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Testy Tuesday – Can We Hold Our Weak Bounce Levels?

That was nice!

In one day, we erased all of last week's losses and cleared the 200 dma before it had a chance to bend lower but, as you can see from Doug Short's chart, the 50 dma is already in decline and we have to do MUCH better than this to get back over that line and turn that frowning average upside down before we are able to say we're back on a long-term bullish path.  

What we have so far is a 30-point, 2-day bounce on the S&P after a 16-day 105-point drop or, we could look at the post election day dip of 80 points over the previous 7 sessions and then 30 points back up is almost exactly that magical 40% retraces we'd be looking for and the short time-frame makes more sense that way.  

UUP WEEKLY Overall, we're looking for follow-through on this move, hopefully back to at least 1,400, which will take another 50% of yesterday's move to complete.  As we noted yesterday, we were looking to make weak bounces to Dow 12,720, S&P 1,375, Nasdaq 2,900, NYSE 8,000 and Russell 790 and we made all of those targets so now we just need to hold them as we attack our strong bounce levels at Dow 12,950, S&P 1,400, Nasdaq 3,000, NYSE 8,100 and Russell 805.  If we can't do that – it's not a real rally.

Dave Fry's Dollar chart shows how close the inverse relationship between stocks and the Dollar has been this Summer and Fall and we finally got the Dollar back below the 81 line yesterday, so of course we are rallying.  It's not about the one-day rally but about what sticks once the variables calm down – and that remains to be seen.

Shorting oil off the $89 line (/CL) is working well this morning and we never quite got to $90 yesterday, which was a good sign for our bearish bets.  The constant parade of "experts" on CNBC who say oil will fly back over $100 because Israel and Gaza are shooting at each other makes it hard to hold conviction on these bets but the bottom line is there is an insane amount of product in storage and very little demand – until and unless the supply is somehow actually disrupted (and this little skirmish simply won't do it) – our premise for an end of year sell-off in oil remains intact.  

Last Thanksgiving, they ran oil up to $102 into Thanksgiving but we were back at $92 for the December contract expiration two weeks later.  This year, we have much larger inventory builds and less optimism re. future demand – no reason to think we shouldn't at least see $85 before December 19th and the USO Dec $32.50 puts at $1 are a good way to play for that move.

Oil makes a good hedge against Global Weakness taking down the markets.  The crisis in Europe continues with no end in site, Corporate Earnings were TERRIBLE and guidance wasn't too exciting and we're going to come back from a long weekend with only a holiday-shortened month to go until we get smacked around by earnings yet again.  

NYMOEven if we do manage to get technically bullish – it certainly isn't time to throw caution to the wind.  Look how fast we worked off our oversold conditions on this bounce – that's not a good sign as another couple of days like this and we're overbought again.

HPQ is getting slammed this morning on $8.8Bn accounting charge from $11.7Bn purchase of Autonomy.  Total disaster!  To some extent, they already took a hit on this deal (and replaced the CEO who made it) but, meanwhile, their earnings suck too with revenues down 6.7%.   Without Autonomy, they are making $1.16 a share in a quarter so not bad for a $12 stock but won't stop it from going down on this news for now.

We are long HPQ in our Income Portfolio and will be taking advantage of this opportunity to press our bet.  This is not NEW news and HPQ is already down 60% from the close of that deal in August of last year, in large part because the street did not like that deal.  At the time, their market cap was more like $75Bn and that $12Bn purchase (among other things) has cost them $50Bn in market cap – at some point, you do have to say the bad news is baked in.  A fun way to play this morning's over-reaction will be to sell the Jan $12 puts for about $1.50 for a net $10.50 entry on the stock.  

Other than some fun plays like that – we're just going to sit back today and let the markets happen.  We have our levels to watch and we bottom-fished all last week so no need to chase a rally.  If we can just hold these weak bounce levels through tomorrow's close – we're really going to be upping the odds that we close November on a good note next week.  

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  1. Phil:  50dma and 200dma have been mixed up on the chart and in the text at the top of the post.  Yesterday, we just cleared the 200dma at 1382.

  2. Phil / HPQ – My ten short Jan 2013 $14 puts sold for $0.85 in October were looking okay yesterday as HPQ stock was recovering but now what do you advise?  roll down and/or out?  thanks.  I missed the vegas discussion so perhaps you can add a bit of that too.  thanks.  

  3. Lflan – Nice call on GMCR yesterday.  Hope you did more than just look !

  4. HPQ – Another bad acquisition comes back to bite them.  Jim Chanos has been short since July.  Word is that he
    was short Autonomy before the merger.   Stock now seems too cheap with the bad news (hopefully) out of the way  !  

  5. I have the Jan $12 HPQ puts sold…looking good till today.

  6. Good Morning!

  7. Phil – looking to enter long term position in in HPQ. What do you recommend? Thanks

  8. Crussell – My advice – DON'T.  They make stupid crap that people don't buy ( at BBY ) anymore.  You can have mine.
    I'm officially done with these turn-around plays that keep bleeding out more bad news.  I'm embarrassed to own them.

  9. Oil Lines

    R3 – 92.34
    R2 – 91.07
    R1 – 90.06
    PP – 88.80
    S1 – 87.78
    S2 – 86.51
    S3 – 85.50

    Yesterday's high and low – 89.80/87.52
    Fib lines – 91.21/90.42 and 86.98/86.64

  10. Good morning!

    Income Portfolio – We have 20 HPQ Jan $23 puts short, now $12.  Let's roll those to 50 2015 $15 puts at $5.65 a bit better than even.  We sold the $23 puts for $5.80 but dilute them by the 2.5x roll and that's net $2.30 (ish) per long so net $12.70 is our entry and we can begin working that off with short call sales.  At the moment, the Jan $12 calls are .50 but not worth it yet – let's give them a chance and see what they hold onto after the downgrade police come.  

    Opening not too strong so good we covered AAPL but we don't want those $560 short calls to get away from us (now $13.60) so we'll set a stop on 1/2 at $18, which would likely be AAPL over $570.  

  11. GMCR closed today my schort Jan 25p sold for 4.45 for 1.63
    They will fall hard
    Same with AAPL interesting to see the latecomers jumping on the band wagon driving this stock up to 570 this morning now 562.00
    Phil shall we close the covers from yesterday ?

  12. FU BBY!!!
    FU HPQ!!!

  13. FU PCLN!!!

  14. good morning, I have 6 Jan 15 $17 puts sold for net $3.80, now $7.20.  Would it be advisable to roll to 8 $15 puts for a $.90 credit? thanks

  15. Phil – I wasn't able to get a clear reading on your posts yesterday because of internet issues. I could be wrong but thought you recommended the weekly QQQ $63.5 puts in case the market gave up its gains which I took at $.50, now $.30. Do you suggest just rolling this to next week due to decay?  

  16. CLSN – Still going up. 

  17. crussell14 – I don't see any $63.5 puts with QQQ only $63 or i'm worng somewhere?

  18. Income Portfolio News

    BBY – Missed earnings by $0.09. Revenues inline but lowered guidance. Schulze will get in cheap now it seems!
    HPQ – Beat by $0.01 but takes an $8B charge for the Autonomy deal.
    CLF – Downgraded from Neutral to Sell at Goldman.

  19. projectwise
    $63.5 QQQ puts are weekly Nov week 4

  20. crussell14 – My mistake was looking week 5 sic…. ty

  21. Here are my lines for AAPL. They are based on the 2012 and 2011 lows so they overlap, but looking back they seem to point out to good support and resistance areas.

  22. Anyone follow SHW?  How the hell do they command a 28 PE with a 20 forward PE?  Are we really going to be using that  much more paint?
    Reminds me of a Steven Wright joke: "I bought some used paint the other day.  It was in the shape of a house."

  23. Stjeanluc,
    Is there a single news source for timely up/dngrades from brkrs? CLF item above

  24. BBY also sucking and down 8% on crap earnings.  No mention of buy-out is bigger deal than horrible numbers.  

    For the quarter ended Nov. 3, Best Buy reported a loss of $10 million, or three cents a share, versus a profit of $156 million, or 42 cents a share, a year earlier. Stripping out one-time items like restructuring charges, per-share earnings were three cents versus 47 cents a year ago. Revenue was down 3.5% to $10.75 billion. Analysts polled by Thomson Reuters recently expected per-share earnings of 12 cents on $10.73 billion in revenue.

