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Thrilling Thursday – What Does the Russell at an All-Time High Tell Us?

openingimageWheee, what a ride!

U.S. small-cap stocks surged to a record Wednesday as investors turned their focus to U.S. economic improvement and the smaller, nimbler companies that could be best-positioned to benefit.

Russell Investments' index of 2000 small-capitalization stocks rose 2.6% to 871.13 Wednesday afternoon, after hitting an all-time intraday high of 872.28 earlier in the session.  Wednesday's rally came on the heels of a year-end surge. The RUT has gained 13% since touching a recent low Nov 15th. The S&P, which tracks larger companies, has added 7.3% over the same period.

"As the U.S. economy gets helped by better housing, small is going to do better," said BAC's Steve DeSanctis in the WSJ. "Then you throw in earnings growth for the first time in a while, and they've had a very nice, strong rally here."  Mr. DeSanctis pointed to analysts' forecasts that companies in the Standard & Poor's index of 600 small-cap stocks will report earnings growth of 4.5% for the fourth quarter, compared with 3.5% for middle-sized companies and 1.2% for their larger counterparts.  Small-cap companies tend to get a larger share of their revenue from the U.S. than bigger firms, which could help their bottom lines if the housing recovery continues, Mr. DeSanctis added.

We came right up to the levels we expected and, in fact, the S&P finished the day at 1,452, which was my target for the S&P to finish 2012 (1,450) so it turns out I was one trading session off in the end.  In yesterday's Morning Alert to Members, we worked out the short-term 4 and 5% lines we expected our indexes to test during the next couple of days and those were: 

  • Dow: 13,319 & 13,447 (finished 13,412) 
  • S&P: 1,442 & 1,456 (1,452) 
  • Nas: 3,028 & 3,056 (3,112) 
  • NYSE: 8,580 & 8,660 (8,632) 
  • RUT: 858 & 866 (873)

As usual, the Nasdaq and Russell are leading us higher but we never got our third breakout to confirm the trend so we did 1/3 covers to lock in some of our bullish gains on some of our positions.  Mostly it was a watch and wait day with no new trades but I did put up a new spread entry on AAPL, in afternoon chat, for those who missed the party the first time.  In this morning's chat, we discussed the Big Chart and my comment to Members was:  

Big Chart looks ridiculous and that's just common sense when you see an unusual pattern you have to be on guard that it will normalize sooner than later BUT, as I pointed out yesterday, it's these unusual breakouts that redraw the charts but the key is here – at the point of break-out – and we should always assume it's more likely a channel will hold than break.


As I said, no additional catalysts expected and that's going to make things tough but the RUT is at new ALL-TIME highs and that's pretty significant and we're only at 1,450 on the S&P, which was my 12/31 target anyway so I don't feel too bad that my 2012 prediction was off by one trading day.  

So, value-wise, I don't have any particular reason to be bearish.  This is the "right" price for the S&P prior to earnings and then we will have to re-evaluate as we get more data.  Our assumption at the moment is that we'll take a hit from retail, as they sold about the same amount of stuff but at steeper discounts so we assume margin compression and also from Finance, because money is not moving, M&A is weak, IPOs were weak and low rates are probably impacting their margins too.  On the other hand, Industrials (people who actually make stuff) should be turning up based on Durable Goods and improvements in Asia and the US offsetting Europe, who don't spend like we do anyway (same GDP, 60% more people).

Euro not only failed $1.32 but also failed $1.31 this morning and is now $1.3089 and the Pound failed $1.62 and is now $1.615 so expect the Dollar to climb – especially as the Yen also continues to collapse, now 86.85 to the Dollar after testing 87, which is a 2.5-year low.  Essentially what's going on is the Fed is printing a fixed amount of money (they sort of, kind of have a plan with a theoretical limit) while the BOJ, who already print insane amounts of money, just said "you ain't seen nothin' yet."  We just did something (albeit something lame) to address our debt while Japan is at 240% of GDP and borrowing more every hour.  

Jimmy Margulies - The Record of Hackensack, NJ - Congress delays Sandy relief color - English - Sandy Relief, Congressional Republicans, Natural disasters, Christie, CuomoOne area in which Congress has shown tremendous restraint in is screwing over the Northeast on the promised aid package for the Hurricane Sandy damage – going over 2 months now without approving the appropriations.  NJ Governor Christie noted that other regions had been hit by hurricanes and got relief in short order (Katrina was 10 days and people thought that was too slow, Andrew was 17 days for Florida…) – this is 66 days folks! 

Maybe there is some truth to the assertion that Christie and U.S. Rep. Peter King (R-N.Y.) made Wednesday that lawmakers from other parts of the country have a bias against the Northeast. As Christie noted, New Jersey and New York are net suppliers of money to Washington, not takers. New Jersey gets back around 60 cents, give or take, in federal spending for every $1 in taxes its residents send to the IRS. New York gets back around 80 cents for every $1 its residents send.  After adjourning without a vote, the process now has to restart Friday in the House, and with a bill for only $9 billion. An additional $51 billion would wait until Jan 15th for a vote.  Just another round of shameful behavior from our Republican Congress.  

VIX If it ever is approved, $60Bn will provide a nice boost to the already-recovering Northeast economy, especially the construction sector, and we got more good news from ADP this morning as they showed a year-high 215,000 jobs added in December.  Later today we'll get the ISM New York Business Index along with Bloomberg's Consumer Comfort at 9:45 and, at 2pm, we have the always interesting FOMC Minutes along with a peak at the Fed's balance sheet after hours.  Tomorrow, we hear from Fed Governors Plosser, Yellen and Bullard and that's always a good market mover, but only after we get the NFP report at 8:30.

Hopefully nothing exciting happens and we consolidate our gains into the weekend.  We're going to be watching our levels carefully as well as the 50 dma on the S&P at 1,422, as noted by David Fry in his S&P chart above.  If we hold that, we're in that critical upper channel that gives us a good chance to make progress back to the old highs (1,565 from Oct 2007, after hitting 1,552 in March of 2000 so a 7-year cycle maybe?).  

Until we see some earnings over the next two weeks – I am hesitant to predict where 2013 will end up – we also discussed those variables in Member Chat last night but it's a work in progress, for sure.  

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  1. Morning everyone. Nice job on the S&P end of the year call Phil, that's remarkable.

  2. Phil/Oil – I think that the price of oil is going to have to come down over the next couple years, due to weaker demand, and increases in supply. Can you recommend a play to capitalize on this?  

  3. Morning Phil-is there a note auction today?

  4. CIM/ Phil: I see that they are restating earnings. Is this bad?

  5. Newt: Can you post the source where you saw CIM was going to restate earnings? Thx.

  6. Oil Lines

    R3 – 95.02
    R2 – 94.44
    R1 – 93.63
    PP – 93.05
    S1 – 92.24
    S2 – 91.66
    S3 – 90.85

    Yesterday's high and low – 93.87 / 92.48

  7. Good morning! 

    Thanks Aaron. 

    Auction/Cturb – Just the 6-month and 3-month, not important.  Next week is auction week.  

    Oil/Palotay – Remind me a bit later. 

    CIM/Newt – If it's true (no confirmation) and if it's a big negative, then it's bad but sometimes restatements are just technical or for tax reasons.  Leon Cooperman made CIM one of his 4 top picks for 2013.  

  8. Phil- Thanks.

  9. My quote for the day:

    "Your purpose, then, plainly stated, is that you will destroy the Government, unless you be allowed to construe and enforce the Constitution as you please, on all points in dispute between you and us. You will rule or ruin in all events." Abraham Lincoln

    History repeats itself!

  10. Phil / European stocks – Spoke to my high school buddy yesterday who is on Bloomberg TV and he said a lot of his guests are looking into companies based in Portugal and Spain which do business outside of their home country and are trading at cheap valuations.  We did not get into talking specific stocks.  I own portugal telecom (NYSE: PT) which has been a dog so far but pays a nice dividend and has some operations abroad.  what are your thoughts/any recommendations?  ADR/ADS obviously easier way to go than buying locally.  I already took note and bought your FTE recommendation last week.  

  11. David Weidner on MarketWatch publishes a list every year of people to ignore in finance. His 2013 list is:


    1. Jamie Dimon
    2. Sam Stovall
    3. Jim Cramer
    4. Bill Miller
    5. Michael Grimes
    6. Sheila Bair *
    7. Vikram Pandit
    8. Greg Smith
    9. Meredith Whitney
    10. Occupy Anything
    11. Glenn Hubbard
    12. Robert Diamond
    13. Mitt Romney

    Some repeats from the 2012 list like Jim Cramer and Meredith Whitney who seem to only find an audience on CNBC!

  12. MLNX falters, INTC is going to destroy cable, and, well, I am going to be a happy camper with my FXE puts……go go go

  13. Income portfolio news:

    AMD - Downgraded at Barclay to Underweight.

  14. Phil – I see oil down a bit, is this an appropriate place to short USO?

  15. We have a stop at $13 for the 119 calls.

  16. P&L swings on this portfolio are not for the faint of heart!

  17. Phil, I had sold the AGNC Jan 30p @ .83 and had it put to me last week while the stock was at 29.50. First time this has ever happened to me, I am ok with it as I wanted the stock, but how often does this happen and what is the advantage?

  18. Phil
     CIM       buy stock at 2.67 sells 2.50 2015 put and call for .90
    Is this still a good trade?

  19. CIM – In addition to Leon Cooperman, David Tepper increased his stake by 160% in the 9/30 quarter and holds more than 10 million shares.

  20. My end of year Income Portfolio update – 1 day late. Humming along with the market now!

    Phil – On CIM you had puts and calls prices that didn't match what was trading then. Maybe read the wrong strike. I used the prices of trades at about the same times for entry points. Also, some options have very wide spreads like for example IMAX so the actual P&L will certainly vary. But it's virtual portfolio…

  21. And Ford (F) so far the best overall pick in the Income portfolio with the calls up 160%!

  22. Phil,
    As a paper exercise in selling protective calls in AAPL, after this 10 % move up, with the nr trm high of 555 as a stop, would this be a reasonable place to sell frt mth calls? Trying to get the feel for this aspect of options.
    Thanks, as always

  23. Not a bad idea…


    Why not create a separate government agency to run a US sovereign wealth fund? Then the Fed can stick to what it does best—keeping the economy on track—while the sovereign wealth fund takes the political heat, gives the Fed running room, and concentrates on making a profit that can reduce our national debt.[...]

    Since it would horn in on their turf, big investment banks on Wall Street are likely to offer a chorus of complaints about a US Sovereign Wealth Fund. But after many years of playing a “heads I win, tails you lose” game with the US Government and the US taxpayers, the big investment banks have no moral standing to object to the US government and the US taxpayers finally getting some of the return that should go along with the risks that they have always had to bear.

  24. SPWR off to the races this morning – we just did them last week:

    SPWRA/Deano – They are attractive down here as a long-term investment but expect a bumpy ride.  Easy way to play them is the 2015 $5/7 bull call spread for .50, selling the $3 puts for .60 for a .10 credit and a net $2.90 entry as the worst case and a nice 2,100% profit on cash in the best.

    ALU with a nice move too – about time. 

    Opening action looks like closing action but good to flatline (consolidate) at these levels (between 4 and 5% lines) as that's the way we build for a proper breakout.  Keep in mind those levels are:  


    • Dow: 13,319 & 13,447 (now 13,377) 
    • S&P: 1,442 & 1,456 (1,459
    • Nas: 3,028 & 3,056 (3,105
    • NYSE: 8,580 & 8,660 (8,608) 
    • RUT: 858 & 866 (873)

    That's 3 over so nice and bullish if we hold it.  S&P should be the key mover.  Dollar at 80.22 is set up to goose us if they drop back but super-weak Euro, Pound and Yen not making that too likely.  Also, watch commodities, which are also weak and you can't have a real rally if people are bailing on commodities – you have to make the stuff you sell out of something…

    At the open: Dow -0.18% to 13388. S&P -0.18% to 1460. Nasdaq -0.23% to 3105.

    Treasurys: 30-year -0.08%. 10-yr -0.02%. 5-yr -0.01%.

    Commodities: Crude -0.13% to $93. Gold -0.66% to $1677.73.

    Currencies: Euro -0.6% vs. dollar. Yen -0.6%. Pound +0.54%.

    10:00 AM On the hour: Dow -0.24%. 10-yr -0.02%. Euro -0.64% vs. dollar. Crude -0.23% to $92.91. Gold -0.51% to $1680.25.

