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Thursday Thoughts – Healthy Pullback or THE END OF THE WORLD?

Wheeeeeee on oil!

Congrats to all who played that game with us as oil bottoms out BELOW $94 this morning (and still hasn't gotten back over the line).  We took 1/2 the money and ran on our doubled-down trades on USO and SCO but $92.50 may be bust for this drop so we'll hang in and see how low we can go this week.  Meanwhile, we got a short, sharp shock thanks to the Fed yesterday but it's perfect for the way we've been playing as we had a few short callers (GOOG, FAS, TSLA) that were getting away from us and Members were getting tired of my calling for patience as we've been waiting for this little correction for over a week now

Using the Big Chart and, of course, our famous 5% Rule to tell us what's going to happen, we can see we had a 1,000-point run in the Dow from 13,000 (we don't count spikes) to 14,000 and that means we expect a 20% pullback (of the run) of 200 points to the 13,800 line as a HEALTY correction.  Another 200 points would take us to 13,600 and – lo and behold – it's our Must Hold line and guess what – it MUST HOLD or the markets are truly turning bearish.  

Of course we predicted the Must Hold line way back in 2009 so not to surprising that, overall, we end up consolidating there in the bigger picture (see bigger chart).  We are NOT expecting to test 13,600 though, that's just the worst-case, where we would be BUYBUYBUYing on the dip but we HOPE to see 13,800 tested so we can get over it and consolidate for a real move (not a spike) over 14,000, as well as our 10% lines on the Nasdaq (3,300) and the S&P (1,520), which came so close to making us up our levels but failed – right on schedule! 

SPY 5 MINUTE We already went long on /NKD Futures in Member Chat this morning (over the 11,300 line) but, for a pullback in US indexes, we're looking for the following 20 and 40% pullback levels to hold (at worst):

  • Dow 13,800 (weak retrace) and 13,600 (strong retrace and confirmed with Must Hold)
  • S&P had a 120 point run to 1,520 so giving 24 back is 1,496 and another 24 hits 1,472
  • Nasdaq (AAPLdaq) had a 200-point run to 3,200 so 3,160 and 3,120 with the 5% line at 3,150 providing strong support, as well as AAPL $450 being ridiculously cheap (we're long, of course). 
  • NYSE's 700-point run gives us a 140-point pullback to 8,860 and then 8,720
  • Russell has led with a run from 800 to 920 so also 24-point pullbacks at 896 and 872 but, if the 10% line at 880 holds – the bears can kiss their assets goodbye.  

We picked up long QQQ next weeklies yesterday as well as the market collapse was mostly caused by the rising dollar, which has popped from 80 to 81.50 (2%) since Friday.  The market has NOT pulled back 2% in PRICE, even thought the thing it's priced in has risen 2% in VALUE.  Things that should make you go hmmmmm….

As noted by Dave Fry on his SPY chart, we had an early sell-off on disappointing housing data but that was silly as it's winter and housing data is always disappointing in the winter (and we had two big storms that slowed things down all over) but this morning, in Member Chat, I pointed out that the AIA Architectural Billing Index jumped 6% to 54.2 in January with the New Projects Inquiry sub-index flying to 63.2 from 57.9 in December.  "This is the strongest indication that there will be an upturn in construction activity in the coming months," says AIA's Kermit Baker (see very bullish chart). 

UUP WEEKLY This is a great indication of future spending – people and companies don't tend to hire architects to make plans for things that are not going to be built and building is the final leg to build the base under which this economy can shift back into high gear.  THIS is what the Fed is worried about in their minutes – that the economy it TOO HOT and they are going to cause TOO MUCH inflation and, lo and behold – today we get a Core CPI that has jumped 50% in a month.  

This is no surprise to PSW Readers, who have been stocking up on gold as it goes down as well as DBA and yesterday we even decided SLV was playable at these lows (though I like gold, platinum, palladium and uranium better).  Inflation is already baked into the economic cake and don't think that we can't take it 'cause it took so long for the Fed to bake it – and we'll never have that recipe again – Oh nooooooo!

Anyway, where was I before having a Donna Summer moment?  Oh yes, inflation – duh!  Moving on then.  So of course we are bullish and how can the fact that the Fed sees the economy improving so much that they feel they may be overstimulating it be a bearish signal.  The Fed is like a doctor and we are a patient they've been pumping blood into to keep alive and, now that we seem to be recovering, they don't think it's a good idea to keep pumping blood into us until we explode.  Sounds reasonable to me, doesn't it? 

So what does the Fed do?  They have a meeting and they talk about taking us off life support to see how it  goes.  This does not mean they will pull the plug and walk away, nor does it mean they expect us to jump out of a hospital bed and run a marathon tomorrow but they WOULD like to see how we do without constant stimulus so they are going to SLOWLY withdraw it and CAREFULLY measure our response – ready to inject us again as soon as we show signs of weakness but HOPING that we are able to continue to recover without artificial means.  Isn't this what they should be doing?  Isn't this their job?  Isn't this doing exactly the opposite of what people have been complaining they have been doing for 4 years?  Shouldn't these idiots on TV be HAPPY about this?  

I was lying in a burned out basement

With the full moon in my eyes.

I was hoping for replacement

When the sun burst thru the sky.

There was a band playing in my head

And I felt like getting high.

I was thinking about what a

Friend had said

I was hoping it was a lie. – After the Gold Rush

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  1. Oil Lines

    R3 – 99.75
    R2 – 98.62
    R1 – 96.47
    PP – 95.34
    S1 – 93.19
    S2 – 92.06
    S3 – 89.91

    Yesterday's high and low – 97.49 / 94.21

    Looking at a long term chart I see Fib lines around 93.50 (61.8%) retracement and 92 (50% retracemen).  I use the highs of September and lows of October as anchors.

  2. Good Morning!

  3. Here is the entire Income portfolio spreadsheet. Prices are from Friday's close as I update them only on weekends. It takes too long to do it on a daily basis. I added the new positions though. WFR is still in limbo as fills are not coming in for all the strikes.

  4. Phil/The End  I'd like to see a pullback for nice, caring people and the end of the world for the haters….
    ….sounds reasonable…. :)

  5. GE / Income port: Was anyone else assigned the short March 22 calls?

  6. Phil/Summer  These painful memories usually occur when approaching a milestone in one's life…. as in a 50th birthday perhaps….
    You're welcome.  ;)

  7. newt
    GE rolled Mar13 22c yeasterday to Sept13 25c for .49cents as well sold the Sep13 21p for .52cents

  8. Yodi: good roll- i spaced the ex div date now i get to figure out do i hold the short position or buy to close- my loss on buying to close is $700.  What do you see happening in the near term with GE?

  9. Phil/AAPL – Do you think it is a good idea to do the weekly Apple play again?  It looks like we can sell this Friday's $450 calls for $3.70, and buy next Friday's $460 calls for $4.65.  For a $0.95 debit.  Thoughts?

  10. Finally, a break!

  11. phil,
    i have the vmw 72-80 apr bcs and sold the 75 put.
    its in territory it hasnt seen in a couple of yrs……should we be bailing on it breaking way below the 75 area esp since we are in april………..would appreciate your thoughts……….

  12. We seem to be in a trading range between 435 and 485 in which case it would make sense to sell more premium. On the other hand, this stock could breakout on either side and bury our shorts in a minute. Decisions, decisions….

  13. Phil / GDX position wrong in Income Port?
    I'm sure everyone has noticed, this guy is tanking and showing up on my PnL report as my 2nd worst loser.  So I started investigating.
    In the income port you are long GDX stock, short the Jan15 40P, short the Jan15 45C.  
    But as I'm looking through the comments, it seems like there is a different thought to the position:
    From 12/31 : GDX/Crussell – In the Income Portfolio it was selling 20 2015 $35 puts for $3.90 (now $3.80) and buying the $35/45 bull call spread for $5.50 (still $5.50) with a $3 stop on the bull spread to net in for $34 worst case and a $8.40 upside on the net $1.60 spread if GDX holds $45 for 2 years.

    From my screen, the put is down 23%, the call spread down 27%.  I have 10 contracts.  GDX is at 38.21, down from 55.  Quite a drop.  The $3 stop on the vertical didn't trigger yet.  Any thoughts?

  14. newt
    GE if you got assigned you do not have any more a short position as you forefood the stock for your short caller. I do not understand what you want to roll or buy.
    GE is a solid company for the long haul I do hold stock as well as long calls obviously against short calls you just have to watch the shorter month a bit more closely if the div is bigger than the premium in the caller you will get called for!!!! possible explain your position a bit better.

  15. Yodi / Good friend ECA
    Down to 17.90…yuk.  From a cost basis of 19.  I'm still selling call's and puts against it, rolling down my Jan14 short 20 call today.  You?

  16. Yodi: Sorry Buy to cover not close.I am short 500 shares.

  17. Look at TZA and TLT that were dead in the water yesterday! And protecting our SCO and USO gains as well!

  18. newt, i was assigned the GE MAR22 calls as well

  19. Hemas- what are you going to do?

  20. GDX / Burrben – The position we have was initiated on 12/10. I'll go back to that day and see why we have a different position.

  21. newt
    Short Stocks I allways kill as soon as possible today is a down day at presnt and possible is a good time to buy them back, and wait for selling further callers until market improoves. But you only must decide this!!!!

  22. newt, will probably close the short position and take the loss.  Maybe take another shot later.  

  23. Good morning and wheeeeeee! 

    $93.21 is already mission accomplished but let's be greedy and wait for the disappointing inventory report (based on our premise that this was not a real holiday driving weekend) before cashing in the rest of our oil shorts.  

    Our weekly AAPL calls getting crushed but we got the money back from the short callers so we'll wait and see now. 

    Dollar 81.42 – as long as it stays under 81.50 we should be able to avoid tragedy but, of course, the energy and commodity sectors are yanking everything down at the moment anyway.

    TSLA all the way to $35 but only back "on track" as we sold the March $34 calls for $4,500 (25 at $1.80) and that's right where they are again.

    Dow getting close to 13,800 already and Nas 3,140 has already failed first pullback with AAPL at $444 now.   S&P 1,500 obviously a key failure and then 1,496 comes into play as well.   NYSE, now 8,826, has failed 8,860 and RUT 912 seems like it's not likely to hit 896 today or tomorrow so I'm inclined to think we'll bounce back by the end of day.  

    92.75 is goaaaaaaaaaal #2 ($92.50) and we didn't even have a plan for going lower as that would have been greedy.  $92.50 is another 2.5% for the day so super-bad if they fail to hold that one. 

    XLF failing $17.50 also bad if it persists (just above it now) and TLT jamming back over $117 and VIX 15 is just what we expected so it would be silly for us to panic now.  

  24. FYI, between AAPL and GOOG we have a -$99K loss so everything else doing great!

  25. burrben
    ECA Long term play I am holding the Jan14 25 caller waiting for short term callers to sell why mess with the long term play???

  26. Hemas- yea im thinking the same- there goes the winings on TSLA earnings play!!!!

  27. FU AAPL!!!!

  28. yodi- thanks- ill follow the rolls you did later.

  29. Phil/Getting assigned: You were right- its not as bad as you would think. I told the girl at the brokerage that it was my first time- she giggled.

