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Whipsaw Wednesday – Once More Unto the Breach, Dear Friends

DBC WEEKLY"Or close up the wall with our English dead" is the 2nd part of that quote.  

It's not a rally when the commodities sector is in free-fall, is it?  Not even Henry V could rally the materials sector but perhaps we'll find a bit of support at DBC $25.50 that we didn't find at $26.75 – just two days ago.  We've been bottom-fishing the sector with individual miners (see this morning's Tweet from our Member Chat) but, so far – there's no bottom (Midsummer Night's Dream's lead character notwithstanding).  

As you can see from Dave Fry's chart, DBC hasn't broken down like this since last May so, of course, no one could have expected it to ever happen and, of course, it's the end of civilization as we know it and these stocks will just keep going down and down and down and will never recover because – this time is different! {end sarcasm font} 

It's very hard to be a fundamental investor because we have to look at charts like this and say "so what?"  While instructive in letting us know how far TA people can be pushed to panic on PRICE – it doesn't change the VALUE of what the ETF holds.  Which is, in the case of DBC, 27% oil, 13% heating oil, 14% gasoline, 7.5% gold and the rest is mostly agriculture and other metals.  We are NOT buying DBC yet, but it gives you an idea of why materials stocks are in the tanker and why we are liking them down here.  

RUT WEEKLYBUT, the problem for the the market is – how can we have a proper rally when commodities are collapsing?  As I noted to Members last night – gold is already so cheap that we were eating it for dessert on my cruise last week and, if it goes any lower, The Donald will have to find something more expensive to decorate his house with – it's just getting silly at $1,350.

Not that I'm a huge fan of gold, it's just that I perceive a certain fundamental value to it based on supply, demand and the rate and cost of additional extraction that says this should be a good bottom for shiny bits of metal.  

The fact that, at the moment, one guy is selling some of his shiny metal in a hurry and causing a temporary imbalance in the market doesn't change the actual VALUE of the gold – just the PRICE of the moment.

Of course (and this is what we were talking about in Chat) if you are one of those people in a hurry to unload your shiny bits of metal at any PRICE, then the price you will get at the moment will suck.  This is why we always want to avoid being in situations where we're FORCED to sell things (or buy things for that matter).  Unfortunately for many gold bugs, who were leveraged to the hilt, that's not the case.  So, we can join them in selling or we can wait out the deluge and pick up some bargains of our own.  

SLV WEEKLYIt's not just gold, of course: silver, copper, iron, rebar, rubber, oil, corn, wheat…  Apparently the human race has suddenly stopped using all of those things and has no plans to resume using them in the future – according to the current PRICE of the commodities and the Materials sector that produces them

Actually, the energy sector (XLE) still isn't really buying into $87.50 oil and is priced ($75.74 yesterday) near it's 5-year high at $80.  $90 was the 2008 top when oil was $140 per barrel – and then both fell to $40 between October '08 and March '09 and that's why we haven't been buying energy stocks – yet (we're still short XOM, in fact) – those are nowhere near as tempting as the miners. 

We, of course, were predicting the dive in oil since it was over $100 and, as recently as March 14th, we were discussing what a scam oil was at $93.50 and discussed how we were using the Futures to make very nice profits below that line.  In fact, on March 12th I had suggested right in the morning post:

If everyone reading this post simply agrees to sell them (the NYMEX pump crew) 10 barrels for $93+ and then doesn't let them cancel the contract – we can flood the US with oil and crash the market – giving us a whole summer of low gas prices – wouldn't that be fun? 

As I had pointed out that morning, there were 165M barrels scheduled for April delivery at the time and now, just 30 days later, my plan would have netted a profit of $6 per barrel for $990 Million.  Maybe some of you did take my suggestion to heart – it really is that easy to break the bank at the NYMEX because it is a total scam.

So we shouldn't be "concerned" about the economy just because oil is getting  more realistic in pricing.  In fact, falling oil prices can offset a lot of other inflation but, for the moment, things are falling in lock-step as traders aren't actually so sophisticated that they can differentiate one commodity from another (hence these ETFs that bundle them all up).  

