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Finally Friday – Maybe Tomorrow the Markets Won’t Fall

Falling, falling, falling

That's all the markets have been doing lately.  As you can see from our Big Chart – it's been a pretty orderly sell-off according to our 5% rule with roughly a 4-5% drop during October with some consolidation, followed by a much steeper 4-5% drop after the election.

We're back to the point where we expect resistance at an 8% total drop as well as some bounce action where once again we'll be measuring for strong or weak bounces to determine whether or not we can get a turn again (our indicators kept us bearish last time).  Regarding the current action, I said to our Members yesterday in Chat:  

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 not 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. 

While we don't think the Fiscal Cliff will end up being a big deal – that doesn't stop others from panicking.  This week we've been scooping up positions they have been running away from but, if we're going to have another leg down – we'll be needing those disaster hedges (see Wednesday's post) to keep us out of trouble.  It doesn't take much to profit from a downturn, fortunately, when we use good hedges.  On Wednesday I suggested the TZA April $17/24 bull call spread for $1.40, selling the $14 puts for $1.05 for net .35 on the $7 spread that was .40 in the money at TZA $17.40.  We got a great open and TZA fell to $17.11, giving us easy entries and yesterday TZA finished at $18.62 and the $17.24 bull spread is now $1.62 in the money at net $1.83 and the short $14 puts have fallen to .75 for net $1.08 on the trade so that's up 208% in two days and it still has the potential to go up to a full 1,900% at $24 – which is what makes it such a nice hedge.

Just 20 contracts like that are $700, now $2,160 and have the potential to go as high as $13,300 in an extreme drop in the Russell.  You don't need to buy a lot of insurance to get a big pay-off if you use these hedges.  The original set of Disaster hedges from October 20th had the other TZA spread that we were layering and that was the April $14/22 bull call spread with the short $13 puts at net .65 (we were more aggressive as we were more sure of a drop) and 20 of those purchased for $1,300 are now worth $5,240 (at net $2.62) for a 303% gain.  Doing the layered protection on Wednesday allows us to stop out the original spread at our bounce lines and take that $3,940 off the table and now we have cash we can use to re-position our bullish trades or do a little more bottom fishing.

And, of course, when we bottom fish, we fish well below the bottom.  HOV, for example, fell to $4.30 yesterday and it was a nice opportunity for us to re-enter our favorite home-builder after we took $5.50 and ran earlier in the month.  Now, just like AAPL, we've had our 20% pullback and it's time to BUYBUYBUY but, like AAPL, there's no need for us to pay $4.30 when we can construct a much better spread.  In HOV's case, we sold the 2014 $4 puts for $1.40 and buy the $4/7 bull call spread for .75 so we have a net .65 credit and our WORST CASE is that we end up having HOV put to us at net $3.35 – an additional 25% discount to the current price.   

A trade like that "limits" us to a $3 gain at $7 on the bull spread but it also gives us 25% free downside protection and, frankly, making $3 at $7 on a .65 credit nets a total of $3.65 back and HOV was $4.30 when we took it so buying the stock, we'd have to hit $7.95 to make the same $3.65 and the best part is, our gain on cash in this trade can be as much as 561% in just a year.  THAT's what we mean when we say we're bottom fishing.  Combining sensible entries like that with a little bit of disaster hedging and, as long as the S&P holds 1,100 – we should be fine – so why NOT start buying now?  We don't need to make perfect bottom calls when we hedge properly.  

If we get some resolution, or even a can-kicking, of the Fiscal Cliff, we will rally very quickly and miss these opportunities for great entries.  If the uncertainty continues, we will likely grind lower.  At the moment, our most recent Long Put List is performing ridiculously well in it's first month – as with our Disaster Hedges, we caught them just ahead of the fall on 10/24 but, unlike the disaster hedges, you don't need margin for the Long Put List so it's easy protection anyone can use.  I do not advocate chasing these positions and, like the Disaster Hedges – it's time to take some profits ahead of the expected bounce.  We'll be watching our levels closely next week and are very likely to add a similar set if we fail to get a good bounce.  Our 10/24 set was:

  • DIA March $120 puts for $2.45, now $3.40 – up 39.5%
  • DIS April $48 puts at $2.15, now $3.50 – up 63%
  • HD Feb $57.50 puts at $1.40, now $1.40 – even   
  • JNJ Mar $67.50 puts for $1.35, now $1.88 – up 39%
  • MA April $355 puts at $5, now $4.25 – down 15%
  • MON April $75 puts at $2.30, now $2.58 – up 12%
  • MRK Jan $44 puts at .93, now $2.27 – up 144%
  • SPY Jan $132 puts at $1.97, now $2.78 – up 41%
  • V March $120 puts at $1.15, now $2.12 – up 84%
  • WMT Mar $70 puts at $1.52, now $3.85 – up 153%
  • XRT Mar $58 puts at $2.10, now $2.42 – up 15%

Even a simple hedge like DIA or SPY on your whole portfolio returned 40% on an 8% drop in the index due to options leverage.  That means hedging with just 10% of your portfolio and risking a 5% loss on the insurance (with a 50% stop) would have paid you back 4% against the 8% that was lost in this dip.  THAT's the money you are free to spend re-positioning and bottom-fishing – it's a strategy that practically forces you to buy low and sell high!  

As you can see from the performance of HD, MA, MON and XRT – we are still very far from a full-blown crisis.  The recent market drop barely touched them.  Our premise is blown on housing (HD) as it's been the real strength in the economy recently while MON still makes an interesting short if the World is going to hell in a hand basket.  Like our disaster hedges – the length of the dates on these puts means they have plenty of room to run but, as I said, next week, if we don't make our strong bounces – it's going to be time to layer in a new batch.  

Have a nice weekend, 

- Phil

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  1. Good Morning!

  2. Oil Lines

    R3 – 89.14
    R2 – 88.20
    R1 – 87
    PP – 86.04
    S1 – 84.84
    S2 – 83.90
    S3 – 82.70

    Yesterday's high and low – 87.25 / 85.1
    Fib lines from yesterday's action – 88.57/87.83 and 84.60/84.28

  3. Income Portfolio news:

    SHLD – Beat earnings (loss) expectation on stronger than expected revenues. It's however looking weaker in pre-market trading.

  4. CCJ is looking very cheap at 16.72. Jan 15 puts and calls can be sold for 7.1 for a really nice 40% off entry, which brings their dividend over 4%.

  5. FWIW
    9:23 AM Dell (DELL) follows up on its FQ3 report by announcing it's acquiring Gale Technologies, a developer of systems management software, and forming a unit that will design end-to-end IT hardware solutions for businesses. Dell just wrapped up its purchase of Quest Software, a bigger systems management firm, and also recently unveiled integrated high-end systems. The moves both complement a server/networking unit that's easily Dell's strongest business right now, and also play into a broader IT trend of providing end-to-end solutions

  6. NKE – april $80 short puts are offering an outzided premium at 2.43

  7. Phil – been spending time looking at SHW. The parabolic move is staggering with fundamentals that look to be priced to perfection. Any views on this or suggestions on an efficient way to short this name? Or maybe I am missing something and shorting it isn't the way to go?

  8. FB – Bucking the trend.

  9. Rough ride so far….

  10. Portfolio adjustments – The FAS Nov put will need to watched today. It could be closed for a small loss right now so we have to keep an eye on that.

    We also have a short FAS Nov 98 Put in the KPA.

  11. Good morning!

    Industrial Production sucked and is giving us a bad open, as is the Dollar popping to 81.25.  Keep in mind the Fiscal Cliff is automatic austerity and that means, compared to other countries, we're acting responsibly with our debt and that's what's keeping a floor under the Dollar so far. 

    Oil is testing $87 but tough short into the weekend.  Gasoline at $2.71, up from $2.65 yesterday.  

    Obama having cliff meetings and what is said by people after those meetings will move the markets – probably in the afternoon.  We get E-Commerce Retail Sales at 10 – interesting but not too important.  

    Barack Obama is due to meet with Congress' four top leaders this morning to discuss how to avert the fiscal cliff. Meanwhile, state budget chiefs are making contingency plans in case Washington fails to come to a deal, setting money aside and looking at where they can start reducing costs. States that could be hit hardest include Virginia, due to its proximity to DC, as well as South Dakota, Georgia and Illinois. 

    DELL getting killed this morning – seems like an over-reaction but so did HPQ and they are down this morning too.  

    At the open: Dow -0.01% to 12542. S&P +0.08% to 1354. Nasdaq -0.07% to 2835.

    Treasurys: 30-year -0.04%. 10-yr -0.01%. 5-yr 0%.

    Commodities: Crude +1% to $86.73. Gold -0.19% to $1710.55.

    Currencies: Euro -0.32% vs. dollar. Yen +0.02%. Pound -0.06%.

    Market preview: Stock futures tick higher after a report that the White House is in advanced talks about replacing broad spending cuts and tax hikes with a more modest package (i.e., kick the can down the road). S&P  +0.3%. Dell -1.5% as Q3 earnings fell 47%amid plunging PC sales. Still ahead: industrial production, e-commerce sales.