  30. CRIS – Needs to hold 2.75…. just look at a weekly chart….

  31. PAY dropped 37% 12$ what is going on?

  32. PAY / Yodi – Bad earnings and bad guidance usually is not good!

  33. Europe still a train wreck!


    Economists had expected that the Markit Flash Eurozone Services PMI, a business survey and one of the earliest monthly indicators of economic activity, would add to tentative signs that a recovery is in the offing.

    But the indicator fell in February to 47.3 from 48.6, marking a year below the 50 threshold for growth and confounding expectations for a rise to 49.0 from more than 30 analysts polled by Reuters, none of whom forecast such a poor reading.

  34. newt
    GE Selling the 21p Sept13 today is OK selling callers wait for a better day

  35. you can not beat them NFLX up 4.60 today unreal

  36. FU NFLX!!!

  37. Unbelievable-AG says he can't prosecute Wall St because it would ruin his career after govt. service and he has to think of his future. Interview below:

  38. Phil,
    I've strayed from the official FAS Money position and wonder if you could/would recommend a Put sale given the drop today.
    My current position is:
    XLF: +20 JAN15 15Calls / -20 JAN15 19Calls – @$2.06, now $2.29
    FAS: -6 MAR13 153Calls @$6.20, now $4.00

  39. KO still my favorite long term hold:
    Board Approves 51st Consecutive Annual Dividend Increase
    The Board of Directors of The Coca-Cola Company today approved the Company's 51st consecutive annual dividend increase, raising the quarterly dividend 10 percent from 25.5 cents to 28 cents per common share. This is equivalent to an annual dividend of $1.12 per share, up from $1.02 per share in 2012. The first quarterly dividend is payable April 1, 2013, to shareowners of record as of March 15, 2013.
    The increase reflects the Board's confidence in the Company's long-term cash flow. The Coca-Cola Company returned $9.1 billion to shareowners in 2012, through $4.6 billion in dividends and $4.5 billion in share repurchases, bringing to $24.9 billion the amount returned to shareowners through dividends and share repurchases since Jan. 1, 2010.

  40. Pharm
    Thanks for the link
    Is your portfolio one page ending in THLD wanted to make sure I received completely?

  41. Phil Again your nose for WMT excellent you could make money with that nose ( 8

  42. Hey Phil, you asked me to ask you this week what our thoughts were on the Income Portfolio.  I am interested in playing some long term income portfolio plays and had asked if there was any in the income portfolio that you would initiate today?  Thanks

  43. GDX Burrben – Here is the trade that Phil posted on 12/10:

    GDX is forming a nice kind of bottom and is not a bad way to play the miners.  At $46.37 they have a ton of implied volatility and you can sell the 2015 $45 calls for $9.90 and the 2015 $40 puts for $6 and that nets $30.47/35.26 for a nice 24% discount if put to you (and GDX hasn't been below $40 since 2010 and that was $39.10 for a day) and almost a 50% profit if called away at a bit below the current price.  Let's do 10 of those in the Income Portfolio. 

    That's what we have in the Income Portfolio now.

  44. Thanks for Income Portfolio update, StJ.  If there's one thing that scares me about this market, it's the ridiculous gains we're making on this portfolio – way too much, too soon.  Look at the diversity of stock – all doing great.  That's not normal at all.  

    AAPL/Palotay – No because we did the weekly play last week because AAPL had popped to what I thought would be resistance at $460 but now they've gone the other way and we aren't getting good prices for the sale vs. the risk of them popping again so we're stuck waiting.    

    FAS Money – LOL, that turns around quickly, doesn't it?  FAS now $145 (our original target) with XLF at $17.51 so, if we flatline here, we pick up another $4,000 at March expirations.

    ExtrapolatingVMW/Mill – Super-ugly chart but just selling off with the markets really.  DB came out with a note that CSCO has better stuff and yesterday VMW released their mobility stuff and it fell kind of flat (like BBRY 10) but, overall, they have reported record profits and revenues – just not growing as fast as people would like so they need to settle down.  The April $75 put can be rolled to the Jan $65 put ($6.20) for better than even and those can be rolled to the 2015 $55 puts ($6.20) and if you think VMW isn't worth net $55, then by all means get out but I'm willing to give them the benefit of the doubt at $71 that they might not fall 30% more just because they already fell 30% and the squiggly lines can be extrapolated that way.  

    AAPL Money/StJ – I want to DD but let's just let it play out I suppose. 

    GDX/Burr – Not sure at this point since we play off what's in the Portfolio once it's in there – I don't go back to every comment but the Income Portfolio shows GDX stock bought for $46.37 (now $39.89 on update) instead of the calls (not much difference other than layout) and then the short 2015 $45 caller that was sold for $9.90 and the short $40 putter that was sold for $6 rather than that spread.  I don't have a good way to go back and check back since I'm not at home but it's not the same position so maybe my 12/31 comment was mistaken or maybe, as sometimes happens, StJ pointed out to me that we already had a GDX spread so there was no need for another one but – anyway, if YOU have the 2015 $35/45 bull call spread at $5.50, which is now $4.20 and miles from $3 and if you sold the $35 puts for $3.90 which are now $4.40 with GDX at $38 and still more than 10% over your strike and 20% over your break-even – I'd say get out of a position you clearly have no faith in and no premise for being in other than a comment you read – that's never a good reason to be in a position.  As for our official position – we're back to where GDX has a great entry point for people who missed it the first time. 

    GE/Newt, Yodi – Yep, Opesbridge just got called away on a stock going ex-dividend today and Derrick said "what do we do" and I said "buy it back and sell more calls to another sucker who will forfeit his premium early for us".  Not complicated really.  

    $25KPM/StJ – Where's the minus sign in front of the P&L?   I guess we were a bit bearish at the top – sometimes you don't realize it until you have a sell-off and your portfolio goes up instead of down. 

    First time/Newt – Damn, I haven't had a girl giggle at me in ages….

    PAY/Yodi – Poor guidance. 

    Europe/StJ – Europe's economy is in bad shape?  SHOCKING!!!

    NFLX/Yodi – Thank goodness – I missed the short this week.

    AG/Jomp – Wow.  Did I say, WOW!  That's a story worth digging into. 

    FAS Money/Gbase – Hmm, you're new but you'll learn I don't do anything based on a one-day move unless it's doing the opposite of a rumor or misinterpreted data or earnings.    I think, and have though since we sold the original short calls, that $17.50 was the right price for XLF and I was willing to concede $17.75 but not $18 (as noted often this week and last) so $17.50 is not where I would short but the other side of the .50 channel – around $17.  We already have a few shorts but they were only to offset the calls that were hurting us.  I see you didn't sell those yet so maybe you want to catch up but I'll be a lot more enthusiastic about selling FAS puts if XLF drops .50 more (2.8%) which would send FAS down almost 9% to around $133 and THEN I'd feel good about selling the $120 puts as another .50 drop in XLF to $16.50 would be a place I'd want to be going long again. 

    KO/Rperi – The original SBUX (drinking crack).  In fact, the original formula actually had cocaine in it!  That stock is a no-brainer any time it gets cheap.  

    WMT/Yodi – Speaking of no-brainers.  Rule of thumb there is, if CNBC says it's true – assume it's a lie. 

  45. AG/Jomp,
    Actually,it was just an attn-getting headline – a tongue-in-cheek spoof, much like the 'Friends of Hamas' against Hagel claim was a jest by a reporter to bait the righties that the right wingers swallowed whole and took as a serious item.
    In reality as the world is structured now, you're right but in fact the AAG never said as much

  46. Wow / Phil – How about that story in Rolling Stone:


    That nobody from the bank went to jail or paid a dollar in individual fines is nothing new in this era of financial crisis. What is different about this settlement is that the Justice Department, for the first time, admitted why it decided to go soft on this particular kind of criminal. It was worried that anything more than a wrist slap for HSBC might undermine the world economy. "Had the U.S. authorities decided to press criminal charges," said Assistant Attorney General Lanny Breuer at a press conference to announce the settlement, "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

    It was the dawn of a new era. In the years just after 9/11, even being breathed on by a suspected terrorist could land you in extralegal detention for the rest of your life. But now, when you're Too Big to Jail, you can cop to laundering terrorist cash and violating the Trading With the Enemy Act, and not only will you not be prosecuted for it, but the government will go out of its way to make sure you won't lose your license. Some on the Hill put it to me this way: OK, fine, no jail time, but they can't even pull their charter? Are you kidding?

    There is really a 2 speed justice system in this country – you steal a candy bar in a store you end up in jail for 2 years, you steal $20B, you pay a $1B fine and no jail. The ROI is pretty good no matter how you look at it.

    The entire story is worth a read as it is just incredible what this guys get away with… I could not believe it.

  47. Phil- Her number is 800-???-????

  48. This Google Glass thing is just incredible:

    I don't know what the final product will be but I want one. We'll all look like Trekkies though… 

  49. BBY: is anyone else having a hard BTC the Jan15 $13 put? I've been at since it was mentioned-- 3 days ago….

  50. Pharm
    Link  fixed it received the second page

  51. BBY/ Retract comment. Thanks.

  52. Why the drop in TASR? Everything I can find looks good….

  53. HSBC,
    Breur's justification – saying that HSBC losing its license in the US would destabilize the entire worldwide banking system -is  ridiculous in the extreme. Hopefully, this will be picked up by the media pundits, right and left

  54. Phil // CSCO
    Following up on post from yesterday 
    ""February 20th, 2013 at 4:53 pm
    Phil // CSCO
    Can u reco a good CSCO bull spread. I have a position but I need to restructure it. I was planning on keeping the Jan15 $20p +$2.71 ) as I'm bullish and they havent changed.
    I grabbed this from the Wiki but it may need to be modified ?
    Perhaps a Jan15 $20/25 BLCS ( net $1.88 ) and keep the short $20p ( $2.71 ) for a virtual credit ?
    Frankly, as a long-term entry on CSCO looking to make the same $2,700, I'd just sell the 2015 $22 puts for $3.90 ($3,900) and buy the $15/20 bull call spread for $3.40 and keep the $500 credit for a net $21.50 entry with a break-even at $18.25 and a $5,500 upside at $20 because, if I'm planting a tree and CSCO is below $18.25 and I end up assigned 1,000 shares – I'll be thrilled to sell the 2017 $17 puts and calls for about $5 and drop my net to $13.25/15.13 on as many as 2,000 shares and that trade still makes $3,750 if CSCO claws back to $17 in 2017 on about $5 of net margin, so still a nice annual return – even if it blows up (short of a complete melt-down, of course). ""

  55. Europe down

    UK FTSE -1.6%
    German DAX -1.9%
    French CAC -2.3%
    Italy MIB -2.9%
    Spain IBEX -2.0%

  56. Phil/FAS Money – thanks – still trying to distinguish between 'sell into the excitement' vs. your well-reasoned approach

  57. Net draw in oil means we're done with our oil shorts in both Portfolios:

    11:00 AM EIA Petroleum Inventories: Crude +4.1M barrels. Gasoline -2.9M barrels. Distillates -2.3M barrels. Crude -2.32% at $93.1.

  58. Anyone buying CIM in here ?  This is old news, but Leon Cooperman added 33 million shares the first of February, and now holds 55 million.  He's obviously not concerned about de-listing.

