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Final Friday of 2012 – Cliff Talks Down to the Wire – Wire Attached to Debt Bomb

Peter Broelman - Australia - Happy New Fiscal Cliff - English - fiscal cliff,new year,happy new year,2013I'm tired of talking about the Fiscal Cliff

At this point, it's a binary event that will or will not get fixed by Monday.  Monday is the last day of the year and the markets are open so still plenty of time to get those last trades in.  Yesterday's down and up action was hysterical but just what we predicted in the morning post, when I said:

Be very careful out there as the markets are in no mood for thinking – they are simply reacting (or over-reacting) to whatever the latest rumor is out of Washington.  We should talk our levels seriously and hedge if we need to but cashy and cautious is the watch-word coming into the long weekend as this thing could go either way – sharply!

Our opening hedge in Member Chat was the DIA March $124 puts at $2.05, which topped out in the afternoon at $2.45 for a quick 19.5% gain but fell back to $2.23 at the close as the markets sharply recovered.  I still like those hedges if they get cheap again.  Also in the morning Member Chat, we discussed a more serious TZA hedge, as noted in yesterday's post. 

While 2012 was a very exciting year in the markets, we're hoping 2013 won't be so much so we can focus more on long-term investing.  As noted in this Financial Planning Flowchart from BusinessWeek, it's difficult to focus on what matters in the long-run when your head is always kept busy with day-to-day nonsense like worrying about Fiscal Cliffs and Retail Sales, etc.  

It happens to me too – if it's important to talk about the Fiscal Cliff, then that's what we talk about but that means we don't have time to talk about other important things like "7 Steps to Consistently Making 30-40% Annual Returns" – which is one of the many useful articles in our Education Archives.  When we had our PSW Conference in Las Vegas this November, most of what we talked about was long-range investing – not day-to-day trivia.  When people have a chance to get away from the madness of daily market moves, they are much better able to focus on their future.  That's why these conferences are so valuable.  

 According to Seeking Alpha: "'Uncertainty' is a buy signal, not a sell signal," is among Josh Brown's top investing lessons for 2012. "Your passing superficial knowledge of the risk factors of a given thing, gleaned from newspapers and TV, and repeated ad nauseam … are priced in. Tell me something I don't know."

Uncertainty is the only thing that's certain at the moment and we remain "Cashy and Cautious" into the end of the year as we patiently wait for this Fiscal Cliff to resolve itself.  As noted by Brown, if the markets tank, it's likely to be an over-reaction and we'll be bringing our own cash off the sidelines to pick up some bargains and the VIX hitting 20 yesterday is just a preview of how much fun it will be for us to sell long puts on beaten-down stocks as the retailers panic out of their positions.  

Martin Sutovec - Slovakia - Last Year Review - English - Last Year Review, New YearA quick review of Predictions for 2012 show how futile it is to predict 2013.  Adam Parker of Morgan Stanley had an S&P target of 1,167 – very specific and very wrong.  Goldman Sachs originally predicted 1,250 but kept raising it during the year to make themselves right later on.  UBS had 1,325, BCS 1,330, CS 1,340, BAC 1,350, which is funny because they were our one trade for 2012 and, based on what we expected their performance to be, we had predicted 1,450 for the year so we were a closer than BAC, using BAC as a basis for our estimate.  

Oppenheimer and S&P Capital IQ called 1,400 and I guess we should listen to S&P when they predict where the S&P will be as we may yet drift into that mark on the button on Monday.  JPM was closer to us at 1,430 and Federated Investors matched us at 1,450.  Keep in mind we began the year at 1,250 so these were pretty aggressive estimates.  If we call 1,400 the proper level for the end of 2012, then that's up 12% for the year and it will take all of next year to match that performance and take us back to 1,560 – the S&P's 2007 highs.  

And then we're back to our long-term bullish premise.  Corporate Profits are higher than they were in 2007 and there is LESS risk going forward than we had in 2007 so the S&P should be HIGHER once all the negativity calms down.  This isn't about being overly optimistic but about the fact that there is no AIG about to lose $100Bn next week – there are not major brokerages on the verge of collapse – we don't have a massively overbought housing market and the consumers are not hopelessly in debt.  Quite the opposite, in fact, they are saving like there IS going to be a tomorrow:

While it's not a great thing if Consumers tighten their belts and spend less (think Japan-style deflation), this is the OPPOSITE problem of what we had in 2008 and there is now too much money sitting around in bank vaults with not enough lending activity going on.  I have long spoken to our Members about the growth in the supply of money (and those savings deposits can be levered 10x by the banks if they ever loan them out) and the slowing of the velocity of money that will, ultimately, lead to inflation when it begins to unwind.  2013 may not be that year but we're certainly a step closer to the inevitable and that's going to be a fantastic time to be in the markets.  

Looking forward to a very happy new year and wishing you all the best in 2013, 

- Phil

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  1. Good Morning!

  2. Good Morning Phil:
    To provide clarity on my question from yesterday at 1:05 PM of how to manage my AAPL positions.
    Presently holding:
    AAPL Jan 15 600 Call/370 Put Strangle  -3/-3
    AAPL Jan 15 600 Call/450 Put Strangle  -3/-3
    AAPL Jan 15 600 Call/350 Put  Strangle -2/-2
    AAPL Jan14 540 Call 5
    Going into earnings,  AAPL will be played and hedge funds giants will re-position.  yes/no? 

  3. jabo – Not sure. I do know that increased funding for mental health needs to be addressed…..
    Yeah, those Utah teachers looked thrilled, didn't they?…..

  4. Tim Eagan - Deep Cover - NRA World - English - nra,guns,kids,violence,play

  5. p53 protein/zero – thanks for the article, I missed it in the NYTs.  As the article noted, the drug companies have been working on that for many, many years, and if they can figure things out, it will be a very big deal.

    It is my opinion, and take it as that, that this will be a very small piece of the puzzle.  'Cancer' is a crafty disease, that can modify its existence inside you, and go a different direction.  When doctors say they have excised all of the tumor out of one after surgery, that is a misnomer, as they do not know.  Cancer cells evade chemo as well.  In essence, the disease has ways to defend itself against invading substances (as do viruses and bacteria), and I do not think this will be any different.  Time will tell.  Hence my focus on the bunker buster bombs that I am now invested in, SGEN, CGEN, CLDX, IMGN, PGNX etc. 

  6. SPY/ Phil: I have the Jan 145/150 BCS and I am thinking of rolling to Feb 140/145 for a ND of $1.83.  I plan to keep the Jan 150 and let the premium burn off it.   Any revisions?

  7. Good morning!  

    Shooting/1020 – Yes, he had no gun and went into a place where many trained men had guns – the NRA's master plan in action already.  

    AAPL/RMax – I think naked short strangles are very dangerous.  You have 8 short AAPL 2015 $600 calls so if AAPL is at $800 you lose $160,000.  Is that really your intention?  Your balance is 5 long 2014 $540 calls and, of course, the short puts but they are averaging $40 so your upside risk is still pretty big, especially as your longs don't last as long as your short positions.  I'm not a big fan of this kind of trading, not with a stock as volatile as AAPL.  If you have no actual opinion on what AAPL will do – don't play them.  If you are bullish on AAPL, however, BE BULLISH on AAPL – not wishy-washy.  Do you realize, for example, that  you can buy the 2015 $300/400 bull call spread for $70 and sell the $350 puts for $35 to make net $35 on the $100 spread that's $112 in the money to start.  Your risk is owning AAPL at net $435, which is lower than 3 of the puts you already sold.  If you just do 10 of those spreads, your net margin is just $35,000 on the short side plus the $70,000 cash on the spreads and you make $65,000 if AAPL holds $400 through Jan 2015.  Not a bad return and if you are worried about that trade coming in – then why on Earth would you be in the one you have, where you are burning $28,000 worth of premium on just the $540 calls this year?  