    Market preview: Stock futures remain down following mixed jobs data (III) and after rising sharply yesterday in reaction to the fiscal cliff deal. The S&P benchmark is flat to lower. Family Dollardives 9% in the wake of its FQ1 report, while Limited Brands tumbles 4.4% following December sales data, although Nordstrom is +3.5%and Ross +5.25%. Biogen sinks 5.8% after its treatment for Lou Gehrig's disease fails in Phase III trials. Later: ISM New York Business Index, Bloomberg Consumer Comfort Index, FOMC minutes

    President Obama has signed the Taxpayer Relief Act into law. It's a piece of legislation that Dennis Gartman calls "nasty, vile, despicable," (video) although he concedes that "we had no choice but we had to sign it." Now that the fiscal cliff is behind us for a while, Gartman sees stock prices building on yesterday's gains. Still, "owning stocks at this point is rather like owning stocks in Zimbabwe a few years ago."

    Fiscal cliff: US must do more, says IMFThe International Monetary Fund has said that US actions to avoid the fiscal cliff did not go far enough to address the country's long-term fiscal deficit and debt problems.

    Goldman(GS): Why This Debt Ceiling Fight Could Be Even More Of A Nightmare Than The Last One.

    More on Dec. ADP Jobs Report: Small businesses added 25K, Medium businesses added 102K, and Large businesses added 88K jobs. Service providing jobs added 187K, wherein trade/transportation/utilities services added 53K jobs, Professional/business services added 37K jobs and financial activities added 14K jobs

    Dec. Challenger Job-Cut Report:32,556 from 57,081 prior More on Challenger job cuts: For all of 2012, there were523K layoff announcements, down 14% from 2011 and the lowest annual total since 1997

    MBA Mortgage Applications: -26.1% vs. -12.3% last week.  More on Mortgage Applications: The seasonally adjusted index of application activity fell 10.4% - with new purchases and refinances contributing equally to the decline. The refinance share of applications remains at 82%. The 30-year fixed mortgage rate rose 1 basis point to 3.52%. - Meaningless during holidays.  

    Dec. ISM New York Report on Business:54.3 up from 52.5 in Nov.  More on ISM New York Index:The future optimism eased after a post-Sandy urge. The six month outlook fell to 67.6. Employment 47.6 vs. 51.6 prior, fell to an 11-month low. Price paid 54.8 vs. 54.7 prior. Revenues 55.3 vs. 45.8 prior, rose to seven month high.

    The Bloomberg Consumer Comfort index inches up to -31.8 from -32.1, finishing 2012 at just about at the year's high. The index has put in what technicians might call a triple top, with three runs – one in early spring, one in the summer, and this one – into the low -30 area. With a bigger share of nearly all paychecks headed to D.C., we'll see if this resistance level can be broken in 2013.

    The S&P 500 wasn't in the red YTD for even one single day in 2012. It's only happened 8 other times ever, with the last occurrence in 1979, according to BTIG Research. (via Mark Holowesko)

    Americans are using more electronic gadgets, but electricity use is barely growing, posing a challenge for utility companies. PEG,NU and others are pouring money into high-voltage transmission lines, while others are slashing spending. EXC is cutting investment in nuclear plant expansions by $1B and in renewable energy projects by $1.3B as it tries to avoid a credit downgrade.

    "Stocks soar on news of rapidly shrinking paychecks" is a headline you won't see today, but Nick Colas points out 79% of households make under $100K/year and are subject to the full brunt of the higher payroll tax which kicked in on Jan. 1 – removing 4% of their annual spending power. He sees it as a 50 bp drag on GDP growth in 2013. 

    "We recommend unwinding this position at a loss," says Citigroup, throwing in the towel on its bullish mid-November call on Treasurys. The Cliff deal avoids big tax hikes for most, says Citi, and removes the tail risk of massive spending cuts. Treasury prices are down again following the strong ADP print.

    Bank-card delinquencies fell to an 18-year low of 2.75% during Q3, the American Bankers Association says. Delayed payments in a composite ratio of eight loan categories, which doesn't include bank cards or mortgages, fell to 2.16% of all accounts from 2.24% in Q2. However, the ABA warns that weak hiring and the expiration of the payroll tax cut could make it harder for consumers to repay debt

    Citigroup (C) is upgraded to Buy at Sterne Agee, which calls the installation of Mike Corbat at CEO a game-changer (that was 3 months and 20% ago; thanks). Potential volatility tied to the eurozone is the biggest threat to the bank, but that situation appears to be stabilizing (that's older news than the Corbat hiring).

    Bank of America (BAC) CEO Brian Moynihan has instructed his staff to be "more aggressive" in lending to companies and has predicted that the bank should surpass JPMorgan in direct-to-consumer mortgage loans in the next half year. Moynihan also wants to settle lawsuits against BofA as soon as possible, while he's cautious about predicting when the bank will be able to return money to shareholders.

    British banks intend to increase loans to companies and consumers after having already provided more mortgages in Q4, a Bank of England survey has found. The government will no doubt be happy given that banks cited its funding-for-lending scheme, which offers banks cheap loans for re-lending to businesses and individuals, as a major factor in the increased availability of credit. 

    China's non-manufacturing PMI rises to 56.1 in December from 55.6 in November, with the construction services sub-index increasing to 61.9 from 61.3. That is consistent with a recovery in the property sector, which supports 40 other industries. However, the transport index slumped, as is consistent with falling demand for China's exports.

    China Poised for 2013 Rebound as Debt Risks Rise for XiIncoming President Xi Jinping may find China’s investment-driven economic recovery in the Year of the Snake jeopardized by mounting risks in the finance industry. Gross domestic product is poised to expand 8.1 percent this year, up from 7.7 percent in 2012, according to the median estimate of economists surveyed last month by Bloomberg News. At the same time, an increase in lending fueled by trust companies and underground banks enhances the risk of loan defaults that would be “severely damaging” to the economy, Standard Chartered Plc says. The danger is that an economic rebound lulls policy makers into complacency, delaying market-driven changes needed to reduce dependence on investment for growth. “If China tries to sustain growth by adding debt and investing it inefficiently it will be like cotton candy: a short-term high with no lasting value,” said Loevinger

    Watch Out, Asia. Inflation Is ComingInflation in Asia may be under control now, but prices across the region could soon start to creep higher, with India and Southeast Asia the most vulnerable, warns independent economist Andy Xie.

    Happy New Year Germany: Greece Needs A New Bailout.

    Why Did A Train Carrying Biofuel Cross The Border 24 Times And Never UnloadWondering why rail traffic has been somewhat surprisingly consistent despite uncertainty? Concerned at government's tenticular reach into each and every aspect of our lives? This somewhat stunning anecdotal report from might shed some light:

    The grains continue a tough post-U.S. harvest run with news today of China cancelling another order – this one 11.6M bushels of American beans. In the meantime, better weather is improving prospects for South America's crops. Beans -1.1%, Corn -0.7%, Wheat -0.2%.

    Told you so!  Weak Demand Turns Tables on Potash Firms. The world's biggest potash producers bet for years on ever-growing demand for fertilizer. Now they find themselves at the mercy of small farmers like Virender Kumar Rai. On his patch of land in eastern India, Mr. Kumar Rai is switching from potash to cheaper crop nutrients, like urea, for his rice, wheat and vegetable crops. "Urea suits me fine now," he says. 

     BP has almost reached its target to sell $38B of assets a year earlier than planned and has combined its dispositions with acquisitions of a large amount of new drilling prospects, but FTreports the company admits the type of turnaround strategy it is employing will take time to bear fruit. “They are turning a corner – but it’s a very long corner,” says Investec’s Stuart Joyner.

    The Noble Bully 1 (NE) is a new type of drill ship developed by Royal Dutch Shell (RDS.A) that helps extract oil at once-inaccessible ocean depths. It's a ~30K-ton vessel as long as two football fields whose design helps Shell drill wells faster, more safely and at a lower cost than ever before, and is part of the technological revolution helping North America's oil and gas boom.

    Miller Tabak raises its price target on Chipotle (CMG) to $360 from $335 while maintaining a solid Buy rating on the restaurant operator. Meanwhile, Jefferies has the other side of the trade, noting pressure from Taco Bell will pressure sales and margins. CMG -1.5%premarket.

    Chrysler (FIATY.PK) December U.S. sales: +10% to 152,367 vehicles, beating the expectations of analysts easily. Strong demand for the Ram pickup and Jeep Grand Cherokee SUV paced the monthly sales haul. The Fiat brand gained 59% during the month, while the higher-volume Chrysler brand gained 6%. The automaker notes industry sales rose at an annual rate of 15.8M, marking the strongest month of the year.

    Ford (F) December U.S. sales: +2.0% to 214,222 vehicles, marking the automaker's best mark for the month since 2006 and beating the consensus estimate of analysts which called for a 1.2% gain. Ford brand up 2.5% to 206,838, to help offset a slip in Lincoln sales. The lynchpin Ford Focus model saw a 58.3% Y/Y gain in sales to 22,604. C-Max Hybrid sales came in at a steady 4,310 for the month. (PR)

    Shares of Ford (F +2%) break higher as investors warm up to the automaker's solid report on December sales amid a backdrop of a stressed consumer. Looking at the year as a whole, the automaker saw its F-Series truck show a double-digit gain in sales growth while it made strides with its lineup of fuel-efficient smaller models. Once again, the laggard was the Lincoln brand which Ford plans to give a shot in the arm in 2013.

    Hyundai (HYMLF.PK) December U.S. sales: +17% to 59,435 vehicles, paced by sales of the automaker's Elantra and Sonata models. Full-year 2012 sales ended up 9% higher at 703,007 units.

  25. Gotta watch out for this knock on all Dec sales:
      Rite Aid (RADreports a 2.2% decline in same-store sales for December with the holiday calendar shift accounting for 1.1 percentage points of the drop. The prescription count at comparable stores rose 4.4% Y/Y during the month with the flu season getting off to a late start.

    It Was a Blue Christmas for Retailers. We have all heard of Black Friday. Last week, though, retailers had an awfully dark Wednesday—and not because Dec. 26 is also one of the busiest shopping days of the year. A report from SpendingPulse, a service of MasterCard Advisors, said holiday spending in the two months up to Christmas rose by just 0.7% from a year earlier—a deep disappointment

    When the going gets tough, the rich go shopping:  Nordstrom (JWNDec. same-store sales: +8.6%. Total sales +9.4% to $1.72B. (PR)  Nordstrom's (JWNDecember sales: Compared to peers, Nordstrom's 8.6% rise in comparable store sales looks downright frothy as both full-price (Nordstrom) and discounted stores (Nordstrom Rack) contributing to results. On a pre-recorded sales call, the company noted strength in the Midwest and South and said sales were strong during the last week of the month. On expansion, 15 stores were added to Nordstrom's total store count compared to a year ago led by expansion of Nordstrom Rack. JWN +3.0% premarket.

    Macy's (MDec. same-store sales: +4.1%. Total sales+3.6% to $5.1B. Shares +1.5% premarket. (PRMore on Macy's (MDecember sales: A solid sales month for the company with the "lingering" effects of Hurricane Sandy and economic uncertainty both a factor. Execs note omnichannel initiatives are paying off with fulfillment stores processing online orders. Online sales for the month were up 51.7% Y/Y. Due to the aforementioned headwinds, the retailer lowers its estimate for Q4 EPS to $1.91-$1.96 from prior guidance of $1.94-$1.99. M -0.9% premarket.

    Target (TGTDec. same-store sales: flat%. Total sales+0.8% to $10.2B. Shares +2.5% premarket. (PR)  More on Target's (TGTDecember sales: CEO Gregg Steinhafel notes the flat performance of comparable store sales growth came as a result of late strength which was just enough to offset a soft first three weeks. Due to the sluggishness, Target estimates Q4 EPS will meet or exceed slightly the low end of its guidance. A new $1B buyback plan is authorized by the company. TGT +2.3% premarket.

    Shares of Ross Stores (ROST +6.9%) soar after the retailerbeats the estimates of analysts with its December sales report and increases its guidance for Q4. Amidst a tough environment, the retailer's management team executed well to help the company show an improvement in margins.

    Costco's (COSTnet sales +12% in December to $11.2B, helped by an extra day of trading that boosted the figure by around 2%. Same-store sales +9%, above consensus of +6.5%. Excluding fuel and forex fluctuations, comparable sales +8%. (PR)

    Kohl (KSSDec. same-store sales: +3.4%. Total sales +4%to $3.4B. Shares -3.5% premarket. (PR)

    Very interesting – are people feeling too rich for the Dollar store?  Maybe bad for WMT too, who benefitted from Recession, gaining new shoppers:  Shares of Family Dollar (FDOfall 8.5% premarket after the retailer puts in a dismal quarter and slides its estimates for FQ2 lower. An emphasis by the company on lower margin items such as cigarettes and soft drinks put a serious crimp on its ability to turn a profit. Peers premarket: DG -3.8%DLTR -2.9%.

