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Which Way Wednesday – Waiting on the Fed

The Fed announces at 2:15.

Not much else matters until then and then we have Non-Farm Payrolls on Friday and nothing matters until then either so it makes sense that we are flat-lining, more or less this week, as we gather more data to see if we can justify these amazing gains for the month

We had a rough day shorting oil yesterday as it was a nickel and dime game as we crossed each .50 line but, while we won a few battles, oil won the day and is at $98 this morning in the Futures (/CL) where we're shorting it again into the inventory report.  The run-up in oil gave us the opportunity to take some March USO shorts in Member Chat for our $25,000 Portfolio as well as a new SCO, with an aggressive new play on the Feb $36/37 bull call spread for .40, which has a .60 upside (150%) in 16 days if oil drops back to about $96.

That's a speculative play but we put it in both of our $25,000 Portfolios and risked a virtual $800 on 20 contracts and, since the $36 calls are $1.15 (covered with the $37 calls sold short at .75), we can also roll out of the position before the $36s go below .60 – but more on that if it has to happen (hopefully not, as that would likely mean $100 oil).  Like a lot of things, yesterday's rally in oil has been propelled by a big dip in the Dollar, which bottomed out (we think) at 79.40 this morning.  

Unfortunately, a bouncing Dollar is a danger to all stocks and commodities and, while the Dollar chart looks bearish – with a falling 50 dma acting at a tough top of the recent range – the fundamental reality of the situation is that we simply are NOT printing money faster than Japan and probably not even faster than Europe and, in fact, the demand for Dollars is increasing as housing activity goes up along with employment.  So, 79, maybe 78.50 but lower than that is very unlikely and, once we pop back over 80 – shorts will begin to cover and we'll have a nice little pop, which should lead to a market pullback – hopefully not too severe.  

Rising oil prices – if true – also create a demand for Dollars as the same 96 Million barrels of oil per day consumed globally at $95 last week are now $98 – so $8.6Bn removed from consumers' pockets in just one month.  Then there's those payroll taxes also being sucked out of the economy and it's simply a wonder that oil isn't plunging.  Perhaps it's the persistent, blatant manipulation, like the "Large Fake Order Strategy" outlined by EconMatters yesterday.  

Will the CTFC ever do anything about this?  Of course not!  That's why George Bush rewrote the rules for Enron and BCS was just found guilty by the FERC for manipulating the California power market from 2006 to 2008, purposely losing $4.1M jacking up energy prices with cash trading so they could reap gains of $34.9M on their positions.  

One would think the simple solution is not to let banks physically manipulate the commodities they are trading since the banks clearly have no use for the oil/gas, etc and have no intention of honoring their contracts and taking delivery – but tell that to JPM, MS, C and others who have fleets of super-tankers holding oil offshore in order to drive up prices when they are selling and then dumping oil on the markets and driving prices back down when they feel like buying again.

8:30 Update:  Oops, forget all that, GDP was a huge miss at -0.1% vs. +1% expected and, even more telling, +3.1% in Q3.  Even more amazing than the 110% miss by Economorons is the fact that the markets are quickly shaking it off, without even a major dip but oil, thankfully, is down a quick .50 – and the Egg McMuffins are once again paid for with very quick $500 per contract gains!  

Gold skyrocketed back to $1,680 and the Dollar fell back to 79.40 as low GDP means LESS demand for Dollars (because no one is using them) and, of course, it puts the Fed back on the table.  Now we may get a more significant statement from the Fed, who have an incentive to do MORE than the current $85,000,000,000 per month in QE and, even better, no quick end to QInfinity is in sight now.  All we need is disappointing jobs number and we have the EZ Money Trifecta this week

Inflation is, of course, our main long-term premise for buying stocks and we just removed our fear (from just a few paragraphs ago) that a bouncing Dollar will kill the rally.  We've discussed our GDX and DBA plays last week and, if the Fed steps up this afternoon with a bigger QE number – we may have to make a special post re. long-term inflation hedges.  Oddly enough, we were just discussing how f'd up Spain still is, with their -0.7% GDP but the joke's on us as we're catching up, with our 3.2% net Q/Q decline in growth vs their 0.3% drop.  

At least we're still better off than Zimbabwe – who revealed yesterday that they have just $217 left in the bank.  Don't laugh though – we'll have less than that if the GOP doesn't extend the debt ceiling!  Keep in mind that Zimbabwe's hyperinflation was a good leading indicator to our last financial crisis.  

In fact, just yesterday, we were discussing in Member Chat that delinquency rates on student loans had hit 15%, with debt totals averaging 60% higher than in 2007 – the last time we hit those kind of crisis levels.

Still, before we begin to buy wheelbarrows to carry around our worthless currency, we should take a closer look at the GDP numbers, which are NOT as bad as they look:  Inventory alone knocked 1.3% off the GDP as it declined sharply and, without that, real final sales increased 1.1% as IPhones and IPads flew off the shelves. Government spending dropped a whopping 6.6%, led by a 15% decline in Federal spending while Congress screwed around with cliff issues and that's 20% of our GDP for another 1.32% hit on GDP.  

Consumption was up 2.2%, Fixed Investments were up 9.7%,  Residential Investment was up 15.3% and our Trade Deficit was also up on rising oil prices and Christmas imports and that knocked another 0.25% off the GDP.  So I think the markets are actually reading this GDP report right by shaking it off – we'll see how the retailers react once the bell opens.  Here's's breakdown

Category Q4 Q3 Q2 Q1 Q4
GDP -0.1% 3.1% 1.3% 2.0% 4.1%
Inventories (change) $20.0B $60.3B $41.4B $56.9B $70.5B
Final Sales 1.1% 2.4% 1.7% 2.4% 1.5%
PCE 2.2% 1.6% 1.5% 2.4% 2.0%
Nonresidential Inv. 8.4% -1.8% 3.6% 7.4% 9.5%
Structures -1.1% -0.0% 0.6% 12.8% 11.5%
Equipment & Software 12.4% -2.6% 4.8% 5.4% 8.8%
Residential Inv. 15.3% 13.6% 8.4% 20.6% 12.0%
Net Exports -$404.0B -$395.2B -$407.4B -$415.5B -$418.0B
Export -5.7% 1.9% 5.2% 4.4% 1.4%
Imports -3.2% -0.6% 2.8% 3.1% 4.9%
Government -6.6% 3.9% -0.7% -3.0% -2.2%
GDP Price Index 0.6% 2.7% 1.6% 2.0% 0.4%

It's going to be an interesting day and I certainly feel a lot better about it with Friday's hedges at the ready.  Watch the Dollar closely, if it goes back over 80, the markets won't like it one bit but any sign of additional easing from the Fed will smack it right back down.  We're also keeping a close eye on Europe, as so many things can still go wrong there – starting with this morning's Italian Bank Scandal.  

Be careful out there.  

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  1. Oil Lines

    R3 – 99.72
    R2 – 98.77
    R1 – 98.19
    PP – 97.24
    S1 – 96.66
    S2 – 95.71
    S3 – 95.13

    Yesterday's high and low – 97.82 / 96.29

  2. ADP looking good this morning. I guess we will see if their new algo correlates better to the job numbers on Friday!

  3. Good comments on Amazon:


    The company's shares are down a bit today, but the company's stock is taking a much less catastrophic plunge in already-meager profits than Apple, whose stock plunged simply because its Q4 profits increased at an unexpectedly slow rate. That's because Amazon, as best I can tell, is a charitable organization being run by elements of the investment community for the benefit of consumers. The shareholders put up the equity, and instead of owning a claim on a steady stream of fat profits, they get a claim on a mighty engine of consumer surplus. Amazon sells things to people at prices that seem impossible because it actually is impossible to make money that way. And the competitive pressure of needing to square off against Amazon cuts profit margins at other companies, thus benefiting people who don't even buy anything from Amazon.

    It's a truly remarkable American success story. But if you own a competing firm, you should be terrified. Competition is always scary, but competition against a juggernaut that seems to have permission from its shareholders to not turn any profits is really frightening.

  4. These guys just won't quite until the top 1% pays the least amount of taxes possible:

    In an alarming trend, governors in Louisiana, Nebraska, and North Carolina have proposed eliminating their state’s personal and corporate income taxes and raising the sales tax to offset the lost revenue….Proponents claim that eliminating income taxes and expanding the sales tax would make tax systems simpler, fairer, and more business-friendly, with no net revenue loss. In reality, they would tilt state taxes against middle- and lower-income households and likely undercut the state’s ability to maintain public services.

    I just don't know how they sleep at night!

  5. Phil Thanks for the incu-raging remarks on costs re hotel. The hotel price is quoted per person on their site so that really put me off. We will see I will reinvestigate the matter as I would like to join the meeting.

  6. PSW Atlantic City conference April 27-29 update – - Feb 20th deadline.  We have 3 weeks from today to get to our minimum of 10 attendees.  We have 7 members signed up.  So 3 more to go to lock this conference down by Feb 20th and then we have 2 more months to add additional attendees and lower the cost for everyone. The group code for rooms at the Harrah's Resort Waterfront Tower is SH04PS3.  Email me with any questions.  If you are interested in going but not sure yet drop me an email so I have some indication of who is interested.  Thanks!

  7. Income Portfolio news:

    BA - Beat EPS forecast by $0.08 but lowers guidance slightly. Looks to open higher by $1.00. There is also a story that they knew about the battery problems before the incident happened.

  8. stjeanluc
    BA I guess we do have enough plays in it, so we can weather any storm but an up beat looks good.

  9. Yodi – re hotel costs in AC at Harrah's Waterfront, the rates I quoted in yesterday's post for both our reserved rooms using the group code and the Priceline comps which were more expensive were both for double occupancy.  A third person is $20 extra per night under our code.    

  10. Gold loving the GDP #

  11. Hopefully Gold Miners love the GDP#

  12. And finally CHK did what they should have done a while back – push McClendon to retirement! And look at the stock take off today. I know they guy started the business and all but he had become a liability and it's confirmed today.

  13. Morning Notes/Phil:  Read the notes this morning and quickly searched for a cave to hibernate.  Can't decide if this market  is a big game of chicken (and the market isn't flinching) or a game of russian roulette,  Either way, bring it in!

  14. Phil,
    Obviously I liked what I saw from my trial membership because I'm here, and I basically understand what you are doing but I can't follow your web site.  I need some kind of flow chart or a road map. Some of the questions I have are:
    1 How do I follow your up to the minute trades?
    2 Where can I down load a spreadsheet of your trades?
    3 I get your mid day comments late and don't know how to use a RSS?
    4 Where should I be on your site?
    5 What is you FAS portfolio? How do I use it?
    6 What else do I have to know to be the most up to the minute informed?

    Please get back to me using my email.
    Thank you,

  15. phil, / board
    lm long feb 164 gld … calls been selling 162 puts vs it…
    would like to roll to a calendar
    do we have one in existence or could you suggest a simple roll further out in time /strike or a calendar………..tks

  16. I guess we should all go long today:


    Fed Days have been extremely positive for the market since ZIRP (zero interest rate policy) was enacted during those dark days of the financial crisis.  So good that more than 30% of the market's gains over this time period have come on Fed Days alone!  

    As shown below, the S&P 500 is currently up 73.60% since the close on the day before ZIRP was first implemented on December 16th, 2008.  If you just look at the S&P 500's one-day change on all Fed Days since then, the cumulative gain is 23.69%, which represents 32.2% of the total gain.  Pretty astounding.

    And that's what – 4 days a year!

  17. Phil/GLD – Good time to cover to our GLD longs here? We're long the Jun 145 Calls. Thanks.

  18. SODA/ Flying above $52.5
    Great trade Iflan!

  19. Good morning!

    Oil almost back to $98 for a double-dip opportunity on the short Futures (/CL) already but very dangerous ahead of inventories at 10:30 so be very, very careful.