    Cancer/Pharm – If they figure that out we can bet on SS going bust as less people die and other fun demographic things.  

    SPY/Newt – Make sure you have good stops on your short $150s and also make sure that it's worth spending $1.83 a month to make a max of $5.  The problem with short-term bull call spreads is they are very targeted, not too much better than naked calls because, if you miss, you miss and that's it.  You're still making a very targeted bet and you have no offset.  

    Dollar was rejected at 80 and back to 79.75 but holding that line.  Markets don't seem like they know what they want to do but seems like there are buyers around so far.  

  8. Phil – Is there a "New Jersey Shooting Sports Council" as in Utah, to better train our Police?….omg….

  9. phil,

    glad you are back in the proverbial saddle w/o the stones.
    am liking the aig and wanted your thoughts into 13 with the govt out. 
    i was thinking jan 15 30- 40 bcs maybe even go to 45 and sell the 30 puts for net .40 credit. …..going out to the 45 costs 1.10 or so……
    your thoughts…….tks

  10. VIX back to 20.50 and TLT at $123.25 but oil still at $91 and nat gas flying at $3.74 although gold is weak at $1,656 and silver just failed $30 briefly (but is hanging on).  Not sure what to make of this as it's mixed signals but Dow holding 13,000 is key – as is S&P 1,400, of course.  

    AAPL now having trouble getting back over $512 – not cool. 

    Shooting/1020 – To be fair, nothing much happens in Gloucester so they might have been napping.  Also, the police were only injured and they killed the shooter but would have been nicer if they Tasered him – still waiting for that to catch on. 

    Thanks Mill but those were just tests, still got more stuff ahead of me.  On 2013, once this cliff nonsense goes away and assuming we survive Jan earnings, the market can easily get back over this year's highs.  Keep in mind we're severely underperforming Europe this year and that's ridiculous.  I didn't mean literally I like AIG, they're a very tough one to play – I was just pointing out that we don't have those kind of downside shockers lurking like we did in 2007.  With AIG – I'd wait for a sell-off back below $30 and then sell long $25 puts and see if I get a very cheap entry for round 1.  

  11. Ah, there's those buyers again.   Snapped back nicely to flat again.  

  12. what popped the mkt?

  13. Oil/phil – any oily expectations for the EIA inventories?

  14. Anyone playing a "crap shoot" trade to bet on Fiscal Cliff resolution?  I believe they are waiting until the last minute to fix it, or kick the can down the road.
    Any good ideas?  Long FAS weekly calls, or TNA, TQQQ?

  15. 1020 PSA – Don't be grumpy – get tested.
    Mr. santelli?…….

  16. SPY/ Phil: Thanks- Just when I thought I had it down….. Would you suggest a move on that BCS- SPY Jan 145/150? Thanks

  17. AAPL/ Phil: Should we look for some covers (these would be on an April BCS)- maybe weeklies or is the possibility of a run up worth holding fast…..?

  18. Fiscal Cliff
    I had dinner last night with Ed Royce, who is the new Chairman of the House Committee on Foreign Affairs and the longest serving Republican member of the Financial Services Committee.  He believes no fiscal cliff deal will be happening this year.

  19. /cl just broke support… whee!

  20. Phil,
    Investing in your health has the "best" returns of all.  Way to go on doing this and getting committed to a "healthy" approach while you are young. 
    Where would you park some cash reserves for the long haul and of course monitor them?  AGNC?
    Thanks again.

  21. Phil – what are your thoughts on NEM and XRX.  thx.  

  22. Phil,
    Looking for some guidance, when you have a moment:
    (1) I am looking at taking some offsetting tax losses by selling the long calls in AAPL spreads (2/14 545/625 and 540/600). What strikes would you suggest to re-establish the long side in early 2013 (both longs showing a $5 loss)?
    (2) I was planning on closing out a small position long in UNG (also for tax loss) but noticed the apparent 10 day bottom formation. Would you er-establish in 2013 (despite supply situ)?

  23. Phil:
    Thanks for your comment regarding AAPL.

  24. Opesbridge/Ron,
    When does he expect the deal to happen – after the inauguration, or after the speaker is re-elected and everyone can claim victory by reducing taxes after they go up automagically … ?

  25. partha/deal  My take, fwiw, is after the speaker is re-elected or a 10% drop in the markets….. :)

  26. Popped/Jabob – The same nothing that took us down earlier.  Just silliness into the years' end. 

    Oil/Scott – Not supportive of $91 and already falling off the report, which was a net small build.  

    EIA Petroleum Inventories: Crude -586K barrels vs. consensus of -1.8M. Gasoline +3.78M barrels vs. consensus of +0.2M. Distillates -2.42M barrels vs. consensus of -0.9M. Crude+0.41% at $91.26. 

    Cliff/Burr – I think kicking the can is most likely and that may trigger as much of a sell-off as nothing at all.  I wouldn't go too crazy but the TZA play pays nicely on disappointment and, if you want to go long – I'd go with FAS, as we've already seen XLF push over $16.50 on mildly good news.  

    FAS Feb $107/115 bull call spread is $5 and you can sell the $97 puts for $3.20 for net $2.80 on the $8 spread – not a bad way to play the cliff bullish with time to roll out if things go wrong.  

    Grumpiness/1020 – Kind of takes all the fun out of getting old if you're going to dissect it like that.  

    SPY/Newt – SPY is only at $140 so you have an aggressively bullish bet that's essentially a coin flip on the fiscal cliff.  As such, I'm not wild about it.  You only have .72 left in the $145s but I'd rather take that and get into the FAS play noted above since all FAS has to do is flat-line and you make 185% at $115 and you have a very easy line to signal a problem at XLF $16.  On SPY, you don't even break even unless it's up 3%. 

    AAPL/Newt – No because our premise was that they've been pushed down by people cashing out to take long-term capital gains ahead of a likely tax increase so, if we are right, there should be a rebound in January.  Once we know we're wrong on that premise (next week) THEN we will need to sell some Jan calls.

    Royce/Opes – Thanks.  That sucks but it seems to be where we're heading.   The Dems don't have much to lose by letting it happen and the Reps are not realistic enough to accept that they need to give more to get a deal done.  

    Health/Ron – Thanks.  I really hate this stuff but I figure 50 is a good time to do it.  Hopefully won't have to go again for another 10 years.  As to parking reserves, I know AGNC is attractive with the returns but you can buy GE for $20.60 and sell the 2015 $18 calls for $3.80 and $15 puts for $1.27 for a net $15.53/15.27 entry, which is 25% off the current price if put to you (and, therefore, 25% free downside protection) and you get a .76 annual dividend payment (4.8%) and, if you have, for example, 10,000 shares – you can sell 30 Jan $21 calls for .35 ($1,050) and, if you get away with 12 sales like that, you are giving yourself another $1.40 dividend, which is like another 10% and now you're doing as well as AGNC with less risk than AGNC and, if GE finishes at $18+, you get a bonus 20% at the end.  You can do that with many stocks, of course, just find a few that make you feel comfortably diversified depending on how conservative you want to be. 

    NEM/Terra – I like ABX so much better that I don't even like NEM.  HMY is my second-favorite gold with NAK my favorite speculative.  As to XRX, I think they are a company that's winding down overall and not too likely to expand earnings much in the future.  They did a good job moving into IT Consulting from equipment but it's a crowded field and a very tough environment with Corporate spending still lame.  