    More on Family Dollar's (FDO) FQ1: The retailer cites increased gross margin pressure and higher insurance expenses as negative factors on earnings during the quarter which offset a brisk 6.6% gain in comparable store sales. Execs noted the holiday season was "more challenging" than expected. SG&E expenses as a percentage of sales fell 30 bps to 28.9%. The company sees FQ2 EPS of $1.18-$1.28 vs. consensus of $1.39. Shares -4.9%premarket. (PR)

    Gap (GPSDec. same-store sales: +5%. Total sales +5% to $2.08B. Shares -% premarket. Shares -0.7% premarket. (PRMore on Gap's December sales: Comparable sales gains led by a 13% rise at Old Navy North America which helped offset another down month for global sales. Gap and Banana Republic in North America showed modest gains, up 2% and 1% respectively. CEO Glenn Murphy says customer responded "favorably" to products and promotions during the holiday season. Shares of GPS -0.4% with the purchase of Intermix and a new $1B buyback plan also in the mix.

    Priceline (PCLN +1.6%) opens higher following an upgrade to Buy from BofA/Merrill.. the firm, which has raised its PT to $770, thinks Priceline offers more potential upside to 2013 estimates than Expedia (EXPE), foresees strong international growth over the next 3 years even as European growth slows down, believes Europe will have a modest 2H economic recovery, and is positive on the Kayak acquisition. Priceline has been range-bound since late August.

    BG Medicine (BGMDrockets 24% after saying it has received the EU's CE mark for the first automated version of the company's Galectin-3 blood test for improving the management of heart conditions. BG is working with four partners to commercialize the test, including Abbott Labs (ABT) and Siemens (SI). The EU approval comes just a week after SA author Robert Fabian called BG Medicine a "hidden gem." (PR)

    A judge yesterday reiterated her ruling that memory chip company Rambus (RMBS) can not use 12 of its patents to demand royalties from Micron Technology (MU). The verdict is a punishment for Rambus improperly destroying documentary evidence related to a lawsuit involving Micron. Judge Sue Robinson's verdict came after an appeal court asked her to explain more fully her initial ruling.

    SunPower (SPWR+16.4% premarket after Lazard raises shares to Buy from Neutral with an $11 price target, saying investors are overlooking the stock that has "strong sales visibility" and the ability to turn in "healthy returns despite a highly competitive solar market." SPWR also enjoys a boost from the $2B-$2.5B sale of its California solar development to MidAmerican Renewables.

    Berkshire Hathaway (BRK.A) unit MidAmerican Energy ispaying $2-2.5B for two solar projects that it's buying in California from SunPower (SPWR), which is also receiving a three-year contract to build them, and a multi-year deal to operate and maintain them. SunPower closed +9.1% yesterday following news of the deal. The acquisition is Warren Buffett's third major solar PV deal in a year.

    Alcatel-Lucent (ALU +9.3%) jumps to $1.54 on an upgrade to Neutral from Credit Suisse, which happens to be one of the underwriters (along with Goldman) for its recent debt refinancing deal. Separately, Alcatel says it will demo 12 new cloud service concepts at CES. Among them: energy management apps for utilities that can monitor/adjust home appliance use, and interactive tables for airports and train stations.

    Keeps going, and going, and going:  Cisco (CSCO+1.3% after catching an upgrade to Outperform from RBC. The firm cites better visibility and gross margin stabilization, among other things. "Cisco's core markets are no longer under attack from Huawei, HP and Juniper and Cisco's market shares have rebounded and stabilized. Cisco has also improved its sales execution and refocused its engineering talent.." IDC's data indicates Cisco, which trades at less than 8x FY13E EPS, lost a bit of Ethernet switching share in Q3. 

    Al Jazeera Acquires Al Gore's Current TVAl Jazeera on Wednesday completed a deal to take over Current TV, the low-rated cable channel that was founded by Al Gore and his business partners seven years ago. Current will provide the pan-Arab news giant with something it has sought for years: a pathway into American living rooms. Current is available in about 60 million of the 100 million homes in the United States with cable or satellite service.

    Three breakfast reads: 

    1) The Curious Collapse At Las Vegas Sands

    2) Dogging The Dow: Examining The 'Dogs Of The Dow' Strategy 

    3) Avis's Smart Zipcar Buy

  26. MoMo Virtual Portfolio trade:  Sold 1/2 (5)of the SODA Jan 42.50 calls for 5.00.  Holding 5.

  27. lflan – No adjustments on the AAPL position? You are only 1/2 covered now with a hefty $700 target. Do you still expect AAPL to be there in April. Not saying that it's impossible with earnings in between – last year they added $150 after the January earnings.

  28. Sold more WFR. Only keeping a small position.  It's had quite a run.

  29. Phil/Cliff Deal
    Do you see any potential longer-term plays based on certain sectors benefiting from new tax credits, i.e., clean energy, etc.?

  30. Shopping/ Phil:  I wonder if the early start of Christmas shopping is taken into account in comparisons?  My wife did 90% of our shopping in Oct and Nov.  since retailers are placing Christmas things earlier every year. I actually found many items cheaper before black friday than after black friday and many things run out if you wait too long.

  31. European stocks/Terra – Sorry, not my area of expertise.  If you have some ideas, I'd be happy to look them over because the premise is sound but I don't follow Portugese or Spanish stocks.

    People to ignore/StJ – It would be easier to have a list of people not to ignore as there are fewer of them.  

    USO/Jerconn – We have inventories tomorrow so tricky to short ahead and, of course, big holiday travel week with Xmas and New Year's so would wait.  Also, Dollar is up and could come down with Fed speak, also boosting oil back up.  THEN I will want to short.  

    AGNC/Rpme – Good deal as they are $30.50 now.  It happens pretty often when the short puts run out of premium but no biggie as you're long the stock at $30 and now you can sell it for a .50 profit and you still keep your .83 so you now make $1.33 on your short Jan puts a couple of weeks ahead of schedule.  The formula for that is:  Gift Horse/Mouth = Don't Look!  You could keep the stock if you really want to be in it and you'll get your net $5 per year dividends but you're way ahead of that now so you can cash in and just sell more puts and do it all again or you can keep the stock with your $29.17 net entry but you can also cash in now, keep the $1.33 and sell the June $29 puts for $2 and then you are net $25.67 on your entry as worst case and you pick up as much from the short puts ($2) as you would in dividends if you held the stock without the bother of actually owning it or having to cover.  

    CIM/QC – I am a bit worried it will get away as it's starting to get attention (maybe my fault) and .90 isn't too terrible for the short sale but if you can get $1 for the 2015 $3 puts, that's better as it still net's out to $2 for the entry but you have more money if CIM goes higher.  Or you can just do those naked for a 1x entry at net $2.  

    Economist/Pharm – LOL!  

    AAPL/8800 – We sold 1/3 the Jan $550s yesterday so, yes, this is a good spot to sell some front months.  With the indexes still strong, I have no desire to sell more than that but if we break down, then I'd want to go to 5 or 6 of 10.  

    Sov wealth/StJ – Isn't that what the Fed is already doing.  They just buy the bad assets that the banks already bought with the Fed's money.  

  32. stfeanluc….yes, close out the AAPL trade above for  the values listed:  18.87 (10 contracts or $18,870)/3.95(5 contracts or $1,975).  That yields $16,895.  I will post new trade before EOD. 

  33. Phil – I am looking to buy SIMG and LF before earnings season. They both have horrible option options, really wide strikes. What is your opinion on synthetics, long calls and short puts with the same strike price? For instance on SIMG buying a synthetic long at 5$, in lieu of buying shares. Thanks.

  34. ZLCS – nice step back up today..!

  35. Asking again
    Phil/Oil – I think that the price of oil is going to have to come down over the next couple years, due to weaker demand, and increases in supply. Can you recommend a play to capitalize on this?  Maybe something with SCO?

  36. RIMM/GOOG/MSFT – Just started working at a new company this week and we are using GOOG corporate gmail running through MSFT outlook on our PCs.  My boss is pissed since he cant use his blackberry any more.  The corporate gmail works well on my Samsung Note and does not interfere with my personal gmail.  

  37. thanks for reminding us Phil!!!!

  38. Pharm – Any opinion on TPIV?

  39. Cliff/Opes – I think the biggest possibility is dividend players, who were beaten down to far.  Energy sector is lagging a bit so trusts very interesting and utilities should come back, especially electric companies that use nat gas as that supply won't shut down in the near-term.  Right now, I'm thinking of adding LVS for the Income Portfolio (and the fund) as I read a compelling article on them in Seeking Alpha that I would have to agree with.  LVS is a nice, fun, volatile stock to play with and should generate a nice income selling calls over time.  

    For LVS in the Income Portfolio, I like 20 2015 $42.25/55 bull call spread at $5.60, selling the $32.25 puts for $3.60 for net $2 ($4,000) on the $12.75 spread so we have plenty of room to sell something like 5 Jan $49.75 calls at $1.05 ($520) – won't be long at that pace until we have a free ride on the longs – even on that 1/4 sale.  

    This weekend, I will review the Income Portfolio, which is miles ahead of schedule at over 10% in 6 months and we will be finally starting to make an income by selling short positions to lock in our gains and generate a bit more cash.  

    Shopping/Arivera – November numbers were not that exciting except for on-line, a bad December would not bode well. They do do it to themselves by pushing things forward (and backward as people wait for post-holiday sales too) but, over the quarter – they still need to net out the numbers.  Retailers are also getting much more scientific about adjusting prices dynamically to conditions but, as we noted in our shopping survey, the conditions did seem to dictate some pretty drastic sales for many retailers.  It does sound like you shop a lot – what kind of things ran out?  I wouldn't know because I have no idea what I'm going to buy until I see it in a store so, if they run out – I simply don't even know it existed.  My interest in shopping has dropped to about zero as I get older – I think I'm over my lifetime "stuff" limit as I was watching a show with some monks in a monastery and was thinking – that's the life!  

    SIMG/Aaron – They are very thinly traded so rogh to get good option prices but June $5 puts and calls should fetch at least $1.40 on the $5.19 stock so you can do a buy/write for net $3.79/4.40 and get about a 12% discount if put to you and a 28% gain if called away at $5 or you can be more aggressive and just sell the puts for .65 against the .85 calls and then you have the $5 calls for net .20 and that's good leverage but, if put to you it's net $5.20 and you need to hit $6.31 to make the same $1.11 you'll make at $5 with the more conservative spread and, of course, the conservative spread has built-in 12% downside protection.  So my opinion is you are asking about gambling, not investing and my opinion on gambling is not good.  With such a short window and such poor premiums and such thin trading – you will either win big or lose big on earnings – that's all this is.  

    LF/Arron – A bit more stable and tradeable but I don't know anything about their new product line or how that space is doing but, assuming you did your research and like them going forward – then, with no dividends and 2015 options, I'd go with the artificial buy/write, selling the 2015 $5 puts for $1 and buying the $5/10 bull call spread for $2.50 so you are effectively in the stock at net $6.50, which is 33% below the current price and your worst case is owning them at that net but you get all the benefits of the gains up to $10 which, with your $2.17 head start, would be a $3.50 profit on your net $1.50 spread for a very nice 233% profit.  That's a spread I can agree with. 

    Oil/Palotay – Well, you can short USO as it decays over time so that's a bonus but I don't agree with your premise due to an improving global economy and the likelihood of inflation – as well as the possibility of war or terrorism over the course of 2 years that can always pop oil back over $100 on any given weekend.  SCO also decays and you'd have to play them bullish so I don't like that idea so it would be a USO 2015 $41/33 bear put spread at $5, selling 1/2 the Jan $33 puts for .30.  If you lose the short puts, you roll them or whatever but you have $3 (10%) leeway on those and, if you can sell them every month like that (and there are $1 strikes so you can), you can collect $7.20 against your $5 spread and be up $2.20 plus whatever value the spread holds.  It's always less likely that oil drops suddenly (other than the contract rollovers, which usually reverse) than it rises suddenly so many chances to zap your short putters along the way.  

    GMail/Terra – That thing is really catching on.  I get mail from more and more GMail accounts – I think maybe because it's easy to set up on the IPhone and syncs with the desktops so nicely.  

    Dips/Jabob – If we ever get one.  

    SPWR up 32% now – talk about things getting away! 

  40. CSCO/Phil:  It seems like I have a remnant in the Income Portfolio of 6 Jan 2013 $17.50 callers I sold for $0.78 each now at around $2.94 that I missed buying back. 
    Thinking of rolling it to 10 Jan 2014 $20 callers for $2.24.  Thoughts?

  41. Phil,
      What is your outlook on Staples? I have 3 sold JAN 13 $15 puts with a net of $12.20. It seems to be pretty stable for the last 5-6 months around 12, so I was looking at DD to the JAN 2014 $12s which would reduce my net to about $11.90, if put. Alternatively, it pays a little over 3% dividend, so would it make sense to accept the assign and sell puts/calls to turn it into a buy/write?
    BTW, thanks a lot for all your help in the past year! It's made a big difference for me. 

  42. Phil/LF – Thanks Phil. I have done my research and think they are going to be this year's "Tickle Me Elmo". I got interested in them because my 3 year old nephew just had to have a LeapPad. So I buy him the hardware and a gift certificate for their app center, and this is something that he will need software for. Great business I think, Elmo was a one time purchase whereas the LeapPad inherently promotes further purchases. 