  59. Phil/HPQ – Do you have an earnings play for them?

  60. stj, anyone,
    i saw we closed the bby call ……….i was under the impression we left the put open ……did i miss it……..tks

  61. Income Portfolio/Ging – I'll try to get to some this afternoon.  The only bad thing about visiting CA is I have a whole day of things to do after the markets close and then I only get up around 3:30 or 4 so I'm way behind compared to when I'm home and wake up 5 or 6 hours before the market opens.

    AG/Jomp – That makes me feel better.

    Banks/StJ – As the guy said, are they kidding?  

    LOL Newt!

    Good one Rustle. 

    GOOG Glass/StJ – How come nobody can talk to you on the glasses?  Well, it's great in a commercial but so is a Tricorder.  I'm sitting in an office on top of Beverly Hills in the real world and my IPhone has trouble getting text messages for some reason.  I very much doubt GOOG has suddenly solved all this in a glasses form factor but it's nice to know they have a vision for cool products.  Meanwhile, if AAPL put out a demo like that, their stock would plunge 10% because of projected supply shortages.  8)

    TASR/Rpme – Looks like someone took $8.50 as a good place to get out.  They have a pretty high multiple now so I agree with that guy taking $8.50 and running with the 50 dma at $8.70 as we were at $8 ahead of earnings and the 200 dma is way down at $7 so a 10% gain in 3 days testing the 50 dam is a good time to lighten up.  Now the question will be who wants to buy in at $7.50 or $7?  

    CSCO/Wombat – 2015 $20 puts still $2.80 so nothing urgent to change anyway.  Pair that with the $20/25 bull call spread at $1.80 and the net entry on the puts is $19 and it's the about same trade so what's to change here?  I don't understand, why did I have to read all that and look up CSCO again when all the prices are the about the same?  Did you think I would change my mind in 24 hours?  

    Europe with a nasty sell-off (thanks Kustomz) – will just be nice if we don't follow them.  Fed speak soon too. 

    Dollar 81.40, oil $92.86.

    You're welcome Gbase.  Lots of bad habits to break is the norm.  Was just talking to Derrick about that (our Opesbrdige Fund trader) – you have to get used to ignoring short-term fluctuations in options prices that wreck havoc with your portfolio balances and focus on what things are really worth.  This is almost impossible for TA or Quant traders to deal with.

    CIM/Albo – That de-listing is nonsense.  It's one of the positions that Opesbridge is adding to, even though a bit more expensive than the original entry now.  

    HPQ/Lance – Way too iffy.  If anything, I play them not to fail $16 but only if you want to stick with them if they do.   You can sell the Jan $15 puts for $1.65 and net in at $13.35 with the stock at $16.75 so a 20% discount ahead of earnings and, if HPQ pops to $19 or $20, those puts should drop about 50% very fast so even the short-term reward is quite nice if HPQ takes off so a great play if you REALLY want to own HPQ.  

    BBY/Mill – I'm pretty sure we officially got out and left maybe a speculative bull call spread at most but spreadsheet is from Friday, not covering this week's moves.    

  62. Phil:
    Do you want to roll those next week QQQ's or DD?

  63. Make or break time with S&P 1,500. /ES futures at 1,499 are an easy bull play here with a simply 1,498 stop as our premise is 1,500 index headline holds up.  

    Dollar 81.37, oil $93, TLT $117.08 and VIX 15.57 are our reference points.

  64. Thanks DC – In $25KPs, with QQQ at $66.40 we may as well spend .35 to roll to the conventional March $67 calls, now .67 and we'll them be in 20 of those for net .83 and down just about 20%, which is fine with 22 days to go.  

  65. Phil: I'm in the ANF earnings play discussed a few days ago (short the this week 49 put and Long the Mar 50/47 Bear Put spread). The stock has moved down approx $3.00 since entering the trade.
    I haven't done many plays like this. What's the plan it the stock gaps down tomorrow the full expected Market Maker Move of over $5.00).
    Just trying to think it through and make a plan.

  66. Phil // No Computer ; >
    I can see why you thought that. That date was MY post from yesterday, not yours -so I'm certainly not flipping on you in 24 hours.  Your last entry on CSCO was on Feb13 (copied below)
    Anyway – it seems like we're saying the same CSCO $20/25 BLCS / Short $20p  // thanks

    "Frankly, as a long-term entry on CSCO looking to make the same $2,700, I'd just sell the 2015 $22 puts for $3.90 ($3,900) and buy the $15/20 bull call spread for $3.40 and keep the $500 credit for a net $21.50 entry with a break-even at $18.25 and a $5,500 upside at $20 because, if I'm planting a tree and CSCO is below $18.25 and I end up assigned 1,000 shares – I'll be thrilled to sell the 2017 $17 puts and calls for about $5 and drop my net to $13.25/15.13 on as many as 2,000 shares and that trade still makes $3,750 if CSCO claws back to $17 in 2017 on about $5 of net margin, so still a nice annual return – even if it blows up (short of a complete melt-down, of course)."

  67. Phil
    what is the plan on the tza 10.5/11.00 BCS

  68. BBY / Mill – The Put is still open. We have the short put, a BCS and a short call against it as per Tuesday's post. Prices are not up to day though. That's weekend work!

    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.

  69. Phil / GDX
    I don't know how you are reading into my comment that I "you clearly have no faith in and no premise for being in other than a comment you read "  
    That's a little harsh!  There was a conflict in my positions vs the income port, and for good reason.  There were two different positions in GDX that you both said was in the income port.  But no matter about that……
    I was more asking if this is a good time to either, DD on the short put/bull cs, or roll the options into better positioning in the future.  I'm trying to look ahead here and take PROactive action, rather than REactive action.  Maybe no action is needed.  Maybe there is.  My total cost for the position is 1.77, and the mid is showing right now at -0.28.  Therefore if we still like GDX, and there has been a overraction, I'd like to take advantage.  

  70. China tightening?
    Hence thanks for the gold comment, I put on a long ABX spread instead — it's down from $52 -$54 in Dec. 2011, @ 40%,  looks cheap to me!

  71. phil, stj.
    tks on the bby……

  72. BA a stock we want to continue to hold if the sequester cuts go into effect next Friday?

  73. I am missing mr stick…
    any hope he shows up today to brighten the mood?

  74. StJ
    Thanks for reposting the Income Port. Am I correct that we have no TZA position in the port ? I am still holding the July 10/14 spread. 
    With the present dip the spread simply breaks even – any advice ?

  75. Why the Fed eventually needs to bail on QE-infinity, in its own words:

  76. I'm having some connection problems anybody else?

    ANF/JBur – The plan is to roll the puts, some adjustment may be necessary but we have to see how it plays out.

    Suddenly I'm connected again so I'll get off the iPad.

  77. Muchas problemas de connectivitado.

  78. Phil
    I loss my connection about an hour go for 10 minutes

  79. TZA / Wombat – We still have the Jul 10/14 BCS in the Income Portfolio. It's tough to go through it because we have a lot open. Maybe I should sort them in alphabetical order…

    That BCS is obvioulsy coming back to us now but might be needed if we keep on selling.

  80. Phil:
    At about 1:00PM I could not get on the site at all. This is what Greg said when I inquired. (email)
    "Should be back up. We had a major spike in traffic for some reason and it overloaded us until our host could pick up the slack.

    Should be back now."

  81. BA/ Rperi: military is only 30ish% of revs and they have a good pipeline of other sources of income. I had the same comment a few weeks back.

  82. The spike in traffic must be the Chinese.  It was a matter of time until they infiltrated PSW!
    Trying to steal Phil's secrets.

  83. Yes there are some connection problems, even in Mexico!!
    I wish to make some comments on the portfolios which are running now.
    It looks to me that some members consider the recommendations and the positions given in the portfolios like it is the bible.
    I feel one should not blindly follow all recommendations like sheep but make your own decission on entering a trade as well as the quantities you are using.
    Each person has it's own tollarance for risk and should not take these portfolio suggestions as the book of roles,
    scrutinizing what this or this person has said.

  84. CSCO/Wombat – Ah, that makes more sense.  Still, same prices, same trade – 2 weeks old out of 2 years is not likely to change our strategy.

    TZA/Willie – Plan?  If the market stays down you cash in .50 as we're already at $11.  When you take a vertical spread like that you are very locked in on the expiration date – it rarely pays to get out of them early.

    BBY/Stj, Mill – That's right we cashed out and arb'd the buy-out.  

    GDX/Burr – Sorry if you thought it was harsh but 2015 trades are not things we usually worry about day to day.  No action since it's about where it was.  Generally, with a DD, you want to AT 20% DOWN, decide you WILL DD if it falls to 40% down (as opposed to stopping out at 20%).  Then there are 3 possibilities – it goes up and you are back on track, it goes flat and you have your cheap entry and then you risk a 2x assignment again when you roll things to next year – it goes down and you DD as planned.  We like GDX but the whole market is dropping, gold is dropping and the Dollar is rising and the VIX is rising etc. – do you really think this is a good day to DD?

    China/ZZ – They cannot afford to have a real estate bubble.  ABX is super-cheap. 

    BA/Rperi – I think priced in.  

    Stick/Jabob – Fed comments didn't help, not sure what will.  

    RUT hitting 899 on futures.  Below that is bad.  S&P failed and now 1,496.25 and /NKD testing 11,200 now but it's the RUT I'd look to play over 900 if the Dow holds 13,800 (now 13,816 on /YM) and /NQ holds 2,700.  If someone at a hedge fund desk, for example, were to add 5 /TF long contracts at 899 with a stop at 898.50 and we get move back to 900 or better – that would pay for a very nice dinner this evening!   

    TZA/Wombat – Was there last time I looked.

    Traffic/DC – That's why we just went through a whole thing to move to the cloud.  Shouldn't be happening.

    Chinese/Grant – Ah, that must be it….

  85. Phil we might have hit a rain cloud (8

  86. Speaking of TZA, that 10.5 call we have left in both KP portfolio is now good for 220% gain and around $4000. I would say that needs to be watched.

  87. Great point Yodi!

    In case you guys didn't pick up on the subtle hint – I'm teaching Derrick how to trade Futures.   /NKD also a good one now that it's testing 11,200.  11,250 was good for a quick bounce earlier.  /NQ quickly back to 2,704 so a good sign there and Dow 13,826 with /ES (S&P) at 1,496.75 with the Dollar now 81.53 and the Euro at $1.3175.   

    Goaaaaaaaal on RUT already as it crosses 900 for a quick $500.  

  88. TZA/$25KP, StJ – Take the money I say.  We can always go back in with a proper spread.  See, who needs Futures when we have ultras?  



  89. Thx newt, Phil.  Spike in CZR – online poker bill moving forward in NV.

  90. AGNC and NLY down today might be a good time selling some puts!

  91. BA taking off in flight again 76$

  92. StJ /Phil TZA
    Thanks StJ – and I wouldn't worry about the alphabetizing, the date is more important ( at least to me )
    I do have a rather amateur question – I noticed that in the other ports the TZA calls are naked, and in the Income port they're a spread. 
    Speaking of TZA, that 10.5 call we have left in both KP portfolio is now good for 220% gain and around $4000. I would say that needs to be watched.