    AAPL/8800 – Good plan.  Feb is very dangerous as, if they blow earnings, you have no chance of recovering.  A wide spread like that also leaves you vulnerable as what kind of cover is a $3 $625 call to a $16 $545 call – you may as well have played them naked.  $15 puts you into the April $500/530 bull call spread and you make 100% before your other spreads are even in the money – what's so horrible about that?  The key to these plays is the ability to sell short-term calls – if you can't do that, you're just gambling anyway.  In our $25KP, for example, we have $45,000 worth of AAPL calls (April $530s) but at least we make $3,000 this week selling and buying back calls.  Not so bad with 15 weeks to go and we still can cover the Aprils and roll them much lower if we choose (but we're still holding on bullish hope).  If you can't sell short-term calls against the long position, then you'd damn well better choose a position that's closer to the money or you are still the sucker paying all the premium. 

    UNG/8800 – I'm not a fan at this price ($3.50) as I think that's about right for them given all the new capacity that's on-line and our flood of nat gas inventory and the once-again mild winter.  

    You're welcome RMax.  

  27. While I'm all for AIDS awareness, is it just me or is Chevron's constant airing of poor families in Africa a bit disingenuous?…..

  28. Phil/grump   I speak from experience….. :)

  29. Phil,
    Thanks for the perspective on managing AAPL spreads – the more I hear it the more it sinks in. When you have the time/inclination, I for one, would benefit from and appreciate a tutorial on the tactical specifics of selling weekly calls against a long position.
    Best for an uneventful resolution to the ky episode.

  30. Sorry, no portfolio update today as I am just in quickly before I leave again. Spent the entire day at the food bank here helping out my mother and the crew there. Really, really sad… And they are getting less and less help and stores who used to give free food now would rather sell it discounted rather than give it. And government help is slowing as well. 2013 will be really hard on the bottom 50% in France!

  31. Phil – This is an interesting theory on the recent decline in AAPL. Many such position holders are not going to want to be short AAPL into earnings, therefore as shorts start to cover we may yet see a very rapid rise in the share price of AAPL.

  32. CVX/1020 – It's so much cheaper to help people in Africa than it is to help people in America, who pay $4 a gallon for the gas.  I like that Congress article.

    Tactics/8800 – Well that's what the FAS Money Portfolio is all about.  Notice we don't sell weeklies every week.  Sometimes we sell monthlies and sometimes nothing at all because the real key is that you are selling premium when you can and when it makes sense to do so and you learn that by practice and experience.  I wish there was some list of 5 things to do that you could read in 30 seconds and then trade for life but it's not that easy.  Of course, if it was that easy then you wouldn't get paid so much to do it, would you?  

    Posse/Jabob – Yeah, that will end well. 

    Food bank/StJ – Tough here too.  NYC having trouble meeting goals this winter as restaurants are slower.

    AAPL/Diamond – Another good theory but still a lot riding on AAPL's earnings for Q4.  

    Only 31M on the Dow at 1pm – very slow…

  33. stjeanluc
    Food bank France. You in deed see an other part of the population there. During my 4 month in Germany this year I saw only fully loaded trolleys in supermarkets. Did not see to many poor people. Obviously I did not go out of my way to look for them.

  34. Phil: Thanks.

  35. Hunger – We sure could use some of the trillion or more on PUBLIC Corporation's balance sheets instead of spending the millions on polishing their image…..
    …and from personal experience, the banks love to trot out their employees – on their own time – for the public good…. usually with a meaningless sum to cover the cost of styrofoam cups and apple juice….

  36. NAK/phil - how is this for a fun play on NAK: buy 300 shares at 3.18, sell one Aug 3 call @ .75, sell one Aug 4 call @ .40. net entry 2.80 per share. if both get called away is a 25% return on sale in 8 months, with 100 shares still in pocket.  of course, size it (2x, 3x,…10x) as you like.

  37. HPQ/phil – i have some Jan14 $13 calls bot for $3, now 2.60. HPQ l;ooking like another weakening.. to keep the position healthy, should i be considering rolling down first? or just adding?  i expect rolling out would be for sometime LATER as this is still 1 year away..  

  38. $1,111/Diamond – Now we're talking!  

    You're welcome Newt.  

    PR/1020 – Used to be corporations didn't really bother, now PR is a part of every corporation and that's part of what leads to this "conspiracy" of the top 1% to brainwash the masses into believing what's good for Corporations is good for America.  

    NAK/Scott – Whatever entry you make, plan to buy more at 1/2 price and you'll be happy.  It's such a long-term project bogged down in so many environmental issues – it's like riding a roller-coaster.  

    2:00 PM On the hour: Dow -0.61%. 10-yr +0.11%. Euro -0.16% vs. dollar. Crude -0.1% to $90.78. Gold -0.47% to $1655.95.

    Dec. Chicago PMI: 51.6 vs. 51.0 expected, 50.4 prior.

    More on Chicago PMI: The improvement was led by a jump in New Orders to 54 from 45.3. Employment however, fell to 45.9 from 55.2. Among the comments: "Lots of uncertainty on 2.3% Medical Device Tax … Sales seem to be softening. Let's see what the new year brings … Credit is difficult to obtain or is relatively expensive." (full report)

    Nov. Pending Home Sales Index: +1.7% to 106.4 vs. +1.8% expected; +5.2% prior

    More on Chicago PMI: Employment 45.9 vs. 55.2 prior. New orders 54.0 vs. 45.3 prior. Prices paid 61.7 vs. 70.1 prior. Inventories 49.8 vs. 47.1 prior. Supplier deliveries 52.4 vs. 57.3 prior.

    More on Pending Home Sales: Index rose to its highest level since Apr 2010 at 106.4, up 9.8% Y/Y. The report expects existing home sales to increase 8%-9% in CY13 to ~5.1M. The median existing home price is expected to rise just over 4% in 2013.

    Bloomberg reports Pres. Obama will offer a mini-deal to avert some of the effects of the fiscal cliff’s tax and spending changes, including delaying or replacing some automatic spending cuts scheduled to begin Jan. 1. A mini-deal could include a cap on tax increases at $400K in earnings and an alternative minimum tax patch. Stocks remain stuck in the red. 

    Breaking news: Wells Capital's Jim Paulsen is bullish (2013 Outlook). Don't worry so much about earnings in 2013, he says, as the market's about to enter "Stage 2" of its bull cycle where earnings may remain flat, but investors get "paid" with higher valuations on profits previously produced.

     It's France, not Greece, Spain, or Italy, that may be the "sick man" threatening the health of the EU, suggests Wilbur Ross. Uncompetitive to begin with, France will reel further thanks to President Hollande. Among them is the repeal of Sarkozy's elimination of taxes on overtime income. "France … has a 35-hour workweek, which is crazy in today's world," says Ross.

    This is why you can't ever prosecute Congressmen:  The House's Ethics Committee has ended its probe of allegations former Countrywide (BAC) CEO Angelo Mozilo made preferential loans to Congressmen and their staffers through his "Friends of Angelo" program and other initiatives. Though still calling the allegations "serious matters," the committee says they're largely outside of its jurisdiction, due to their age and the current status of the loan recipients.

    Longshoremen and cargo carriers reportedly agree to a 30-day extension of contract talks, temporarily averting a potentially crippling strike at U.S. East Coast and Gulf ports. Shares of Home Depot (HD) and Lowe's (LOW), seen as especially vulnerable to a port strike, begin to turn positive.

    Solar stocks are rallying again, likely thanks to year-end short-covering (previous). LDK +9.2%STP +6.8%CSIQ +3.6%.GTAT +4.6%YGE +4.7%.  MEMC (WFR +3.2%) is in the news: the company announced board members John Marren and William Stevens, each of whom have served for 11 years, are retiring (this should strengthen the hand of activist firm Atlai Capital), and that its SunEdison unit has sold 24MW of solar projects to Canadian Solar (CSIQ +3.6%).

    U.S. rail traffic is closing the year with big gains, as intermodal traffic surged 10.2% this week vs. last week’s 8% gain and the 2.55% 12-week moving average. Among the top carload commodity groups: petroleum products +71.5% Y/Y; crushed stone, sand and gravel, +29.5%; lumber and wood products, +27.3%. Decliners: metallic ores -26.3%; coal -11.1%.

