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Fed Up Thursday – WMT and the Fed Fail to Boost the Market

Nothing exciting was revealed from the Fed Minutes yesterday.

Not that we really expected anything spectacular but the lack of anything positive is a negative the way these markets are heading.  The FOMC takes note of a contrast between more favorable indicators on the consumer side and weaker activity in the business sector. The committee's business community contacts indicated an "uncertain outlook" for government spending, taxes, and regulation – essentially the Fed is as worried about the Fiscal Cliff as everyone else is.

Policymakers largely deemed the Fed's September decision to begin buying $40Bn of mortgage-backed securities each month as effective in lowering long-term interest rates, in turn helping to support spending and a recovering housing market. Several Fed officials thought the benefits of the bond-buying were likely to grow over time.  "Looking ahead, a number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity extension program in order to achieve a substantial improvement in the labor market," the minutes stated. "Operation Twist," in which the Fed has been buying about $45 billion of long-term Treasury securities using the proceeds of selling short-term Treasurys, is due to expire in December.  Bernanke has said the Central Bank would review all of its asset purchases at its final policy meeting of the year on Dec. 11-12 – so more uncertainty until then. 

What we are certain about is that, coming on the heels of yesterday's disappointing Retail Sales Report, WMT released very weak numbers with comp store sales up just 1.5% for the quarter while expenses climbed 2.5% and the World's #1 Retailer (accounting for 10% of all US sales) MISSED on top-line revenues by $1.8Bn out of $113.2Bn.

Not exactly a confidence-booster to reverse a down-trending market, is it?  WMT, a Dow component, is down 3% in pre-market trading while TGT, who were in-line with their earnings report, is trading flat on a 2.9% increase in comp-store sales and uninspiring guidance.  

As noted by Doug Short: Even if we go with the “Sandy impacted retail sales” argument – the Hurricane excuse doesn’t really justify that the gross gain in retail sales nationwide over the last year was only $20.42 billion (not seasonally adjusted). Of the $20.42 billion in sales the major category percentage contribution is shown in the adjacent table.

Click to ViewImportantly, over the past year the bulk of retail sales have come from Motor Vehicle sales as sub-prime auto loans have made a vast resurgence and nearly as much simply went into the gas tank. Non-store retailers also comprised a large chunk of consumer dollars as more shoppers gravitated toward the internet leaving companies like Best Buy (BBY) gasping for air.  However, while consumers did spend money over the past 12 months, it has been a slowing rate of growth since June of 2011. This decline in the annual growth rate of sales is troubling.

With incomes under pressure, food and energy costs rising, and businesses being impacted by a recession in Europe combined with an inability to pass along cost increases to consumers – the economy is set to continue grinding along at a very sub-par growth rate. For investors – corporate earnings are being impacted as demand slows, rising input costs cannot be passed along and cost-cutting measures have primarily been exhausted. Short contends that this leads to concerns about the validity of exuberant forward earnings expectations and current market valuations.

Also of concern is Europe officially entering a double-dip Recession (did it ever really end?) with Q3 GDP down 0.1% after falling 0.2% last quarter.  Year over year, GDP for the Euro-Zone is down 0.6% with France and Germany the only positives – and just barely at +0.2% each.  "That was the last good number from Germany for the time being," says Commerzbank economist Joerg Kraemer. "The German economy will probably shrink somewhat in the fourth quarter."  

Click to ViewBack home in the US, we have plenty of crappy numbers, with Jobless Claims up 78,000 for the week to 439,000 but that's likely storm-related – as we had an extra-low 361,000 last week.  Not storm related is the Empire State Manufacturing Index at -5.2 with Labor Conditions at -14.6 – the worst level since 2009.  We'll get the Philly Fed at 10 but that's not likely to be any better.  The October CPI was an anemic 0.1% with Core CPI remaining at the usual 0.2% and, as you can see from the chart on the left – how can we expect any better if our Corporate Masters continue to pay our workers less and less money, no matter how hard they work?

All this is pushing bearishness to a 15-month high, according to the AAII Investor Sentiment Survey, which is up 8.9 points to 48.8% bearish while the percent of investors who consider themselves bullish has dropped 9.7 points for the week to finish at just 28.8%.  The long-term average for the bulls is 39%, for bears – 30%.  

In-line with our short play on Visa (see yesterday's Disaster Hedges update), COF is reporting deteriorating credit quality in October with the 30-day delinquency rate rising to 3.66% from 3.52% previously. Charge-offs on credit cards rose to 4.25% from 3.93%, for auto loans to 2.14% fro 1.97%. The numbers jibe with a report from Fitch, which shows worsening U.S. credit performance in October for the first time in a year.

All this horrible news makes me doubt my bottom call here, at our Must Hold lines, which failed on the S&P and the NYSE yesterday (which is why we are layering our Disaster Hedges – in case I'm wrong) but it is all news we've been warning about for months and the only difference is that now the media is picking up on it all and hitching it to the wagon of Fiscal fears and driving the whole thing off a cliff to really freak out investors

On a positive note, negative equity improved across the nation in Q3 with 28.2% of homeowners underwater vs. 30.9% in Q2, according to Zillow and AGNC's CEO, Gary Kain, must have been at our PSW Investor Conference this weekend as he made a presentation showing the company is still capable of double-digit returns – even in this low-rate environment and, more importantly, he emphasized my point that Mortgage REIT dividends aren't facing a tax increase as they never qualified for the discounted rate in the first place!  So the panic sell-off that is plaguing this sector is completely ridiculous.  

Almost as ridiculous as AAPL at $540 – but that's an article for another day.

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  1. Phil – from yesterdays post:
    I am in the Oct 550/625 BCS Bought 550 @ 64, sold 625 @ 40. I've been selling front month calls – now in Dec 580's @ 8.70, now 6.10-should I roll to 570's? Or do you have another suggestion like rolling BCS out to 2014's?

  2. Oil Lines

    R3 – 89.09
    R2 – 88.07
    R1 – 87.42
    PP – 86.40
    S1 – 85.75
    S2 – 84.73
    S3 – 84.08

    Yesterday's high and low – 87.06 / 85.39
    Fib lines from yesterday's high and low – 88.09/87.51 and 85/84.75

    Inventories are today at 11:00.

  3. Good Morning
    Phil—I am glad to see you posting—hope you are feeling better

  4. Derek and I hope you feel better soon, Phil!
    I spent the entire day yesterday on Capitol Hill, meeting with the Chief of Staff of a NY senator, and 3 Congressmen from junior to a committee chairman, all of whom are members of the Capital Markets Subcommittee of the Financial Services Committee.
    I think we may be overestimating the likelihood of a fiscal cliff deal anytime soon.

  5. hope you are feeling better phil.  

  6. Good Morning!

  7. Suck it up Phil!  ;)

  8. AAPL – understanding the numbers article on SA

  9. AMRN – Up big on TEVA rumors.  This is the latest in a whole series of rumors.  Maybe someday it'll happen.

  10. Phil…are you trying to make us grouchy today???

  11. Apparently, it's never a good time to raise taxes:


    “Raising taxes during a recession has been proven time and time again to hinder economic growth,” South Carolina Rep. Joe Wilson told POLITICO in a statement.