    With BBY, we are positioned for a buy/out in the Income Portfolio – with 30 short 2014 $15 puts sold for $2.20, now $4.50 and those we need to roll to the 2015 $13 puts at $4.  We also bought 30 of the 2014 $15 calls for $6.04 and they are now $1.45 and we can roll them to the 2015 $13 calls, now $2.70 for $1.25 and that's worthwhile as it positions us to begin selling front-month calls if there's not going to be a purchase.  

    HOV having another good day and back over $5. 

    Thanks Never, I fixed the text. 

    HPQ/Terra – That ship has now sailed!  HPQ is a LONG-term turnaround play, there is nothing likely to move them higher in the short-term is what we were saying in Vegas but I do like them long-term because I believe they can be turned around.  The Jan $14 puts are not $2.60 but the 2015 $10 puts are $2.30 so, if you roll to 1.5X of those, you pocket another .85 per current share and you're in the short 2015 $10 puts for a net $1.13 so your net exposure to owning HPQ is cut from net $13.15 on 1x to net $8.87 on 1.5x (about the same $13.31 per original share).  That's the roll I'd make.  

    PCLN having another jumpy day.  Some other Momos as well.  

    Chanos/Albo – Very good on CNBC just now. 

    HPQ/Crussell – I'd sell the 2015 $10 puts for $2.30 and buy the 2015 $12/17 bull call spread for $1.25 and sell 1/2 the 2014 $15 calls for .85 so you net a credit of $1.52 on the $10 puts for a net $8.48 entry and you make up to $6.52 at $17 (428%) on just over $1 in margin so a fun way to play with a low-entry penalty. 

    FAS Money – Now with dramamine!  

    $25KP – This is my bi-weekly warning to take the money and run if you didn't like being down $15,000 last week!  

    AAPL/Yodi – See above.  We gained about $15,000 on our April calls yesterday and we locked in that gain by selling $7,000 worth of covers and IF AAPL goes up to $580 – we'll be down $7,000 on our short covers (ignoring the stop out) but up another $10,000 on our longs and well in the money for more sales at much higher strikes.  If AAPL goes down, we have a nice bit of coverage that allows us to recoup 1/2 the losses all the way back to $520.  Why would we want to change that?  

    AAPL Money – Same thing as the others.  This was horrifically down and people were freaking out.  If that was you – GET THE F*CK OUT OF THE POSITION.  These are supposed to be fun trades – not life and death positions.  If you stress over the position – it's simply not right for you.  

    Random stock/Rperi – Generally, rolling to a lower strike for a credit is a good idea.  As above with Terra (and I assume yours is HPQ too), if it nets out to about the same net commitment – why not lower the strike? 

    QQQ/Crussell – I picked them in the morning if we couldn't hold our lines.  We did and we ditched them as planned.  If you want to hedge the Nas – I'd go with the next weekly $62 puts at .19 as they have a .18 delta so 100% of the upside move would be captured and then some (as the delta would increase as you get in the money) but your loss is limited to what you put in.  

    SHW/Rain – They acquired a big distributor and the synergy is not yet reflected in their earnings projections.  

  25. Ah yes, HPQ is the random stock.  Forgot that one important detail.  3 months straight at horse sales tends to fry the ol' brain.  I'm glad to be back at the office.  Thanks for the response, Phil.

  26. Phil
    Could you be more clear on the AAPL Money Portfolio advice?! :)

  27. I have to smile every time someone refers to thanksgiving as "turkey day".  When thanksgiving comes around, King crab legs go on sale.  For 20+ years, I've been more thankful for King crab than turkey!  I'll have to start calling it "crab day".

  28. Phil:
    Do you ever get that excited about insider purchases? This was kind of interesting.

  29. Information / 8800 – I get my morning information from Bespoke but you can get that from a lot of sources like Yahoo and MSN for example.

  30. SJL,
    thanks for news refs

  31. 25KP / Phil – Interestingly enough, we just has a $25K swing since Thursday. Does that count as a 100% win now?

  32. Jab0 – to answer your question from earlier, it looks like BBY is pulling ahead nicely into first place for biggest POS.

  33. Phil Thanks re. AAPL nice projection. Stock in deed is not for the weak at heart!

  34. Who replaces HPQ in the DOW….hmmmm

  35. HPQ/Autonomy – jeez, HPQ i thought you were better than that, but when the beancounters can't even get their job right, what kind of employees are you hiring? GOOG and AAPL can't have hired ALL the competence there is…  or have the college grads of the last decade really been that bad?

  36. Opesbridge website
    We are pleased to announce that the Opesbridge website is up and running.  Please go to  Feel free to register and secure access to comment letters and performance information.
    If you have any questions, comments or suggestions please write to me at or call me at 310-275-3300.

  37. Phil,
     How would you deal with 3 sold Dec BBY $20 puts? The Schultze buy premise seems shaky now, no? 

  38. scottmi – Deloitte Touche handled Autonomy's books at that time….fwiw….

  39. Huge p-bar on AAPL all the way to 606.5. WTF!

  40. Virtual Short Strangles Portfolio updates – Let's move the 3 RUT Nov4 800 callers to 805 callers:
    - Buy to close 3 RUT Nov4 800 calls for $0.875, sell 7 RUT Nov 805 calls for $0.4

  41. Clarity/DC – Not without violating FCC standards.  :)

    Crab day/Rain – They had lobster at the first Thanksgiving (it was New England, after all) as well as eel – which no one seems to eat anymore, other than sushi.  Clams, oysters, fish, venison, all kinds of fowl – not sure why Turkey ended up the official food.  They had the first Thanksgiving in 1621 and by 1637 the colonists had earned so much trust from the Pequots that the warriors all left village, leaving the women, children and old men with the colonists at Mystic – who massacred the whole tribe and took over their land.  Crab day indeed!  

    In 1637, the Pequot tribe of Connecticut gathered for the annual Green Corn Dance ceremony. Mercenaries of the English and Dutch attacked and surrounded the village; burning down everything and shooting whomever try to escape. The next day, Newell notes, the Governor of Massachusetts Bay Colony declared: “A day of Thanksgiving, thanking God that they had eliminated over 700 men, women and children.” It was signed into law that, “This day forth shall be a day of celebration and thanksgiving for subduing the Pequots.” 

    Insiders/DC – You have to know who's buying and why.  Sometimes insiders buy stock to make a statement, sometimes for tax reasons.  You need to know whether or not the purchase is significant to the guy buying it – if Warren Buffett is a director and buys $7.4M worth of stock – it may just be a poker bet he lost….  In Tesoriere's case, he made a statement of ownership last Oct with 16M shares and sold 1M this October, presumably to book a tax loss and then bought 3.2M shares at about $2.25 in November.  Possibly nothing more than dollar cost averaging last year's 16M at $6+ ($106M+).  Still, at those numbers he's holding about 10% of the stock so just make sure he doesn't start selling! 

    $25KP/StJ – It is volatile.  The trick is to catch one of those $25K swings going in our direction AFTER we're even.  

    AAPL/Yodi – Yep, a great stock for the faithful but tests you regularly.

    Web Site/Opesbridge – Very nice! 

    BBY/Kevin – Same as Income Portfolio adjustment.  The Dec $20 puts are $8.25 and maybe they get bought out, maybe they don't but better to give it time and roll to 2x the 2015 $13 puts at $4.10 for about even so very little additional commitment but a much better position or, don't forget, you can always just move on to another stock, like MSFT or CSCO – if you don't REALLY want to own BBY long-term.

    AAPL/StJ – May have been a flush but that's a bearish one, trying to see if they can trigger any buyers before selling off.  