    U.S. auto sales are expected to cap off the best year for the industry since 2007 with a projected 9% rise for December to an annual sales pace of ~15.2M vehicles, helped in part by higher incentive spending on pickup trucks. But a strong end to the year could be overshadowed by concerns that consumers will curb spending in January due to the fiscal cliff. 

    Shares of Aeterna (AEZS) are now soaring, up over 18%on the back of earlier reports that it's reached an agreement with the FDA on a Special Protocol Assessment for Phase 3 trials of its endometrial cancer treatment doxorubicin eptide conjugate, or AEZS-108. The company says the agreement provides it with "a clearly defined development and regulatory pathway."

    The passage of a bill that will enable the sharing of Netflix (NFLX) video-watching activity on Facebook came at a price to Netflix: the company has spent over $1M on lobbyists over the last 2 years, and has also created its own PAC. Expect Netflix to now shift its lobbying efforts to the upholding of net neutrality in the face of ISPs unhappy with the online video provider's bandwidth-hogging ways.

    China's telecom ministry says it will "earnestly complete the preparatory work for [4G] LTE frequency distribution and license-granting" in 2013. Does that mean 4G licenses will be issued at least on the early side of the 2014-2015 timeframe government officials have suggested? China Mobile (CHL), which is building a huge 4G trial network, must hope so. So must base station supplier Alcatel-Lucent and 4G baseband chipmakers Qualcomm and Sequans.

    The Chinese government has signed off on new Internet censorship rules: posts and pages containing "illegal" info can now be deleted, and service providers have to "instantly stop the transmission" of such content, as well as take "relevant measures." But there isn't a requirement to have all Internet users register their names to gain Web access, as had been proposed. Investors seem relieved: SINA +3.7%SOHU +2%RENN +1.5%BIDU +1%YOKU+1.1%Update: Bloomberg claims rules requiring users to identify themselves when signing up for new Internet and phone service have also been passed.

    Facebook (FB -1.1%claims AppData's figures on Instagram usage are inaccurate. "We continue to see strong & steady growth in both registered & active users of Instagram," it says. Ironically, AppData's read on Instagram activity might be skewed by the fact it bases its figures on a user's Facebook sharing. Though still down on the day, Facebook is off its early-morning lows. (also)

    11 analysts have lowered their Apple (AAPL -0.4%) targets in recent weeks, Fortune observes. Many of them attributed their cuts (III) to reports of iPhone order reductions, but the recent drop in Apple shares is probably playing a role as well. Topeka's Brian White maintains the highest target ($1,111), and ACI Research's Ed Zabisky the lowest ($270). The average target is still at $740, 44% above current levels.

    More on Apple: Topeka's Brian White, he of the $1,111 PT, claims "an insatiable appetite" exists for the iPad Mini in mainland China and Hong Kong, with checks indicating nearly all models are sold out in Hong Kong stores. He also claims Chinese iPhone 5 availability has improved, and that local resellers are calling it the most popular high-end smartphone. (previous)

    Intel (INTC) will partner with H-P (HPQ), Lenovo (LNVGY.PK), and contract manufacturers Compal and Quanta on2013 Smart TV launches, claims Digitimes, whose track record with these kinds of scoops is very much hit-and-miss. Voice, gesture, and face-recognition tech will reportedly be included. Intel's Smart TV platform, which relies on its Atom CPUs, has only seen a few design wins thus far. QualcommMarvell, and other ARM processor vendors are also targeting this market.

  39. NAK/phil – thanks – and still looks like may sink more. i can wait.

  40. HPQ/Scott – When you buy naked calls, you don't own anything and you are the sucker paying premium.  In this case, you are promising to pay $16 for HPQ when it's below $14 – don't you see how that makes you a sucker?  If, on the other hand, you were to take the same $3 (now $2.60) and buy the 2015 $10/17 bull call spread for $3, you then OWN HPQ at net $13, which is LOWER than it's priced now.  Since you have a bull spread, there's no margin required and the only thing you have done is capped your gains at 133% but, rather than pay premium and watching it erode – you have COLLECTED .70 in premium, since that is your net discount to the current price.  If you are willing to own HPQ for net $9.40 (32% off the current price), then you can also sell the 2015 $12 puts for $2.60 and that drops your net on the $10 calls to .40 with a $6.60 potential upside and your worst case is owning HPQ at net $12.40 but, since you have the $10 calls – your break-even is way down at $11.20 – 18% off the current price.  Rather than needing $16 just to break even, that trade makes $5.60 at $16, which is 1,400% on cash.  TOS says net margin on the put side is just $1.20 and, if you sell the puts, it won't cost you anything to sell short calls and you can sell 1/2 x the May $15s for .85 and now you have a completely free long play and your $10 calls would be $5 in the money (x 2) before you owe your caller his first penny.  Or you can be a sucker and pay someone net $16 for a $13.70 stock…

    You're welcome Scott.  Usually they spike out a low before turning.  

    40M on the Dow at 2:30.  13,000 still holding so far but a crappy way to finish off the year. 

  41. Been sitting here thinking back on the Santa's Inflation Hedges from last year (or was it two years ago?) and this weekend would seem like a good time to start thinking about and discussing Cliff Hedges.  What if we see an extended sell-off come Jan 2? What stocks and/or sectors would be good targets for shorts, or what semi-beaten down stocks do we need to keep an eye on if they become fully beaten down so we are ready with our sideline cash?  I have some of the previously discussed TZA hedges in place, so maybe I just miss that post from Christmas morning, or maybe I'm not confident in my hedges covering a significant drop.  Either way would love to hear some thoughts from you and everyone while we drift aimlessly along on pathetic volume. 

  42. My daughter kept making stones and had all kinds of problems that required surgery.  As it turned out the a Doctor finally tested her thyroid and found a benign tumor on her para thyroid.  During out patient surgery, they found the thyroid also had a tumor.  The Doctors think the calcium imbalance  was the cause of all of her prior problems.  Be sure to have your thyroid checked as it may be the cause of the stone problem.

  43. Home prices rising will just push more people into rentals. The rental market here in FL is very tight (season) and foreclosures have been kept off the market, If something does come up,  gets scooped up quickly.

    60.80 TNA needs to bounce.

  44. Pharm:
    Like to know the long term outlook of PLX.

  45. HPQ/phil – oops yes thanks for the reminder on naked calls and the play to consider.. in fact, these are half cover (margin reducing) for 2x May13 $14 calls that were sold at 1.73, so was a net credit of .46 per set so i'm positive on the overall trade, but was considering what  i might do with the long calls if i close out the shorts

  46. WMT/ Phil: What would you do with a long Jan13 $65 put?

  47. HPQ/phil – and thank you for the lesson and great framing of how the 10/17 BCS for $3 is same as OWNING buying in for $13..with some premuim collected up front. always helpful to have the obvious stated again (at least for me!). :-)

  48. Kustomz
    TZA could go up but it sits on a very powerful 82.90 line, been a problem for over a year. My bet is it is stuck till the big BS meet 6:30 PM Sunday, better to watch Football!

  49. Phil:  Merry Christmas!  This has been a great trading year thanks to PSW and truly appreciate the work ou put into this.   
    I'm trying to create my Cliffhanger ( ) falling into the cliff buy list.  If our idiots in power let us fall, do you expect a quick sell-off followed by a recovery or a slow, methodic sell-off?  Also, would you expect it to be a broad market sell-off or some specific areas? 

  50. shadowfax – What do you see in AAPL chart?

  51. 13,000 holding on the Dow.

  52. Where have you been Shadow? Yep the markets have been given super powers by the Fed. Only the politicians can fk it up from here.

  53. Phil / HMY – would you take a stab here?  looks like its bottoming out but the strikes in S. Africa are a worry.  hopefully priced in.  

