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Wednesday Worries – AAPL Makes $76,103 While You Read This

$76,103 – That's not sales, that's profit!  

Every minute of every day, AAPL is making $76,103 (at $40Bn a year) on the sale of $316,120 worth of products.  No company on Earth comes close to that kind of metric and, overall, the stock's performance clearly indicates that but, if you listen to the MSM, you would think AAPL is finished.

We had a nice, in-depth discussion about AAPL in Member Chat this morning and we not only concluded it's still a buy but we came up with a lovely spread that has the potential to turn $3,000 into $45,000 between now and Jan 2015 if AAPL simply holds $600 – needless to say we're very proud of that as it's always nice to have a trade or two in your portfolio that returns 1,500% and we rarely get a chance to do them with a blue-chip stock like AAPL.  

Note in the above chart, that AAPL is still a relative outperformer this year – shown priced against HPQ, DELL, INTC, IBM, CAT and ISRG – all good companies that have simply failed to keep up.  We also like HPQ at this level, now $14.30 as their REDUCED guidance has them earning $3.62 per share next year after earning $4.05 this year and that's still 25% back on your money, which sure beats TBills and we're not even counting the $18Bn in cash they have on hand, which is quite a lot when you consider that their entire market cap is now just $28Bn.  Small wonder HPQ spent $9Bn buying back their own stock last year, when it was priced 100% higher. 

HPQ is a pretty good candidate for a buy/write, where we Buy the stock for $14.30 and Write 2014 $15 puts and calls (sell short) for $5.50 and that nets $8.80 on the trade and, if HPQ is below $15 in Jan 2014, then another round of shares will be put to you at $15 for an average entry on 2x of $11.90, which is 17% below the current price and, if HPQ is over $15 in 16 months, then you get called away at $15 for a $6.20 profit on cash (75%).  Buy/writes are our favorite tools for making long-term entries – see "How to Buy a Stock for a 15-20% Discount."

As we mentioned INTC in the above chart, let's look at a similar trade idea for them.  INTC is nicely beaten-down at $22 but may go down to $17.50 before stabilizing so this is a bit early but we can buy the stock for $22 and sell the 2015 $20 calls for $3.70 and the $15 puts for $1.50 and that drops the net entry to $16.80, which is 23.6% off the current price and lower than we think it's likely to fall and we're only committing to buying another round at $15, and that's 32% off the current price, which would give us an average entry of $15.90 – worst case.  If called away at $20, our gain is $3.20 of our net cash investment of $16.80 or 19% over 28 months – not a bad return for betting Intel simply doesn't fall more than 10% lower than it is now but nowhere near as exciting as HPQ because it's considered less risky and we're being more cautious as we don't think it's bottomed yet.  INTC is also kind enough to pay you a .90 dividend while you wait – adding another 5.3% to your annual return!   This is better than T-Bills folks…

Now, back to the markets.  As we can see from our Big Chart, we're having a bit of a pullback, with the Nasdaq and Russell down 5% from the September highs and the other indices down roughly 2.5% so far. 

The Nasdaq made a critical failure yesterday as it fell below it's 2.5% line AND it's 50 dma at 3,082 while the Russell is right on their 50 dma at 824 and in danger of failing their 2.5% line at 820 as well.  The S&P is our most important indicator and it looks like they are right on that critical 5% line at 1,440 – our only index not to fail that level and that is all of our remaining hope so we'll be watching them VERY closely this week.  

Should the S&P fail – then the Dow has no support down to 13,295 so they'll make a nice short but we're still hoping we won't have to pull the trigger on that one.  Going into this dip, TZA was our primary hedge in the Income Portfolio and our April $15s have gained .40 since Friday (16%), well outpacing the 2.5% drop in the Russell for a nice offset.  

Otherwise, we're still long-term bullish as nobody notified us that the Fed has withdrawn QE3 and it was just yesterday that China threw another $40Bn into the markets.  What's bumming everyone out this week is worries about earnings (not so bad so far) and all these TERRIBLE pronouncements from the IMF's meeting in Tokyo this week on the state of the Global Economy.  At PSW, we've been telling you the Global Economy sucks for months so it's not surprising to us but it seems to be shocking the sheeple – who are now running for the exits but, as noted on the Big Chart – certainly not at anything like an alarming pace so far.  

In order to climb a wall of worry, we need to first recognize and accept those worries and what we have here is the beginnings of capitulation after a very long period of denial (where bad news was good news into the Fed).  This is why we prefer to buy now with a 20% downside cushion – we're a little early to call it a bottom but the FACT of QE3 means we may not make too low of a trough on the way down so we're using this earnings season to do a little bargain hunting.  

Tell us when something new happens that we should be worried about but, so far, China's slowdown we've been discussing all year, Europe's mess is 2-years and counting, California Cities in debt crisis also old news, Japan staggering under 220% debt is bad, but just 10% worse than 2 years ago and 7.8% US Unemployment is the best reading since Obama took office and the only thing we have to worry about there is whether or not Jack Welch's head will explode if we go down to 7.7% next month.  

So far, earnings are coming in better than expected – we'll see how the week plays out but this correction may be shallow indeed if it turns out we've underestimated the recovery in the US and overestimated the impact of China and Europe slowing down.  

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  1. Good Morning!

  2. Good Morning everyone — last night ES touched the bottom of the channel from 1262 looks like our halloween run is gonna get started.
    AAPL also touched the 5/22 to 7/26 and stopped right to the tick. Time to test the top of the channel at 670 .

  3. Oil Lines

    R3 – 97.05
    R2 – 94.98
    R1 – 93.43
    PP – 91.36
    S1 – 89.81
    S2 – 87.74
    S3 – 86.19

    Yesterday's high and low – 92.91 / 89.29

  4. The only interesting earning today was COST and they beat by $0.09 at $1.39/share. That's up 27% from last year's Q4. Revenues were up 14% compared to last year as well. They are indicated higher this morning.

    They are not cheap at almost 28x earnings. Target and Wal-Mart trade at around 15x. On the other hand, they are cheaper than Target if you factor in growth with the PEG ration at 2.34 compared to 3.8 for Target (Wal-Mart is at 1.6 so pretty cheap it seems). Price/Sales is relatively close although COST is again cheaper. 

  5. IMAX initiated with an Outperform at Credit Suisse: Target $28

  6. Momentum Block Update:
    "Momentum indicators for equities around the globe are in sell mode, however, momentum in currencies market has improved overnight; three best players in this category (AUDJPY, AUDUSD, and USDCAD) are now in buy zone. Since these tend to lead the change in trend in equities, current correction may be near its end."

  7. 9 years in Iraq was worth it! I just read that Russia signed a new $4.2B weapon deal with Iraq and that Lukoil and Gazprom are getting big oil projects there… 

  8. The weekly FAS calls look pretty safe… 

  9. PHARMBOY    What do you think about QCOR?  Would you stay away from a one product company or are they attractive at this level?  Thanks for your thoughts and all you do for us here on PSW

  10. Phil, I am sitting on a OCT DIA 136 long call that i'm considering rolling to try to save this play.  I don't see DIA getting back to 136 in the next few months,  but based on long term optimism how far out would you suggest rolling if at all?  Do you think is is worth it or should i consider it lost.  Thanks for your advice.

  11. SPX/Phil – lost 1440..

  12. My "swag" on the lows before the next move up….ES 1365… AAPL 575….. :)

  13. phil,
    im short the 10x oct fls120 and long the 135's.  it the son of the sep trade that went awry.
    the trade sits at about a -8k
    since this is the week before exp i was wondering what if there were some rules of thumb to keep in mind and what your thoughts would be as to a positive role scenario………

  14. AAPL – Net $33.70 excluding this week's sale.
    AMZN – Net $11.18 excluding this week's sale.

  15. Morning all….As my frontal lobotomy is in the healing process, I watched CNBC this morning.  Did Sorkin walk off the set?  He had clearly had enough of Kiernan's antics, which have gone beyond any reason.  Point #2, early in the show they announced a Welch rebuttal appearance, but never delivered nor explained.  Maybe I just missed it…  Enough of this, time to focus on the day ahead.

  16. QCOR/wil -we are in the sold puts.  Oct 21s and Jan 15s.  I like the Jan for now, but they have already moved a bit.  I would not buy any stock in here JIC the gov't hits them due to 'false' advertising/claims.  As for the sales/insurance fiasco…I am not worried about it, as the drug works, and payers will scream when they have a child that needs the drug.

  17. Thanks Pharm

  18. mjjwo9b/brain  You're lucky you didn't need a broom and a dustpan….. ;)
    I watch Bloomberg until 6am pst…..

  19. The MoMo portfolio is in cash now with about $28K. 

  20. AMRN – buying a few Oct 10 puts.  FDA ruling on exclusivity of their 'fish oil'.  Let's say that they have issues with their 'exclusivity', as GSK has the same thing, just not as pure .  Now, this is a gamble, but one that I think is worth it…small, gamble…and I am usually wrong!

  21. Good morning!  

    We had yet another discussion on why I like AAPL this morning so worth a read and the new trade idea for them is:  


    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.


    We covered 6 of 10 of our AAPL longs in the $25KP yesterday by selling the weekly $640s for $7 and they are opening right around there so let's stop out of 2 at $8.50 (probably AAPL over $642) but, otherwise, let the premium burn.  I'm worried about a serious move up on the IPad Mini announcement.  

    Dollar holding 80 so far but if it falls below we can get a serious move back up in stocks and commodities.  The Euro is down at $1.2884 so we need that to cross over $1.29 and the Pound ($1.6013) needs to hold $1.60.  

    Oil is at $92.31 and should rise into inventories but $93 has been an excellent shorting spot for /CL so let's keep an eye on that one.  

    After a bad start, Europe is getting kind of flat so that's encouraging.  What would be really encouraging is for XLF to get back over $16 so let's keep an eye on them ($15.96) but, of course, in the FAS Money Portfolio, we pretty much bet that wouldn't happen until Friday (JPM earnings).  We need to buy back those short calls at .13 as it's not worth the small risk of having them open up 90% already

    Still a lot of negative pressure and we're watching that S&P 1,440 line like a hawk (failing at open) as we need to get more defensive if that's breaking.  Expect the weakness to last at least until Europe closes as they are freaking out about the IMF meeting and also about Spain – who refuse to be bailed out and raise all sorts of questions on the Euro's ability to last. 

    The Dow is our best short for a drop to 13,000 and the DIA Oct $132 puts at .49 are a good deal for a possible double on that drop.

    We get the Beige Book today and these are the anecdotes that led them to decide we need QE3 so maybe not a good one this time!  

    At the open: Dow -0.12% to 13458. S&P -0.04% to 1441. Nasdaq -0.01% to 3065.

    Treasurys: 30-year -0.32%. 10-yr -0.13%. 5-yr -0.06%.

    Commodities: Crude -0.09% to $92.31. Gold -0.19% to $1761.65.

    Currencies: Euro -0.02% vs. dollar. Yen +0.07%. Pound -0.1%.

    Market preview: U.S. stock futures struggle for direction as earnings seasons gets underway with Alcoa's (-1.1%) mixed results late yesterday. The S&P benchmark is flat while Nasdaq futures are+0.1%. Yum Brands is +4.6% following rather tasty results and FedExpress is +3.1% as it reveals a $1.7B "profitability improvement" plan. Later: Wholesale Trade, Fed's Beige Book, Fed Speak

    Corporate insiders get even more bearish, the Vickers sales-to-buys ratio rising to 5.61:1 from 3.8:1 at the start of September. The deterioration comes from Nasdaq issues, where the ratio jumped to 6.17:1 from 2.96:1. Perspective: The long-term average is 2-2.5:1. One year ago, with stocks gasping for air, insiders weren't sellers – the ratio dropped to 1.04:1.