Gasoline has fallen from $3.25 on March 12th to $2.75 this morning and, if those prices hold steady, that .50 per gallon (if it ever gets passed down to consumers by greedy refiners) drops another $6Bn a month into consumers pockets and, in fact, we bottomed out at $2.44 last summer so, hopefully, oil is not done falling yet but a bit greedy for us to look for profits below the $87.50 line without a proper downside catalyst.  Anyway, I think as long as we keep our group profits under $1Bn, we don't have to declare them because – as Leona Helmsely said: "Only little people pay taxes."  

ceres 4Speaking of taxes, Quartz notes that US taxpayers are now subsidizing Climate Deniers to the tune of $885Bn a year on hurricanes alone.  That's the cost of cleaning up the environmental mess caused by global warming as we leave those poor polluting businesses alone in the "free market."  It's kind of stunning how stupid the American people are, really.  They vote as if there are no consequences to destroying the environment and allow businesses to destroy it and then the same voters complain when the Government needs money to clean up the mess.  

“Climate change is fundamentally changing the United States, and American taxpayers are paying a huge price for it.” 

It reminds me of the refrain from 1960's environmental/anti-war anthem "Where Have All the Flowers Gone" – "When will they ever learn?"  50 years later – it looks like "never" is the unfortunate answer.  

Big Mac CPI IndexThis morning's market collapse started with a bad German Bond Auction.  We had a bad bond auction in the US last week so it shouldn't be a surprise that no one is willing to accept these ridiculously low returns on their money in what is CLEARLY and inflationary environment.  Now that this austerity idiocy has been proven to be a false dogma based on bad statistics, perhaps Europe will wake up and do something about their MASSIVE unemployment problem and THAT would get the Global inflation train running full force.

But not until "THEY" finish flushing all the retail suckers out of commodities – of course.  

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  1. Oil Lines

    R3 – 91.59
    R2 – 90.34
    R1 – 89.51
    PP – 88.26
    S1 – 87.43
    S2 – 86.18
    S3 – 85.35

    Yesterday's high and low – 89.09 / 87.01

  2. FYI, for gold I have R1 at 1406, PP at 1377 and S1 at 1350.

  3. Speaking of gold, another great post on Barry's site – for your goldbug friends:


    2. The price of gold cannot fall, it can only be manipulated lower: When gold’s price falls, it is an unnatural act. It can only occur as the result of an international cabal of Central Bankers and politicians. Its a conspiracy, and we know who the guilty parties are.

    5. Central Bankers are printing money relentlessly, and this can only drive Gold prices higher: NOTE: You must ignore, for the moment, that Gold has not gone higher for the past 2 years as Central Banks around the world have ramped up QE. This only means that ultimately, Gold will go much much higher.

    6. Gold works whether the economy is good or bad: When we have a red hot economy, Gold is your hedge against inflation. When we have a bad economy, Gold is a safe harbor against collapse. It is a one way trade that never fails!

    7. Gold will survive after the world economy crumbles: Gold is the ultimate currency, as it has a value that will survive even after the whole world tumbles around you. Get yourself some gold coins and a Glock and you will be just fine when the whole world goes to shit. We welcome the era 

    11. Gold is always rallying in one currency or another: Sure, it may be down 30% in Dollars, the reserve currency it is priced in, but you can always find a currency falling faster than it does and claim you own it in that denomination. Last week, it was up in Japanese Yen. This week, it is up in Zimbabwe dollars.

  4. Phil – if my memory doesn't fail me, your previous price target on gold was $1200 – don't you hope that we have a way to go on this?  That price also corresponds nicely with the price targets that some have on the miners, – Morningstar has ABX "consider buy" at $15.60 and CLF  at $12.60 – I mention this cause I have noticed in the past that your valuations usually correspond nicely with what they come up with…

  5. Good Morning!

  6. stjean – Gotta love those gold buggerers….. :)

  7. phil,
    your thoughts for the following rehab ..

    im short the apr 162 gld put 10x..been rolling since jan or so……

    my net in is about 3 $ or so and current price is 29 or so…….my way of being long gld…so net -26 or so…
    i cant get anything by rolling and was hoping you could rec a way to play using same dollar exp or going out six months or so.  and being in a position where i am selling premium and using it vs just rolling month to month…i.e. a new bcs and selling lower puts etc….
    tks for your thoughts….

