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G20 Tuesday – Nothing Ventured, Nothing Accomplished

OK, cheating a bit here.  

I started this article on Friday and we were reviewing Anthony Mirhaydari's list as it's an excellent jumping-off point for contemplating the current market situation.  I ran out of time on Friday, as I hadn't intended to get into such a major topic at first, so we're going to finish the list off this morning and discuss on this market holiday below (also, there was lots of good stuff in weekend Member Chat – see the end of Friday's comments):

Since it is Friday Monday Tuesday, and a holiday weekend, let's review something we discussed in yesterday's Member Chat – which was an article by Anthony Mirhaydari titled "10 Big Worries About This Market."

Now Anthony's a smart guy so I review this out of respect but we all need to keep in mind that a lot of people are "bearish" for a lot of the wrong reasons and, since this is a list of 10 good ones – it's worth taking a hard look at them.

keep calm parody meme for binary options tradingBefore we begin, I just want to mention another smart bear who is being backed into a corner today – poor Bill Ackman is being taken to the woodshed for daring to piss off Carl Icahn, who disclosed a 13% stake in HLF today  and sent the stock flying up 22% pre-market.  There is nothing worse than a short squeeze when you are bearish and the worst part is, to get out of the trade you have to capitulate by BUYING the stock you hate – thereby adding to the run-up.

While we all know Bill Ackman has a litany of very good reasons to be short HLF – who cares if more people are buying than selling – especially when one or two of the buyers are so big they totally overwhelm the sellers?  The whole market is like that – it's all about sentiment – until it isn't.  Our job is only to know when the wind is changing so we can get out.  We're not here to fight the battles with the big boys.  

"Can we rally on?" asks Mirhaydari – and he acknowledges the Fed and other Central Banks as the primary driver of the rally but he also premises his outlook on what he believes is a coming Global Recession (or the continuation of one we only papered over so far) and I gave my view on what's going on in Europe in yesterday's post.

Indeed "Too Much Faith in Cheap Money" is Miraydari's worry #1 and yes, we are kicking the can down the road but, even in laying out his concern Anthony points out Japan is 230% of their GDP in debt.  That means that the US, Europe and China have a very, very long road ahead to kick their cans down before we're in the same situation as Japan (which is to say up 40% in the past 6 months on the Nikkei).  

What if kicking the can is the correct strategy?  What if we have faith in cheap money because it works – the same way fireman have faith in water to put out fires.  Will things get wet and even damaged from all the water?  Sure they will, but it beats getting burned – right Japan?  So let's give worry #1 a grade of C – it's a religious argument at best - Keynes vs. Hayeck - and we're not going to solve it here.

Worry #2 is "Investors are Way too Optimistic" and we'll skip that since it's silly.  They are only too optimistic if they are wrong and, as I often say to Members – sometimes the reason 99% of the people are on the same side of a bet is simply because it's obvious.  When the Fed stops dropping $85Bn a month into the Economy and 150,000 people a month aren't being hired and when Corporations stop reporting record earnings – DESPITE the recession in Europe – THEN I would say Investors are too optimistic but not buying into your bearish premise does not make me an optimist – maybe just a realist.

Worry #3 – "The Economic Data Are Stalling Out."  In Europe, yes, in Asia, no, in the US, no way.  In fact, the long-suffering Empire State Manufacturing Index just surprised up at 10.04 today, way higher than the -1.75 expected and up from -7.8 prior.   New orders were up 20.49 points and shipments jumped 10 points to 13.08 and, of course, prices paid rose to 26.26 but we'll discuss inflation later.  Like the Fiscal Cliff, Sequestration and the Debt Ceiling may cut the legs out from under this rally but we can cover that with some hedging – fear of things that haven't happened is not a good reason to run from the markets – as the bears learned in November  (well, some of them did). 

Record gas prices are mentioned but what all these analysts seem to miss is the 10% drop in demand and we can simplify that by assuming people are getting 10% better mileage on the average car or have found ways to drive 10% less and consume 10% less energy in their home  Either way, unless the "record" gas prices are 10% higher than they were (they are not), then what all these clever analysts claim is a net negative for the consumer is actually a net POSITIVE as consumers don't care what they pay per gallon – they care what they pay per fill-up or per month in their energy bills.    If you charged me $50 a gallon for gas but I only needed one gallon a month – how is that impacting me negatively?

OPEC (and the NYMEX crooks) have totally screwed themselves by keeping prices so high for so long.  They have destroyed demand in a way that will never come back and, even worse, they have set the planet firmly on the path to alternate, renewable energy.  We've been very publicly, very short on oil so take my commentary from that perspective but, even as I write this, we are having yet another $1,000 per contract morning shorting oil off the $97.50 line we've been playing for two weeks.  We also have longer-term SCO and USO trades looking for bigger moves down but I think we are on very solid fundamental footing here.  

Worry #4 is a good one and, since it's 9:20 I'm going to pause here and finish this article over the weekend.  "Fewer Stocks are Moving Up" is a legitimate technical concern regarding rally exhaustion but I question the very brief time-frame (30 days) – especially as we're clearly consolidating along the top of long-term ranges so, of course we are taking a breather here – a healthy one perhaps.  As I said above (and have been saying all year) – we MUST watch our levels and keep our emotions in check.  

By the way, the article contains statistics and good arguments on the author's side and I'm not repeating them here so please do read the whole thing for the proper perspective as I am simply taking a semi-contrary, more bullish position here.  

QQQ WEEKLY Worry #5 is essentially the same as worry #4: "Weakening Market Technicals."  Now, you know I take my TA with an earth-threatening meteor-sized grain of salt but the fact that so many market participants do practice that particular form of voodoo makes it a self-fulfilling prophesy – a pattern our 5% Rule does an excellent job of identifying.  

Mirhaydari points to weakness in EEM and copper as examples of "warnings" we should take seriously and we do check with "Doctor Copper" every morning in Member Chat but perhaps EEM is down because G7 is up and there's only so much money in the World (albeit more being printed every day) and this is nothing more than simple rotation back to the First World.  

EEM WEEKLY If we are rotating back to the Developed World, then copper is going to lag because we already have plenty of stuff, thank you.  In the dot com boom of 20 years ago – was copper up?  Was oil up?  Was gold up?  No – it was a different paradigm driving the markets and those who failed to adapt to the new model had a very hard time of surviving.  

Saying copper must go up for Global Markets to thrive is like saying wagon-wheel production is the best economic indicator we have – it might have been true at one time – it might have been true for 200 years – but not this year

Speaking of thriving markets: Did you know that Private Sector Employment is now back to pre-recession levels – with the notable exception of the Housing Sector.  RBC's analysis does show that "the private sector (excluding housing) is back and in full recovery mode," says Mark Zandi, chief economist of Moody's Analytics.  By contrast, employment in housing-sensitive sectors — including construction, wood product manufacturing, furniture sales and architectural services — totaled 13.5 million last month, RBC says.That's nearly 500,000 above their December 2010 low. But it's still almost 3 million below their total before the recession started in December 2007.

This has been our bullish premise for two years now – jobs are clearly coming back – only a Republican could possibly deny those facts.  More jobs eventually lead to more spending and, ultimately, more housing but OBVIOUSLY housing is going to be a lagging – not leading indicator.  If you are going to wait for the next housing bubble to jump into the markets (or housing) – you are likely to once again not only miss the boat but to once again be the guy boarding the Titanic while everyone else is heading for the exits (but at least the band was still playing).  

So, rather than trying to use housing to "prove" we're not recovering, think of housing as another 3M jobs waiting in the wings to come back – almost another 100,000 jobs a month in that sector alone for the remainder of Obama's term.  If the Government stops shrinking (down 20,000 jobs a month on average over the past 3 years) and the private sector keeps adding 150,000 jobs a month – we could be adding 250-300,000 jobs a month once this train gets moving.  How's that for a bullish premise?

Worry #6 is an interesting one: "Rising Geopolitical Risks" –  Unless China and North Korea are nuking Japan and Greece has literally caught on fire and I wanted to say people are marching in the streets in Spain, Italy and France but that's already happened so I'm already running out of things that can be worse than meteors falling from the sky the day before an actual astroid misses the Earth by less than the distance of a flight from NY to Tokyo.   Let's see what Anthony comes up with:  North Korea blah, blah, Japan and China blah, blah, North Africa blah, blah, Iran blah, blah and now Russia is also disputing islands with Japan.  Sounds like business as usual to me.  Hey, remember that time when Germany invaded EVERYBODY and Japan bombed us and we bombed them and 20M people were killed?  We survived that and stocks are up since then – I don't think North Korea's going to take us out (been there, bombed that too).

If you are not going to invest in the market because the World is a scary place with countries that fight and threaten each other – may I suggest our BBB trade – "Bullets, Beans and Bullion" as you may as well just stock up and head to the fallout shelter now because, judging from history, you're going to have a long, long wait before peace and harmony break out all over the planet.

Worry #7 is "The Risk of Inflation" – Risk?  We're counting on it!!!  Mirhaydari talks about $4 gas but we covered that above and rising prices due to Fed money printing is EXACTLY WHY you'd damn well better have money in the market and not sitting around in a bank where it's losing value every day.  The falling labor productivity is, so far, a blip but also a good sign that Big Business simply can't squeeze any more concessions (longer hours for less pay) from their workers so they either have to invest in better software, robots, etc. to improve productivity (and that boosts the economy – until the robots have all of our jobs), hire more workers or give better incentives to the workers they have.   Maybe they do a little of each and THAT is EXACTLY what a booming economy looks like – isn't it?