    Whoever is manipulating the jobs data to make it look better is doing a bad job of it, notes BofA, as the key number – overall payrolls – is still not very impressive and continues to come in weaker than what the ADP print would suggest. The unemployment rate – coming from a different survey – is "particularly unreliable on a one-month basis."

    Spain doesn't necessarily need IMF loan assistance, says Managing Director Lagarde. Of course it doesn't now that the ECB has pledged to buy its debt (once the country submits to its conditions). Lagarde seems to view the IMF's role as continually crying wolf (III) about dire financial conditions in the hope of scaring up central bank and government policy action.

    Singapore's central bank is expected to ease policy this week, according to a survey of investment houses. The bank adjusts monetary policy through the currency, so easing means slowing the pace of the Singapore dollar's appreciation. The government recently cut its 2012 growth forecast and inflation has fallen to its slowest pace in 2 years. EWS +22.8% YTD.

    Looking past the current economic valley is South Korea, its finance minister saying policymakers should relax. "Mobilizing all available fiscal, monetary and financial policy means in a bold move with a large size may have harmful effects." Try something "less costly and more salient" like cutting regulations, he advises. Invitation to Jackson Hole: Revoked!

    The debt of 30 California cities – including Oakland, Fresno, and Sacramento – is placed under review for downgrade by Moody's. The move follows Moody's August report in which it noted bankruptcy is likely to become a new tool for cities trying to get concessions from bondholders.

    Mortgage REITs continue to slide - NLY -1%AGNC -2%,HTS -2.3%, to name 3 – the sector revaluing itself for what must surely be significant dividend cuts. The Fed's MBS purchases – likely to help book values and dividend maintenance in the short run – are vaporizing net interest margins. Absent a big jump in leverage, returns must fall.

    OPEC cuts its forecast for world oil demand growth this year to 800K barrels/day from 880K previously. 2013's forecast is left unchanged at 800K. "Risks to the forecast for 2013 are primarily on the downside." First the IMF, now OPEC. Is there any organization on the planet not prepping for slowing growth going forward?

    We're now using so little oil that Canada has to find new customers!  Canada is focusing attention on India and other Asian countries as it seeks to reduce its dependence on the U.S. for exports of hydrocarbons, Minister of Natural Resources Joe Oliver says. India is particularly concerned about securing supplies of natural gas given dwindling production at its main gas fields; Oliver says he welcomes Indian companies interested in acquiring energy assets in Canada.

    Iraq predicts oil production of 9-10M barrels/day by 2020, far higher than yesterday's bullish IEA prediction of 6.1M. The country's deputy PM for Energy says Iraq has underway a plan to address the infrastructure bottlenecks raised by the IEA. 

    Chevron (CVX -2.5%) tumbles at the open following yesterday's announcement that its Q3 profit will be "substantially lower" than its Q2. UBS cut its Q3 EPS estimate for CVX to $2.83 from $3.22 based on "significant" negative foreign exchange impact, lower-than-expected production, lower liquids realizations and higher corporate expenses.

    Alcoa's (AAearnings report, greeted initially by at least moderate enthusiasm, raises some red flags after the company cut expectations for growth in aluminum consumption in 2012, even as it reaffirmed its outlook for a doubling of aluminum demand between 2010 and 2020. AA -1.1% premarket. 

    BUYBUYBUY!!!  With 325 suppliers building parts at 5,000 factories around the world for Boeing's (BA) 787 Dreamliner, it's little wonder that, in the words of company exec Jeffrey Luckey, the company "lost visibility in the supply chain." However, Luckey says that Boeing now has the chain under control and will be able to ramp up output to ten 787 jets a month by the end of next year from 3.5 currently.

    BAE Systems and EADS cancel their planned $45B merger after negotiations became bogged down in political deadlock.

    More on EADS-BAE merger breakdown: "It has become clear that the interests of the parties' government stakeholders cannot be adequately reconciled with each other or with the objectives that BAE Systems and EADS established for the merger," BAE says in astatement. The end of the merger is not a huge surprise given that it was dependent on France and Germany agreeing to reduce their influence. 

    Shares of Toyota (TMfall 1.3% premarket after the company issues a recall for over 7M vehicles. Though the raw number of automobiles affected is high, with no injuries or deaths attributed to the faulty power window switch the issue isn't viewed as one the automaker can't climb out of rather quickly.

    Cummins (CMI-3.7% premarket following its sales warninglast night. Deja vu all over again, this warning is nearly identical to the one given 3 months ago to the day. Shares cratered then, but were quickly back on the rise and soared the day (July 31) of the earnings release. Will history continue to repeat (earnings set for Oct. 30)?

    Federal Express (FDX+3.1% premarket following its $1.7B "profitability improvement" plan. The sell side reacts: The magnitude of the savings figure suggests that the stock will go higher on the news, says CSFB. The plan is well above the $400-500M expected by JPMorgan, which sees a positive response from the shares

    The EU could issue a "statement of objections" by next week to UPS's (UPS) proposed €5.2B acquisition of TNT Express unless the U.S. firm offers concessions that would assuage antitrust concerns, the FT reports. The EU is worried that the deal will leave just three "global integrators" that can provide a full range of delivery services by road and air.

    The Nevada Gaming Control Board reports that Las Vegas casinos took in $490.94M in gaming wins during August, down 1.2% from last year's mark. Overall, casino revenue in the state fell 3.1% compared to a year ago. On watch: LVSMGMWYNNPENN,MPELBYDCZR.

    Wal-Mart's (WMT) investor meeting highlights: The company says it will push its pricing advantage with another $2B investment to grab market share. Grocery stores appear to be an ongoing target of the company, with its claim that it now holds a 17% pricing advantage in local markets on food items. Wal-Mart also plans to try to fend off the challenge of dollar stores by using pricing, depth of brands, and a localized assortment to meet market needs. (webcast)

    Protests against Wal-Mart (WMTspread to 28 stores in 12 states as organizers hint that further events could be planned into the holiday season. With a workforce of over 1.4M workers, catching enough support to force a union down the throat of the retailing giant is given a very low chance by analysts.

    Costco (COST) fired on all cyclinders in FQ4 (III) with same-store sales in the U.S. and globally both clipping along at a healthy pace. Analysts note the retailer has struck a unique formula for success with below-market gas prices bringing consumers to its warehouse stores to save money where they are then happy to add to the company's coffers with higher membership fees. New vision centers and private-label products also helped boost sales and margins during the latest period. COST +2.2% premarket.

    More on Costco (COSTFQ4: Net profit +27% to $609M. Same-store sales +5% and +6% excluding the affect of gasoline prices and forex fluctuations. Membership fee revenue +18% to $694M. Ends FY 2012 with 608 warehouses, including 439 in the U.S., and plans to open another 14 before the end of calendar 2012. (PR) 

    The House's Intelligence Committee has received "dozens and dozens" of calls about suspicious behavior by Huawei and ZTE equipment following the panel's report recommending that the Chinese companies be shut out of the U.S. market due to security fears. Meanwhile, Canada has indicated it won't allow Huawei to help construct a secure government communications network, also due to security risks.

    Bloomberg describes how the SEC extracted key data from a reluctant Facebook (FB) prior to the company's IPO. The volley of emails between the sides "depicts a management team…still guessing at even rudimentary aspects of its business." Many of the issues "now unnerving investors were foreshadowed" in the correspondence, including about Facebook's mobile strategy.

    A "quality-control crackdown" at Foxconn related to iPhone 5 (AAPL) scratches is making shortages worse, a source tells Bloomberg. The report meshes well with earlier reports of labor disturbances caused by workers unhappy with Foxconn's quality-control rules. Interviewed workers claim each step in the iPhone 5 production process brings with it the potential for scratches to its aluminum back. The iPhone 4 and 4S use glass casing rather than aluminum.

  22. Welch / mjj – I wonder what he would say – the guy cut 100,000 jobs while at GE and manipulated earning reports (later caught by the SEC). Not the poster child of CEO behavior…

  23. APPL/Phil
    When is the iPad announcement supposed to be? Today? Any time?
    I read somewhere it was the 17th or is that the release date?

  24. BA – Phil can you recommend long term play on BA? I'm thinking about initiating a position in my IRA account.  I like the buy/write plays, but the naked put eats up a lot of margin in the IRA account.  TIA

  25. Oil inventory report / Phil – I believe that this week the inventory report is tomorrow at 11:00 AM because of the holiday. At least that's what they have at Bloomberg.

  26. COST – how much of their sales were due to gas ……????  I have not looked into the books yet, but my guess is a bunch comes from there.

  27. Welch et al:  The best advice for Jack is to put the iPhone down.  His assistant should cancel his data plan.  The sad deal for these corporate narcissists is all they focus on is their big ol' wave when it hit the beach.  Unfortunately, as it recedes back into the ocean, we are left with the flotsam to pick through.  I'm not a Jack fan, but I have moved on and find him kind of weird to listen too.   Dan Lyons hit it on the head a few years back:

  28. CELG Oct/Jan 75 calendar is coming back in with the move down on them.  Once the Octs hit $2, I will roll them most likely to the Nov 75s, as there is now a H&S forming on the daily chart. 

  29. Phil—are you bullish yet??? ;-)

  30. SGEN – adding to the Mar 30/35 BCS for 75c, selling the Mar 20s for 1.20 or better.  That is 45c credit.

  31. How the F#CK is oil still going up!?!?! What a crock of sheeeet! Im shorting…

  32. Does anyone recall what we got out of GLL $14 calls for?

  33. GLL / David – $0.40 on 10/2.

  34. 25KP – The 640 calls hit $8.50 so 2 of them are gone!

  35. AAPL $1,000/Diamond – I like this p/e chart!  

    AAPL/Amit – That's why I'm worried about the covers – virtually no upside resistance once it gets going. 

    COST/StJ – I keep waiting for them to get cheaper but they never do.  That membership fee is brilliant.  55M members and their total income is "just" $1.5Bn so a $10 rise in fees drops $550M to the bottom line any time they want to…

    IMAX/Diamond – $20 is close to where we like to get in ($17.50).  The stock can be bought for $20.35 and selling the 2014 $20 puts and calls for $8 net's $12.35/16.18 for a very nice entry or just selling the 2014 $17 puts for $2.50 is a very nice net $14.50 entry on 1x. 

    Dollar holding 80 despite Euro and Pound improving – perhaps a little Yentervention is to blame….

    Iraq/StJ – Making the world safe for Russian Capitalism….

    FAS Money – Although the .10 on the short $118s seems unreachable, I'd rather free up the slot and sell something else when we do get a pop.

    DIA/Hemas – It's just .35.  If you really want to roll it, I'd sell the same calls to someone else and roll to the Nov $138s at .60 so you drop your net by .10 and now you have a reasonable spread to get a longer look without spending money.  If we have 2 good weeks of earnings, this market could take off sooner than you think. 

    SPX/Scott – Yes but barely.  Have to give them a chance.  RUT needs to confirm at 824 and Dow 13,400 should fail too.  

    FLS/Mill – Well they're at $128 so you already used up all the premium on your short $120s (now $8.60) and I suppose you are in a bear call spread (which I hate for exactly this reason) and totally screwed as your $135s are just .20 so it's really a matter of whether or not you want to push this short naked with earnings on the 29th but I'd just roll the calls to the Nov $125s ($6.60) and eat the $2 for now in exchange for selling $3.30 of premium and then your roll is to the Jan $130s (now $6) but they are not terribly expensive so I don't know why you're short in the first place.  

    Sorkin/Mjj – I didn't even notice.  I tend to tune those guys out – just want to hear if any breaking news. If Bloomie didn't ignore breaking news (other than the ticker) I'd never watch CNBC.  Welch is simply becoming a fool – maybe he finally realizes it after getting feedback on today's WSJ piece.  

    Bloomberg/1020 – That's what I wake up to, I only switch on CNBC when I don't have time to look anymore.