    ADP numbers were strong so a good indicator for Friday – that's also helping us shake of scary GDP headline:

    Jan. ADP Jobs Report: +192K vs. +172K consensus, 215K prior.  More on ADP jobs: December's job gain revised down to 185K from 215K. The average gain over the past 3 months is 183K, more than 10% below the level during the same period a year ago. The manufacturing sector shed jobs for the 5th time in the last 6 months. S&P futures add a tick to losses, now -0.2%. (full report)

    We can expect a bit of profit-taking from some based on scary GDP so hard to draw conclusions from morning action.  I imagine several big funds could be in meetings right now and, with a very good January in the bag – they may say "screw it" and decide to cash out and take a ski trip or head off to the bahamas to chill out for a week or two.  If your fund makes 10% in the first month of the year – it's actually a prudent strategy.  

    Nothing too exciting in earnings.  BA good, as expected, but still with the battery thing dragging them down.  

    CNBC hysterical, as usual.  Bob Pisani says "well some bulls are arguing we should look at the inventories in GDP, but I don't want to get into that kind of granularity…"  Yes Bob, ignoring an item that accounts for more than 100% of the miss is "granularity" when it doesn't make your point.  Jeez, you have to be really careful who you listen to these days…

    Then the same idiot begins lauding the rising trend in industrial metals and the builders – which, of course, COMPLETELY conflicts with his bad GDP premise.  Doesn't matter – doublespeak allows for holding two contrary thoughts at the same time and believing both are equally true.  

    At the open: Dow +0.52% to 13954. S&P +0.51% to 1508. Nasdaq 0% to 3154.

    Treasurys: 30-year -0.26%. 10-yr -0.06%. 5-yr 0%.

    Commodities: Crude +0.3% to $97.86. Gold +1.13% to $1681.45.

    Currencies: Euro +0.42% vs. dollar. Yen +0.55%. Pound -0.06%.

    Market preview: Stock futures and EU shares sink after U.S. GDP unexpectedly contracts in Q4, led by a plunge in defense spending. "This is one chink in the armor of the recent better-than-expected economic indicators," says analyst Wayne Kaufman. "If it turns out Sandy and the fiscal cliff were the reasons for (the contraction), people will shrug it off." The S&P benchmark is -0.3%.Later: FOMC announcement 

    GDP Q4 : -0.1% vs. +1.0% consensus, +3.1% prior.   More on Q4 GDP: Defense spending falls 22% – the biggest drop in 40 years – leading real federal spending -15%. State/local spending -0.7%. Personal consumption expenditures +2.2% vs. 1.6% in Q3. Nonresidential fixed investment +8.4% vs. +1.8%. Stock futures dipped and then bounced on the soft print. as traders look at calendars and realize we're halfway to 2013 Q2. (full report)

    The AAII Investor Sentiment Survey in a graph shows the sharp rise in bullish sentiment occurring alongside the rise in stocks since mid-November. The bulls are at their highest level since March 2011. The bears are at the smallest since a year ago. 

    Ignore plunging consumer confidence at your peril, suggests SoberLook, as stock prices are pretty well tethered to it (or is it the other way around?). In any case, divergences don't seem to last for very long.

    Italy is the outlier in Europe, falling 2% as the Bank of Italy and Mario Draghi get further ensnared in the Monte dei Paschiblowup. The central bank – then led by Mario Draghi – reports spotting accounting regularities back in 2010. It made a few phone calls, but didn't force the bank to disclose the information. EWI -0.6%premarket.

    Another ramping up of a lingering territorial dispute between China and Japan doesn't bode well for Japanese automakers (TM,HMCNSANY.OB). China's Defense Ministry says its navy will conduct exercises in a region that skirts the islands in dispute. Though the trio have already slashed output in China, demand for Japanese autos could get even worse after the brazen military moves.

    Boeing (BA): Q4 EPS of $1.46 beats by $0.26. Revenue of $22.3B beats by $0.06B. (PR)   More on Boeing (BA) Q4 earnings: 2013 EPS guidance of $5.00-$5.20 vs. consensus $5.13. Revenue guidance is light – $82B-$85B vs. consensus of $88.2B. "Assumes no significant financial impact from the FAA directive." Shares +0.6% premarket. (PR)

    More on Boeing (BA +0.6%Q4: core operating earnings +9% to $1.8B as revenues climb 14%. Net profit slides 30% to $978M. Backlog rises to record $390B from $378B at start of quarter. Commercial Airplanes revenue +32% to $14.2B on higher delivery volume; continuing production on 787 despite suspending deliveries; expects to deliver 635-645 planes in 2013, including Dreamliners. Defense, Space & Security sales -2% to $8.3B; backlog is $71B, more than twice projected 2013 revenue. (PR)

     What did they know and when did they know it? Even before battery failures led to the grounding of all Boeing (BA) 787 jets, there were problems that raised questions about their reliability, according to a NYT report. If true, BA could be open to fraud lawsuits and attempts by carriers to get back some of what they paid for the new airline. Fixing the battery issue is its "first order of business in 2013," BA says.

    The Amazon (AMZN) bull case has pivoted to a story of margin expansion from revenue growth after the company surprised analysts with better-than-expected profit margins during Q4. A number of firms are out with price target increases, citing margin expansion as a major factor. PT hikes: Barclays to $260 from $245; JPMorgan to $333 from $245; Baird to $325 from $300; BofA to $315 from $300; Credit Suisse to $334 from $301. AMZN +8.3% premarket to $281.62.

    Facebook (FB) is due to release its Q4 results after the bell, when it is expected to report EPS of $0.15 as revenue increased to $1.51B from $1.13B last year. Analysts are particularly looking out for growth in Facebook's mobile revenues, which provided a pleasant surprise in the company's Q3 disclosure and have helped shares recover from their post-IPO slump.

    Three breakfast reads: 

    1) Microsoft: The Enterprise Strikes Back 

    2) Developments In China Explain The End Of Gold's Rise 

    3) Green Mountain Coffee Roasters 3.0

  20. On the bright side – up $15,000 in 2 days!

  21. Good Morning!

  22. sgh225 – first of all, welcome to the crazy world of PSW full benefits!  To answer your questions and I am not being a smart arse by saying most of your question's answers are IN CHAT:

    1 How do I follow your up to the minute trades? In Chat.
    2 Where can I down load a spreadsheet of your trades? StJ has the spreadsheets, and you can follow those In Chat
    3 I get your mid day comments late and don't know how to use a RSS? Stay In Chat
    4 Where should I be on your site? In Chat on the daily post.
    5 What is you FAS portfolio? How do I use it? Since you are just starting, follow the daily post by StJ.  DO NOT PLAY IT until you have been here for 3 mo.
    6 What else do I have to know to be the most up to the minute informed? Read the past months posts and chat to get a feel for what we are doing on the site.  DO NOT TRADE (paper trading is ok) for a few months.  Get a feel for how we are doing things.  IF you cannot be here on a daily basis, do not trade the a position that is a daily trade…..JMHO.

  23. Virtual MoMo trades;   Sell to close 2  AMZN 265 Feb 16 puts for 3.15.   Buy to open 10 more SODA March 52.50 calls for 4.20.   

  24. Just to give a general outlook on the famous AMZN trade My play was yesterday 4PM down -450.00 today up to 1028.00 The Feb13 260p dropped from 10$ to 1.90 The far out play just shows a general credit of +- 300$

  25. Pharm/ What is your say on VRTX earnings report yesterday.
    Are you still bullish on the stock at $45?
    I followed your Feb 41 put sale trade reco.
    Do you have any other play on them?

  26. Phil/Zimbabwe  If money in the "Bank of U.S." is borrowed, wouldn't having a surplus of $217 be better?….. :)

  27. Pharm well said. It reminds me of the fellow laying under a tree keeping his mouth open in hope a fryed chicken will dropp in to his mouth.
    Trading options takes many years and you never finish learning. Sometimes I wish I could learn an other language just by injecting the know how and va la you speak it. Just not available yet.

  28. VRTX – none right now.  I want to see how they behave.

    yodi – LOL.  Trading options is a suckers game….many times we are the suckers.

  29. sgh225/ what the heck kinda place is this….. and to expand on what Pharmboy said. This is not a place where you get told the trades of the day, or even of the week or month and blindly do them. Phil is all about education and helping you learn how to design your own trades. He's also not primarily a short term trader (Go read "The Man Who Planted Trees", which is somewhere in the member files. It's an initiation rite for all of us). We do talk about short-term stuff and there are a few masters of it – watch Lflantheman for a few days – but by-and-large, the income portfolio is the place a lot of us have parked a lot of our bucks.

    That said, a lot of us do tend to freak over the daily stuff, and Phil does his best to calm us, but it can get pretty entertaining at times. As Pharm said, watch and learn.

  30. Yodi – That's some weird f**king tree!   :)

  31. Ah, DEPO. My Old friend. Too bad we parted ways when you were much higher.  Selling Ps on them is a good way to play this little company.  A generic maker (TEVA, WCRX, PRGO, etc) would be a good fit to pick these guys up for premium payment on a generic drug.

  32. Son of a motherless goat.  SGYP….I forgot about them……well, nibbling at the July $5 Ps (STO).

  33. sgh225- welcome       This is a VERY dynamic site. I echo Pharm's comments. Study the site like you would study chemistry or law. (It is that wide ranging.)

  34. Virtual MoMo trade:  Sold to close 2 AMZN 275 calls for 4.65.  That long strangle was a loser and I now prefer to get completely out of the trade, forget about it, and move on.   

  35. SGYP…..60 to 65c for those….take no less.

  36. 1020 – you have two of those in UR yard, no?

  37. Good Morning
    Pharm—you funny ;-)

  38. Chickens that is…that seem to drop from the palm trees! or maybe those are ducks from Ralphs……!

  39. PSW AC Conf:  For those who may be on the bubble, I attended my first PSW LV in November.  It was a real eye-opener.  What I accomplished in a couple of days of exposure to Phil, Pharm, Craig, et al made my previous couple of years of hanging around the web site seem silly.  If you are inclined in the slightest, you really should go.  Just rubbing shoulders with other PSW members proved to be really valuable.  Strictly on the basis of value, it's a great deal.  You will have real time conversations with Phil and the gang and they will get to your questions and agenda items.  I'm sorry I cannot attend the event…I sure would like to.  Terrapin, nice job on doing the heavy lifting…

  40. from SHJ…..ladies and gents….start your engines:

  41. Virtual MoMo trade:   BTO  10 EBAY March 16  55 calls for 2.25

  42. Yawning gap between upbeat business news (profits up, Dow up) and real economy (consumer confidence plummets, economy shrinking).

  43. PBR / Phil:  Can you translate the SA comment on PBR?  Petrobras (PBR -4.9%) sinks at the open, as its increase in gasoline and diesel prices isn’t high enough to stem worries about losses from expensive imports. The 6.6% hike for gasoline still leaves it 13% below international prices; Credit Suisse says the market was looking for 7%-10%. If no further increases are coming, CS expects a 9%-13% downside to consensus 2013 earnings estimates.
    They have earnings coming up on Monday.  I've been looking for an entry.  What do you think?

  44. Damn Iflan…..u go dude, but the bonds are saying a pullback for a few days. 

  45. Pharm/Ducks  You're right!  Funny thing is they always seem to drop in pairs…. ;)

  46. Oil – what, is that it?

  47. Apologies, Iflan….. :)   EBAY looks promising….SODA, not as confident in that one.

  48. mjjwo9b – That was my shoulder you were rubbing….. ;)

  49. AAPL over $460!  

    NFLX under $170 (now you see why the prudent move was to take $4.50 off the table!). 

    AMZN/StJ – I like the clip on CNBC of Bezos just laughing when they ask him about profits.  The only profits he cares about is the $22Bn he's now worth.  Kind of like Ellison at ORCL – so what if the company doesn't make much money – that's not the point….

    Taxes/StJ – It would be funny if all the poor people left one of these states and the top 10% finally realized they can't actually run things without them.  

    Hotel for PSW Conference/Yodi – I'm a luxury hotel guy.  I always try to be prudent booking rooms but then I'm usually a sucker when they offer me an upgrade "for a little extra" once I get there.  Google shows $229 a night at the Borgata that weekend (right next door and nicer than Harrah's) and, further away but in the real Atlantic City is the Atlantic Club for $120.  I'd spend the money for the Borgata though – very nice place. 