  42. Here is where HP made a BIG mistake – Hiring this clown…..
    Hewlett-Packard: 2010 – 2011
    On September 30, 2010, the Board of Directors of Hewlett-Packard announced the election of Apotheker as the company's Chief Executive Officer and President, effective November 1.[11] He succeeded Cathie Lesjak, who served as the company's interim CEO since August 6, following the abrupt departure of former CEO Mark Hurd. Hurd had been forced to resign after an internal investigation into a sexual harassment (that found him not guilty) claim uncovered expense-account irregularities.[12]
    During Apotheker's tenure at HP the stock dropped about 40%. It dropped nearly 25% on 19 August 2011, after HP announced a number of seemingly abrupt strategic decision: to discontinue its webOS device business (mobile phones and tablet computers), to begin planning to divest its personal company division, and to acquire British software firm Autonomy for a significant premium.[13] Over the months following Apotheker's departure, HP eventually spun-off the remaining webOS assets into a new subsidiary, Gram; backtracked on any plans to spin-off its personal computer division; and wrote-down almost $9 billion related to the Autonomy acquisition, which it indicated was due to a lack of due diligence during the acquisition process under Apotheker.[14]
    On September 22, 2011, the HP Board of Directors replaced Apotheker as chief executive, effective immediately, with fellow board member and former eBay chief Meg Whitman.[15] Though Apotheker served barely ten months, he received over $13 million in compensation: a severance payment of $7.2 million, shares worth $3.56 million, and a performance bonus of $2.4 million,[16] although the company lost more than $30 billion in market capitalization during his tenure.

  43. Phil/massacred  Try not to remind the kids on Thanksgiving…… ;)

  44. Income Portfolio updates:

    BBY - Trying to figure out our new break-even point. Our current position (Jan 15 13 P/C) has a break-even of $11.70 (selling puts for $4.00 and buying calls for $2.70). However, we carry a $6.90 loss from our previous set so that would make our break-even point at $18.60. I guess selling front-month premium is now a necessity. I doubt that any buyout could come in near $18 now.

    HPQ - Same thing here. Our break-even price with the current position (Jan 15 P) is at $9.35. However, we carry a $2.50 loss from the previous set (we also went from 20 to 50 short puts so I adjusted). So I new break-even is now at $11.85.

    Hope I got everything there.

  45. HPQ/1020 – nice summary. :-(

  46. Phil / Turkey — I don't know why it's turkey either but I wonder if that's why Ben Franklin's suggestion to apoint the Turkey as the national bird didn't fly :)  

  47. Phil please your comments on the following
    MMM Buy 3x jan15 80c @ 14.10
    sell 3x Jan15 90c @ 8.55
    sell 2x Jan15 75p @ 7.45
    sell 3x Dec12 90c @ 1.02
    net credit 121.00
    Margin 2,000.00 PM

  48. A new World Bank analysis of the global warming disaster that awaits us:

    Without further commitments and action to reduce greenhouse gas emissions, the world is likely to warm by more than 3°C above the preindustrial climate. Even with the current mitigation commitments and pledges fully implemented, there is roughly a 20 percent likelihood of exceeding 4°C by 2100. If they are not met, a warming of 4°C could occur as early as the 2060s. Such a warming level and associated sea-level rise of 0.5 to 1 meter, or more, by 2100 would not be the end point: a further warming to levels over 6°C, with several meters of sea-level rise, would likely occur over the following centuries

    Probably will be ignored by scientists like Marco (don't know how old the planet is) Rubio in the Senate.

    It's only the lives of billions of people at stake. What could go wrong? Just so frustrating. On the other hand, it looks like my kids will inherit beach front property here in South Jersey.

  49. Phil MMM obviously a set up to sell 24x monthly calls

  50. EXC/Phil – what a fall. hitting/failing their monthly 200MA and back to prices last found in 2004.

  51. Phil
     I am holding cash in my IRA, any suggestion on where to park it?


  52. Matt Taibb:  SEC Rocked By Lurid Sex-and-Corruption Lawsuit
    "The filing of this lawsuit now by Weber officially begins the raging clusterfuck portion of the story, as he and his lawyers are releasing lurid details not only about Kotz and Maloney, but about a host of other SEC and SEC IG officials. It's very strong stuff: the only things missing from this lawsuit are tales of SEC officials running white-slavery rings and snorting brown-brown off the corpses of strippers with West African rebels."

  53. qcmike/cash
    I'll give you my routing number.  I'll take good care of it for you as I do some Christmas shopping this weekend.

  54. UK FTSE +0.2%
    German DAX +0.7%
    French CAC +0.6%
    Spain IBEX -0.4%
    Italy MIB -0.3%

  55. Kustomz – So downgrades don't matter anymore since France ended in + territory.  Makes sense nowadays.

  56. INTC – New yrly low.  Almost embarrassed to admit I'm shopping for a new laptop.  I must be the only one in America !

  57. rustle123 
    Any good ideas ? 

  58. Ink, just about every market on the globe has been highjacked by Central banks. Its a new world for the time being. Next crash will be currency related.

  59. Rainman / Turkey Day:  Your Pacific coast is showing!!

  60. And because the highest tax bracket goes to 39% doesn't mean that you'll pay 39%. Once again, trying to scare people:


    Dave Weigel complains today that too many rich people have no idea how income taxes work. They've heard that Obama wants to raise tax rates on people who make more than $250,000, so they're working on ways to keep their income right at $249,000. After all, if they go over the threshold, they'd suddenly have to pay the higher rate, and it would be a net loss.

    This isn't true, of course. Obama is only proposing to raise tax rates on income over $250,000, so if your income goes up to $251,000, you only pay the higher rate on the extra $1,000. The tax bill on your first $250,000 stays exactly the same.

  61. Best tech company in the world…

    IBM Research, in collaboration with DARPA's Systems of Neuromorphic Adaptive Plastic Scalable Electronics (SyNAPSE) program, has reached another brain simulation milestone. Powered by its new TrueNorth system on the world's second faster supercomputer, IBM was capable of crafting a 2.084 billion neurosynaptic cores and 100 trillion synapses — all at a speed "only" 1,542 times slower than real life. The abstract explains that this isn't a biologically realistic simulation of the human brain, but rather mathematically abstracted — and little more dour — versions steered towards maximizing function and minimizing cost. DARPA's SyNAPSE project aims to tie together supercomputing, neuroscience and neurotech for a future cognitive computing architecture far beyond what's running behind your PC screen at the moment. Want to know more? We've included IBM's video explanation of cognitive computing after the break.

    Sorry AAPL, MSFT and others, but IBM not trying to compete in the smartphone business when there are real problems to be solved!

  62. I think  AAPL should have the PE of PCLN (24) and PCLN should have the PE of AAPL.
    It's time to play, conservatively, over the next year:
    AAPL x 2
    But take anything close to 50% of that as a huge win.

  63. Turkeys – I can never think of turkeys anymore without remembering my favorite Nassim Taleb chart:

  64. Phil, do you like INTC anymore? I'm getting sick of this position, and I can't believe I've stuck to my guns with HPQ Jan14-10 puts but I just never liked HPQ….

  65. Phil/AAPL – my chart on schwab shows a spike to a high of $606.50 at around 11am. Did anyone else see that?

  66. Spike / Ksone – We did….

  67. What, no wheeeee on oil as it reaches S2!

  68. qcmike/cash
    If IMAX can go a little lower, you might want to buy a few shares before the Hobbit's release on 12/14

  69. StJ /AAPL- Sorry. Just catching up. Thanks.

  70. Oil dropping nicely, great for Futures and USO play.  Dec $32.50 puts already $1.27.

    AAPL tested and held $555 nicely. 

    HPQ/1020 – Horribly mismanaged since Hurd left. 

    Massacre/1020 – Are you kidding?  I'm very proud when my children give their reports on the real Thanksgiving – someone has to tell these people the truth! 

    Thanks StJ!

    MMM/Yodi – Not sure if you mean to sell all 3?  Seems you'd want to own the 3 2015 $90 calls and if you pay $2,565 for 3 of those and sell 2 offsetting $75 puts for $1,490 then you're spending net $1,075 for the 3 calls and you net into MMM for about $93.58 and then you sell 3 $90 puts for $306 so you're pretty bearish to start.  What exactly are you trying to do with the trade?  MMM is at $89 and you don't believe it can gain $1 in 3 months but you do believe it gain gain $3.58 in 24?  Not my kind of trade….

    MMM fell from $94 to $86 in a week at earnings, back to $90.60 and then $86 again and now $89 – seems a bit violent for selling 5-week puts that are $1 out of the money, don't you think?  If you are going to be bullish on a stock – be BULLISH on the stock – don't take half-assed positions trying to save some money but then betting against yourself.  With MMM, you can buy the 2015 $80 calls for $14 and sell those $75 puts for $7 for net $7, which is $87 and now, at least, you are in the money and not burning premium.  Then you can sell the April $87.50 calls for $5 and now you have a basis of net $2 and your downside worst case becomes owning MMM at net $77 while, to the upside, if you get totally burned, you're in at net $82 and you make $5.50 (at least) on the spread.  If all goes well, you burn about $3 of premium per quarter and return 150% of your cash ($900) each quarter after the first and THAT's worth $3,000 of margin!  