  43. UK FTSE +0.3%
    French CAC -0.3%
    German DAX -0.3%
    Spain IBEX -0.4%
    Italy MIB +0.1%

  44. Look at GM taking off, that's a welcome development!  Did we have a play on them?

  45. CSCO/Kinki – I think I'm bullish on CSCO so, if you have nothing covering those short calls, I'm not sure how much that will help although, obviously, better than nothing and the correct play to make if you still believe CSCO will fall short of $21 over the next year.  As I'm bullish on them, I'd buy the 2x 2015 $20/25 bull call spread at $3 and roll the Jan $17.50 callers ($3) to 1.5x the April $19s ($2).  Then you have a reasonable spread with good protection and plenty of time to roll and net $3.50 in upside protection.  

    Inside banks/Angel – Scary stuff.  

    SPLS/Kevin – You're very welcome.  I don't see employment coming back so fast (or business) that it's going to crank them up too much but I also don't see things getting worse and they are priced for disaster.  They pay a nice 4% dividend of .44 so you can play them for that by buying the stock (or taking your assignment) for $11.80 and selling the 2015 $10 puts for $1.70 and the $12 calls for $1.80 for a net $8.30/9.15 entry and that makes the .44 dividend 5% while you wait and you have a 20% cushion on the stock built-in.  This goes back to what Craig and I were talking about in Vegas – the beauty of this strategy is you knock off about 20% of the stock price each cycle so, even in stocks that are flat or go down a bit – as long as they don't go BK – you eventually end up holding a free stock within 10 years or less that pays you a nice annual dividend.  

    LF/Arron – That's the kicker – whether or not they have a hot toy.  If they have caught on to that app model – then I heartily approve because I see the way those things suck money out of kids.  7-11s are now full of gift cards for all sorts of games and parents give them out all the time and they are ridiculous – Maddie got $50 to spend on gold on one of her games – that's more than we would have paid for a whole video game in the old days.  She then take the gold to the virtual store in the game and buys a nice sword or some armor and then she can go off and kill higher-level players until she runs into an area where people have better swords and better armor and then she needs to go shopping again – it's insidious and, as I was saying yesterday – it gives her nothing of lasting value – there are people who spend more money on their game characters than they do on their cars but once they are done with the game – they have nothing to show for it and, of course, they make no actual productive use of their purchases.  So, great investment in the company but I pity the direction society is heading…  

    Europe/Kustomz – Thanks.  We still have a bit of catching up to do but getting to short-term equilibrium now.  

    GM/Jerconn – No, I liked F better.  As StJ noted, it's the profit leader in the Income Portfolio so not a bad pick.  I was on TV in 2009 ranting about GM and how they should save their investors money and stop trying to make cars (they were losing about $20,000 per car at the time) and I don't think I've ever truly come around to thinking they've changed.  They were just so f'ing bad back then – the whole culture – I still can't accept them as people to give money to. 

  46. MoMo trade……Sold to close the remaining 5 SODA January 42.50 calls for 6.00.  Only reason I'm exiting this trade is to roll them further out.  So, will buy later month calls……well….later.  

  47. CSCO/Phil:  Sorry if I wasn't clear, I have the currently existing Income Portfolio position of 10 2015 $15 putters and 10 2015 $15 calls.  We also had 6 Jan 2013 $17.5 callers to generate income, but they must've been bought back at some point as they are no longer listed and I didn't notice it until today.

    So I am bullish right along with the Income Portfolio, these callers are just for generating "dividends".   So perhaps selling something farther out in time or maybe just covering the 2015 calls with 2015 callers to complete the Bull Call Spread might be a better move.

  48. Phil/LF – I heartily agree, however LF is pushing apps that are learning tools. Taken directly from their app store, they are categorized into: reading and writing, mathematics, science and social studies, creativity and life sciences. Earlier this month they announced that they were the #1 selling tablet and #1 toy in the UK. Insiders have been buying over the last few months. I had to do a double take on that one, #1 tablet in the UK.

  49. Phil, i'm still in the USO Jan 34/33 bear put spread, bought at 55c now 35c. would you hold this or cash out the short leg? thanks,

  50. Phil,
    RIG does not pay a dividend….with this settlement, and my basis at 33, i'm thinking of selling a 2015 call 55 for around 6.5? or is there a more aggressive trade that you would recommend. Also, fool me, did not take advantage of aggressively selling a Put when opportunity existed.  Hold my hand will you, and lead the blind….. thank you

  51. Shopping/ Phil:  Actually, my wife shops a lot, I just pay!   Most of what we shop is for our  two young daughters and things like Lullaloopsy dolls and other popular kid stuff sell out quickly. Since Puerto Rico is an island, restocking takes a while so we notice.  Guess this is not an issue in the US mainland.

  52. Speaking of Ford:

    While traditional economic indicators get the most attention, a lot of economists like to look at sales of pickup trucks as an indicator of strength in the small business sector. The reason they focus on pickup truck sales is because small business owners tend to make up a large portion of the overall buyers of these types of vehicles. To that point, Ford's (F) December report of its iconic F-Series truck line continues to signal positive growth in the U.S. economy.

  53. DELL & HPQ having nice moves today.  I'm still long and strong in DELL.  Boring, but very profitable so far.

  54. Palotay / Oil :  I tend to agree with you that oil looks a bit rich right now. I see the primary driver as being the dollar, because a tanking JPY and a sliding Euro will, just on a dollar-adjusted basis, take it down.  But I haven't made much money fading Phil in the past, so I dunno, tempting, but maybe take a pass….

  55. Phil…Somewhat confused as always.On income port.,have some positions,not all.On F for example,up huge.When is it investing vs greed with 1 year to go?Close whole position,or just short calls?Trying to understand when to act.Thank you

  56. Good Afternoon—
    Phil—do you like silver --if so is there a spread on slv you can recommend? Thanks
    Pharm—-I have some PGNX  not PLX—do you like one more than the other —-thanks

  57. TPIV – no thanks.  Penny stock, lots of shares outstanding…and been around a long, long time.  For a roll of the dice, sure, but plan on losing.

  58. ZLCS…almost even…do you know what to do when you are even?  Get out, or sell at least 1/2.  I still like them, but like my note above, this is a very early gamble.  Most, no more than most, lose.

  59. Savi – PLX is a safe, easy play.  PGNX has lots of potential.  PLX is my largest holding.  

  60. Thanks Pharm

  61. IRWD – not a big fan of CNS drugs, but the company is in bed with FRX with their GI drug.  FRX is CNS.  My Adam F. interpretation is FRX buys IRWD.  Selling Feb 10 Ps.  Not buying calls yet, but the Current stock paired with the Jan calls for 30-35c is a good risk reward.  The stock is moving UP. OH resistance is…$12.5 at the 200d MA.

  62. Phil debt ceiling and dollar, the dollar should gain going into this.

  63. Phil, Staples has been getting a lot of bad press over the last year. One article I remember had the sales associates unable to sell any of the advertised electronics specials with out getting the customer to buy an extended warranty. if the customer insisted the associate was to get the person out of the store without purchasing anything, called walking the customer. Sales people who sold the items without the extended warranty would be fired….NY Times.

  64. QE highlights

    Several members thought it would be appropriate to diminish or end QE before the end of the year
    A few wanted QE until about the end of 2013
    Some members emphasized the need for ‘considerable’ accommodation
    Various members stressed importance of monitoring labor market

  65. WTF was that.

  66. Pharm
    What trades ?
     Selling  puts for    new position ?

  67. CSCO/Kinki – Well that's fine as you already have bullish longs and you already did a 1/2 sale so you can just go ahead and roll to 9 of the April $19s and you remain well-protected and deeper in the money to your callers.  If CSCO goes down, you have coverage and, if they go up, you can roll again.  

    UK/Aaron – That's a good indicator of US tastes.  

    USO/Ethan – That one was a bet USO stays below $92 into Jan expiration.  Only $93 now and we do intend to short them so I'd stick with it but not buy the short leg and compound the problem if inventories pop oil tomorrow.  

    RIG/Jasu – Big relief rally on that settlement so you are in good shape.  You have a $16.68 profit on RIG and you are tying up $25 in margin to own them (assuming ordinary) and, if you sell a 2015 $55 call, you drop that to $20 net margin.  Since you would cap your gain at $55, why not just cash in and pick up the 2015 $45/55 bull call spread at $4 and sell the $35 puts for $3 so you are then in the $10 spread for net $1 and you make $9 more at $55 and your worst case is you are back in them at net $36 and the overall margin requirement is far less (TOS says just $3.20 net margin for the short puts, plus the cash for the spread.  If you want to be fancy, with your $9 upside, you can also sell 1/2 Jan $50 calls for $1 and .50 per long is a nice, 5% monthly dividend to pay yourself while you wait. 

    Boehner got re-elected.  I'm surprised. 

    Kids stuff/Arivera – Oh, that explains it.  Those kids items sell like hot cakes when they are a fad.  Happens everywhere with really popular items. 

    F/StJ – Those trucks will make a huge comeback when homes start getting built again.  Most of those "small business owners" are contractors, I think.

    HPQ/Albo – On fire!  DELL doing well too.  It was just November, in Vegas, when I was trying to tell people HPQ was not worthless.  Funny how fast things change…

    Oil/ZZ – Yen over 87 now (weak) and Euro $1.3107 with the Pound pathetic at $1.614 and the Dollar is $80.26.  We haven't had a draw on oil in weeks but it's still up at $93.20 so SOMEONE wants it up and they are expecting a draw on this report but the barrel count is still bloated at Cushing, which is bursting at the seems with oil BUT the NYMEX has paired back their open orders considerably for the front 3 months as so many traders have been able to take profits at $90+ so not too much pressure to roll out in this cycle with under 500K open in the front 3 months and 3 weeks left to trade:


    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Feb'13 92.91 93.30 92.49 93.17 13:34
    Jan 03


    0.05 122995 93.12 261453 Call Put
    Mar'13 93.29 93.71 92.93 93.62 13:34
    Jan 03


    0.07 45145 93.55 178862 Call Put
    Apr'13 93.68 94.13 93.39 93.99 13:34
    Jan 03


    0.02 16437 93.97 65269 Call Put
    May'13 93.98 94.48 93.75 94.34 13:34
    Jan 03


    0.01 10035 94.33 71063 Call Put

    If Brent fails $110 (now $112), then this whole thing may crash but, at the moment, the bulls have not lost control of the board yet.  

    Greed/490 – It depends on a lot of things.  How big is the position in your portfolio?  How is the overall performance.  If everything is up, then you can afford to be a little greedy on some but if it's a huge position – then you are a fool not to take some off the table.  In our Income Portfolio, we have $500,000 and F is net $1,500 worth of long calls with an obligation for us to possibly buy 3,000 shares of F at net $10.52 ($31,560) so we "risk" $31,560 but we certainly don't think F will go BK suddenly so, at most, we risk $15,000 if they fall to $5 and we're too dumb to stop out.  And what's our upside?  So far, we're up net $3.15 or $9,450 at this price so it's a question of how high we think F can go between now and next Jan and I think maybe $17, which would be another $9,000 so I'm willing to risk them going back to $12 and losing $4,500 of what we have to take a shot at $9,000.  Also, we can sell March $14 calls for .52 and that's $1,560 so not a bad dividend to pay ourselves while we wait.  So, as long as F holds $12 and we are 3 of 5 indexes over our levels – we're not being greedy, we're just going with the flow.  

    Silver/Savi – I like them off the $30 line but when gold is $1,650 at the same time, I'd rather play them as the gold stocks tend to be more liquid with tighter strikes.  SLV lines up pretty well with silver and there's nothing wrong with the April $27.50/30 bull call spread at $1.50 for a 66% gain at $30 (now $29.64) and you can pair that with the sale of the $27.50 puts for .70 and that knocks your net down to .80 with a $1.70 upside (200%) and you need silver to be about $31 to collect the whole thing but it's $30.63 now so about a $1 spread on the two.  

    If you want to be more aggressive, the AGQ $46/55 bull call spread is $3 and you can sell the ABX Jan $30 puts for $2.30 so you have net .70 on that spread with AGQ currently at $45 so you need a 9% move in silver, to about $33.50 to collect the full $8.30 on that one.  

    Oh no, Fed Minutes show dissension in the ranks – going to get a bit of a pullback – how much is the key.  

  68. 65M on the Dow at 2 at 13,387 so we'll see how much damage this does.  Without Free Money – what are we smiling about???

  69. FOMC Minutes: Everyone is clearly not on board. Fed officials are "evenly divided" between ending QE around mid-year or continuing until year's end. Several FOMC members thought it appropriate to slow or stop QE well before the end of 2013.