    So when Bush came in power in 2000, we had to lower taxes because we had a surplus, and now we have to lower taxes because it's a recession.
    Too many people bash Keynes because they remember only one part of the equation but he was smarter than that – in bad times, the government should provide stimulus when needed but in good times we should save so that we can provide stimulus in bad times later. Lately, we have provided stimulus in good times with tax cuts and bad times and somehow Keynes gets a bad name…. Idiots!

  12. Capitol Hill report, continued
    I also met with the Chief of Staff of the House Majority Whip (the third highest ranking Republican).  I got no sense of optimism from him either on prospects for a fiscal cliff deal anytime soon.

  13. Phil – do you see a longer term play in DMND?

  14. Rough day for FAS Money… 

  15. DMND Phil yesterday I remarked on this stock and sold additional to my Nov caller a naked Dec 12 caller for 2.25 Today the stock dropped 4.00 so at this stage both callers are worthless. stange how things happen! Hope you are drinking you tequila today to clear your cold!!!

  16. stjeanluc – joe "you lie" wilson?

  17. Kudos to Governor Bobby Jindal, for his push back on sore loser romney….

  18. I've never been a fan of the can-kick, but if there was ever a better time for it, I haven't seen it. Why don't we just do away with the Jan 1st timeline completely, and engage in honest reform of taxes and entitlements? The way we are going, the market is pinning its hopes on a Republican capitulation on taxes, therefore suggesting that the only way to stop the slide is a significant tax increase? Have you ever seen a sizeable tax increase, presented BY ITSELF, cause a market rally?
    This is unfolding in the worst possible way.

  19. Jindal/1020,
    he is just trying to position himself for his next election knowing Romney was a loser. He is really like Romney just changes his position depending on current trends but will go right back to his BS if it changes again.

  20. barf – I doubt anything "honest" can be acheived at this point…..
    I would like to see personal taxes go up as promised and then an honest discussion about the rest…..

  21. Opesbridge – Ron, scary perspective.  But don't forget these are the early days of staking out negotiating positions.  At least, I hope that's it.

  22. Don't forget, deficits do not matter

  23. jomptien – Of course, but he still had the nads to point it out…..

  24. Fiscal cliff/opes – thanks. confirms the seasoned perspectives i was collecting tuesday. congress has no incentive to make any deal 'early'. gaming a deal will happen right up to deadline. no confidence here we will have a happy xmas rally.

  25. Good morning! 

    DMND finally put out their restated earnings and wiped out all profits from 2010 & 2011 and the cost of integrating Pringles and legal/accounting costs and other one-time fees are hitting them for a $2.46 per share loss so far this year BUT, if you take out those one-time costs, they actually earned .53 per what is now $15.19 share.  I figure they are good for at least $1 a share going forward and the 2015 $17 puts are now $6 for a net $11 entry so let's add just 5 of those to the Income Portfolio as we may very well DD at $8 if things go the wrong way and we can also play the 2014 $15/22 bull call spread for $2, which gives us a potential for $11 of upside at $22 and we're up $4 at $15 so we can fearlessly sell front-month calls against our net $4 credit once they stabilize.  

    Japan bucked the negativity in Asia as they face yet another Government shake-up and the guy who is likely to take over said he favors massive QE to get the economy moving (and the Yen diving) and also, they seem to be finally moving towards settling that island nonsense with China.  

    Tokyo bucks the selloff, +1.9% as opposition party leader Shinzo Abe – possibly set to come to power in coming elections -makes clear his position: "The biggest economic problem is prolonged deflation and a strong yen … Markets will only start to react once unlimited monetary easing is conducted." 

    The Dollar is still very strong, at 81.10 but down 0.15 today as the Euro runs up to test $1.2785.  The Pound is at $1.585 and usually they are .30 apart so maybe the Euro can get a penny back at some point.  Mission accomplished on the Yen as you now need 81.26 of them to buy a Dollar and that's got the Nikkei back at 8,880 – back over the critical 8,850 line the BOJ likes to defend.  

    Silver ($32.37) and gold ($1,713) are having bad days with copper at $3.46 but that's not so terrible and doesn't indicate the kind of Global Economic weakness the markets are pricing.  Nat gas is $3.77, gasoline is $2.69 and oil is once again at $87 but I don't want to short it into inventories – tempting though it may be.  

    Consumer Comfort is up a bit from last week but still awful at -33.1 but, for the first time in 5 years, less than 8 out of 10 Americans now rate the economy negatively.  

    There won't be anything positive in the markets now until we take back S&P 1,360 and NYSE 8,000, with the latter 100 points away already.  12,500 on the Dow is the next major failure and we're stepping towards a 10% correction (another 4% down from here) if that fails most likely.  Dow Transports gave up 5,000 yesterday and they need a whopping 75 to get it back now so YUCH all around and every reason to get more bearish if we don't turn it around today or tomorrow.  

    At the open: Dow -0.13% to 12555. S&P -0.01% to 1355. Nasdaq +0.01% to 2847.
    Treasurys: 30-year -0.22%. 10-yr -0.07%. 5-yr -0.02%.
    Commodities: Crude +0.44% to $87.13. Gold -0.38% to $1723.45.
    Currencies: Euro +0.31% vs. dollar. Yen +1.29%. Pound -0.04%.

    10:00 AM On the hour: Dow -0.19%. 10-yr -0.03%. Euro +0.35% vs. dollar. Crude -0.1% to $86.66. Gold -1.08% to $1711.45.

    Market preview: Stock futures bounce around above and below zero following a data dump earlier, including a Sandy induced jump in weekly jobless claims. The S&P benchmark is flat. Europe is almost solidly red, though, with the eurozone's entry into a double-dip recession dragging on shares. Following earnings, Wal-Mart is -3.1%.Later: Philly Fed Business Outlook, Bernanke, Plosser 

    Killing the mood this morning (if there ever was one):  "We should be standing pat now rather than easing policy further," says Richmond Fed President Jeff Lacker, the lone dissenter from current FOMC policy. What's the use, he says, of buying up assets to increase the amount of reserves in a system already flooded with them. "It's not clear whether monetary policy … can bring about any material improvement in economic growth right now." 

    S&P 500 futures reflexively drop a couple of handles after the big jump in initial jobless claims, but the effect from Hurricane Sandy is in play as apparently NY didn't report last week, so we got it all this week. It's also the first key post-election economic number. Does Jack Welch care to comment? S&P -0.2%. 

    ECB Governing Council member Luc Coene reportedly says Greece will need to write down debt in order to help resolve its problems. With the private sector already having taken haircuts on their Greek bonds, that seems to indicate that Coene is referring to debt held by public entities, such as EU governments. While that would put him in line with the IMF, it would put him at odds with the EU consensus, particularly Germany. 

    "Our aim is that no one loses their home," says Spanish finmin De Guindos as the cabinet passes a decree attempting to stem the tide of evictions. The mortgage default ratio will remain low (yes, if the government decrees such). Addressing the need for the government to request a bailout, he says the country doesn't need any IMF money. 