    I bring this up because, as Phil has said over and over again, this is disaster insurance, so if we're the least bit concerned about a correction or getting toppy – shouldn't these be naked calls as well ?
    Curious you're thoughts //

  93. And, by the way, that $500 also more than pays for the AC conference fee!  

    1:15 PM Midday top 10 gainers: CBMX +115%WH +85%PRKR+48%RPRX +31%CLRX +26%MKTG +23%ALIM +20%JAXB+17%BRY +17%CBR +15%.
    Midday top 10 losers: PAY -39%GENT -23%EBIX -23%PATK-16%XRSC -16%. CMGE -16%CHLN -16%RBCN -15%RFMD-15%ANTP -14%.

    January Existing Home Sales4.92M vs. consensus 4.90M, 4.94M previous.

    Jan. Leading Indicators: Leading Index +0.2% to 94.1vs. +0.3% expected, +0.5% prior. Coincident Index +0.4% vs. +0.2% prior. Lagging Index +0.4% vs. +0.7% prior .

    February Philly Fed Business Outlook: -12.5 vs. +1.0 expected, -5.8 previous.

    The Bloomberg Consumer Comfort Index rises to -33.4 from -35.9 last week. It's the 3rd consecutive gain and the February increase has erased all of January's slide. The economy "getting better" segment shows little improvement, remaining at 29%, well off the cycle high of 37% in November (36% say it's getting worse). Little movement in unemployment, higher taxes, and gasoline pricesup $0.44 in 5 weeks may have something to do with that.

    The VIX (VXX +4.2%) stretches its 2-day gain to 53%. Do the sharpest drops (in stocks) happen in bull markets? This would bethe 12th time since 1991 the VIX has spiked more than 25% in 2 days with the S&P above both its 50 and 200-day moving averages, says Jerry Khachoyan.

    The countdown begins to the Fed trotting out members to walk back yesterday's FOMC minutes after the big miss on the Philly Fed Index. New Orders fell to -7.8 from -4.3. Prices paid 8.9 vs. 14.7. Six-month indicators actually improved though, rising to 32.1 from 29.2, the 3rd consecutive increase. (full report)

    In a bit of a wonky presentation, St. Louis Fed chief Bullard says one measure suggests current policy is far easier than what the Taylor Rule would mandate, and an argument can be made for rate hikes as early as August. His own personal forecast, he says, would see unemployment falling to 6.5% and mandating higher rates in June 2014. Stocks are at session lows, whether from the suggestion of imminent hikes or the realization the Fed has little more clue than the man on the street.

    "If the hawks aren't even daydreaming about ending the program, QE will continue with a long time," writes Adam Button. His comment comes after Dallas Fed chief Richard Fisher – never a supporter of asset purchases – tells Reuters (video) he supports tapering QE "sooner than later," but only if the economy keeps improving. 

    The hawks have made some noise, now the doves get their say: QE is providing the economy a "much needed boost" and will be required deep into 2013 H2, says the San Francisco Fed's John Williams. "Unemployment is far too high and inflation is too low … We need powerful and continuing monetary accommodation." Stocks are bouncing, but just a hair.

    Bill Gross (BONDweighs in on the debate following the FOMC minutes, saying Pimco estimates January 2014 as being the end date for QE. As for the stuffed balance sheet: "(The) Fed will never sell what they now own."

    The long bond continues to climb, now up more than a full point since the FOMC minutes yesterday. When the Fed got hawkish in 1993 after a long period of ease, bond prices collapsed. Now they gain? It seems as good of a tell as any that the economy is not ready to handle tighter policy (see Hoisington). TLT +0.7%.

    Roughly 2M homeowners moved back above-water on their mortgages last year, according to Zillow. A national home price rise of 5.9% would hardly seem enough to move that many, but price gains were far larger in the hardest-hit markets. Indeed, Zillow finds the biggest number of those moving above-water were in Phoenix, LA, and Miami.

    The AAII Investor Sentiment Survey for the week ended yesterday (before 2 ET or after?) shows bears adding 3.8 points to 32.5% – above the long-term average of 30.5% for the first time in 7 weeks. The additions came out of the neutral camp, as bulls were essentially unchanged at 41.8%.

    "I am as bearish on stocks as I have been in some time,"writes Doug Kass. "Much of the current investor optimism expressed in a rising stock market is not consistent with the underlying economic and profit data," he continues, saying the exact same thing David Einhorn said on the GLRE earnings call yesterday.

    Spain's fiscal consolidation has "gained traction" says Fitchfollowing news the country's deficit/GDP ratio fell below 7% in 2012 (excluding the cost of the bank bailout). Just for the record, the target as per agreement with the EU was 6.3%. The only thing gaining traction may be Rajoy's efforts at lowering expectations. EWP flat YTD.

    Strong performance in the financial sector (XLF) since last summer has been almost completely concentrated in the big caps, says Bespoke, but small and mid-cap financials have begun to show relative life over the past couple of weeks. Another strong sector – materials (XLB) – has been led by the smaller stocks, but everything has fallen off a cliff recently.

    Casino stocks prove as skittish as ever to Macau-related news, this time dipping with Asian markets weak on the day and aNYT article highlighting the threat of a new gambling mecca in the Hainan region of China. Decliners: MGM -3.2%MPEL -3.5%WYNN-2.3%LVS -2.8%.

    First came yesterday's more hawkish Fed comments, and today it's rising U.S. crude inventories, as crude oil prices tumble another 2.5% to ~$93/bbl. on top of yesterday's similar losses. The uptrend in oil markets is now "firmly broken," according to VTB Capital's Andrey Kryuchenkov. XLE -1.1%OIH -2%XOP-0.8%USO -2.1%UCO -4.1%OIL -2.1%USL -1.5%BNO -1%.

    Shares of oil refiners have gushed higher over the past year, but so have earnings – meaning the stocks may still look cheap. "It's a circular formula," Oppenheimer's Fadel Gheit says: Belief that the refiner boom will end keeps investment low, which strains capacity and keeps the boom running. Analysts have underestimated refiner earnings for six straight quarters, and they still are. (also)

    Until inventories increase on the U.S. east coast, refiners are likely to continue making handsome profits and their share prices likely will continue rising, Paul Ausick writes. Eastern refinery closures are contributing to a short supply of gasoline; the difference is made up by gasoline imports from Europe, where refiners are bidding up the Brent spot price to acquire crude to refine and send to New York.

    Not heard on Chesapeake's (CHK -0.9%) conference call: Aubrey McClendon. In another sign of change, CHK said it hashedged 50% of its projected 2013 natural gas production; a year ago, it hadn’t hedged any of its gas for 2012, and was clobbered as prices tanked. CFO Dominic Dell'Osso reiterated CHK's commitment to pay down debt, but still with $12B in long-term liabilities, Credit Suisse fears CHK may be backing away from its earlier $9.5B debt reduction target.

    This is why we never chase:  Solar stocks are taking a breather (TAN -4%) amidst reports the EU and China are nearing a solar trade war.  With China in the midst of a leadership transition and commerce minister Chen Deming expected to step down, EU officials assert "there is no clarity on what the new leadership thinks about trade." The EU haslaunched an investigation of anti-dumping complaints levied at Chinese module makers, and China has responded with an investigation of EU polysilicon vendors. YGE -7.9%CSIQ -7.5%.SPWR -6.5%TSL -7.5%. (Tuesday)

    Chrysler (FAITY.PK) increased global sales by 12.7% in January with the Fiat brand performing strong in Brazil. During the month, Latin America passed Europe to become the automaker's number two region by sales.

    Though Tesla Motors (TSLA -9.2%) CEO Elon Musk is taking the hardest loss today on the automaker's tumble in share price, Daimler (DDAIF.PK) is also suffering with its 4.7% stake in TSLA making it number two on the list while Toyota (TM -1.1%) also has a stake. Interestingly, Musk says he won't ask the big boys for more money but will fund Model X SUV production through profits. Look for issues of Tesla cash flow to be a major topic in 2013. (transcript)

    Safeway (SWY +13.5%) rallies after beating analyst profit estimates by a wide margin with its Q4 report. Though margins are still razor-thin, the grocery store operator managed to keep same-store sales growth in positive territory. Even better, execs noted that same-store sales rose 2% duringr the first eight weeks of Q1 as the company's loyalty program gains favor with customers.

    Grocery store stocks rise after Safeway's earnings report lifts sentiment. Supervalu (SVU +1%), Kroger (KR +3.4%), and The Fresh Market (TFM +1.5%) are all higher, but no relief for Whole Foods Market (WFM -0.4%) – stuck on the wrong side of the consumer discretionary spending line.

    Jack in the Box (JACK +7%) rallies after posting a strong FQ1 report. The company pulled off the earnings triple play as it struck a balance of lowering expenses without disrupting same-store sales. The Qdoba chain showed some signs of life during the period, improving same-store sales by 1.5% despite increased competition from Taco Bell and Chipotle. 

    The glass is definitely half empty for retail analyst Rob Wilson as he digests Wal-Mart's (WMT) earnings report and soft guidance. He notes FQ4 makes 9 out of 11 quarte

  94. The glass is definitely half empty for retail analyst Rob Wilson as he digests Wal-Mart's (
    WMT) earnings report and soft guidance. He notes FQ4 makes 9 out of 11 quarters the retailer has seen inventory growth outpace sales and wonders why the company is so quiet about its online business. Remember the Mexico affair? FCPA expenses in FY12 marched from $17M to $58M in Q4 without skipping a beat. In the big picture, is the big spend on marketing and pricing paying off in traffic and profits? WMT +1.3% premarket.

    Wal-Mart read-throughs: The giant accounts for close to 10% of all of retail sales, so when WMT speaks people listen. According to its earnings call (transcript .pdf), baby formula (MJN) and energy drink (MNST) sales were up strong at Sam's Club. No big surprise, but office electronics and video games (TTWOATVI) were weak.

    Shares of Deckers Outdoor (DECK -5.8%) trade weak in contrast to other shoe sellers that are outperforming on the day following a decent quarter from Crocs. Though the heavy short position in the stock is always in the background, on the fundamental side demand for Uggs is also worrisome. (Google Trends chart)

    Goldman Sachs maintains its Buy rating on Crocs (CROX+4.4%) following the retailer's solid Q4 report. The firm thinks the spring season could be positive for the company with its track record of good execution during the period.

    Sony (SNE -2.6%) continues to slump following its PlayStation 4 event. The company's failure to reveal pricing info or actual hardware has drawn criticism, and some aren't impressed with the graphics improvements relative to the PS3. AMD (AMD -4.1%), later confirmed as the PS4's CPU/GPU supplier, is also lower, and so is GameStop (GME -1.7%) – though Sony promised not to blockused games, the PS4's support for on-demand purchases via Gaikai might be weighing on shares. Activision (ATVI +0.4%) is outperforming a bit after announcing Diablo III will be released for the PS4. (previous)

    It's a crushing blow for NBC (CMCSA -1.9%) as the networkfinishes fifth during the important sweeps week for the first time in its history. That CBS, ABC, and Fox would beat NBC was well-telegraphed, but a slip below Univision was a bit more painful for execs to take. The post-Olympics ratings rush is long over as the network hangs on by a thread as it waits for a return of The Voiceand Revolution to its lineup. 