    With the Dow down the first 4 days of the week (off 2.13% total), Ryan Detrick takes a look at what happened on the Friday of theprevious 9 instances when this happened, and finds no discernible pattern other than maybe to expect a sizable move today.

    Very bad: Oct. Industrial Production: -0.4% vs. +0.2% expected, +0.4% prior. Capacity utilization 77.8%, vs. 78.4% prior.

    Sept. Treasury International Capital: Net foreign purchases of long-term U.S. securities were $3.3B

    More on Sep Treasury International Capital: Net foreign purchases of long-term U.S. securities were $17.9B, with net purchases by private foreign investors of $3.8B and net purchases by foreign official institutions at $14.1B. Taking into account both foreign and U.S. securities, the net foreign purchases of long-term securities were $3.3B. Foreigners increased their holdings of U.S. T-bills by $23.6B.

    The FHA's projected losses amounted to a much larger-than-forecast $16.3B at the end of September, an annual independent report shows, with the agency holding reserves of $30.4B vs expected losses of $46.7B on the loans it has insured. A bailout of the FHA, which is suffering badly from backing loans made from 2007-2009, gets ever more likely, although a decision won't be made until February. 

    U.S. Postal Service's FY loss more than triples to $15.9B, mainly due to two defaults of over $11B combined. Operating revenue -0.8% to $65.2B. Mailing volume -5% to 159.9B pieces, but package revenue +8.7% to $926M, boosted by online shopping. Has cash on hand equal to about a week's pay for its 525K employees. Labor accounts for over 80% of costs vs 61% at UPS and 41% at FedEx.

    Foreign exchange revenues – about a 15-20% slice of the key FICC business at investment banks - are off 23% to $5.7B this year, according to Coalition. Central planning has always been "the other invisible hand" in the global economic system, but it seems more so today than ever, and its interference with trading strategies is keeping investors away from fx trading.

    Finally, a chink of light emerges in Southern Europe, where exports grow strongly in the first eight months of the year. Greece's overseas sales +11% as imports -13%, while Portuguese exports +10% and imports -5%. Italy's and Spain's exports also grow. Overall, the eurozone's trade surplus in September jumps more than five-fold Y/Y to €9.8B. (PR)

    Hong Kong's Q3 GDP grew 1.3% Y/Y, less than forecasts for 1.7%, but above 1.2% reported in Q2. "The biggest drag on (the) economy is external trade," says an economist, and there's little data suggesting a rebound. The government narrowed its full year growth forecast to 1.2% – the slowest pace since 2009. EWH +19% YTD. 

    The "world has changed" moment of the week is Japan opposition party leader Shinzo Abe's call for "unlimited easing" by the Bank of Japan. Abe is likely the country's next PM after current PM Noda dissolved parliament and called a snap election. Tokyo +2.2%overnight adds to a 1.9% gain on the back of Abe's comments the day before. 

    With Japan looking like it's sliding into recession, the government downgrades its economic outlook for the fourth consecutive month, the longest stretch since the financial crisis. In its monthly report, the government blames the "deceleration of the world economy" as it cuts its assessment of consumption, investment, corporate profits and the job market.

    Japanese PM Yoshihiko Noda calls an election for Dec 16 after the upper house approves a bill to issue bonds that will fund government spending for the rest of the FY and stop it from running out of money. The decision will make compiling an extra budget to stimulate the economy difficult, while the drafting of next FY's budget will be delayed.

    Yesterday's AAII report of a big jump in bearish sentiment brought that indicator to its highest level (chart) in a year.

    The White House is having advanced internal discussions about kicking the fiscal cliff can a bit further down the road, reports the WSJ.

    More on The Sequester: The talks are about replacing the $100B in spending cuts set to take place in January with a smaller package of targeted cuts and tax hikes, according to sources. The move would put off any big decisions until mid-2013 (wonderful). The White House and congressional leaders are set to begin negotiations today.

    Annaly (NLY) is upgraded to Outperform at Wells Fargo, which says the now-universal knowledge of the problems facing the mREIT sector has created a buying opportunity "not seen since the height of the financial crisis." Shares +1.5% premarket. Earlier: Wells upgrades Hatteras.

    Industrial metals prices are set to rally into the middle of 2013, says Westpac's Justin Smirk, who has the hottest hand in forecasting of late. He's keeping it simple: Easy money in the U.S. and Europe will combine with a rebounding Chinese economy. Copper, zinc, nickel, and aluminum are all headed higher.

    Hostess officially closes down its business and lays off all 18.5K of its employees. Though the company blames a national strike by workers as crippling its efforts to emerge from bankruptcy, a lineup of brands decidedly off-trend also contributed. Will a major food player such as Grupo Bimbo (GRBMF.PK), Hillshire Brands (HSH), Flowers Foods (FLO), or Post Holdings (POST) take a stab at buying out well-known names such as Wonder Bread, Ding Dongs, or Twinkies from the Hostess rubble?

    Casino stocks hit blackjack: Penn National Gaming (PENN) continues to roar higher after the company decides to spin off its real estate assets, now up 38.1% premarket. The entire gaming sector is on watch with the casino REIT play now firmly part of the discussion. The Market Vectors Gaming ETF (BJK) is teed up for a big gain today, while movers premarket include Las Vegas (LVS+5.8%, MGM Resorts (MGM+6.6%, Boyd Gaming +10.4%, and Pinnacle Entertainment +9.6%. 

    Other winners from the casino sector moving off the news Penn National Gaming will split off its real estate assets into a REIT include Ameristar Casinos (ASCA +17.5%), Melco Crown (MPEL+4%), and Wynn Resorts (WYNN +2.9%). Though the fuse for the rally was lit by Penn's announcement, Las Vegas Sands CEO Sheldon Adelson tipped off a split of gaming and real estate assets could be part of the strategic game plan in the sector during the firm's Q3 earnings call earlier this month (transcript).

    Wal-Mart (WMT) could see a wave of protests on Black Friday with a coalition of employees calling for demonstrations at over a thousand stores across the country. Though the company is a perennial target of unions over its wages and benefits, a plan to open for Black Friday shopping at 8:00 PM has created a rallying point for the loose organization of workers.

  12. As I said yesterday, I see $509 as the next line for AAPL. That's a 50% retracement from the June 2011 lows. Quite incredible.

  13. Phil,
      I've got some Apr 600 and Apr 610 calls on AAPL. I've been rolling down since AAPL was at 700. I sold half of the 2015 400 puts for $47. Trying to figure out the best time to roll down in strike and when to sell some covers. Appreciate your advice.

  14. FU AAPL!!!
    FU VXX!!!
    And if he talks and the market goes lower again…
    FU OBAMA!!!

  15. /DX stick.

  16. FAB Universal Corporation (FU)
    FAB Universal Corporation provides podcast hosting, distribution, audience analysis, advertising, content subscriptions, and App sales for podcast producers worldwide. The company operates in three segments: Media, Healthcare, and Software. The Media segment offers podcast hosting, content management tools, and advertising services. It provides a Web based podcast distribution platform to broadcast audio or video show for podcast producers.
    Just in case anyone didn't know what company Jabob (FU) was referring to!

  17. What does this mean for AGNC?

  18. Phil/AAPL 25kp
    Roll the AAPL calls to April 550 and sell something like the Jan 580 for ~8.2?

  19. Canadian Stock Traders (or Traders of Canadian Stock):
    Does anyone know if Canada has pre-market & after-hours trading? I am particularly interested in the Toronto Venture Exchange. If so, is there a web site where I can follow it? Thanks!!!

  20. NKE/Scott – And FL just had very nice earnings.  

    SHW/Trader – They just bought Comex, which is a massive paint store organization so the math is assuming the mix of paint offered in the stores shift towards SHW and they have a massive increase in sales – which is logical because I really don't think people care that much about what brand of paint they buy.  Combine that with a comeback in housing and there are probably much safer things to short.  Earnings went from $4.84 last year to $6.52 this year (+35%) and projected at $7.88 next year (+21%) is a p/e of just 18.8 and that's before the earnings projections move up on the acquisition.

    FAS Money – As planned, we're just killing the November puts and not rolling, although now they are $3 so it would have been nice to stop out earlier, of course (and good call by StJ to do so).  Still, it's a $200 loss if you still have it open and let's see if $15 holds on XLF (now $15.09) and we get a bounce later but stop if we can't hold $15 as we have enough trouble with the Dec puts if that happens.  

    $25KPs – Hopefully, this is a morning flush but the Dollar is flying at 81.40 so of course the markets are doomed if we keep going.  It's not like we don't like our long positions, it's just that they totally suck at the moment…  We'll have to add a hedge into the weekend though, as we simply can't afford to go any lower. 

    AAPL Money – Just failed $520, World is clearly ending, need to consider our next roll.