    Beachfront/StJ – I only worry that the effects will hit us far sooner than that.  It's like when the tide changes and you built a castle on the beach – you don't need the water to get all the way up the beach to destroy your castle – you will almost certainly be wiped out by random waves ages before the actual water line gets to your moat.  That's what Sandy and other disasters are about – every year, we get encroached more and more by "outlier" storms – a relentless pounding that will clear the coasts long before they are actually a meter underwater.  You would think the Reps would care more with NC, SC, GA, FL, AL, MS, LA and TX all vulnerable to weather changes.  Nevada can become uninhabitable with a few more degrees – they barely have enough water now.

    EXC/Scott – That is amazing but still a falling knife at the moment.  

    Cash/QC – Last week I would have said AAPL.  I wouldn't do anything into this weekend but, next week, if we're still over our lines – you can do something like buy FTE, which pays a 14.5% dividend at $10.40 ($1.50) and buy the May $10 puts for .65 and sell the may $10 calls for $1.10 so you net in at $9.95 and you cannot lose and you'll get your .75 maybe in March so 7.5% for a no-risk trade – providing they don't push the dividend behind your date but, either way, you can't lose the money and, in fact, you are guaranteed to make .05.  

    Europe close mixed (thanks Kustomz) – call it flat.  

    Our volume at 12:21 is 53M on the Dow – nothing exciting. 

    IBM/StJ – Probably seems old-fashioned to them for people to want to "talk" on "phones".  They'll probably have direct links via implants for us (very Borgish) and resistance will be futile.  

    AAPL/BDC – It's just going to be hard to crack that $Tn mark.

    Good chart, Rdn:

    INTC/BDC – Nope, I said in Vegas, they and MSFT are in a very bad part of the cycle at the moment.  More so INTC – it may take them years to get their mix right again.  

    AAPL/Ksone – Just one of those "fat-finger" flushes.  See earlier comments.  

    Wheeeeeee on oil!  $86.34!!!  

    IMAX/Rustle – Now that one I do like. 

  71. ksone
    I got it $606.50. Most likly a limit that went market when nothing resonable on the bench.

  72. rustle123 

    Thank you, 

  73. NFLX – Trading above the 200 SMA.  See if it can close above it.

  74. Phil/truth  Well then, here's something to help the kids with their report on Christmas….
    Happy Holidays!  ;)

  75. According to ZH, NTSB shifting from BB to Iphone. 

  76. 50% gain on USO puts in a day means you are just greedy if you hold them.  At least good to take 1/2 off with 50% gain and stop out other half with 25% gain so you lock in 37.5% gain and then, if oil continues down to $85 or less, you still get 1/2 of the additional gains from here down.  

  77. Phil The MMM play surely is missunderstood
    I BUY 2015 80 calls x3
    I SELL 2015 90 calls x3
    I sell 2015 75 puts x2
    The above play cost nearly nothing
    My intention is to sell monthly calls first one DEC 2012 3 X 90 call @ 1.02
    So to start the complete play nets 121.00  credit So I will be selling monthly calls against the obove 2015 set up
    Obviously the stock will go up and down during that time thanks

  78. Bernanke not doing much to instill confidence. 

    Christmas/1020 – That one I'd rather let them enjoy while they can.  

    1:00 PM On the hour: Dow -0.07%. 10-yr -0.21%. Euro -0.05% vs. dollar. Crude -2.88% to $86.71. Gold -0.51% to $1725.55.

    Stocks take a decided turn down as Bernanke speaks and seems to rule out any more stimulus for the moment. Seriously? The chairman again promised QE will continue even after the economy recovers and the market wants more? DJIA -0.6%, Nasdaq -0.6%

    Ben Bernanke stays on point, promising continued QE even after the economy shows improvement. He says fiscal cliff worries are already posing a drag on U.S. growth, but a long-term deal could make "the new year a very good one for the American economy." Do we detect an optimistic turn in attitude from the chairman? 

    Now taking questions, Bernanke says the housing problem is complex with no silver bullet, but he likes the virtuous circle of rising home prices, more employment, and low rates. He's encouraged by signs mortgage originators are expanding capacity (see here). While not ruling out a cut in the rate paid on excess reserves, he says it's wrong to think of this as a major unused policy tool. 

     You can't turn inflation expectations on and off like a switch, says the Richmond Fed's Jeff Lacker, questioning fellow FOMC members' casual ideas about letting CPI perk up to higher levels. It works great in the models though. "At the vey least, the precedent set by an opportunistic attempt to raise inflation temporarily is likely to cloud our credibility for decades to come." 

    This isn't a temporary setback, writes Jeremy Grantham, the 3% U.S. GDP growth rate average of the last century is gone forever. Be wary of Fed policy – set by a man who didn't recognize a 1-in-1200 year housing bubble – and premised on the idea 3% growth is normal.

    European finance ministers are due to meet in Brussels today, when, it was once hoped, they'd finally authorize more bailout money for Greece, but that prospect is apparently looking unlikely. Ministers will also have to work out how to plug another €15B hole in the country's finances, over and above the bailout already agreed. The gap was created by giving Greece another two years to cut its budget deficit. 

    Yields remain high as Spain sells €4.9B ($6.3B) of short-term debt, above a target range of €3.5-4.5B. Spain auctions €4.2B of 12-month paper at 2.8% vs 2.82% at a sale last month and €713M of an 18-month bill at 3.03% vs 3.02%. The focus now switches to Thursday, when Spain hopes to kick off its 2013 funding program with sales of bonds that mature in 2015, 2017 and 2021

    French bond yields barely move following Moody's downgrade of France, with those for the 10-year OAT up a mere 0.2 bps to 2.09%. "The rating change does not call into question the economic fundamentals of our country, the efforts undertaken by the government or our creditworthiness," says Finance Minister Pierre Moscovici.

    Japan will spend another ¥1T ($12.3B) in trying to prevent its moribund economy from sinking into recession, adding to ¥750B of stimulus that was announced last month. However, given that Japan's GDP is around $6T, how much of an impact can the spending have?

    Homebuilder sentiment isn't just another wonky number with no predictive ability. It's had a nearly exact correlation with housing starts over the last decade, notes Joe LaVorgna, and the latest print says starts are headed far higher. XHB +50.5% YTD.

    Capacity constraints in the mortgage origination business should start to ease as banks are adding or transferring thousands of staff to keep up with booming refinance demand. It may mean lower rates for borrowers as previous low capacity allowed lenders to keep the benefits of the Fed's QE to themselves. It's also likely to lead to an even faster rate of prepayments, not what the agency mREITs near to hear.

    Caterpillar's (CAT -0.2%worldwide retail sales of machines for the three months through October +8% Y/Y, which is up from +6% for July-September but down from +13% in June-August. North America provided the strongest growth in the latest period, rising 13%, while Asia-Pacific increased 6%. October sales of power systems +1% vs -1% in September.

    The growing consumer trend toward small screens is a drag on big box retailers quite accustomed to lush margins on big-screen TVs and profits from extended warranties, according to the execs at Best Buy busy explaining away the retailer's extended slump. The candid take from the front lines can't be altogether encouraging to TV sellers such as Sony (SNE -1.5%), Sharp (SHCAY.PK), and Samsung (SSNLF.PK). (BBY earnings call)

    Heard on Best Buy's (BBY) Q3 earnings call: 1) The company still sees employee training leading to a competitive advantage as it transition to become the go-to place for hands-on electronics expertise. 2) On the retailer's price-match program, execs can't be cajoled to disclose the impact on gross margins but do note the firm's blue shirts on the floor now have the power to close sales easier. 3) The lower outlook for free cash flow factors in both lower margins and timing of inventory positions. 4) The rate of decline in net income is expected to moderate in Q4. (webcast) 

    ARM (ARMH -3.4%) has opened lower after Raymond James downgrades shares to Outerperform from Strong Buy – ARM closed near its 52-week high yesterday. Meanwhile, Intel (INTC -2.7%) is lower not only due to H-P's bleak PC and server sales data, but also due to a downgrade to Neutral from UBS, which is worried about the near-term impact of Paul Otellini's May retirement.