    Non-performing loans in China rose ¥22.4B to ¥478.8B in Q3, according to Beijing, the 4th consecutive quarter of increases – a string never seen in the 8-year history of the data. As a percentage of total loans, non-performing is at a nearly unbelievable 0.95% vs. 0.94% in the previous quarter.

    Xi Jinping formally replaces Hu Jintao as head of China's Communist Party, while the Politburo Standing Committee is cut to seven from nine. The conservative nature of the committee means that hopes for economic reform are low. One new member Zhang Gaoli, presided over fast growth as head of the Tianjin region but racked up huge debts and built dozens of buildings that now stand empty – a model that many feel China needs to get away from. 

    Annaly Capital (NLY) Co-CIO Rose-Marie Lyght exercises options to purchase 15K shares of company stock for $13.25, bringing her stake up to 142.6K shares

    Gold slides 1.1% amidst the World Gold Council reportingan 11% Y/Y decline in Q3 demand to 1.1K metric tons. Central banks remained steady buyers, but investment demand – ETPs, bars, coins – was off 16% Y/Y. The WGC notes 2011 Q3 is a tough comparison, and demand remains well above the 5-year average of 984.7 metric tons.

    Philly Fed awful at -10.7 is the nail in the coffin today – even worse than +4.5 expected but it says right at the top of the release that the hurricane hit them hard so I certainly don't consider it proof of anything.  

    Nov Philly Fed Business Outlook: -10.7 vs. +4.5 expected, +5.7 previous.

  26. Last Wednesday I mentioned that my next line for AAPL was 528 and it looks like we are getting close now!

  27. AAPL – too late for puts? damn. i suggest a new theme song for the company.

  28. If AAPL breaks 530, it may fill the gap at 430…. sorry….

  29. Phil/DMND
    Don't see anything for 2015. Did you mean sell the 2014 puts?

  30. Pharm – AVEO's gotten KILLED lately. I know you said there was a big catalyst this month or next. Im in Jan 7.5 calls and thinking of doubling down. Your thoughts?

  31. Jindal/1020, Yes it was good to hear all in all

  32. Hi stjeanluc, what about the MoMo Portfolio ? TIA

  33. The long WMT play Jan15 65c/62.5p Closed today the first short caller for .05c sold yesterday for .45 waiting for WMT to recover and will sell a further Dec12 caller! Just one of the plays which were discussed in LV

  34. Phil- Israeli/Gaza- Seems like that is going to escalate significantly. Any thought s on impact on market and any plays on that crisis.

  35. AVEO/jro – the FDA was supposed to be involved this month or next, but it has been pushed out 6 mo, so no catalyst.  Sell premium, which is puts….out to Jan.   1/4 lots.

  36. AAPL – i have 530.99 as a 50% fib retracement. next support down to 517.59..  430 still seems a LONG way away..  

  37. Phil - With the VIX flat, the cliff, earnings and the Gaza in the news, are investors still a bit complacent?

  38. AAPL/Jomp – I'm on the verge of calling for another $50 roll down on longs for $25 but you have an aggressive Oct spread you let go a little too long.  You are paying premium and talking about paying more premium – that's a bet.  How many bets are you going to make where you burn premium?  If you want to be in AAPL, I strongly suggest setting up an April or farther bull spread (to let them have Jan earnings) with a firm plan of selling calls to offset your costs.  Ideally, the 2015 $500/650 bull call spread is $55 on the $150 spread that's $35 in the money to start and ALL you have to do is sell $2.50 of premium per month for the next 24 months and it's a free spread and, if you have to spend $50 to roll your calls down to the 2015 $400 calls, then ALL you have to do is sell $5 of premium per month and it's STILL a free spread.  If you can't afford a sensible position like that – DON'T PLAY AAPL!!!

    Thanks Savi.  

    Thanks Ron.  Not to encouraging in DC?  That sucks.  

    Thanks Occam.  

    FU 1020!  8)  

    AAPL/Scott – That is a very good article, all should read.  

    Grouchy/Jabob – FU too!  

    Idiots/StJ – Keynes never said anything the story of Joseph didn't say 3,000 years earlier.  Funny how our leaders pretend to be pious but they never seem to know the very basic lessons of the bible…

    Very sad Ron.  I can't believe they're willing to do this again but, then again, they are Republican'ts 

    DMND/Crussel – GMTA.  

    FAS Money – Wow, easy come, easy go on those short puts.  May as well just kill the Novembers tomorrow (give them a chance today) and not roll them into December as we have enough risk there if it doesn't work out and $864 to make if it does – which is plenty for a month.

    Tequilla/Yodi – I wish!  Never a good idea with holes in your kidneys.  Great play on DMND, good time to take the longer position above.  

    $25KPs – Hopefully this is the bottom and, as I said above, if we don't get back over NYSE 8,000 and S&P 1,360 tomorrow, we'll have to make some bearish adjustments into the weekend.  

    Romney/1020 – What a total ass that guy is.  Thank God he's not President.  Such a repulsive attitude that even Jindal is outraged…


    "With regards to the young people, for instance, a forgiveness of college loan interest, was a big gift," Romney said. "Free contraceptives were very big with young college-aged women. And then, finally, Obamacare also made a difference for them, because as you know, anybody now 26 years of age and younger was now going to be part of their parents' plan, and that was a big gift to young people. They turned out in large numbers, a larger share in this election even than in 2008."

    Romney also said that "free health care" was a "big plus" for Hispanic and African-American voters, who overwhelmingly supported the president in last week's election.

    In other word, Mitt would take away these "gifts" of low-interest College loans (and how many of us didn't take one?), planned parenthood and health care for people who are too young and too busy with college to have jobs that pay them enough for the coverage while their parents are probably also stretched to the limit trying to pay for their college.  This is how the top 1% keep the bottom 99% down – where's the equal opportunity in this country when a guy like Mitt can afford to breeze through college without even taking a loan while people from more modest backgrounds have to put themselves $250,000 in debt to get the same education.  It's not equality at all – it's a joke.  And guys like Romney are there to maintain that edge for the privileged few while screwing the under-class and it's absolutely despicable that he does this while claiming he's for an America where everyone has an equal chance.  These are despicable people and thank God their agenda has been stopped – at least for another 4 years – but they're not going anywhere and they won't be satisfied until the chance of one of their maid's kids rising to a level where they can compete for a CEO position is one in 100M – as opposed to the 1 in a Million they've already reduced it to. 

    Worst way/Barf – The thing is, do we need to pay off the deficit or not?  As long as we believe the deficit is bad – then we MUST raise taxes.  We can't cut our way to prosperity – that should be obvious.  We must raise taxes and raise is a funny word when all we're doing is repealing the Bush tax cuts, that have caused about 30% of our debt in the first place over the past decade.  The economy did great under Clinton with these "high" taxes – I was just reminding Tina of that this morning as she was reading an article that showed our own taxes going up almost 10% under the worst-case scenario.  