    IPad announcement/Zip – It was originally rumored for today with a 10/17 launch but now no one is sure but they say the weekend for sure.  

    BA/JJ – Sure, I love those guys at this price (70.85).  Combination of small dividend ($1.76) and the possibility of a crash knocking them down to $40 makes me like the artificial buy/writes better on BA like selling the 2014 $60 puts for $4.60 and buying the $55/70 bull call spread for $10 for net $5.40 on the $15 spread that's 100% in the money to start.  If they do have bad luck – you get a great opportunity to roll and adjust and, if not, then you have to force yourself to be satisfied with the 185% upside.  

    Oil inventory/StJ – You're right.  What BS, that was not much of a holiday.  No wonder they popped $93.  

    COST/Pharm – Lots of gas sales but usually a loss-leader for them as they really try to pass it straight through to Members.  

    Welch/MJJ – I'm always amazed when guys like that run around using up their reputation with nonsense.  You would think they would be smart enough to know it's the only thing they have left…

    Bullish/Jabob – I'll be bullish when XLF is over $16 and the Dow is back over 13,500 and the S&P is over 1,450 and AAPL is over $650 – maybe this afternoon….

    Oil/Jrom – No inventory until tomorrow means they can push it today without fear. 

    AAPL $25KP – 2 of the calls stopped out.  Now we want to sell 2 next week $650 calls for no less than $8.50 if AAPL goes back below $640 to replace the $8.50 we just spent.  That's also where we'll likely roll the remaining 4 if we break $650.  

  36. CNBC Pushing /CL to 97.  Cheerleaders!

  37. AAPL//fyi…went to aapl store IN CT yesterday at around 5pm…it was the most empty ive ever seen it…including periods when they aren't releasing new products…and most of the people in the store were around the computers….very few around iphone 5…i was just concerned about aapl technicals…now im actually worried about fundies for first time in many years…its only one visit…so im going back this weekend…but it was worrisome…im worried that the phone just isn't a big enough upgrade to entice as many people as expected given growing competition….they are advertising the EARBUDS! that is a red flag….i have the stock hedged with puts…and i was planning to take them off before earnings…but i may wait until after report…havent decided yet….im going back to mall this weekend just to make sure it wasnt aberration….that shopping center is biggest in our region…so people come from other states to it….it does matter.

  38. That's pretty amazing:

    The first private rocket company in the world—SpaceX of Hawthorne, California—has just achieved a big success for space exploration and the American space industry: their Dragon spaceship has successfully docked with the International Space Station at 9:05AM.

    I guess better than depending on Russian rockets for resupply.

  39. DD on QQQ again for .05c?

  40. Oil pinged R1 right on the nose…

  41. @Felipe
    To be clear: Own  3 AAPL spreads,  and selling 1 weekly call, a $655 for 100 weeksl? 3 to 1?

  42. Pharm/ ZLCS, is it time to accumulate?
    Phil/ SVU is it time to accumulate?

  43. COST/Phil – Asians here in LA love Costco, and I'm aware of a Costco in Seoul – a little inconvenient since they built it for car access rather than subway, but they love it in Seoul as well as in LA. It's a solid alternative to the usual price-gougey US imports.

  44. YRCW -  Blankfein must be trading YRCW..

  45. stjean/AAPL
    FYI. The 25k portfolio shows 8 $640 calls sold.
    Phil: 10/9/12
    $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.  

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

  46. COST/snow: Yep.  Costco in Japan is the same.  Its like going to an "American" theme-park.  All kinds of stuff from the States in GIGANTIC sizes.  People who go there for the 1st time always ooooh and aaaah at all the crazy jumbo-sized merchandise we take for granted.   Lots of fun though.  There are Japanese fan-blogs on the web describing all the wacky merchandise and deals.
    I always go when I feel a little homesick and its rainy, or have a need to buy multi-vitamins and Splenda in bulk.

  47. Angel
    The verizon store, no Apple store here, doesn't stock them, special order.

  48. Thanks DC! Corrected.

  49. $25KP – Time to Triple down on the QQQ Oct $70s at .05 ($200 for 40 more).  New average will be 0.28 and we'll need a $2 gain in the Qs (3%) to get even.  Hopefully we move up once we get past the EU close, the 1pm 10-year note auction and the 2pm Beige Book….

    AAPL/Angel – That's interesting but it's a one-month wait still so maybe that's why.  AT&T won't even project when anything other than the 16Gig version will come.  Don't forget, for most people now, it's an upgrade, not an initial sale so the sales are spread out over contract periods and more handled through Telco providers than at the AAPL store – that's the downside to having massive market saturation. 

    Russia/StJ – They charge us $50M per seat!  

    QQQ/Morx – You read my mind.  

    AAPL/Flips – Yes, in the above you just want to sell 1 to stay out of trouble but it really ads up because you spend (with the short puts sold) net $1,000 on each $10K spread and then you're selling about $150 a week in premium for $20 out of the money calls and that's for 2 years+ = 100 weeks = $15,000 of sold premium.  People don't realize how great these plays are over time.  As long as you are confident in the value of the long-term spread – then the short-term call sales are fairly low risk (you make $27,000 before you owe your caller his $150 back over the long run) and really add up over time so there's no need to be greedy up front.  

    SVU/Lionel – I'd wait for earnings (10/16).  Dividend on them is now 15% (.35) at this price ($1.91) so, as a new trade on SVU, you can buy them for $1.90 and sell the 2015 $2 puts and calls for $2 and you have a net .10 credit and you'll collect another .70 in dividends (assuming they hold up) for a net .80 credit and you net in at $1.20.  Also, you can just sell the $2 puts for $1.25 and net in at .75 on 1x – not bad as you gain $1,200 against $300 of ordinary margin if they hold $2!  

    Good chart Rain. 

    COST/Snow – I love them and I usually hate those kind of places.  They do a very good job.

    YRCW/Scott – Been hanging around $6.50 to $7.50 since Sept.  Very tough to play though. 

    AAPL/$25KP, DC – Thanks for catching that.  

    Not getting any real momentum going so far.  

  50. Phil,
    What is your opinion on edu?

  51. SHADOW you need to get your i phone thru your service provider huh?

  52. Supposed picture of AAPL guy with IPad mini:  

    We think this might be the iPad Mini before it has been released

    Seems real because he's asking for directions as his map app must have gotten him lost….  This certainly looks real, note the mini dock connector:

    EDU/Harip – That is one loco stock.  We used to play them back in 2007 but it's very frustrating because they go up and down wildly on all sorts of news – it's essentially a slot machine…  I would say they are worth $20 nd that big sell-off in July, to $9, was a good opportunity to get in but $16.50 is just not that exciting as they could go $4 either way or both for no apparent reason.  

    Europe closing about -0.4%.  

    Dollar back over 80 (80.03)


  53. PHIL GREAT POINT ON MARKET SATURATION..I think china dependence is big mistake anyway…just look at japanese carmakers….plummeting…sales crashing just because of a stupid goat filled island…so on top of the chinese economy being a massive house of cards that will implode much more over the coming years….you have to worry about the govt reacting harshly to our govt actions…and their people shunning our products.

  54. ONE OF MY FIRENDS just bought one A 64 GIG 2 days ago from at&t wireless over the phone…she said 14-21 days til shipment and that people were getting them much sooner than that

  55. MY FRIEND FURTHER STATES : there are NO covers at the store either…which is annoying…the guy said the 3rd parties didn't have enough time to build them…yet you can order them online from numerous outlets…and the aluminum scratches much easier than prior versions…so you really need a case immediately

  56. DIA puts - picked up some 134 puts when SPX broke 1440 this morning. gain paid for a bunch of QQQs. now a close trailing stop is on…

  57. ZLCS – sure, small quantities.

    Wow, high beta things are getting crushed.  Fixed income also taking it across the board….nice.

  58. Phil/AAPL
    Those $650 next week calls are now $8.10 with AAPL @ $641.16.

  59. Phil/AAPL
    …but it sure looks like it wants to go higher.

  60. China/Angel – Well, on the whole I wonder how many of the real population give a damn.  I think the attacks on Japanese cars may be more posturing by Government forces than real sentiment although we had our own version of that in Detroit at one time so you never know.

    64G/Angel – On-line, T has no listing and I went to the store by me and they said end of Oct this weekend so about 20 days but I said don't bother, I'll see what else is out for Xmas.  As to scratches, the other phones are glass on both sides, only aluminum or whatever on sides.  That's why people are freaking out about scratches – wasn't an issue before and still isn't on the front of the screen but people like to complain about things…

    DIA Oct $132 puts up to .57 (+.08) on half-point drop in the Dow so that's 16% to 0.5% for 32x protection – pretty good!  Hopefully this (13,400) is the bottom that will hold though..

    AAPL/$25KP, DC – Then that triggers the sale of 2 for $9 (now) of the Oct $650 calls and now we set a stop on 2 more of the weekly $640s (now $7.20) at $8.50 again.  So we're only rolling when we have to and we're making sure we roll for even or better.  

  61. AMRN broke down….here we go…..

  62. PHIL my friend still insisting he bot 64 gig on phone form att..odd huh?

  63. AMRN – 1/2 out at 35c.  Will put a stop on the rest at 10c trailing.  I can't watch it today.

  64. 21/iphone-5-aluminum-scratches-easily/&docid=AvYCWRSC1ITBqM&imgurl=,r:1,s:0,i:78&tx=86&ty=42

  65. AMZN/AAPL – someone rolling out of AMZN and into AAPL?

  66. Phil,
    Given the new taxes in place in France and the fact the rich are leaving France now – would it not be wise to short the French Banks?  And if so, which one do you think is the best to short?

  67. no glass

  68. stjeanluc…….Her'es what to do with the virtual  MoMo port.   AAPL is the present MoMo, so put 10 January 620s there for 56.00  

  69.  ebay starting daily deals now on services…see ya grpn wouldnt want to be ya

  70. AMZN  $247.25!

  71. SVU
    Don't forget that they suspended their dividend in July.

  72. MoMo portfolio / lflan – OK. I guess we continue the portfolio for now!

  73. Phil / AAPL:  Your AAPL play looks interesting, but the numbers don't add up.  Is this because I use Schwab?  (1) Short $400 put: margin is $4000 ($12K for 3) PLUS value of put, so no immediate credit for sold put.  (2) BCS is $5000.  Therefore, net cost to account: $9000 per unit.  And (3) selling naked weekly calls – against what?  There is no long naked call to sell against.  Should I change broker? 

  74. Gamble play/ AAPL weekly 645 at $3.50 (were above $6 a few hours ago) trying to get them for $3

  75. Finally, bonds are wake up.

  76. Checked out the Apple store here in SoCal inland empire on Saturday. Constant line of 30 to 50 people to get iphone5. Rest of store did not seem to have the usual Saturday crowd though. I have the 4s and probably will not upgrade until next year when 4g coverage is better.

  77. bought AAPL 630/635 BCS for 3.55

  78. AAPL/Angel – I'm sure it varies store to store locally.  Also, I get the feeling if I were getting a new account instead of upgrading that they would do better but I could be wrong.  As to aluminum, it's a shame about the scratches as I'd rather use it without a case.  

    AMZN/Scott – Looks that way for a change.  

    French banks/Ging – That's not a bad thought, can't be good macros for them.  The big ones are BNP, Soc Gen and Credit Agricole but none of them are regularly traded in US. 

    Transports fell below 5,000 again.  Although we could fall 100 points further (2%) – we generally get sharp moves up from this line.

    SVU/RJ – Thanks, it was still listed on Yahoo at .35 but you're right, the dividend was suspended.  Still I like companies that have the mindset to pay a dividend but are cheap because they took time off.  Those kinds of stocks were huge winners back in the crash as dividends came back once the crisis was over.  