  70. Fed minutes  oh oh

  71. Gold also showing "they" cant print forever, or at least they will be smart enough when it comes to timing.

  72. Thanks Phil

  73. Dollar 80.47 so we're actually holding up very well considering so far. 

  74. SPLS/Rpme – Good, move those dead-beats out the door and bring in the suckers who make our margins!  8)  I've worked in retail – I know exactly how that stuff works.  IBM would have never sold a PS2 if they hadn't dropped a $100 Bill in the salespeople's pocket every time and, in order to do that, they had to give $200 to management so they'd allow the program.  That was 30 years ago – nothing changes other than "what are we pushing this week?"  

    Not much of a sell-off at all with the Dollar at 80.50 and only Lacker actually dissented – what they discussed is one thing but the bottom line is you have one no vote and that's it.  

    Minutes of the 12/11 meeting:

    A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., on Tuesday, December 11, 2012, at 11:00 a.m. and continued on Wednesday, December 12, 2012, at 8:30 a.m.

    Developments in Financial Markets and the Federal Reserve's Balance Sheet
    The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the Federal Open Market Committee (FOMC) met on October 23-24, 2012. He also reported on System open market operations over the intermeeting period, including the ongoing reinvestment into agency-guaranteed mortgage-backed securities (MBS) of principal payments received on SOMA holdings of agency debt and agency-guaranteed MBS; the operations related to the maturity extension program authorized at the June 19-20, 2012, FOMC meeting; and the purchases of MBS authorized at the September 12-13, 2012, FOMC meeting. By unanimous vote, the Committee ratified the Open Market Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account over the intermeeting period.

    The Committee considered a proposal to extend its liquidity swap arrangements with foreign central banks past February 1, 2013. All but one member approved the following resolution:

    "The Federal Open Market Committee directs the Federal Reserve Bank of New York to extend the existing temporary dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2014. In addition, the Federal Open Market Committee directs the Federal Reserve Bank of New York to extend the existing temporary foreign currency liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2014."

    Mr. Lacker dissented because of his opposition to arrangements that support Federal Reserve lending in foreign currencies, which he viewed as amounting to fiscal policy.

    Options for the Continuation of Asset Purchases
    The staff reviewed several options for purchasing longer-term securities after the planned completion at the end of the month of the maturity extension program. The presentation focused on the potential effects for the U.S. economy, based in part on simulations of a staff macroeconomic model, and for the Federal Reserve's balance sheet and income of continuing to buy MBS and longer-term Treasury securities over various time frames. In their discussion of the staff presentation, some participants asked about the possible consequences of the alternative purchase programs for the expected path of Federal Reserve remittances to the Treasury Department, and a few indicated the need for additional consideration of the implications of such purchases for the eventual normalization of the stance of monetary policy and the size and composition of the Federal Reserve's balance sheet.

    Staff Review of the Economic Situation
    The information reviewed at the December 11-12 meeting indicated that economic activity continued to increase at a moderate pace in recent months. Employment expanded further, and the unemployment rate declined slightly, on balance, from September to November but was still elevated. Consumer price inflation slowed as consumer energy costs fell, while measures of longer-run inflation expectations remained stable.

    Private nonfarm employment increased at a slightly faster rate in October and November than in the third quarter, but government employment decreased somewhat. The unemployment rate declined to 7.7 percent in November, and the labor force participation rate in that month was at the same level as in the third quarter. The relatively large share of workers employed part time for economic reasons trended up a bit, on net, while the share of long-duration unemployment in total unemployment was essentially flat and remained elevated. Indicators of firms' job openings and hiring plans were little changed on balance. Initial claims for unemployment insurance were boosted in early November by the effects of Hurricane Sandy but returned within weeks to a level that was about the same as before the hurricane.

    Manufacturing production declined in October, as output was held down at the end of the month by the disruptions and damage caused by Hurricane Sandy; the rate of manufacturing capacity utilization also declined. Automakers' schedules indicated that the pace of motor vehicle assemblies would rise somewhat in the coming months. Broader indicators of factory output, such as the diffusion indexes of new orders from the national and regional manufacturing surveys, continued to be subdued at levels consistent with only small gains in production in the near term.

    Real personal consumption expenditures rose at a modest pace in the third quarter, but spending declined in October, likely in response in part to some disruptions caused by the hurricane. Probably reflecting those disruptions, sales of light motor vehicles fell in October but then increased notably in November. Some factors that tend to influence household spending became less supportive: Real disposable personal income moved up only slightly in the third quarter and declined in October. Moreover, consumer sentiment fell back in early December to about its level during the summer. In contrast, household net worth increased in the third quarter, partially a result of higher equity and home values.

    Conditions in the housing market continued to improve gradually, but construction activity was still at a low level, restrained by the considerable inventory of foreclosed and distressed homes and the tight credit standards for mortgages. Starts and permits of new single-family homes were essentially flat in October after rising significantly in the preceding month. Starts of new multifamily units rose in October, although permits declined somewhat following their brisk increase in the previous month. Meanwhile, home prices advanced further and sales of existing homes continued to expand, but new home sales were little changed.

    Real business expenditures on equipment and software decreased in the third quarter. In October, nominal new orders for nondefense capital goods excluding aircraft moved up a little, but shipments of these capital goods edged down and the level of orders remained below that of shipments. In addition, other forward-looking indicators of equipment investment by firms, such as surveys of business conditions and capital spending plans, were still subdued. Real business expenditures for nonresidential structures also decreased in the third quarter, although nominal construction spending by firms increased in October. Inventories in most industries appeared to be roughly aligned with sales in recent months.

    Real federal government purchases increased markedly in the third quarter, led by a sharp rise in defense spending. However, data for nominal federal spending in October pointed toward a decline in real defense expenditures in the fourth quarter. Real state and local government purchases were little changed in the third quarter. State and local government payrolls decreased on net over October and November, and nominal construction spending by these governments edged lower in October.

    The U.S. international trade deficit widened in October, and both exports and imports fell sharply from the previous month. The decrease in exports was widespread across categories, while the reduction in imports importantly reflected lower purchases of consumer goods and non-oil industrial supplies, although petroleum imports increased.

    Consumer prices moved up more slowly in October than in the preceding few months, primarily because of a small decline in energy prices after several months of large gains. Moreover, survey data indicated that retail gasoline prices decreased further in November. Consumer food prices rose a little faster in October, as the effects of last summer's drought started to show through at the retail level. Increases in consumer prices excluding food and energy remained subdued. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers edged up, on balance, in November and early December, while longer-term inflation expectations in the survey were little changed and continued to run within the relatively narrow range that has prevailed for some time.

    Measures of labor compensation indicated that gains in nominal wages remained slow. Compensation per hour in the nonfarm business sector increased slightly over the year ending in the third quarter, and with a moderate rise in productivity, unit labor costs were essentially unchanged. The employment cost index rose only a bit faster than the measure of compensation per hour over the same period. In October and November, increases in average hourly earnings for all employees were small.

    Economic activity abroad remained subdued, especially in the advanced foreign economies. The euro-area economy contracted further in the third quarter, and consumer and business confidence remained low. Economic activity in Japan also declined in the third quarter, and a sharp drop in exports restrained economic growth in Canada. In emerging market economies, by contrast, recent data on exports and manufacturing improved somewhat. In most countries, inflation was still well contained, and monetary policy abroad generally remained accommodative.

    Staff Review of the Financial Situation
    U.S. financial conditions were little changed, on balance, over the intermeeting period. In early November, market concerns about the fiscal outlook and ongoing federal budget negotiations seemed to intensify, prompting a notable reduction in equity prices and yields on Treasury securities. But these concerns reportedly eased somewhat over subsequent weeks, and the initial move in equity prices was reversed. In contrast, yields on intermediate- and long-term nominal Treasury securities declined, on net, perhaps reflecting some increase in safe-haven demand associated with concerns about the potential economic effects of a substantial tightening in fiscal policy. Indicators of inflation compensation derived from nominal and inflation-protected Treasury securities showed mixed changes and remained within the ranges observed over recent years.

    The expected path of the federal funds rate derived from overnight index swap rates flattened somewhat, on balance, over the intermeeting period, as longer-dated rates declined. Market-based measures of uncertainty about the path of the federal funds rate beyond the near term also declined. The survey of primary dealers conducted prior to the December meeting showed that they expected the FOMC to maintain purchases of longer-term securities after year-end at about the current pace of $85 billion per month.

    Conditions in unsecured and secured short-term dollar funding markets remained stable, on net, over the intermeeting period, with reports of only limited disruptions to trading or operations following Hurricane Sandy. Yields on Treasury bills maturing beyond the year-end were noticeably lower than those on shorter-term bills; market participants pointed to the anticipated ending of the Federal Reserve's maturity extension program and the expiration of the Federal Deposit Insurance Corporation's unlimited insurance of noninterest-bearing transaction deposits at the end of the year as factors contributing to this pattern of yields.

    In the December Senior Credit Officer Opinion Survey on Dealer Financing Terms, respondents reported little change in credit terms over the past three months for important classes of dealer counterparties. While respondents reported that the use of leverage by counterparties had remained basically unchanged, they noted greater demand for funding of various types of securitization products.

    Broad U.S. equity price indexes edged up, on net, over the intermeeting period, while equity prices of large domestic banks decreased a little. Nevertheless, the credit default swap spreads of most large domestic bank holding companies continued to move lower. Option-implied volatility for the S&P 500 index over the next month declined moderately, on balance, while measures of equity market volatility for longer maturities remained above their historical averages, excluding the financial crisis period.

    Yields on investment-grade corporate bonds were little changed over the intermeeting period, and their spreads over yields on comparable-maturity Treasury securities widened modestly. Yields on speculative-grade corporate bonds fell to historical lows, and their spreads decreased slightly.

    The pace of bond issuance by nonfinancial firms increased further in October and November after rising robustly in the third quarter, as some firms reportedly sought to issue new debt before the end of the year. Commercial and industrial (C&I) loans outstanding also expanded notably in October and November. Nonfinancial commercial paper outstanding increased somewhat in November following a small decline in October. In the syndicated leveraged loan market, institutional issuance surged in October before subsiding somewhat in November, although it remained at a still-robust level.

    Financial conditions in the commercial real estate (CRE) sector were still generally strained amid elevated vacancy and delinquency rates. However, prices for CRE properties continued to increase in the third quarter, and issuance of commercial mortgage-backed securities remained at a solid pace in the current quarter.

    Residential mortgage rates declined modestly over the intermeeting period, largely in line with the decline in MBS yields. Refinancing expanded a bit further in October and November. House prices continued to increase despite a rise in the proportion of properties sold through foreclosures or short sales. The share of existing mortgages that were seriously delinquent fell in the third quarter but remained elevated.

    Consumer credit continued to expand briskly in September, led by sizable increases in auto and student loans. Revolving credit decreased in September but was little changed, on net, over the previous few months. Issuance of consumer asset-backed securities continued to rise at a strong pace. Delinquency rates on consumer credit generally remained low, with the notable exception of student loans.

    Bank credit was about flat, on balance, over October and November. Growth in C&I loans and consumer loans was offset by a decline in banks' residential real estate loans. The November Survey of Terms of Business Lending indicated some easing in loan pricing and terms.

    M2 growth was rapid in October but slowed in November. Liquid deposits continued to grow at a strong pace, as yields available on alternative money market instruments remained low. Reserves increased over the intermeeting period, in part because of the settlement of the ongoing MBS purchases announced at the September FOMC meeting.

    In many foreign financial markets, asset prices fluctuated as sentiment regarding negotiations over both the U.S. fiscal situation and official support for vulnerable euro-area countries shifted during the period. Spreads on Greek sovereign bonds over comparable German bunds fell, on balance, reflecting in part the agreement by European officials and the International Monetary Fund to grant further aid to Greece. However, spreads on Italian and Spanish bonds were little changed on balance over the period. On net, foreign equity prices rose slightly. The foreign exchange value of the dollar edged lower on balance. However, the dollar appreciated against the Brazilian real and the Japanese yen, which were held down by weak economic data and, in the case of the yen, by market reaction to statements suggesting that the country's likely next government would urge the Bank of Japan to seek a higher rate of inflation. Yields on foreign benchmark sovereign bonds declined, as central banks maintained or extended monetary accommodation. The Bank of Japan expanded its asset purchase program and announced a new lending scheme. The Bank of England announced that it would transfer cash holdings from its asset purchase fund to the U.K. Treasury, a measure that may exert some further downward pressure on gilt yields to the extent that gilt issuance by the government is reduced. The Reserve Bank of Australia and several emerging market central banks also eased monetary policy.

    The staff also reported on potential risks to financial stability, including those associated with a disorderly resolution of the so-called fiscal cliff, a delayed increase in the federal debt ceiling, or a future deterioration of financial conditions in Europe. In addition, in monitoring for possible adverse effects of the current environment of low interest rates, the staff surveyed a wide range of asset markets and financial institutions for signs of excessive valuations, leverage, or risk-taking that could pose systemic risks. Valuations for broad asset classes did not appear stretched, or supported by excessive leverage. Indicators of risk-taking and leverage had moderately increased, on balance, over the past couple of years but remained notably below their levels before the financial crisis.

