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Friday, March 31, 2023


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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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? to..how much?

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


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

That's 10 of them.!!

Yes Iflan, riding them from 3.5 and getting more momentum

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

The above trade in AAPL exited at 4.40.

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

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.

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

Iflan:  9 minutes?

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

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

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

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

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

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 🙂

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.

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

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

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.

And this one Newt:


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

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!

Stj: Killer! Thanks.

Here is the chart between 1921 and 1971…

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. 


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.

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… 

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!

"…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!

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

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

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?

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. 

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.

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

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.

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