Worry #8 "Worrisome Global Elections" makes me think Anthony wrote the title before he wrote the article and now he's just stretching to round out 10.  I almost never do top 10 lists – even though those kind of articles get 2-3x more hits than any other kind but, unfortunately my fellow writers tend to go for the ratings more often than not.  

Worry #9 is "Looming US Budget Fights" and, as I was saying to Ron (I'm spending the week with Opesbridge in LA) last night, I'm pretty sure we're already seeing the sequestration concerns holding back the markets and, when and if those worries are lifted, THEN the market will really take off!  $1.2Tn worth of spending cuts sounds like a lot until you realize it's just $120Bn a year, which is 5% of government spending and half of that comes from our bloated $1Tn military budget.  Isn't that what we're SUPPOSED to be doing to show some fiscal discipline.  While I wouldn't be too enthusiastic about investing in Defense stocks – I am certainly not worried about $60Bn of other Government cuts sinking the economic ship.

 Worry #10 is "Slowing Corporate Earnings Growth" and I find this disingenuous as earnings are, in fact, up about 3.5% this year, which puts the S&P currently priced at about 13.5x forward earnings – quite reasonable actually.   Of course growth is slowing – this isn't China.  We had huge growth because we had losses reported in '09, barely recovered in '10 and had a nice recovery in 2011 and 2012 was more of the same but, now that every additional percentage point of earnings is setting a new ALL-TIME RECORD, perhaps it's OK that they slow down just a bit.    

So not really enough reasons for us to turn bearish.  Show us the level failures and we'll be happy to re-consider but, at the moment, it looks to me like we are consolidating for a massive break-out once we do get past the Sequestration nonsense.  Consensus earnings for 2013 (ZH chart left) is for a massive improvement through 2013 and the fact that the author points out that just 65 of 500 S&P companies (13%) warned they might not meet those numbers really isn't what I'd call bearish – would you?    

As the G20 meeting wound down, Bundesbank President Jens Weidmann spoke to reporters following meetings of Group of 20 nations' finance chiefs in Moscow. In the G-20 "there's unity in rejecting an active exchange-rate policy to bring about competitive advantage," Weidmann said. "Politically-motivated devaluations can't sustainably improve competitiveness, they don't solver structural problems and they set off reactions" elsewhere, he said. "The clear language in the communique underlines this unity, and will allow the debate in the future to take place with a less excited tone," he said.

On the whole, the G20 was soft on currency manipulation and had little to say in general and that's got the Nikkei and the US markets all excited this morning as it's a green light to shower their citizens with Dollars and Yen until we are literally swimming in currency and then we can inflate our way out of debt  so let's watch Google break $800 today and maybe someone will even buy AAPL today – I think we should pick up 10 weekly $470 calls for $1.80 for our virtual $25,000 Portfolios as a fun way to start the week.  

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  1. SBUX – intends to double the number of employess in APAC over next 5 year, to 40,000 employees.  With an average of 20 employees per retail store, should mean a little less than another 1,000 stores over next 5 years. 200 per year is not too aggressive for them.

  2. Phil
    Thanks for incouragement. After reading you responce to right wingers I agree that there was way to much unbacked up opinion, that you spent way too much time debateing them, and yes you always had proof while they just carried on. I would never want that to return for 2 reasons: 1 This is primarily an investing site. 2 Politics should involve how we invest or stay away.
    Mostly I dream of a Republican that will rationally explain his view. I continuely end up with this guy is only out for his best interest and or bought up sell out.The don't trust a fox to guard the hen house.
    I wanted to post what my USO moves were, about the time to do that you had already posted oil plays, although mostly futures. Now that I get futures real time I watch them and wish options could be traded 24 hours a day. My USO plays are more a swing trade, the 97.50 and 98 lines have been perfect at least 2 times per week for USO.

  3. Wonder if pricematching everyone will help or hurt Best Buy?

  4. Will history repeat itself:

  5. No holiday ex-USA; having to get the kids up for school the only reason I would be writing about cosmic doom and dinosaurs at 7 AM.  News from Europe truly grim [as usual].  Of course we knew austerity wouldn't work, and that Obama feeding the sharks probably would, at some point, and inflation be damned, since eating less beats all hell out of not eating at all.   The question is, what might the collateral damage be in global markets, both equity & debt, if this long-running melodrama actually takes a sharp turn downwards?
    If it's not coming, I can't see why not. And maybe U.S., Japanese & Chinese mega-stimulus will just enable their economies to plow through any storm that the Euro economies might generate.  But you gotta wonder.
    The SWW points on Spain posted today are as follows. I tracked down the original ariticle, and it didn't even make the front page, which I find almost conspiratorial:

    ·  The public debt exceeded  Euro 8822 billion at the end of 2012 [i.e., USD $1.177 Trillion]
    ·        Debt Grew by  Euro 146 Billion in one year [@ $195 Billion]
    ·  The increase in the first year of Prime Minister Mariano Rajoy is the largest ever recorded
    ·        Debt-to-GDP is highest since 1910 
    ·        Interest expense is at record high
    So I check out the 10-year bond yields in Europe [rates [posted below, WSJ 2/18/2013] and think of the French Minister of Labor announcing two weeks ago:[cite: various]

    "Francois Fillon made the undiplomatic outburst during a trip to the French island of Corsica, where farmers were demanding more government money.
    “I am at the head of a state that is in a position of bankruptcy,” he said.
    “I am at the head of a state that for 15 years has been in chronic deficit. I am at the head of a state that has not once passed a balanced budget in 25 years. This can’t go on.

    And ask myself:  Would I lend my hard-earned cash to the French government for a whiff over 2.2%?

    Portugal 6.117
    Spain 5.169
    Italy 4.323
    France 2.277
    Germany 1.650
    [U.S.  2.009% for reference]
    Inquiring minds, as they say.


  6. I would also inquire as to how to make all the formatting symbols disappear from my posts, sorry!!

  7. TOS Strategy Roller
    Has anyone tried this??  How did you like it.
    Craigzooka??  It would work with your IRA portfolio…..

  8. And from Odey:  ""In a world where Venezuela devalues its currency by around 40% and yet, at 6.3 Venezuelan bolivars to the dollar, is still far away from the black-market rate of 19 to the dollar. In a world in which Kirchner, in Argentina, has outlawed inflation and more mysteriously the placing of advertisements in local newspapers. In a world in which Petrobras in Brazil loses $21 per barrel thanks to the government’s determination not to allow the price of petrol to rise, whilst in the USA, one of my favourite companies, Tesoro, makes margins of $15 per barrel refining oil for a consumer who pays the full price for his petrol. In such a world the USA is very competitive – certainly with Latin America and also, to my mind, with the Far East."

  9. edro00, It would absolutely work with the IRA portfolio.  The only issue is that I currently use my paper money account for something else, and I only get one paper money account with my TOS account so I cant lock it up with the IRA portfolio.

  10. Craig if I am not mistaken, with the new update this weekend, TOS now gives you the capability to have a papermoney margin account plus a separate $100,000 papermoney ira account as well.

  11. TOS / rperi – You always had the options of 2 Paper money accounts – IRA and Margin. The new option is for a Portfolio Margin paper money account which is nice.

  12. Phil: What instruments would be best for setting up a long/ short U.S. T-Bond [2.008%] vs. French Govt. [2.227%]?  Would I have to use futures?

  13. Bonds / Zero – I don't know of any ETF traded in the US that covers only the French bonds. Barclay iShares has one but that trades only in London – maybe your broker can trade them. Here for your reference:


  14. Finally updated the Income portfolio spreadsheet. I can't post all the positions right now but here is the current P&L:

    That's up $10,000 since 2/1 – 2 weeks. Here are some notes:

    CMG Mar Short 320 calls – Up 38%
    CSCO - The Feb 21 calls expired worthless on Friday (just) so we are now uncovered
    BBY - We have 13K of profits in the positions with 10 days to earnings and the big announcement.
    IMAX - The spreads are really wide but it might be possible to get $4 out the possible $5 for the Jan 14 spread.

    Can someone let me know if they were able to open the WFR position. There a $1 spread between bid and ask in all the strikes.

  15. I'll post the updated positions tomorrow with the strangles portfolio.

  16. Thanks, Stj, awesome list!

  17. Stj,
    I was able to fill the WFR Jan 15 7 calls at $1.07 but no deal on the other leg (3.5) yet.

  18. Currency War update, G20 edition.

  19. Good Morning!

    Off to a late start so I'm recycling the article yet again but this time, at least, I should get it finished!  

    So I'm just changing the date on this post and I think the comments should stay where they are.

  20. STJ/WFR for Income.  I sold some 3.5 2015 Puts but nothing on call spread. Very thin market it seemed. 

  21. Phil,
    /cli3  march contracts with 1 day left have 55784 M barrels. likely short /cl at 96.5?  Thanks

  22. #next_pages_container { width: 5px; hight: 5px; position: absolute; top: -100px; left: -100px; z-index: 2147483647 !important; } stjeanluc, How do I get to your spreadsheets? Especially your Income Spreadsheet.