    Staff Economic Outlook
    In the economic projection prepared by the staff for the December FOMC meeting, real gross domestic product (GDP) growth in the near term was revised down slightly relative to the previous forecast. This downward revision primarily reflected weaker-than-expected data for consumer spending and household income that more than offset the somewhat better-than-anticipated news regarding employment and business equipment investment. The staff's medium-term forecast for real GDP growth also was revised down a little, as some of the recent weakness in household spending and income was carried forward in the projection. In addition, financial conditions were anticipated to be a little less supportive than expected in the staff's previous forecast. With federal fiscal policy assumed to be tighter next year than this year, the staff expected that the increase in real GDP would not materially exceed the growth rate of potential output in 2013. In 2014 and 2015, economic activity was projected to accelerate slowly, supported by a lessening in fiscal policy restraint, gains in consumer and business confidence, further improvements in financial conditions and credit availability, and accommodative monetary policy. The expansion in economic activity was anticipated to result in only a gradual decline in slack in labor and product markets over the forecast period, and progress in reducing unemployment was expected to be relatively slow.

    The staff's projection for inflation in both the near term and the medium term was essentially unchanged from the forecast prepared for the previous FOMC meeting. With crude oil prices expected to continue to decrease slowly, the boost to retail food prices from last summer's drought anticipated to be only temporary and fairly small, long-run inflation expectations assumed to remain stable, and considerable resource slack persisting over the forecast period, the staff projected that inflation would be subdued through 2015.

    The staff viewed the uncertainty around the projection for economic activity as somewhat elevated and the risks as skewed to the downside, largely reflecting the possibility of a more severe tightening in U.S. fiscal policy than expected, along with continued concerns about the economic and financial situation in Europe. Although the staff saw the outlook for inflation as uncertain, the risks were viewed as balanced and not unusually high.

    Participants' Views on Current Conditions and the Economic Outlook
    In conjunction with this FOMC meeting, meeting participants--the 7 members of the Board of Governors and the presidents of the 12 Federal Reserve Banks, all of whom participate in the deliberations of the FOMC--submitted their assessments of real output growth, the unemployment rate, inflation, and the target federal funds rate for each year from 2012 through 2015 and over the longer run, under each participant's judgment of appropriate monetary policy. The longer-run projections represent each participant's assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy. These economic projections and policy assessments are described in the Summary of Economic Projections, which is attached as an addendum to these minutes.

    In their discussion of the economic situation, participants regarded the information received during the intermeeting period as indicating that economic activity and employment continued to expand at a moderate pace, apart from weather-related disruptions. The unemployment rate had declined somewhat since the summer but remained elevated. Although household spending had continued to advance, growth in business fixed investment had slowed. The housing sector had shown further signs of improvement. Consumer price inflation had been running somewhat below the Committee's longer-run objective of 2 percent, apart from temporary variations that largely reflected fluctuations in energy prices, and longer-term inflation expectations had remained stable.

    In their assessments of the economic outlook, many participants thought that the pace of economic expansion would remain moderate in 2013 before picking up gradually in 2014 and 2015. This outlook was little changed from their projections at recent meetings. Hurricane Sandy was expected to weigh on economic growth in the current quarter, but rebuilding could provide some temporary impetus early in 2013. Participants' forecasts, which generally were conditioned on the view that it would be appropriate to maintain a highly accommodative monetary policy for a considerable time, included an outlook for a continued gradual decline in the unemployment rate toward levels judged to be consistent with the Committee's mandate over the longer run, with inflation running near the Committee's 2 percent longer-run goal.

    Participants observed that growth in economic activity continued to be restrained by several persistent headwinds, including ongoing deleveraging on the part of households and still-tight credit conditions for some borrowers, and that a major headwind facing the economy at present appeared to be uncertainty about U.S. fiscal policy and the outcome of the ongoing negotiations on federal spending and taxes. While participants generally saw it as likely that the Congress and the Administration would avert the full force of the tax increases and spending cuts scheduled to occur in 2013, almost all indicated that heightened uncertainty about fiscal policy probably was affecting economic activity adversely. For example, it likely had reduced household and business confidence and led firms to defer hiring and investment spending. Some participants noted that an early and constructive resolution to fiscal policy negotiations had the potential to release pent-up demand and therefore be followed by a boost to spending, investment, and employment; however, a few pointed out that an extended breakdown of negotiations could have significant adverse effects on economic growth. Other factors weighing on the economic outlook included the slowdown in global economic growth and continued uncertainty regarding the European fiscal and banking situation.

    In their discussion of the household sector, many participants noted a recent drop in consumer sentiment and a softening in consumer spending. Some participants thought this reflected uncertainty about fiscal policy, including the prospect of higher taxes, and several noted that growth of households' real disposable income remained weak despite recent gains in employment. While indicators of spending were mixed, purchases of autos and other durables remained relatively strong. A couple of participants observed that businesses in a few areas had reported strong holiday-related activity. Many pointed out that reductions in households' debt, together with rising home prices, had led to an improvement in household balance sheets; it was noted that household net worth was approaching levels seen before the financial crisis.

    Business contacts in many parts of the country were also said to be highly uncertain about the outlook for U.S. fiscal policy, and participants noted that this uncertainty appeared to have weighed on investment and hiring decisions. Although firms' balance sheets were generally strong and liquidity was ample, some business contacts reported that they had shifted toward a higher proportion of part-time employees and postponed plans to expand capacity. A number of participants suggested that the business sector was well positioned to expand spending and hiring quickly upon a positive resolution of the fiscal cliff negotiations. In a few regions, contacts reported concerns about the expense associated with new regulations, including those related to health care, and in some cases indicated a shift to the hiring of part-time workers in order to avoid these costs. There were reports of weaker manufacturing, particularly in the Northeast in the aftermath of Hurricane Sandy, and a slackening in economic activity in the Southwest related in part to cutbacks in defense spending. Export orders had softened, reflecting the slowdown in global growth. The energy sector continued to expand. In the agricultural sector, farm incomes were high, notwithstanding the drought, although elevated grain prices were cutting into profits on livestock.

    Meeting participants generally agreed that the recovery in the housing sector had continued. Many commented that the headwinds facing the housing market appeared to have dissipated somewhat. The capacity constraints on the processing of new home-mortgage applications appeared to be easing, and gradually rising home prices had reduced the proportion of households with underwater mortgages. It was noted that the mix of new home sales seemed to have shifted from homes already completed to homes not yet built.

    In discussing labor market developments, participants generally viewed the recent data as having been somewhat better than expected, with moderate gains in payroll employment and a decline in the unemployment rate. However, the unemployment rate remained elevated, and part of the decline in unemployment in November was attributable to a drop in labor force participation. A few participants noted that some exits from the labor force may have been related to the loss or prospective loss of eligibility for emergency unemployment insurance benefits. Several pointed to indicators suggesting that rates of hiring remained depressed relative to those observed before the financial crisis. A couple of participants noted that vacancies remained at a high level in terms of their historical relationship to the rate of unemployment, suggesting that at least some firms were having a hard time finding suitable workers; indeed, business contacts in a couple of regions had reported difficulty in locating and retaining workers with requisite skills. However, one participant suggested that employer-worker mismatch likely reflected longer-term problems and had probably not worsened materially as a result of the recent deep recession and slow recovery.

    Incoming information pointed to stable, low inflation that was running a little below the Committee's longer-run goal of 2 percent. Crude oil prices had moved down since the October meeting amid accumulating inventories and market concerns about a weaker global outlook. Despite some reports of labor shortages in certain industries, compensation pressures had remained subdued, and unit labor costs were little changed over the previous four quarters. Most participants saw the risks to the inflation outlook as broadly balanced, and many noted that longer-term inflation expectations were well anchored. One participant, however, expressed concern that considerable uncertainty surrounded the relationship between unemployment and inflation, raising questions about the extent to which resource slack would keep inflation restrained over the medium term.

    In their discussion of financial developments, a few participants commented that recent steps taken by European authorities had reduced volatility in sovereign debt markets over the intermeeting period; however, concerns remained about the fiscal and economic outlook in Europe. Many noted the ongoing deleveraging in the private nonfinancial sector of the U.S. economy and indicated that it was difficult to judge when that process would be complete. A few participants, observing that low interest rates had increased the demand for riskier financial products, pointed to the possibility that holding interest rates low for a prolonged period could lead to financial imbalances and imprudent risk-taking. One participant suggested that there were several historical episodes in the United States and other countries that might be used to build a better understanding of the financial strains that could develop from a long period of very low long-term interest rates. Pointing to a recent decision of the Financial Stability Oversight Council, one participant commented that further money market mutual fund reform would help reduce risk in the financial system.

    Participants exchanged views on the likely benefits and costs of additional asset purchases in the context of an assessment of the ongoing purchases of MBS and possible additional purchases of longer-term Treasury securities to follow the conclusion of the maturity extension program. Regarding the benefits, it was noted that asset purchases provide support to the economic recovery by putting downward pressure on longer-term interest rates and promoting more-accommodative financial conditions. Participants discussed the effectiveness of purchasing different types of assets and the potential for the effects on yields from purchases in the market for one class of securities to spill over to other markets. If these spillovers are significant, then purchases of longer-term Treasury securities might be preferred, in light of the depth and liquidity of that market. However, if markets are more segmented, purchases of MBS might be preferred because they would provide more support to real activity through the housing sector. One participant commented that the best approach would be to continue purchases in both the Treasury and MBS markets, given the uncertainty about the precise channels through which asset purchases operated. Others emphasized the advantages of MBS purchases, including by noting the apparent effectiveness of recent MBS purchases on the housing market, while another participant objected and thought that Federal Reserve purchases should not direct credit to a specific sector. With regard to the possible costs and risks of purchases, a number of participants expressed the concern that additional purchases could complicate the Committee's efforts to eventually withdraw monetary policy accommodation, for example, by potentially causing inflation expectations to rise or by impairing the future implementation of monetary policy. Participants also discussed the implications of continued asset purchases for the size of the Federal Reserve's balance sheet. Depending on the path for the balance sheet and interest rates, the Federal Reserve's net income and its remittances to the Treasury could be significantly affected during the period of policy normalization. Participants noted that the Committee would need to continue to assess whether large purchases were having adverse effects on market functioning and financial stability. They expressed a range of views on the appropriate pace of purchases, both now and as the outlook evolved. It was agreed that both the efficacy and the costs would need to be carefully monitored and taken into account in determining the size, pace, and composition of asset purchases.

    Meeting participants discussed the possibility of replacing the calendar date in the forward guidance for the federal funds rate with specific quantitative thresholds of 6-1/2 percent for the unemployment rate and 2-1/2 percent for projected inflation between one and two years ahead. Most participants favored replacing the calendar-date forward guidance with economic thresholds, and several noted that the consistency between the "mid-2015" reference in the Committee's October statement and the specific quantitative thresholds being considered at the current meeting provided an opportunity for a smooth transition. However, possible advantages of waiting a while to introduce the change to the Committee's forward guidance were also mentioned, including that a delay might simplify communications by keeping the introduction of thresholds separate from the announcement of additional asset purchases. Among the benefits of quantitative thresholds that were cited was that they could help the public more readily understand how the likely timing of an eventual increase in the federal funds rate would shift in response to unanticipated changes in economic conditions and the outlook. Accordingly, thresholds could increase the probability that market reactions to economic developments would move longer-term interest rates in a manner consistent with the Committee's view regarding the likely future path of short-term interest rates. A few participants expressed a preference for using a qualitative description of the economic indicators influencing the Committee's thinking about current and future monetary policy rather than quantitative guidance because they felt that qualitative guidance would be at least as effective as numerical thresholds while avoiding some potential disadvantages, including the possibility that the numerical thresholds would be mistakenly interpreted as the Committee's longer-run objectives. A few participants commented that the quantitative thresholds might be interpreted as triggers that, when reached, would prompt an immediate increase in short-term rates. However, a number of participants indicated that the Chairman's press conference and other avenues of communication could be used to emphasize, for example, the distinction between thresholds and the longer-run objectives as well as between thresholds and triggers. Participants also discussed the importance of clarifying that the thresholds would not be followed mechanically and that a variety of indicators of labor market conditions and inflation pressures, as well as financial developments, would be taken into account in setting policy.