    LOL Arivera.   As I noted Friday, we just have to keep raising our stops and take that exit when we get the signal.  

    Questions/Sgh – Glad you are staying!  ALL trades originate right here in chat.  Every day an RSS feed is created for Members (see end of morning post) and you can get that fed to a phone or whatever (you'll have to learn how on your own – I never use them myself) but my comments are in blue and trade ideas are in white and, frankly, if you are not a day trader – the first thing you have to learn is not to act like one.  We have all types of traders here and no one should try to follow them all – the idea is to LEARN what trades work best for your lifestyle and temperament – and look for those opportunities when they come along.  There's a link to spreadsheets in comments under the Income Portfolio (here).  As to where should you be on the site – I'd say start by reading the Education Archives and then my chat or Optrader's chat – depending on what you are looking for.  As to FAS portfolio – you obviously did not do the welcome homework assignment and read the last month of posts as we had that discussion recently but, like all our virtual portfolios – they are teaching tools so you get a paper-money account on TOS and trade along and ask questions when you have them.  I think, at this point, Wombat can answer most of your questions…

    And what Pharmboy said!  

    And what Snow said!  

    GLD/Mill – Feb way too close, obviously.  I think $1,600 hold on gold, maybe $155 on GLD and the Jan $155/170 bull call spread is less than $7 and then you can try to get .50 to $1 a month selling calls to work into a free spread.  March $167 calls are $1.08 for example, so a 1/2 sale there allows for a $50 move up in gold and the 2x roll to April $177 (now .50) is $15 away, or about $150 move up which, of course, would put your spread 100% in the money for a $8 gain anyway. 

    GLD/Opes – I'm for selling 1/2 those March $167 calls (above) to pocket some cash and, if gold fails $1,670 again (GLD $162, I think) then I think we should sell the June $160s (now $6.80) and roll the June $145s ($18.60) to the Jan $140s ($25.25) so cheap roll and lots more time to sell calls.  

    RUT testing 900, Dollar 79.33 but TLT $116.57 so no one is running to bonds.  VIX 13.82 only up 4%.  

    FAS Money – Waiting game now. 

    $25KPM – QQQ right on that $67 line.  Perfect call so far.  IBM $203.88 so fine there too.  CRUS $28.19 – also perfect.  AAPL is dead money unless the Fed does us a solid later.  NFLX calming down ($167) and SCO brand new and down .05 so far. 

    $25KPA – Same as above but with AAPL trade I expect to make $50,000 back on.  SHLD great, GOOG still over but not getting worse (we rolled once) and they did dip $10 this morning so still hope.  FFIV right on target, VMW just hoping. 

    AAPL Money – On target to be our best performing portfolio of all time.  Remember, just $5 per month gets us to $560 for net $125,000 profit on current positions, not including sales we may make along the way.  NFLX gave us a great example of why I'm too nervous to sell calls right now but, over 24 months, there will be many opportunities for patient traders.  

    Zimbabwe/1020 – I was going to mention that but it was a distracting tangent I didn't want to go on in the morning.  Yes, $217 means Zimbabwe is still $16Tn richer than we are.  

    Thanks MJJ – Very glad to know we're actually helping with the conferences.  I think having a chance to spend a couple of intensive days live with the Members is great.  That's why I'm happy to do it twice a year.  

  50. Mjj:  I would wait on Phil's comment, but I will add that I used to trade PBR, until the government/ruling class [same thing] got too greedy, as will happen in this part of the world [I'm 6 years in the Carib, lived 7 years between two S.American countries] and starting overtaxing PBR and underfunding development operations.  I stay away now.

  51. Come'on VIX….make my month.

  52. BRCM – Should we be closing out the bear put spread on this play?

  53. PSW AC Conference – re hotel rooms, I had to reserve a block of 5 rooms in order to get the contract with Harrah's approved.  I can increase that number as we firm things up and more people sign up and indicate they want to stay there. But I am on the hook for those 5 rooms so hopefully we get 4 other attendees to stay at Harrah's using the group code and at a very good rate which beats Priceline.  I will be staying there.  It is very hard to book a conference room at one of these hotels and get your contract approved without guaranteeing a certain number of hotel rooms to be taken.  

  54. Pharm, bought some of that  short double bond ETF(that which can not be named on PSW), @ $66 the other day, based on TA. 2 blasphemous statements in one sentence, try and make back what i lost 2 years ago on that bugger.

  55. EIA Petroleum Inventories: Crude +5.9M barrels vs. consensus of +2.5M. Gasoline -1.0M barrels vs. consensus of +1M. Distillates -2.3M barrels vs. consensus of -1.1M.
    Your thoughts on the report.

  56. Thanks 1020 – Just like my last camping trip in northern Wisconsin, it took several showers and a lot of tomato juice to rid myself of the close up encounters  :)
    Thanks Zero for the insight.

  57. Phil/EIA/USO
    But I guess we wait for the FED at 2:15. It's all about the dollar for now?

  58. mjjwo9b – Northern Wisconsin!?  How did you know where I am from?  (Wausau)  :)

  59. TYX/Pharm – That can go on for a very long time before hitting real resistance.  

    Oops, forgot to mention oil inventories were, as we expected, another net build:

    EIA Petroleum Inventories: Crude +5.9M barrels vs. consensus of +2.5M. Gasoline -1.0M barrels vs. consensus of +1M. Distillates -2.3M barrels vs. consensus of -1.1M.

    It net's out about as expected due to Distillate draw (heating oil mostly) but cold snap ended already so the traders know that's a one-off.  We had a quick snap to $97.30 but back at $97.70 now and yet another chance to short at $98 maybe?

  60. VIX, whats that


  61. Phil
    Thanks for the FB trade

  62. QCOM/phil – good story here, but have been weak. do you follow QCOM at all?

  63. Phil Hotel Thanks will look in to it

  64. First look at the new BlackBerry phone:


    But, tragically, there's really nothing to love. Nothing in the Z10 stands out as class-leading and, while the BB10 OS does have a lot of charm and brings all the best productivity-focused attributes of BlackBerry to bear in a much more modern package, the app selection is poor and the gestures here aren't so good that they make up for that major shortcoming. Will more and better apps come with time? Absolutely, but after waiting this long (and then making Americans wait another month yet) BlackBerry really needed to make a huge impact out of the gate. Unfortunately, it hasn't.

    All is not lost: at $199 (which BlackBerry says is the suggested on-contract price in the US), the Z10 and BB10 are a nice piece of kit. The BlackBerry faithful who've been waiting patiently for something more modern will flock to this (and its QWERTY-having cousin) in droves, but there simply isn't enough here to woo those consumers who have already made investments in Android or iOS. Too little? Maybe. Too late? Sadly.

  65. Slow news day.  Comic relief: Ballmer interview       At the end of the article, Bloomberg ingenuously added the legend: (This interview was edited for content and clarity.)    In the comments section following, one wag, referring to the article's title, wrote "In other news, a monkey on PCP isn't afraid of much, either"  :)

  66. SGH225 /  Welcome.  I converted from basic membership to premium because I couldn't follow the recommendations in basic.  It seems things were always referenced to Chat, chat, chat.  Once I got into chat, I was shocked.  The chat seemed like this crazy, uncontrolled, chaotic mess.  Very frustrating at the time.  I was very confused on the various portfolios and I kept looking for someone to tell me what to do….like all the other internet investor sites.  That is not how it works here.  In addition to the ideas above, take a look at Craigzooka's IRA Portfolio.  It is a lower intensity and much smaller $$ version of the Income portfolio.  The virtual trading recommendation is really good advice.  Trade your style and ignore the rest.  There is a ton of information on this site and it gets very confusing.  One thing that took me forever to figure out:  Don't try to mirror the portfolio's.  They are intended as examples only.  Still, if you see a trade or two that you like, you can go along for the ride.  I did FAS Money in a virtual account for 6 months.  It was an easy way to get the hang of it.

  67. QCOM / Scott – I am long Jan 15 50 calls, selling against them to lower my cost basis. What I like is that they sell to everybody – iOS, Android and even the new RIMM phone! And they are in phones, tablets, etc…

  68. Love those earnings plays.  CRUS, NFLX, BRCM all fun and winners and easy to adjust.  Hope we keep doing those regularly.  Also, Barry Ritholz was on Sirius POTUS with Pete Dominick yesterday afternoon.  Best hour of radio since, well, since Bruce Barlett was on last week.  Just two great people to follow. 

    This is not as much as question as an observation.  I have been in the CHK Jan 14 $15/20 for net $3.08 bull call spread selling the $18 puts for $3.23 to cover for a while now.  Fluxuates a lot if you look at it daily, which I am trying not to.  Made some extra selling 20 $5 Jan puts when CHK dipped to $13.50.  Now the spread is about even at $3.10 while the puts are down to $1.95.  I'm not so trusting on a company whose stock shoots up 10% on a CEO's exit, and I am considering getting out with my profit on the puts.  Any considerations to the contrary?

  69. Ballmer:  If you stuck a beard on Stevie B, he'd look a lot like the Jeff Bridges character in Ironman.  Just saying.

  70. BRCM On set of plays was set up 16th Jan13 But still a good play today
    Here we go
    Jan15 vertical 28/35 cost 3.70
    Jan15 sell 28p credit 3.40
    and for good measure sell Feb13 35c @ .33
    I have done 5 off
    PM margin 498
    Max profit at 35 3336.00
    return if unchanged 2916.00
    all at experation!
    lower protection 28.33
    cost on 5 off 140.00
    selling the Feb13 obviously will reduce your cost

  71. PBR/MJJ – Brazil price-fixes PBR locally so they are losing money at the net sales prices and the hike they were allowed is not enough to offset cost increases.  A lot of Chinese companies have that problem too.  So no, I don't like them until/unless they show something better in earnings.  Brazil doesn't care if PBR never makes money – the idea is to control gas prices for their citizens.  This was the first rise they've been allowed in 10 years and it's just 6.6%?  That was it – that was the pop you've been hoping for – see you next decade…

    And what ZZ said.  

    BRCM (yesterday's earnings play)/Palotay – Yes but no real hurry.  The bear put spread is now .85 so a .15 loss but you could cash the $33 puts for $1.50 instead, leaving you with naked short $30 puts (now .65) and you can cover that with the sale of the $35 calls for $1.50 more and then you are technically in the short 2015 $28 puts for a net credit of $5.50, less whatever, if anything you end up owing on the short strangles.  

    Harrah's Terra – Oh, I didn't know you needed to book 5 rooms as part of contract.  I'll take one then.  

    Thanks DC, at least one of us was on the ball…  Yep, Dollar now 79.30 and market supportive.  Fed meeting as we speak, deciding how to play this.  

    You're welcome, QC.  

    QCOM/Scott – Sure, just another flavor of BRCM with same good long-term potential.   Unlike BRCM, however, they are high in the channel so I don't like them bullish here but I like them too much to be bearish.  (wow, that song makes me want a Kamakaze – long story but they were 3 shots for $1 at Maximus last time I heard this song…).  

    RIMM back to $15 and AAPL traders seem happy with non-threatening BB10. 

    LOL ZZ – Good comment.  I really would like to bring a chimp in for a week to run MSFT.  I would absolutely go long on the stock ahead of that week…

    Good advice Mjj.  To me it's like walking into a busy restaurant kitchen and asking everyone what they are doing at the same time – it may seem chaotic but, once you begin to understand what's going on – it all makes perfect sense and you begin to understand how each individual effort contributes to the greater whole.  

    CHK/Rperi – I still like them for the long haul but nat gas isn't going anywhere and they will have to keep selling assets to pay off debts and Aubrey was a genius and CEO X may not be.  So, unless you like the wild ride, $20 is a good exit point. 

    $97.50 again on oil!  Maybe lower this time as it's 3rd test today.  