  23. Good Morning…  CNBC:  Like hounds to the scent, they are all over that Tesla story.  How do they get Langone to play straightman to Joe D??  

  24. Good morning.  Thanks, StJ, not sure I ever noticed that before.

  25. I won't be able to update the portfolios at the open as I have a slight emergency at home this morning. I'll catch up later.

  26. Good Morning-
    STJ—hope everything is ok

  27. Pharm
    What would you do with EXEL I was excercised and now own the stock.

  28. BBY!!!

  29. The North/Phil – you mentioned north Korea a couple of times. As you  may know, the first woman to be president of south Korea, (my wife's friend and schoolmate) Pak Kunhye took office today. The general expectation is that the north will give her a test within a month or two, certainly before June. It could be another ship sinking or artillery shelling of an island, but it could be something new and different. But it's almost a certainty that they will do something that will have the rest of us upset and worried and will truly test President Pak. I think she'll come through it with flying colors, but it will be a tough test, no question.

  30. BBY has a pulse….  

  31. Phil--is it time to dip our toes with GDX yet?

  32. FU AAPL!!!

  33. Good Morning!

  34. spreadsheet / sgh225 – it's here :
    There is a tab for income portfolio at the bottom of the spreadsheet.

  35. Interesting

    How The Super Rich Avoid Paying Taxes

  36. phil,
    just wanted to remind u about the name of the firm and contact number i needed to open a business trading entity

  37. /CL – 96.55

  38. GOOG braking through 800

  39. PSW //

    TLT – I saw a few auctions this week – are we still holding the March117s or rolling down the road ?

    AAPL – holding the other half of the AAPL call from last week ( Feb22 $470's ) hoping for a bump. hmmmm. Anyone ?

  40. Good Morning! 

    Holy crap, look at the Russell go.  Congrats to anyone who owns a small business, I guess. 

    AAPL getting killed yet again – easy entry on the weekly $470 calls, now $1.60 and there's no news for this drop so I'm game for adding 10 calls to both $25KPs and, if they drop to test $450 or $440 – then we can just do the rolls down so that's the plan but I'd hate to mix $1.60 if it turns back up.  

  41. Phil // AAPL
    Read my mind. Filled at $1.35 !!

  42. WOMB wait a while and you get it still cheaper AAPL

  43. srinirap / new trading entity
    The firm to which Phil referred is
    Starting a hedge fund is not a one-stop shopping situation.  One must select a law firm, an administration firm, an accounting firm, a bank (or two), a clearing broker and, possibly, a compliance firm, and, optionally, a website design firm.
    For Opesbridge LP I used's website design service and's administration affiliate, G&S Fund Services.
    I would be happy to help you navigate the process.   Feel free to call me at 310-275-3300.

  44.   Pre-market – Tuesday 2-19-2013  
    "The most important single central fact about a free market is that no exchange takes place unless both parties benefit."
    Milton Friedman
    Dr. John L. Faessel
    Commentary and Insights
    Quotes of the day
    "Show me just what Muhammad brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached."
    ~ Pope Benedict XVI ~
    BULLISH SENTIMENT continues to run extremely HOT * but the McClellan Oscillator remains in Neutral
    ‘Price’ in the S&P 500 (SPX) is near the low of the channel that extends off the mid-November low tick as the Stock Market continues to advance. Sentiment is running extremely hot – and moving into the euphoria* and danger zone.  The McClellan Oscillator is in Neutral at, minus 20 so my favorite overboughtness / oversoldness indicator suggests more upside could be easily absorbed by the market. The Stochastic’s – slow K (86.25 and fast (83.52) indicates an overbought market suggesting a possible retreat.  
         Keep an eye on Hourly channel support at (SPX) 1515
    However the Market is cheap by historical standards
    The S&P 500 (SPX) is priced at the lowest multiple of earnings at a bull-market a peak since World War II, approximately 14.5 X what companies earned over the past year, versus 28.2 X at the 2000 peak, or 16.8 X in 2007. Also; Cash makes up a whopping 14% of corporate assets today, 2X that of twenty years ago. Nonetheless capital expenditure accounts for just 16.4% of cash, well below the 28.1% average since 1990.

    65.4 Million Guns Bought Since Obama Took Office
    Gas prices hit a historic high
    Last week the S&P 500 (SPX) Index of U.S. stocks surged to new highs adding another 0.31% to the prior week’s continuing breakout.
    The S&P 500 (SPX) closed Friday at 1519.79 up from 1517.93 a week ago
    Short term price resistance is a at (SPX) 1515.
         The October 2007 (SPX) all-time highs and price resistance is at 1576
    Short term price support is at 1514
    Hourly channel support is at 1515
    Then deep channel and trend line support of 1406.
    November retreat lows / and Price support is at 1343.
    The 50-day moving average support is at 1467
    The 200-day moving average support is at 1406
    Greek, Spanish and Italian short and long-term bond yields moved higher again last week off their January 11th lows;
    · Greek 10-year yields have slipped to 10.87% – down from a high of 24.41%
    · Italy 10-year (gross) bond yield – 4.37% off cycle highs of 7.29%.
    · Spanish 10-year (generic) bond yield 5.18% off cycle highs of 7.41%.
    Friday’s key indicators and metrics:
    Cycle highs or lows are in red
                  · McClellan Oscillator is NEUTRAL at minus 20

  45. Yodi // AAPL
    I'm scaling in – very happy $1.35 – if it drops another 20-30% , I've got room for another DD. I was looking around this morning and couldn't find any rationale for the drop – again. 

    Where I need guidance is in the ( possible ) roll – I've been reading a lot of Phils archives on this. So you would take the cost basis of your position and roll down and out so you would come out even ? Or are you looking more from a T/A view and taking a small debit ?

    I guess we know when we know ; >

  46. From Doug Kass:

    I am as bearish on stocks as I have been in some time.

    I continue to hold to a contrarian and bearish view of future worldwide economic growth and on the direction of U.S. corporate profits.

    At the core of my concern is that a global economy built on a foundation of excessive monetary easing is one of low quality, decaying fundamentals and not likely to be effective or self-sustaining.

    To me investors are not being realistic in their expectations (and almost magical thinking) that an aggressive printing press can relieve and trump the profound challenges and headwinds to global growth without any negative consequences.

    I remain concerned that much of the current investor optimism expressed in a rising stock market is not consistent with the underlying economic and profit data.

    The Economy
    Domestic economic growth is stumbling under the weight of structural headwinds, a continued deleveraging and the uncertainty of tax and regulatory policy.
    I see little improvement ahead.

    Fourth-quarter 2012 U.S. real GDP contracted. Disappointing and subpar growth lies ahead, with the important consumer sector adversely impacted by tepid wage and salary income growth. Despite the props of a 5% year-over-year increase in home prices and a steady increase in stock prices, lower to middle income consumers are further suffering from:

    a jobs market that is not improving much;
    a 2% reduction in disposable income (due to the expiration of the payroll tax holiday);
    a marked reduction in refinancing activity (worrisome, as it occurred coincident with a modest mortgage rate rise);
    several months of consecutive gasoline price increases; and
    the specter of additional fiscal drag ahead (in March when the spending sequester will likely take effect).

    While early indications are that domestic economic growth is improving from the dreadful fourth-quarter experience, the trajectory of growth is likely to be modest at best.
    Nominal U.S. GDP growth is likely to expand by only 3% to 4% this year, an awful performance considering the unprecedented quantitative easing by the Fed. Even such sluggish growth requires the continuation of an excessively accommodative Fed (holding the risk of negative consequences), which makes our economy vulnerable to any exogenous shocks and still does not provide a suitable backdrop for healthy corporate profit growth.

    Outside of the U.S., economic progress remains mixed. Activity in both Japan and the eurozone fell more than was generally expected, and China's economy is behaving marginally better than consensus expectations.

  47. CTL – um, those July 40 10c calls have tripled.  Can't remember where I saw the huge trade, but decided to join in….not too shabby.

  48. Kass part 2
    Corporate Profits
    Today, despite analysts and strategists unrealistic optimism, participants' confidence in the markets is elevated as investors have cared little about slowing growth. I believe that reality will prevail, however, as ultimately corporate profits are the mother's milk of the markets.
    Not only were fourth-quarter 2012 S&P profits and sales disappointing but forward guidance has been poor.
    The current disconnect between stock prices and the slowing pace of earnings growth is reminiscent of the second half of 2007. The difference between then and now is 2007's emerging weakness was centered in the financial sector. By contrast, in late 2012 and expected in early 2013, the profit weakness is more broad-based.
    At the start of the earnings season, the consensus forecast for fourth-quarter 2012 S&P 500 profits was about $25.50 a share — now, with over 80% of the companies reporting, $23.50 a share looks more likely. (Missing fourth quarter 2012 by 8% is not a rounding error.)
    A disappointing picture for S&P earnings lies at the core of my ursine market vision. In the fullness of time, an earnings cliff is not likely be ignored.
    Consensus, top-down and bottom-up 2013 forecasts for the S&P 500 are at $108 a share, $107 a share and $112 a share, respectively, up from about $103 a share expected in 2012.
    My projection is for $100 a share or less for S&P profits — well below 2013 consensus and under the anticipated actual 2012 earnings.
    Markets discount the future, not the past, and stocks today are arguably as expensive as they were in 2007 based on:

    the loss of business sales momentum;
    the risk of mean reversion in profit margins;
    how far operating profit forecasts have fallen in the last few months; and
    that a projected hockey stick recovery in consensus profits is unlikely.