    Research in Motion (RIMM) is upgraded to Hold from Sell by Jefferies' Peter Misek, who says this could be a $43 stock in a year if things go well. A Jeffco survey indicates carriers have a far more positive view of the BB10 than Misek expected, and he gives the phone a 20%-30% chance of success. The Ax in RIMM, according to Notable Calls, Misek's last upgrade of the stock presaged a one-month 40% move. Shares +4.8% premarket.

    Apple (AAPL) roundup: 1) HTC's CEO calls a (Sterne Agee) estimate that the company is paying a $6-$8/unit royalty to Apple "baseless," and says HTC achieved "a very, very happy settlement." 2) Defunct mobile app startup Color's assets and engineers were acquired (previous) for $7M by Apple, TechCrunch reports. 3) Apple appears to be partnering with eBay (EBAY) on an Apple-run online store for refurbished products.

    Three lunchtime reads:

    1) Berkshire Hathaway's shopping list
    2) Another real estate bubble?
    3) Soros buying gold as record prices seen on stimulus

  79. rumors that a truce is going to finally happen in Israel;
    Prior to U.N. Secretary General Ban Ki-moon's meeting with Binyamin Netanyahu, the Prime Minister released a statement in which he addressed Ban, the U.N., and the rest of the world calling for an end to Israel's operation, saying, "The moment we draw symmetry between the victims of terror and the unintended casualties that result from legitimate military action against the terrorists, the minute that false symmetry is drawn, the terrorists win."
    Netanyahu added, "Mr. Secretary, no country would tolerate rocket attacks against its cities and against its civilians. Israel cannot tolerate such attacks. If a long-term solution can be put in place through diplomatic means, than Israel would be a willing partner to such a solution. But if stronger military action proves necessary to stop the constant barrage of rockets, Israel will not hesitate to do what is necessary to defend our people."

  80. BBY as the go to place for knowledgeable employees has a long way to go. Having just completed a search for new computer, I can say that the BBY here are terrible, 3 visits and the only person who had a clue told me she was going to work at the apple store…ended up buying at comp usa.

  81. Phil, any idea why AB is up so much, I own it and like it but cant find the reason.

  82. Since PSW LV….PGNX…look at that!

  83. Pharm/PGNX
    I was just about to ask….Keeping holding or sell?

  84. Hi Phil – Any thoughts on CLF?  TIA

  85. PGNX – Nice Pharm.

  86. CRIS/Pharm – awkward place with only $2.5 and $5 calls and puts.. but chart shows support, possible turn. you like it here in any shape or form?

  87. Pharm,  as long as you are answering questions,  how about ZIOP?
    scottmi…"The Last Word"

  88. Yes Pharm! Mighty nIce call…… :)

  89. Last Word/stockbern – Indeed! i consider it the alpha and the omega…   ;-)    Cheers!

  90. Ira portfolio update!

    Sell 1 WDC jan 32 put $1.24

    buy 1 WDC jan 25 put $0.10

  91. WDC/craigz – i presume the jan 25 put is to reduce margin requirement.. why not sell 2x jan 32/30 put spread which should just require $400 margin instead of $700 for nearly the same return ($110 v $114) or even a 3x for $165 return on $600 margin?

  92. MMM/Yodi – Oh come on, that's not even close to what you said before!  So that's an artificial buy/write of sorts and there's nothing wrong with that.

    Peace in the Middle East/Jabob – I wonder how long this one will last.  Netanyahu, of course, makes a good point.  If terrorists in Cuba were firing missiles at Miami and Fort Lauderdale 100 times a day – hard to imagine we'd "end the operation" while even one missile continued to be fired.  Of course, this is playing out just like I said it would last week so – yawn…

    BBY/Rpme – The point was supposed to be that they would train up the floor staff to be more like AAPL but I see none of it being executed so far.

    AB/Rpme – They did a presentation at a conference last week that people seemed to like.   They've changed up their mix of products and really recovered from the crash so it's a good little stock at this price – maybe someone just noticed.  

    PGNX/Pharm – Very impressive.  I hope it's not just us buying.  

    CLF/Ink – Very strangely, CLF got a GS downgrade to sell – due to a weak iron market, at the same time CS says they are upgrading the whole steel sector and GS is upgrading AKS saying they don't see negative catalysts, which one would assume would include weak iron ore demand.  So it depends what you want to believe but even if it's evil GS, they're just playing the cycle and it's not a reason not to be a long-range investor.  

    Cliffs Natural Resources (CLF-5.2% premarket after Goldman Sachs downgrades shares to Sell with a $25 price target (from $33). The firm says CLF's decision to delay its Bloom Lake expansion and curtail some operations underscores the disadvantages for high cost producers like CLF in a relatively weak iron ore market. The firm also expects lower production volume in Canada will translate into higher costs.

    Goldman Sachs raises its rating on AK Steel (AKS) to Neutral from Sell as it downgrades rival steel producer Cliffs Natural Resources to Sell. The firm believes AKS's balance sheet concerns have diminished with last week's capital raise and sees no further company-specific negative catalysts on the horizon. Shares have shed 34% in the past week. AKS +2.2% premarket. 

    Credit Suisse offers six reasons why steel stocks will soon rise, believing the recent selloff of high-beta, risky assets has resulted in oversold levels, and investors should take advantage of trading opportunities with fundamentals set to improve in coming months. The firm's Outperform rated steel stocks are RSMUSANUE and AKS.

    CLSN/Albo – Sounds interesting.  

  93. @scottmi,

    I am selling the put spread because I really want to own 100 shares of the stock.  But I want to reduce my cost basis as much as possible.  Doing my put spread reduces the cost basis to 30.86 for 100 shares.  Your play, while more profitable on a per margin basis, does not lower my cost basis enough.

  94. Phil
    MMM In deed I better speak German or Spanish with you as my set up was the same than before!!!! Glad you see my point!

  95. WDC/craig – i see. thanks!

  96. F/phil – what is your outlook for F, GM and automotives in general? look for next qtr spikes as insurance buys lots of new cars to replace Sanday-damages? Since obama is reelected, is there enough renewed hope and comsumer enthusiasm for a new car in every driveway?

  97. Autos/Scott – I think we're in a bullish trend for autos with a lot of pent-up demand to be filled (people putting off buying a new car for a few years).  I don't think Sandy is a very big deal as I think I read about 100,000 damaged (doesn't mean destroyed) and a general projection for auto sales is about 14.5M in a year so half a point MAYBE can be added by insurance-paid cars.  The key is low rates for financing and consumers willing to put an auto loan around their necks and that's all about confidence, which is improving so no reason not to go with F but I don't trust GM as they are not that different from the company that ran itself into the ground 5 years ago.  

    A nice way to play F at $10.86 is to just sell the 2015 $8 puts for .90 and buy the $8/12 bull call spread for $2.10 for net $1.20 and that puts you in F at net $9.20 with up to $2.80 of upside at $12 (233%), which is only a 10% gain from here and you are starting out $2.86 in the money so you're up 150% if they just flatline – doesn't that sound like a good deal?  Worst case is you own them for 15% off at net $9.20 and I wouldn't even sell calls against them unless they fail at $11.50 again.  Net margin on the short put sale is just .83 plus the $2.10 cash means you're in for $3 cash and margin so even if you sell .05 per month in premium – you can add 20% returns to the entire trade.  

    Very nice, maybe getting back to green into the close.  

  98. S&P green, RUT green, NYSE green, Nas green (all barely) but Dow couldn't pull it off.  

    Still not a bad day coming off such a big rally.  

  99. Netanyahu / Phil – With all due respect, Netanyahu's analogy is not accurate.  Unlike Cuba, Gaza is not a sovereign nation but a state under illegal occupation. 
    In the words of Avi Shlaim (a professor at Oxford and someone who served in the Israeli military himself), "…Israeli soldiers continued to control all access to the Gaza Strip by land, sea and air. Gaza was converted overnight into an open-air prison. From this point on, the Israeli air force enjoyed unrestricted freedom to drop bombs, to make sonic booms by flying low and breaking the sound barrier, and to terrorise the hapless inhabitants of this prison."  I think his article below, written during the last Israeli-Gaza conflict, gives a fair breakdown of the situation…including the fact that Hamas are not good people.