  54. Phil
    could I get your thoughts on when it make sense to use EDZ as a hedge versus TZA. EDZ has been pretty beat up. Thanks

  55. Hedges/Rperi – Good thing to get around to over the weekend if I can.  Inflation hedges were, of course, upside plays but you're talking about disaster hedges and, as I said, for the cliff I like the TZA spread or the DIA March $124 puts (now $2.35) with the intent of turning them into a mattress play.  Longer term, you can check out the Long Put list, we had MA and V on there along with XRT, WMT, MON, HD (already down off highs), JNJ, MRK (already had a big fall) in the October revised set and, at the time, we were targeting March and April puts mostly so if you can use April puts now, they still make good hedges and we usually picked puts that were $1 or $2 except for MA, where we were forced to go $5.  Simple enough?  The logic is, if the economy collapses, they go down with everyone else and their puts are fairly cheap because they simply aren't expected to fall.  

    Thyroid/Vortex – Thanks.  Not sure I needed to worry about that this weekend but a good idea to check anyway…  8)  

    Rentals/Kustomz – That's good for the REITs.  Good call on TNA, you have been nailing those timing calls lately.  

    Covers/Scott – Good, note the positive impact of NOT being in naked calls.  Whole different ball game.  As I said, much better to go with the longer-term covered play in these uncertain times.  

    WMT/Newt – Well, those puts are down to .35 but not too far off the money but will be toast if they solve the cliff and pop the market so maybe a roll back to the March $62.50 puts at .72 as you gain the same .50 on a $2.50 drop as you would with the Jan puts but you have 2 more months to be right.  Of course you are more or less playing for WMT having a poor Q4 and their earnings are 2/13 so, if no cliff – I'd get the hell out of them next week.  

    You're welcome Scott.  These are things we learn by doing so best way to go is to just keep reviewing strategies as the market dynamics shift.  Over time, you start to get a feel for what works under various circumstances and, most importantly, what trades you are comfortable staying on top of as they go through their various cycles.  

    Thanks Arivera.  If there is no deal, I expect a pretty sharp 5% dip which could get worse but probably more slowly.  If there is a can-kicking – I think we still drop a bit but recover faster and, of course, if there is an actual deal – rally time.  Either way, I'd be buying on the panic and still bullish for the long haul.  Even if they just let the cliff happen and leave it – we need to pay those taxes and cut the military, etc.  The AMT needs to be fixed and unemployment can't be cut suddenly like that but most of the other things need to happen eventually anyway if we are ever going to balance the budget.  

    46M on the Dow at 3:35.  

    HMY/Terra – Well, you missed my fabulous 11/26 call on them at $8.21 but not so bad now at $8.60 and our play that day was selling the 2014 $8 puts and calls for $3 (now $2.90) against the stock so the net now is still nice at $5.70/6.85 up .50 on the base entry but still a nice 40% gain if they hold $8 for the year.  As the cliff is looming and the 200 dma is $9.16, you may want to wait and see if there's a nice dip to buy into. 

    Oops, speaking of nice dips, here's one now as Obama makes statement that there will be no deal today.  

  56. Is Grover Norquist the most powerful man in the Universe?!

    Thanks Phil, computers have made it much easier to trade TNA/TZA. I take a step back when news is about to effect the markets. I like to watch…said with a cheesy voice.

  57. kustomz
    Pinched nerves in my neck, sometimes can't get up, somtimes kinda OK. Made a few bucks on TZA today but my system has an issue that boiled over at 1:30 today, I think yesterday I checked someones ????  link because My laptop got zinged the day before, get stuck on a page only way is restart. If I feel good tomorrow I wil find and destroy whatever it is. Run your own stuff and it me against a billion. Those anti – anything safety stuff don't like my unapproved programs. January2 I get my meds back, that will help all of this. 

  58. EDZ/Crussell – That was our favorite hedge early this year but they popped to near $20 and we stopped playing them a long time ago.  Now EDZ is $9.38 and looks interesting but we kind of like emerging markets for 2013 as they will certainly profit from a US recovery, especially if Europe also pulls it together.  So I prefer TZA for a hedge now as the RUT is more likely to take a hit than EEM if our "leaders" can't get it together.  

    Careful shorting WMT:

    Gilford Securities is encouraged by the activity it saw at the Wal-Mart (WMT -0.3%) stores it visited (primarily in Long Island). The firm thinks the visits suggest sales are "up significantly" from a year ago, in spite of the impact of Hurricane Sandy. Gilford is also pleased with Wal-Mart's strong Black Friday performance, believes food/consumables sales are benefiting from aggressive pricing, and thinks "apparel departments had a good sell-thru across much of the US."

    Interesting for later this month:


    U.S. oil inventories shrank far less than analysts had expected, but the glut at the Cushing, Okla., hub continued to grow, setting a new record, according to data released Friday by the U.S. Department of Energy.

    The surprises prompted a retreat in U.S. crude-oil futures, erasing the February contract's early gains. Futures for February delivery settled down seven cents at $90.80 per barrel on the New York Mercantile Exchange on a day of light trading.

    Crude-oil stockpiles fell by 586,000 barrels to 371.1 million barrels for the week ended Dec. 21, compared with an average survey estimate calling for a drop of 1.9 million barrels. The inventories have increased 13% from the year-ago levels, the department's Energy Information Administration said in its weekly report.

    "It's somewhat of a bearish report," said John Kilduff, a trader at Again Capital.

    U.S. stocks at the much-watched Cushing hub stand at 49.2 million barrels, up 2.2 million barrels from the previous week. Cushing is the delivery point for the benchmark Nymex oil contract. An excess supply of crude at Cushing has depressed prices of U.S. crude, causing the price gap between the U.S. and the international crude benchmarks to widen.

    Inventories of petroleum products also increased more than expected. Gasoline stockpiles rose by 3.8 million barrels to 223.1 million barrels, compared with a build of 400,000 barrels forecast in a Dow Jones Newswires survey of analysts.

    The buildup of gasoline in storage indicates weak demand for the fuel. Mr. Kilduff said this was surprising, given it was the week before Christmas.

    HLF up another $1 today ($29.37).  

  59. Thanks Phil.

  60. Shadow, I think your neck is sore from launching the Subi to hard. ;-)
    Feel better, and swtich from PC to Mac. I haven't had a single issue since I made the switch.

  61. Out of time to pop back now but with that bit of negative news, a fun trade is the DIA Feb $134 calls at $1.05 – could gain a quick 50% if the Dow pops back over 13,100 on Monday.  

  62. Grover/Kustomz – It is scary how much control he has over the party.  Even more scary is that they signed a pledge so they feel they are committed to honor it under any and all circumstances, no matter how much the situation has changed since they signed it.  If only they stuck to their Congressional oaths with half as much enthusiasm….

    You're welcome Arivera.  

    Well, that's the bell.  Looks like 85M on the Dow at the end but all downhill in the last 20 minutes.  Monday should be very interesting as they have all weekend to make fresh rumors and it still can come down to the wire on Monday afternoon.  Madness! 

    Have a great weekend everyone.

    - Phil

  63. Kustomz
    Bought a MAC, didn't work, I run custom stuff I built with 6 monitors, with Mac you do Apple or the highway. Havn't launched the suby since Sept. when I blew that tread and belts off. Have snow tires now, one burnout and no more traction, hell no pavement showing round here.

  64. Sell-off just kept going in the Futures.  S&P 1,386 just hit – not good if that doesn't hold.  

    Oil still $90.75 makes a nice short if we're collapsing (/CL).  Iran running exercises in Straight of Hormuz only thing keeping us over $90.  

    And further down we go – loving the oil short now.  

  65. dropped like a rock after the bell!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  66. Grover guesting on CNBC says no to any tax increases – no exceptions.  Says budget must be balanced by 100% spending cuts.  Reps have to let cliff happen with this nut-job running their party.  