    It is my expectation that projections for domestic economic growth will decline further in the months ahead, led by weakness in the consumer sector (previously discussed). This will further pressure corporate profits.
    Already supportive of my slowdown thesis is the recent flattening of the yield curve, a lower absolute yield on the 10-year U.S. note (down by about 8 basis points in the last few weeks) and a recent rollover in several credit risk metrics (including deterioration in the high-yield debt markets).
    It remains my view that the 2013 real GDP in the U.S. will be (at best) +1.5%. This compares to the Congressional Budget Office's recently issued a forecast of +1.4%. To me there appears to be accumulating downside risks to economic growth in the form of the fiscal drag of policy and given that quantitative easing is losing its effectiveness.
    With inflation running low, sales and profits will be challenged. Business pricing power is limited, but costs are likely to trend higher (raw materials, interest rates, etc.). Meanwhile, productivity is starting to decline — it was down -2% in the fourth quarter of 2012 — and unit labor costs are rising. This spells a threat to today's unprecedented and high profit margins, which are not likely to be as stable (as many prognosticators expect) but are more likely to mean revert over the next two years.
    Not only are fourth-quarter 2012 S&P profits disappointing but forward guidance is poor.
    In January, about 56 companies in the S&P 500 issued first-quarter 2013 earnings guidance: 45 were negative, and 11 were positive. That rate of negative guidance (80%) is the worst since FactSet started to keep these numbers (in 2006) and above the previous high established in last year's third quarter (74%).
    Against the above backdrop of economic/ profit storms and continuing/unattended budget deficits, the only solution being offered appears to be global money printing.
    It is a near universally accepted truth that the world's stock markets will continue to perform well as long as the global easing continues. And for now, the only thing that seems to matter is a continuation of that expansionary monetary policy.
    Dialing up free money masks the secular problems temporarily, and, if done dramatically, and for an extended period of time (as is now the case), the consequences can be negative and the ability to dial back down more problematic.
    Market optimism has lifted hedge funds to their highest net long exposure in 18 months and has resulted in a reversal from outflows to inflows into domestic equity funds and in a massive swing into extremely bullish territory in nearly every market survey of sentiment (and in the market's volatility indices).
    The disconnect between weak economic fundamentals, ebullient investor sentiment and elevated stock prices form an unhealthy and potentially toxic cocktail.
    For those who are of the view that the U.S. stock market feels like it will never decline (and that global easing is the panacea for growth and ever rising share prices), we suggest you look at the price of gold in mid-September 2011 and/or the price of Apple's (AAPL) shares in late-September 2012. At those points in time, investor sentiment was at an extreme. Now look at the subsequent price drops following those heights and where those prices stand today.
    It is important to remember that over market history, progress often cuts with a manic edge. There is little or no permanent truth in financial markets as financial ideas have their seasons. So it is, as in the later stages of bull markets there is often a blurring between progress and fantasy.
    In Minding Mr. Market, Jim Grant (Grant's Interest Rate Observer) once wrote, "The country's most admired companies are frequently on their way to becoming the least admired investments." Jim's comments might also apply today to the market indices.
    I am as bearish on stocks as I have been in some time.

  49. Dougie Kass has been dead wrong so far this year….

  50. Phil, in the IncPor the GE MAR13  22 short calls are now 1.61, should we roll to the 2X Dec13  25 for a few pennies?  For the TSLA MAR 34 calls the same move could be made rolling to the JUN13  42 calls (2X). 

  51. Womb
    rolling in case of AAPL if I have long calls well out of the money I roll them normally further out and obviously further down when AAPL is down then I look at a putter to sell same time out and which covers the shortfall of the roll so in the end I do not have a cash layout. I am hasitant to roll a short caller down as AAPL can jump on you any time. Actually I do have very few callers left in my Portfolio to roll. I prefer to let them run worthless.

  52. Holy Crap, this AAPL just ate all my comments!  

    Does anyone know why the screen seemed to wipe sideways and suddenly my comment box was blank?

  53. Yodi
    Wise man. Thank you sir.

  54. Phil //
    Are you using a track mouse ? ( Flat panel mouse )

  55. Any one entered my YUM tree planter of Jan13 8th and and the Apr13 backratio of Jan13 28th both looking good YUM up .74 today!!!!

  56. Mouse/Wombat – No, it's an AAPL mouse but apparently when I moved my finger sideways on the surface it changed the screen but I tried going back and the comment box is blank.  

  57. Phill .. I've been trying to work out why my macbook does that for quite a while!

  58. Yes, if you accidentally use a three-fingered swipe ( set up in your sys prefs ) to change screen layouts – it will literally give you a new layout.
    A two fingered sideswipe will go back and forth from the previous pages within a window ( like a back button )
    The way PSW is coded – it doesn't cache or save comments until they are literally submitted. 
    I've mentioned this to Greg because it also affects screen refresh. Not sure he can do anything about it as I beleive you're using a WordPress engine.
    For example, i fyou have a plug-in that refreshed your tabs while your writing a comment, it will simply erase, or, in tech speak, not re-populate.

    Hope that helps.

  59. I'm thinking I'm just screwed so forgive me if I miss your comment and feel free to re-ask.  

    Most important thing was flipping SBUX short 2014 $40 puts, now .95 to the 2015 $45 puts for $4.40 in the Income Portfolio (20 short contracts) as we're up about $4.60 on the $40s and now we get paid another $4.40 for the short $45s so net $9 puts our break-even at $36 instead of $34.50ish but we'll make $3.45 more over 2 years so well worth the switch as we'd still love to by SBUX for that net price.  

    I'm watching CNBC in the TOS box and it's amazing how often it's silent (for commercial breaks) vs the amount of talk time.  I'd be surprised if there is less than 30% commercial time to their broadcast.

  60. Kass/jabo
    He was dead right on Apple on the sell, the buy and the sell again.  And even though he's been bearish the last few weeks, the Dow has been going up and down in a tight range at these levels.  He can't be down too much.

  61. Rustle-- Kass seems like the smartest guy they bring on CNBC. Still, his calls seem like a coin toss to me. Better than Cramer, of course. But not much better in my opinion.

  62. bai2r,

  63. Thanks  Wombat – I guess you're saying I'm screwed then….  8)  

    Oh well, to very quickly recap:

    USO/Shadow – I agree, we've been talking about that at Opesbridge this morning – just have to be patient fisherman and we get $97.50 or $98 to short /CL often enough not to chase lesser entries.  

    Gold/StJ – (hope all is well over there) – I think that head scratching guy would have made the same comment in 2004 as we double-topped 200% ago or in 2008 when we broke that line 50% ago so now we're into the top of our 3rd $500 leg up and he feels the squiggly lines make GLD a bad investment?  Perhaps he should check out these squiggly lines instead (from Scott's linked article):

     We've printed about 20% more money in just two years and we're already committing to print 10% more in 2013 and gold should be LOWER than it was in 2011?  I don't think so.  Something's gotta give and it's not likely to be the end of money printing.  

  64. Phil any thoughts on the SDS play Mar13 48/51 bull call spread well under water now it look like we not going down any more? TIA

  65. Phil // Mouse
    Well, to put it in Philspeak, yes ; > However, I do find that the second drafts always come out better.

  66. Phil, reposting
    Phil, in the IncPor the GE MAR13  22 short calls are now 1.61, should we roll to the 2X Dec13  25 for a few pennies?  For the TSLA MAR 34 calls the same move could be made rolling to the JUN13  42 calls (2X). 

  67. Phil USO
    I have a sell Mar 35.50 @$1.30, could have got $1.25. When was oil @ $95.25, 3AM or? They have only dumped 1,500 contracts, when is the deadline? Thanks

  68. Phram
    What would you do with EXEL  I took the stock on expiration.  now have 500 sh at 4.50 cost

  69. EXEL – sell premium.  Apri or May $5s.  They are flat for the past few weeks, so if you are comfortable, sell calls and puts, otherwise, just the calls, and pay that stock down.

  70. Phil,
      given your bullish stance and feeling that the sequester will do little to slow down the market, should I take off my TZA protection/insurance that I have on my portfolio? I'm also short EDZ puts with the same intent. I've been rolling these along for now. Thx.

  71. Bonds/ZZ – As obvious from above chart – you'd have to be nuts to let any of these people hold your money over any period of time.  Try using the Word box (on the bar of the comment box) as it's supposed to strip stuff like that out when you paste.   As to trading French bonds – as StJ says, it's pretty slim pickings and not something I follow so couldn't say other than to mention that I find it very distracting to have to start going to 10 different places to check on various trades I have going so, if I can't put the chart right on TOS and trade off the main platform – I have no desire to trade it.  

    Oil/Jasu – I don't like trading last day contracts.  They can move very violently and very randomly.  That's why TOS flips the contract they are tracking for you a few days early, they are trying to nudge people away from trading the soon-to-be-dead current contract.  Let's say you have it open and something blows up in the Middle East and oil pops $5 while you are in the bathroom for 2 minutes.  You can't roll it and, if you don't close it out, you'll be assigned at the days end and then you will have to accept delivery of 1,000x barrels of oil at Cushing in 15 days and I'll bet you don't know anyone you can sell those too and, of course, if you can't pick up the barrels that day – you'll have to pay for storage too.