    Speaking of scenarios:  Oil inventories were, as expected, a nice net draw but the headline build in crude is not going to get us back to $87 so it's a no-play on oil here unless we get a silly move up to $87 so we can short it again (now $86.40):

    EIA Petroleum Inventories: Crude +1.1M barrels vs. consensus of +1.5M. Gasoline -0.4M barrels vs. +0.2M. Distillates -2.5M barrels vs. -0.5M. Crude -0.3% at $86.48

  39. Phil/FU    Damn! Now I'm considered "family"…..  ;)

  40. Next line for AAPL – $510. I am using the lows of June 2011 to draw these lines now.

  41. scottmi,
    AAPL's Uptrend Channel from 533/528 to 480/465. < 533 bearish. 493(20 MA) strong support.

  42. iflan/MoMo – Let me just say this about iflan: the last time he invited us into his AAPL trading circle, he started very slow w (i think) $50K and made it $225K+ in pretty short order.  That, of course, was extraordinary – but I wouldn't basil on the guy.  And tho I know the market doesn't care right now – who knows when – AAPL is the same – if not better company – that it was at $700.  still, it has bled me. rolling calls is a bitch.  even rolling short puts sucks.  but it is what it is.

  43. And what 1020 said.

    I don't know if I'm supposed to share this but some fantastic deals on ski chalets for rent for those who have a group willing to spend $10-20K for a luxury week.  

    Jindal – Could be an early sign of the rift that will finally tear the Republican Party apart.  Guys like Jindal, who Govern in relatively poor areas, see they will not even keep their current jobs, let along high office aspirations, if they keep toeing the GOP line.  The winds are changing and only the hard-liners don't see it.  Unfortunately for the GOP – most of them are hard-liners…

    $528/StJ – And we failed it already.  

    $430/1020 – Ahhhhhhhhhhhhhhhhhhhhhhhhh!  

    DMND/DC – TOS has 2015 contracts and they are trading but thin so far.  Short 2015 $17 puts are DMND150117P17

    WMT/Yodi – Good entries if nothing else.  Keep in mind WMT did extra well as we went into recession and they gained new shoppers.  It is possible the trend reverses as the economy improves and they lose a bit of market share.  

    Israel/Ksone – I think there won't be much impact on oil and the fear of war is certainly priced into the market.  Realistically, it's not a war – Israel could wipe that entire area off the map over the weekend if they wanted to (well, they probably do want to – if it were acceptable to do so, let's say) so it's not a war, it's just an escalation of action against what Israel considers a terrorist organization (as do many UN countries).   Hamas also hates Freemasons, Rotary and Lions clubs so, if they do defeat Israel – we're next!  I guess everyone forgot that they did this in December of 2008 as well – also well-timed to boost oil prices – and that didn't last very long (about 3 weeks).

    Gaza conflict map.png

    Israel is about the size of New Jersey and Gaza is kind of like if Seaside Heights declared war on New Jersey and started firing rockets into Trenton – this is very silly stuff to worry about as it's only a question of how long it takes Israel to get very pissed off.  

    Complacent/1020 – Earnings were not that terrible and guidance was not that terrible and now we've discounted a 5% drop in GDP ($800Bn) for the worst-case scenario on the Fiscal Cliff.  Europe isn't worse, just the same and Asia is improving and even WMT wasn't that bad – just unexpected and they were already up 20% for the year, which we already said was too much and wait for the correction.  Well, here's the correction – in WMT and many other stocks that had gotten ahead of themselves.  Things still are not CHEAP and I'm not gung-ho bullish but if we can take additional 20% discounts on our entries here thanks to a better VIX and more expensive 2015 options then, for long-term investors, betting the S&P holds 1,100 through 2015 is just not a terrible bet.  

    XLF $15.15 – wow!  

    AAPL/NF – Nasty, horrible-looking losses, of course but, in AAPL Money, for example – we're looking at a $29 loss on a $201 position (14%) that's pretty aggressive and nets out at $115 with the hopes of making $85 at $700 (not counting short sales) – IN TWO YEARS!  It's not even 2013 yet so we have more than 24 sales to go and the entire $115K can be paid for by selling just $5,000 a month of short calls – like the Dec $575 calls, that are 10% out of the money and $5.50 for $5,500 in pocket should we decide to sell them (but we think we can do better, so we wait).  As I said this weekend, this is like buying a beach house you intend to rent for $500,000 and let's say your mortgage plus expenses is $4,000 a month so your "job" is to find enough tenants to pay you $48,000 a year or more.  If you find renters – what do you care if the PRICE of your beach house drops to $400,000 or even $300,000 – as long as the renters pay you $4,000 a month – you are "on track" to make what you intended.  Only when you can no longer generate the expected return on your investment is it really in trouble. 

  44. UK FTSE -0.8%
    French CAC -0.6%
    German DAX -0.8%
    Spain IBEX +0.3%
    Italy MIB -0.6%….

  45. Phil/Israel
    It's not that easy of a war if Egypt (which probably won't back Hamas right now because they still have some solidifying to do in their own country) and Iran (who very well could back Hamas) get into the action.  Israel is preparing already for a possible attack on Iran if they support Hamas.  And oil could be affected if that scenario comes to fruition.

  46. It's incredible to see on the 5 minute chart, the ES, TF and NQ move with lock step with AAPL…..

  47. "in" lock step with AAPL….

  48. Wow – Even I can't help but nibble at AAPL at 525. Is this the classic "Lloyd & Co drives the price down 25% so they can buy it cheap" scenario?

  49. Phil – speaking from Israel, the country IS mad as all hell and ready to topple Hamas in Gaza…there's a military plan in action but nobody except the generals knows if that includes a ground incursion but without that it's unlikely that things will change for more than a few months to a year.  12,000 rockets over the last seven years is certainly enough reason to "clean up" in Gaza.  On a really sad note, the three killed in today's rocket hit in Kiryat Malachi were Lubavitchers, one of them visiting from India, on the very anniversary of the Mumbai attack in which three Lubavitchers were killed in India in 2008…

  50. I just realized I had AAPL 525 puts as a disaster hedge from a month or so ago. It had no value until yesterday and then all of a sudden today … oh my…

  51. And by the way, if politicians are so worried about giving a tax cut to everybody, they might be better off spending time curbing speculation in the energy market! There is just no way oil should still be at $86 with the inventories we have… That would be a win-win stimulus package – well except for the oil companies but who cares!

    And BTW, another stimulus would be to subsidize the replacement of heating oil systems by natural gas everywhere… Good jobs and we don't know what to do with our natural gas.

  52. Nice BDC….

  53. $AAPL. $MS comes to defense, saying iPhone & iPad tracking ahead of estimates just now.

  54. BTW, is it me or they are now posting 4 new sets of weeklies at once for certain stocks. For example, AAPL now has the Nov4, Nov5, Dec1 and Dec2 available for trading. So does XLF, but not FAS. Good for planning I guess!

  55. 1020 – I sold out of those 525's so fast my head is spinning. AAPL is a buy here, worth a shot at 535 for the near term expiry IMO (low low position size and just for the gamble). But seriously, Dec 605 are less than $2?
    Still a little LV left in me….

  56. AAPL-Mini – It's going to crush in sales.  Again, who knows what that means in market.  But I'm walking out to buy one now.  Replacing my IPad One (!) – what demographic am I in?