    On its FQ2 call, Cisco (CSCOboasted its VCE JV – 58%-owned by EMC, 35%-owned by Cisco – is now on a $1B+ run rate. But as ZDNet's Larry Dignan observes, Cisco and EMC's latest 10-Qs (III) indicate the JV has generated huge losses since its '09 inception. EMC claims a $430M cumulative loss for its stake in VCE, and Cisco a $325M loss. Last year, Gartner estimated VCE generated $222.9M in sales (+53% Y/Y) in Q2 '12 for its costlyVblock server/storage/networking systems.

    The French government is thinking of taking a minority stake in Alcatel-Lucent (ALU -5.6%), Bloomberg reports, while adding other options are on the table. The government, which has already taken an active interest in the struggling telecom equipment maker, has also reportedly considered encouraging a merger with Nokia Siemens NOKSI), and is said to be interested in safeguarding ALU's patents (which the company has been trying to monetize). (previous)

    Shares of Verifone (PAY -38.5%) continue their plunge as one analyst downgrade on top of another piles up after the company'spreliminary FQ1 earnings report comes in dismal and Square hits the market with a new point-of-sale system. Amid the abandonment of the stock, SunTrust comes clean: "We are simply at a loss to explain such a huge miss."

    Google (GOOG +0.1%) roundup: 1) Eric Schmidt visited China to court local developers. Though Android has a dominant Chinese smartphone share, monetizing that usage has been tough, especially since many of those phones use rival search engines. 2) Google is reportedly talking with eyeglass vendor Warby Parker about making Google Glass, referred to by one critic as a "Segway on your face," more fashionable. The report follows a new demo video for Glass. 3) Ad spend on the revamped Google Shopping is32.7% more effective than Amazon (AMZN) ads, according to CPC Strategy. (previous) 

    Apple (AAPL -0.9%) roundup: 1) David Einhorn has scheduled a 2PM ET call to discuss his preferred stock proposal (webcast). Ahead of the call, he asserts the proposal is "a lot better" than a standard dividend or buyback hike. 2) As iWatch rumors grow, AppleInsider uncovers an Apple patent for a watch with a flexible touchscreen and a spring that allows it to conform to a user's wrist. 3) AU Optronics (AUO) has reportedly resolved its iPad Mini panelyield issues, and is working on the next-gen version. It might not be a coincidence the Mini is now listed as "in stock" on Apple's site.

    Apple (AAPL -0.7%) rises slightly as David Einhorn makes his case for a preferred stock distribution (webcast). Einhorn imagines Apple issuing one or more "iPrefs" with a face value of $50 to to shareholders for each common share owned. Each iPref would pay a $0.50/share quarterly dividend, and would be publicly traded. The iPrefs would yield more than Microsoft and IBM's long-term debt, and the Fed's zero interest rate policy "creates enormous demand for safe income," Einhorn argues. (live blog)

    Apple's (AAPL) out and AIG's in at the top of Goldman's VIP list - 50 stocks appearing as top holdings at hedge funds. 117 funds own the insurer, with 80 counting it as a top 10 holding. Apple is a top holding in 67 funds, down from 109 in Q4. Also slipping ahead of Apple is the next putative $1,000 stock, Google.

    Three lunchtime reads:

    1) Chasm opening between weak French and strong German economies

    2) Fed's commitment in question

    3) Five dangers set to trip a 100-year bear market

  95. OK, now the resume of our regularly scheduled ramp program.  Good riddance and good night.

  96. TZA / Wombat – We ended up with a naked call in the other portfolios as part of a spread to begin with. In the Income portfolio it's a $4 spread with 100 contracts so potential for a $30K insurance and that's plenty. And the BCS should lose value slower than the naked calls. 

  97. FTR – not a bad day to sell some puts..

  98. Keep on smoking PM and MO going up WITH smoke!!!!

  99. Virtual short strangle portfolio update -
    OK stjeanluc, your prediction of a drop this week came true and here we are, starting to sell the put side:
    - Sell 15 RUT Mar 800 puts for $1.05, Buy 5 RUT Mar 805 puts for $1.15
    - Sell 15 SPX Mar 1360 puts for $1.625, Buy 5 SPX Mar 1370 for $1.85
    This is an initial sell, more to come later if and when the market drops some more.

  100. Looks like this was the break we needed:

    Until today, the S&P 500 had been trading in overbought territory (greater than one standard deviation above its 50-day moving average) since the first trading day of the year.  Today's continuation of the big decline we saw yesterday has finally pulled the S&P back into neutral territory.  As shown below, eight of ten sectors are now neutral as well, whereas last week nine of ten were overbought.  The only sectors that remain overbought are both defensives — Consumer Staples and Utilities.

  101. Let's also prop AAPL up:
    - Sell 10 AAPL Mar 410 puts for $1.96, Buy 10 AAPL Mar 395 puts for $0.95
    Now, see if PSW could move the market

  102. CZR/Rperi – Thanks – there's another trade that pays for the conference! 

    REITs/Yodi – Especially with the high VIX.  Selling puts is perfect for people with ordinary or PM accounts. 

    • NLY 2015 $13 puts can be sold for $1.85, which is a year's dividend. 
    • AGNC 2015 $28 puts fetch $5.70 and that is more than a year's dividend.

    TZA/Wombat – That because, in the Income Portfolio, they are long-term insurance that cover a pretty drastic drop.  As we're not short-term traders there – we will ride out a dip and only are concerned if there is a sustained drop, which the spread would pay off on.  In shorter-term portfolios, we want shorter-term payoffs – like the $25KP money we just took off the table.  In the Income Portfolio – do we want to take a profit today and leave the portfolio unprotected?  No way – so we don't gamble and we just buy our quarterly long-term insurance policies.  

    And what StJ said.  

    FTR/Scott – Thanks, earnings are today.  Simple play on FTR is the April $3.50/4 bull call spread at .30, selling $4 puts for .35 for a .05 credit on the .50 spread.   This is a straight bullish play, of course but if we risk owning 1,000 shares for net $3.95 ($3,950) as the worst case (and then we would sell 2015 $3.50 puts and calls for $1.50 and net out at $2.45 and enjoy our .40 dividend for two years), we can collect a very quick $550 so I like it but too much stuff in the Income Portfolio and too long-term for $25KPs so just a good earnings idea that a more flexible hedge fund might like to try.  

    Oversold/StJ – Wow, that was quick – very bullish sign. 


  103. Phil or stj Did we close the Mar SDS play??

  104. Peter : good eyes.

  105. SDS/Yodi – I don't know if it was an official play certainly should be closed at this point along those Russels

  106. FWIW I am getting some very very bearish signals, including this regaining lines says bounce. Only been on line 30 minutes but that is what I came back to.

  107. Obi-One Kinobe waves his hands at Imperial Bears and says: "This is not.the sell-off you've been looking for."

  108. Peter: is this where the long position is used to decrease/ remove PM on the trade? LIke in IRAs?

  109. Peter D:  Is this correct??   Sell 15 RUT Mar 800 puts for $1.05, Buy 5 RUT Mar 805 puts for $1.15

  110. Phil
    Don't you expect the typical overreaction to the sequester BS next week? Whether it's real or not won't some outfit be happy to use it to enter the market at better prices? And your thoughts on TLT after the minutes.

  111. newt & mjjwo9b,
    Yes, I don't know how deep this correction would eventually be, so I'm getting some long puts as hedges.  Instead of selling 10 contracts of naked puts, I sell 15 and buy 5.  It's not the same as IRAs, where we would need to cover up all the shorts to be able to save on margin (same or higher number of shorts than longs).

  112. Sorry, typos should be "same or higher number of longs than shorts"

  113. spoke to soon… Lamont

  114. Wow, what a comeback on the Dow.  

    Did you see what we did to FTR?  

    These days just fly by in CA.  

    H-P (HPQ +2.8%) has jumped in afternoon trading amidst reports David Faber is at the company's HQ to cover this afternoon's FQ1 report. Some speculate a breakup announcement is on tap. Shares have traded in a pretty narrow range over the past month after rallying strong in the prior weeks. (earlier)

    Let's see how our Build a Berkshire Workshop is doing (I wish!):

    Still, this is why I love the Fund – as we get bigger, we can have Buffett-like fun.  

    /NKD back to 11,280 – good for $400 per contract off that 11,200 line and no, we don't keep it overnight!!!  

    Sequester/DC – I think it's assumed and baked in at this point.  The actual event will cause a sell-off, of course, but nothing big, I would think.   On TLT, I just think we're not ready to go lower (higher rates) so moves will be made or hints will be dropped to get it back over $118 to about $120 very soon.  

    Oops, now it's all going down again for the same no reason.  Someone selling into Mr Stick's close…

  115. Hey, a chance to get more for AAPL already.  Sell 5 AAPL 410 puts for $2.31, Buy 5 AAPL 395 puts for $1.09.

  116. peter: Thanks

  117. So, we were looking for 13,800, 1,496, 3,160, 8,860 and 896 and we got 13,871, 1,501, 3,130, 8,816 and 906 so no 3 of 5 under and we did test 13,834, 1,497 and 900 so we will watch closely again tomorrow. 

    Dollar 81.475 at the bell.  Oil $92.92, gold $1,576.  

    AIG kicking ass with earnings – maybe too good to be right. 

  118. Peter D, good to see you again.  With the VIX so low it has been very difficult selling short strangles!   Can you give any insite into why you are buying 1 long to every 3 shorts on the RUT and SPX?  Is there anything significant about the strikes widths?  5 points on the RUT and 10 points on the SPX?  Are shooting for a delta?   Also, i would guess your plan is if the market rebounds, to sell the call side when the market is higher and if it goes lower to scale in to a larger position?   Thanks.

  119. Interesting figures about AAPL:


    Of course, investors should really be looking at Apple's cash as a percentage of its overall market cap, and below is a chart showing this ratio going back to 2000.  With Apple's stock declining from $700 down to the mid-$400s over the last few months, its market cap has fallen by nearly $250 billion.  This has pushed Apple's cash as a percentage of market cap up to 33%.

    While you might think this is high, back in the early 2000s, Apple's cash as a percentage of market cap was above 50% for years.  And during the financial crisis, Apple's cash got as high as 37%.  Just something to be aware of as you hear all these calls for Apple to do something with its loot.

    Looks to me like selling the AAPL Jan 15 225 for $5.35 for $5 of PM margin for 100% returns in 2 years is like the lock of the century! By then they will have the $225 in cash anyway.

  120. HPQ play?  Note HPQ in a weekly downtrend following the 50 Weekly SMA since 2011…tonights spike puts price right up against the 50 again (18.32)…PHILhow would you play this?  outright short or some puts?
    Note, I just became a premium member over the weekend and trying to follow along here.  I finally dove in for membership as I was always anxiously awaiting Phil's posts on Seeking Alpha…made some money on some ideas that were still valid.  I am a full time trader after retiring from wall street after 25years.  Hello everyone!