    I will tell you what's really cool with AAPL – when I move the mouse over another window, that window automatically becomes active – I don't have to click on it.  Why can't Windows be that smart?  

    And, speaking of which, that laptop with the touchscreen and surface drives me NUTS!  Every time I touch the mouse pad the wrong way it brings up the tile screen or Skype (with all my daughter's friends wondering why she's not answering them since I don't know how to stop it from turning back on each time).  Maybe I'm just not a windows person but I find the Surface system super-annoying compared to me nice little IPad, which is a constant pleasure.   I don't even buy newspapers anymore – it's so much easier to just read on the Pad and then I can save articles that I like.

    NoKo/Snow – That would really suck.  Are they really that kookie?

    GDX/Jbob – We've already got that stuff but, as noted above, I do like GDX, ABX, GLD or the always fun HMY, which is dipping back to $6.50 and makes for a fun trade on the Jan $5/8 bull call spread at $1.45 (so no premium with $1.55 upside) and you can sell the $5 puts for another .30 to cut the net down to $1.15 on the $3 spread that's $1.50 in the money. 

    TLT/Wombat – I think we have a firm bottom here – just waiting and seeing at the moment with more the 3 weeks left.  

    AAPL/Wombat – Good job.  Maybe it's us they are trying to shake out in the first place?

    GOOG holding $800 today is very good for AAPL.   Now an iWatch story on CNBC re. it adding up to $9Bn to bottom line.  Even with a p/e of 8, that's not too bad!  

    Kass/Rustle – I think he got burned way short as his rationale is no longer coherent.  Investor Optimism is totally consistent with underlying economic data and profit data – more profits, more jobs, more money = happy/confident employees.  If he has to go back to the uncertain tax policy well – you know he is stretching.  The bears are also beating that 2% reduction in disposable income drum like a dead horse but don't we get a 6% reduction in our paychecks EVERY JANUARY as those of us who exceeded the $100K mark last year have to start paying SS again?  Has that ever stopped you from doing things or changed you spending habits?  That happens to the top 10% every single year and we manage to handle it – I am pretty sure the bottom 90% can handle a one-time 2% reduction without the whole country going over a cliff.  

    And gas again!  CNBC is right now driving from DC to Boston on ZERO gallons of gas.  If 1 out of 100 cars in the US stop using gas, that's $6Bn a year SAVED in gasoline (62Mb or 1Mb per week added to inventory).  If all 200M cars who use and average of 750 gallons of gas per year (15,000 miles at 20mpg) paid .30 (10%) more for gas – that's $45Bn so we need either 7.5% of the fleet to go electric to offset each 10% rise in gas (re net consumer spending) or we simply need the fleet to move from 20 to 22mpg – which is, of course, already happening.

    I also like Kass's "Nominal US GDP growth is likely to expand by ONLY 3% to 4% this year."  Aren't we the World's biggest economy?  When's the last time we grew 3-4% in a single year?  This is your bearish premise Doug???

    Income Portfolio/Hemas – I'm inclined to wait for StJ's update to go over those.  No urgency on the roll as the portfolio is generally well on track – even with our additional hedge getting clobbered.  

    Tesla/Rustle – That's a good one but so is this:

    SDS/Yodi – Yes, we were worried about holding up over the holiday weekend so I think it needs to be rolled or killed this week.

    Oil/Shadow – I don't know for sure, I think it's not until tomorrow actually.  They've generally held up well on the last trading days and we got a big sell recently so I'm not inclined to mess around ahead of inventories this week.

    TZA/Japar – If it is a sensible amount of insurance and it's only costing you some of your upside gains (as with the Income Portfolio's example), then why take it off?  Insurance is what it is – it protects you from unexpected disasters.  If insurance only protected you from expected disasters – it would be a lot more expensive!  

    Yay – I got caught up and AAPL back to $458! 

  72. Phiil: Someone in Europe asked me about the Sequester today, to which I responded "….. There is too much support for Obama, as the election showed, too little support for the Republicans, who would rightly get the blame for any economic damage caused by playing "terrorist" with the U.S. economy, and too much positive momentum in the U.S. economy to make it a useful gambit.  We should fade any selloff that it causes."    Would you agree, or am I being too optimistic?

  73. NoKo/Phil. Yes. Not to the point of war, because the oligarchs like their luxurious life style, but Pres. Pak will almost certainly get a test before June.

  74. Phil // SCO
    Agree with your logic around OPEC, Read through the Wiki on the trades but lots of in/outs. 
    Don't know shinola about Futures so little jealous of your morning oil mcmuffin money. 

    What would think of simply selling Jan15 SCO puts at $35 after inventories  ?
    I remember you saying ultras were a bad long hold though ..
    SDS – roll or kill ?

  75. Phil – Any thoughts on BBY?

  76. /CL – 96.50 again

  77. I think an entire hedge fund could be based around taking Phil's recommendations and waiting until they fall another 20% – Apple weeklies, looking good, thanks bro!!

  78. Snow: What's your guess on N. Korea?  They've already sunk a ship and played around with their tinker toy nuclear delivery systems.  Annex the DMZ?

  79. StJeanLuc – Would you mind dropping me a email at

  80. Phil / You can change the settings for your Apple mouse by going to System Preferences > Mouse. You can toggle the screen swiping functionality on and off, along with a bunch of other things. If your using a magic mouse, I find it too sensitive at times and have disabled some of the bells and whistles.

  81. NoKo/zero – Good question. Best guesses floating around are that it will be something "asymmetrical", not seen before so unanticipated. If they had the capability, a massive cyber attack would be the best bet, but I don't think they can pull that off unless China helps them (extremely unlikely).  Could happen, though.

  82. TSLA: anyone playing them on earnings?

  83. Phil….SVU…Whats my move with the $4- offer comming up.I have 8k shares,sld Jan14 5c@1.40,sld Jan14 2.50p@1.05 .bot Jan14 1.50c@1.50?I'd like to close it all out now around $4,but they are only buying 30% at $4. Sell with open market close to 4 or hope I get picked at 4 and also close out options as who knows what happens after $4.Svu could tank after deal?Advice..thank you

  84. Phil – if you move 2 fingers towards the centre left edge you get an arrow and that seems to take you back to a previous page. It's been irritating me for a while – then I discovered if you moved 2 fingers towards the right and get a similar arrow you get back to where you started. Not sure if that was your problem…

  85. Sequester/ZZ – As above, I think it's already priced in and we can really fly once it's over.  

    127408 600 GOP  Obama and the Sequester cartoons


    127374 600 LOCAL NC   Medicaid and unemployment cuts cartoons


    127417 600 Nut or Shooter cartoons

    NoKo/Snow – So should we be shorting the SoKo ETF or is this the sort of thing you guys quickly shake off?

    SCO/Wombat – Ultras decay over time so selling puts on them is a BAD idea.  A 10% spike in oil will drop SCO 20% overnight and you are giving oil 300 chances to crush you as you leave that position open day after day – daring something to happen to spike oil.   That's why we do like the Futures on oil – in and out before anything unexpected can happen and then we wait PATIENTLY for the next good opportunity.

    BBY/MJJ – Yes, I think we should take $5.50 and run for our 2015 $13 calls in the Income Portfolio – not worth the risk that earnings disappoint with no buy-out news.   We can replace it with 20 of the 2015 $17/20 bull call spreads at $1.50 and sell 10 (1/2) the May $17 calls for $1.80 so we net into the spreads for $1,200 with a $4,800 upside and, even at $20, we only owe $3,000 back but, if BBY falls, we can sell puts for $1, roll the longs down and then we have an almost free spread to sell calls against long-term.

    Oil/Burr – $98-$95 has been a reliable channel and we use $97.50 as it gets hit a lot more often and we'd be bored waiting for $98 to get hit but $96.50 is just gambling – could go either way for no reason at all.

    Waiting/ZZ – I have often said that the best strategy for following our site would be to wait for us to roll or DD a position as you saved yourself a 20% loss and it's a position we still like enough to put more time and money into.

    AAPL/Amalfi – It's Ron's IMac.  I have one at home but it's just my side monitor running Power EtradePro (I like the charts and Hi-Lo scanner).  Now that I know the mouse does that – I won't do it again – my magic pad is much more forgiving.  Also, I am loving this machine and my Toshiba LCD is hooked up to it (usually on my laptop) and Toshiba says the mac supports 4 USB screens so I'm thinking of dumping my HPQ and making this IMac my main computer when I get home.

    TSLA/Newt – Those could go either way but I'd buy on the dip. 

    SVU/490 – I'd take it and run.  SVU may go higher but it's a nice profit and why risk it.  For sure the calls, as you risk losing a 66% gain and then the short puts are just .25 so a waste to wait for those to expire and that leaves you with the stock and the short calls and the $5s are down to .15 so you net $3.85 for the stock plus the $1.25 profit on the calls and you are out at $5.10 – which is more than you'd get if you wait – so kind of a no-brainer there.  

    Arrows/Julianz – Yes, that's what happened but, unfortunately, going back did not save the comments that were there – super annoying but lesson learned.  