  57. xlf only thing keeping us from another big swoon…watch closely
     IDF just tweeted 274 rockets fired from gaza have hit israel since yesterday

  58.   rockets raining on tel aviv and oil selloff picking up

  59. Pharmboy, 
    The biotech catalyst are lined up for Q1 2013.Any great setup for some big gains early next year?

  60. Phil – I know you are an expert at rolling options.  In fact, your knowledge is unbelievable. You are the best I've ever seen.  However,  trying to keep rolling options on a stock like AAPL that is in a confirmed downtrend  is a losing game IMHO.
    I believe your rental property analogy has some basic problems.  No one is going to pay you the same amount to rent a $300,000 house as a $500,000 house.  Also, as the price goes lower it takes away your ability to make a profit. To turn what was to be a short term trade into a 2 year + investment in order to get even makes no sense to my feeble mind.  And to say that you can be accurate on when to roll going forward is a mighty big assumption.  At some point on a trade we have to take a loss (hopefully a small one) and move on.  As we found out, our belief that AAPL is worth over $700 doesn'tmean that the market sees it the same way.  Don't mean to be critical, but seems like too much aggravation for the potential reward.  Just my 2cents.

  61. Detailed analysis of the Empire Manufacturing:

    While most of today's economic data has been weaker than expected, the Empire Manufacturing report for November came in slightly ahead of expectations (-5.2 vs -8.0).  The table to the right highlights the levels of the General Business Index and each subcomponent based on the current environment as well as the outlook six months out.  Given that this morning's headline reading was negative, it is not a surprise that five of the nine subcomponents are also negative.  Additonally, it is also typical to see that the outlook for six months from now is higher than the current environment.

  62. My "guess" would be that hamas is playing into Netanyahu's plan to have an excuse to get rid of Israel's unruly neighbor….
    Imagine if Mexico or Canada were to do the same to us….unreal….

  63. 1020..BINGO

  64. AAPL/Phil: the weekly rental analogy was good to hear again. Thanks.It gave a good perspective on how to view this downtrend with AAPL. I went back and calculated that I need .92 in weekly premium over the life of the spread to have a "free" ride. As I am perusing the option chain it gives me a target.  Right now I am looking at this weekly $540 calls (currently $1.51 bid) to sell against my April 565/612 BCS with a ND of 18.42.  Is this a good strike? if I get into Friday afternoon and find AAPL moving up I assume a roll to the next weekly?

  65. AAPL: I found this interesting.  So I ran some calculations on loss of Market Cap for APPL from $700 level.   170*(940,692,000 sh.) =  160 Billion loss of market cap. That's a lot of IPads and Iphones.

  66. AAPL Special Div ?
    During the LV weekend, someone brought up the potential of a AAPL Special Div.  From what I understand this could be issued at any time, and well make the price of the calls increase in price by the Div amount.  Since I'm considering selling more call premium to save my Jan13 550/600 spread, how can we mitigate this risk?
    Would the Div only be issued during the next Ex-Div date only?

  67. jerconn--please stay safe.. double standard..

  68. Good News!
    IWM blew through 76.70 and trendline resistance at the exact same point. Twice today we bounced off trendline support, 10:00 at 76.70 lime and 12:30 at 76.28 line. It looks like SPY did the same although I din't plot the lines, a ruler shows it so.

  69. could we please invite Mr Stick to come back again??

  70. Europe close – Actually, this is a point I was going to make tomorrow (and probably still will) but Europe is way behind us in pulling back so far.   As you can see below, we're down 8% on the S&P from the highs and also 8% up from the June lows (so a 50% Fib retrace right here at 1,350) while the DAX, FTSE and CAC – WHO ARE ACTUALLY IN A MEASURED RECESSION – are down barely 5% while the Hang Seng is down 5% and the Nikkei is down 5% and the BSE is down 5% so either we are over-reacting or we should be shorting the rest of the planet:

    What's really killing us is the Dollar is up from 78.60 at our Sept high to 81.12 now – that's up 3.2% and we often have 2:1 market to Dollar moves.  We were at 78.93 on Oct 18th so it's been a short, sharp shock knocking us down for the past 30 days but, eventually, the Dollar stabilizes and the markets level back in.  Of course you could also note that the 5% drop in global equities AND the 3.2% rise in the Dollar is EXACTLY why we're down 8% – but it's really a more complicated combination of the two.  

    So, in conclusion – BUYBUYBUY!  Just kidding – we do need to resolve this cliff thing or we're doomed but then it will be BUYBUYBUY anyway.  So, in final conclusion – Cash is King but nothing wrong with a little bottom-fishing here in case they kick the cliff down the road and we take off early.  

    Iran/Rustle – Come on, it's always "what if Iran, what if Egypt…." larger counties (other than Iraq back in the day) tend to behave in fairly rational, self-interested and predictable ways – no matter how much you try to vilify them.  If that were not the case, the World would have ended in nuclear war long ago.  Since kicking the living crap out of Egypt in 1973, Israel has had 40 years of more or less continuous war with Palestine but, as I said, that's like New Jersey having a war with Seaside Heights, it only matters in the Summer when you want access to the beach…  Lebanon, kind of, sort of is different but generally it's been the same PLO waging war from there instead on 4 or 5 occasions and now the PLO is gone and Hamas is running things out of the Gaza and I very much doubt Abdullah in Jordan wants to mess around this time as they now have free trade pacts with the US and a nicely developing economy they certainly don't want to blow up.  Egypt is trying to go legit so they're not going to stick their necks out for the Palestinians (and Hamas forced themselves into power – it's not even like they were elected to lead) and Iran doesn't want to give Israel any excuse to drop a few HADES on their "research facilities".  

    Speaking of oil – back to $85.25 – that's the reality.  

    Attacks/Jerconn – Yes, people don't realize how much restraint Israel actually shows under the constant assault from the Gaza – what other country would put up with random bombings on an almost daily basis?  So the other day they reminded the terrorists that they can take them out any time they want to and now the terrorists are screaming about how mean Israel is and it will probably last as long as usual (a week or two) and then back to the normal harassment.

    AAPL/BDC – Nice surprise.  Don't let them slip away.  

    Good idea for nat gas StJ.  It is silly to use oil heat at this point and, the more oil we take out of the heating market – the more oil is available for cars – so a win/win on that one.  

    AAPL/Neet – Thanks. 

    Weeklies/StJ – Maybe they are starting for high-demand stocks?  I'm not sure that's to our advantage as premium sellers.  I think the weekly "expiration" tends to panic the suckers we sell premium to.  If they can see clear paths to roll well in advance – we may not get to make those quick 50% gains anymore.  

    Rockets/Angel – I really think it's BECAUSE of oil that this is happening.  Just trying to stir up trouble so they can get rid of those year-end contracts before they pile up and cause a big mess.  

    AAPL/Albo – Well then you don't want to own AAPL long-term and you are gambling and not investing so you SHOULD take your loss and get out.  The same would go for a vacation property.  If you can't get your rent but you want to build equity in a property and retire with it, you may be willing to ride out some lean times but, if all you have is a business plan and the property isn't producing what you expected – then it would be foolish not to cut your losses and move on.  I'm not going to argue the merits of owing AAPL 2015 $500 calls – there's nothing I am going to say to convince you and we won't know who's right until 2015 but feel free to criticize the concept then – but not less than two months after we begin legging into a 2-year trade – that's just silly.  