  121. Welcome Dawnr…. Hopefully the handle doesn't reflect your feelings about the market!

  122. CNBC buys "Nightly Business Report". So NBR will become just another MSM mouthpiece:

  123. I like this quote:

    “There is nothing intelligent to be said about gold. Nobody can tell you the right price for an ounce of gold. People will tell you it should go up or go down. To make any intelligent statements about investments you have to know what the right price is. You can’t do that with an asset like gold, which doesn’t produce any cash flow. So you can buy it out of superstition or ignore it because you are an atheist but you cannot buy it with an analytical foundation.”

  124. Howdy robert,
    Good questions!  We already have the short calls that we sold last week in the virtual portfolio, betting that the market goes down before we sell the puts.  We followed up by selling the puts today.
    Why 3 to 1 ratio?  Well, we usually do 2 to 1, but since we don't know when we'll get another chance in March expiration to sell more, we may as well sell 3 to 1. Plus, we are a bit confident that RUT won't go to 800 in 3 weeks.  If it does, then we do have the margin to roll the shorts away from the money.  Why $5 on RUT and $10 on SPX?  That's usually what we do and we try to buy the cheapest possible long puts compared to the shorts, so we'll have $5 cushion if it makes sense.  Sometimes we go for $10 on the RUT if that makes more sense and there is no $5 strikes in between.
    Lastly, I don't really look at Delta when selling short.  Sounds strange, huh?  I just look at support and resistance lines.

  125. The masters of the universe could not make any money if it was not for taxpayers subsidies:


    Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.

    The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. – - account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry — with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

    Too Big to Make Money?

    And don't you love how they strut around like they are such geniuses at finance… We basically pay their salaries just like we do for teachers and cops. Just 1000x more for less work!

  126. I like it when these idiots talk about free-market solutions:

    While most Americans view their healthcare system as “free-market,” Switzerland actually has the most market-oriented healthcare system in the West. It translates into universal coverage and low entitlement costs. Swiss government entities spent about 3.5 percent of gross domestic product on healthcare in 2010, compared to 8.5 percent in the United States. That’s a difference of more than $5 trillion over 10 years: real money, especially relative to our $16 trillion debt.

    When the facts are:

    Do they know that the Swiss health care system has an individual mandate? Do they know that the Swiss health care system has arguably more regulations, such that they can’t even charge a 25 year old and an 80 year old a different price (like you can in Obamacare)? Do they know that the Swiss health care system regulates drug prices and fees for lab tests and medical devices? Do they know the most someone can pay for insurance in Switzerland is 8% of income (which is less than Obamacare allows)?

    Just like the Chilean model for retirement… Or the Estonian miracles. Kudlow posted an article in NRO the other day when he said that spending had averaged 19% of GDP historically (and they were higher anyway) so that we were too high now. But forgot to talk about revenues that are at 15% of GDP when historically they are at 19% as well. And also forgot that we are getting older so spending will creep higher as more people need retirement benefits. But these are facts so his mind can't process them. Idiots!

  127. /NKD back to 11,360 now!  Not a bad pick from this morning at $5 per point/per contract….

    By the way, for those of you wondering if you can trade Futures – TOS says margin requirement is $1,760 per contract – not too awful and I don't think the account I'm looking at has any special rate.  

    In general, Futures are up about 0.25% with the Dollar calming down at 81.32 and the Euro back over $1.32. 

    AAPL/StJ – Just a cash machine.  Of course they IPO'd, got a ton of cash, spent it, then made money and then the stock crashed and that drove up the ratio unnaturally but I think the main point is it doesn't last – it's too much cash to equity and somethings gotta give so either the cash has to go or the equity has to rise. 

    HPQ/Dawn – Welcome!   At 12:26 our play was just to sell the puts as they were an excellent price.  Also, note in our Income Portfolio (above) that we've been short 2015 $15 puts for quite some time and, in fact, banging the table for people to buy HPQ was a major part of our Las Vegas conference in November.  SO – you're assumption that I would short them just because you cast your bones and see some squiggly lines in the sand is a false one.  HPQ beat the crappy estimates 

    Hewlett-Packard (HPQ): FQ1 EPS of $0.82 beats by $0.11. Revenue of $28.36B (-6% Y/Y) beats by $570M. Expects FQ2 EPS of $0.80-$0.82, above $0.77 consensus. Expects FY13 EPS of $3.40-$3.60, above $3.32 consenus. Shares +5.1% AH. (PR) 

    More on H-P's FQ1: FY13 guidance is unchanged, but the Street might believe it now. PC sales -8% Y/Y, better than FQ4's -14%. Printing -5% (even with FQ4) – consumer hardware -13%, commercial -6%. Enterprise hardware -4% (-9% prior) – high-end servers -24%, x86 servers -3%, storage -13%, networking +4%. Services -7% (-6% prior), op. margin just 1.3%. Software -2%, license revenue -16%. R&D -13% Q/Q to just $794M (2.7% of revenue), SG&A up slightly. $253M worth of buybacks. HPQ +6.4%AH. CC at 5PM ET (webcast). (PR) 

    There are no plans to break up H-P (HPQ), Meg Whitman insists during the FQ1 call. Speculation about a breakup had picked up ahead of H-P's report. Management bragged on the call of of PC share gains (esp. in the U.S.), a printing mix shift towards high-margin ink relative to hardware, and improved channel inventory. However, EMEA server sales are said to be "tepid," and total sales to the region fell 11%; Americas -3%, Asia-Pac +1%. PC pricing remains tough, and Itanium server and non-3PAR storage demand continues to plunge. Shares +4.8% AH. (live blog) (more)

    As a pro trader, I think I will ask you what your rationale would be for shorting a stock where the underlying company estimates and has demonstrated that it is on track for earning $3.50 per $18 share (20% per year) AND GROWING?  So no puts and no short calls from me as they will be well over that big red squiggly line in the morning and than it's on to a more reasonable p/e, like 6, which will put them at $19, at least.    In the morning, we can look at BULLISH plays on HPQ.

    NBR/Rexx – Very sad.  

    Gold/StJ – I don't completely agree.  At $250 or less it's conductive properties make it worth using in many things so, to me, that's a logical minimum.  Then you have the general demand for it as jewelry and gifts that have to take it up near $1,000 but, after that – you are certainly in La-La Land. 

    Great point on Banks, StJ – I wouldn't mind so much if the very same guys didn't go on TV and scream about how other people and industries should learn to get off the Government payroll.  Switzerland also noted – just another version of the Conservative Fantasy Camp examples they love to keep trotting out – even though it actually proves the exact opposite point, once you actually check into it.

  128. PSW // Network problems ?
    The security firm, Mandiant, also published this video showing Chinese hackers in action:

    Our analysis has led us to conclude that APT1 is likely government-sponsored and one of the most persistent of China's cyber threat actors. The scale and impact of APT1's operations compelled us to write this report. In an attempt to bolster defenses against APT1 operations Mandiant is also releasing more than 3,000 indicators as part of the appendix to this report, which can be used with our free tools and our commercial products to search for signs of APT attack activity.
    Highlights of the report include:

    APT1 is believed to be the 2nd Bureau of the People’s Liberation Army (PLA) General Staff Department’s (GSD) 3rd Department, which is most commonly known by its Military Unit Cover Designator (MUCD) as Unit 61398.
    APT1 has systematically stolen hundreds of terabytes of data from at least 141 organizations.
    APT1 focuses on compromising organizations across a broad range of industries in English-speaking countries.
    APT1 maintains an extensive infrastructure of computer systems around the world.
    In over 97% of the 1,905 times Mandiant observed APT1 intruders connecting to their attack infrastructure, APT1 used IP addresses registered in Shanghai and systems set to use the Simplified Chinese language.
    The size of APT1’s infrastructure implies a large organization with at least dozens, but potentially hundreds of human operators.
    In an effort to underscore that there are actual individuals behind the keyboard, Mandiant is revealing three personas that are associated with APT1 activity.
    Mandiant is releasing more than 3,000 indicators to bolster defenses against APT1 operations.

  129. 'throw some bones around'?  welcome indeed…
    Phil I am a technical trade-swing and scalp, not an investor and not a fundamentalist.
    I rely on supply and demand levels and yes, my little squigly lines are an odd enhancer that tells me HPQ is in a long term downtrend hitting a weekly level.  sure tomorrow we may get some overshoot with price poking head above 50 but I will be looking for weakness to go short.

  130. Welcome dawnR!

  131. At the close: Dow -0.31% to 13885. S&P -0.63% to 1502. Nasdaq -1.04% to 3131.

    Treasurys: 30-year +0.4%. 10-yr +0.18%. 5-yr +0.09%.

    Commodities: Crude -2.4% to $92.94. Gold -0.1% to $1576.4.

    Currencies: Euro -0.75% vs. dollar. Yen -0.49%. Pound -0.12%.

    Market recap: Stocks eased off lows as Fed doves struck back against hawks, whose talk of a possible earlier than expected end to stimulus had prompted yesterday's losses and today's early weakness; a sour reading on manufacturing from the Philly Fed had piled on to early concerns. The Dow was aided by Wal-Mart, whose earnings beat estimates. Gold futures eked out a gain; crude oil lost 2.5% to $92.84.

    Pouring it on in the Q&A session, the San Francisco Fed's John Williams suggests a rate cut – even to negative territory - is possible. Earlier, Williams hit back at all this talk about a premature end to QE. Stocks are still red, but continue a late bounce.

    Stan Druckenmiller – who's made reining in the budget deficit a cause since giving up compounding others' funds at a remarkable pace – tells CNBC the "hype" over the puny $85B sequester is "a joke." 

    Economic Optimism vs. the Sequester (Rational Irrationality)

    GOP’s complaints about looming spending cuts ignore its role in creating them (McClatchy)

    More on AIG Q4 earnings: Book value/share (excluding AOCI) of $57.87, +15.5% Y/Y. P&C division loss of $945M thanks to $2B Sandy hit – the company posted an operating profit of $290M even with that. Premiums written of $7.8B, flat Y/Y. Life and Retirement income of $1.1B vs. $912M a year ago. Conference call at 8 ET tomorrow. Shares +3.7% AH. (PR)

    Wells Fargo (WFC +1.3%) is a rare big-cap in the green, with news Warren Buffett added 17.3M shares to Berkshire's stake in the company (total now 439.8M) not hurting. Wells has now surpassed Coca-Cola as Berkshire's largest holding.

    Smaller Hedge Fund Managers Outperform: A Study of Nearly 3,000 Equity Long/Short Hedge Funds (All About Alpha)

    Warren Buffett's favorite economic indicator:  Industrial packaging stocks gained today on reports Georgia-Pacific plans to raise its price for containerboard by $50/ton this spring, which likely would be followed by price hikes from peers. Industry consolidation and tightening inventories have given producers more pricing power going into spring and summer when demand for shipping cartons usually increases. IP +3.1%RKT+4.5%PKG +4.1%KS +1.7%

    Within a decade solar will be cheaper than coal. Within 2 decades, cheaper than gas (Atlantic)


    Newmont Mining (NEM): Q4 EPS of $1.11 beats by $0.14. Reports Q4 attributable gold and copper production of 1.3M oz. and 35M lbs., respectively, at average realized prices of $1,700/oz. and $3.22/lb. Shares +2.3% AH. (PR)  Newmont Mining (NEM) says it increased net gold reserves by 400K oz. to 99.2M oz. in 2012, and reports copper reserves of 9.5B lbs. NEM says 2.9M oz. of gold reserves were added at the Merian project in Suriname, and 2.6M oz. of gold inferred resources were added at Long Canyon in Nevada. - That's $160 BILLION in reserves!

