned against owning this obviously TERRIBLE stock…

    While I was writing that warning, AAPL earned $500,000 – $76,103 per minute drops to the bottom line – oops, took me 2 minutes to calculate and a minute to write this so let's call it $710,000….

    AAPL/Pstas – Couldn't agree more.  We're not there yet but this is getting like 2008/9 when I spent a good deal of my time trying to convince people to buy AAPL for under $100, but it had fallen from $200 so clearly it was technically damaged and that proved it was worthless….

    AAPL/Cturb – In a perfect world, they will test $600 and really dump out all the weak hands ahead of earnings but it's kind of iffy.  I love that you can sell the 2015 $400 puts for $40 for a net $360 entry and you can pair that with the purchase of the $500/600 bull call spread at $50 so you're in AAPL for net $10 on the $100 spread that's 100% in the money and, if you have 3 of those for $3,000 in cash (and about $12,000 in ordinary margin), you can sell 1 Weekly $655 call for $1.50, which is $20 out of the money and if you make 100 sales like that over the next two years, you'll collect $15,000 in premium against the $3,000 cash position and the $30,000 you collect if AAPL is over $600 is just a bonus.  

    Obviously, this plan is dependent on AAPL holding $500 and I'd avoid selling calls on earnings weeks, when you are most likely to get burned but, otherwise, it plays kind of like the FAS Money spread.

    UBS/ZZ – Thanks. 

    LOL 1020! 

    AAPL/Diamond – That's a good article.  After making a decent effort to find a phone I like better, I guess that is the reason I decided to get the 5 anyway – it was certainly faster than the Galaxy for web browsing, which is my primary non-phone use, and the screen looks fantastic and feels great – which are things that are hard to quantify.  Overall, I decided to wait (I still have the 4, not the s) for their first upgrade and then I'll buy it.  Meanwhile, that gives me an excuse to get the Mini for Xmas…

    Volatility/Kinki – Thanks.  I should learn to write whole articles out of all my little observations.  They never seem like such a big deal to me though…

  149. StJean – Did you start up the VXX ETF decay portfolio yet?  If not, maybe we could look for strikes today, or are you waiting until you see a spike to purchase the put?

  150. VXX / Burr – Waiting for the 2015 LEAPS to come out. This trade takes about 2 years to unwind so we need longer dated options.

  151. Gee, almost forgot the big chart….

  152. NASDAQ went through its 50 DMA (following AAPL there) while the RUT is only 3 points away from there!

  153. AAPL/Phil:  Wow, great play.  Gotta love those 2015 option premiums.  Sounds like a terrific way to invest in AAPL without feeling like a hot-shot momentum swing trader (no offense to lflan, hehe) ;)

  154. zero – Your article on bipartisanship is a good point for voters to consider, but due to the fact that fox's own dick morris wrote it…..makes me wish for more gridlock… Obama.  :)