    AAPL/Japar – At this point, you need to consider getting into a vertical as $600 is pretty high.   The April $600 calls are $16.30 and you can sell $585 calls for $20 and roll down to the $510 calls at $48.50 so net $12.20 you can be on the money in a $75 spread and, at this point, you should be thrilled to get out even.  You can then sell the Dec $570 calls for $5.50 to knock off some of your basis and your spread will be $65 in the money before you have to give them back their $5 and then you can roll it (or just stop out at $10 and raise your basis $5 after AAPL is recovering by about $20).  As to the short puts, there's nowhere to really roll and the 2015 $400 puts are now $54.40 but, as long as you really want to own AAPL at net $353 – it's a non-issue.  You say it's a half sale so you can, of course, roll them down to 2x the $320 puts at $27 to net you in at $298.50 but not enough of a difference to bother doubling down yet so I'd certainly wait.  

    What you can do – and this is a good trick with short puts when you get worried – is roll the $400 puts at $54.40 to the $350 puts at $36 and you originally sold for $47 so you net into the $350 puts at $28.60 and now you have a 1x net entry at $321.40 so you've bought yourself another 10% off on the initial entry without raising your exposure AND you drop your margin as well (also by about 10%).  Again, if you REALLY want to own AAPL at net $353 then I'd rather keep the $47 and the potential upside but we are talking about saving $31,600 per contract on an assignment – so not chicken feed if you are worried about too much AAPL. 

    Dollar 81.46!  

    AGNC/Yshen – What does Cramer's opinion on AGNC mean?  Nothing…

    AAPL/DC – Sorry, still can't do it.  I like the roll down but not ready to sell long calls yet.  I just want to see if this is a blow-off bottom before making changes.  

    Canada/Laddoo – No clue. 

  21. Phil/AAPL
    So you are still looking for a stronger bounce (maybe any bounce!) before the cover? 

  22. Interesting comparison if you plot a one year TZA against the VIX.  Even more interesting is if you plot a 2 year (or more) the correlation didn't start until Aug of 2011.

  23. We've seen this movie before. An ugly week prior to Thanksgiving, followed by a move up during the holiday…..

  24. AAPL – Oops, that was 10 contracts, of course (TOS default).  

    Bounce/DC – Sure.  I like my 501 jeans at $40 and I have 3 in the closet and they go on sale for $30 and I buy 1 more pair but I don't sell my other 3 for $30 because I KNOW they are worth more and I won't be able to replace them for that price.  This AAPL trading is based on the fundamental VALUE of the company which has nothing at all to do with its current PRICE so I am loathe to short it (including selling calls) at $520 – especially as we topped out at $700 so 20% off is $560 and it would be shocking for us to go down 30%, to $490 without at least bounce-testing that 20% line.  This is an unprecedented drop in AAPL, going all the way back to 2008, when they fell about 50% but a year later they were back at $200 and then $300 and $400 and $500 and $600 before having another serious correction (almost 20% in May/June this year).  

    If you think AAPL can fall another 20%, to $416 – the April $460 puts are $22 and would be at least $40 at AAPL $420 or lower so a nice 100% gain but if that seems like flushing your money down the toilet on a ridiculous bet – then congratulations – you are a long-term value investor!  

    Speaking of VIX – still 18 – never seen so little panic on so much selling.  TLT $127 so the march into bonds continues.  

  25. IMAX/phil – any queue of blockbusters lined up for the holidays to push this back up again before end of year?

  26. Stj: I think its time to put the MOMO portfolio to rest. I don't think lflan is coming back. Its just misleading for others.

  27. Is Iflan ok??

  28. Is Lflan still a member?  

  29. Interesting situation has developed with many stocks having declined so much in value, and given  this low rate environment. Companies with investment grade ratings and not overly leveraged should issue new short term bonds and retire stock.  For example, Dell (and I know you're tired of hearing me talk about this) could issue some bonds at a rate below 3% and retire stock, on which at current levels, they are paying 3.6%+ in dividends.  This would be super accretive to earnings. 

  30. Burrben
    Lflan he got burried under a truck load of apples!!!

  31. I'll check with lflan to see what he wants to do…

  32. FU BBY!!!
    What a POS!!!

  33. FU JRCC!!!
    another POS!!!

  34. Don't look now….BBY under 14…..

  35. Phil- how low do you see HPQ going? Do you like doubling down here?

  36. SOrry, I wanted to add BBY into that question as well, thanks.

  37. FU HPQ!!!!
    another POS!!!

  38. jabo — You forgot GLW.

  39. Sorry for the small print.
    AAPL -From S & P  yesterday. 
    Analysis prepared by Equity Analyst Scott Kessler on Nov 15, 2012, when the stock traded at $524.74.
    We raised our opinion on the shares to strong
    buy, from buy, in November 2012, following a
    notable price decline. With AAPL's growth expected
    to exceed that of many of its peers, and
    considering its substantial cash position, strong
    FCF generation, and relatively high ROE, we see
    the stock as a compelling value. Despite somewhat
    soft demand for computers and consumer
    electronics, and competitive threats, we think
    sales of iPhones, iPads and MacBooks will
    continue to grow at a healthy pace through FY
    15. Higher volumes and a focus on common
    components should lead to better profitability,

  40. I cannot understand how people scramble to take profits on AAPL, which at $510 has a PE ratio of 11 while AMZN has operating losses (!) and a PE ratio of almost 3,000! – the stock is up today 0.7%…

  41. MItch McConnell really does resemble a turtle.  I think of a Warner Brothers Cartoon when I think of him.

  42. I Zega – Hate to rain on your parade but if you factor in the cash hoard, the PE is probably closer to 8 by now.

  43. i zega
    Anything goes in the casino look at the DOW changes like a traffic light!!!

  44. CVX testing a support trendline

  45. Phil,  Do you have a buy list for right now?  I'm thinking it is a good time to be selling puts on names we really want to own.  Any help would be appreciated.

  46. 11:36 AM Europe closes sharply lower after a moderate sell off picked up momentum as markets opening with a thud in the States. Stoxx 50-1.4%, led by Italy -2.1%. The euro -0.6% to $1.2700. For the week, the Stoxx 50 lost 2%. Monday: A meeting of the Eurogroup to maybe decide on allowing Greece more bailout funds.

    IMAX/Scott – I liked them on 10/10 at $20, almost 10% up from there and our play was a buy/write at $20.35, selling the 2014 $20 puts and calls for $8 for a net $12.35/16.18 entry or just selling the 2014 $17 puts for $2.50 for a net $14.50 entry on 1x.  At $21.83, the 2014 $20 puts and calls are $9 but there are now 2015s so you can do a similar play, selling the 2015 $20 puts and calls for $13.20 and that nets you $8.63/14.32, with an $11.37 profit at $20 is a super-useful thing to do with some cash.  With such a nice upside, you can sell 1/2 Jan $22.50s for $1.10 and drop you long net to $8.08 and 7 more sales like that and you're below net $5 on the longs.  If IMAX pops, you can stop the short calls at $1.60 and roll the loss so no big deal at all as you're on track to gain 2x $11.37 on the long side.  

    So the market pops on smiley faces from Bohener et al.  See, that's all it takes – breadcrumbs and that was a nice blow-off to clear out the last of the weak hands this morning.  

    LFan – He's still active but hasn't commented since election day.  Maybe he just took a break until the Fiscal madness ends and things bounce back.  I used to do that – no sense in sitting around starting at a slow sell-off if you don't believe in it and have no intention of shifting positions.  

    Retiring stock/Albo – Buffett is near that point too.  I wish more companies did it on downturns – they usually foolishly wait for a rally. 

    BBY//Jabob – Nasty today.  Earnings are Tuesday and no one liked DELL's comments.  

    HPQ/Jrom – I WANT to DD here but I'll wait to see if they hold $10 as things just get crazy cheap these days and, if it's flattish – I'd rather buy time than more positions.  BBY, same thing.  While tempting, these are rational discounts and we know the discounts can get irrational so it's not worth jumping in too early – temping though it may be.  

    HPQ/Jabob – Can we have your watch list so we know what to avoid?  

    Buy List/Palotay – Not confident enough we're at a bottom for a full buy list.  Hopefully after Thanksgiving.  

  47. The weekend portfolio update looks likely to be painful now… Maybe I should skip a week   ;-)

  48. Pharm, what do you like for GLD next week calls…….if any?

  49. rustle123 – Here you go!  mitch (lonesome george) Mcconnell…… :)

  50. Zega/AAPL
    No worries. I think it really is people trying to take profits before the year ends. It will end soon enough. Look at the hard reaction to the somewhat positive response from the fiscal cliff get-together this AM. Just need a little more certainty and things will return to normal (or more normal).

  51. CVX great premium offered for CVX 2015 $85 puts. can sell for 9.45 (or better), giving net 75.55 entry to CVX. if expires OTM is a 52% return on margin ($1,810) which is 23% annualized

  52. Virtual Short Strangle portfolio updates – With the November options gone, let's sell some more:
    - Sell 3 RUT Nov4 (Weeklys) 740 puts for 1.175, sell 3 RUT Nov4 800 calls for 0.575

    We might need to roll the short call if the market surges next week.