    CIBC economists believe many of the forces that made gold so attractive appear to be turning over, while expectations for other supportive factors are overdone. They say investors have piled into gold as a hedge by incorrectly buying into the myth that central banks have been printing so much money that inflation is inevitable, "a myth because, in reality, money growth has not been particularly brisk." 

    More on Marvell: FQ1 guidance is for revenue of $700M-$740M and EPS of $0.12-$0.16, somewhat favorable to a consensus of $707.8M and $0.13. FQ4 EPS beat assisted by $283M in buybacks. Company says it gained hard drive controller share (atLSI's expense?). Gross margin was 53.2%, +90 bps Q/Q and -130 bps Y/Y. Opex +9% Y/Y, above rev. growth of 4%. MRVL +4.5%AH, shares have been depressed for a while. CC at 4:45PM ET (webcast). (PR)

    F5 (FFIV) is burnishing its mobile credentials ahead of next week's Mobile World Congress. This week, the company has announced: 1) Mobile App Manager, a cloud-based solution for managing access to corporate apps/data on iOS/Android devices. The solution, which competes with offerings from many other IT software firms, addresses security issues related to the BYOD trend. 2) The latest version of its traffic signaling software for 4G networks. The software, stems from F5's purchase of Traffix Systems, and addresses a booming market.

    Hewlett-Packard (HPQ): FQ1 EPS of $0.82 beats by $0.11. Revenue of $28.36B (-6% Y/Y) beats by $570M. Expects FQ2 EPS of $0.80-$0.82, above $0.77 consensus. Expects FY13 EPS of $3.40-$3.60, above $3.32 consenus. Shares +5.1% AH. (PR)

    Frontier Communications (FTR): Q4 EPS of $0.06 misses by $0.01. Revenue of $1.23B (-4% Y/Y) misses by $10M. Expects 2013 free cash flow of $825M-$925M and 2013 capex of $625M-$675M. Shares +0.3% AH. (PR)

    Google (GOOG) officially unveils the Chromebook Pixel, a touchscreen laptop meant to take on the MacBook Air and Windows 8/RT ultrabooks and convertibles. Whereas existing Chromebooks are typically low-end systems running on ARM CPUs, the Pixel starts at $1,299, is powered by an Intel (INTC) Core i5 CPU, and sports a 12.85," 2500×1700, touchscreen display The Verge calls "absolutely gorgeous." Two shortcomings: The device offers only 32GB-64GB of storage, and there's still a shortage of Chrome OS apps. (earlier) 

    Learning to Love Investment Bubbles: What if Sir Isaac Newton had been a Trendfollower? (Social Science Research Network)


    Source: MIT Technology Review

    50 Years Ago: The World in 1963 (The Atlantic)

  132. Just kidding Dawn – although I am very anti-TA, of course.  Long-term, you can't shake me off bullish on HPQ.  Short-term – I would not want to be the sucker paying premium on a bet they will continue to be priced like they are going BK either, so I won't be able to help much with a bearish set-up – other than to say – I super-duper wouldn't.

  133. Stj: Gold addendum:  Aside from its conductive properties and jewelry demand [although related to the latter], gold has enjoyed thousands of years of transactional value.  Its particular value in water, fish or coconuts at any given time may vary, but it's unalloyed history of acceptance as a medium of exchange, related to it's relative scarcity, has put a floor on its value in any given epoch which is more or less inversely related to transactional value of the more ephemeral media of exchange — dollars, Euros, Renminbi, bills of exchange, mortgage bonds, wampum [shells beads], and what have you.
    The oldest civilizations, like Egypt, were based primarily on barter, but in the tomb of Rehkmire [ca 3500 BC] there is a scene called "the paying of the taxes" in which "debens" of gold of about 1/4 pound, oxen, bows, linen, silver, oxen and pigeons are being levied.  I  would conclude that the price of gold at any given time is no more a LaLa Land number than the price placed on the paper pledges of your average overstretched sovereign government to the effect said promises might someday be redeemed for something edible or useful. 
    I would suggest that is merely Howard Marks who has failed to say anything intelligent about the value of gold, having missed the blindingly obvious point that the near-universal acceptance of gold in trade is a superstition that I'll bet he shares, and is based on an analytical foundation which is comparatively speaking far more solid that most of the curious paper instruments that modern governments pawn off on the unsuspecting public.  One can indeed buy gold with the most solid of analytical foundations — millenia of acceptance in payment for the necessities of human existence by both the devout and atheists alike.  That poor Howard is not willing to invest in it because he can't determine it's "correct price" on the basis of it's dividend yield is a character flaw that might someday find him wandering around the deck of a sinking Carnival Cruise Liner unsuccessfully offering soggy shares of IBM to an unsympathetic crewman for a seat in the last lifeboat casting off from its awash main deck.

  134. zero / gold:
    You could argue that we have become totally disconnected from the transactional value of gold . How many gold pieces for an ox? Less than a millennia ago that would have been a much easier question to answer.

  135. Good morning!

    Nikkei 11,450 – I guess we should have held them overnight!  Well, now the Russell is the laggard – we'll see if there's a good play on that later but only 908 on the Futures (/TF) now could get interesting if the Dollar breaks lower. 

    Futures up about half a point but Bullard's on CNBC and just said Fed's policy is easy and will stay that way for a LONG time!  That should be good for a pop.

    Stanley Druckenmiller: "We Have An Entitlement Problem" And One Day The Fed's Hamster Wheel Will Stop.

    Nirvana, Creditopia, And Why Central Banks Are The Devil.

    Dollar 81.51, oil $93.14, gold $1,579, silver $28.76, copper $3.55, nat gas $3.25 and gasoline $3.07, never really dropped with oil (good for refiners as the crack spread widens).  

    Copper Uncoils as Economic Worries Stalk Markets. Copper prices are unraveling as global economic uncertainty returns to haunt risk assets. After an optimistic start to the year, Europe's recovery hopes were dashed by weak manufacturing data; there are fears the U.S. sequestration will undermine growth, and China is showing signs of weakness. And the minutes from the last Federal Reserve policy setting meeting showed divisions about when the central bank may start to wind down its bond-buying program

    Very good chart:  The Global Risk Landscape For 2013.

    Italy's voting is this weekend and the Euro is reacting to the uncertainty at $1.318 so that's keeping a lid on things.  Spain, meanwhile, is in the middle of a corruption trial:

    The graft allegations roiling the Spanish elite may edge closer to the head of state, King Juan Carlos, when his son-in-law and a senior palace official testify in court on corruption charges. Inaki Urdangarin, a former Olympic handball player married to Princess Cristina, is due to answer questions in Mallorca tomorrow as part of a private prosecution where he has been named as an official suspect on six counts including fraud, embezzlement and money laundering, a court spokeswoman said. Magistrates on the tourist island will also question Carlos Garcia Revenga, the princess’s personal secretary, who is also a suspect, she said.

    More important, China had a bad day/week:

    Shanghai Composite Heads for Weekly Loss; Autos Lead DeclineChina’s benchmark stock index fell, heading for its steepest weekly loss in five months. Automakers and metal shares slid, while consumer-staples shares advanced. SAIC Motor Corp., the biggest automaker, climbed 2.2 percent, adding to a five-day loss of 9 percent. Chinese stocks dropped this week on concern government policies to curb gains in property prices may damp demand for autos, bank loans to construction materials. New home prices rose in most cities the government tracks in January, a government report today showed. Kweichow Moutai Co. led a rally for liquor makers. The Shanghai measure has dropped 4.4 percent this week, heading for the biggest loss since September.

    China Home-Price Gains May Presage Policy Tightening: EconomyChina’s new home prices rose in most cities the government tracks for a third month, adding pressure on leaders to intensify policy-tightening efforts to prevent asset bubbles and inflation as the economy rebounds. Prices climbed in January from December in 53 of the 70 cities, compared with the previous month’s 54, which was the most since April 2011, according to data today from the National Bureau of Statistics. Ten cities showed declining prices and seven were unchanged. 

    Is This the Start of China's Tightening Cycle? "The very fact that the PBOC (People's Bank of China) conducted the draining operation is a hawkish signal. Clearly, the central bank is trying to send a message that it will not tolerate too easy liquidity conditions," Dariusz Kowalczyk, senior economist and strategist, at Credit Agricole CIB said.

    India Profit Growth Curbed by Slowing Economy, Kotak SaysIndia’s slowest economic expansion in a decade is limiting profit growth at the biggest companies even as foreigners remain net buyers of the nation’s stocks, according to Kotak Institutional Equities. Earnings-per-share (SENSEX) for the 30 companies making up the benchmark S&P Dow Jones Sensex Index in the year ending March 31, 2014, will probably be 1,320 rupees, 2 percent below previous estimates, Sanjeev Prasad, co-head and senior executive director at Kotak, said yesterday in Mumbai.

    The fear-mongering is rampant in the media and it should be as bearish positions are now at their breaking point (20%) where the next step is margin calls.  The way we were burned on FAS Money and GOOG short calls is what's happening to many funds and there are people who will do anything – ANYTHING – to try to stop the market from making the next level.  

    That pullback was not satisfying to the bears so you'll see a parade of doomsayers on CNBC today as who is more bearish than Conservatives, who have been betting since November that Obama will wreck the economy.   Now it's only 8 months to the next election and they risk losing control of local Governments if, God forbid, millions of people go back to work, health care gets cheaper, we cut back on military spending without the World blowing up and the deficit shrinks.  

    I mean, really, what's their platform going to be – let's go back to the good old days?  

  136. Tried to post earlier but had problems with Google Docs!

  137. Friday's economic calendar:

    10:15 Fed's Rosengren participates in panel on "Crunch Time: Fiscal Crises and the Role of Monetary Policy"

    4:19 AM Some European bourses add to gains after the IFO index improves more than expected and following sharp losses earlier in the week. Asian shares were mixed in the wake of poor overnight economic data from Europe, with China closing sharply lower for the week as the government tightens monetary and housing policy. Japan +0.7%, Hong Kong -0.5%, China -0.5%, India +0.3%. EU Stoxx 50 +1.1%, London +0.7%, Paris +1.3%, Frankfurt +0.7%, Milan +1%, Madrid +0.9%.

    6:00 AM Overseas: Japan +0.68%. Hong Kong -0.54%. China-0.51%. India -0.04%. London +0.75%. Paris +1.25%. Frankfurt+0.55%.

    6:49 AM There's a little green on the screen as overseas markets try to lead the U.S. out of a couple days of losses. S&P 500 +0.5%, Nasdaq 100 +0.4%. Europe +1.7%, Japan +0.7%. 

    6:59 AM The Shangahi Compositie slides another 0.5% overnight, leading the index to its worst weekly loss (4.9%) in almost 2 years. They call this a "healthy correction" in the business – the decline comes following a 24% rally since Dec. 3. CAF - which outperformed [[FXI][] by a wide margin on the way up - gave up ground this week on the way down. 

    8:00 AM On the hour: S&P +0.53%. 10-yr -0.02%. Euro -0.06% vs. dollar. Crude +0.37% to $93.19. Gold +0.08% to $1579.8.