  86. Oh no, did I forget to mention FAS Money?  We need to add 20 XLF 2015 $16 calls at $2.80 ($5,600) – essentially putting our profits back on the table.  We have 8 short FAS March $149 calls that we sold for net $3,000 but they are currently $9.50 (down $5,200) so, if FAS goes down, the new position is essentially free and we can start selling again or if XLF breaks over $18 and FAS goes over $158 – at least we are in position to roll to another 1.5X roll (the April $162s are $6 but hopefully it won't come to that!).  

    There's also a WMT play we like – the 2015 $55/65 bull call spread is $7 and the $60 puts can be sold for $4 so let's do 10 of those in the Income Portfolio, selling 5 April $70s for $1.06 as that's better than a 12.5% return on our net in just 59 days.  If WMT has poor earnings, we can sell more puts and roll the spread lower but I'm worried that the rumors are false and WMT pops back over $70 for the last time and we never get another cheap opportunity.

  87. Phil / /

    SCO / Understood – I like the Black Swan sidestep logic. When I get up on TOS, any advice on wading into futures?It seems like this is the safest, most logical play on oils volatility.
    On a Mac with TOS apparently you have to log out and then back into a paper trading account ( lame ) but it does give me the ability to trade futures. I know you're giving a workshop on them in AC – any chance you can record it ?
    AAPL 470's / if they don't get any volume mojo by EOD, they're going to get eaten alive. Any roll suggestions, what I'm finding is pretty pricey into April.
    MAC / I run 3 Cinema Displays ( the center one being my iMac ) and its NASA amazing. The documentation will tell you cant do it, but you can. If you have any q's feel free to mail me offline

  88. Phil / Oil
    Timely advice.  I got out for .05 profit before it spiked to 97.15… 
    Come on 97.50!

  89. Phil, a housing recovery is one of your premises for 2013. At what level  does HOV get interesting or do you like another homebuilder better now?

  90. Tesla,
    I am probably in a minority position here, but I think that they are going to miss by 10% to 15% on revenue.  While they likely produced between 2,500 and 3,000 wehichles during Q4 as forecasted, probably 500 – 800 of those were made during the last few weeks of December with a number of them actually not physically delivered until early January.  Tesla says that they don't recognize revenue until vehichle is delivered, but I really don't know if they mean 'at the factory door' or if they mean 'when physically in the hand of the customer'.  With around 3,000 units produced, timing of revenue recognition from just 300 units can make a substantial difference.
    Tesla, and Musk in particular, has IMHO oversold us all on expectations for the company, and may be able to do so again and counter any negative Q4/2012 numbers. 

  91. Virtual MoMo portfolio:    I'll be making an adjustment on SODA during the last 30 minutes of the trading day.  We have 15 March 52.50 calls and it appears they report earnings in the morning.  

  92. PSW Atlantic City conference April 27-29 – Game on!  With Savi officially on board as of today we have 10 members signed up and now have the minimum number needed.  We now have two months to finalize the agenda and hopefully build attendance up closer to 15 or 20 people.  I need to start working on my poker game as it sounds like Phil is getting a lot of practice out in Vegas.  I'm looking forward to it as I'm sure Phil is as well.  Please email me with any questions or if you're interested in attending.  Thanks!

  93. Back on line – did I miss anything?

    Got a lot to catch up to so I won't update the portfolios until after closing today. 

  94. HLF – Stj, what's the expected move according to options?  Earnings tonight.

  95. Phil—do you like VOD for the income port?

  96. Waiting for Ackman to take on Icahn in Netflix.  They are back to being a $200 company with little cash flow, rising content costs and less earning than they had when they were at $200 last time.

  97. Phil,
    Am I interpreting your  12:20 cmt (below ) correctly  – you feel TLT is at a bottom? Wouldn't that also suggest that equities are due for a pullback/breather ?
    TLT/Wombat – I think we have a firm bottom here – just waiting and seeing at the moment with more the 3 weeks left.

  98. Netflix has to sign up over 1,041,000 for a year just to pay for what they spent on House of Cards.

  99. SoKo ETF/Phil – Ya know what, I think it would be smarter to wait until NoKo pulls its stunt, then buy the ETF cheap and long.

  100. TOL reporting earnings tomorrow before the open.  Do they move enough for a play?

  101. XLF/ Phil: Sell the calls?

  102. Phil / Waiting:  It's very cruel, really.  I've thought about it — you're in an inextricably self-referential position. It's sort of the Davis uncertainty principle – the more certain you are in respect of the position, the less precisely you can know the momentum in this instant, and vice versa.  We would pity you, if it were not for knowing that you'll probably die richer than any of us.  Of course you'll still die, so I hope you're having fun!!

  103. ANF Trade
    Looks like the skew for ANF in the front month vs the back month is really high.  Maybe there is a calendar trade here, selling the ATM in feb and buying march?  What do you think? 
    Earnings is on the 22nd
    Skew Graph
    The spread between the first month and second month vol is 84.    

  104. HLF / Lolo – The options are pricing an 11% move tonight. Historically they move about 7% but there is a lot more riding tonight with that fight between Ackman and Icahn. I would be careful!

  105. Virtual MoMo trade :   SODA    STO  15  March 57.50 calls for 1.40.   So the position now a fully covered spread.

  106. Sell STK DELL @ 13.80 buy FEB4 14c

  107. Sorry, got caught up with very silly CC with brokers who don't understand PM (and these are specialists who are assigned to work with hedge funds!).  Took them over half an hour to realize their computer was wrong and I was right….

    Futures/Wombat – Not safe at all.  Practice 2,500 hours with one contract trades and then, if those go well, you're ready for 2,500 hours where you can scale into 2 contracts and, 5,000 hours later, 4 contracts can be the limit (assuming you are still solvent).  I doubt we will record conference as it's kind of informal, not like we have a certain presentation.  AAPL is not something to roll – we win or we lose.  I was hoping for $2 to get 1/2 out but didn't come.  Thanks on AAPL – I do have one cinema display on the HPQ and then the big IMac so maybe I buy another cinema for my 3-screens in the middle.  I'm in CA but remind me when I come back please.  

    Oil/Burr – Good man. 

    HOV/Jet – Didn't we just do them when they came back down near $5?  I have not had a chance to look over the space but you can see from HOV's fast recovery why I like them any time they get cheap.  

    TSLA/Lotter – You may be right on the miss but I'm not sure people will care much.   They are over our target as we sold calls with anticipation of some issues to keep them down around $37.50, which is what I feel is a fair price at this stage.  

    PSW AC Conference is ON!!!  Thanks to all who will be attending and thanks most of all to Terra for getting it all together – looking forward to seeing you guys in April.

    Hey StJ – Hope all is well.  Not too exciting today – just the normal 1% moves with GOOG $800 and all that…

    VOD/Savi – If they were not in Europe I would love them.   Makes no sense to concentrate on worst market.

    NFLX/Rustle – I think we my have to join Ackman at this point.  

    TLT/8800 – I don't think they are well-connected at the moment.  TLT can rattle around between $115 and $120 without the market caring.  You can see from the VIX disconnect with VIX down 3% today and TLT down less than 0.5%.

  108. Ahhh, now we can rally.

  109. NFLX/Rustle – I think that whole industry (cable, studios, web services) is going to implode as they all run their costs to the moon trying to compete by offering the lowest-price service to consumers who are already sick of the whole thing.  Now TWX is talking about going direct to consumers.  It's all greed, as if I want to have to subscribe to HBO and then decide if I also want Showtime or Viacom's shows etc.  You want to see Americans rioting in the streets – try taking away their 100 channels…

    Waiting/Snow – Good plan. 

    TOL/Rperi – Too random but will give us good insights to the industry.  If they bust up, I think all builders are in very good shape but if they fail $35 (down 7%), I'm pretty sure the whole sector will fly down to meet them. 

    XLF/Newt – No, we were buying calls to cover our runaway short FAS calls. 

    Dying/ZZ – Don't count on it, in the very least I hope to be able to download my consciousness into a computer so I can continue to annoy my family and friends long after my body has gone to dust.  Will give a whole new meaning to "pulling the plug."

    ANF/Burr – Good one.  Earnings on Friday, apparently and the stock not likely to fail $49 (50 dma) but you can sell Friday $49 puts for $1.60 against a March $50/47 bear put spread at $1.10 for net .50 credit.  Fun to do 10 of those in $25KPA if we get our price tomorrow.  

    HLF/Lolo – Way too crazy to call. 

    SODA/Lflan – Are they still above $40?   Must not have had earnings yet…

  110. SoKo ETF waiting/Phil – Koreans are tough and resilient, you can always count on that.

  111. No love from AAPL, but not dinging me, thanks to the power of option decay. But Cisco, AMX [Carlos Slim's outfit] Ferrell Gas Partners [buses are the new airlines], Corning, HPQ holding steady, Nam Tai seems to have caught Apple-itis, RRC [Range Resources turning and burning, homebuilder Pulte et al, geez, should have take Phil's advice, Taser, where you at in the house??  No way I'll chase WFR, but it's a rocket, my KO & Facebook shorts betting on them being declared health hazards are flat, don't have the stones to short oil, having quadrupled down on it's long ride up and gotten out even.  Ideas welcome, good ideas even better.

  112. Exciting / Phil – Actually got to see why healthcare is so expensive in the US with a little scare from Mrs. StJ this morning! She is fine but she has been fighting Lyme's disease for a couple of years now and we have some bad days. In any case we spent 6 hours in the ER in the brand new hospital nearby and the stuff they have is just unreal. When I compare with what I see in France in a comparable sized town, night and day! I guess it's all related to money. Or good insurance in our case!