  53.  A 40% retrace of SPY decline from interim 11/2 Hi (@50dma) to 11/16 Lo i= 138.40 which is also the 200dma.
    Just saying

  54. DELL average down:
    Buy Jan 15 $5 leaps at $3.90
    Sell May 13 9 calls at .72
    Last DELL post .  I PROMISE ! ! !

  55. Phil = Hello.  Would you mind sharing a thought or two on Japan's Abe calling for unlimited monetary policy?  TIA!

  56. It's amazing that the same idiots on CNBC who said we were going up still at 13500 are now saying even if the fiscal cliff is solved we are going lower or sideways because there will be higher taxes.  Again if they were a student of the markets, some of the best market years were in higher taxed years because you had a stronger budget with increased revenue.

  57. Of course these were the same guys who said to sell at 6600 on the Dow.

  58. DELL / Albo – Wouldn't it make more sense to sell the Jan 13 calls instead. You are selling calls after the next earning period. 

  59. Stjeanluc – Thanks.  Good point.  I don't expect any big move up for awhile. Would like to suck some premium out of the May calls.  Will roll out and hopefully up before they report.



  62. angelcur / CNBC — the only edge is that you get the news at the same time as the traders that react to the news.  It is much more real time than bloomy.

  63. Now is another chance to close the Nov FAS Money puts if you still have them!

  64. FU GAZA!!!
    FU HAMAS!!!
    Israel should take it back from Hamas! They never should have given it away to begin with!

  65. Weekend/StJ – Yes, better not to look! 

    CLF still paying insane premiums – 2015 $25 puts can be sold for $7 for a net $18 entry on the $35 stock.  

    CVX/Scott – Nice as long as you REALLY don't mind owning them for net $75 because in a real crash, they could get there pretty easily and, if you can ride it out, you'll probably be fine but if you are in the trade to make money on margin, it can go 100% the other way very easily.  

    Good job with short strangles Peter – really weathering the stress tests very well in a weak market.  

    Japan/Ink – It's really not too different from what Bernanke says.  They have to keep up with us or we won't be able to afford their Toyotas.  The Nikkei sure liked it and it's not a bad thing with their economy in deflation and the Yen is still a flight to safety currency so they need to discourage people from buying them as well.

    Taxes/Rustle – That's why I think this is a great buying opportunity.  There is no correlation between taxes and the market and the people selling are simply ditto-heads who think Obama is a socialist and they are coming for your money but, even if taxes were 70% – why wouldn't I invest in the markets?  Will I not be taxed on TBills?  Will I magically make more money by keeping it under the mattress?  It's ridiculous – I still need to make money and unless some other asset-class becomes more favored with tax breaks than stocks – why would I change my mix?  

    CNBC/Angel – They are despicable but they do move the markets.  Still almost every broker I visit at work has it on – which goes far to explain why brokers do so badly…

    FAS Money/StJ – Yes, good call, back to .65 is a nice profit for the week after all.   Good lesson in not panicking.

  66. Fascinating live interview with John McAfee holed up in his compound in Belize trying to evade the Belize police who want to question him about the killing of his neighbor.  He is claiming if they take him, he will be killed in jail there.

  67. McAfee should've created a different kind of protection.

  68. FAS / Phil – I have bad memories on the FAS strangles and not panicking into a $7K loss…. It's really a tough call to make on expiration as it could go either way and rather quickly! Worked out well today though!

  69. Looks like Shadow may have called it yesterday with the 77 IWM pin.  I assume the market is open Friday, but does anyone know when is the expiration calc'd for RUT weekly options next week?  TIA

  70. Thanks, Phil.  I'm glad we weren't greedy in the virtual short strangles portfolio.  The progress looked slow, but it came through very well in the downdraft and we have plenty of margin to play with.

  71. Man almighty, I didn't get a chance to play it today but that AAPL drop to 505 and bounce back to 530 was just plain nuts. That is, yet again, another opportunity to turn 50 cents into $10. How many expiration in a row have we seen this now? I played one the Friday before PSW and pointed out the recurring phenomenon. 
    If I wasn't on airport pick-up service today I would've had another great chance!

  72. CLIFF/DEAL: remember how many times european politicians told the markets what they wanted to hear to buy more time..and then disappointed…could be what is happening here…im skeptical any serious deal is close
    LAND OF SETTING BAD FISCAL POLICY//: its amazing nikkei rallying so much on promises of the exact same failed policies for 20 years on an even grander scale….likely a short soon v other deveoped marketsremember how many times european politicians told the markets what they wanted to hear to buy more time..and then disappointed…could be what is happening here…im skeptical any serious deal is close

    Sent from a small windowless cubicle situated within my mind's eye

  73. McAfee/Rustle – That's why I don't hang out in those countries.  Belize does have one of the World's highest murder rates at 39/100,000 vs about 5 in the US.  As that's annual, if you live in Belize for 100 years, you have a 39/1,000 (4%) chance of being murdered.  

    FAS/StJ – Goes back to not selling puts if you don't REALLY want to own it in the end.  FAS was hitting low $40s at the time – even with decay it's now double and was well over $100 in April so yes, it would have been great to have it put to us.  The problem is, half the people going into these trades are not prepared for a downside event.  If you play Financials for a year and DON'T get a 20%+ correction – that's a miracle.  

    Expiration/Rdn – Not sure how they handle the holiday – I'd do rolls by Weds.  

    Slow and steady wins that race, Peter.  8)  

    Expiration play/BDC – You're right, we should have grabbed those calls on that dip.  I feel like we're too exposed to AAPL so I didn't think of it but could have made a nice bundle on the $515s, which hit $1.11 this morning and are now $10.50. 

  74. Best investment of the day:  Buy all the boxes of Twinkies you can find and in 2 months, there will be nostalgia buffs or wackos who will buy it for $20 a box.  I remember people buying original coke when new coke came out for $20 for a six pack back then.  And Billy Beer is still selling today.

  75. Yeah Rustle, you don't even have to worry about the twinkles ever going bad!!

  76. I would think Billy Beer is unfit for human and/or animal consumption at this point. 

  77. Ikea apologizes for use of forced prison labor

    Young confirmed that some of Ikea's suppliers used political prisoners as laborers, and that certain Ikea employees were aware of the situation. The suppliers in question were state-owned companies that operated under the former communist regime. The report noted that at the time, Ikea employees were not allowed to visit production sites in East Germany without tight supervision. "Even though Ikea Group took steps to secure that prisoners were not used in production, it is now clear that these measures were not effective enough," Ikea said, as cited by the newspaper.

    This must be why someone had scribbled "Freiheit" on the back of our china cabinet.  But what is a corporation to do when a totalitarian society won't let anyone inspect their factories?

  78. Inkarri19/Billy Beer
    They are buying it but not drinking it.  Again, nostalgia, just like an old lunchbox.
    BTW, Grover Norquist was on CNBC, and I don't think there's anyone I quite hate as much as him.  He basically extorts everyone in the Republican party with his pledge of never raising taxes with the threat of funding someone to run against them if they go against that pledge.  He is basically a terrorist to this country.  No one should have that much power who is not even elected to anything.

  79. rustle123 – Agreed!

  80.  Ding Dongs, Ho Hos, Zingers, Suzy Q's, Chocodiles, Snoballs, and even Wonder Bread…13 products in all are now extinct. RIP!  Consumer confidence will plummet this quarter.

  81. Someone should tell "poopie head" grover that Belize is in need of tax reform…..

  82. revtodd64 – It must mean Michelle Obama's plan is working perfectly….Muh ha ha ha…. :)

  83. 1020 –  LOL!  Mixed greens for me tonight!

  84. Fortunately Marketwatch is on top of how to stockpile twinkies.

  85. VIX down 5% to 17.   Another reason we like to sell those jacked up 2015 puts while we can. 

    Cornering the Twinkie market/Rustle – Good plan.  

    Billy Beer/Ink – I don't think it was very fit when it was fresh anyway. 

    Prisoners/Rev – What do you think goes on in this country?  That's a huge industry.  

    Nostalgia/Rustle – I have a can of Duff on my shelf.  Norquist is a complete tool but he's not really the problem, he's just the conduit for this ridiculous dogmatic focus on tax avoidance.  That's what "tax reform" is all about – over the past 40 years, every inch they get they refuse to give back until you get this:

    Notice how no attempt was ever made to include the bottom 99% in tax breaks until Clinton began raising taxes – then they shifted the strategy to make it "everybody's" fight but the top 0.1% had already shaved almost 1/2 their taxes and the rest was all about not letting it go back for that group.  To do this, they allowed overall tax collection to slip to unsustainable lows and blew up the deficit and then they use the deficit to justify getting rid of a Government that may want to collect taxes one day.  

    Of course NO ONE talks about the real criminals – Corporations pay 4/5 less taxes than 50 years ago and when you consider our deficit is 6% of the GDP and they are failing to pay 5% of the GDP in taxes – it's pretty obvious what ONE THING we can address to fix our budget. 

    Now I REALLY wish we had those AAPL calls. 

  86. I did get the bounce but it was lame. Nobody believes there is a deal including me. I really hope no deal because any deal will be a Dem sell out again.