  72. Sgh // OMG thank god they got a new whipping boy : > Seriously, though welcome. If I may give some advice – there are so many different moving parts, just start reading everything you can find on here and germinate. Read through as many of these day posts as possible. The guys here are really good – it'll take while depending on your level of experience ( oh, god how I dispair for the true beginner .. )
    I posted a cheat sheet for beginners a few days back on spreads that may help, and the guys are generally pretty helpful.
    Hang in there mate and check your ego at the door.
    It's only money ; >
    Phil / Yodi // I have posts for both you on the previous days thread. When does this switch over becasue when I'm up 5am PST there are posts coming in that are time stamped correctly for today ? 
    Palotay // I might hold off on that closing of BRCM, its already dropping even though earnings were adequate. Presently down -0.19and some pretty bearish activity

  73. QCOM/stj – i used to be in and out of QCOM years ago. now i think there are some residual shares in the kids accts.  Just sold one this week 62.50 put for .89 in IRA acct. if i get the entry, will sell the Jan15 62.5/65 strangle for $18.20 or better for a net entry of around 43. turns dividend into 2.2% yield and if taken at 65, a 51% gain, and if another put to me at 62.50 then approx 53 ish net entry.

  74. QCOM/phil – thanks. channel schmannel! ;-)  spiked down yesterday to take out stops at a fib support and riding on 30MA today up to and spiking through the 5ma and pivot..  sold the 62.50 this week put. not rushing to enter, but i am liking this around here with throwing on the Jan15 straddle i described to stj. 

  75. Yodi ///
    So here is a perfect example
    Your recent post on BRCM

    Jan15 vertical 28/35 cost 3.70
    How are you to know if this is Bull/Bear ? This was why I was suggesting pluses and minuses ( that way I know what you're selling / buying and I can figure it out myself )

  76. Earnings tonight (average move / priced into options)
    We are on a roll now so why not press our luck!

    CTXS - 7.9% / 11% (whisper is for a $0.04 beat)
    FB - 5.9% / 10.7% (whisper if for a $0.02 beat – not much history there though)
    JDSU - 9.4% / 10% (no whisper)
    LVS - 7% / 6%
    QCOM - 5.6% / 5%

  77. UK FTSE -0.3%
    German DAX -0.5%
    French CAC -0.6%
    Spain IBEX -1.5%
    Italy FTSE MIB -3.4%

    Some light on why Italy was lower today from Forexlive..
    The catalyst for the decline in Italy was oil services group Saipem, which is down more than 30% on a profit warning and an investigation into improper share sales ahead of the warning.

  78. In the 25KP, the NFLX 175/170 BPS is now $4.00 (30% win) just in case people are wanting to quit now ahead of the Fed statement!

  79.  Some perspective on the 0.1% 4th Q 2012 decrease in annual rate of U.S. GDP today, the worst performance since the second quarter of 2009:
    From FT 1/30: "

    "First, the inventory swing shaved 1.3% off growth on the quarter, just off our estimate of 1.1%. But, this is old news, and inventories will swing to a positive contribution in Q1, and modestly more than we had expected such that GDP at 1.9% is more likely to be over 2.0% rather than weaker.
    Second, we know government spending has been and will remain weak, but the 6.6% drop and the 1.3% knock on GDP growth was driven by defense spending, a lumpy animal that gave something back off the bounce in Q3. Defense spending accounted for ALL the drop in government spending. Take defense out of the equation and GDP would have been on consensus. Just for some perspective.
    Third, we saw strength in areas that are key going forward, namely consumption and investment spending. Equipment and software purchases contributed 0.9% to Q4 growth. No sign of weakness in either of these two areas."

  80. Cheat sheet/Wombat, Others – Please use the Wiki!  That's what it's for. If you have something to add, please add it.  Don't ask me how – I haven't a clue how that thing works but millions of people seem quite good at contributing to Wikis so PLEASE, if you are motivated to add to the knowledge base – do it.  As to posts – I generally try to finish yesterday's comments in yesterday's post before I publish the new morning post (around 8:30) but, once I move on to a new post – I pretty much never go back to an old post so it's up to you to re-ask if I missed something.  CTRL-C is "copy" and CTRL-V is "paste" and then you can move the comment to me – not vs. vs.  

    QCOM/Scott – As I said, I like them but they're not cheap.  Other things are so I move on.  

    $97.50 holding on oil so far.  

    LOL Wombat – You tell that Yodi!  (he used to always do that to me, about time someone did it to him).  My usual answer was CONTEXT!  If you don't understand whether he's bullish or bearish AND the reasons AND agree for reasons of your  own – why on Earth would you be making the trade?  

    Earnings trade/StJ:  Here's a fun way to play FB on earnings:  

    • Buy the April $31/35 bull call spread for $1.50
    • Buy the April $31/27 bear put spread for $1.25
    • Sell the weekly $31 puts and calls for $3.35

    That's a net .60 credit on the spread and FB would have to move more than 10% to put you in trouble but it's still rollable and you also should be able to recover some of the losing side on the April verticals.  Seems like a fun play to do 5 of in the $25KPA to see how it plays out.  

    On this trade we're taking advantage of pumped up earnings premiums AND the low-VIX longer premiums.  

    JDSU/StJ – Lack of faith makes March $12/13 bull call spread just .53 with almost 100% upside and no premium.  All they have to do is show well and this will be the last time we see $13 on this stock and, if they miss – it can be converted by selling puts into the sell-off.  The Jan $12 puts, for example, are currently $1.70 so net $1.20 even if you do lose the entire spread and, if you lose the spread, then you'll get more than $1.70 for the short puts. 

    LVS can be played to go up but not too far up by taking the June $52.25/60 bull call spread for $2.45 and selling the Feb $52.50s for $1.75 for net .70 on the $7.75 spread.  Would take a 15% (2x normal) move in LVS to blow you out and plenty of time to roll.  

    Italy/Kustomz – No mention of the bank scandal?  I would think that's the bigger deal.

    FT/ZZ – I agree.  

  81. Phil
    GMCR Any trades on earning out 2-6 ?

  82. wombat
    Posting I find if you post still on yesterday's site it will not come up on todays. Even if it is 5 AM still yesterdays notations.
    BRCM I did hope you learned If you pay for a spread it is a debit spread if you get money out it is a credit spread.
    BRCM ich hoffte, dass Sie gelernt haetten, Wenn Sie für einen Spread  zahlen ist es eine Debit Spread, wenn Sie Geld  bekommen ist ein Credit-Spread-
    So just to see if you would pick up I wrote Jan15 vertical 28/35 COST 3.70 !!!!

  83. Phil Hope you will understand (8

  84. SOB..oil.  I am gently being reminded of my days of old when it went up up and away, only to fall on that day (that I moved out of the trade).

    rpme – u so crazy!

  85. fed never more accommodative in history 4 years into recovery and we get negative gdp print…just think about the long-run ramifications of that…wow

  86. Here's a good t'weet for ya:

    Congratulations blackberry on creating an operating system that is competitive with Palm OS

  87. Good historical reference on GDP and recessions…..GDP is usually positive when a recession starts….

  88. Phil – looks like its time to reload on GLW? Their quarterly concall had one time charges all over it, and thought it might be time for a new spread.

  89. ZO/ GDP Gov't spending slowing probably was but …even if it was 1+ with govt spending included….its highly disturbing…we are building massive overcapacity globally through artificial demand
    and all we have to show for it is a building stock bubble and pitiful growth

  90. Yodi // BRCM
    Yes, that part is obvious – a debit is costing you, a credit is a credit
    But just because its a COST ( which would be a debit ) does not mean its a bear or a bull – nor does it tell me if youre placing calls or puts. -- you can have debit spreads on either side. 
    For someone who hasn't been following a thread for context – how would they know what you're placing? I really like your trades, I just wish you could format it consistently soI don't have to research it.
    For example, if it a Bull Put Spread 
    Jan15 vertical 28/35 cost 3.70   would be Jan15 vertical +28/-35 cost 3.70
    Phil // I didn't place the trade because I was confused, just to be clear. Wiki, first I've heard of it. Should I repost my 'confession' to you from yesterday ? 

  91. actually for a Bull Put Spread, it would great if folks could standardize to something like //
    Jan15 vertical +28/-35p cost 3.70

  92. angel – put your green googlie goggles on!

  93. FB play sell Jan5 29p @ .72 Down turn you got the stock for 28.28 Margin 460.00 on 2off

  94. EMC getting a nice bounce one day after the VMW drop and their own lukewarm quarter. 


  96. wombat,
    Somehow we have all been figuring out trades here without // or +-. Instead of us changing, I kindly suggest you study the way things are done here and adapt.

  97. GDP / Phil – And as we have seen in Europe, cutting government spending is not a good thing for growth. More proof last quarter here! 

  98. Stjean,
    Do you think the volume on JDSU today means someone knows something? It has me paranoid to make a bullish trade.

  99. IWM weekly 91 Cs…playing for da fed.  9c…..


  101. wombat
    BRCM well taken in this case the spread is a call debit spread.

  102. Phil I am glade you off the hook (8

  103. Angel: I respectfully disagree.  By sheer coincidence, I just spent the last half hour reading a [rather boring] 14 page study from BBVA that I picked up out of FT's "Long Room" blog on Emerging Market Middle Class growth.  The conclusions, however, are fascinating — a large percentage of the EM population will be lifted out of poverty and into middle classes [as defined], which changes consumption patterns markedly — away from food and shelter in favor of discretionary expenditures.
    The list of Biggest Beneficiaries, in order, are: transport, communications, restaurants/hotels, recreation&culture, personal care and effects, and financial services. All regions, including Africa, will undergo this change: middle classes in Asia will first be China [a middle class country by 2020], then the rest of East Asia, then India.  In Europe [among the underdeveloped], Russia and Turkey lead.  In Latin America, Brazil, Mexico, Argentina, Chile, Peru, Colombia.
    My takeaway: well, quite a few items, but Asian transport first and foremost.  There are dozens of Chinese carmakers, but I guess I would focus on the Toyotas,  Nissans, Hyundais, and Fords/GM's of the world — although anyone who knows more about car manufacturers and their export prospects than I [that would be virtually everyone], feel free to pitch in.

  104. Maybe Dell will buy NOK…as MSFT puts cash into DELL to go private.  In angel's words: THAT WOULD BE SWEET!

  105. Zero – I would happen to agree with your post.  But we need one more good correction first.  That domino effect will start over seas with the EU.

  106. Yodi // Thanks for being so open-minded – it really will help new people quite a bit, and the only reason I'm bugging you is because your trades are good.

    StJ // I'm with you on both JDSU and LVS. Recently read another article about Macau buildout – I think they'll beat. Also with Jarbo, should the pre earnings drop concern ?

  107. JDSU / Rj – A simple solution is to stay on the sideline for this one! Someone always knows something, it's just a matter what they do with it. I have no opinion on the stock now, I just posted the numbers!

  108. Phil,
    Earnings trade/StJ:  Here's a fun way to play FB on earnings:  

    Buy the April $31/35 bull call spread for $1.50
    Buy the April $31/27 bear put spread for $1.25
    Sell the weekly $31 puts and calls for $3.35
    Aren't you going to be either long or short the stock in 2 days?


  109. LVS / Wombat – Same as JDSU, I don't have an opinion on LVS. I just post the numbers so that Phil can have some stats to make a play. In either case, Phil's setup are not wildly crazy to playable in small qantities. I guess we have been somewhat lucky with earning trades so far and like Phil says, it's amusing!

  110. Middle class / Zero – You need to have a long term investment view with the scenario. I agree with it and that would definitely provide a huge lift to the world economy. In the meantime, let's make sure we don't screw the more established countries with idiotic austerity measures as they still represent the largest share of word economy in the short term!

  111. Phil/ SVU  I'm still short some $3 Jan 14 Puts, now @$0.50.  Under my Portfolio Margin I'm being charged $7500 in margin for 30 contracts, value $1500.  So essentially being charged $3.00 in margin  – which is  SVU to go BK.   That doesn't seem like good return on margin, does it?  I could cut out (at a nice profit) or hedge the margin.  if i paid .05 to buy 30 July $2 Puts that seems to reduce margin requirement by $6000 for investment of $150. Suggestion? Thanks/

  112. Some additional notes from Kevin Drum on the GDP numbers:

    On a political note, it would be nice if this report persuaded some people that government spending really does affect economic growth. Unfortunately, the kind of people who refuse to believe this seem to have a weird, walled-off section in the brains that makes an exception for military expenditures. Higher spending on bombs and aircraft carriers is good for the economy, but higher spending on bridges and electrical grids merely saps business from the private sector. I don't know if the anti-Keynesians really believe this or are only pretending to believe it, but it works out the same either way. A report like this won't change their peculiar views one whit.