    In any case I'll update the portfolios later tonight when I post the lines. I guess it's a good thing we have GOOG in the NASDAQ because AAPL not helping again! Who would have thought that GOOG would get to $800 before AAPL. 

  113. GLD- looking for a long play on gold- 14/JAN – any suggestions? Already have some GDX puts/short.

  114. These guys don't even know about inflation and how it undermines the lower class:


    In the above video, Congresswoman Marsha Blackburn of Tennessee worries that raising the minimum wage will keep teenagers out of the workforce, preventing them from gaining valuable experience:

    I remember my first job, when I was working at a retail store, growing up down there in Laurel, Mississippi, I was making like $2.15 an hour. And I was being taught how to responsibly handle those customer interactions, and I appreciated the opportunity.

    Travis Waldron crunches the numbers:

    [W]hat Blackburn didn’t realize is that she accidentally undermined her own argument, since the value of the dollar has changed immensely since her teenage years. Blackburn was born in 1952, so she likely took that retail job at some point between 1968 and 1970. And according to the Bureau of Labor Statistics’ inflation calculator, the $2.15 an hour Blackburn made then is worth somewhere between $12.72 and $14.18 an hour in today’s dollars, depending on which year she started.

    And they run our government! Idiots

  115. It's finally about inflation. FINALLY! (how much did I need to lose waiting for this event). The really good news is that TLT and JNK,etc, are still in super-rich put-option land and with the VIX low the premiums are ridiculous. Pile in people.
    I'll probably go long PCLN into earnings and see if they can hit 900. 
    Other than that, it's simply the buy-anything strategy (except AAPL) as everything is up to the point that I can seriously get mad at myself for selling out of a long NFLX Mar 115 call after earnings for 30 and now it's 85+!
    Oh and bitcoin (my favorite investment of all-time, ever) is up 117% from Jan 1. 

  116. TSLA too risky to play into earnings tomorrow but AUY is oversold and might be a good entry here for a 1.7% div-payer…

  117. BDC—not to sound stupid —well maybe to sound stupid but what is bitcoin?

  118. Well, inflation is in check, b'c gold should be going through the roof.  Gold is also a hedge against economic collapse, and since the VIX is low, one should be buying cheap, OTM calls on GLD for that pocked rocket, hyperbolic ramp…ugh, but it is not.

    I am telling you all, IF TLT collapses, the market will go right along with it.

  119. Dying – as it came up… here's a very interesting podcast from RadioLab called "The Bitter End."

  120. Phil and all having problems
    Based on your problem, Java problems I had and they came through etrade pro, and now the PSW site. you have been MAC attacked. My solution was delete, uninstall all Java, and it is in many places beyond programs and download the old version:
    ( only the 32 bit version. APPL say they will have a fix in a couple days in the link. They had 6u39 for a couple days but seems that got bomed also, in case the 38 doesn't load.

  121. Phil / Oil –  I thought we were shorting off 96.50, 97, 97.50.  Back on 2/11 you said:
    "Oil about to give us another shorting opp at $96.50 (/CL)!" 
    No worries if something changes, I'm flexible.  I always maintain tight stops over the line, only short after a cross below the line at 96.49, trade 1 contract, and take profits around the 0.25 profit.
    In my paper account, I'm practicing doubling down as it goes against you, and then getting back to even, etc.  But that's paper.  I've made and lost 100K's in my paper account.  Hell I'm short 3 different SPX strangles of 50 contracts each in my paper account….but just for learning.

  122. Scottmi:  Interesting, perhaps, but the conclusion I came to after reading it was "just scoot mi."  You're not a doctor by any chance?

  123. Snow: I missed this today, thanks for pointing it out.  I give S. Korea high marks for poltical maturity. At the same time, I'll bet the South talks to China, and I'll further bet my last dollar that China isn't taken any chances here at all, they have this situation covered from every angle.  There's no way — none — that China is going to allow a barbarian coastal tribe contaminate their homeland with radioactivity or give the U.S. a free pass to inititiate military strikes in their neighborhood.  Note that neither China nor Russia said a word, even though they're both veto-wielding members of the Security Council.  Somehow they don't find "final destruction" worthy of even a casual expression of dispproval.  What does that tell you?

    GENEVA | Tue Feb 19, 2013 10:27am EST

    (Reuters) – North Korea threatened South Korea with "final destruction" during a debate at the United Nations Conference on Disarmament on Tuesday, saying it could take further steps after a nuclear test last week."

  124. Savi – Bitcoin – lot's of info on the internet but I would start here and I use this site to watch the price.

  125. BDC—thanks
    maybe a bit over my payscale

  126. Good morning! 

    Very harsh rejection of oil off our $97. 50 line this morning – fast drop back to $97 so far and that line is OK to short off if it breaks but bouncy at the moment and has been bouncy since end of yesterday's session so very strange action.

    Dollar up to 80.70 not helping oil, Euro $1.337, Pound $1.5288 (and back closer to the normal .30 gap to the Euro) and Yen is 93.50 – as we expected, 95 was just too weak for Yen to sustain.  

    Copper $3.63 (remember the failed test of strong $3.75 last week), silver $29.02, gold way down to $1,589, nat gas $3.30 and gasoline still high at $3.083 and that might be a better short than oil (/RB).  

  127. Pharm,
    Curious as to why you feel (6:18 PM tue) that if TLT collapses so will equities? Similar to '07/08 when panic reigned, everything was flushed?

  128. TOL did well but discounted to do it so they are keeping people nervous:

    More on Toll Brothers (TOL) FQ1 earnings: The mix of deliveries has the average price of new homes falling to $569K from $582K in Q4 and $571K a year ago. Backlogs of 2.8K units, +57% Y/Y. Net signed contracts +38% in dollar terms, +49% in units. Gross margin of 23.4% vs. 23.2% a year ago. "It appears momentum is building …We are continuing to gain market share and see little competition from local private builders." Shares -5.2% premarket. (PR)

    Wednesday's economic calendar:

    7:00 MBA Mortgage Applications

    7:45 ICSC Retail Store Sales

    8:30 Producer Price Index

    8:30 Housing Starts

    8:55 Redbook Chain Store Sales

    2:00 PM FOMC minutes

    4:05 AM Asian shares follow Wall Street higher, boosted by yesterday's strong German investor sentiment data, which, says Credit Agricole strategist Guillaume Tresca, will "boost emerging-market stability and exports to the (eurozone)." Meanwhile, European shares are flat-to-high higher. Japan +0.8%, Hong Kong +0.7%, China +0.6%, India +0.1%. Euro Stoxx 50 +0.1%, London +0.1%, Paris flat, Frankfurt +0.2%, Italy +0.2%, Spain flat.

    6:00 AM Overseas: Japan +0.84%. Hong Kong +0.71%. China+0.60%. India +1.95%. London +0.46%. Paris -0.01%. Frankfurt-0.02%.

    8:00 AM On the hour: S&P -0.02%. 10-yr -0.06%. Euro -0.12% vs. dollar. Crude +0.1% to $97.19. Gold -0.75% to $1592.1. 

    Notable earnings after Wednesday’s close: AUYCAKE,CROXCXODEPOETEETPFLRFSTGDPGNKHLXIAG,



    MBA Mortgage Applications: -1.7% vs. -6.4% last week.  More on MBA Mortgage Applications: The seasonally adjusted refinance index fell 2% Y/Y; the purchase index also fell 2%. The average contract rate on a 30-year fixed mortgage rose to 3.78%, the highest level since August. From Bill McBride, a long-term chart of the refinance index shows it slipping, but remaining at a high level. Purchases remain subdued. 

    Of the $37.5B of flows into ETFs this year, 92% has gone into stock funds, according to ConvergEx, well above the typical ratio of 65-70%. U.S. stocks garnered the biggest share at 42%, while Japanese ETFs (see WETF) saw 8%. Dividend ETFs (DVY) have received nearly $4B already this year vs. $9B for all of 2012.Previous: "Fear fatigue."

    The average-loan-to-deposit ratio at the 8 largest U.S. banks fell to 84% in Q4 from 87% a year earlier and 101% in 2007, according to Credit Suisse. At just 61%, JPMorgan (JPM) had the lowest ratio (now we know why the London Whale was so busy; who's putting that money to work now?). "Bankers out there are drowning in liquidity," says the ABA VP. "We're dying to make loans."

    Minutes from this month's meeting of the BOE's MPC have unexpectedly revived the possibility that the bank may renew its bond-buying. The MPC voted to 6-3 to leave scheme on hold, with the dissenters, who included Governor Mervyn King, calling for an increase of £25B. The last time the MPC experienced such a split was in June last year – a month later it backed a £50B increase in bond-buying. Sterling -0.6% vs the dollar. (PR)

    The number of people in work in the U.K. rose by 154,000 in Q4 to a record 29.73M, further extending the puzzle of how the labor market remains strong despite the stagnant economy. Unemployment-benefit claims fell by 12,500 vs consensus for a drop of 5,000. The number of people without a job in the wider ILO measure fell by 14,000 to 2.501M; unemployment rate dropped to 7.8% from 7.9% in Q3 and vs forecasts of 7.7%. (PR)

    A key pledge of the Hollande government, France will miss its goal of a budget deficit of 3% of GDP this year, the PM tells lawmakers as massive tax increases are offset by slowing growth. Who could have predicted that? Credibility or no, markets continue to lend 2-year money to the country at 0.24%, 10-year at 2.26%. EWQ+2.7% YTD.