  88. Damit someone is selling into this ending and selling a lot.

  89. Steady stair steps up, elevator shaft down. I love trading futures….. ;)

  90. Phil – Prison Labor.  
    Yup, I remember Cramer's great recommendation.

  91. Phil
    do you think the risk is to the upside next week – rallying into Thanksgiving? Thx and hope you are feeling better!

  92. Deal/Shadow – What they need to do is extend bottom 98% tax cuts and unemployment.  As long as those get taken care of, they can spend a year arguing about the rest.  

    Prison Labor/Rev – He's right on that one.  We incarcerate more people than any country on earth and somehow it's OK to force them to work for companies (and put non-prison workers out of a job) – not sure what the benefit to society is, especially when most of the workers they displace do things like assemble furniture and other jobs that can't be shipped overseas.  

    Shaft/1020 – That's what we're getting!  

    Still, overall we had a nice Asia rally, Europe ignored it but now we ignored Europe and held green so MAYBE we have a nice move next week but even flat would be good considering the holiday.  

    Next week/Crussell – I don't see a big rally into a 4-day break but if there's not too much selling, I think we have a good chance the next week.  

  93. Angelcur – I think you will be glad to know that "Ring Dings" are still available, since they are made by Drake, not Hostess.

  94. The problem with prison labor is those that benifit the cheap work don't pay the expensive housing. Then then don't pay taxes and have no clue why it doesn't balance out. Must be those intitlements.

  95. Well, that was an encouraging end to the week.  

    Have a good weekend everyone!  

  96. PGNX – Pharm highlighted this one last weekend – CEO just bought 50K shares, up 10% today. Nice job Pharm!

  97. WOW
    In this never before released audio, Lee Atwater advises how to capture the votes of racists and marginalize people of color, all without sounding racist. It may induce strong emotions in listeners. WATCH:


  98. What's this "greatest prison population per capita in the WESTERN world" nonsense???
    We're number 1 in the ENTIRE world, stat.

  99. Prison Labor - here's a pretty good summary. I have also seen an 'industry' marketing video a little while ago.. bizzare.

  100. Have we bottomed for now – nice hammer prints on AAPL, XLF, QQQ – will be good to see follow through on Monday. Will it be the start of next year end rally all the TA gurus are talking about?
    Although I did pick up some AAPL BCS – not much just tip toeing here. Plan to pick up XLF/FAS next week if we get some good follow through

  101. Craigzooka / IRA Spreadsheet —-  Success.  I stumbled on a link to the various StJL spreadsheets.  A nice chance to study your approach.  Thanks.

  102. mjjwo,
    would you be good enough to post the link to craigs spreadsheets as i missed the conf and would like to check it out also..tks

  103. BTW, if you had gone long when AAPL hit 509, you would have done well for the day!

    My comments early on Friday morning!

    As I said yesterday, I see $509 as the next line for AAPL. That's a 50% retracement from the June 2011 lows. Quite incredible.

  104. My general rule when rolling short puts is to achieve a small credit in the trade. Sometimes achieving that requires you to pick a strike that is too close to the money or pushes you too far into the future. When my position is in deep trouble, I rarely pick a strike and sell 2x, instead I try to achieve the small credit in two unequal pieces, one that recovers about 2/3 of the amount, and one that recovers 1/3. This leaves me with two separate positions, hopefully not close together, and hopefully not too far in the future. I find it a much more comfortable situation. The margin requirement is usually less than a simple 2x would give you.

  105. millcreek / PSW Spreadsheets:  I'm not sure how to do that.   They are shared Google Spreadsheets that StJL manages.  It's one of those I can look but can't touch deals.  

  106. Spreadsheet / Millcreek – The link for them is:

    The IRA sheet is the last one.

  107. Qualcomm (QCOM) is now the biggest semiconductor company in the world by market cap:

    QCOM Market Cap Chart

    Now Qualcomm may be in position to enjoy a long run atop the semiconductor heap. It may even be the new Intel. It occupies a core position in the mobile space that is analogous to that of Intel in PCs. No other company comes close to its market breadth in powering smart-phones, tablets and infrastructure.

  108. Looks like Siri has some pretty tough competition even on iOS devices now:

    But if Google’s voice search isn’t perfect, it is truly useful. Most of the time it understood what I was asking and gave me a good-enough answer to my question. In that way, it’s groundbreaking. Google Voice Search isn’t just better than Siri or any other voice recognition system I’ve used. It also approached a threshold that transformed it from a novelty act into something I could imagine relying on in my daily life. With Voice Search, Google is beginning to make good on Apple’s broken promise.

    For those of us with Android phones, we had Google Voice Search before Siri, but Apple sold their tool better as usual.

  109. A couple of interesting weekend reads:
    Marketwatch targets 8 cash-rich low debt companies that might be good components to a watch list.  AAPL is at the top of the list.
    Also, an intriguing article making the investor's case that companies with tons of cash overseas should bring the cash home regardless of taxes.  Tax efficiency is not the only way to increase the bottom line.  The author notes that Microsoft used its overseas cash to buy companies like Skype, and others, that basically flushed $6 billion down the drain.  How is that better than just bringing the cash back to the US, pay your taxes like your hard working customers, and pay dividends to investors with the rest?  

    Expeditors CEO Peter Rose states this case well:

    We think working to achieve operational excellence is a far more worthwhile goal than trying to establish your own art form of financial and tax engineering. We also believe, rightly or wrongly, that in the long run, the market pays a premium for sound, fundamentally sustainable operating income… the more people get caught up in trying to structure their international organization to benefit from ridiculously low tax rates, the less their corporate strategy is focused on making money through their core operations by servicing their customers…
    We think it's ridiculous that some companies "mickey" with their tax rates by permanently leaving profits offshore, to the point of having to borrow domestically to fund dividends and domestic operations. That kind of "financial engineering" gaming of the system seems counterproductive to us.

    Rose's point is clear: Operate the business… Build sustainable income… And don't get distracted by offshore tax rates.

  110. Barrons cover article on Apple v Samsung today.  It states Apple's cash as $29 billion which i guess is technically correct but ignores long term marketable securities of $92 billion as of 9/29/12.

  111. Stj / Apple 50% Retracement:
    "A Technical Analyst and a Fundamental Analyst are chatting about the markets in the kitchen.
    Accidentally one of them knocks a kitchen knife off the table landing right in the fundamental analyst’s foot!
    The fundamental analyst yells at the technician, asking him why he didn’t catch the knife?
    “You know Technicians don’t catch falling knives!” , the technician responded.
    He in turn asks the fundamental analyst why he didn’t move his foot out of the way?
    The Fundamental analyst responds, “ I didn’t think it could go that low”

  112. StJ – nice fib prediction on AAPL –  I wish I had caught it at 509 but 515 ain't too bad

  113. Good one Zero!

  114. Stj:  I think Leonardo of Pisa, figlio di Bonnacci, would be amazed by the use to which you put his solution to a puzzle on the breeding fortunes of rabbits: " A certain man had one pair of rabbits together in an enclosed space, and wishes to know how many are created from the pair in one year when it is in the nature of them in a single month to bear another pair, and in the second months those born to bear another….."  Seems like a strange way to predict Apple's stock price, but, hey, whatever works….:)  I'm an al-Khwarizmi fan myself — with a nod, of course, to the anonymous Indian who invented Zero (zephyr, or al-sifr).

  115. On a more serious note [from Weather Underground]: "The colossal devastation and loss of life wrought by Hurricane Sandy makes the storm one of the greatest disasters in U.S. history. The storm and its aftermath have rightfully dominated the weather headlines this year, and Sandy will undoubtedly be remembered as the most notable global weather event of 2012. But shockingly, Sandy is probably not even the deadliest or most expensive weather disaster this year in the United States--Sandy's damages of perhaps $50 billion will likely be overshadowed by the huge costs of the great drought of 2012. While it will be several months before the costs of America's worst drought since 1954 are known, the 2012 drought is expected to cut America's GDP by 0.5 – 1 percentage points, said Deutsche Bank Securities this week. “If the U.S. were growing at 4 percent, it wouldn’t be as big an issue, but at 2 percent, it’s noticed,” said Joseph LaVorgna, the chief U.S. economist at Deutsche. Since the U.S. GDP is approximately $15 trillion, the drought of 2012 represents a $75 – $150 billion hit to the U.S. economy.. This is in the same range as the estimate of $77 billion in costs for the drought, made by Purdue University economist Chris Hurt in August. While Sandy's death toll of 113 in the U.S. is the second highest death toll from a U.S. hurricane since 1972, it is likely to be exceeded by the death toll from the heat waves that accompanied this year's drought. The heat waves associated with the U.S. droughts of 1980 and 1988 had death tolls of 10,000 and 7,500 respectively, according to NOAA's National Climatic Data Center, and the heat wave associated with the $12 billion 2011 Texas drought killed 95 Americans. With July 2012 the hottest month in U.S. history, I expect the final heat death toll in the U.S. this year will be much higher than Sandy's death toll."      

    Query whether we'll have a repeat next year.  Or every year.  Worth watching, certainly.