  113. Transports ugly at -1.44%.  Other than RUT, the rest are essentially flat. 

    GMCR/QC – I'm not a big fan but they are holding up better than I thought as their machine goes off-patent this year.  Probably because they've wisely partnered with just about everyone who would end up competing with them.  Those parnerships (SBUX, DNKN, etc) have led to a lot of machine sales with big up-front profits but those partners then can sell their own K-kups and that's where the model kind of falls apart.  Their growth is already down to about 10% a year and that's if all goes well – if something else comes out, they are already only dropping 10% to the bottom line so not much room to give there.  Anyway, I hated them at $100 but I liked them at $20 and now, at $50, I could care less.  I would say the play was to say they can't break $50 but NFLX makes that a rough call for any of the Momos.  Still, that fear aside, you can sell the Feb $50s for $2.02 and buy the June $50/55 bull call spread for $1.40 and that's a net .62 credit and you don't have much trouble until GMCR is up 20%.  That's good enough for 10 in the $25KPs

    LOL Yodi (or should I say "lautes lachen"?).

    GDP/Angel – I don't consider a big drawdown in inventory to be bad for GDP.  That's a real flaw in the model.  IPhones and IPads stocked up and sold out – there's Billions right there.  People were more pessimistic about Q4 retail than actual results so they didn't order enough stuff to sell and, of course, Obama didn't buy any tanks.  That's the whole GDP miss – has nothing to do with the economy being slow.  It would be a mistake for the Fed to react to this with more stimulus – real danger of over-doing it now. 

    Note supply vs velocity of money.  Velocity near all-time lows and if they can't pull that supply in in time – well, things can get crazy pretty fast:

    LOL Pharm.  

    GLW/Deano – I love them long-term but they may still re-test $11 so I'd be careful about committing too early but it's the kind of stock where, if they get cheaper, I want more.  Actually, they are missing from our Income Portfolio so let's say selling 10 2015 $12 puts for $2.25 is a good start and we can then spend $2.45 to buy the 2015 $8/12 bull call spread so that's net .20 on the $4 spread that's 100% in the money and the break-even is way down at $10.10 because we own the $8 calls.  TOS says margin is $2,500 for 10 plus the $2,450 in cash means this trade returns $3,800 on $4,950 in margin (77%) if GLW flat-lines from here.   Of course we may sell calls along the way but, for now, our worst case is we end up owning $10K of the stock but it would have to be below $10 so we'd DD for an even lower entry on 2,000 shares.  

    Dollar 79.28.  

    GDP/StJ – Maybe a nice wart in Mali will goose things a bit.  France certainly seems to think so and I hear the UK is sending "advisors" – that's always a great first step.  

    OPEC/Angel – We get so little oil from there these days it's very overblown.  So much new production from non-OPEC sources and demand is lower than 2008.   CAFE standards keep rising and there should be 1M electric cars added this year (1%) and that doesn't seem like much but if you have 1% of the cars completely stop using oil each year – it starts to add up. Solar power growing by leaps and bounds and our 1Mbd wars are winding down and the new 737s and Dreamliners (if they ever fix them) consume 20% less fuel as well.  As you saw today, even with that production cut, US has a huge inventory build (and that's AFTER exporting 7M barrels last week).  They'd better cut more than that…


    FB/Sgh – We don't care, we got a net credit on the overall position and, whichever way FB goes, we'll roll the losing side of our short puts and calls and we're covered (hopefully) by the $4 April spread in either direction.  As long as FB is between $27 and $35, we keep our .60 plus whatever premium on our spread and any amount left from the spread that went against us.  Watch it play out over time and hopefully you'll get it. 

    SVU/Rexx – 167% in a year?  It's better than a bank so it depends what better you have to do with the money.  TOS only charges net .50 or I guess $1 if you ignore the fact that you do have cash in your account – so margin is less than you think.  I'd look into switching brokers as that seems like a pretty arbitrary margin charge on SVU – if you owned the stock for $3, wouldn't you now have a more than $1.50 margin credit (at 50%) with the stock at $3.93.  So how can charging you $3 possibly make sense?  You are right, though – if $150 frees up $6,000 and you can use that $6,000 to make more than $150 – then it's a no-brainer.  

    Good note, StJ.  

  114. FB/Sgh
    Sell the weekly $31 puts and calls for $3.35
    I can see the point of his question. Basically if the stock goes over 31 you will be responsable for say 100 shares ( one option sold) does the stock go below 31 you will be assigned 100 shares. In any case you will keep the 3.35.
    However before Friday we have the oportunity to roll the losing side in to a better position so you will not be short -100 shares or assigned + 100 shares. In any case you are some what covered with the 3.35 up to 34.35 and down to 27.65 and you do not hope you have a NFLX jumping 20$ at the time

  115. The market was 0 to 0.10.  I bid .05 for 50.  I bought 9 at .05; then they woke up and reset the computer.  Try again tomorrow.

  116.  Angel:  I agree with Phil about his scary huge money supply/no money velocity chart, and would underline it by referencing his "radical payoff of household borrowing in the midst of a horrible recession" chart of a day or two ago.  If Americans decide the coast is clear and that they can 1/ start spending and 2/ start borrowing again to do so, Bernanke can forget about his helicopters — he's going to have to put the entire Fed staff on the street with giant industrial-sized vacuum cleaners that make a huge sucking sound that can be heard all the way to Beijing to prevent the Mother of All Inflationary Balloons from blowing us all to pieces.

  117. AAPL – Van Tharp's take on the mystery of AAPL. in brief:
    1/ all of the articles you read about AAPL are garbage
    2/ Be long when the markets are going up. Be short when the markets are going down.  If you are not sure then stand aside.
    3/ What’s Apple doing right now?   It’s going down. If you want a position in AAPL, what direction should you take?  

  118. Fed blames the weather and essentially changes nothing.  


    For immediate release

    Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. 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 expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.  Although strains in global financial markets have eased somewhat, the Committee continues to see 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 and longer-term Treasury securities 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 of 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. 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 the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

    I think the markets were expecting more easing in light of GDP so a bit of disappointment on the note but another $85Bn dropped into the economy next month ought to fix that right up….

  119.  syrian state tv saying israeli warplanes bombed military site

  120. LOL Rexx – Good discipline.  

    Hyperinflation/ZZ – Great time to get that vacation home you've been putting off.  

    Van Tharp/Scott – Wow, brilliant stuff.  Buy low and sell high and follow the trends, eh?  That really does change everything.  I'm going to write it down and use it…  8) 

    Syria article here.  

    FOMC Announcement: No changes, with $85B/month in asset purchases and ZIRP remaining the monetary law of the land. New FOMC voter, Kansas City Fed chief Esther George, replaces the Richmond Fed's Jeff Lacker as a dissenting vote. The Fed blames a pause in the recovery on weather and other transitory factors.

    By the way, my key takeaway from BA earnings is that they DID NOT get hammered by the worst round of Defense Spending Cuts – EVER!!!  That, to me, is more significant than speculation over problems with a battery on their planes at this early stage of production.  

  121. BA great point, and you know Airbus is going to screw up the A350.

  122. FB  I do hold the leap Jan14 play well set and doing well. However on the near month call sales I sold the Feb13 31c for 1.94 the call is in the money and trading still for a premium well over 1.70. I decided to roll the caller for a small debit of .44 to March 13 to the 33c giving me 2 $ up in stock  value just in case FB will shoot up putting the Feb 31 caller very much higher ITM. Just a sense of precaution. Normally you will not buy that amount of premium!!!

  123. Much lighter and extremely overdue sell off.  RUT is selling off harder and they have been a leading indicator index in the last few months of where the market will go in the short term.

  124. WCRX just had lift off……

  125. Oil, Gasoline and Energy will be a Cancel to our Economy and a future Stock Crash no matter hard the Liberal media like CNBC Cheer Lead.

    NEW YORK (AP) — The nation's crude oil supplies rose last week, the government said Wednesday.

    Crude supplies grew by 5.9 million barrels, or 1.6 percent, to 369.1 million barrels, which is 8.9 percent above year-ago levels, the Energy Department's Energy Information Administration said in its weekly report. Gasoline supplies shrank by 1 million barrels, or 0.4 percent, to 232.3 million barrels. That's 0.9 percent above year-ago levels.

    No one will mention that we are exporting Gasoline and Distillate fuel

    RBG13.NYM RBOB Gasoline Feb 13 3.03 11:07AM EST 0.06 (1.92%) 

    From Todays Government Inventory Report

    Wednesday Jan 30 Government Crude Inventory Report

    Produced 9.1 per day of Gasoline

    Imported . 623,000 gasoline

    Gasoline Available = 9.723 mb per day

    We used 8.3 per report

    But somehow came up with a draw.

  126. SCO FEB 35 Puts are extremely attractive with crude very oversold.  With premium, you should be protected to about $100 in oil.

  127. Just 62M share at 2:50 – that's very good on a down day (no conviction to selling).  

    Nice – WSJ Statement Tracker, Compares any two Fed Statements.  Very cool. Notice this significant change:

    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,expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. 

    So even the Fed has a lower VIX….

    WCRX/Pharm – Very nice pop. 

    RUT/Rustle – Gotta love those TZA's. 

    Good notes John. 

    SCO/Rustle – We did that spread yesterday.  Oil back to $98 but once again we have to fear the overnights on Futures so we back off until tomorrow.  

  128. Pharm - not sure if I'm watching this one because of you, but I got out of CYTK on the way down, now it's making a nice turn back north, any opinion on getting back in?

  129. CYTK.mrm – not me.  Not real exciting to me, but I need to study the mechanisms.  Don't get me wrong, the things they are working on are exciting, but their science does not get the creative juices flowing! :)

  130. WCRX – Mar 14/15 BCS paired with selling the Mar 13 Ps for 10c debit.  There is a technical gap to fill up to 16.75, and something made it jump….TEVA buyout?  :)


    BBC: Tomorrow’s World

    Email this post Print this post
    By Barry Ritholtz – January 30th, 2013, 12:30PM

    Via the Beebs, we see this monster graphic showing what the future might hold
    click for complete expanded graphic

    Read the rest of this entry »

  132. RUT is cracking, so taking stjeanluc prompting to sell off the RUT Feb 925 long calls in the virtual short strangle portfolio:
    - Sell to Close 5 RUT Feb 925 calls for $1.625, Buy to Close 5 RUT Feb 935 calls for $0.7. 

  133. Pharm

    TKMR  Tekmira   any trade   ?  no options


  134. SCO/Phil
    Wasn't talking spread, just straight put writing, this way if it does continue down, you are safe to 34.20 on the stock or a little over $100 in oil.  Even if oil goes up another $1, you should still see full expiration and with the RSI currently at 25.86, that's very unlikely.  Just like NFLX going higher when it was 176 with a RSI of 90.3 was very unlikely.

  135. And sell some SPX long calls by doing:
    - Sell to Close 3 SPX Feb 1525 calls for $4.2, Buy to Close 3 Feb 1535 calls for $2.2

  136. Pharm / WCRX – be careful, they are buying not selling and might fall down if they pay too much or it falls through.  "Endo Health Solutions Inc. (ENDP) is in talks with drug makers about selling itself, Reuters reported, citing people familiar with the matter. The exploratory talks include Warner Chilcott PLC (WCRX) and Valeant Pharmaceuticals International Inc. (VRX), but there is no official auction process underway and discussions are at a preliminary stage, according to the report." 

  137. Pharm / SHJ - If his thesis is correct then TBT has a long way to go up, and/or TLT has a ways to fall.  Am looking at these for some insurance ideas…

  138. Phil // Nice on GLW. I like them a lot. you know the P/F on them is bear to $4
    Also, when you get a chance at the EOW, can you update us on the TZA currents ?
    PSW // Anyone know anything about the drop in ALU ? Can't find anything.