    On the April position, like the $25KP, the April $570 calls at $38.50, are now $31 – we haven't even done a major adjustment yet.  I'm sorry if you are not getting immediate gratification but, again, this is not meant to be a quick gamble – not with 5 months worth of premium to sell and our general faith that AAPL will be back around $650 by then and, as you say, if not – then it becomes a longer-term position because the $31 April $570s can be rolled to the 2015 $500/650 bull call spread at $55 for $24 more and, in fact, we can sell the April $585 calls for $24 to someone else – hopefully a short-term player like you who will panic out with a loss when there's a dip – and then we're in a 20-month spread for net $38.50 with a $85 position advantage to our caller.  BECAUSE we have a long-term view – we are not aggravated watching the position and BECAUSE we are long-term investors who understand the long-term value of our positions – when that beach house drops to $300,000 – we're happy to buy yours from you – and spare you all the aggravation while you take your quick $200,000 loss and look for the next short-term reward that may never come.  

    France/Angel – Well once we're done freaking out about Spain – there's nowhere else to go but France.  

    Empire/StJ – Looks like the longer-term outlook is pretty good.  

    AAPL/Newt – I wouldn't sell $540 weeklies for $1.50 when you can sell Dec $575s for $6.50.  What are you trying to accomplish.  If you sell a $10 out of the money call 52 times a year on a stock that can easily move 10% ($50) in a month, you are essentially playing Russian Roulette over and over and over again until you blow your head off.  How many $1.50 wins do you need to make to make up for a $20 loss?  Do you think you'll get away with 14 consecutive sales without that happening?  Does the past movement of the stock support that theory?  Just 5 weeks ago, on the way down $170, AAPL jumped $29 in 3 days (Oct 15-18).  What would you do?  5 weeks before that, AAPL jumped just under $50 between Weds and Friday (9/12) – no earnings – just jumped.  Aug 16-17 – $20…  You have better odds playing Russian Roulette.  

    $160Bn/Jbur – That's the entire market cap of all but maybe two dozen S&P companies.  AMZN $99Bn, GOOG is only $212Bn, HPQ $25Bn, TGT $41Bn, SNE $10Bn, ERIC $27Bn, VZ $120Bn….  Talk about madness.  

    Special Dividend/Burr – It doesn't really change anything.  The options adjust to reflect the dividend and you are CREDITED with the cash when you exercise your call (as the person who sold you the call collected the special dividend on the stock you had the right to).  I don't recommend holding those options if it happens as they are messy and tend to get very thinly traded over time but all you have to do is roll out to a new, "normal" contract once they announce the dividend (if they do).  

    Good news/Shadow – I hope so! 

  71. MLPs
    I noticed MLPL (2X levered Alerian MLP index ETN with issuer credit risk) dropped to $34.45.  I bought more today (personally, not for Opesbridge).

  72. Weeklies / Phil – I checked and they are expanding the weeklies for some stocks:


    Looks like an experiment so far, but weeklies are so popular now that they might soon offer these new extended dates for more stocks.

  73. Phil
    I remind you of Japan's new plan to print money, should push the dollar down along with declining EUROS.
    Bottom fishers should note Apple is a very small .4% below my target. What is $20 in a major market melt down on a $600 plus stock?
    IWM is holding over those lines so far and more than 20 minutes!

  74. Phil. Thanks. 

  75. anyone watching /RB—-wow

  76.  bear market surges that instantly fail…i bet hedgies that were on avg barely up for year….after AAPL plunge and election plunge are down big this month..could be down for year now
      jefferies saying apple tv imminent…stock not responding..


  78. angelcur
    Apple stock should not respond to the TV, it has all the markings of another disaster. Personally I think this is the Apple Pie Thanksgiving and investors wanting anything to bring the price back up. Next week is all about the world goes on sale not Apple TV, they would be smarter to start a Telco!

  79. Phil – Please understand that I wasn't talking about taking a long term position in AAPL.  What I was referring to was continuing to roll short puts out and down.  Trying to catch the bottom.  Huge risk.  Remember when most of us thought that $625 would be the bottom in AAPL?   

  80. IWM was over the 200, 50, and 20 SMA. Lets consider a rising chanel now, a 50% retrace on the 2 day chart would point to a 77.70 ish close along with the rising trendline, and that would qualify as a stick. Of course there are high chances of another sell off close as that is the new normal until it isn't!

  81. OK, I feel better now….

  82. lol stj

  83. STJ: Me too! Thanks.

  84. Another take on the Downfall video…!


  85. :)     Good Stuff stjeanluc!

  86. Just trying to brighten the mood… before we all end up with that bunker mentality!

  87. stjeanluc… wasn't the market supposed to go higher if Obaaama was reelected???
    I think he shoved Mr Stick up Romney's A&&!!!

  88. Jabob, he would have to remove the one that's there already!

    Tweet of the day:

    BREAKING NEWS: @mittromney  says Black Friday is a new holiday Obama set aside just for Black voters #obamagifts 

  89. Now for the bad news – HPQ is below $13.

  90. stj—you are on a roll ;-0

  91. Saving those charts STJ, LMAO

  92. mjjwo9b / proximity -- Catching up while waiting for my flight out of Vegas.  No problem with the questions, enjoyed it.   Thanks for the recommendation for Absinthe.  Saw it last night and also had my first Absinthe.  Great show.

  93. Weeklies/StJ – Well, if people will buy them, they'll sell them.  Will be interesting to see how they play out.  

    Japan/Shadow – Japan's plan weakens the Yen – stronger Dollar and Euro by comparison.  

    You're welcome Newt. 

    /RB/Savi – Very silly down and up and down move.  Just shaking everyone off. 

    Too bearish/Shadow – I think we should just say skeptically cautious.  

    Long hedges/Angel – Doesn't surprise me.  Won't take much to have a huge rally.  Barney Frank just called the sell-off engineered over-reaction to no big deal cliff action.   AAPL TV scheduled for next year, not this. 

    AAPL TV/Shadow – It's all about whether or not they can do an ITunes deal with the TV vendors.  If they can – it will be a huge hit and, if not, they shouldn't bother as it's just another Hulu/NFLX/AMZN service no one needs.

    Rolling/Albo – But that's how we scale into the long position!  Sure, if AAPL took off right away and put us in the money – we wouldn't roll and we'd take our profits but, as we were prepared for when they started dropping – that didn't happen so we're moving into the long-term position at amazingly good prices.  Yes, it's a huge risk – we could end up owning 2x more AAPL at net $300 – oh the horror!!!  What then?  $150, $50, .25????  When will we stop buying a company that makes $100,000 a minute for less and less money?  It must be worth less because it's priced less, right?  After all, no stock has ever gone down in price before that is worth more a year later has it.  I can only imagine all the stocks you could have "saved" us from back in March of 2009…

    LOL StJ – Quite the rally we're having from the Chinese perspective….   Great video – I never get tired of that.  

    Another crap finish – they are training us to expect it.  CNBC is saying it's an unbreakable pattern.  