  116. Been trying to get a better feel for the big deal. Unfortunately the republicants still have their eyes and ears closed to the people's message. They expect democratic capitulation on tax rates, they still think Obama bought his job. Ther are few that will be hurt more by no agreement than me and what I read is Obama is not under any deal going to allow the Bush tax cuts to continue never mind reducing more. He has veto power and can use it.
    Wyoming is one of the fight the government states. Barraso brought me into anopther of his town hall meetings and he is as clueless as Romney. What really shocked me was how many Wyomingites are brainwashed including our governor Mead.
    One of my favorite parts suppliers is moving family and business from California to Maine in December at a great loss but next year is a lot worse than people think for business in California. I hope to find out why Maine.
    After droping below zero and snow here it got to 48 degrees today and forcasting rain for thanksgiving, that will ruin a great snow base for the resorts. The elk are still in Yellowstone park, and the first wolf killed sheep in Alta this week,about 1/4 mile away, that confirms the tracks in my yard.

  117. About saving money?
    I southern Idaho and Jackson Wyoming makes no difference, FOX, ABC, NBC, and CBS all owned by the FOX media, they have them all. Even the sheriff has asked why so many people voted against him, the problem is not enough!

  118. Good morning!

    Prisons/Scott – Good summary of the situation.  

    Bottom/Gandhjo – I hope so. 

    Big Chart – If we adjust the 7.5% move in the indexes for the 2.5% rise in the Dollar since 10/1 we get a nice 5% move.  The trick is what happens to the Dollar/Euro into the end of the year.  Our fiscal cliff, if it hits, actually is "responsible" budget cutting and strengthens the Dollar.  Kicking the can down the road is more QE, effectively and will weaken the Dollar so look for a really outsized reaction to any progress on the cliff issue.  

    $509/StJ – Next time we have a chance like that on a Friday, we damned sure need to remember to take it!   Great call. 

    Good rolling advice Barf.

    Google voice/StJ – I do find it better than Siri as I have both on my IPad (AAPL put Siri in the last update).  Siri is amusingly stupid, Google's is so reliable, I prefer it to typing.  

    Meanwhile, I finally got my IPhone 5.  It is a very satisfying little device and does exactly what my old IPhone 4 did only better with better screen (barely bigger), way faster processor, LTE (very fast) and better speakers – which is important to me as I prefer speaker phone in the car.  The IPhone store at the Garden State Plaza had a 20-min line to get in as they were at the fire department limit.   I had previously stopped by MSFT's surface kiosk, which was very well done and the computer was excellent with a nice clicky keyboard/cover (one option) and it was fast and worked as a laptop or tablet very well with good speed and great resolution.  I was all set to remain impressed all day but then I touched an IPad Mini – Oh my God – screw the specs – it's weightless and had fantastic resolution and is fast as lightning and a very comfortable size for web browsing, book reading and anything else and then you have to consider it's much cheaper than the Surface too so, unless you NEED a keyboard (which you can get with an IPad anyway) or to use office – it's not much of a contest.  Also, comparing an IPad Mini to a kindle or a Nook is like comparing a Hyundai to a Porsche – yes, they are both cars but that's about where it ends – I don't think AAPL is going to be hurting for sales on this one.  

    Another cool thing about the AAPL store is that once we picked something to buy, it was instant check-out, you just grab any blue-shirt person to take your credit card and they Email your receipt so it's a 10-second transaction (they'll print it and get it if you want).  Also, FINALLY, the store takes my credit card and KNOWS who I am because I've used the card before so they have all my address info and everything else they need.  I really think AAPL has a future outsourcing their ability to build and run retail store – It's a total pleasure to shop there.  

    Offshore taxes/Rev – While I agree with the principle of what Rose states, the reality is that it's very possible to do both so many companies do.  Those loopholes must be closed – no ifs ands or buts.  

    Barrons/Terra – Makes you wonder what's to be gained by massively understating AAPL's cash position?  

    Fibonacci/ZZ – It's just an observation of the natural tendency of almost anything to grow and regress – including money flow into and out of stocks.  

    Weather/ZZ – If Global Warming is making things worse, I dread the future of weather.  

    Deal/Shadow – Obama's main goal is to extend tax cuts for the bottom 98% and then raise taxes on the top 2% and THEN they'll see what they have to cut.  It really bothers me that no one talks about taxing corporations properly. 

    Seriously, Fox owns all the local networks in Jackson?  Well, you guys are just screwed.  

  119. Here's another shot of the AAPL store – it's pretty big, I just turned the other way for this one.  

    That's Jackie on the bottom right with her tiny friend holding a mini.  Notice how many blue shirts there are – and you can't even see them all as the Genius Bar in the back has a bunch sitting down and there's a training center down that way too.  I think a lot of us are pretty good with tech so we don't appreciate the value of an AAPL store, where you can quickly get help with your phone or tablet or laptop just by showing it to someone on the floor.  If it's tricky, they make you an appointment with the geniuses and I've always gotten great service there too.  On the other hand, I dropped off my Laptop at BBY before I left for Vegas on the 3rd, not even a year old (Sony) and they told me the drive is dead and they'll fix it under warranty but still waiting two weeks later.  

  120. Oh yeah, and I forgot my point on BBY was we waited about 30 mins in the line to see the sole Geek squad guy behind the counter on a Saturday morning and he took 15 minutes to verify that we had a warranty and to write us up but there was no diagnostic until they called me 3 days later to say they had to replace the drive.  I had a dead IMac drive once (after 5 years) and they told me it was dead while I was waiting and asked if I'd like the contents recovered to the new drive.  I asked BBY if they could transfer the contents and they said they'd have to send it out to specialists and BS, BS, BS…  Fortunately, it's just my travel laptop so I don't really have anything on it that's important.  

    Coolest idea I saw at the mall yesterday was an IPhone case that's also a wallet!  I haven't found one I really like yet but it's my goal now as it makes perfect sense to me to combine those two pocket items:

  121. Phil:
    I would have to agree with your assessment of how Apple does retail. The store in Ann Arbor shows even more blue than yours only because it's not as busy (yet still busy for November). My point is it demonstrates Apple's level of commitment toward the customers experience when they visit one of their stores. I am a business client in Ann Arbor because of the level of purchases I make for myself and my business.  Any time I have an issue they get on top of it and follow through without flaw. If I need something repaired, it usually gets done in less than three days (or right away if possible).  They know who I am and make me feel good about being a loyal customer. 
    Nothing has really changed in my opinion with Cook at the helm. The products are still great, the stores are still busy, and the service still remains top notched.  Its only a matter of time before the excuses to bash disappear and Apple's stock gets priced appropriately.
    Great report on what you saw.  The level of traffic at your store certainly inspires confidence for a good quarter. 

  122. Phil
    Another wallet case for your review.

  123. Phil / Fibonnacci's rabbits:   Grow…. & regress?  Didn't Steve Tyler write something about that in "Sweet Emotion"?  You really do have to go down the rabbit hole to figure out this trading stuff!! 

  124. Drought / Zero – Maybe the people who are affected by the drought (mid-west farmers) will eventually vote for people who want to do something about climate change rather than the ones who just pretend it's a hoax. 

  125. Shadow:  If you're around  — here something you may choose to comment on.  I travel a lot, and can't carry around fast, powerful computers.  I could set them up in my usual haunts, but often must use whatever is around. So I'm groping towards a different approach.
    What is essentially "my computer" are my programs and data.  Data are not the problem, I have them in Dropbox and cloned/synched in encrypted form on a slim Seagate 1 T hard drive I carry with me.  But I want that same hard drive to have my programs – including an OS.  That way, my OS and other programs can be upgraded or updated on my portable hard drive over time, and my computer hardware can evolve independently, without losing my indexing, reloading software and licenses,  dealing with incompatible versions, and all the other hassle of changing machines. 
    I was told the other day it was possible, but certainly not by having a Windows OS on a hard drive, since Windows has all kinds of fiddly bits that need to be in the computer's memory / RAM.  It was suggested, however, that I could install / run Linux from a portable hard drive which would virtualize itself [along with my other programs] within whatever computer I happened to have available — mine, or even someone else's.  This would have to be set up for me, since my programming capabilities are limited to clicking on "install/run."
    In theory, I could then 1/ carry around my data files, programs and Linux OS in a portable hard drive as I have imagined, and upgrade or add software at will, and 2/ replace my worn-out computers as I go — independently of one another.  Presumably I would also transfer the hard drive contents onto newer, smaller and faster ones as those become available and the older one gets beat up.  The essential point of the exercise is the separation of software evolution and hardware evolution within my own "cyberworkspace"  that frees me to set up wherever I am on whatever I have available.  I apologize for any incoherence in the foregoing explanation, but my understand of "virtualization" is nominal, although I'm very clear on where I'd like to go with the idea in functional terms. Would you say this is feasible?