    I've included a couple of his key points below but the rest of the article can be accessed at:  http://

    'I write as someone who served loyally in the Israeli army in the mid-1960s and who has never questioned the legitimacy of the state of Israel within its pre-1967 borders. What I utterly reject is the Zionist colonial project beyond the Green Line. The Israeli occupation of the West Bank and the Gaza Strip in the aftermath of the June 1967 war had very little to do with security and everything to do with territorial expansionism. The aim was to establish Greater Israel through permanent political, economic and military control over the Palestinian territories. And the result has been one of the most prolonged and brutal military occupations of modern times.
    Four decades of Israeli control did incalculable damage to the economy of the Gaza Strip. With a large population of 1948 refugees crammed into a tiny strip of land, with no infrastructure or natural resources, Gaza's prospects were never bright. Gaza, however, is not simply a case of economic under-development but a uniquely cruel case of deliberate de-development. To use the Biblical phrase, Israel turned the people of Gaza into the hewers of wood and the drawers of water, into a source of cheap labour and a captive market for Israeli goods. The development of local industry was actively impeded so as to make it impossible for the Palestinians to end their subordination to Israel and to establish the economic underpinnings essential for real political independence.
    Gaza is a classic case of colonial exploitation in the post-colonial era. Jewish settlements in occupied territories are immoral, illegal and an insurmountable obstacle to peace. They are at once the instrument of exploitation and the symbol of the hated occupation. In Gaza, the Jewish settlers numbered only 8,000 in 2005 compared with 1.4 million local residents. Yet the settlers controlled 25% of the territory, 40% of the arable land and the lion's share of the scarce water resources. Cheek by jowl with these foreign intruders, the majority of the local population lived in abject poverty and unimaginable misery. Eighty per cent of them still subsist on less than $2 a day. The living conditions in the strip remain an affront to civilised values, a powerful precipitant to resistance and a fertile breeding ground for political extremism.'

  100. Pharm
    what are your thoughts on REGN?

  101. hey shawnk—Gaza is occupied by Hamas not Israel. They gave it to them years ago in order to have peace. Maybe, Avi should complain to Hamas???
    "Peace of us means the destruction of Israel. We are preparing for an all out war, a war which will last for generations.
    ~Yasser Arafat~
    Throughout his authorized biography (Alan Hart, Arafat: terrorist or peace maker) Arafat asserts at least a dozen times: "The Palestinian people have no national identity. I, Yasser Arafat, man of destiny, will give them that identity through conflict with Israel."
    ~ Yasser Arafat ~
    "The Palestinian people does not exist. The creation of a Palestinian state is only a means for continuing our struggle against the state of Israel. For our Arab unity. In reality today there is no difference between Jordanians, Palestinians, Syrians and Lebanese. Only for political and tactical reasons do we speak today about the existence of Palestinian people, since Arab national interest demand that we posit the existence of a distinct 'Palestinian people' to oppose Zionism".
    ~ Zahir Muhse'in ~

  102. "There will be no peace until they will love their children more than they hate us."
    -Golda Meir-
    'If the Arabs put down their weapons today, there would be no more violence. If the Jews put down their weapons today, there would be no? more Israel'
    ~Benjamin Netanyahu~

  103. Dennis Miller on Palestinians

    For those who don't know, Dennis Miller is a comedian who has a show called Dennis Miller Live on HBO. He is not Jewish. He recently said the following about the Mideast situation:

    "A brief overview of the situation is always valuable, so as a service to all Americans who still don't get it, I now offer you the story of the Middle East in just a few paragraphs, which is all you Really need. Here we go:

    The Palestinians want their own country. There's just one thing about that…
    There are no Palestinians. It's a made up word. Israel was called Palestine for two thousand years. Like "Wiccan," "Palestinian" sounds ancient but is really a modern invention. Before the Israelis won the land in the 1967 war, Gaza was owned by Egypt, the West Bank was owned by Jordan, and there were no "Palestinians."
    As soon as the Jews took over and started growing oranges as big as basketballs, what do you know, say hello to the "Palestinians," weeping for their deep bond with their lost "land" and "nation."

    So for the sake of honesty, let's not use the word "Palestinian" any more to describe these delightful folks, who dance for joy at our deaths until someone points out they're being taped. Instead, let's call them what they are: "Other Arabs Who Can't Accomplish Anything In Life And Would Rather Wrap Themselves In The Seductive Melodrama Of Eternal Struggle And Death."

    I know that's a bit unwieldy to expect to see on CNN. How about this, then:
    "Adjacent Jew-Haters." Okay, so the Adjacent Jew-Haters want their own country. Oops, just one more thing. No, they don't. They could've had their own country any time in the last thirty years, especially two years ago at Camp David. But if you have your own country, you have to have traffic lights and garbage trucks and Chambers of Commerce, and, worse, you actually have to figure out some way to make a living.

    That's no fun. No, they want what all the other Jew-Haters in the region want: Israel. They also want a big pile of dead Jews, of course --that's where the real fun is — but mostly they want Israel.

    Why? For one thing, trying to destroy Israel – or "The Zionist Entity" as their textbooks call it — for the last fifty years has allowed the rulers of Arab countries to divert the attention of their own people away from the fact that they're the blue-ribbon most illiterate, poorest, and tribally backward on God's Earth, and if you've ever been around God's Earth, you know that's really saying something.
    It makes me roll my eyes every time one of our pundits waxes poetic about the great history and culture of the Muslim Mid east. Unless I'm missing something, the Arabs haven't given anything to the world since Algebra, and, by the way, thanks a hell of a lot for that one.
    Chew this around and spit it out: Five hundred million Arabs; five Million Jews. Think of all the Arab countries as a football field, and Israel as a pack of matches sitting in the middle of it. And now these same folks swear that if Israel gives them half of that pack of matches, everyone will be pals.

    Really? Wow, what neat news. Hey, but what about the string of wars to obliterate the tiny country and the constant din of rabid blood oaths to drive every Jew into the sea? Oh, that? We were just kidding?

    My friend Kevin Rooney made a gorgeous point the other day: Just reverse the Numbers. Imagine five hundred million Jews and five million Arabs. I was stunned at the simple brilliance of it. Can anyone picture the Jews strapping belts of razor blades and dynamite to themselves? Of course not.

    Or marshaling every fiber and force at their disposal for generations to drive a tiny Arab State into the sea? Nonsense. Or dancing for joy at the murder of innocents? Impossible. Or spreading and believing horrible lies about the Arabs baking their bread with the blood of children?


    No, as you know, left to themselves in a world of peace, the worst Jews would ever do to people is debate them to death. After September 11th our president told us and the world he was going to root out all terrorists and the countries that supported them. Beautiful. Then the Israelis, after months and months of having the equivalent of an Oklahoma City every week (and then every day) start to do the same thing we did, and we tell them to show restraint.

    If America were being attacked with a bus explosion every day, we would all very shortly be screaming for the administration to just be done with it and kill everything south of the Mediterranean and east of the Jordan.
    Please feel free to pass this along to your friends. Walk in peace! Be Happy!"

  104. Craigzooka – you can sell naked puts in the IRA account?

  105. Jabo -  Didn't mean to set off a post war :) .  Just wanted to share an alternate point of view regarding Bibi's analogy.  I respect your opinion but would like to point out that there were people living in what is now Israel [hence why we have refugees] when the state was created so there were Palestinians.  You can ask Chomskey or Edward Said (if he was alive) about that.
    Jews have been one of if not the most persecuted groups in history and hence I understand Israel taking precautions to make sure history doesn't repeat itself.  However, it was Hitler and Stalin that killed millions of Jews prior to the creation of Israel, not any Muslims or Arabs.
    Muslims actually fought side-by-side with Jews during the crusades and the two groups got along well in Jerusalem.  I don't want to turn this into a political or religious thread so I'll leave it at that. 

    Disclaimer:  Author owns shares in Islam, i.e. I'm Muslim.

  106. Another good column from Bruce Bartlett:

    Although it is commonly believed that the Laffer curve – the idea that tax cuts pay for themselves – is the core Republican idea about tax policy, this is wrong. The true core idea is something called starve-the-beast – the idea that tax cuts will force cuts in spending precisely because they reduce revenue. But there are slight indications that some conservatives have awakened to the reality that not only does starve-the-beast not work, but it also leads to higher spending. [...]