    AAPL/Kong – I have PM so I get it wrong sometimes but looks to me on TOS paper money that selling 3 2015 $400 puts is net $12,180 in margin and then, separately, you're buying the 3 bull call spread for $15,000 so $15,000 cash and net $12,000 in margin and, of course, the short puts count as a margin sale each week for naked shorting.  If you have ANY kind of margin issues in your account – this is not a trade you should be within 100 miles of obviously as, like FAS Money, sometimes you may have to roll up to 2 or 4 short calls on a pop….

    Bonds/Rhc – Just in time for the auction. 

    4G/TraderD – I have the new IPad with 4G LTE and hardly ever don't get a signal when I travel.  

    AAPL/Amit – That's a fun play. 

  79. The case against patents:

    One might hope that if it is indeed worth preserving such a large government intrusion into private activity that during the intervening six decades evidence would emerge that patents do indeed serve the desired purpose of encouraging innovation. Sadly the story of the past six decades is the opposite. In new industries such as biotechnology and software where innovation was thriving in the absence of patents — patents have been introduced. Given this continued extension has there been a substantial increase in innovation in recent years? On the contrary, it is apparent that the recent explosion of patents in the U.S., the E.U. and Japan, has not brought about anything comparable in terms of useful innovations and aggregate productivity.

  80. Iphone 5 scratches - seriously folks, It's a phone you'll replace in less than a year…..

  81. Phil / iPad:  I, too, have an iPad, had an iPhone [now Samsung], both still on AT&T, and I don't get an iPad 4G signal hardly ever, even when it sat next to either of the phones with a full strength signal.  Antenna?  I don't get it.

  82. So Phil,   Are we officially short these?
    AAPL $25KP – 2 of the calls stopped out.  Now we want to sell 2 next week $650 calls for no less than $8.50 if AAPL goes back below $640 to replace the $8.50 we just spent.  That's also where we'll likely roll the remaining 4 if we break $650.  

  83. 10:00 AM On the hour: Dow -0.3%. 10-yr -0.13%. Euro -0.02% vs. dollar. Crude +0.23% to $92.6. Gold -0.1% to $1763.25. 

    11:00 AM On the hour: Dow -0.33%. 10-yr -0.17%. Euro +0.12% vs. dollar. Crude +1.21% to $93.51. Gold +0.04% to $1765.65.

    11:52 AM Europe closes on the lows with the Fed's Sept. 13 QE∞ announcement looking more and more like a key inflection point for Western equities. The Stoxx 50 is off 5.4% since its initial Pavlovian pop. Today: Stoxx 50 -0.7%, led by Spain -1%. The euro flat at $1.2866

    Up until the QE∞ announcement, euro traders have generally been trend-followers, says CitiFX, but since, traders have gotten bearish even as the currency is basically flat. Combined with Citi's belief the euro is trading 300 pips rich to its swap-spread and the group recommends selling any rallies in the currency.

    12:00 PM On the hour: Dow -0.54%. 10-yr -0.07%. Euro +0.01% vs. dollar. Crude +0.39% to $92.75. Gold -0.14% to $1762.55. 

    1:00 PM On the hour: Dow -0.76%. 10-yr -0.01%. Euro +0.03% vs. dollar. Crude -0.5% to $91.93. Gold -0.12% to $1762.85.

    1:04 PM The Treasury sells $21B in 10-year notes at 1.7%. Bid-to-cover ratio of 3.26, vs. recent average of 3.11; indirect bidders take 41.3%. Direct bidders take 22.9%

    A minor lift for flat Treasurys in the wake of a strong 10-year note auction: the 30-year yield -0.02 to 2.904%; 10-year -0.01 to 1.7%, matching up with today's sale. Yields on the 10-year are down from last month's 1.764%, but still a ways above the record auction low of 1.459%.

    Bond markets will inevitably move against the U.S., it's just a question of when, says Jamie Dimon, speaking at the CFR (watch live here). Had the Simpson-Bowles plan been implemented a year ago, the U.S. economy would be booming now, he argues

    The Dow sinks to a triple-digit loss midday despite a big gain in Wal-Mart, +3.5% on its investor day. Leading the decline are Chevron (-4.3%) following its earnings warning, and Alcoa (-4.8%) following its earnings report. - CVX costing the Dow 40 points!  XOM 20 more so half the Dow loss is two stocks. 

    August Job Openings and Labor Turnover Survey (JOLTS):3.56M job openings, down from 3.59M in July. Job openings +13% Y/Y. With unemployed at 12.54M, there are 3.5 potential job seekers for each opening, down from 4.4 a year ago.

    Currency devaluations work, says economist Surjit Bhalla, who claims the consensus believes deliberate undervaluation does little to boost economic performance (where's he finding that consensus?). However, he doesn't condone the practice, noting China's undervaluation (45% by his estimate) has created huge distortions that threaten political and economic upheaval

    "We're not going to cut them off," says Jamie Dimon (at the CFR), regarding the question of whether JPMorgan (JPM) is pulling out of Spain and Italy. He says, the bank has $15B of exposure to the two countries, and stands to lose $6B if things go badly.

    The mortgage-related lawsuits against Wells Fargo (WFC) and JPMorgan (JPM) are insignificant compared to the legal and asset write-down exposure at Bank of America (BAC) and Citigroup (C), writes Antoine Gara. For Wells, even a worst-case scenario would see a nickel cut from a forecast Q4 profit of $0.89, estimates KBW's Fred Cannon.

    "What is perceived in the market is not necessarily reality," says Ivy Zelman of the generalization that "nobody can get a mortgage." In a highly bullish presentation on the housing market, she says the facts don't square. First off, 57% of Americans have credit scores above 700. Second, credit standards are getting easier again, with even 580 scores high enough to qualify. 

    PBOC Governor Zhou Xiaochuan's decision to skip the IMF annual meeting in Tokyo as the island dispute between China and Japan continues is "regrettable," says Japan's finance minister Koriki Joijima. "We will take a wide view on communication with China."

    Not limited to mortgage REITs, panic grips another favorite of income investors, closed-end investment funds – notably those trading far above NAV for seemingly no other reason than their fat yield. The payouts on many of these are sustained by digging into capital rather than by earning a return on it. PGP -7.5%PHK -7.8%,PHT -5.5%.

    The mutual fund industry weighs in on new rules allowing hedge funds to advertise to the public, warning it will eat into their business … that's a joke, but the ICI objects to SEC proposals which do not subject hedge fund advertising to the same sort of regulations and disclosures mutual funds must adhere to.

    China is importing more natural gas by pipeline than sea for the first time, which could imperil planned liquefied natural gas projects from XOMBHPHES and others awaiting investment approval. “We don’t think LNG will grow to be as big as many people are thinking," CLSA's Simon Powell says. “LNG prices are still too high to compete in China. Piped gas imports are way bigger.”


    General Motors (GM -0.6%) and Ford (F -0.9%) could be in line for extra global sales in Q4 as rivals Toyota (TM -2%) and Honda (HMC -0.7%) reel from the double-whammy of large recalls and slumping sales in China. Analysts warn that a territorial dispute between China and Japan could keep an informal boycott of Japanese products in place for months, while the safety recalls for both automakers are another hit to their reputation for quality.

    United Airlines (UAL -1.2%fires off a round of price hikes on its domestic flights in the hopes that other major carriers will follow suit. Earlier this week, Southwest Airlines (LUV +0.1%) moved the other direction, launching an off-peak winter sale on select flights. The bigger picture: Lower fuel prices and higher baggage fees have the bottom lines of airline companies moving in the right direction despite sluggish industry demand.

    Yum Brands (YUM +7.4%) knocks out a gain after reporting solid numbers for Q3 including steady sales in China. Looking ahead, the company plans to open over 1700 new units this year and says the pace of expansion in China is still on track. A charge of $25M-$75M is expected in Q4 as more employees take an early payout of pension benefits. (conference callearningssales breakdown)

    Chipotle vs. Taco Bell: No sooner had Yum Brands posted its quarterly earnings before analysts on both side of the Chipotle debate pointed to the 7% rise in Taco Bell's same-store sales to make their case. While one camp sees the jump as a clear indication that the Cantina Bell menu is pulling consumers away from pricier Chipotle restaurants, the other side maintains Chipotle's growth numbers will be undeterred by the marketing blip.

    Shares of Green Mountain Coffee Roasters (GMCR -4.2%) slump with a new note out from OTR Global warning that the price differential between the company's K-Cup products and those from private labels could be as much as 20% to 50% – viewed by analysts as unsustainable. Another significant drag on GMCR's hopes to dominate the space is the growing emergence of heavyweight Kraft.

    Another tidbit from Wal-Mart's (WMT +2.8%) investor meeting (webcast): The company plans to have over 240 Neighborhood Market stores in place by the end of FY13, a significant pickup in the pace of growth for the small-sized supermarkets across the landscape. While posing an obvious threat to local and national grocery stores, the initiative could also effect pharmacy sales at Walgreen (WAG +0.1%), CVS Caremark (CVS +0.5%), and Rite Aid (RAD +0.4%) eventually.

    Helen of Troy (HELE -9.6%) slides after its FQ2 earnings missed across the board this morning. Net income fell 2.6% as the housewares and personal-care products company saw higher acquistion-related taxes which eclipsed a slight improvement in overall revenue. The firm cites an ongoing difficult retail sales environment for the miss, and again lowers its earnings expectations for the fiscal year, now anticipating income of $3.50 to $ 3.60 per share. Revenue estimates remain unchanged.

    Best Buy (BBY +1%) founder Ricahrd Schulze has made "significant progress" toward pulling together a bid for the retailer that could fly with backers, according to sources. Discussions between Schulze's reps and current management at Best Buy have opened up since CEO Hubert Joly came on board.

    Dead Mel talking? Sirius XM Radio (SIRI +2.5%) CEO Mel Karmazin presented at the Liberty Media conference today (webcast), in perhaps one of his final public appearances at the helm. The exec tipped off that the company expects FY12 revenue of $3.4B – roughly in-line with the estimates of analysts. Net subscribers are on the move, with the latest estimate for FY12 now pegged at 1.8M after the satellite radio player added 446K subscribers in Q3. 

    EBay (EBAYofficially launches its eBay Now one-hour delivery app/service. San Francisco is the only city supported for now, but more are on the way. Also unveiled is a revamp of eBay's frequently-criticized web site, one that prominently features a Pinterest-like stream of merchandise images personalized to reflect a user's tastes. eBay is also working on other changes to improve its site's aesthetics and promote the random discovery of merchandise.

  84. More on 
    eBay: Reuters reports eBay has quietly launched a local daily deals service in a handful of urban areas, in partnership with local online ad firm Signpost. The news has prompted a selloff in Groupon (GRPN -3.6%), which was initially higher following the launchof a restaurant point-of-sale solution that competes with the increasingly popular Square Register. Though Groupon has its share of problems, competition from Internet giants hasn't yet taken a huge toll on its sales

    "We will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services," declares the oft-criticized Steve Ballmer in his annual letter to Microsoft (MSFT) shareholders. He also reiterates Microsoft's wish to "unify the cross-device user experience" between PCs, mobile devices, servers, and cloud services. Ballmer is clearly targeting Apple, but obtaining a similar level of developer support and keeping OEM partners happy won't be easy.

    Microsoft (MSFT) will finally launch versions of Office for iOS and Android starting in March 2013, a product manager confirms - past rumors indicated fall launches. The Windows versions of Office 2013 will be available to businesses in December, and consumers by the end of February. The absence of iOS/Android Office apps has allowed upstarts such as Google-acquired Quickoffice to fill the void. No word on whether the apps will be covered by Microsoft's hyped Office subscription plans.