    Nearly always a buyer of real estate of late, Blackstone (BX) is planning to unload about 8K apartments it just bought in Germany, reports Bloomberg. Blackstone acquired the units for €450M in 2012 amid the reorganization of insolvent Level One.

    German harmonized index of consumer prices (HICP) falls to +1.9% in January from +2% in December. CPI +1.7%, matching flash estimates, vs +2%. (PR)

    Side effect of weak Yen – you get paid less for your stuff and pay more for other people's stuff!  Japan's trade deficit increased to a record ¥1.63T ($17.4B) in January from ¥641.5B in December, due to the sharply weaker yen and higher energy imports. However, exports climbed for the first time in eight months, growing 6.4% on year to ¥4.8T, with sales to China +3% for the first increase since May. Exports to the U.S. +10.9% but to the EU -4.5%. Imports +7.3% to ¥6.43T.

    Moody's predicts that China's economy will this year grow in the upper half of the firm's previous 7.5-8.5% forecast, saying that the country was recovering well after avoiding a hard landing. However, Moody's says growth will depend on structural reform, while it also warns that the increase in non-bank lending could endanger the financial system. (PR)

    Sterne Agee warns revenue in Macau may only grow 1% in February instead of the double-digit pace expected by some analysts, although its keeps a positive stance on the Macau gaming sector for the long term. A crackdown on the VIP segment may only be a blip on the radar, according to the firm. Gaming companies with ties to the region are down premarket as initial reports on Chinese New Year gaming activity are disappointing. MPE-2.2%WYNN-1.8%LVS -2.2%.

    Michigan Governor Rick Snyder has to decide whether to declare a financial takeover of Detroit by the state and appoint an emergency manager after a review team concluded that the city suffers "operational dysfunction" and faces a fiscal emergency due to its "chronic deficits and its long-term liabilities." Ultimately, Detroit might have to one day carry out what would be the biggest municipal bankruptcy filing in U.S. history.

    Gold falls to its lowest level since August, now at $1,591 and off more than 11% since the heady post-QE∞ announcement days. The move is more of a blip on a longer-term chart and the metal is basically flat since summer 2011. GLD -0.8% premarket.

    Cliffs Natural Resources (CLF +1.1%) is upgraded to Overweight from Neutral with a $40 price target (up from $35) at J.P. Morgan, which says shares are pricing in 2015 iron ore prices at $110/metric ton, 29% lower than current spot prices. Since mid-September 2012, CLF's peer group is up 17% on average while CLF is down 37% despite a 53% rise in seaborne spot iron ore prices.

    As parking space for 787s in Seattle and South Carolina comes to a premium, Wall Street is becoming increasingly concernedabout the drain on Boeing's (BA) finances. The company has $13.5B in cash and short-term investments plus $3.7B in free cash flow it generated in Q4. However, "costs" include $200M in final customer payments that Boeing is losing out on for every month the Dreamliner is grounded, and $1B a month on production.

    Tesla Motors (TSLA +5.5%) moves higher as the bite is taken out of last week's critical article on the automaker by a NYTreporter. What to watch: Push comes to shove on production numbers tomorrow as the automaker reports earnings with speculation raging. A report tipping off the waiting period for Model S delivery is down to 30 days is a development which could either be a gigantic positive showing the automaker's production has ramped up significantly or a disturbing trend if people have been asking for their deposits back.

    An editor with The New York Times backs up Elon Musk's claims that a reporter's test drive of a Tesla Motors (TSLA) was flawed, saying "casual and imprecise notes" were taken during the trip. Though falling short of saying the reporter sabotaged the drive intentionally, it's a major win for Musk and the company in the high-profile PR battle .

  129. Shares of all three office supply companies are on the rise after Office Depot decides to merge with OfficeMax in an all-stock deal. The quick analyst take is that Staples may take some market share while the newlyweds get to know each other. Premarket: SPLS+3.8%ODP +13.6%OMX +15.4%.

    Great sign – just what we were hoping for!  More on La-Z-Boy (LZB): Q4 beats across the board on a 10.3% increase in total sales versus the prior year period. Net income rose 14% as its retail segment swung back to profitability. Sales in the unit, which includes La-Z-Boy Furniture Galleries stores, swung to an operating profit of $2.67M from a year-earlier loss of $646K. Same-store written sales, which the company tracks as an indicator of retail activity, rose 12%. Wholesale upholstery, a main contributor to its top line, saw revenue rise by 12% to $279.9M. Shares +10.6% AH.

    Electronics retailers continue to shift store space to refrigerators and furniture as they seek avenues of profitability. Though hhgregg (HGG +4.4%) has made the most dramatic product strategy changes to date, analysts think Best Buy (BBY +3.4%) and RadioShack  (RSH +2.8%) won't be too far behind to enter more aggressively into the turf of Sears (SHLD +1.1%

    Another good sign: More on Marriott (MAR): Q4 beats on all counts as net earnings jumped 28% Y/Y, driven by stronger revenue per available room and higher average daily rates. In North America, comparable systemwide revPAR increased 5.9%, including a 4% increase in average daily rates, while world-wide revenue per available room increased 5.2% and average daily rates improved 2.9%. Shares-0.8% AH.

    Herbalife (HLF): Q4 EPS of $1.05 beats by $0.02. Revenue of $1.06B beats by $122M. (PR). Shares +2.2% AH.  More on Herbalife (HLF): Q4 beats on both earnings and revenue. For FY13, the company raises its earnings view to a range of $4.45 to $4.65 per share on sales growth of 12% to 14%. The Street is at $4.62 per share.

    ROFL!  More on Sodastream (SODA): The company powered right by the estimates of analysts, led by strong growth in the Americas. Revenue from Soda Maker Starter Kits up 62% Y/Y to $66.1M, while consumables sales rose 54% to $64.8M. Gross margin down 430 bps to 53.0%, but in-line with guidance. For 2013, the company expects revenue of $436.3M and adjusted EBITDA of $61.1M. SODA -4.9% premarket. (PR)

    Green Mountain Coffee Roasters (GMCR) exec David Sachs says the company could increase its market penetration from 12M Keurig machines to 35M by 2016 as coffee hits another growth cycle. One potential way to triple sales is through the consumer trend of finding healthier foods and drinks. He thinks the company can promote the health benefits of coffee and create new K-cup blends infused with antioxidants.

    Time to short NFLX:  Don't underestimate Intel's (INTCWeb TV service, says The Verge's Tim Carmody. The service is expected to feature an advanced cloud DVR and user-tracking support, and though a la carte subscriptions won't be offered, Intel is promising more service "flexibility" than what consumers normally get. Moreover, Intel has assembled a team with superb media/electronics bona fides, and its use of an Internet gateway design developed with Comcast (previous) could let it create a Web TV standard.

    Good for VOD!  The U.K.'s auction of 4G spectrum has raised £2.34B, below the government's expectation of £3.5B and well below the £22B raised in a 3G auction in 2000. Five operators won spectrum, including Vodafone (VOD) with a bid of £791M, Everything Everywhere (DTEGF.PKFTE) with £589M, Telefonica's (TEF) O2 with £550M, and BT's (BT) Niche with £186.5M.

    France Telecom (FTE): 2012 net profit -79% to €820M, hurt by a €1.84B write-down on the value of assets in Poland and other countries. Operating income -49% to €4.06B. Revenue -3.9% to €43.52B amidst a price war in France. Reiterates guidance that operating cash flow will fall to above €7B in 2013 from €7.97B; confirms plans to cut dividend to at least €0.80 in 2013. (PR) 

    While Apple remains 35% below its all-time high of $705, Google (GOOG +1.2%) has shot above $800 for the first time. The Internet giant now has a market cap of $264B, and trades at 14.2x 2013E EPS (exc. cash). Today's gains come as the WSJ provides details about Google's rumored retail store plans. Google is said to be "studying Apple's playbook" for creating an electronics brand, and has debated whether Motorola's phones should be promoted. One source claims Google's stores might not launch in 2013.

    Uh-oh!  Foxconn has frozen hiring at almost all its factories in China, as the company is reportedly slowing production in response to reduced orders for Apple's (AAPL) iPhone 5. With workers' staying at the company for less than 13 months on average, Foxconn's headcount could fall by tens of thousands. 

    Apple (AAPL) is the latest company to say that it's suffered a cyber-attack, with hackers breaching its systems after staff Mac computers were infected with malware when they visited a Web site for software developers called iPhonedevsdk. It's the same site that hackers used to get into Twitter's and Facebook's systems by exploiting a well-known security hole in Oracle's (ORCL) Java software.

    The judge presiding over Greenlight Capital's suit against Apple (AAPL) over the bundling of proposals within its proxy says Greenlight has shown a "likelihood of success," suggesting a ruling in Greenlight's favor is on the way. Apple's shareholder meeting arrives on Feb. 27. (previousUpdate (5:19PM ET): Full quote fromReuters. "Candidly I do think the likelihood of success is in favor for Greenlight," says district judge Richard Sullivan. Should the case go forward, he'll focus on whether Greenlight would be irreparably harmed by a bundled vote.