    Two days of losses is apparently enough: Ben Bernanke shrugged off concerns the Fed's policies are fueling asset bubbles at a meeting earlier this month, reports Bloomberg, citing anonymous sources. Does Jon Hilsenrath have the day off?

    St. Louis Fed chief Jim Bullard appears to be back on the reservation, leading off his CNBC appearance by telling the gang Fed policy is very easy and going to remain so for a long time. Bullard made a few headlines (he likes them) yesterday, saying one model suggests a rate hike could come this summer. 

    U.S.-focused stock mutual funds regain favor with inflows of $924.6 mln -Lipper.

    The European Commission cuts its 2013 outlook, predicting the economy will contract by 0.3% this year before returning to growth of 1.4% in 2014. The EC had forecast the economy would expand 0.1%, but tight lending conditions and record unemployment – which is expected to peak at 12.2% – have dashed any hopes of a recovery this year. With inflation seen falling to 1.8%, pressure could rise on the ECB to lower rates.

    The euro loses its Ifo-induced bounce after the European Commission cuts its 2013 eurozone growth forecasts and is now-0.1% vs the dollar. The EC also predicts that the recession will cause Spain, France and Portugal to miss their deficit targets, with Spain's shortfall to widen to 6.7% from 6.3% in 2012 rather than drop to the country's goal of 4.5%. (Map of country forecasts) 

    German IFO business climate rises to 107.4 in February from 104.3 in January and vs consensus of 105. Current assessment 110.2 vs 108.1 and 108.5. Expectations 104.6 vs 100.6 and 101.3. The euro jumps vs the dollar and is now +0.3% at $1.3234.

    Germany achieves its first general government surplus in five years, with "net lending" coming in at €4.2B, or 0.2% of GDP. Central and state government cut their deficits considerably, while the surpluses of local governments and social security funds increased sharply. (PR)

    EU banks will repay €61.1B of the 2nd LTRO next week, far less than the €122.5B expected by analysts. The news suggests banks are a little less confident than the U.S. money market funds that have begun lending to them again. The euro (FXE) dropped about half a cent on the news, now flat at $1.3185.

    Bundesbank looks ahead to ECB "exit" as LTROs repaidA bumper return of 3-year loans to the ECB would boost the case for it exiting crisis mode, a top Bundesbank official said ahead of Friday's news on how much banks will hand back at a repayment window next week.

    EU regulators are reportedly looking at reaching a settlement with banks over the rigging over inter-bank interest rates, although some firms don't want to open talks, as they believe that allegations of wrongdoing have no merit. The EU is carrying out three separate probes into at least a dozen banks and inter-dealer brokers.

    The Bank of England can’t just go on doing down the poundDevaluation has now become an end in itself at the Bank of England – but it’s no panacea and we risk a lost decade like Japan.

    Italian markets are calm ahead of an election on Sunday and Monday, although the rise in the polls of Silvio Berlusconi's Freedom Party – it's second with 30% – has been unnerving investors over the past few week. And while the expected winner is the center-left Democratic Party, its projected 34-35% wouldn't be enough to form a government. FTSE MIB +0.5%, 10-year bond yields -4 bps to 4.45%.

    The Rise of a Protest Movement Shows the Depth of Italy’s Disillusionment. For months, he has been shouting his way from piazza to piazza, drawing tens of thousands as he rails against tax collectors, corrupt politicians and financial speculation. And when he arrives in Rome on Friday for the final campaign rally of his “Tsunami tour,” Beppe Grillo, the Internet-savvy comedian turned populist rabble-rouser, may lead Italy’s third-most popular party.

    Chinese new home prices climbed in 53 out of 70 cities in January on a monthly basis, increasing expectations that the government will continue tightening policies that have caused Chinese stocks to fall sharply this week. Shenzen led the way, with an increase of 2.2% in December, while prices in Beijing and Shanghai rose as well. 

    Along with China renewing its push for property curbs is Hong Kong which last night doubled to 8.5% the transfer tax on property costing more than $258K (likely about 100% of transactions!). This comes following an earlier move to widen the transfer tax to include commercial purchases. EWH +1.9% YTD.

    China Ministries Consider Steps to Curb Overcapacity. China is considering measures to curb overcapacity and "blind expansion" by companies, including limits on energy consumption and differential power prices, citing a person familiar with the matter. The National Development andReform Commission, Ministry of Industry and Information Technology, Ministry of Finance, Ministry of Land and Resources and Ministry of Environment Protection will work together on the measures, according to the report.

    Official austerity hits China's high-end catering business hard. High-end catering companies across China have seen a substantial drop in business since the central government launched new rules to combat extravagance, wastage and corruption in December, said Shen Danyang, spokesman for the Ministry of Commerce on Wednesday at a press conference. Restaurants and function centers in Beijing have seen a 35% decline in revenue, those in Shanghai a 20% decline, and those in Ningbo in the eastern province of Zhejiang, a 30% drop, according to a survey. Sales of prestigious dishes including bird's nest and abalone also saw a 40% fall during the Lunar New Year holiday, known locally as Spring Festival. The sale of shark fin has fallen 70%. Luxury hotels have seen a 45% drop in sales of their gift boxes and sales of premium spirits including Moutai and Wuliangye have also been hit hard.

    White House: keeping close eye on spiraling gasoline prices.

    First Solar (FSLR-2.1% premarket as Pacific Crestdowngrades to Sell and Cowen is cautious ahead of earnings. The company finds itself in a Catch-22, says Cowen – without new business capacity will need to be shut, but any new bookings are likely to be low-margin.

    Morgan Stanley (MS) makes another shopping mall investment in Russia in a year with one of its funds buying a Moscow shopping mall. Terms are undisclosed, but the deal's value is estimated at more than $1B. It's a significant amount – Russian commercial real estate sales were just $5.9B in 2012's first 9 months.

    Oppenheimer upgrades Home Depot (HD) to an Outperform rating due to what it sees as strong housing trends. The firm raises its price target on shares by $9 to take it to $76. HD +1.2%premarket to $65.15.

    The increased pace of hiring by the Big Three (GMF,FIATY.PK) automakers is another sign that the resurgence in the U.S. car industry is just getting start. The key to the turnaround is demand. Consumers emboldened with widespread access to credit are set to replace their gas-guzzling older cars, according to's Jessica Caldwell. 

    GM (GM) intends to invest $7.3B in its South Korean operations over the next five years to improve its manufacturing and engineering capabilities, and double the size of its design center at its HQ in Incheon. The plan runs counter to recent speculation that GM was intending to reduce its presence in Korea, including with production and job cuts.

    Boeing (BA) is expected to today present a redesign of its 787 batteries to stop them overheating as it looks to persuade the FAA to allow the Dreamliners to resume passenger flights, hopefully next month. CEO Jim McNerney tells the WSJ that Boeing is confident it has identified "all probable causes" of the battery failures. United Airlines (UAL), though, has taken the 787 off nearly all its schedules through June 5. And remember the fuel leaks on a Japan Airlines 787? Investigators reckon the cause was the coating of a mechanism that controls the movement of fuel between tanks.

    Budding refinery giant Delta Air Lines (DAL) receives its first shipment of Bakken crude at its Pennsylvania oil refinery. The crude will be refined into jet fuel for use on Delta's planes. 

    Credit Suisse downgrades Wendy's (WEN) to Underperform from Neutral due to valuation concerns following the stock's mini-rally this week. Higher commodity costs and a cautious consumer spending are broader themes in play in the restaurant sector.

    Herbalfe (HLF) could reportedly end its relationship with one of its top 49 salesmen as the company tightens its sales-generation rules amid controversy about its business model and how sales leads are made. A sources says the development is a serious one, although Herbalife downplays it.

    Goldman Sachs (GS) has become ensnared in the investigation into the suspicious trading of Heinz (HNZ) options ahead of the announcement of its $28B buyout, with the account that carried out the trade owned a "private wealth client" of the bank. Goldman, which hasn't been accused of wrongdoing, said it doesn't have "direct access" to information about who owns the account. Given Swiss secrecy laws, the SEC will have a job finding out.

    Nordstrom(JWN) store expansion, e-commerce plans dent profit forecastNordstrom Inc on Thursday said it would spend far more money this year on building out its e-commerce capacity and expanding its chain of discount Rack stores, leading to a profit forecast that disappointed Wall Street. 

    Abercrombie & Fitch (ANF): Q4 EPS of $2.21 beats by $0.26. Revenue of $1.47B misses by $0.02B. Shares +1.9%premarket. (PR)

    Shares of Abercrombie & Fitch (ANF) move up 3.8% in premarket trading after the retailer beats estimates with its Q4 report. Retail analysts thinks the tight inventory position and the first dividend hike in years from the company just might suggest it's low-balling its guidance. 

    Vodafone (VOD) CEO Vittorio Colao continues to act the tease over the carrier's intentions with regards to its 45% stake in Verizon Wireless, telling the WSJ that he doesn't know if the U.S. operator's ownership structure will be the same in a year's time. Verizon Communications (VZ), which owns 55% of Verizon Wireless, would "love" to take control, but the latter provides over half of Vodafone's adjusted operating profit. 

    Former Vodafone Europe chief Michel Combes has been named Alcatel-Lucent's (ALU) new CEO, effective April 1. Combes, whose arrival will end Ben Verwaayen's tumultuous 4 1/2-year reign, is also joining Alcatel's board. Separately, Alcatel is naming former Nortel/Bell Canada CEO Jean Monty vice chairman, effective immediately. The appointments come as rumors of possible mergersasset sales, and government investments continue to fly. (PR)

  138. Samsung (
    SSNLF.PK) has made corporate sales a "top three priority" for its mobile-phone unit, but while it has a 16% market share vs 50% for Apple (AAPL) and 10% for BlackBerry (BBRY), security concerns exist given Samsung's use of Android. To help overcome those fears, Samsung has teamed up with GD (GD) to get Pentagon approval, while it's also poached execs from rivals and mobile-security companies.

    Frank Kendall, the Under Secretary of Defense for Acquisition, has authorized the Pentagon's purchasers and program managers to start talking to suppliers about the plans for implementing $46B of automatic cost reductions, which are due to take effect next Friday. The impact of the cuts will be exacerbated by the DOD not receiving an appropriation for this year, with much of its money in the wrong accounts.

    HERE IT IS: David Einhorn's Massive Presentation On What Apple(AAPL) Should Do.

    Three breakfast reads: 

    1) Hewlett-Packard Is A Fallen Angel That Can Double In 3-5 Years 

    2) Major U.K. Outlets Hike BlackBerry Z10 Price Above iPhone 5 

    3) Merck: The Most Undervalued Company In Pharma 

  139. Thank you to the user who directed me to the optrader tab that focuses on TA and explains Phil's 'personality'.  Believe that forum more appropriate for my style.
    Interesting that the comment is no longer in the string an hour later…I guess Phil did not agree with your take on HPQ in a long term downtrend…
    Phil, HPQ 3-5 years not my time horizon, looking for a trade for few days.  I do like HPQ at lower levels.  I can post articles this morning that say it is a value trap and oh, just this morning Mizuho changed their rating to under perform $8-$14…but you know what they say about wrestling with a pig…you both get muddy and nobody wins.