    Committee Policy Action
    Committee members viewed the information received over the intermeeting period as suggesting that economic activity and employment continued to expand at a moderate pace in recent months, abstracting from weather-related disruptions. Household spending had continued to advance and the housing sector had shown further signs of improvement, but growth in the business sector had slowed. Anecdotal evidence indicated that uncertainty about U.S. fiscal policy weighed heavily on sentiment in the household and business sectors. Although the unemployment rate had declined somewhat since the summer, it was still elevated relative to levels that members viewed as normal in the longer run. Members generally agreed that the economic outlook was little changed since the previous meeting and judged that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continued to pose significant downside risks to the economic outlook. Inflation had been subdued, apart from some temporary variations that largely reflected fluctuations in energy prices. With longer-term inflation expectations stable, inflation over the medium term was anticipated to run at or below the Committee's longer-run objective of 2 percent.

    In their discussion of monetary policy for the period ahead, all members but one judged that continued provision of monetary accommodation was warranted in order to support further progress toward the Committee's goals of maximum employment and price stability. The Committee judged that such accommodation should be provided in part by continuing to purchase MBS at a pace of $40 billion per month and by purchasing longer-term Treasury securities, initially at a pace of $45 billion per month, following the completion of the maturity extension program at the end of the year. The Committee also maintained its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS into agency MBS and decided that, starting in January, it will resume rolling over maturing Treasury securities at auction. While almost all members thought that the asset purchase program begun in September had been effective and supportive of growth, they also generally saw that the benefits of ongoing purchases were uncertain and that the potential costs could rise as the size of the balance sheet increased. Various members stressed the importance of a continuing assessment of labor market developments and reviews of the program's efficacy and costs at upcoming FOMC meetings. In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.

    With regard to its forward guidance about the federal funds rate, the Committee decided to indicate in the statement language that it expects the highly accommodative stance of monetary policy to remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In addition, all but one member agreed to replace the date-based guidance with economic thresholds indicating that the exceptionally low range for the federal funds rate would remain appropriate at least as long as the unemployment rate remains above 6½ percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee thought it would be helpful to indicate in the statement that it viewed the economic thresholds as consistent with its earlier, date-based guidance. The new language noted that the Committee would also consider other information when determining how long to maintain the highly accommodative stance of monetary policy, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. One member dissented from the policy decision, opposing the new economic threshold language in the forward guidance, as well as the additional asset purchases and continued intervention in the MBS market.

    At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the System Account in accordance with the following domestic policy directive:

    "The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to complete the maturity extension program it announced in June to purchase Treasury securities with remaining maturities of 6 years to 30 years with a total face value of about $267 billion by the end of December 2012, and to sell or redeem Treasury securities with remaining maturities of approximately 3 years or less with a total face value of about $267 billion. Following the completion of this program, the Committee directs the Desk to resume its policy of rolling over maturing Treasury securities into new issues. From the beginning of January, the Desk is directed to purchase longer-term Treasury securities at a pace of about $45 billion per month. The Committee directs the Desk to maintain its existing policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities. The Desk is also directed to continue purchasing agency mortgage-backed securities at a pace of about $40 billion per month. The Committee directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability."

    The vote encompassed approval of the statement below to be released at 12:30 p.m.:

    "Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Although the unemployment rate has declined somewhat since the summer, it remains elevated. Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

    The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.

    To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. The Committee views these thresholds as consistent with its earlier date-based guidance. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent."

    Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Dennis P. Lockhart, Sandra Pianalto, Jerome H. Powell, Sarah Bloom Raskin, Jeremy C. Stein, Daniel K. Tarullo, John C. Williams, and Janet L. Yellen.

    Voting against this action: Jeffrey M. Lacker.

    Mr. Lacker dissented because he objected to the asset purchases and to the characterization of the conditions under which an exceptionally low range for the federal funds rate would remain appropriate. He continued to view asset purchases as unlikely to add to economic growth without unacceptably increasing the risk of future inflation, and to see purchases of MBS as inappropriate credit allocation. With regard to the funds rate, Mr. Lacker was concerned that linking the forward guidance to a specific numerical level of the unemployment rate would inhibit the effectiveness of the Committee's communications and increase the potential for inflationary policy errors; he preferred qualitative guidance instead.

    It was agreed that the next meeting of the Committee would be held on Tuesday–Wednesday, January 29-30, 2013. The meeting adjourned at 11:25 a.m. on December 12, 2012.

    There's nothing scary here and certainly nothing that wasn't well-known before today.  We are, of course, a bit overbought anyway so very easy to spook us off the 5% line but don't even tell me it's a panic if they can't even pull a test of the 4% lines.  Dow volume at 2:30 now 70M so 5M shares traded in the half hour after the announcement.  

    While it's possible that Fund managers are all rushing to meetings and will come out in the next hour breaking the emergency glass on the SELL button or not remains to be seen but this is simply why we did our 1/3 covers yesterday, nothing more.  


  75. Getting dizzy watching apple chart last hour. Wild swings on the way down…

  76. Phil……WHR….Have BCS Jan 14 95/105 at net $3.00,now 5 so in good shape.But sold 3/13 90c@ 6 now 18 not good.Is my next move to roll to Jan 14 105c @ $12 to get back into position? I think WHR is ahead of itself. Thanks

  77. CSCO/Phil:  Thanks alot for the advice.  Can still eke out a $450 profit by April on those callers if we drop below $19.  Fine by me!

  78. Phil,
    Would you recommend any adjustments to the following:
    GLD Jun 2013 $145 call @ $30.10, GLD June 2013 $170 call @ $13.40 ($16.70 spread).
    AGQ Mar 2013 $58 call @ $9.90, ACQ Mar 2013 $75 call @ $4.90 ($16.70 spread).
    ABX Jan 2015 $33 puts @ $5.15.
    Thank You.

  79. Silver/Savi – another angle to consider. sell HL (Hecla) Feb or March $6 puts with intent to enter.

  80. Phil, Thanks on the guidance on RIG……Yeah, cash out the profit is the way to go. Will initiate the 45/55 BCS with a put sale….

  81. Any AG plays this year?  Drought conditions have continued.  A number of grains seem well-supplied, wheat, however, seems to be at risk.  I realize PSW is not exactly "Hay & Forage Grower" [] but there is a wealth of cognoscenti on this site.

  82. scottmi—thanks--will look at that as I think /si will go higher

  83. MoMo portfolio:  No re-entry into AAPL today.  Tomorrow looks generally down to me overall.  

  84. Barcelona is proposing to privatize one of its largest and best city parks, the mountaintop of Tibidabo [a phrase derived from Jesus's 40 days in the desert discussion with the Devil].  I guess there's more than one way to shrink the public sector besides firing useless bureaucrats.  In fact, it's an even bet useless bureaucrats thought that up.  Now, with 50% of French employed by the public sector, I wonder if Larry Ellison would be willing to buy the Eiffel Tower.

  85. WHR/490 – You have to use stops, you know…  So you had a net $3 credit and we're only at $106 so you really owe the caller $16 if we close here but not good.  Yes, that's a good roll but why spend $6 to position your short caller when it would only cost you $6 to buy another round of calls and then you can roll the March $90 calls to 2x the June $105s at $10.20 for better than even.  That puts your spread below the caller and still for net $3 and you collect $1 more per long(ish) so net $2 and that means you don't lose until $113 but you should certainly stop out 1/2 the new callers if they hit $15 and then it will be easy to roll the rest.  

    CSCO/Kinki – No problem.  Always focus on how you can make money while keeping yourself covered.  

    GLD/Hextra – So that's a bull call spread?  Not much to do with ot other than hoping GLD gets back to $170.  I wouldn't give up on it and $160 is still net $15 for you so nothing to worry about unless gold can't hold $1,650 and then you can sell puts or short calls or roll down because the $17.50 you can still salvage from the $145s is more than you paid for the spread.  On AGQ, that's way more volatile and you're way out of the money and you let those die a long time ago as the $58 calls are now $2.  I don't get your $16.70 number, I assume you pasted it and forgot to change it and you paid net $5 and now it's 32% out of the money so you need a 16% move in silver to $35+ just to get back in the money so you either believe in this one or you don't and, if you believe in silver, see above because I just did 2 silver trade ideas, and, if not, then take your $2 and stop buying out of the money bull call spreads with no offsets.  ABX is now $34.45 and the puts are $5.90 so down about 15% and you net into ABX for $27.85 and that one is simple, if you don't REALLY want to own ABX for net $27.85 then you shouldn't have sold the puts in the first place so be happy you weren't forced to commit and take your 15% loss and stick to stock you actually want to own when you sell naked puts and you'll be a much happier trader.  And the same goes for your spreads – you don't WANT the positions – you are just gambling and that's why they hurt you.  Find things you want to INVEST in and build up positions and then, over time, they will pay you dividends (including the sale of short calls) for the rest of your life.  That's much better than flipping a coin every day to see if you made money or not.

    You're welcome Jasu.  Much more relaxing to take profits off the table and let a little ride.  

    Dollar 80.56 is up 0.7% for the day and indexes are down less than that so, other than the usual TZA, DIA hedges – I don't see any reason to panic yet.  Dow volume 84M at 3:36

  86. Phil: Think maybe this is what russell at an all time high is telling us?

  87. Zero/
    The Eiffel Tower is already operated by a private company.
    So what could be the next step when most assets are sold or leased…. "privatizing" civil servants maybe :)

  88. AAPL at half the average volume so far.

  89. HL/savi – their Lucky Friday mine is reopening in Q1 (closed last year for safety reasons), so production to ramp up again too. should put them back to $7+ range at least. Some tempting buy/writes too.

  90. Phil / AC – I put in a call to Caesars re the potential spring PSW conference.  It gives us two options – either the Harrah's or Caesars.  I think we will get better rates at these 2 venues than Revel or Borgata but certainly can check those to be sure.   Which wkend in April is best for you?  I may not be able take a day off from my new job but certainly much more likely to take a Friday off to trade the markets than a Monday.  I think a Friday would prob work better for most.  So we could set it up for thurs night for 3 nights with one day of trading on friday and 2 days of seminar and wrap up on sunday.  Let me know your thoughts.  thanks. 

  91. Ags/ZZ – If I were doing a Secret Santa Portfolio (and I'm not sure enough of inflation in the first half to do one yet), then I'd certainly go with DBA, which is a little below the middle of the channel at $27.83 but very, very attractive in the low $20s so selling some 2015 $27 puts for $2.30 is not terrible for a light entry but I wouldn't want to pick up a bullish spread (like the 2015 $25/30 bull call spread at $2.40) until/unless they get back over their 50 dma at $28.50.  Since the net delta on that spread is just .27, it's not a very big penalty to wait for $1 to confirm the ETF is breaking back up before putting money into it.   Of course, if DBA isn't moving higher, then the rest of the Ag sector is money down the toilet anyway.  Wheat is only 6.5% of DBA with sugar, cattle, corn, soybeans, cocoa and coffee all around 10% – it's a good mix and cattle took a big hit already (early slaughter to avoid feeding them) and should come back.

    Tibidabo/ZZ – I was there with the kids a few years ago, very nice.  Amusement parks and castles are a fitting tribute to Jesus and the Devil:  

    Don't tell Trump they are willing to sell the Eiffel Tower – it's just the kind of phallic symbol he loves to put his name on…

    LOL Arivera.  That was my advice on AAPL yesterday for people who aren't so brave.  

    What's next/Lionel – That's easy, it won't be the first time that countries have sold their citizens into slavery to pay off debts.  We already have a slave work-force in prison and 3 strikes your out makes people slaves for life while ridiculous drug laws give us the biggest prison population in the World by a wide margin.  Here's a video explaining how we can go back to being a slave state.  Here's another cool video on a similar topic.  

    April/Terra – Good Friday is March 29th and that's my 50th birthday and it's Passover so not the first weekend but the rest of April is fine.  

  92. AAPL Covers/ Phil: I understand the covers from yesterday but was was gunshy due to several fights AAPL and I have had. So not wanting to deal with rolls right out of the gate for 2013 I haven't initiated them- they would be front month covers on an April BCS.  My question is how do you determine when the premium is too far gone and not to engage?I get that I need to sell premium on a regular basis but as its been pointed out AAPL can move…

  93. Lionel:  The best way to privatize civil servants, who are mostly neither civil nor servile, is to put 'em out there on the unemployment line with everyone else. I would start with about 400 out of 550 congressmen and see how that works out.

  94. scottmi—-what buy/writes are you thinking?

  95. Not much damage overall.  Dollar finished at 80.56, up 0.77% and the markets are down not even half a point and all in about the same range they were in this morning when I listed them out in the Alert and we certainly weren't worried then.  

    AAPL underperformed so we need to watch them and the volume ended up at 128M so not too serious anyway.  

    AAPL/Newt – I guess you missed my key call to get the f*ck out of the position if you are in the least bit worried about it.  We also had "fights" with AAPL in the $25KP and, because we exercise a discipline and keep selling without emotion, we have kept ourselves from disaster so far.  You can't not sell, that ruins the whole point of owning the spread.  As to how do you determine – you have to evaluate each situation, there's no rule for it.  Yesterday we picked the $550 calls to short because we got $4,500 and we thought $555 would be hard for AAPL to break and because we can roll them to Feb $590s (and they were only 1/3 covers anyway) and because we looked ahead to where we could roll down ($20 for $10) as well as where we could roll out (July) should the move break below our comfort zone (AAPL $440).  So now we are comfortably in the spread with defined points at which to take additional action (over $555, under $540) and happily looking forward to spending our $4,500 while you are still playing Hamlet – see the difference?  