    Glu Mobile (GLUU -13.1%) is tumbling again today after itsQ3 pre-announcement fails to calm investors put on edge by a harshNorthland Securities report. Glu's admission that none of its 11 Q3 game launches were "breakout" hits (unlike some older launches) speaks of the intensely competitive environment for iOS and Android games. Zynga (ZNGA -3.1%knows a thing or two about that as well.

    downgrade to Neutral from Piper's Michael Olson has made Zynga among the day's big tech losers. Olson predicts Zynga'sbookings decline will continue "at a steeper pace" into 2013. He also claims a survey of over 7,700 teens confirms "social gaming is as unpopular among teens as we have ever seen" – that's not exactly good news for Facebook (FB -2.3% - previous) either. Glu Mobile'spre-announcement might also be affecting Zynga's shares.

    Facebook (FB -2%) is getting tripped up by negative comScore data yet again. The research firm estimates U.S. Facebook PC use fell 20% Y/Y in September, worse than August's14% drop. This leads Oppenheimer's Jason Helfstein to think estimates might be too high. A shift in activity to mobile devices is clearly one reason for declining PC use, but there's also some evidence younger Americans are just spending less time on Facebook in general. 

    Apple (AAPL +0.9%) roundup: 1) The Guardian reports the iPad Mini will only come in a Wi-Fi-only version. That's a slight negative for iPad baseband and RF component suppliers such asQCOM and SWKS, but 3G/4G iPads have been premium products, and consumers have largely preferred Wi-Fi-only models. 2) Apple has reportedly been exploring the use of carbon fiber in its devices for at least 3 years. 3) A Piper survey indicates 40% of U.S. teens own an iPhone (up from 23% a year ago), and 31% an iPad.

    Three lunchtime reads:
    1) Goldman on the reality of the jobs market
    2) The new U.S. energy scene: how to play it from here
    3) Why the housing crash is far from over

  85. Phil/ iphone
    I like the 4s enough that I am not motivated to rush out to get the 5. I usually like to let some other sucker buy the first round on anything until it's clear the bugs are worked out, even if its an apple product.

  86. Beige Book looking WAY better than last time.  No excuse for not putting in a bottom here.  

    DIA $132 puts finished at .65, fun to play the long side now with the Oct $135s at .38. 

  87. Phil/AAPL- those who forget the lessons of history are condemned to repeat them. I remember this forum before the frenetic activity changed into hourly trading of AAPL options, and those who dared to flip options over the short term were condemned as peasants who had no patience. Fortunately this reader took Phil's advice many moons ago:
    Sold AAPL Jan 14 300 put for $18.50 now trading at $7.07
    Sold AAPL Jan 14 380 put for $34.96 now trading at $17.02
    Sold AAPL Jan 14 410 put for $35.65 now trading at $22.40
    Phil, you are hiding your light under a bushel. And without wishing to offend, Lflan's approach can only work for himself – I do not believe it is reproducible by anyone else. Recommendations for flipping options on a daily time frame sails close to the wind of providing investment recommendations – something which I feel we should steer clear of on this forum.

    7 Biggest Lies about the economy by Robert Reich:

  89. I'm sure this goes for both sides but incredible how slander and libel laws don't apply to politics at all.  I wonder if they did, would it keep them on their toes to be more honest.

  90. hi PHIL
    can u recommend a play on natural gas

  91. Patents/StJ – Have ground innovation to a halt. 

    IPad/ZZ – You don't get the LTE signal?  I'm usually in NYC area, Florida, CA or Vegas but really could count the number of times I don't get a signal on one hand.  

    AAPL/$25KP, Rhc – At the moment we should have 4 short weekly $640 calls and 2 short Oct $650 calls against the 10 longs.  We have the same roll as last time which is if 2 of the short weekly $640s hit $8.50, we stop them out and DO NOT COVER AGAIN unless the Oct $650 calls drop to $8.50 – in which case we sell 2 of those and complete the roll.  

    IPhone/Trader – More to the point, there is no way in Hell I would be motivated to break a contract just to get the upgrade and, as noted above, 40% of US Teens (and probably adults) already own an IPhone and probably 2/3 are still under contract so AAPL will get their replacement sales but over the course of the next 2 years.  Once upon a time, people would consider this a great thing for future earnings but sentiment is so bearish on AAPL at the moment, there's no point in applying any long-term logic to them. 

    AAPL/Winston – Very nice, that's definitely the way to play them – without all the drama too.  I think in the short-term, we have a unique opportunity to establish a position in AAPL that will be worth $40-50 per share on the 26th and of course it's a gamble – I have said as much many times and, when we were net even last week I reminded people who didn't have the stomach for it to get the hell out because it is painful and expensive to stick with this position but the adjustments we make are a good learning experience and that is the primary reason for the $25KP in the first place.  

    Reich/Rustle – I like his little videos.  

  92. Oil making a stand at PP? Not liking the beige book it seems!

  93. Finally some sense in AMZN. S2 is about $245 and we are getting there. I also have a Fib line at $242 or so. And $240 seems like a decent line so we might settle around here. 

  94. AAPL traders…….look at the AAPL one day chart today, and look at the DOW chart.  The DOW is steadily down and AAPL is in what I call a moderated wave.   So today, right now, daytrading not likely to work for you.  So, I traded it lots yesterday, none today.  The setup is not favorable. 

  95. Okay. I miss read it. Thank you Phil

  96. Republicans/Rustle – OMG!  The funny thing is she first says you don't want Obama because he'll stop Medicare and then says you don't want Obama because he's a Socialist.  He must be the worst kind of Socialist, the kind that will stop Socialistic programs!  What idiots….

    Nat gas/Hero – Only one I like is long on CHK, still not too expensive at $19.50 and you can sell 2015 $13 puts for $2.50 and buy the $10/18 bull call spread for $5 and that's net $2.50 on the $8 spread and you're effectively promising to own CHK for net $15.50 (20% off) but, because of the $10 calls, your break even is $12.75 (34% off).  Over $13, you essentially own it at net $12.50 (because of the $10 calls) and you can make up to $5.50 at $18 (44%).  So you don't lose money unless it falls more than 34% and you make 44% if it falls less than 10% – THAT's the way to play long-term!

    Oil/StJ – I think people were thrilled to take $93 and run today.   Strip is still very heavy with 2 weeks left to trade:


    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Nov'12 92.26 93.66 91.42 91.48 14:16
    Oct 10


    -0.91 228873 92.39 208692 Call Put
    Dec'12 92.60 94.02 91.81 91.86 14:16
    Oct 10


    -0.92 83586 92.78 248520 Call Put
    Jan'13 93.04 94.46 92.28 92.30 14:16
    Oct 10


    -0.95 34018 93.25 131379 Call Put
    Feb'13 93.49 94.87 92.75 92.78 14:16
    Oct 10


    -0.94 19848 93.72 68085 Call Put

    The really hard thing is most traders only want to roll 1 month forward but that will make Dec ridiculously heavy (350K max for a month is "normal") and Jan isn't much help either so they are going to take what they can and get out this month. 

    AAPL/Lflan – I agree, other than our one roll, nothing to do today. 


  98. AAPL/Phil – "..and do not cover again.."  what do you think is in the realm of possible (liekly) that you do not want to cover against? an AAPL pop today/tonight? much?

  99. Oil hahahahhahaha! A big FU from Afghanistan OIL! Anyways….
    Pharm – would you double down now on AVEO?

  100. JROM..HOWS IT GOING!!??

  101. The chart just turned on AAPL..    645 weekly AAPL calls in the MoMo port at 4.5

  102. That's 10 of them.!!

  103. Yes Iflan, riding them from 3.5 and getting more momentum

  104. flan
    what are you using to determine a turning in the chart?

  105. The above trade in AAPL exited at 4.40.

  106. Hello ALl – According to WSJ, the Fed's Kocherlakota, the Fed might run current policies for four or more years.

  107. I have a meeting.  I can't watch a daytrade the rest of the afternoon so I have to let it stop out at 4.40.   You can ride this trade if you want.  Suggest trailing stop of 0.2 and stop out no lower than 4.30.  See you tomorrow.

  108. ms tech index broke 200-day today…i think tech is really not in a good situation heading into earnings season

  109. Iflan:  9 minutes?

  110. Stick – to judge by yesterday, doesn't look like a stick is coming.

  111. Beige Book:

    Reports from the twelve Federal Reserve Districts indicated that economic activity generally expanded modestly since the last report. The New York District noted a leveling off in economic activity, and Kansas City indicated some slowing in the pace of growth. In general, other Districts reported that growth continued at a modest pace.


    Consumer spending was generally reported to be flat to up slightly since the last report. A number of Districts characterized retail sales as expanding at a modest pace, while reports from New York, Chicago, and Kansas City indicated flat or softening sales. Vehicle sales were also generally characterized as stable but up from a year earlier and generally at favorable levels. Used car sales were mixed. Most Districts described tourism as fairly robust, though Kansas City noted some general softening, while New York and Dallas indicated some scattered signs of weakening.

    Residential real estate conditions improved since the last report. Most Districts reported strengthening in existing home sales, while prices were described as steady to increasing, with declining inventories noted in the Boston, Atlanta, Minneapolis, Dallas, and San Francisco Districts. Residential construction was also described as rising in most Districts. Commercial real estate markets were mixed since the last report. Office markets showed signs of softening in the northeastern Districts--Boston, New York, and Philadelphia--while most other Districts reported stable or mixed market conditions. Industrial markets showed some strength in the New York, Philadelphia, Cleveland, and Atlanta Districts, while softer conditions were noted in Richmond.

    Conditions in the manufacturing sector were mixed but, on balance, somewhat improved since the last report. The Boston, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts reported some expansion in activity, whereas New York, Chicago, and Minneapolis reported some weakening in activity. The nonfinancial services sector showed modest improvement in the latest reporting period. Richmond, Minneapolis, Dallas, and San Francisco reported some expansion in activity, while New York and Philadelphia indicated steady or mixed conditions.

    Overall loan demand was steady to stronger in most Districts. Credit standards were little changed since the last report, and a number of Districts noted improvements in loan quality or steady to declining delinquency rates. Agricultural conditions were mixed, with drought conditions continuing to adversely affect much of the mid-section of the nation. Activity in the energy sector remained robust.

    Districts mostly reported little change in prices of both finished goods and inputs. Prices for agricultural commodities and petroleum-based products were generally reported to be higher, while natural gas prices were said to be low or declining. Employment conditions were little changed since the last report. Several Districts continued to report shortages of highly skilled workers, but otherwise wage pressures remained modest. Philadelphia, Cleveland, and Chicago noted increases in the costs of employee medical benefits.

    This is pretty good stuff except for the slowdown in Manufacturing evidenced from the terrible PMI reports as well as regional Fed reports but they are not declining – just no longer expanding.  

    Consumer Spending and Tourism
    Consumer spending was mixed but generally reported to be flat to up slightly over the latest reporting period. Retail sales were said to have improved modestly in the Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco Districts, while sales were characterized as flat to softer in the New York and Kansas City Districts. In general, retail sales were reported to be running only modestly ahead of a year ago. A number of reports noted various factors affecting sales, such as rising gasoline prices, political uncertainty, concerns about the "fiscal cliff" and weather. Atlanta and San Francisco noted that discounters have been outperforming traditional department stores. Cleveland reported that back-to-school merchandise sold well, while Chicago said that such sales were below expectations. Boston noted a pickup in furniture sales, Richmond cited brisk sales at building supplies stores, and San Francisco reported stronger demand at restaurants and food-service establishments.

    Vehicle sales were mixed but generally at favorable levels. Sales of new vehicles were steady to stronger and running ahead of comparable 2011 levels. Philadelphia, Atlanta, Minneapolis, and San Francisco described sales as strong, while New York and Chicago reported some moderation in sales in September, after a fairly strong August. Kansas City and Dallas reported some softening or leveling off in sales. The Cleveland and Kansas City Districts noted that crossover SUVs have been selling well relative to less fuel-efficient vehicles. Sales of used vehicles were mixed, with San Francisco describing them as robust but New York and Cleveland characterizing them as flat.