  126. Phil
    good morning.
    i hope you are feeling better.
    i want to get into some April AAPL spreads.
    since the stock is down considerably from the Sept 21 high of $705, it may be a good time to start legging in.
    however, given the fiscal cliff uncertainty, I want to pick very safe spreads, likely to expire in the money, even if congress  does not deliver and even considering a January "earnings miss" by AAPL.
    what do you think are some choices?

  127. AAPL Stores and Mini – Ditto PD's comments on the mini.  Kindle Fire is, however, a fair comp – but the min crushes  it regardless of price.  I now have a mini and a kindle with the backlight.  I love to read books on the latter – no latent or other distractions to fiddle with. But it's the pad for all else.   Slim. Light.  Fast.    The Bethesda Apple store is sold out by noon every day here.  As is Pentagon City. One thing to consider whether shopping or anecdotally assessing sales is that all the small Mac and Apple tangential shops (repair, training, etc.) get small shipments that no one really knows about.  I call. They hold it. I pick it up.  This has been so for any Apple products in high demand and long-ish ship times. No phones in these joints tho.   Interesting to consider that Jobs publicly loathed a smaller pad.  Don't know about behind the scenes, but the mini was necessary and is going to kill. 

  128. Just posted the virtual portfolio update:

    I am pissed off as I had a lot of good comments and WordPress deleted all the contents when I published the post….

    Here are some quick news for the Income Portfolio:

    HPQ – Made another 52-week low. They report earnings on 11/20. We have already been told that earnings will be tough all through 2013. Maybe baked in already.

    BBY – Also made a 52-week low and they also report on 11/20. I have seen conflicting stories about the potential buyout. I am guessing that Schultze is waiting for the next earning report to set a price. His original offer was $24 to $23 but I don't see an 80% premium for a company growing sales at less than 2% a year and losing money no matter how much you believe in the turnaround. 

    The TZA diagonal is helping the portfolio and is showing a $14K profit!

  129. zeroxzero 
    I read your question to Shadow, I cannot help, and I am limit to "install/run." also
    What do you do for security?  I have looked at a VPN’S for traveling do you use one?

  130. Question for the experts
    If IWM goes up 1% for how much will the TLT drop? TIA

  131. Phil,
    ABX -  I was thinking of an inflation hedge. Gold seems to be the choice of many, but it appears to me that the divergence of gold and large gold miners over the last year compared to the last 5 years makes the latter more attractive. I looked at the ABX trade in the income portfolio, but the puts have gotten away. What do you think of the same strikes, but in 2015?
    AAPL – Just curious if anyone has checked to see if the Ipad mini is cannibalizing sales from the Ipad instead of from their competition?
    Farmers – I still know quite a few farmers having been raised on one and still having 2 brothers in the business. Most farmers I know insure their crops. When there is a drought like this and the crops are not worth harvesting they collect insurance money and avoid the costs associated with the harvest. Not sure many of the individual farmers are affected much.

  132. Zero
    Which OS does your software require?  If Windows, will it run under XP.
    Not all computers can boot from removable drives, how are you planning to connect the computer to your drive? 
    Where do you find your computers on the road?
    Have you considered a pocket PC such as

  133. qcmike:  I use Folder Lock.  It will lock folders, or encrypt them, will create self-executable files you can carry around in a USB and will open with a password, offers secure backup storage [which I didn't buy [I'm just storing the encrypted or locked files on my Dropbox service], and a neat little thing call "wallets", in which you can load you ccard info, passport, d. license, whatever in little lockable "cards"  [virtual, no plastic or cardboard here] in case you lose any of the foregoing — you can store it on the aforesaid USB, laptop or pad in case.   Best $39.95 I've spent in a long time.  There are a lot of programs out there, I researched the issue for quite awhile, the good ones all work, user-friendly is nice and this one is.  If it doesn't use a publically-known encryption method [which doesn't mean you can crack it] but some "secret formula" encryption it's probably bogus, tantamount to a "secret method of constructing bank vaults"  — stay away.

  134. edro:  I've been using Windows 7, will move to 8 pretty soon.  But I'll see what our tech has in mind with Linux.  I have a variety of desktop or big laptop computers scattered in different places I travel, use a Sony Vaio on the road but will move to a slim Samsung 13 / 7 next week if I can find one.  Sometimes I have to use whatever DOS-based machine is lying around.  The tech says he has programs that will virtualize both my programs and OS within any non-Apple host computer, nice if he can do it.  We have a session planned tomorrow afternoon before I leave town Tuesday, I'll let you know what I find out.  As per my query to Shadow, I can't represent that any of this actually works yet, but it sure would be nice to have data, programs and OS on a 4 oz. hard drive instead of lugging around heavy metal.

  135. As for the micro computer, it's a cool little deal, but my aim is to have have to carry any computational machine at all, but to have data and programs in a portable form that I can trick any available machine into running for me.  Everything has limitations, I expect, but I'd like to know how far that envelope can be pushed with current technology.

  136. By way of analogy, not that you need one, I don't have to carry a portable car around with me when traveling, nor do I have to hire a special chauffeur to drive my Avis rental car when I get where I'm going, so I'm not sure why I can't do this with computing.  I have a feeling I'm going to find out, but we'll see.

  137. Lake Tahoe 
    Anyone live in the area?  I'm staying in Incline Village for 2 nights looking for a 1month rental from after Tks Giv to Pre-Xmas.  

  138. StJeanLuc / Keylogger
    Just a FYI, but I installed a KeyLogger which records all of my keystrokes and backs it up to a password protected file each day.  Therefore if I'm typing something in notepad/word/PSW/whatever, it's always saved.  It's not super pretty, but after losing tons of documents over the years, I found this was the best solution.  All key strokes are always backed up.  
    Hackers generally use these as trojans, but they do have legit uses as well.

  139. Thanks Burrben… I'll have to start writing my post in Notepad and just past them in WordPress because it's been bad. Lots of bugs in that software! The simpler, the better… Keylogger might be a bit too much for that. But it's a good idea!

  140. Zero
    I have been disappointed with Virtual Machines, esp the display capability.  If you are moving to Win8 have your tech look at Windows to Go.  It is a Microsoft supported USB memory stick application that is reported to work really well even on older machines.

  141. Good morning!

    Futures looking good with Global markets up nicely as everyone seems to have decided we're not going over the fiscal cliff now.  We'll see how long it lasts – I'll do strong and weak bounce calculations later – but let's enjoy it while we can.  Don't forget, I said Friday it was time for a bounce as we hit that 8% line, which is a support line as it's the weak bounce off 10% and you don't actually need to get to 10% to establish the bounce zone but the good news is that it is a bullish indication if it holds and we never fail 8%.

    Of course how much of this is a market rebound and how much of this is simply the Dollar moving back down to 81.10 (down 0.5% from Friday's high at 81.51) remains to be seen.  

    Euro $1.277, Pound just failed $1.59, 81.24 Yen to the Dollar has the Nikkei back at 9,125 (and how do you like those /NKD longs now?), oil $87.81 with Gaza news still big, gold $1,722, silver bouncier back at $32.62, copper $3.485 but still no sale over $3.50, nat gas $3.82 and gasoline topped out at $2.73, now $2.715.  

    Today is the last trading day for December oil contracts but they got rid of enough with all the war scare that there's not too much pressure now but the end of this month should be more interesting (around Dec 19th) as they have a lot of barrels to clear by the end of the year and not too many trading days:


    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    89.25 17:27
    Nov 16
    1.05 263809 85.87 332832 Call Put
    Nov 16
    1.03 60758 86.44 133725 Call Put
    87.64 17:27
    Nov 16
    1.00 35314 87.04 107227 Call Put
    Nov 16
    0.97 20599 87.60 56967 Call Put

    Israel Ready to Invade Gaza if Cease-Fire Efforts Fail. Israeli ground forces are poised to invade the Gaza Strip for the first time in almost four years amid efforts by Egypt and Turkey to help end the rocket battles that have killed 71 Palestinians and three Israelis. “We will continue to act, to attack and perhaps even to intensify the operation,” Defense Minister Ehud Barak said during an appearance near Tel Aviv yesterday, according to an e- mailed statement. “If there is a need, we won’t hesitate to undertake ground maneuvers.” The escalating conflict between Israel and the Islamist Hamas movement, which controls the Gaza Strip, threatens a region still unbalanced after a wave of popular uprisings last year.

    Hedge Funds Cut Bets in Longest Retreat Since 2008: CommoditiesHedge funds cut bullish commodity bets for a sixth straight week, the longest slump since the depths of the global recession four years ago, on mounting concern that economies are slowing. Money managers lowered combined net-long positions across 18 U.S. futures and options by 17 percent to 772,512 contracts in the week ended Nov. 13, Commodity Futures Trading Commission data show. Holdings have tumbled 38 percent since Oct. 2 in the longest retreat since August 2008. Investors turned bearish on copper for the first time since August. Commodities are headed for the first annual loss since 2008 as weaker growth and more supply will mean surpluses in sugar, aluminum and zinc, according to Morgan Stanley.