  139. Thx mrm.  Just saw that myself.  Interesting, but I still like WCRX for an IRA.  Nice dividend, good prospects in the generic business, and they themselves are bait for a bigger fish.

  140. TLT is in the 110 area, yes. I don't think Uncle Ben will allow it though.

  141. Pharm - all of my bios are dropping today and IBB has a bullish engulfing, so time for caution in the bios…

  142. TKMR….no thanks.  Not there yet.  They popped b'c of ISIS's approval I think.

  143. mrm…u r correct.  Mine have also taken a small hit.  SGEN is down a buck, so starting to lighten up on the March 30s. 

  144. This makes a lot of sense Peter… I'll update the spreadsheet.

  145. SCO/Rustle – Makes sense.  I'm pretty sure they are gunning for $100 at the moment but they picked a rough week for it.  

    TZA/Wombat – What kind of update?  Last idea for them was last Friday's post but we also use them in the Income Portfolio – certainly no change – we failed 900 on the RUT so Friday's shorter-term  trade is on if you need downside protection.  The hedge from Friday's post was

    TZA is a more exciting form of protection and one we are already using in our Income Portfolio with a July spread but an aggressive play for a short-term pullback, with TZA at $11.26 is the March $10 calls at $1.40, offset by the short sale of the the same DBA short puts or, if you want to play with tight stops, the short sale of IWM Feb $90 calls at .85, which drops the cost of the March $10s to net .55 and we're just playing for a quick rejection of the Russell at 900 – NOT a long-term hold! If the Russell is over 900 and joined by the S&P 1,500 and the Dow at 13,800 – it's time to get out of this trade so we're really protecting against the rejection we expect at these levels but this spread does offer unlimited upside so it's lots of fun for aggressive traders.  

    TZA is $11.44 now and the March $10 calls are $1.55, up from $1.35 pre-fed and a low of $1.19 this week.  Our target entry was $1.40, which was the 900 cross right on the button.   IWM Feb $90 calls already down to .60 – it's a brilliant strategy.  8)

    ALU/Wombat – Maybe profit-taking ahead of earnings.  That rising 50 dma is right at $1.40 so maybe a test of the life cross but, if $1.50 provides support – a nice bullish trend continues.  

  146. GOLD has a nice long base.  I am in the March 100 calls, sold the Feb 100 calls.

  147. 6 minutes to close – no cowbell for AAPL
    but more importantly – no go go girls ; <

  148. Thanks, rustle, I'm long SCO, I was a prime candidate for a little insurance.  I had scaled in, so the damage wasn't too bad, but another pop would have been unpleasant, and, with the Euro rising on a "Europe is tightening" scare, it is a distinct possibility.  Maybe the French Minister of Labor will repeat his "France is bankrupt" speech tomorrow in broken German.  But having some 35 puts is more comforting than undistilled hope.

  149. QCOM beat and raised guidance…. Over $66 AH.

  150. Dumpin the dollar to hold 1500.

  151. JDSU up over $13 AH as well! So far, so good! Waiting for FB and LVS now.

  152. Wow, a discussion between Rick Santelli and Maria Bartiromo on CNBC! World financial knowledge just dropped for 5 minutes.

  153. Phil // TZA
    Yes, I took the DBA hedge ( as well as the SQQQ's ) from last Friday.
    Since TZA is new to me I just wanted make sure I'm positioned well.
    I have  a diagonal bull call spread ( april -$16 / July +12 )
    Sold Feb $12 calls and
    I sold a bunch of July $10 puts a while back  ( which I'd be happy to own )


  154. Oooops, FB not reacting well!

  155. 116M on the Dow in the end – ho hum…

    Nas with a big bounce at the close.  

    FB down to $30 – not bad at all for our play!

    Facebook (FB): Q4 EPS of $0.17 beats by $0.02. Revenue of $1.59B (+40% Y/Y) beats by $60M. Shares -7% AH. CC at 5PM ET (webcast). (PR)

    LVS up to $54 and that should work out.  

    Las Vegas Sands (LVS): Q4 EPS of $0.54 misses by $0.05. Revenue of $3.0B (+8.9% Y/Y) in-line. Shares +2.6% AH. (PR)

    JDSU with a big bump past $13 – that was easy too…

    JDS Uniphase (JDSU): Q4 EPS of $0.18 beats by $0.04. Revenue of $429.4M beats by $5.21M. Shares +8% AH. 

    I'm loving this earnings season!  

    At the close: Dow -0.33% to 13909. S&P -0.41% to 1502. Nasdaq -0.36% to 3142.

    Treasurys: 30-year -0.04%. 10-yr +0.07%. 5-yr +0.08%.

    Commodities: Crude +0.47% to $98.03. Gold +0.83% to $1676.55.

    Currencies: Euro +0.54% vs. dollar. Yen +0.41%. Pound -0.26%.

    Market recap: Stocks tipped modestly lower after a surprise contraction in U.S. GDP reinforced the Fed's decision to maintain its bond-buying program. Despite a run of strong corporate earnings, the GDP data fanned concerns about the economy's ability to absorb higher taxes and potential cuts in government spending. The euro rose to a 14-month high vs. the dollar on signs of tightening in the euro zone.

    Banish thought of an early end to Fed asset purchases, says Goldman's Jan Hatzius, believing the fiscal drag assures slow growth and little improvement in unemployment this year. It'll likely be 2014 before GDP growth gets back to 3% and the Fed can consider a reduction in QE.

    Fixed-income is the most overbought in his 55-year career, says Dan Fuss, preparing to open a fund to U.K. investors (what a salesman). He's busy slashing duration along with exposure to emerging markets and junk bonds ("from a valuation point, ridiculous"). "For heaven's sakes, don't go out and borrow money to buy bonds right now."

    AMD (AMD -3.5%) slumps in afternoon trading thanks to acredit downgrade from Fitch: the chipmaker's long-term and senior unsecured debt have both been lowered to CCC (3 notches below investment-grade) from B. The ratings agency expects AMD to post negative free cash flow of $250M-$450M for 2013, and predicts annual sales will decline at a mid-to-high teens rate. It's also concerned about upcoming cash payments to Globalfoundries. Fitch had already downgraded AMD in October. (earlier)

    Facebook (FB): Q4 EPS of $0.17 beats by $0.02. Revenue of $1.59B (+40% Y/Y) beats by $60M. Shares -7% AH. CC at 5PM ET (webcast). (PR)

  156. Earnings / Phil – Not as many possible plays tomorrow, but WYNN on deck and I guess we can take something from LVS! I'll post the numbers tomorrow.

  157. StJ //
    Thanks for the double whammy ! JDSU / LVS — 

  158. Now it's Maria and Kudlow and even he makes her sound like a fool… She is so focused on trying to score political points with the contracting GDP that she can't see what is going on. What an idiot!

  159. Thank Phil Wombat… I look for the opportunities and he calls the plays! But it has been fun so far.

  160. And it looks like FB is flat now which would also be perfect!

  161. speaking of ALU submarine cable rumors 
    check this out //

  162. StJ
    I thought Phil just did the BLUE highlights ; >
    and no gogo girls.

  163. St.jean:
    What's your plan with QCOM? I recall that you like to sell calls against a longer position after earnings. How far out and what strike? I am eyeing the April $70's to sell a half position against 2015 $50's long position. TIA

  164. QCOM / Dc – Waiting to see where we end up tomorrow. I actually sold some weekly 67.5 today as the premium was just too good to pass. Might end up ITM on Friday but I don't really care as the underlying longs will more than make up for it! The Apr 70 strike would make sense as QCOM has had trouble going over 69 last year so it would seem safe and they would expire before the next earnings. Tomorrow they should be around $1.60 or so based on the current delta. 8 such sales over the next year and my cost basis for QCOM would be around $55. Good deal I think. Ideally I would need to sell $2 every quarter to have a free play (one can dream or plan) but I don't know that it's possible selling every quarter. Just thinking…

  165. "Madness in the individual is an exception, but in a group it is the norm."   Friedrich Nietzsche

  166. Talking about any specific individual or group Zero!

  167. This will be, by an order of magnitude, my longest post on PSW, and I’ll try never to do it again, but it was a dull day and there is no way to post a link to this piece, my apologies.

    Central Bank Governor (CBG): “Ah, good morning, take a seat will you. I’ve just come from a meeting at the Treasury. The government’s struggling to work out how to increase prosperity and it has asked the central bank to help out. And as you’ve been immersed in state of the art academic monetary economics, I want to know what ideas you have.”
    Central Bank Monetary Economist (CBME):  “Well, we’ve been looking at the ideas of Mr Keynes and we think we can increase employment at the expense of a bit more inflation by loosening monetary policy.”
    CBG:  “Sounds like a good plan. Any serious side effects we ought to be aware of?”
    CBME:  “Not as far as we can make out. Mr Keynes’ followers are all very clever monetary economists.”
    Sometime in the late 1970’s
    CBG “Ah, Good morning, take a seat. I’ve just come from the Treasury and they want us to do something about the rampant inflation, which seems to be a direct result of the ideas of those clever Keynesian economists.”
    CBME “It didn’t go quite go according to plan unfortunately.”
    CBG “So how do we get this inflation under control?”
    CBME “Well, we’ve been looking at the ideas of Mr Friedman, and we think that by targeting the money supply we can eradicate inflation by removing money from the economy.”
    CBG “Are you sure that this is going to work?”
    CBME “Well Mr Friedman is very clever and everyone else thinks it’s a good idea. We can’t see what could possibly go wrong.”
    Sometime in the early 1980’s
    CBG “Ah, good morning, I’ve just had the Treasury on the phone. They have expressed concern that the high level of interest rates from targeting the money supply has had the unintentional consequence of eliminating our manufacturing base. They’ve asked us if we can target something else instead.”
    CBME “Mmm. It’s not like we were able to target the money supply anyway. It kept jumping around like a cat on hot coals. We could try foreign exchange targeting and anchor sterling to the Deutschmark.”
    CBG “Are you sure that is wise? What happens if our economies diverge?”
    CBME “We’ve been looking at the exchange rate mechanism that the Europeans have developed and they have had less macroeconomic volatility than us. It’s a semi-pegged system and the IMF believes that there are substantial benefits. And the chaps at the IMF are of course all very clever. Mr Friedman doesn’t like this idea and he was wrong on the money supply one.”
    Sometime in the early 1990’s
    CBG “Ah, good evening. Sorry for the late timing of the meeting but the Treasury are furious that a hedge fund managed to devalue sterling by 25% today. The Treasury are insisting we stop foreign exchange targeting with immediate effect which I firmly agree with and target something else. What’s the latest in the world of state of the art academic monetary economics?”
    CBME “The most recent breakthrough clearly demonstrates that inflation targeting will solve all of our problems.  New Zealand and Canada have just started doing it and all the cleverest people at Stanford, MIT and Chicago believe this really is the ultimate target.”
    CBG “How can you be so sure this is going to work this time?”
    CBME “They are using the latest general equilibrium modelling techniques which will help central banks manage inflation expectations leading to economic stability.”
    Sometime in 2012
    CBG “Ah, there you are. Come in, come in and take a seat. I’ve just come from the Treasury and they are not convinced that inflation targeting is going to get the economy moving again. And those chaps at the BIS have been arguing that inflation targeting led to the massive credit boom in the first place. The problem is that I’m not quite sure if there is anything else left for us to target.”
    CBME “Well, there is one other potential target Sir. Those very clever people who used to think that inflation targeting was the right thing to do are now arguing that we should target nominal output instead.”
    CBG “That sounds a bit like increasing employment at the expense of a bit more inflation. And what evidence do they have that this will work this time? CBME “Evidence? Monetary economists have never had to provide any evidence before. What we do is build logical models so we can target the things that very cleverest people tell us to target.”
    CBG “But the targets always seem to lead to recessions and poverty. Surely the point of a central bank is to create conditions to increase the prosperity of the population by supporting productivity growth.”
    CBME “But that’s the government’s job, Sir. Not ours.”
    CBG “So what do you think our job is?”
    CBME “Well, the Treasury needs someone to blame when it all goes wrong don’t they?”