    Tourism was generally described as steady at robust levels, though there have been scattered indications of some softening. Boston, New York, Philadelphia, Richmond, Atlanta, Minneapolis and San Francisco described tourism as strong, whereas the Kansas City and Dallas Districts indicated some signs of weakening. Even Districts reporting strength noted some pockets of softening: Boston reported a small drop in advance bookings, New York indicated a dip in activity in mid-September, Richmond noted a significant drop in government-sponsored bookings, and Atlanta mentioned disappointing cruise bookings and on-board spending. The Dallas District noted weakening travel demand from Europe and Asia; Atlanta also indicated weakening traffic from Europe but added that Canadian and Latin American visitors largely picked up the slack.

    That's actionable (disappointing cruise spending).  This is worse than previous reports, where tourism was a stand-out but, again, maybe just a reflection of taking a rest after a good run.

    Real Estate and Construction
    Residential real estate showed widespread improvement since the last report. All twelve Districts reported that existing home sales strengthened, in some cases substantially. Selling prices were steady or rising. Boston, Atlanta, Minneapolis, Dallas and San Francisco noted declining or tight inventories, which have put upward pressure on prices. Modest price increases were reported in the New York, Richmond, Chicago, and Kansas City Districts. New York and Richmond reported relatively strong demand at the high and low ends of the market, whereas Philadelphia and Kansas City noted relative strength for mid-range homes; Boston indicated a shift in the mix toward lower or medium priced homes. New home construction and sales were more mixed but still mostly improved: increased construction and/or new home sales were reported in the Atlanta, Chicago, St. Louis, Kansas City, Dallas and San Francisco Districts. Multi-family construction, in particular, was described as robust in the Boston, New York, Atlanta, Chicago, and Dallas Districts. Residential rental markets continued to be characterized as strong, even in the New York and Atlanta Districts where rents increased somewhat less strongly than in recent months.

    Commercial real estate markets were mixed since the last report. Office markets showed signs of softening in the northeastern Districts--Boston, New York and Philadelphia--with New York remarking on substantial new supply coming on the market in early 2013. In contrast, Atlanta, Minneapolis and San Francisco noted some improvement, while most other Districts reported stable or mixed market conditions. Industrial markets showed some strength in the New York, Philadelphia, Cleveland and Atlanta Districts, while conditions were described as sluggish in Richmond and mixed in St. Louis. Atlanta noted weakness in the market for retail space. Commercial construction activity was also mixed: Atlanta, Minneapolis and Kansas City reported some improvement in non-residential construction activity, while Richmond and Dallas noted that activity was sluggish.

    Residential real estate coming back.  First time we've heard that and one of the most important components in the economy.  

    Conditions in the manufacturing sector were mixed since the last report, though on balance, more Districts reported that conditions had improved than worsened. The Boston, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts reported that activity expanded, though growth was generally seen as modest. Activity was reported as mixed in the Dallas District, while the New York, Chicago, and Minneapolis Districts reported that activity weakened, though declines were mild for the latter two. Significant gains in manufacturing related to the construction, energy, and transportation sectors were reported across several Districts, with particularly robust gains tied to the automotive industry. There were exceptions in the Kansas City and Dallas Districts where manufacturing related to transportation equipment was reported as mixed.

    Steel production was said to be flat in the Cleveland and San Francisco Districts, and lower in the St. Louis District. Activity related to machinery and equipment was reported as lower in the Philadelphia, Chicago, and Kansas City Districts. Weaker sales growth in the high tech industry was reported by Dallas, and Kansas City said that growth among high-tech firms remained sluggish in its District. The Boston District noted some weakness in the semiconductor industry, while the San Francisco District said that new orders from the semiconductor industry had improved. Manufacturing contacts in the St. Louis District were tentative about the outlook for 2013, and contacts in the Dallas District noted some uncertainty about the outlook due to the upcoming election.

    That's those poor PMIs again.  This report is more current, through Sept 28th but indications are we'll get another bad round of manufacturing outlooks this month.

    Nonfinancial Services
    Activity in nonfinancial services was stable to slightly stronger since the last report. The Richmond, Minneapolis, Dallas, and San Francisco Districts reported that service-sector activity expanded, while such activity was reported as steady in the New York District and mixed in the Philadelphia District. Richmond noted that business activity strengthened for professional, scientific, and technical service firms, and Dallas noted strength in energy, accounting, and audit-related services. There was an increase in activity for a wide range of consulting services in the Boston and Minneapolis Districts. Activity related to health care was reported to be stable in the San Francisco District, but increased significantly in the Boston District. San Francisco reported continued sales growth for a wide variety of technology services, and noted that demand picked up for restaurants and other food-service providers.

    Reports on goods transportation services generally remained positive. A pick up in such activity was noted in Cleveland, Atlanta, Richmond, and Dallas, while such activity was said to be flat in Kansas City. Contacts in the Cleveland, Atlanta, and Dallas Districts reported strong shipments of automotive, construction, and energy-related products. Port activity expanded to record levels in the Atlanta and Richmond Districts. Air cargo volume increased in the Atlanta District, but declined in the Dallas District due to weakness in the international sector.

    Interesting – who would imagine we have record port activity anywhere?  

    Banking and Finance
    Overall loan demand increased slightly on net since the last Beige Book report. New York, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, and San Francisco reported stronger loan demand on balance, while Kansas City and Dallas reported flat demand and Chicago reported somewhat weaker demand. Most Districts reported an increase in mortgage lending, especially for refinancing purposes. New York, Cleveland, St. Louis, Kansas City, and San Francisco reported some increase in demand for commercial and industrial loans, while demand for business loans was weak in Chicago and Dallas, and was characterized as mixed in Richmond. Demand for consumer credit, particularly for auto loans, was said to be strong in the Cleveland, Atlanta, St. Louis, Dallas, and San Francisco Districts, while consumer loan demand was more limited in New York, Richmond, Chicago, and Kansas City.

    Credit standards were little changed since the last report. However, New York noted some tightening for consumer loans and residential mortgages, while Richmond and Chicago reported some easing for commercial and industrial loans. Still, loans remained difficult to obtain for many small businesses in the Cleveland, Richmond, and Chicago Districts. Banking contacts in the Philadelphia, Cleveland, Dallas, and San Francisco Districts reported stiff competition among lenders. Philadelphia, Kansas City, and Dallas noted general improvements in loan quality, and delinquency rates generally held steady or declined in the New York, Cleveland, and Dallas Districts.

    More evidence of housing improvements but not much otherwise.  

    Agriculture and Natural Resources
    Agriculture conditions were mixed since the last report. Drought conditions continued to hurt the agriculture sector in the Chicago District, parts of the Minneapolis District, and the Kansas City and Dallas Districts. However, agriculture activity was reported as higher in the Atlanta and St. Louis Districts, as well as in parts of the Minneapolis District, and was reported as stable in the San Francisco District. The Chicago and Dallas Districts noted that increased rainfall had improved crop conditions. In the Dallas District, crops were reported to be mostly in fair to good shape, with production levels ahead of last year but below average due to ongoing dry conditions. Producers in the St. Louis District reported that crops were generally in better condition than at the time of the previous report, and harvest rates for corn and rice were well ahead of their five-year averages. Contacts in the Atlanta District reported that the rise in some crop prices related to the drought in the Midwest led to an increase in crop production in the Southeast. Higher feed prices continued to adversely affect livestock producers in the Atlanta, Chicago, Minneapolis, Dallas and San Francisco Districts, though the Chicago District noted some easing in higher feed prices which provided a bit of relief.

    Activity in the energy sector remained strong, with the Minneapolis, Kansas City, and Dallas Districts reporting robust gains in activity. The Minneapolis District reported that oil production hit a new record high in North Dakota, and the Cleveland District reported that oil and natural gas production held steady. Natural gas exploration was reported as lower in the Kansas City District and in parts of the Minneapolis District. Coal producers in the Cleveland District reported declines in production.

    Wow, we really dodged a bullet there!  

    Employment, Wages, and Prices
    Employment conditions were little changed since the last report. The Boston, Cleveland, Atlanta, Minneapolis, and Dallas Districts indicated that employment levels were flat or up slightly, with stagnant demand and uncertainty related to the upcoming presidential election, U.S. fiscal policy, and European debt issues cited by some as restraining hiring. The New York and Chicago Districts noted weaker labor market conditions, and conditions were described as mixed in Richmond. Firms in the St. Louis District reported an increase in hiring plans. Several Districts continued to report that employers were having difficulty filling highly skilled positions. In response, a few Districts noted that firms were starting to increase training programs to meet their staffing needs.

    Most Districts reported that wage pressures remained modest since the last report, though an increase in the cost of employee medical benefits was noted in Philadelphia, Cleveland, and Chicago. To the extent that wage increases were observed, they were concentrated among highly skilled workers in information technology, health care, professional services, and some of the skilled trades, according to reports from the Chicago, Minneapolis, Kansas City, and San Francisco Districts.

    Price pressures were said to be contained as most Districts reported that both finished goods and input prices were little changed since the last report. Higher prices were cited by some Districts for agricultural commodities and petroleum-based products, although low or declining natural gas prices were reported in the Atlanta, Kansas City, Dallas, and San Francisco Districts. Contacts in the Atlanta, Chicago, Kansas City, and Dallas Districts noted that drought conditions continued to result in higher feed prices. There were scattered reports of higher crop prices starting to show through to food prices at the consumer level. Atlanta reported an increase in corn and soybean prices, while Chicago and Kansas City reported that these prices declined somewhat. Slightly lower prices for some technology-related products were reported in the San Francisco District.

    If it's true that employers WOULD hire if not for the uncertainty, things could pick up sharply after the elections and, of course, after someone does something about the fiscal cliff.  Overall, it's a much-improved BBook – especially in real estate.  Nothing to pop champagne corks over but nothing to panic out of stocks over either.  

  112. You're welcome Rhc.

    AAPL/Scott – I would think we'll still be 6/10 covered into the close but with 2 now in Oct.  I wish I had more confidence but how can we?   There was no IPad event announced today – that was the catalyst we were hoping for.  

    Fed/Ink – We already expect it to go forever but the threat of Romney coming in and firing Bernanke is spooking the markets now. 

    Volume still very shallow – 61M on Dow at 3.  

  113. TNA boought some weekly 58.5 calls  for 1.35 . Hoping for a small rally tomorrow morning.

  114. Amit/rally
    What action do you see and on which charts to predict the rally tomorrow morning? TIA

  115. AVEO, not yet.  I am selling Nov 10s and Oct 10s.  I will buy Nov 10 calls when it gets to a doji day……when…when when

  116. Wage divergence graph- does anyone have this graphic showing how the top is getting more income compared to the bottom?

  117. Pat-- they need to kill premium tomorrow so usually pattern is mon,tues,wed down — thursday gap up to kill all those spx options.SPX options tells me we see a gap up to 1435 tommorrow.
    Also if you observe tape action we should see short covering rally thats my speculation :)

  118. Newt – I'm sure you could probably compare Apple with let's say Cisco, swap out the Apple name  for 1% and Cisco for everyone else and you would have your chart.

  119.  surprised msb having this much trouble lifting broad market given its playthings aapl, euro, xlf firm

  120. I would not be surprised at all to see AAPL gap up tomorrow.

  121. Hard to say what to make of this selling.   Not much volume, not that severe. 

    Wages/Newt – We've used them before, I'll look after close. 

    MSB/Newt – Perhaps "they" are done supporting markets. 

  122. Wow StJ – that one really hammers it home! 

  123. Meanwhile, over in Europe, the Catalan newspaper reported figures that indicate Catalunya has paid over 25 Billion more Euros to the central government for redistribution among the provinces that they received in loans.  And they're not happy about it. Now 74% of Catalans want a referendum on self-determination/autonomy.     I had thought that Germans would preserve the Euro at all costs, as I thought it would be more costly for them to abandon it.  But the costs of mounting a comprehensive "rescue" get worse every day, and the article I posted yesterday showed how Germany could skate on its Euro loans, which are steadily becoming more burdensome, if it reverted to a Deutschemark and let the Euro value fall out of bed.  I no longer have confidence in my view, nor do I have a replacement, for the moment.