  94. mjjwo9b / screens — Go for it!  You won't regret having more screen real estate and you'll wonder why you didn't do it sooner.

  95. Defending 522 in AAPL, mucho importante

  96. Phil
    What price would you consider HOV attractive to dip into again?  Looks like its down almost 30% from its recent high.

  97. STJ – Yeah, HPQ & DELL continue to drop.  DELL reports today after the close.  Believe the stock is a buy on weakness.  At least I hope so, as I'm long and will get longer on weakness.

  98. is this a stick???  I forgot what that was like.

  99. The return of the stick?

  100. Notice how the Dollar rises into pretty much every close too:

  101. Lo and behold, the stick returneth…

  102. Hey all today is a logorirthmic nightmere. The problem I see is there are no more sellers or buying this late afternoon. The computers are runing true to form and now there is a new breakout forming without any volume. If this holds I am holding long overnight, another model says the turn is Tuesday. How about a 13:45 stick? Sorry all this has so may lines lined up today it has to be a botttom or its 2008 but that doesn't make sense because we don't have a concrete why. Next week is short so maybe the jurks are going to give us something to thank.

  103. CNBC perfect contrarian indicator again?  Call the unbreakable pattern, and higher we go.  They called the last bottom with their disaster prep. evening special.

  104. FB – temped to buy a few puts, but they may have more upside coming.  Any thoughts?

  105. Phil/US down more than ROW,
    Regarding your 1:54 post, could this be played as a pairs trade?  On one side you could buy SPY – what would be the best ETF to express the short side, the rest of the world?

  106. Holy crap a sell signal, The BOTs are going head into the algo hell. Hopefully they don't know what to do next and that gives us an advantage, 50/50!

  107. looks more like a broken weak stick

  108. Absinthe/Rain – I heard that show was good.  I thought the drink was illegal…

    Oops, speaking of CNBC misleading people – it's a stick!

    HOV/DC – Attractive, to me is $3-4 but you'd probably be lucky to get $4 as that's under the rising 50 dma.  Of course you can sell the 2014 $4 puts for $1.40 for net $2.60 and buy the $4/7 bull call spread for .75 and you net in for, worst case, $3.35 and you have up to $3.65 of upside at $7 off your net .65 credit spread.  

    Pretty lame stick..

    Nightmare/Shadow – At some point, panic fatigue sets in on the fiscal cliff issue.  

    Right Rkyroma.  

    FB/Rkyroma – I think the bears got burned on the lock-up expiration having the wrong effect and a lot of this is short-covering.  Certainly they didn't do anything to deserve a 20% run but, then again, they didn't do anything to deserve the 20% drop on fears of the lock-up so I don't think it's compelling either way – other than maybe selling calls like tomorrow $22.50s for .20 but there are easier ways to make .20 I think.

    Short ETF/Wappler – Well EDZ, of course.  If we're all going down, they're going up.  EEM just failed the 200 dma yesterday but bounced off $40 so far – not much support below there for the next 5%, which is 15% on EDZ to $14 and the Dec $11 calls are $1.60 or the $12/14 bull call spread is .60.  

  109. Good luck Albo

  110. What I saw into the close was a bunch of chicken shit weak hands capitulating, I believe tomorrow will be green because it is Friday and that is how it was this week, with hope, on the evening news, too bad Walter C. isn't around with that comanding voice.

  111. Phil,
    But isn't EDZ emerging markets?  I'm looking for something that reflects Asia and Europe (DAX, FTSE, CAC, HSI, NIKK, BSE), not convinced EDZ is a good representative of these exchanges.

  112. Phil, gotta hand it to you, you called a DOW 12,500 bottom a few days ago if I'm not mistaken and that seems to be what we saw today…don't know if it's THE bottom but it worked today…plus I used one of your discarded ideas – the tomorrow TNA 50's to go from .35 to .75 today, that was nice…what else do you have up your sleeve?

  113. Looks a bit undervalued – and they keep transitioning their business model, with their founder back at the helm:
    Dell (DELL): FQ3 EPS of $0.39 misses by $0.01. Revenue of $13.72B (-11% Y/Y) misses by $180M. Expects Q/Q revenue growth of 2%-5% in FQ4, below a consensus for a 5.6% increase. Maintains guidance for at least $1.70 in FY13 (ends in January) EPS. Shares +1.5% AH

  114. DELL / Deano – They are in a similar situation as HPQ except that they actually still make money. But with a forward P/E of 5.4, they are not expensive. The only question is growth. And I don't know that there is a lot to expect there.

  115. For High Yield ETN’s – how about MORL & BDCL…
    For SVU I sold 2 1/2015 $3 calls yesterday for $ 1.75- It is the only open interest.
    Big money, I know, but it adds up with the put sells as well.

  116. Stjeanluc – they are similar to HP, but I think they are further along in the business transition, and with the founder back at the helm, I think its a significant advantage. I own HP as well, but I am far more confident in Dell, despite the difference in size.

  117. I'm in NFLX Apr13-115 calls. Hoping AAPL throws $9B at them ($160 per share).
    It's a perfect marriage of content and Apple's TV ambition. Going through iTunes to rent movies would be really nice. Imagine starting a movie one night but deciding to turn in early, and then finishing it on your iphone on the plane the next day. Brilliant!
    Here's a guy who says dream on. But then he goes and pushes JIVE in the article, which alone evaporated any credibility he had in my eyes.

  118. Rainman / Screens :  Already on the Christmas list.  I feel it is my job to help Amazon improve their P/E.

  119. Rainman / Screens :  Already on the Christmas list.  I feel it is my job to help Amazon improve their P/E.

  120. Opesbrige, why not AMJ? You don't fear the 2x decay?

  121. BDC – u have been duped…as TOS shows March and June 115s….Apr is but a figment of the imagination….or your trade station!!!


    Man, I go on a little R&R, and come back to this.  I need to go on vacation more and short the market.  The last 3 yrs, every time I walk away, things blow up…..

  122. DELL / Deano – No doubt, there is a lot less risk with DELL over the next 18 months but I am not sure there is much reward either.

  123. MLPL / biodieselchris
    I think the monthly (rather than daily) rebalancing of MLPL significantly mitigates the decay problem.

  124. I've been attempting to do some calculations that involve GDP data. It appears to me that last year's nominal GDP increased 4.5%, and 2011 increased 4.3% over 2010. Yet, I keep reading how our growth is 2% or possibly worse. I am using year to year change. Where does the 2% number come from, does anybody know?

  125. DELL – Listening to conference call.   Quarter was pretty much as expected, tho a little short.  Not surprising considering that people waiting for Windows 8.  Reiterated $1.70 this year.  Disappointed that there won't be a big stock buyback now.  Just believe that stock is very undervalued.  CALL NOW OVER.
    deano – One difference between DELL & HPQ is the amount of debt that HPQ has added largely  with bad acquisitions. i.e., EDS & PALM.
    In Oct '08 HPQ had long term debt of 7.6 billion.  Now it's 24 billion.  They had cash of 10.2 billion.  Now it's9.5 billion.
    In Jan 2008, Dell had 1.89 billion in long term debt and now it's 6.3 billion (as of last quarter).  They had cash of 9billion, now it's 11.8.
    Dell has 3 plus billion of excess cash and HPQ has a deficit of 14.5 billion.  Huge difference IMHO. 