  67. Congresspeople are leaving the building and not talking to reporters.   Can't possibly be a deal and they only spent about an hour in session – pathetic!  

  68. Shadow I'll email you later on my new setup, keep your eyes peeled.

    1375 in /ES may be the next level..

  69. Phil – You say WMT earnings are 2/13 @3:40pm.  Yahoo and Earnings Whisper say 2/21.  Who is right?

  70. Phil – You say @3:40pm, WMT earnings are 2/13 .  Yahoo and Earnings Whisper say 2/21.  Who is right?

  71. WMT/Grant – Not sure.  I got mine from Yahoo Finance but Whisper is pretty good with that stuff.   Oh wait, now I'm sure – it's 2/21/13 – I was flashing back to Europe dating for some reason.  

    Obama saying stuff but I can't figure out what!  I guess the goal now is to push a bill through the Senate but the main goal seems to be to put everyone on record that they voted down a plan by Monday – in other words, he is trying to get something done but the reality is this is enough rope for the Republicans to hang themselves as they drive the country over the cliff next week.  

    "If we don't see an agreement, I have asked Senator Reed to put up a bill that extends unemployment and makes sure taxes don't go up for the bottom 98%."  So that's the line in the sand, no matter what, the Reps will have to vote no on those cuts and will get 100% of the blame as the Dems are probably almost entirely lined up for yes votes in House and Senate.  

    Going to be lots of fun on Monday!

  72. Phil:  What is the cool trader way to play binary events?  Super sophisticated long/short cleverness?    Put in buy orders 5% below the market for your pet stocks? Go to the beach [assuming no snow on the beach]?  Or generalizing is always idiocy?

  73. Hi Everyone, Phil I hope you feel better even when the pain meds wear off, 
    Happy last weekend of 2012!  Something tells me that 2013 is going to be a wild ride.  Hope everyone has their hedges in place – up and down.  I don't know if anyone's still posting to the holiday shopping survey, so I'll add my after-Christmas-sale observation here- No trouble at all finding parking spaces anywhere – can't mean good news for merchants.

  74. Pharm, or anyone with knowledge of this issue.  My kids, in a school outside of the U.S. at present, include one of my daughters who has a rather short attention span and lack of focus in class.  No teacher has mentioned the words "attention deficit" disorder, probably because it is quite unknown to give otherwise normal and healthy children psychoactive drugs in our community.  That seems not to be the case in the U.S. — where they will be attending school in a year or two.
    In researching the question, which I'm sure is a complex one, of whether giving children any kind of psychoactive drug in lieu of other modalities — more parental attention, exercise, diet, or whatever — is ever advisable,  Icame upon a disturbing comment, to wit: 
    "Dr. Joseph Tarantolo is a psychiatrist in private practice in Washington DC. He is the president of the Washington chapter of the American Society of Psychoanalytic Physicians. Tarantolo states that “all the SSRIs [including Prozac and Luvox] relieve the patient of feeling. He becomes less empathic, as in `I don’t care as much,’ which means `It’s easier for me to harm you.’ If a doctor treats someone who needs a great deal of strength just to think straight, and gives him one of these drugs, that could push him over the edge into violent behavior.
    I am not broaching the subject of "guns."  Guns can kill more people faster than most other non-explosive weapons, a good reason to control them to the extent feasible politically.  But even a pencil in the eye can kill, so I am rather asking whether there is in fact a commonly-known correlation between the advent of psychoactive drug use in students and the incidence of violent, non-empathetic behavior.  SSRI's like Prozac, Luvox and others have been implicated, and drugs such as Ritalin, cocaine, amphetamine, and tricyclic antidepressants (Tofranil, Pamelor, Elavil) are suspected to potentiate — make more effective – the action of the SSRI.   Here's a white paper on the subject written 13 years ago, after the Columbine shootings:
    I know that PSW has generally focused on guns as the elephant in the room in respect of school shootings — and certainly guns are by far the most effective legal weapon with which to kill lots of folks quickly. But if I end up facing some school administrator or counselor at some point in respect of giving drugs to my children, I would be curious as to what any Members of PSW community have experienced on the subject of giving psychoactive drugs to schoolchildren.

  75. Here is my play for the year on VXX.
    bear vertical Jan2014 33-34 roi of about 100%
    i'm sure you could come up with some better possible spread choices or a better idea of when to enter but I like it with this huge spike in the vix. I think either way the cliff shouldn't create the volatility. I think it is more the fact that our leaders are failing at coming together on anything as simple as tying their shoes it seems. I'd like to hear your thoughts on using the long term Contango of the VXX etn to make some profit. Happy holidays to all! I'm really glad I joined everyone here is brilliant!!

  76. zerozero/   You should read the following book before allowing anybody to prescribe a drug to your child.  Incredible research into the effect of exercise and the brain, helping with depression, ADD, and many other issues…
    Spark: The Revolutionary New Science of Exercise and the Brain
    Book Description
    Publication Date: January 10, 2008

    A groundbreaking and fascinating investigation into the transformative effects of exercise on the brain, from the bestselling author and renowned psychiatrist John J. Ratey, MD.

    Did you know you can beat stress, lift your mood, fight memory loss, sharpen your intellect, and function better than ever simply by elevating your heart rate and breaking a sweat? The evidence is incontrovertible: Aerobic exercise physically remodels our brains for peak performance.

    In SPARK, John J. Ratey, M.D., embarks upon a fascinating and entertaining journey through the mind-body connection, presenting startling research to prove that exercise is truly our best defense against everything from depression to ADD to addiction to aggression to menopause to Alzheimer's. Filled with amazing case studies (such as the revolutionary fitness program in Naperville, Illinois, which has put this school district of 19,000 kids first in the world of science test scores), SPARK is the first book to explore comprehensively the connection between exercise and the brain. It will change forever the way you think about your morning run—or, for that matter, simply the way you think

  77. Zerozero: We have found that diet and exercise are great at offsetting/ reversing ADD, ADHA etc.  There is a direct correlation between the low fat, high sugar and carb diet trend and kids that are diagnosed with ADHA. If you aren't already doing this try whole fat, low sugar unrefined foods. Whole dairy, non GMO grains, heavy spinach and kale (greens) diets, High DHA (fish oils) and decrease any meds (with a doctors supervision and you will find that dietary and physical fit changes will naturally decrease need) currently being taken, try accupuncture/ pressure along the liver meridians, avoid perfumes in soaps and lotions etc. I recommend seeing a natural health care provider to help you through this.

  78. zero/daughter   Forget the drugs and use the google….
    …"short attention span and lack of focus"…  Sounds like Dyslexia.
    Great read:
    The "dyslexic" writing and his family practice this (some more than others)  :)
    A BIG help.
    zero – Please feel free to ask away, I'd be happy to share our experience raising a child and on being dyslexic….