  168. H'm, my post didn't really work out any better than the gyrations of the Central Bankers, regettably.

  169. St.jean/QCOM
    Thanks for your thoughts on QCOM.

  170. Zero
    Nice post. :)

  171. MBS hedge fund play/ option play:  the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.
    How do we capitalize on this with options?????

  172. Zero – tried to clean that 'long' post up.  Wow, was that a mess.

    For all:  When copying and pasting from email, intranet, etc, us the little W above in the bar, and post in there.  It gets rid of a bunch of crap that comes in the copy strings.


  173. Newt:  I dunno, but I'll trade you my formatting secrets for your green ink trick.

  174. Newt, buy MBS and long treasuries.  Remember, they are replacing longer term with shorter term to drive down the rates.  So…..long TLT.  :)

  175. BoaMLynch Equity Strategist Macro: Michal Hartnett, Chief Equity Strategist

    Hello stocks & real estate, goodbye bonds & commodities
    Great Rotation has begun. Catalysts: positioning, policy, prices. Evidence:
    creditors, commodities, correlation. Secular winners: equities, housing, banks,
    value stocks and stock-pickers. Losers: bonds, credit, commodities, growth stocks
    (and Investment Strategists…it's no longer a macro world). Buy steepener trades.
    The Big Risks: 1994 (bond crash); 1987 (currency war)
    Transition is very unlikely to be smooth. Risk scenarios to orderly Great Rotation:
    a bond crash as in 1994; a risk shock as in 1987, driven by a currency war. And
    combo of excess risk positioning & liquidity withdrawal could lead to a big
    correction in Spring.

    Buy JGB’s!…Japan, Gold, Banks
    Japan is the last of the Great Reflation Trades; Gold is natural hedge in 2013
    against rise in volatility; Banks are the Value play on “Normalization”.

  176. Phil/StJ/PSW
    we have been using google docs for quite some time now and I was hoping you would consider branching into some other google stuff. For instance google+ hangout. You can have a live trade room where we can share our screens live with at least 9 people (maybe more, not sure) at a time. I would do this sometimes with my investment club at college and it was really useful. I'll also post this in tomorrows chat to see if anyone is interested. Shoot me an email at if interested.
    this could be another way to share live trades and show live charts on TOS as you screenshare and teach us real time!!
    Please I hope you consider this! I have a lot of college friends I have talked you up to and they are interested in becoming members. This could help push them to take the plunge!

  177. Amazon: positivity premature
    Shares rise despite fall in sales growth due to higher than expected operating margin but if revenue growth continues to decelerate, the stock will crack:

  178. Phil / X – Accomplishing my scans of the stocks I track and saw X reported (Was out of town Tuesday).  If I read market currents right, this recent pullback 15% may be a buying opportunity off the 200dma.  Your thoughts?

  179. deano // AMZN
    registration required – can you synopsize ?

  180. Wommer:  "…Amazon has a market value of $127bn, about 70 times its 2012 free cash flow. To make sense of that valuation, both sustained revenue growth and margin expansion will be required. If revenue growth continues its current pattern of steady deceleration, the stock will eventually crack, even if margins continue to widen."

  181. Chile posts 2012 fiscal surplus of 0.6 pct of forecast GDP  [Reuters]

    … a country that is run on strict Keynesian economics, adjusting government spending down in boom times and cranking it up during recessions and natural disasters.  They also run a government-managed, privately-operated, publicly-owned Social Security system, investing in a national fund of stocks and bonds, with companies required by law to distribute 30% of net profits to stockholders in the form of dividends. Their national debt is only about 10% of GDP, as compared with our own 100%-plus debt load. Their central bank rate is steady at 5%.  And this is despite being a nearly completely export-driven economy, hugely dependent on imported oil (they are working hard on expanding various green energy projects), and with their biggest export customers being Europe, China, and the US, in that order.

    Our lobbyist-dominated form of government could never accomplish such a thing.

    We may not be able to manage our national government as well as this, but we can do better than we are doing today. Of course, we can also do worse, and emulate the EU …

  182. dplatt
    Looks like an interesting idea, let us see how it works. dropped you an email

  183. Good morning!

    Last day of the month and, as you can see from the Big Chart – it's simply the flat-line we expected into the month's end so far.  

    Dollar 79.33 seems to have finally stopped going down and that is giving us oil $97.71, gold $1,675, silver $31.95 (just failed $32), copper $3.76 is big improvement (healthy and good for FCX), nat gas still pathetic at $3.31 and gasoline now painful again at $3.031 and testing $3.04 since inventories yesterday.  

    Earningspalooza today with lots of data too but I figure we essentially end the week pretty much where we started: Dow 13,900 (down 10), S&P 1,500 (down 2), Nas 3,150 (up 8), NYSE 8,900 (down 4) and RUT 904 (up 8).  Of course RUT 900 is more likely but a flat day will be close enough and that's really doing great considering all the crap that got throw at us this week – especially the terrible GDP headline number.  

    If the markets are able to look past bad headlines, it's another reason for the bears to throw in the towel as there's not much point shorting when a 110% miss on GDP barely moves the needle lower. 

    Global PMI and NFP is our big challenge for the rest of the week and, if we are going to have a pullback – it will likely come in the next two weeks because expiration day is the 15th and the Dow is up about 300 points since Jan expirations already with almost no put sales (low VIX) so it's a lot of happy call buyers if we don't pull back a bit.

    Thursday's economic calendar:

    7:30 Challenger Job-Cut Report

    8:30 Initial Jobless Claims

    8:30 Personal Income and Outlays

    8:30 Employment Cost Index

    9:45 Bloomberg Consumer Comfort Index

    9:45 Chicago PMI

    10:30 EIA Natural Gas Inventory

    3:00 PM USDA Ag. Prices

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet

    Notable earnings before Thursday’s open: AETALKSAN,APUAZNBEAVBLLBMSBXCAMCLCNHCNX





    Notable earnings after Thursday’s close: AFFXBCR,BKHCAVMCBCTCTCTRPEDEMNFBHSGDOT


    7:30 PM Japanese shares dip then recover in early trading, inching higher despite weak U.S. data and warnings of a "pause" in growth from the Federal Reserve that sent Wall Street shares lower overnight. The Nikkei Average is just fractionally higher at 11,118, with blue-chip shares lagging: Advantest (ATE -1.7%) is lower after posting a narrower quarterly loss, Nintendo (NTDOY.PK -4.1%) down after slashing its FY sales forecast again for a second straight quarter amid weakness in Wii U console sales, Toyota (TM -0.2%) after announcing a 1.3-million-vehicle recall, mostly in the U.S. 

    4:17 AM Asian shares are ending a strong month on a mixed note after sharp gains in the previous session and the unexpected contraction in U.S. GDP, while European shares are uniformly lower as earnings from heavyweights such as Shell and AstraZeneca drag on markets. Japan +0.2%, Hong Kong -0.4%, China +0.1%, India-0.6%. EU Stoxx 50 -0.7%, London -0.3%, Paris -0.7%, Frankfurt-0.3%, Milan -1%, Madrid -1.8%.

    6:00 AM Overseas: Japan +0.22%. Hong Kong -0.39%. China+0.12%. India -0.55%. London -0.36%. Paris -0.63%. Frankfurt-0.65%

    Home Prices Surge More Than 5%, the Most Since 2006 (NYT)

    I love guys who make sweeping conclusions based on one-day pullbacks:  The Dow is just a few ticks aw

  184. 6:00 AM Overseas: Japan +0.22%. Hong Kong -0.39%. China+0.12%. India -0.55%. London -0.36%. Paris -0.63%. Frankfurt-0.65%

    Home Prices Surge More Than 5%, the Most Since 2006 (NYT)

    I love guys who make sweeping conclusions based on one-day pullbacks:  The Dow is just a few ticks away from the 14,000 marker, but it may not make it there, says CNBC's John Melloy. Why? Take a look at small-cap stocks, he says. Stocks with smaller market values – as represented by the Russell 2000 (IWM) – got pounded. As smaller companies are considered to be riskier than their large-cap counterparts, they're considered to be a leading indicator of the "animal spirits" that lead a rally, Melloy says.

    CITI(C): This Big Thrust Into Stocks Is Probably Just Seasonal, And That Means A Correction Is Looming. (graph)

    Elliott's Paul Singer On How Money Is Created… And How It Dies.

    Threats Cloud Euro's Flight. With Europe's Economy Still Hobbled, the Currency's Surge Could Soon Stall. The euro, once on death's door, is on a monthslong tear, rising Wednesday to its highest level since November 2011. But even some investors who helped propel the currency above $1.3560 Wednesday say it can't fly much further. Europe's economy is still in the doldrums, they say, and a stronger euro could make the situation worse. And with central banks elsewhere racing to push down their own currencies, boosting the relative value of the euro, the European Central Bank eventually could be compelled to join them.

    Countries Headed For Trouble Exhibit An Observable Pattern Of Events.

    German retail sales -4.7% Y/Y in December vs consensus of -1.6%, with the drop the largest since May 2009. On month, sales -1.7% and -0.1%. Sales fell across the board, with food, drinks and tobacco -4.1% Y/Y, clothes, shoes and textiles -6.5%. However, its worth pointing out that the metric is notoriously volatile and that retailers reported decent Christmas sales. (PR)

    German unemployment has unexpectedly fallen for the first time in 10 months in January, declining 16,000 to 2.92M vs consensus for a rise of 8,000. The jobless rate dropped to 6.8% from 6.9% in December. "The German labor market is in a good position," says SocGen economist Anatoli Annenkov. "Wages are fairly robust and inflation is coming down. Real income is growing and domestic demand may help the economy to expand again in the first quarter."

    Bank of Italy Seen Vigilant as Monte Paschi Risk SurfacedThe Bank of Italy acted vigilantly in its oversight of Banca Monte dei Paschi di Siena SpA (BMPS), with the discovery of accounting irregularities leading to a criminal investigation targeting previous management, a former senior Bank of Italy official who was involved in the inspections said. Pressure from the central bank prompted a shakeup of executives at the Siena-based lender last year and led to the uncovering in January of secret documents about some transactions hidden from regulators, said the person, who asked not to be identified because the probe is confidential.

    Japan's industrial production +2.5% M/M in December vs -1.4% in November and consensus of +4.1%. With the companies surveyed for the report expecting more gains in January and February, the data adds to other metrics which indicate that the economy is recovering from its recent slump

    Time to Get Off the China Stocks TrainChinese shares are having their day in the sun, with the benchmark Shanghai stock index trading at an eight-month high on Thursday. The rally, however, may be close to running its course, some analysts say.

    The China Securities Regulatory Commission may raise the leverage ratio for securities companies to help "boost profitability", citing Li Geping, secretary general of the Securities Association.

    Isn't the Chinese property bubble obvious? Divergent views are emerging over whether there is a bubble building in the Chinese property sector, which has produced a string of aggressive high-yield issues this year, the most recent of which was Greentown China's conveniently successful US$400m bond this week. The recent hot flow of money into Chinese high-yield property bonds, much of it from private banks unable to earn a decent return elsewhere, had the look and feel of a sector overheating, and many have indeed traded down in secondary. If it looks like a bubble and inflates like a bubble, then it will ultimately pop like a bubble.

    China's Beijing city has submitted a property tax trial plan to the State Council for approval, citing an unnamed person close to the local finance and tax department. The property tax may be imposed in the city as early as 1H, citing the person.

    Hackers in China Attacked The Times for Last 4 MonthsFor the last four months, Chinese hackers have persistently attacked The New York Times, infiltrating its computer systems and getting passwords for its reporters and other employees. After surreptitiously tracking the intruders to study their movements and help erect better defenses to block them, The Times and computer security experts have expelled the attackers and kept them from breaking back in. The timing of the attacks coincided with the reporting for a Times investigation, published online on October 25, that found that the relatives of Wen Jiabao, China's prime minister, had accumulated a fortune worth several billion dollars through business dealings.

    California is set to receive $5B more in tax revenue for January than it initially forecast. One reason could be increased state rates, while another may be the rise in national capital gains taxes that took effect this month – with January the deadline for 'estimated tax' payments for the prior calendar year, investors may have cashed out to avoid the hike.