  124. And this one Newt:


  125. Transports 5,005 – haven't gone down since they failed it – good sign.  

    SOX got crushed today, down 1.4%.  RUT holding 824 – our last hope but very interesting that they held 824 today. 

    Spain/ZZ – Big mess that won't go away. 

  126. Volume barely finishing at 100M on the Dow.  CVX and XOM were half the loss and CAT, HD, IBM and UTX did the rest but 25 out of 30 were down.  

    RUT very encouraging, even the Futures are holding 824.  

  127. Phil all aluminum bac
    Dpends T6 resists scratches, brushed looks good a do it yourself thing that can be redone over and over, you can repolish it, and you can get some adhesive backed plastic clear film and apply it yourself

  128. Chart / Phil – When you look at the years 1917 to 1971 you see the top 1% going from $300K to $425K and since then, $1.2M. And we want to give them more tax cuts. And they bitch about redistribution… They have been in favor of it for the last 40 years!

  129. Stj: Killer! Thanks.

  130. Here is the chart between 1921 and 1971…

  131. Hard to believe that these guys are actually in charge of anything important such as for example, governing our country:


    Rep. Paul Broun (R-GA) told a church group in Georgia last month that embryology, evolution, and the Big Bang theory were "lies straight from the pit of Hell.” The speech was captured on video and provided to TPM at the time by Democratic tracker The Bridge Project. 

    Now a spokeswoman for Broun, Meredith Griffanti tells CNN Broun will not comment on his remarks. But she added that they weren't meant for public consumption and that Broun was “speaking off the record to a large church group about his personal beliefs regarding religious issues.” The church group posted a publicly available video of his full speech on YouTube after the event. 


  132. And I guess it's easy to try to score easy political points on the death of diplomats relying on the fact that public will not recall that you are partly responsible…


    House Republicans cut the administration’s request for embassy security funding by $128 million in fiscal 2011 and $331 million in fiscal 2012….Last year, Secretary of State Hillary Clinton warned that Republicans’ proposed cuts to her department would be “detrimental to America’s national security” — a charge Republicans rejected.

    Ryan, Issa and other House Republicans voted for an amendment in 2009 to cut $1.2 billion from State operations, including funds for 300 more diplomatic security positions. Under Ryan’s budget, non-defense discretionary spending, which includes State Department funding, would be slashed nearly 20 percent in 2014, which would translate to more than $400 million in additional cuts to embassy security.

    That's the problem with budget cutting: it sounds great when you're thumping tubs on the campaign trail in front of adoring tea party crowds, but when the actual work of governing comes up, those cuts have to come from actual programs that do actual things. Like protecting our embassies.

  133. 1921-1971 – That's the America we all grew up in.  The land of equal opportunity and all that – after the 80s (cough, Reagan, cough, cough) that opportunity was taken away from all but the privileged few and I'm sure many Conservatives still believe things are like they were pre-80s, when hard work really could let you get ahead but it's very, very clear from this chart that the only thing that gets you ahead these days is starting out ahead.  

    At the close: Dow -0.99% to 13340. S&P -0.66% to 1432. Nasdaq -0.43% to 3052.

    Treasurys: 30-year +0.43%. 10-yr +0.12%. 5-yr 0%.

    Commodities: Crude -1.09% to $91.38. Gold -0.03% to $1764.55.

    Currencies: Euro +0.11% vs. dollar. Yen -0.12%. Pound -0.04%.

    Market recap: Stocks closed near session lows, with the Dow posting back-to-back triple-digit losses, as outlooks fromChevronAlcoa and Cummins added to concerns about a global slowdown. The IMF warned that if the eurozone fails to solve the debt crisis, its banks could be forced to sell as much as $4.5T worth of assets. NYSE decliners beat advancers seven to six. - Seven to six is not much!

    In an age of popping bubbles, a doozy remains – the "central bank put." "Central banks are neck deep in extreme policy experimentation mode," writes Mohamed El-Erian, and market reaction to failure "will not be pleasant." Most think they can get out at the turn, an idea sounding better in theory than practice.

    Bear market may begin Tuesday (Market Watch)

    "(The) Fed has created – not a divorce – but a trial separation between stocks and earnings," says David Rosenberg, speaking at a conference. With the stock market the only place to get income, what's an investor to do? Rosenberg's favorite warning sign of a recession -the Y/Y change in the 3 month moving average of CAPEX orders – has begun flashing red

    The weak shall inherit the earth (Economist)

    Speed Kills: How Superfast Trading Hurts Small Caps (CFO)

    VIX was down today:  Particularly interesting given the decline in stocks, the VIX (VXX -0.7%) is also sliding. The VIX nearly always rises when stocks decline as investors are willing to pay up for equity index options. Surely one of these gauges is getting it wrong.

    Fed Beige Book: The economy expanded modestly in September, though the New York district reported a leveling off in activity and Kansas City indicated a slowdown. Most districts reported strengthening in existing home sales, with prices described as steady to increasing. A number of reports on consumer spending note the negative effect from rising gasoline prices and concern about the "fiscal cliff."

    More Beige Book: Office markets showed signs of softening in the northeast, with New York remarking on a substantial amount of new supply coming online. Employment conditions were little changed during the month (don't tell that to the BLS). The energy sector (oil and gas) remains a bright spot for the Minneapolis, Kansas City, and Dallas districts, but not so much for Cleveland (coal).

    How Much Trust Should We Have in Economic Data? (The Fiscal Times)

    As Brazil's central bank meets, a rate cut isn't assured for the first time in over a year. The benchmark Selic currently stands at an all-time low of 7.5%, but the bank indicated at its last meeting a pause might be in order. For the moment, still-slowing growth will have to be balanced against inflation of 5.28% (vs. the 4.5% top of the target range).

    "Our goose is cooked," writes a mortgage trader, imagining a conversation at the trading desk of a pure GSE mREIT like Annaly (NLY). With MBS prices bid to all-time highs (thank you Fed) and refinances on the way up, mREITs face an ugly combination of lower yields and higher prepays. One solution: Unload their MBS at these high prices – tell the staff to take a long vacation – and wait for Bernanke to exit. 

    Moody's (MCO) is none too pleased about getting passed over on rating a CMBS deal – a part of the market in which it previously had a lock. "Not a single one of these loans merits investment-grade consideration," says Moody's analyst Tad Philipp of the $1.1B security issued by JPMorgan. S&P (MHP) – which got the business – stands by its IG ratings.

    Rowan (RDC -1.6%) and Diamond Offshore (DO -1.7%) aredowngraded to Market Perform at FBR Capital, which says it is growing more selective among offshore drillers as the likelihood of sticker shock from deepwater contract news is lower, and offshore drillers could ultimately attract investors looking to increase exposure to U.S. land services once they gain more clarity.

    Chevron (CVX -4.1%) shares sink after the company warnedof disappointing Q3 earnings, but several analysts say CVX's long-term strengths will fuel a higher stock price. It's worth noting that much of the weak update comes from one-time issues, including the hurricane, refinery fire and planned maintenance that pressured production.

    Costs reportedly are ballooning for several Norwegian field development projects as the tight supply market takes its toll on budgets. Talisman Energy's (TLM) stalled Yme project faces a 188% cost overrun, BP is confronting major cost challenges to its Skarv and Greater Valhall projects, and Eni’s (E) Goliat field shows a 20% cost increase.

    Investors should take profits on Alcoa (AA -4.1%) before aluminum prices tank, Nomura advises in lowering its target price on the shares to $9 from $12 "to reflect more conservative forward multiples given continued weakness in aluminum prices and deepening structural challenges as China continues to overproduce and subsidize its domestic industry." (earnings)

    Wells Fargo (WFC) says it will provide financing for an 11.3 MW solar project being developed by MEMC Electronic's (WFR-6.6%) Sun Edison unit in New Mexico, the sixth Sun Edison utility scale solar project funded by WFC in the past year. El Paso Electric (EE) agrees to purchase the power supplied by the project for the next 25 years. 

    Two-for-one Big Macs: McDonald's (MCD +0.4%) starts tostep up the use of discounting in Europe as it attempts to hold on to sales. Though the chain has used promotions before in Europe to increase store traffic, the scope of the most recent push is much larger with most of Germany and France encapsulated. The development has the potential to significantly impact the overall bottom line of the company with close to 40% of its operating profit derived from the continent.

    Humana (HUM -0.2%) says it's entered into an exclusive agreement with the Veterans of Foreign Wars, or VFW, to become the exclusive national Medicare Advantage plan carrier for the organization. Humana can now market Medicare Advantage health plans to the VFW's 700K+ members and their spouses who are Medicare eligible, and provide guidance for those who will soon be qualified. 

    Needham takes a favorable view of 3D Systems' (DDD)$35M acquisition of Rapidform, a Korean developer of object scanning and inspection software for 3D printing. Needham notes the deal is expected to add $15M in revenue and $0.06-$0.09 in EPS to 2013 results; increases 3D's global channel network by 25%-30%, and bolsters its efforts to be a provider of end-to-end 3D printing solutions, rather than mere hardware.

    Shares of Barnes & Noble (BKS +6.7%) spike higher as execs presenting at the Liberty Media Investor Meeting (webcast) strike a positive tone. Though Nook revenue is pegged at $3B for 2012, the rosy B&N estimate is drawing its share of skeptics with the firm's track record of shooting too high with its guidance a backdrop.

    YouTube (GOOG) now gets a quarter of its video views from mobile devices, says exec Robert Kyncl, who recently hinted a subscription service could be on tap. That kind of mobile video dominance shows why YouTube, which saw its mobile traffic triple last year, may be comfortable with the lapsing of its iOS deal with Apple, given it has cleared the way for ad-supporting apps to be offered through the App Store. 

    Very Interesting Article:  (Statistically) It’s My Birthday Too, Yeah (NYT)

  134. Someone is playing games with BBY… Look at the Put volumes in Nov, Dec and Jan. – 60,000 contracts traded today at the 17 and 18 strikes. Volume for Oct was 1000 for these 2 strikes! Same thing happened on 9/25… 

    Someone knows something… 

  135. Told you so:  

    At least one analyst is blaming Mitt Romney's better poll performance for today's triple-digit drop in the Dow Jones Industrial Average. Independent analyst Jim Bianco postulates that concerns over Romney pulling off an election victory are causing traders to wonder about the future of the Federal Reserve and Chairman Ben Bernanke. Interestingly enough, the markets have in fact been falling ever since Romney started surging in the polls after the debate. Coincidence? Perhaps..

    Also, Spain just got downgraded – made the Dollar pop to 80.11 and futures took a dive. 

     Spain's credit rating is cut to BBB- from BBB+ at S&P, which also retains its negative outlook on the country. "The deepening economic recession is limiting the Spanish government's policy options." (see also) 

  136. Romney / Phil – I bet you a few of them are also worried about the deficit picture… Sorry, I forgot, the $5T tax cut is revenue neutral!