    During the George W. Bush administration, spending increased sharply even as revenue collapsed. Revenue as a share of G.D.P. fell to 17.5 percent in 2008 from 20.6 percent in 2000, yet spending rose to 20.1 percent in 2006, before the economic crisis hit, and 20.7 percent in 2008, from 18.2 percent of G.D.P.

    It's incredible that these guys still propose plans that spend 20% of GDP while we collect 15% of GDP in taxes but still refuse to raise taxes and expect to lower the deficit. I guess it's the new math…

  107. @biodieselchris,  you can sell naked puts, but they must be cash secured.  That is why I am buyin the way out of the money junk for $0.10.  That 10$ buys us 2500 in margin back.

  108. As far as BBY goes, what big box store is their competition?  Out here in Vegas we have Fry's but other than that, Sears and ….???  If BBY can get that customer experience thingy going….

  109. Fry's is very small and limited here in CA so not real competition for BBY.  At this point, I don't think there is any real brick and mortar competition for BBY, only smaller guys like RadioShack.

  110. WDC / CraigZ – I know you discussed selling Put's for premium in Vegas to lower cost basis.  However, the WDC Put at .10 yields me $10 but costs me $7.00+ in commissions.  I appreciate your posts and the idea to sell premium to lower costs though.  Keep up the good work Craig.

  111. Phil…HOV     Sld Jan 15 3c @ $2.40,now 2.20 and running.Time to move out and roll to the 5c @ 1.50?I think yes,but I have a lot to learn. THX

  112. WDC / CraigZ – Now I get that BUY of the Put… It is the margin thing!  I am still learning.  Thanks

  113. BBY / Jfaw – They have competition from Wal-Mart, Target and others for some of the stuff they sell. And specialty retailers like GameShop for games for example. Even wholesalers like Sam's, Cotsco and BJ's sell some electronic stuff cheaper. And for the high end where the margins might be higher, some local stores do good business with much better service.

  114. Pretty tough reading today's action… I think that we are still hostage to the politics in Washington and the shenanigans in Europe. 

    Due to the holiday on Thursday we have some numbers around the open tomorrow:

    8:30 AM – Jobless Claims
    8:58 AM – US PMI Preliminary
    9:55 AM – U. of Michigan Confidence
    10:00 AM – US Leading Indicators

    Also we get oil and gas inventories tomorrow (10:30 AM and 11:00 AM)

    We also get the Bank of England Minutes and tomorrow night the HSBC Flash Manufacturing PMI. Then on Thursday while our markets are closed, PMI from the  Euro-Zone and Germany. And finally on Friday Germany's GDP. 

    We could get some market moving news. I am going to guess that we go up or down from here!

  115. BBY / All – I'm trying to figure out the likelihood of a buyout by Schulze and would appreciate input from PSW members.  Assuming the current board and CEO are reasonable people, wouldn't they jump at a $17+ offer if he's able to line up the financing?  I'm optimistic for the following reasons but please let me know if there are holes in my arguments and/or whether I'm neglecting any other crucial factors.
    -Even if BBY goes up a dollar tomorrow to $13 (and roughly stays there for the next 30 days) , a $16 buyout would mean a 30% premium.  With declining sales and profits (which might decline further if they match online retailers during the holidays), I don't think they see too much near-term upside so why not take the deal?
    -For Schulze, (in Phil language) if he really wanted to own BBY when it was $26, this is his chance to buy it for a 35% discount WITHOUT having sold puts.  Furthermore, I don't think the deal has to even make financial sense for Schulze.  For someone who spent ~46 years leading the company from a small business to juggernaut, he probably has developed an emotional connection with his "baby" and wants to save it. 

  116. Phil AND Lflan
    need your opinion on the following:
    i averaged into the Aapl  Jan 2013 $600/650 BCS over a period of about 2-3 months in the summer with an average price of $20. I sold them all for $8.60 when AAPL was at $556 and going down.
    i had planned to buy back in but missed all the action last Friday.
    since I had a ' semi boat load' of  spreads, I would like to get back in and hopefully make most of the upside I would have had with the Jan 600/650's
    however, I am  less confident of AAPL making it to 650 by Jan, given the trading action of past two months.
    what do  you suggest? April spreads? Which ones? 
    I don't want to go into 2015 if I can help it…too much uncertainty?

  117. Germany's Schaeuble: No Agreement Among Eurogroup on Greece

  118. Randomness – some words on Randomness

  119. Gaza/Shawn - The Gaza exists as part of a treaty with Egypt from a 1948 war in which Egypt encroached into Israel and took their land - Gaza was a piece they didn't give back but chose instead to dump a "gypsy" population of Arab refugees there – the Palestinians.  So let's just make sure we have the history right before we start acting like Israel is trying to take something over.  Israel took over the land in the 1967 was but gave it back to the Palestinians in 1993 (Oslo Accord) and withdrew their troops (and, forcibly, their own citizens) in 2005 – after which the Palestinians quickly lost control and it became a terrorist state run by Hamas.  Israel's logic in occupying Gaza was essentially the same as the logic with which the US occupied Iraq and Afghanistan – better to give the terrorists some troops to aim at over there, than let them focus on civilians back home.  

    The fact that Avi Shlaim says something is true doesn't make it true.  I appreciate what he has to say and I don't know the circumstances under which he came to hate Israel so much but it's a clear point of view in his articles.  Are there 10 writers like this?  No.  5?  No?  Three?  I don't see them.  I see this guy lauded as the foremost authority on Israel's evil intentions over and over again but I withhold judgment as I don't have enough facts to understand why this is.  After Israel withdrew, hundreds, maybe thousands of Palestinians were killed in fighting between Hamas and Fatah – those people just can't catch a break it seems but no one ever seems to mention that rampant killing. 

    Egypt also had closed the boarders with Gaza but only Israel gets blamed for the conditions inside the strip where they inspect trucks for weapons but don't actually block commerce.  Arguments against a blockade seem kind of ridiculous when the evidence that Gaza is still importing missiles drops on Israel by the dozens every day, doesn't it?  I guess Israel should be sending in food and medicine trucks and just steer around the bombs and missiles to deliver aid and look like nice guys.  The only problem like that is this is what they do to people who "sympathize" with Israel in Gaza.  Also, Gaza has 1.5M people, the whole Nation of Israel only has 7M – kind of hard to support that many people and very hard to get motivated to do so when the 1.5M want the 7M dead.  

    Anyway, it's all very complicated and no different than Serbia/Croatia to me – who the Hell can figure out who's "right" (if there is such a thing).  What's not right is firing rockets at civilians – I would think people could agree on that one but, for some reason, there seems to be some debate as to whether Israel has a right to defend itself from such abuse.  Gaza is no longer occupied by Israel – there are no Israelis trying to settle there but in no way has that improved the situation – it has simply allowed terrorists to take over the region and step up their missile attacks to the point at which Israel felt compelled to take action.  

    Starve the beast/StJ – Another Reagan brainchild that should have run it's course decades ago but is still a core GOP policy.  

    BBY/Jfaw – That's the sad thing, they really don't have much in the way of competition now that Circuit City and Comp USA went away (for the most part).  The big box guys are in their space and RSH kind of but no real competition like them nationally.  There are regionals like PC Richard or Fry but BBY is doing $50Bn in sales – that's pretty damned big – about the same as all of AMZN so maybe AMZN does $10Bn in electronics as a national competitor and they have to grow 20% to take 4% away from BBY (if it were a direct take).  BBY's biggest problem is they have been CD/Movie and TV-centric with PCs/Laptops in 3rd place for their stores and all 3 of those segments have severely underperformed.  They don't even sell speakers (I'm sure they have some, but no focus) or stereos and appliances have also been lame lately but they are picking up and the rest will cycle around eventually – they just have to find a better mix for their stores but they certainly have the muscle to do it.  

    HOV/490 – So you are just selling calls?  I wouldn't want to be bearish on HOV long-term.  

    Dollar drove up to 81.25 and that's knocked the Futures down about 0.4% but holding there.  Seems to be the no agreement on Greece thing.

    Big Chart with a nice, bullish consolidation pattern as long as we don't blow it. 