    Risky Student Debt Is Starting to Sour. The number of student loans held by subprime borrowers is growing, and more of those loans are souring, the latest signs that a weak job market and rising debt loads are squeezing recent graduates. In all, 33% of all subprime student loans in repayment were 90 days or more past due in March 2012, up from 24% in 2007, according to a Wednesday report by TransUnion LLC. Meanwhile, the Chicago-based credit bureau found that 33% of the almost $900 billion in outstanding student loans was held by subprime, or the riskiest, borrowers as of March 2012, up from 31% in 2007.

    Deutsche Bank (DB): Q4 net loss €2.17B vs profit of €147M profit last year and vs consensus of €311M, with earnings hit by a €1.9B goodwill impairment charge for restructuring and the creation of a non-core unit to sell €125B in assets. DB, which is being investigated for interest-rate manipulation, is also taking €1B in litigation charges to reflect "adverse court rulings and developments in regulatory investigations." (PR- It seems to me that innocent people don't put $1.35Bn aside – "just in case."

    More on ConocoPhillips (COP): Q4 EPS beat by a penny as an overall increase in production Y/Y managed to offset margin pressures to its bottom line. Net earnings cratered 58%, as commodity prices fell and the company was hit by lower average realized prices for oil and natural gas, falling 2.7% and 1.5%, respectively. Production from continuing operations edged up 1.8%, primarily due to new production from major projects and drilling programs, as well as higher production in Libya and China. Shares-0.9% AH

    Macquarie downgraded Exxon Mobil (XOM) to Neutral today because it doesn't believe shares have much more room to move to the upside after nearing all-time highs. The firm sees XOM struggling to generate production growth in both 2013 and 2014, adding that the pace of stock buybacks will slow to $15B for 2013 and possibly $10B the next year. 

    Five energy stocks multiple insiders have bought in the last three months, according to Insider Monkey: Halcon Resources (HK), down 30% in the last year; Apache (APA), whose Q3 net income fell 82% Y/Y; Basic Energy (BAS), 20% of whose outstanding shares are held short; and drilling-focused Weatherford (WFT) and Key Energy (KEG).

    California gasoline could soon hit $4 a gallon.

    Honda (HMC): FQ3 net profit +62% to ¥77.4B ($851M) vs consensus of ¥104.95B. Revenues +25% to ¥2.43T. Last year hurt by the Japanese earthquake and flooding in Thailand. Cuts FY forecast by 1.3% to ¥370B vs ¥211.48B last year, due to weak European demand and slow sales in China because of the islands dispute with Japan. Aims to sell record 4.4M vehicles this year vs 3.82M last year. (PR)

    One of our old "Boeing Buddies" still chugging along:  BE Aerospace, Inc. (BEAV): Q4 EPS of $0.73 beats by $0.01. Revenue of $803.2M (+22.7% Y/Y) beats by $30M. (PR)

    Walmart(WMT) sets limits on US ammunition sales after demand surges.

    More on AstraZeneca (AZNQ4: Profit excluding items -8% to $1.94B, with a patent cliff hurting earnings in Q4 and expected to continue to do so this year. As such, AstraZeneca warns of a "mid-to-high single digit percentage decline in revenue for 2013," (vs consensus of -3%) and that earnings will drop "significantly more than revenue" as operating costs rise. Shares -3.9% in London.

    Las Vegas Sands (LVS): Q4 EPS of $0.54 misses by $0.05. Revenue of $3.0B (+8.9% Y/Y) in-line. Shares +2.6% AH. (PR)  More on Las Vegas Sands' (LVS) Q4: Margins were negatively impacted by a lower table game hold and a $240M tax assessment at Marina Bay Sands. Revenue per available room fell 1.3% to $231. The company raises its quarterly dividend to $0.35 per share from a quarter. Steve Wynn is set to entertain on the firm's conference call at 4:30 PM EST. LVS +4.2% AH. (PR) 

    Time Warner (TWX) is reportedly thinking about selling its headquarters in Manhattan, which could fetch over $1B. The price will depend on whether Time Warner would leave the building or lease it back after a sale. If Time Warner does sell the property, it would follow Sony in offloading a Manhattan HQ. 

    Tech guidance roundup: 1) Citrix (CTXS - earnings) expects Q1 revenue of $670M-$680M and EPS of $0.62-$0.63 vs. a consensus of $670.7M and $0.67. Expects 2013 revenue of $2.95B-$2.98B and EPS of $3.13-$3.15 vs. a consensus of $2.91B and $3.14. 2) ServiceNow (NOW - earnings) expects Q1 revenue of $81.5M-$82.5M and EPS of -$0.05 to -$0.04 vs. a consensus of $78.1M and -$0.01. Expects 2013 revenue of $387M-$392M vs. consensus of $368.3M. 3) Electronic Arts (EA - earnings) expects FQ4 revenue of $1.025B-$1.125B and EPS of $0.57-$0.72, mostly below a consensus of $1.22B and $0.71. CTXS +11.6% AH. NOW+8%EA -1.9%.

  185. Some mobile chipmakers are ticking higher following strong calendar Q4 reports from 
    Qualcomm and SkyworksCRUS +0.9%AH. AVGO +1.3%RFMD +1.2%BRCMTQNTINVN, and OVTIcould also end up moving. Meanwhile, strong reports from Citrix,Fortinet, and ServiceNow have produced modest gains in some enterprise IT names. RHT +1.1% AH. VMW +0.8%FFIV +0.6%INFA+1%.

    More on Qualcomm: Expects FQ2 revenue of $5.8B-$6.3B and EPS of $1.10-$1.18 vs. consensus of $5.88B and $1.10. Expects FY13 revenue of $23.4B-$24.4B and EPS of $4.25-$4.45 vs. consensus of $23.6B and $4.32. 182M baseband chips shipped in FQ1, +17% Y/Y.  Expects 163M-173M shipments in FQ2 (+7%-14%), better than feared. $250M in buybacks. Royalty-bearing device sales rose +29% Y/Y in Sep. quarter with ASP of $224-$230 (up Y/Y). 2013 device guidance unchanged at 1B-1.07B, FY13 ASP forecast still at $214-$226. QCOM +6.1% AH. CC at 4:45PM ET (webcast). (PR) (slides)

    More on JDS Uniphase: FQ3 guidance is for revenue of $405M-$425M, in-line with a $414.8M consensus and perhaps better than feared given recent history. Gross margin +220 bps Q/Q and +90 bps Y/Y in FQ2 to 48%. Telecom test/measurement sales -0.4% Y/Y, better than FQ1's 8.5% drop. Optical component sales +12.7% (+8.6% in FQ1), lasers +20.3% (+5.6% prior), optical security/performance products -4% (+11.7% prior). JDSU +7.1% AH. CC getting started (webcast). FNSR +4.3%OPLKOCLRNPTN, and XXIA could also rally. (PR) (slides) (fact sheet)

    Ericsson (ERIC): Q4 net loss 6.26B ($986M) krona vs profit of 1.49B krona a year earlier, due to an already announced 8B krona writedown of ST-Ericsson chip JV. EBIT +17% to 4.8B krona vs consensus of 4.3B krona. Revenue +5% to 66.94B krona, boosted by 51% jump in North America. Gross margin rises to 31.1% from 30.2% vs forecasts of 30.8%. Expects improved profitability in H2 as it focuses on increasing high-margin sales. (PR- Things like this make overall earnings appear weaker than they are.  Keep that in mind.  

    More on Facebook: Monthly active users (MAUs) +5% Q/Q and +25% Y/Y to 1.06B. Mobile MAUs +13% Q/Q and +57% Y/Y to 680M, exceeded Web MAUs for first time. Ad sales (84% of revenue) +41% Y/Y, Payments revenue flat after accounting adjustment. Mobile accounted for 23% of revenue, up from Q3's 14%. Costs/expenses +82% Y/Y, well above revenue growth and Q3's 57%. R&D spend +140% Y/Y to $297M. Capex was $287M, down for second straight quarter. Cash/investment balance at $9.6B. FB -5.2% AH. (PR) (slides)

    Facebook (FBQ4 beat, which followed a 50%+ rally over the last 3 months. Zynga (ZNGA) is up 1.6% - the fact Facebook's Payments revenue rose 8% Q/Q (but was flat Y/Y) after adjusting for an accounting quirk is going over well. In its Q4 slide deck (.pdf), Facebook notes its global ARPU rose 19% Q/Q and 12% Y/Y to $1.54. ARPU for the U.S./Canada ($4.08) is still well above ARPUs for Europe ($1.71), Asia ($0.69), and the rest of the world ($0.56). U.S./Canada made up 49% of Q4 sales vs. 50% in Q3. CC is underway (webcastlive blog).

    Mentioned during Facebook's (FB) CC: Total expenses are expected to grow 50% in 2013 (likely exceeding revenue growth). 2013 capex budget is set at $1.8B, up from 2012's $1.6B. North American ad prices rose 18%, no doubt aided by Sponsored Stories. The FBX exchange is now handling 1B ad impressions/day. Mark Zuckerberg claims likes/comments rose 50% following a news feed algorithm change, and hints video ads are on the way. Zuck on Google: "Our relationship … isn't one where the companies really talk." Shares -4.1% AH. (more) (live blog)

    Facebook(FB) warns costs will grow faster than salesFacebook has warned Wall Street that its costs will grow faster than sales this year, as the social networking site battles for a larger slice of the mobile advertising market

    This iWatch Concept Features Seamless Linking To iPhone, Is Perfect In Every Way (Redmond Pie)

    iWatch concept 4

    iWatch concept 3

    Henninger: Obama's Thunderdome StrategyThe president's goal is to make Republican ideas intolerable.

    The Rise Of America's Lunatic Fringe.

  186. WYNN/StJ – Certainly worth a look.  And those "opportunities" are amazingly useful – ranges help spot nice discrepancies to take advantage of.

    Cool map Wombat.   I'll tell you want is true with ALU – they tripled the capacity of Moscow's cables with 100G fiber.  Once countries start putting money into infrastructure, I think ALU will really take off and, at $1.56, worth the wait.  Submarine cable deal seems to be in partnership with Slim's AMX and not widely known yet so a good time for people to pick up on our ALU trade (see Income Portfolio) on this pullback. 


    Today, “100G technology is playing a fundamental role in scalability as operators are seeking to manage their bandwidth expansion to meet increasing demands for content-rich services and to address new applications such as data center interconnection needs,” said Philippe Dumont, President of Alcatel-Lucent Submarine Networks, in the release.

    The submarine cable line will connect seven countries with eleven landing points in the United States, Colombia, Brazil, the Dominican Republic, Mexico, Puerto Rico, and Guatemala…

    Rotation/ZZ – I agree with Hartnett on Stocks and Real Estate.  The leverage you get with real estate in an inflationary environment is still amazing but it's a long-term play and people have been so recently burned that there are still many, many bargains out there – especially at these rates.  

    Screens/DPlatt – If you do all the heavy-lifting (I have neither the time or inclination to learn new tricks), I'd be happy to give it a try on a weekend.  Just set something up and give me the links and we can experiment.  As a concept, it sounds good but, in practice, I haven't been happy with versions I've seen. 

    AMZN/Deano – It's a very frustrating stock to short but I think I like the idea as we test $300 with their 3,247 current p/e ratio.  

    X/Jfaw – They are holding the 200 dma at $22 for the moment and I doubt they go lower than $20 but I'd give them the weekend to see if it isn't a falling knife.  Either way, I still like them long-term.  Fortunately, we stopped out of our original short puts in the Income Portfolio as you MUST take the money and run on X when you do get the pops.  Now we're scaling back in but too early so far on our first round (10 short 2015 $22 puts at $4.20, now $5) but, on the whole, we don't mind rolling to 2x the $20 puts, now $4, to drop about $3 more in our pockets and stay short 20 $20s at net $3.60, which would be net $16.40 on 2,000 – not a bad adjustment to our "too early" entry of 1,000 at net $17.80.  BEHOLD THE POWER OF SCALING IN WITH SHORT PUTS!!!

    Chile/Constant – Great point!