  79. Diet, eating the right food and Exercise are very important for every body.
    I grew up in a home (60's & 70's) where eating locally raised foods with little suger and salts in our meals was the norm. Mom was raised in a small town in Northern Italy and the idea of eating any other way, let alone fast foods, was not tolerated.
    I excelled in sports. – there were no video games and only rabbit ears on the T.V.  I spent hours outside, every day. (California) 
    I grew up dyslexic.
    Thru repetition and adult patience, I made it out alive. But I am here to say, the best thing I have ever done for my dyslexia is TM. I just started just this past August and my focus, attention span and energy have never been better (we'll see if that translates into better trading in 2013) :)
    Albert Einstein, Thomas Edison, Charles Schwab, David Boies. All Dyslexic.
    Lastly zero, here's this:

  80. I am deeply grateful and overwhelmed by your responses.  Thank you, I shall research every one thoroughly.  We do have a very natural, fruit & fish, natural diet here, but the school, run by Americans, seems to give away candy and chips as "snacks", products that don't exist in my home but for the occasional high-quality chocolate.  The kids do get ample exercise, but my eldest [almost 10] year old daughter is quick, intuitive, but quite incapable of sustained concentration, and consequently doesn't read well or like to read, and, being also strong-willed, is impervious to the pleas of her teachers to pay attention in class.
      I like the TM suggestion, as I have have meditated for years for sleeping purposes in changing time zones, starting out with zazen practice in connection with martial arts.  Works for me; I can change my measured blood pressure and/or put myself to sleep in minutes.  Newt's food recommendations I shall value highly, and I'll certainly read Canuck's book suggestion straightaway — I've kept myself sane under trying conditions with exercise for a long time.  But Dyslexia is completely unknown to me — I thought it had to do with transposing a word order from time to time, obviously not — and my daughter clearly suffers from something that my other two don't experience at all.  "Just plain dumb" have been some of sotte voce comments, but I've run into thousands of people in dozens of countries, and I know stupid when I see it; she's much too wired to be dumb, she can read a person's intentions from their body language at 50 yards, I have been mystified up to now.  Off to hit the books, thanks again.

  81. Normal



    /* Style Definitions */
    {mso-style-name:”Table Normal”;
    mso-padding-alt:0in 5.4pt 0in 5.4pt;

    Wait  ZZ, one more story and recommendation for you.  
    Not quite 10 years ago, I sat in a room as the psychologist told me that my 2 year old son was moderate to severely autistic, and might never talk.  Lost in the trauma of that day was the parent teacher conference with our other, older son’s first grade teacher, who told us that he was having trouble focusing in class, and basically intimated that he was destined to be a bit of a loser.
    By the end of the next school year, he won Student of the Year for 2nd grade.  Today that kid  has a 4.0 (for now) at a top high school that accepts very few kids from his elementary-middle school.  What changed?  As I dived into the world of unproven autism therapies, my older son came along for the ride.  Although we never put him on the gluten-free/dairy-free diet that so dramatically helped my youngest son, gone were the sugars, artificial dyes, flavorings, and nitrates that are the mainstay of the standard American diet, and in their place came the supplements (non-psychotropic)– vitamins, fish oils and b12s.  Also gone were all chemical fragrances, especially laundry fragrances, which generally require buying new clothes because the chemical fragrances are now designed not to break down.  I’m always amazed at how many of my kids’ classmates come to school in a cloud of toxic laundry smell while clutching their asthma inhalers and taking their stimulant medications.
    You’re getting a lot of reading suggestions, but I would add to that Dr. Daniel G. Amen’s  work – Healing ADD: The Breakthrough Program That Allows You to See and Heal the 6 Types of ADD. – along with his more current books.  He starts with brain health through supplementation, diet, and exercise, but is not afraid to use prescription drugs if necessary.  Good luck.

  82. zero – Your daughter sounds a bit like my son – He's 13. He too, is quick and intuitive, but does not like to read. Oddly enough, he has a twin sister who is a "gifted" student. We started his testing in third grade and found out he was dyslexic in fourth grade. We have explained to him his dyslexia and how it will require his extra effort and understanding.
    By having him take ownership of his "situation" and with the help of the wonderful people at his (public) school, Christopher acheived an A in all his classes and one B in….english…last year, in the sixth grade. The best thing that happened to Chris has been the increase in his self-esteem and the quiet knowledge that he can achieve greatness in the classroom.
    If your Daughter enjoys science and math and shows focus on what she likes, that too, are signs of dyslexia.
    "Just plain Dumb"?  I suspect that once you identify and begin the help that she'll require, she will be the one who will have the last laugh….  :)

  83. Some more technical damage done especially on the Dow and NASDAQ – both 50 and 200 DMA gone . Monday could be interesting again with politics and low volume!

  84. Time to exit the longs?
    If the OEXA200R drops below the 50% line we regain clarity as to the market?s direction. That will be the unambiguous signal to exit any remaining long positions immediately in expectation of a serious, imminent market decline. Conversely, it will also be the clear signal to go short to take advantage of that sharp decline.
    In my opinion, the most significant indicator of where we stand today is the fact that the market is above both its 140 year historical trend line and the trend line for the secular bear that began in 2000. These are the marco-forces that will gravitationally pull the market back into equilibrium at some point in the near future, likely beginning in late 2012 to 2013. Add to that any number of catalytic world events which could exacerbate such a correction. QE has been a countervailing force to recent market slides but, realistically, Fed Chair Bernanke can only feed the market so many cans of QE Red Bullbefore it eventually crashes.
    How far will the market drop? QE3 might save the day once again, temporarily. But in light of the factors mentioned above, it should come as no surprise if in 2013 ? 2014 we end up experiencing a market event worse than that of 2008 – 2009. Luckily, OEXA200R should give us ample advance warning of the next major correction however we want to trade it. Buckle up!

  85. You have all been a great help, thanks, rdn and 1020.  I am finding many similarities in all the comments to my current situation – my daughter's younger sister is also the best in her class — but the brief reading I did between these sets of comments does sound rather like ADD, or ADHA, although these are not uncommonly paired with dyslexia. I can reach no conclusions at present, but I'm in this for the long haul, have a lot at stake — for them, not me — and will follow up on every suggestion and source cited as we approach going back to school in a few weeks.  If anything has really surprised me among the comments, it's the chemical laundry fragrances, which I'd never even heard a hint of.  We are already a fish-and-fresh fruit family, but I've not given them supplements, although I take them myself, and that's an easy change.
    Overall, I feel rather like Philip Marlow heading up the Congo in search of Colonel Kurtz, but it's the job at hand, and I must again thank you all for your thoughtfulness and help.

  86. Zero- we had a similar struggle with our younger son. just didn't take to reading. not dyslexia, was a total mystery.. and then a tutor led us to Torgurson Vision Therapy. He was a TEXTBOOK case for tracking..they knew exactly what was going on, and had therapy to address it.  A physiological issue with coordinating the eye muscles to focus together.   It worked for us.  Here is their site:

  87. Wow.  An eye exam.  Now I feel even dumber than yesterday.  Doh!!   Thanks, Scott, I'm obviously new to this game, and thanks again to everyone!!!

  88. CLIFF????

  89. Eyes/Zero – it's not an easy thing. We were actively trying to figure out what was going on for over 4 YEARS. relatively new and growing area of eye doctoring, kind of like the divide between Medical Doctors and Physical Therapists.

  90. McConnell should be strung up after his comments about having to work over the weekend. if that doesn't explain it all on how out of touch they are with the american people. what a pompous ASS!   Poor f**king baby!  Senate Outraged at Having to Work Weekend to Save Nation

    Read more:

  91. mackey/mCONnell -   Color me speechless….. :(

  92. Just a tad of "The Onion" in that story ;)

  93. Violence & meds etc/ZZ – Zero, I think you heard what you were looking for, namely individual-oriented clinical advice, so you're good to go. As an epidemiologist, I can tell you that the outcome you were asking, the incidence of violent, non-empathic behavior is a tough one to grab on a population basis. Where do you go to get unbiased statistics on that, as opposed to what gets reported? Think about violent crime reporting – it's all based on where people look for crime and violence, and that will be where they expect to find it, ie in "bad" areas. If you look at arrest and conviction stats, those are even worse because they're largely driven by race and money. And speaking of money, the CDC used to do this sort of stuff, but then the money went away……

  94. Yeah, mcCONnell may not have said it….but I'm sure that's what he told the wife….. :)

  95. Actually Chuck Schumer (D) from New York complained about having to work.

  96. Good morning! 

    Not much going on in the Futures but it's early.  Gold popping back to $1,668 is most encouraging move so far.  

    Senate convenes at 11am today and it doesn't seem like they are going to make it but who knows.  