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    8:30 Initial Jobless Claims

    9:00 PMI Manufacturing Index

    9:45 Bloomberg Consumer Comfort Index

    9:55 Reuters/UofM Consumer Sentiment

    10:00 Leading Indicators

    10:30 EIA Petroleum Inventories

    11:00 EIA Natural Gas Inventory

    BBY/Shawn – I think Shulze sincerely wants to buy them but is having trouble getting the money together and BBY's board was not too enthusiastic about being taken private either.  Logic doesn't play into it as the current management is not likely to survive a takeover and times are tough when you are looking for a 7-figure salary with a massive expense account so they'd rather keep things going as they are for as long as they can.  Don't expect a board to really act in a company's best interest if there is less money in it for them. 

    AAPL/Maya – Your time-frame is way too short – it's the short-term uncertainty you should fear – not the long-term value.  AAPL was under $600 all summer and you made a BET that it would go over $650 and just because you mitigated your premium by selling $650 calls doesn't mean you weren't still the sucker paying $20 of premium for a position that was out of the money.  What you were thinking when your spread went from being $50 in the money (and up at least 50%, I'm sure) to being $100 out of the money – I have no idea but don't you think your temperament is not suited to this kind of trade if you caught a $150 move up between July and September but still managed to lose over half your money on the trade in the end?  I ONLY like long-term AAPL spreads IF you can sell front-month calls against them to pay for them.  Just taking a target spread and waiting to see if you get lucky or not is nothing more than gambling and, if your personality is such that you can't take a short-term profit but will take a short-term loss – then the only way you can win is if everything goes perfectly for you – and how likely is that?  

    Good article Scott.  

  120. Phil/aapl
    inetresting analysis and I have to re-evaluate why I held on to it- maybe cos I did not think it would fall that hard as the fundamentals looked good all along.
    however, something should still have been done.
    all right—- reflection time!

  121. Jabo – REALLY!? Quoting the sellout Dennis Miller? Did he even graduate high school!!? Not someone Id want to quote. Plus, the guy used to be an annoying liberal comedian who always bashed the right in various ways (all not funny) and the past 5 years or so he's switched to the right and bashed the left (probably b/c there is more money being a conservative 'comedian').
    Another lovely day in this sh!tty country .  Got to give props to the Afghan security guards who did their jobs well. This was a small one though b/c I didnt even hear it and it is 1/4 mile away from my location…Sigh…  I hate religion. 

  122. BBY – I have the Jan14 $15 Short Puts.  Order placed to roll to Jan15 with a small credit.

  123. Good morning!  

    Futures back to flat but not expecting much on what should be a light trading day.  

    Dollar calmed down – back to 81.07 and oil back to $87.50. 

    Miller/Jrom – I think it's easier to be a Conservative comedian – you don't actually have to be funny, just hit those talking points and you'll have guys like Rush drooling to have you on the show where all you have to do is combine Obama and Muslim into a sentence and they'll be rolling in the aisles.  Dennis and Rush even compete for the same sponsors - like this gold company that feeds the paranoid Conservative investor crowd.  


    With precious metals reaching record highs in 2011, Dennis Miller will be spreading the word to let individual investors know that they can take their existing IRA or old 401(k) plan and roll it over into physical precious metals without any tax consequences.


    "If you want to include physical gold in your existing IRA or old 401(k), the only company I trust with the process is Regal Assets," said Dennis Miller.


    Hope you get out of there soon Jrom – doesn't sound like things are getting too much better. 

    Futures taking a more positive turn now – not sure why.  

    Oh, I see CNBC's plan now.  When there is a deal and the fiscal cliff is averted, CNBC will claim that Congress "rose above" partisan politics thanks to their campaign and then they will attempt to take credit for influencing it for the next 4 years.  There's already a subtle change in their language as they hammer their little talking point over and over this morning.  

    3:55 AM Asian shares rise, helped by strong U.S. home-building data overnight, with Japanese shares continuing to benefit from the weak yen despite wretched trade figures. However, European stocks fall after eurozone finance ministers again delay the release of more bailout cash for Greece. Japan +0.9%, Hong Kong +1.4%, China+1.1%, India +0.6%. Euro Stoxx 50 -0.4%, London -0.2%, Paris-0.4%, Frankfurt -0.3%, Madrid -0.7%, Milan -0.2%.

    6:00 AM Overseas: Japan +0.87%. Hong Kong +1.39%. China+1.07%. India +0.72%. London -0.17%. Paris -0.12%. Frankfurt-0.05%.

    6:57 AM Stock index futures are about flat, erasing a sizable overnight loss caused by the failure of the EU to agree on to release the next Greek bailout tranche. European stocks and the euro also reverse early losses, knowing even if agreement didn't come last night, it's still almost certainly coming.

    EU Stumbles on Greek Debt Reduction After Clash With IMFEuropean finance ministers failed to agree on a debt-reduction package for Greece after battling with the International Monetary Fund over how to nurse the recession- wracked country back to fiscal health. With creditors led by Germany refusing to put up fresh money or offer debt relief, the finance chiefs were unable to scrounge together enough funds from other sources to help alleviate Greece’s debt burden, set to hit 190 percent of gross domestic product in 2014. More than 11 hours of talks broke up early today in Brussels with praise for the Athens government’s economic overhaul and a declaration that an accord on the financing package will wait at least until a hastily arranged meeting of the ministers on Nov. 26.

    While Eurogroup Chairman Jean-Claude Juncker publicly blames technical details for the failure to agree on how to reduce Greece's debt burden, German finmin Wolfgang Schaeuble reportedly says the Troika remains divided over how to fill a €14B hole in the country's finances through 2014, and whether to use 2020 or 2022 to define its debt sustainability.

    Fitch reiterates that it will review its AAA rating on France in 2013, just two days after Moody's joined S&P in stripping the countryof the top rating.

    The BOE's Monetary Policy Committee discussed cutting interest rates to below 0.5% at its meeting earlier this month, but in the end voted 9-0 to make no change, due to fears that such action could weaken bank balance sheets and undercut lending. The minutes show that the MPC is unlikely to cut rates "in the foreseeable future." The panel also voted 8-1 to maintain the bank's bond buying scheme at £375B. - That's as much as the Fed in an economy 1/6th our size!

    MBA Mortgage Applications: -2.2% vs. +12.6% last week

    Japan's trade deficit almost doubles Y/Y to ¥549B ($6.7B) in October, well above consensus of ¥360B. Exports -6.5% to ¥5.15T, shipments to China -11.6% due to the islands dispute, to the EU -20.1%, and to the U.S. +3.1%. Imports -1.6% to ¥5.7T. Mizuho economist Norio Miyagawa is optimistic despite the figures. "I believe Japan's exports will recover gradually as the U.S. and Chinese economies are picking up," Miyagawa says.

    Japan's LDP, which is expected to win the country's election on Dec 16, says it would change the law governing the BOJ in order to bolster co-operation between the government and the bank. The LDP, whose leader Shinzo Abe has called for much more powerful easing, would also set a 2% inflation target and strengthen Japan's effective control of highly disputed islands in the East China Sea.

    China, Japan and South Korea intend to start a first round of talks next year about a free-trade agreement despite the row over islands in the East China Sea. Chinese Vice Foreign Minister Fu Yin played down the impact of the spat, saying, “We do not want to give overemphasis to the territorial disputes and the differences." The deal is key to a 16-country trade pact called the Regional Comprehensive Economic Partnership.

    The DOJ is objecting to a plan to pay Hostess Brands execs $1.8M in retention bonuses while the company is wound down. It's the latest example of Justice trying to prevent such payments to managers at failing businesses. "They're objecting more and they're finding more success," says Lawrence Friedman, a former director of the Department's Trustee Program. - I love that – they run the company into the ground and they want bonuses to stay on during the bankruptcy.  I'd start by taking their salaries back!  

    A judge has to decide how much Microsoft (MSFT) should pay for the use of Google (GOOG) wireless and video patents following the end of a week-long trial yesterday. Google wants $4B a year, although Microsoft reckons that $1M+ is all that Google deserves. A small verdict would weaken the Californian company's position in negotiating deals with other rivals.

    The FTC is reportedly uncertain that it can successfully sue Google (GOOG) for placing links to its products and services above those of its competitors in search results. The commission's uncertainty is based on doubts that it can prove that consumers are hurt by the practice. The speculation comes just over a week after a report said the FTC was pressuring Google to agree to a settlement.

  124. Whew!….sporting quite the look after an evening bender of Roy Rogers and smores……
    Happy Thanksgiving Everyone!   :)