  137. Stj:
    "…Rep. Paul Broun (R-GA) told a church group in Georgia last month that embryology, evolution, and the Big Bang theory were "lies straight from the pit of Hell.”, theory were "lies straight from the pit of Hell.”
    Stj:  I was not aware that the Immaculate Conception applied to everyone, I thought it was just Jesus.
    "Embryology (from Greek ?μβρυονembryon, "the unborn, embryo"; and -λογ?α-logia) is the science of the development of an embryo from the fertilization of the ovum to the fetus stage."
    I guess The Stork is the one bringing babies to all those moms.   Kinda makes you wonder why Evangelists are so worked about sex, since it appears to be just harmless fun unrelated to reproduction, and a lot safer than drinking and snake-handling.  And you don't need evolution to explain why chimpanzees share 98% of our DNA, since even a Supreme Being has to practice up before being able to create someone in his Own Image.  I'm sure his wife complained that the early versions didn't look anything like him. 
    Now, as for the Big Bang theory, I tend to agree with the good pastor about it being a lie.   While the observable universe may well have been created by a big bang, it now appears that quantum mechanical fluctuations can create big bang universes from the laws of physics at any moment, so there is no reason to think that G-d took the time to create our particular universe.
     Nor is there any reason to believe that either time or space are finite or otherwise delimited — universes probably pop in and out of existence all the time.  The very fact that we can accurately measure the age of our universe [13.7 billion years] in a unit of measurement that has some relationship to our life spans probably indicates that it hasn't been around very long.  If a fruit fly [lifespan 30 days] were to measure the age of the universe in equivalent fruit-years, the universe would be @ 960 Billion years old, so we are just measuring time within the frame of reference of very short-lived carbon life forms.  Carbon-14 has a half-life of 5740 years, while Uranium-238 has a half-life of 4.468 X 109 years, as a point of reference.
    So, while G-d may well have set up the Laws of physics and quantum mechanics, it seems unlikely he had anything to do at all with the local Big Bang to which we owe our existence.  I would guess he was styling on some awesome beach in one of the truly bitchin' universes that emerged from his Laws, chatting up some hotties over a Quantum Cocktail.  I know I would have been.  Of course, none of the foregoing is to be confused with PSW's Big Bank Theory, which is in another universe altogether!

  138. The uranium reference is "10 to the power of 9", doesn't come out in the formatting.

  139. stj/BBY – is the put volume you quoted buying or selling?

  140. BBY / cdel – I read buying, but that could mean that these puts were sold on 9/25 when there was a spike as well. The Dec 17 traded around 1.80 that day and were 1.56 today. That's a $0.25 profit on 14,000 contracts – about $350K. The Nov 17 spiked as well on 9/25 and traded at $1.20. They are $0.80 today so another $560K there. Now the Nov 18 puts and Jan 18 puts only spiked today. It possible that someone is placing some sort of calendars. First a Nov/Dec trade and now a Nov/Jan trade. 

    There is no way it's a coincidence… There are trading 300x the normal volume! Buying a calendar would profit from little movement. Selling one would profit from a large move like for example going private. I am guessing someone is selling the calendar, betting that if the buyout goes through at anything over $19.5, the trade is profitable. And the deal falls through and BBY crashes, they do well also. At $20, the trade makes $500K…

    Any idea Phil?

  141. Big bang / Zero – Apparently the Big Bang is not in question, just the source of it. That's good enough for me…  Not to say that there could be another billion universes parallel to ours created by that many big bangs. 

    It's actually the thing that bugs me the most in life – not ever finding out. 

  142. 50 DMA are in play everywhere except for the NASDAQ where it's already blown…

    I wonder if Kudlow will see the correlation between the market performance and Romney's move in the polls! I am guessing traders don't like uncertainty and that level just got higher.

  143. Hi,
    to implement the following trade from earlier today
    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.
    can anyone tell me what month and years to use for the bcs is it same as date for sold put.
    thanks in advance

  144. Interesting thoughts on China and a recession.
    I went back into Yum's prior press releases to see how that compared to the recession years.
    4Q 2012: expects low single digits to flat
    4Q 2011: 21%
    4Q 2010: 8%
    4Q 2009: 3%- recession year
    4Q 2008: 1%- recession year
    4Q 2007: 17%

    There are several things I took away from the guidance. The first is that China's same store sales growth is plunging off a cliff. The second is that if it comes in flat, it would be an even worse 4th quarter than those during the actual Great Recession.
    2009 was by far the worst year for China- as it was globally. Full year Chinese same store sales declined 1%. This year, if fourth quarter comes in flat, they'll be about 9% but that is simply because the first half of the year came in relatively robust. You can really see the Chinese economic slowdown in the second half of 2012.
    I trust Yum's numbers. It runs 4000 KFCs and 750 Pizza Huts in China. It is the largest restaurant operator in the country. What the data tells me is that the first half of 2013 is not going to be very pleasant- globally or otherwise. China is slowing quickly.
    I'm going to continue to watch this closely.

  145. tt
    the BCS and short put are both Jan 2015.  You won't have any other choices for 2015.
    the short weekly calls are this weeks Oct2.  You then get an expire or you have to roll to next weeks Oct3

  146. VEGAS—--
    Venetian has a special offer if you have not made reservations as yet

  147. Winston / AAPL – Being the house by collecting premium at about 50% below today's action is what Phil teaches.. I, for one, do not have the resources to even play that due to IRA requirements so I simply stay away.  I have thought the same thing, selling puts at the levels you are takes the daily gyrations of the market out the picture.  I am sure you are sleeping soundly!  Congrats!

  148. oops sorry —go to The Venetian and look under the Grazie Loyalty program--or e-mail me and I will send you the link—about $200 per day

  149. ALL – from Savi

    -Nobu requires a 50% deposit to hold the reservation —it would be easier if you send me the full amount which is $148 p/p which includes tax and gratuity ($115 plus 8.1% tax and 20% gratuity)
    -will NOT be taking the beverage option—as we do not seem to be drinkers!!!--drinks can be purchased at dinner
    -within menu A we will have to  choose option 1 or 2—will check if we can have a mix or make substitutions
    -please send the funds thru pay pal by OCT 21st as I have to give them a count and send them the deposit—your payment is your reservation
    -please feel free to e-mail me at savi_ted at hotmail dot com, if you have further questions 

  150. Oil Lines for 10/11/2012

    R3 – 95.78
    R2 – 94.72
    R1 – 93.14
    PP – 92.08
    S1 – 90.5
    S2 – 89.44
    S3 – 87.86

    Yesterday's high and low – 93.66 / 91.02

    Inventories are today at 11:00 AM.

  151. Graph by CNNMoney that shows the growth of the world's largest economies between 2000 thru projections in 2017.  It is interesting to see the strides China has made in half a generation …

  152. Good morning!

    Futures turned around nicely since last night's scare, now up about 0.3%.

    Dollar just held 80, now 80.05 after spiking to 80.30 on Spanish downgrade.  Euro $1.2887, Pound $1.6023 and 78.10 Yen to the Dollar. 

    Oil $91.85 (2-3Mb net draw expected at 11), gold $1,770, silver $34.21, copper $3.73, nat gas $3.48, gasoline $2.96 and, just in time for today's 30-year auction – TLT $123.  

    Japan still a disaster, the Shanghai gave up 0.8% but the Hang Seng got back to 21,000 (1 short):

    Japan's machinery orders -3.3% in August vs +4.6% in July and consensus of -2.3%. The figures, which are an indicator of capital spending in 3-6 months, add to other poor economic data recently, including declines in industrial output and exports.

    China Stocks Fall on Economic ConcernsChina’s stocks fell after auto sales unexpectedly dropped and the 21st Century Business Herald reported new bank loan growth slowed last month.

    Luk Fook Same-Store Sales Fall More Than 30% in Golden Week. That compares with 65% growth in same period last year, citing financial controller Law Tim Fuk. Visitors this year reduced their purchases. Law expects yearly growth of jewelry sector to slow to single digits in the future.

    Disputed Islands With 45 Years of Oil Split China, Japan. China and Japan sat down for talks and agreed to jointly develop a natural gas field under the East China Sea, defusing a dispute between Asia’s biggest economies over who owns the reserves. That was in 2008. The accord, hailed as a model for cooperation at the time, has yet to be carried out and the countries now face a new territorial dispute, also in the East China Sea. The quarrel over who owns the uninhabited islands called Diaoyu by China and Senkaku by Japan is again linked to a prize beneath the ocean that may hold enough oil to keep China running for 45 years. 

    Japanese PM Yoshihiko Noda calls for talks to limit the economic fallout from his country's dispute with China over islands in the East China Sea, although he reiterates that the territories belongs to Japan. While Japanese car sales have suffered, the nation is also China's second-largest provider of foreign direct investment. At stake in the row are fishing rights and access to up to 160B barrels of oil.

    Bank of Korea Cuts Interest Rates as the Economy SlowsThe Bank of Korea cut borrowing costs for a second time this year, adding to government efforts to avoid a deeper slowdown amid Europe’s debt crisis and a cooling global economy

    3:15 AM Asia markets mostly fall following S&P's two-notch downgrade of Spain, adding to fears about global growth that have been weighing on markets this week. Japan -0.6%, Hong Kong flat, China -0.8%, India -0.1%.

    4:05 AM European shares are mixed in early trading, with positive news in trading statements from French retailer Carrefour and Britishluxury goods group Burberry offsetting S&P's downgrade of Spain to BBB-, just one notch above junk status. EU Stoxx 50 -0.3%, London+0.2%, Paris +0.1%, Frankfurt +0.2%, Milan -0.7%, Madrid -1%.

    Yields on 10-year Spanish government bonds rise 9 bps to 5.89% following S&P's ratings downgrade, although it's not the biggest spike ever seen. Two-year yields are +10 bps to 3.37%. Ahead of an auction of up to €6B of Italian debt later, the country's 10-year yields are +4 bps to 5.15% and 2-year yields are +5 bps to 2.41%. 

    Thursday's economic calendar:

    8:30 Trade Balance

    8:30 Initial Jobless Claims

    8:30 Import/Export Prices

    9:45 Bloomberg Consumer Comfort Index

    10:30 EIA Natural Gas Inventory

    11:00 EIA Petroleum Inventories

    1:00 PM Results of $13B, 30-Year Note Auction

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet

  153. BBY/StJ – I don't know what they're doing but 9/25 was a sharply down day where they tested $17 so may have just been someone covering a long position as the tested the 50 dma at $18.20 and then plunged back to $16.78.  We don't play this way but you can buy the stock long for $17.80 and buy the Nov $17 puts for .80 and now you've spent $18.60 and you risk $1.60 max with no upside limit on a buy-out – a lot of people play that way.  As you say, they could be selling the calendar as well.  

    Big Chart – Those 50 dmas are holding so far.  We have to give the AAPLdaq a pass for now. 

    AAPL/Tommy – That was all 2015 for the spread and the short puts and the weeklies are going to be whatever the front week is.  

    China/Rpme – See above news – big trouble with retail sales!  

    PC shipments/StJ – Wow, that is very bad…

    Growth/Diamond – Looks like Iraq is the way to go.

  154. Oil / Phil,,   given a net draw at 10:00, how high do you think oil will go in the run up to the inventories?  Or do you see it going higher than 92 at all?

  155. Any oil plays Phil?

  156. Jrom / You posted your oil and option TOS commissions for Newt the other day.  I can't find my notes.  How much are they charging you for an oil contract, and how much for an option.  I think you said 2.75, and .86 respectively.  Is that right?

  157. Oil – Generally we get a run up into inventory.  Watch the 80 line on the Dollar but, below that, there's no reason they shouldn't test $93-93.50 again and a good draw in inventory could take them higher but there was a lot of selling pressure yesterday because there's only 7 or 8 sessions left before the contract rollover (22nd, I think) and they still have 200,000 open contracts to dump out of so that's 30K a day that have to be cancelled or rolled – doable but heavy selling pressure.  

  158. Two upgrades on google:
    Nomura maintains buy, raises PT from 770 to 900
    Susquhana raises PT from 770 to 880
    Google peaked at 774 on Friday, closed at 744.56 yesterday

  159. 2can- I pay 2.75 for futures and a Flat fee of .85 per option.

  160. thanks Jrom

  161. It's weird how people stick so vehemently to ancient theology, like somehow the ancients, who knew less about their physical universe than we do know, somehow had some mystical insight we currently lack.
    Isn't it so obvious that the bible is just another version of ancient theology resulting from people trying to describe their universe with the relatively limited powers of observation they had at the time?