    “There is nothing either good or bad, but thinking makes it so.”

  96. Phil: Got it, Thanks. 

  97. PLX/qc – how about stock and the Aug $6 calls and $5 puts for $1.05. It is a nice spread and you can sell the spread b'f buying the stock since the calls are a bit wide on the bid/ask.

  98. Less than a year after commencing shipments of Gorilla Glass 2, Corning (GLW) is set to unveil its successor at CES. The company boasts Gorilla Glass 3 will offer a 3x improvement in scratch resistance and a 40% decrease in visible scratches relative to its predecessor, as well as 50% more retained strength once the glass becomes flawed. Corning needs ongoing glass innovations to both stay ahead of rivals such as Dragontrail glass vendor Asahi, and to bolster its margins and ASPs at a time when industry volume growth is soft.

  99. "Violent" turn in the dollar, I like the sound of that!

  100. Anyone have insight on CAT, up 9% in 3 days?

  101. The pause that refreshes or a correction?

  102. If it was not for gerrymandering, Boehner would not be speaker and we would not be having the mess in DC we have now:

    David Wasserman, undisputed popular votemeister, has just updated his national House popular vote number with the certification of final results from New York State. And the Democrats now has a non-trivial lead of 1.362 million votes. 49.15% to 48.03%.

    Right now the GOP lost the presidency by close to 5 millions votes (the latest tally) and they got 1.36 million fewer votes than the Dems in the House and lost Senate seats. Not sure how they can claim a mandate on anything… But the fight for the debt ceiling looks to make the fiscal cliff one look like a schoolyard tussle. Don't get rid of the long term hedges just yet!

  103. And speaking of gerrymandering:


    There was serious gerrymandering in only one Democratic state: Illinois, for a total advantage of 1.7 seats. But there was serious gerrymandering in six Republican states, for a total advantage of 13.2 seats. Republicans tried hard to gerrymander themselves into a majority, but it turned out that two nonpartisan states (a commission in Arizona and a court in Texas) ended up producing 4.4 extra Democratic seats.

    Bottom line: The net result is still fairly modest, thanks to the vagaries of nonpartisan redistricting. At the same time, the effect of partisan gerrymandering is larger than we thought. The sum of Democratic and Republican gerrymandering is a net Republican advantage of 11.5 seats. That's still not enough to say that the Republican House majority is solely due to gerrymandering, but it's close.

    And when neutral bodies get into the act, Dems pick up seats…

  104. aaron/LF – My two grandkids (5 & 3) both got Leapfrogs for Christmas.  I bought the cases and other stuff that goes with the base unit for them.  And of course, the APPS!  My son tells me the 5 year old loves it and is all over the math apps already.  Seems like an interesting play you are considering.

  105. HL/Savi – for a "i don't even want to think about it" i like the buy HL and write 2015 $10 call, $5 puts, or if really conservative, the $7 calls.  Do the nice!  Bring the calls in closer if you want to work it, and the puts too if you really want to play. I believe the 7-10 range is godd for 2013, and after that, either miners stay healthy, or we are all totally Boehnered.

  106. Good morning! 

    Dollar violence/Diamond – I'm not a huge fan of guys who say there are "cycles" and ignore fundamentals.  It's really a question of who prints the most money and, right now, it's Japan, followed by US but 79 was really low for the Dollar so we expected at least a bounce to 80, which we have today.  Longer-term, it's policy driven and we've seen the power any Central Bank has to distort things when the SNB supported the Euro most of last year when it should have been much weaker.  The Swiss stopped buying Euros in September and the Euro topped out about $1.31, but up from $1.20 so mission accomplished with a 10% gain.  That led to a relative Dollar rally from 78.50 (a ridiculous floor we called) back to 81, which was, just 3% back up but that then whacked the S&P for 10% until things calmed down.  

    So what's the "correct" value?  Who knows – because it's all relative.  This is the great misconception about currency values as their value is only taken in relationship to other currencies or as a function of how much commodities they can purchase although even that is a chicken and egg equation.  It doesn't matter how weak you think the Dollar is fundamentally, if the Yen and the Euro crash – the Dollar will go up and vs. vs.  The biggest change in the Dollar in 2013 is we may lose a little of the "flight to safety" boost that has been keeping us from realizing the weakness caused by the Fed's printing $3Tn new Dollars over the past few years.  Keep in mind they give those $3Tn to banks and the banks can then lever that money 10x so, once money begins to be lent out again – inflation is just around the corner and that is NOT a sign of a strong Dollar in the long run.  

    Better employment will be good for the Dollar but money pouring out of TBills will be bad (more Dollars in circulation) but housing creates a demand for lots of Dollars so that's going to be the key, along with jobs as money will likely pour out of the Bond market this year and it needs to be sucked up somewhere (partially into the market, of course).  

    Speaking of money and stuff – Gold is taking a big tumble this morning as the international read on the Fed minutes is QE Forever will end sooner than that.  Gold fell 2.5% to $1,634 and that's a huge 1-day move for them ($40) and a nice buying opportunity as that's not what the Fed said at all. 

    We'll see where we are in the morning but below $1,650 is a buying opportunity although $1,550 is the real bottom of the channel with the 200 dma at $1,665 and how often do you think gold is below it's 200 dma? 

    GLW/Diamond – I love those guys, they are constantly innovating.  They just poked over their 200 dma so hopefully setting up for a good run.  

    CAT/RPme – Fixing the cliff is a big confidence booster globally and they were oversold anyway at the $80 line, where we had some plays in November.  So it doesn't take much to push them to a more realistic price (p/e still below 10 at $94).  

    Big Chart – Nothing to complain about so far – consolidating for a breakup at our 5% lines (short-term off the Futures spike lows), which were:  13,447 (finished 13,391), 1,456 (1,459), 3,056 (3,101), 8660 (8,608) and 866 (873) – that's 3 of 5 over with none under 4% and, more importantly, we held those 4% lines all day – even on the Fed panic AND with the rising Dollar.  Pretty strong overall.  

    Dollar 80.94 this morning and we're still holding up well in the Futures.  You would think it was the end of the quarter, and not the beginning, the way we're flatlining into Friday.  

    Votes/StJ – I think you place too much value on Democracy because you are French.  This system has been broken for decades – it's just business as usual and the fact that they shoved this cliff deal up the Republican's asses is a pretty strong indication the debt ceiling will be another non-issue in the end.  

    HL/Scott – Interesting little miner.  

    Oil down to $91.60 – I guess we shouldn't have waited.  Still, be very careful as the API report came out last night and showed a 12M barrel draw in oil but it was almost totally offset by a 3.3Mb rise in gasoline (down to $2.75) and a whopping 6.7Mb rise in distillates so some crazy stuff was going on last week as refiners cranked out the supply that no one actually wanted – maybe anticipating a holiday driving week that turned out to be a bust?  

  107. Good article by John Stossel on flood insurance and unintended consequences.  

  108. Democracy / Phil – There are some idiosyncrasies in the French system as well I am sure. What drives me the most crazy is the fact that no one in our press seems to point out the obvious except highly partisan outlet. It's like the supposedly neutral people are so afraid to look partisan for reporting the truth. Maddening…. 

  109. The press is bought and paid for in this country (and most of the World now).  That has been the great change since the 60s, when corporations decided freedom of thought had to go so they could squash the peace, love and environment movement that was threatening their bottom lines.  

    Think of the horror they were facing with "hippies" getting together and having festivals where they didn't even consume anything and the whole disaster of people caring about the environment and man's impact on it – it had to be stopped the same way they stopped communism the generation before so they turned hippie into a dirty word, cracked down on pot, which anyone could grow and cut back on education, because those kids were doing way too much thinking.  

    My kids will never riot over a war in Vietnam or even Afghanistan because they don't even know where those places are (not from the school, anyway) and, as I've said before, philosophy isn't even taught anymore.  Remember when we used to watch the news with our parents because it was the only thing on?  That never happens anymore either.  That's why Americans know nothing about the World around them.  What's the point of voting if you don't even know what you are voting for?  

    Over the past few decades, our whole system of deciding elections has been transformed to reward whoever has the most money to spend – that's not an accident, neither is packing a Supreme Court until you have a mix of judges who are willing to call Corporations Citizens – it's all part of the plan to undermine our "Democracy" and hand the power to the moneyed elites. 

    “If we can't think for ourselves, if we're unwilling to question authority, then we're just putty in the hands of those in power. But if the citizens are educated and form their own opinions, then those in power work for us. In every country, we should be teaching our children the scientific method and the reasons for a Bill of Rights. With it comes a certain decency, humility and community spirit. In the demon-haunted world that we inhabit by virtue of being human, this may be all that stands between us and the enveloping darkness.”  Carl SaganThe Demon-Haunted World: Science as a Candle in the Dark

    “The major western democracies are moving towards corporatism. Democracy has become a business plan, with a bottom line for every human activity, every dream, every decency, every hope. The main parliamentary parties are now devoted to the same economic policies — socialism for the rich, capitalism for the poor — and the same foreign policy of servility to endless war. This is not democracy. It is to politics what McDonalds is to food.” John Pilger

    “The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything.” Charles Moore

    “Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.'” Isaac Asimov

    “What difference does it make to the dead, the orphans and the homeless, whether the mad destruction is wrought under the name of totalitarianism or in the holy name of liberty or democracy?” Mohandas Karamchand Gandhi

    “Democracy must be something more than two wolves and a sheep voting on what to have for dinner.”  James BovardLost Rights: The Destruction of American Liberty

    “A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.”  Thomas Jefferson

    “Representative government is artifice, a political myth, designed to conceal from the masses the dominance of a self-selected, self-perpetuating, and self-serving traditional ruling class.” Giuseppe Prezzolini

    “People use democracy as a free-floating abstraction disconnected from reality. Democracy in and of itself is not necessarily good. Gang rape, after all, is democracy in action.  All men have the right to live their own life. Democracy must be rooted in a rational philosophy that first and foremost recognizes the right of an individual. A few million Imperial Order men screaming for the lives of a much smaller number of people in the New World may win a democratic vote, but it does not give them the right to those lives, or make their calls for such killing right.  Democracy is not a synonym for justice or for freedom. Democracy is not a sacred right sanctifying mob rule. Democracy is a principle that is subordinate to the inalienable rights of the individual.”  Terry GoodkindNaked Empire

    “Democracy… while it lasts is more bloody than either aristocracy or monarchy. Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There is never a democracy that did not commit suicide.”  John Adams

    I believe Gandhi is the only person who knew about real democracy — not democracy as the right to go and buy what you want, but democracy as the responsibility to be accountable to everyone around you. Democracy begins with freedom from hunger, freedom from unemployment, freedom from fear, and freedom from hatred. To me, those are the real freedoms on the basis of which good human societies are based.” Vandana Shiva


    “In a society in which nearly everybody is dominated by somebody else's mind or by a disembodied mind, it becomes increasingly difficult to learn the truth about the activities of governments and corporations, about the quality or value of products, or about the health of one's own place and economy.

    In such a society, also, our private economies will depend less and less upon the private ownership of real, usable property, and more and more upon property that is institutional and abstract, beyond individual control, such as money, insurance policies, certificates of deposit, stocks, and shares. And as our private economies become more abstract, the mutual, free helps and pleasures of family and community life will be supplanted by a kind of displaced or placeless citizenship and by commerce with impersonal and self-interested suppliers…

    Thus, although we are not slaves in name, and cannot be carried to market and sold as somebody else's legal chattels, we are free only within narrow limits. For all our talk about liberation and personal autonomy, there are few choices that we are free to make. What would be the point, for example, if a majority of our people decided to be self-employed?

    The great enemy of freedom is the alignment of political power with wealth. This alignment destroys the commonwealth – that is, the natural wealth of localities and the local economies of household, neighborhood, and community – and so destroys democracy, of which the commonwealth is the foundation and practical means.” Wendell BerryThe Art of the Commonplace: The Agrarian Essays


    “Americans see democracy as a remedy for all ills-to be taken three times daily like prescription medicine. It works for them. Ergo – it should work for the world. What America naïvely forgets is that for democracy to function, most of a populace must have something personally that is worth preserving.” Arthur Hailey

    “Sometimes it seems that everybody in the world is in favor of democracy, just as long as it gives them the result they want.” Jack Lessenberry

  110. Phil:  great quotes this morning. They'll go in my Dropbox file under the Pha-q header for when I run into chowder heads. 

  111. Good stuff Phil… Didn't mean to give you more work this morning!

  112. Not work, good to do a bit of off-topic reading once in a while – new post is up and jobs are out!