    Bounce lines are going to be: 

    • Dow fell from 13,600 to 12,500 (8%) so a great line for bounce and psychological support.  Weak bounce is +220 (12,720) and strong is 440 (12,950).  Notice how we add 10 to get to a psychological level as it's close enough and the point is to pick a line where we get bullish and, really, at that point we'd better see 13,000 anyway, which just so happens to now be the 200 dma and it will NOT be good if we fail to take it back as it will begin bending down (flat now) and then the 50 dma will bend down faster and we'll be heading for a death cross in January.  
    • S&P fell from 1,470 to 1,350 (8%) so 120 points means add 20% (24) for a weak bounce to 1,375 and 40% (48) for a strong bounce to 1,400 (and I bet I don't have to explain those 3 extra points!). 
    • Nasdaq fell from 3,175 to 2,825 (350), which is 11% so let's call it an overshoot caused by AAPL, BUT – you can't just go adjusting it because then you have to get into whether it should have been at 3,175 in the first place – as AAPL caused that too when it was at $700.  This is why we call it the AAPLDaq.  So let's just use the 350 drop and call it 2,900 for a weak and 3,000 for strong, which is now the 200 dma anyway and leave it at that.  I noted over the weekend that our AAPL comeback premise seems to be on track from my observation of traffic at the Garden State Plaza.  Also this:


    Anti-virus company Avast conducted a survey of Windows-based PC users the day before Windows 8 was released.

    The results were devastating for Microsoft and non-Apple PC makers.

    They were excellent, meanwhile, for Apple.

    Byron Acohido wrote up the results for USA Today and filmed a short video with charts. You can watch that here. In the meantime, here are the key points:

    • The survey covered 135,000 Windows users split across three versions of the operating system: Windows 7, Windows Vista, and Windows XP.
    • Only a very small percentage of users--9%--said they were going to accelerate a purchase of a new computer because of Windows 8.
    • Overall, 16% of those surveyed said they planned to buy a new computer
    • Of these folks, a staggering 42% said they plan to buy an Apple product--either a Mac or an iPad (see chart above)
    • Most of the Apple buyers (30% of the total buyers) planned to buy an iPad, suggesting that some of these planned purchases are motivated by the desire to buy a tablet. (Maybe Microsoft can save some of these with strong sales of the Surface.)
    • The rest of the switchers, 12%, planned to buy a Mac.

    Last week, it was reported that Windows 8 sales are off to a weak start.

    That's not surprising, given the results of this survey.

    And the most ominous part of the survey is the implication that nearly a third of those who plan to buy a new computer plan to buy an iPad. Some of these purchases may be supplemental--the PC owners may keep their PCs--but they won't do anything to help the Wintel PC business.

    As tech guru Jean-Louis Gassee points out in his weekly note, the survey also suggests that Windows 8 has created a huge opportunity for Apple to convert a lot more Windows users to Apple products.

    SEE ALSO: Windows 8 Sales Are Well Below Microsoft's Expectations

    • NYSE fell from 8,450 to 7,900 (550 – just 6.5%) so 110 bounces of 8,000 and 8,100 with 8,000 also acting as the 200 dma.
    • Russell fell from 860 to 770 (10.5%) and has miles to go to make the 200 dma at 805.  Weak bouncing to 790 won't impress us nor will 805 but we'll call that the strong bounce there.  

    Q4 is off to a rotten start and deservedly so to some extent as earnings really sucked (more on that later) but still an over-reaction to the fiscal cliff and, as we expected, a little fear fatigue is settling in at this point and now we need some actual negative catalysts to fall further – as opposed to the simple lack of a resolution that took us down all month.

    It's a short holiday week so we don't expect any major market heroics – especially as we have a whole other week of November after Thanksgiving but then it's a very nice (for retailers) 6 weekends between Thanksgiving and Christmas – so plenty of time to buy IPads and close Q4 out with a bang. 

  142. Notice that Consumer Discretionary and Financials, which we talked about extensively, were two of our strongest sectors – along with Industrials and Health Care.  Health Care we stayed out of as we didn't know which way the election would go and then how it would affect them but that's getting clearer now and Industrials seem a little odd to be up considering this:  

    So I'm sticking with my two favorite sectors for now.  

    Michigan Report/DC – Thanks for additional color.  I like the wallet but not sure I want to have to open that every time I want to look at the phone.  Thinking I just want something that holds AMEX, Driver's license and Insurance Card – what else do you really need in a wallet?  Actually, if I wore suits, I would love that for a jacket pocket but seems a bit big for jeans.  

    Rabbit hole/ZZ – More like the one that leads to Wonderland.  

    Feeling better/Maya – I am slowly getting better but stones are stuck and I go for MRI and Cat Scans right after Thanksgiving and they have to decide what to do with me.  As far as AAPL – there is no such thing as a "safe" spread.  Our AAPL Money Portfolio is off to a terrible start but I still have faith.  If you can't sell front-month premium for AAPL – I really don't think there's much point to owning it as, obviously, the risk factor is huge on this stock.  

    Currently I like the 2015 $500/650 bull call spread at $37 so you net into AAPL at $537 (now $527) with 2 years to make $113 (300%) if they get back to $650.  If you can't be satisfied with that trade – you should stay away from the stock because you'll never be satisfied with anything.  You can offset the spread with the sale of the 2015 $400 puts at $52 and that's then a net $15 credit with a $165 potential upside (1,100%) but, with a 300% upside on the plain spread – I say why incur the net $40 premium and instead buy 2x of the spread and only if AAPL drop to the point where you lose 50% on the spread should you THEN sell puts (for a lot more money) and use that money to roll and reposition the spread far lower.  

    With a $113 upside cushion on the base spread and a $37 cost, all you have to do is sell $1.50 worth of AAPL premium per month and you have a free spread.  I hate to endorse doing one thing for the next two years but, if I did, this would be it!  

    BBY/StJ – I think they'll be lucky to get $20 at this point.

    TLT/Yodi – It's not a direct link but usually TLT goes down when the market goes up and vs. vs as that's technically the "sideline money" you hear about.  

    ABX/RJ – Miners often disconnect from Gold but the reality is they have the gold – it's just the investors that are silly.  At the moment, energy costs are high but what's really hurting the industry is Governments cracking down on environmental and labor issues – not because they care but because they want to put the squeeze on the miners as you're talking about lots of small Governments that are struggling for revenues.  In a place like US, on the other hand, they actually do care about the Environmental impact and that has projects like Pebble Mine in Alaska on permanent hold (NAK).  That's why a company like NAK can be sitting right on top of $300Bn worth of gold and copper that they own but only be worth $300M.

    ABX, on the other hand, is well in production and geographically diversified and they have about 120M ounces of proven gold reserves ($200Bn) as well as 1Bn ounce of silver ($32Bn) and 6.5Bn pounds of copper ($23Bn).  For all that – they only get a market cap of $33Bn and you are speculating on both the forward price of gold and the cost of extraction but I love owning the miners long-term and ABX is the best (NAK and HMY are the only other ones I like, with HMY very cheap again too).  

    At $33.72 on ABX, the price per share is the market cap in Billions (1Bn shares) so easy to value and you can do a buy/write to pick up the dividend (.80) by selling the 2015 $30 calls and puts for $13.20 for net $20.52/25.26 and that makes the dividend 4% or you can go artificial and just sell the 2015 $30 puts for $5.40 and buy 2x the $35/42 bull call spreads for $2 each for a net $1.40 credit so the worst case is ABX is put to you at net $28.60 (15% off) and you have up to $15.40 of upside (1,100%) at $42 – up 24.5% from the current price.  This is an aggressive target as we need ABX to be higher than it is now to make more than the short put credit but I like the risk/reward on this one.  

    By the way, on trades like this, keep in mind that if you stop out just 1/2 of your bull spread at $1 (50% loss), you lower your net entry on the put side by another 4% – to $27.60 so these "worst cases" are only if you sit there like a deer in the headlights when something moves against you.  

    Mini/RJ – I would say of course it is cannibalizing sales but you have to compare that to losing sales to other tablets plus the new sales it brings in.   AAPL had managed that masterfully with the IPod family for years so I'm not worried about their ability to execute with the IPad family as well.  

    Slingshots/Diamond – Not sure I buy the premise that funds continue to stupidly follow rigid guidelines to screw themselves over and over again and now are setting up for the 11th (according to Schwarz) time.  To some extent, yes they have to rebalance but of course it is a conspiracy as they run the stock up – dump it – talk it down – and then buy it again – not because they "have to" but because it's very, very profitable to yank AAPL around like this.  

    Tahoe/Burr – I have a 1Br condo at the Marriott Grand but I think it's rented already.  Should be open units there and it's very nice.  

    Virtualness/ZZ – Tina prefers one of those "Go to my PC" things so, no matter where she is, she simply logs into her home computer and the laptop or whatever she's working on shows here the screen and then when she works it's all EXACTLY the same as being home.  She doesn't need to synchronize or update or transfer data or store programs off site – very simple really.  I, on the other hand, just do all my stuff on the web in the first place so it doesn't matter where in the world I am – I just get on-line and log into whatever I need – just like I'm at home.  Doesn't work if you need proprietary software, of course, but I haven't run a company in a decade that didn't have a web-based system.