  126. JL – my reward with Dell is just the monthly premiums, and more recently, the small dividend they pay. I know they'll be around for a long time – the guy at the top is very competitive. HP – its been too many musical chairs for me. I also think the autonomy acquisition was/is a complete disaster. I'll stick with my HP, but its been a rough ride. ORCL has been much more enjoyable.

  127. Sorry, DELL now has over 8 billion in debt following the acquisition of Quest Software.  But the 3 plus billion in excess cash is accurate.

  128. Barf – Nominal is not inflation adjusted.  Your number is not factoring in inflation.

  129. Phil / Hedges – All I can say is that my TZA BCS has been the profitable trades these last few weeks.  Without PSW, hedging would have been on Saturdays with a tool for the bushes!  Thanks for that education Phil.  I did close out my Jan 13/19 for a nice profit (I had 4), the 13 long call was at 1.00 delta.  I have 5 Jan 16/22 for 1.43 currently at 2.18.  So, that is hedging very well.  I have found I need 8-10 of these BCS to be neutral.  As what Phil said in post today, if we cannot take some levels back, I will need to hedge some more.  So, Phil, The April 14/22 you mentioned in yesterday's write up is up 1.14 to 3.14.  I will look for a better hedge for entry – Do you have a better play to get me to the 10 (I need 5 more TZA's) or so hedges I need to get to neutral should this market implode?

  130. Angel / France/ Spain:  Hi, in Barcelona now.  Just had dinner with an antique dealer, who gets into all the big houses in the area, says Spain really is on sale, with many of the richer people getting wiped out now, given their exposure to banks, real estate and industrials.  He suggests that Italy is not much better off, and continued on to say just what you wrote today --that France will inevitably be the crash heard round the world, with their banks broke, big companies failing, and Hollande — who is not nearly as competent as the arrogant, smarmy Sarkozy — is quite out of his depth in the crisis. 
    He thinks Germany will have to give all the profits back and cover the debts of the Peripherals eventually, I told him they are more likely to bow to popular pressure [in a year, not a week], re-adopt the Deutschemark, which will soar, and arrange a debt support package for the now-0.75 to a dollar Euro in Deutschmarks. I don't believe in predictions, including my own, but it kills time while you wait for that killer trade.
    Barcelona's main avenue [Passeig de la Gracia] and all its businesses were shut down by a union-led strike today, with tens of thousands converging there.  Timing is always tough to call, but the Euro crisis could unpredictably switch from an economic to a political crisis without warning — those old enough to remember 11,000,000 French workers shutting down the country in May 1968 might not be surprised.  As it turned out, a month later Parliament was dissolved, new elections were held, and everyone went back to work, but during the demonstrations the Paris stock market was set on fire, so Spring 2013 might be a nice time to follow Phil's "balance" advice with more enthusiasm.

  131. Ah yes, the NFLX are indeed March…

  132. Capitulating/Shadow – I think there is a lot of selling as people take capital gains while they can.  I think that it's very possible that it's going to be very difficult to get a proper rally into the end of the year because there are plenty of people waiting for a rally to take their gains, whether through timing or position.  The problem with this state of not knowing is it becomes prudent for people to hedge for the worst and, if someone had a 20% gain for the year and now it's 15% and they can take it off now and keep 12.75% (after 15% tax) vs possibly hitting another 5% drop and running down to 8.5% this year or possibly 7% (at 30%) if they wait until next year and there's no recovery (and the more the cliff looms the less likely recovery seems) then it almost doesn't make sense to take the 12.75% and run.  So that's very possibly the selling pressure we see and it may continue to be relentless into the end of the year unless there is some sort of resolution or delay to the cliff. 

    EDZ/Wappler – Yes, as I noted, India hasn't lost much either and we know Australia has run into serious problems and Mexico and Brazil etc are heavily reliant on US and EU trade….  You can go for an EU ETF instead but I like EDZ for the movement it gives you.  

    12,500/Jerconn – Gotta love those whole number levels.  Good job working the TNA!  

    DELL – Nothing exciting but seems to have been baked in from the lack of reaction.  P/E only 140% of HPQs…

    SVU/Randers – Good sale. 

    NFLX/BDC – I would think AAPL can make those content deals themselves.  That seems to be the entire delay in AAPL TV – getting the content to look and feel like ITunes.  AAPL TV already supports NFLX and Hulu but I don't think AMZN and ITunes, of course, has plenty of shows but I think AAPL is trying to get some sort of on-demand holy grail or household server thing where a multi-terrabyte drive on one PC can let everyone in the house watch what they want, when they want on any device they want, anywhere they want.  If they can pull that off – it's going to be hard to beat.  If anything they should buy TIVO for $2Bn to avoid a patent fight. 

    GDP/Barf – Perhaps not adjusted for inflation?  

    And what Ink said!  

    DELL/Albo – Good point, maybe they deserve that higher p/e ratio.  

    You're welcome Jfaw – glad you were able to master this valuable skill.  Remind me tomorrow and we'll see what looks good for a current TZA – crazy that Wednesday's jumped so much already…

    Nice report ZZ – thanks!  

  133. Well, per Zero's excellent on the scene reporting Europe is a recessionary tinderbox; Here we are enjoying the post election Obama rally while the cliff edge beckons. HMMM, smells like blood in the streets. Being net short has made for a good, Conservative week. What can I say.
    Picking up a few AAPL shares as it falls to each "support" level and will continue to buy if it falls further. No options til it turns- and it will turn. Also still liking the BRK/B 14-Jan 80 calls for $10 or so.
    Sure would like to see the VIX spike though- makes for better strangle sales.

  134. Phil / Absinthe — It was illegal up until 2007 and is making a rapid come back.  I had one and didn't experience the purported psychotropic effects.  It did, however, make my tongue numb enough that it was difficult to whistle in appreciation of the entertainers.  I'm planning on doing some more in depth research on the subject after my next visit to the speciality liquor store. :)

  135. You guys may be right, at least the numbers make sense. I'm not sure why we inflation adjust our concept of GDP, when our budget works in nominal terms. This would seem to have a lot of potential for confusion, don't you think?

  136. Phil,
    Given your incisive analysis of the current mkt state-of-affairs (Capitulating, 8:03 above) with respect to the dim prospects for a meaningful rally, I need a little guidance on managing AAPl short puts (1/13 550s cost $24 now $51) which have used up the premium I sold with AAPL @525. How far up would you advise selling Dec calls?  560s for $8, 570 for $6,  580s for $4 or ?
    As always, thanks for your help.

  137. Phil,
    Typo above: my AAPl puts are 2/13 not 1/13 (after earnings fortunately).

  138. The bad news is that we had another down day today. The good news is that it was not as bad as yesterday. But tomorrow is OpEx day so it could be wild…

    Another lesson for me – next time we cross the 200 DMA on multiple indices, maybe add a couple hedges just in case!

  139. pstas – I'll take Obama for the next 4 years, over a market correction, anytime…..
    What can I say..:)