    No other major news but good news from China:

    China's HSBC PMI expands at the fastest speed in 19 months in December, increasing to a final reading of 51.5 from 50.5 in November and coming in higher than the preliminary figure of 50.9. "Momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilize," says HSBC's Qu Hongbin.

    Chinese shares look set to post their first annual gain in three years, helped on the last day by positive PMI data and a plan to allow brokerages, P-E houses and insurers to set up mutual funds. The move adds to the increasing liberalization of China's markets, with Beijing recently raising investment quotas or ceilings for foreign institutions and central banks. The SSE Composite Index is +1.5%.

    Although the U.S. looks like it's about to fall off the fiscal cliff, Asian investors don't seem to be panicking, with shares mixed ahead of more crunch talks today. Japan closed after finishing +23% for the year on Friday. Hong Kong flat. China +1.6%, India -0.1%. 

  97. Binary events/ZZ – I'm not sure what the "cool" trader does but the smart trader generally stays away.  Volatility is generally priced in and, when you bet on both sides, you are paying huge amounts of premium with not even a guarantee that one of your bets will pay off because a flatline can screw you on both sides.  

    On the other hand, when you sell the volatility, you run the risk of your event being worse than accounted for and taking a loss on something you didn't want to have a position in.  Cashy and Cautious is the general way to play a binary event unless you think you really know something.  

    As to putting in buy orders – why guess when the time to buy is when everyone else is panicking and you don't have to guess when they will do that – plenty of time to buy WHILE they are panicking if you are cashy – that's the whole point!  So I guess that's how to be cool – have cash and patience.  Warren Buffett is cool to me and he can go years without making a move but, when other people are freaking out – he walks in with his cash and does some very smooth bottom-fishing. 

    Thanks RDN – Other than some strange stuff with my leg (gets numb easily), I feel fine.  Probably bad reaction to drugs that seems to be wearing off.  Not a good sign if no one is shopping already – I know I didn't go near a mall this weekend and we had a good storm that kept people home on Saturday.  

    ADD/ZZ – I am not a big fan of drugging kids (or adults for that matter).  Is your daughter bored because Jackie "had ADD" according to her teachers but, rather than put her on drugs, I sat down with her and talked to her about what I used to do in school to pretend I was interested and Tina lobbied the school board to put in a better advanced placement program and now Jackie and 5 other kids are in a separate satellite where they learn material 2 years ahead of the rest of the class and they are are (all former ADD profiles) active and engaged and Jackie has made first honors for 3 straight years.  In fact she went ballistic because she legitimately lost her homework and a teacher only gave her a half credit, which may cost her an A for the first time in 3 years.  Anyway, if your daughter is smart (and  you indicate your other daughter is, right?), then you really need to consider that she just thinks differently than other kids and maybe the course work simply isn't engaging her.  

    I remember, for some reason, they put me in a regular Social Studies class in 7th grade (first year of Jr High) and I had never been in a regular class before and I almost went insane listening to the stupid questions and the constant repetition by the teacher going over and over things for all the slow kids – who wouldn't have "ADD" when there's nothing to hold your attention?  My old school books are generally filled with pictures of monsters and space-ships and little flippy cartoons like a pitcher throwing a baseball that you make by drawing a slightly different picture in the corner of every page and then flipping the page to make it look like he's moving – those things take hours and that's what I used to do in class so I had ADD too and my dad used to come home with red knuckles because the nuns would whack him with a ruler when he was "drifting off".

    My Dad never had the benefit of drugs but I discovered loud music and then pot (usually combined with loud music) was really great at cutting back on my thinking and getting my brain into the here and now – something you can, as some mentioned, accomplish with meditation and practice.  That's all these drugs are, they dull the mind and free up the brain to stay in the moment and I'm sure there are people who need that but some people are simply thinking more than others and that's not a disease, is it?  Jackie, like me, doesn't sleep much because her brain races a mile a minute and it's no help for her to lay in her room and shut her eyes as then there's nothing to do but think so we gave her a TV, which helps a bit (I can't go to sleep without a TV or music) and I taught her my trick of just listening to shows you already know so you're not tempted to look (Star Trek works great for me).  

    So, rather than looking for a quick fix or letting teachers categorize your kid – I think you're doing the right thing, exploring the problem (if it is, indeed a problem) but maybe take a little more time to simply engage your daughter and try to figure out what kinds of things she can do to help herself.  Or maybe your wife's brain is more like hers – Tina doesn't get Jackie at all – they think totally differently and Maddie is way too emotional for me (or Jackie) to talk to when she's upset but that's just something we learned in dealing with our very different daughters.  That dyslexia thing is also worth checking out or maybe she just needs glasses but it's all under the category of doing what you're doing – take the time to understand your daughter and I'm sure you two will be able to find a path that works for her.    

    VXX/Dplatt – If we do hit the cliff, VXX could easily pop all the way to 100 and THEN I would be thrilled to short it.  By Jan 2014, of course, we should be back to $30 or less anyway as we started this year over 100 and bottomed out at 27 recently.  If there is no cliff, we'll drop fast on VXX and you may want to bet the current Jan bear puts then.  

    Tax increases/StJ – That's what we all need to do – bite the bullet and pay off our debts.  It's a shame that we see these charts over and over but never do they talk about increasing taxes on Corporations – that's simply a forbidden topic in the MSM and that's why we're doomed in this country. 

    Big Chart – Big ugliness now, breaking those 50 dmas was a clear sign to get more bearish and now we have to go back over before we get bullish again (but it can all reverse in a day for now).  Gotta watch that 12,800 line on the Dow, which is 5% down.  If that doesn't have support, then the weight of the Dow can pull down those other indices below their lines as well.

    Exiting long/Burr – That's the signal we're getting.  Still, here's a more bullish perspective:

    The average of all durable U.S. consumer goods is nownearly at 4.5 years. That's up from less than 4 years before the financial crisis, and could fuel a pickup in consumer spending … assuming the age increase doesn't reflect a "new normal" in a time of high unemployment and stagnating real wage growth. The average age of cars on the road is now above 4 years, compared with 3.5 years around 2000 and less than 3 years in the '80s.

    That's a lot of pent-up demand if the dam ever breaks.  This one is interesting:  

    Insider Monkey's Jake Mann takes a look at how Apple (AAPL -1.1%) invests its $120B in liquid assets. "Corporate securities" (either debt or equities) made up $46.3B of the total at the end of FY12, treasuries made up $20.1B, and U.S. agency securities $19.5B. Another $11.9B was invested in mortgage and asset-backed securities, $5.6B in muni bonds, and $5.5B in foreign government debt. Apple's treasury holdings rose 87.9% Y/Y, easily surpassing the 49% increase seen in its asset base (exc. cash). Corporate securities rose 31.5%.

    CNBC provides a list of the worst financial predictions of 2012. Among them: Facebook would turn in a great IPO; China would see a hard landing; Greece would leave the eurozone; the U.S. bond bubble would burst, and the U.S. would see a double-dip recession.Among the reasons Cullen Roche thinks the predictions flopped: Europe is too interdependent to let Greece walk, the U.S. government has no insolvency risk, and "everyone wants to predict the next big financial crisis."

    Some 2012 lessons of investing don't look that unfamiliar: Risk did better than risk-off; don't fight the Fed (or the ECB); it's better to always buy cheap than to try to factor in market timing. What did you learn this year?

    McConnell/Mackey – If I were a Republican, I would question whether or not some of these people are double-agents, who are purposely working to destroy the party from within.  Why else would they be such dumb-asses?  

  98. phil, whatI see where I live there are two kinds of so called republicans- those that secretly beleive what mcconnell preaches but don't understand that they are not quite rich enough to reap the benefits for the top .01% and those that are hard working blue collar people who are trying to protect guns,religon and do away with entitlement programs of which they get none. neither faction understands that the republican party doesn't give a shit about either of them and are scared to death that their freedoms are going to be taken away.