  8. Gold / Jerconn – I doubt that they push gold down to $1200 as miners would start shutting down higher costs mines at that price which would be bullish for the commodity. The True-all-in mining costs are getting closer to that $1200 number.

  9. Good morning! 

    Gold/StJ – Reminds me of my logic that I'd rather have 1,000 water filters in my basement ($10,000) than 1,000 gold coins ($1.4M) as my price for a water filter when the World collapses will be at least 1 gold coin (and only if I think it's easier to trade for a cow than my water filters).   And, of course, I will point out to newer Members my favorite economic cartoon that pretty much says it all for those situations:

    Gold/Jercon – I thought $1,200 ($1,150 actually) was the bottom of the range if we failed $1,550 last summer but that was $3,000,000,000,000 of QE ago.   I think there's a bit better support than that – figure that's +10% global money supply so $1,300ish should hold.  That doesn't mean we can't panic to all sorts of silly levels but moves like this rarely last.  I'm still working on the theory that "THEY" are flushing out all the weak hands ahead of the rampant Global inflation data that's getting harder and harder to contain and, once we get into that cycle – it's going to be very tough to buy the things that are being given away at the moment.  Unless, of course, this time IS different….

    I tweeted out the official exit to our $93.50 short on oil – just to make sure everyone is clear about that.  $97.50 is better than our $98.50 goal and I hate to let myself get caught up in the moment as we were pretty damned sure of that target as well.  As I've said, if Memorial Day demand is a bust – then all bets are off to the downside but this whole commodity sell-off is pretty overdone when KO, JNJ, GWW, WWW, CSX and MAT are all beating so far this week.  

    There are plenty of misses and I still think the rally is about done here and we may get a correction, but the commodities are acting as if the Global economy already collapsed AND that nobody is willing to do anything about it.  

    What's the short story of the Rogoff dispute (austerity figures)?  That the rational that countries can't function with 90% debt to GDP is BS.  Of course, Japan has been proving that for a decade, as I have often said, but no one wanted to dispute a couple of Harvard Professors.  Turns out not only was their data selection prejudicial but the didn't even calculate it correctly.  Now the whole thing will be revisited, Austerity will fall out of favor, Krugman will get another Nobel Prize for being the only guy with the balls to stand up to these idiots, I will once again by ignored for saying the same thing and NOW maybe we can make some real economic progress as the Keynesians come out of the woodwork. 

  10. Looking at a new position in ABX – buying the share at $19 and selling Jan15 18P and 20C for $7

  11. Ok I will say it FU AAPL

  12. AAPL down on CRUS comments.

  13. 7 days to earnings…

  14. How's the morning going?  Excellent…QQQ puts are a double.  Take 1/2 off and the rest are a free ride!

  15. ABX has not worked well here! But one trade that is working well is the QQQ calendar. The long calls have lost only $100 but we have now sold about $5600 of short calls against them.

  16. RIG/Phil: Wow, looks like RIG 2015 $35 puts are going back to your old Income Port sell recommendation of $3.10 (its around $3.15 now).  Do you still like that as a short put sell price?

  17. CRUS earnings a 'canary' for AAPL earnings?…..

  18. WMT surely has no down draught up .20 78.90

  19. It looks like AAPL is buying ABX and CLF!

  20. Really AAPL has over 100 per share in cash – so we are saying $300 for the company. I did really well buying when it was back at $350. 

  21. DAX down close to 2%. Biggest loser in Europe, their 10 year also hit a record low 1.28%.

  22. GLD/Mill (what a popular topic!) – It's dangerous to flip bearish on gold and start selling premium when gold could bounce up $130 in a day as easily as it fell.  10x sound like a lot, especially with GLD at $133.75 so basically, the question is, how do you make $30 on gold, right?   Unfortunately, you're so deep in the money that even a roll to 2015 only takes you to the $159 puts and that's a whopping amount of margin to hold onto.  Much as I HATE to say ABX again, I just looked at GDX (which has the benefit of not being able to go BK) and the 2015 $30 puts can be sold for $6 and I do like that play but GDX DID fall all the way to $17.50 in 2008 so it could happen again and you have to consider whether or not you could ride that out.  Note that your put-to price on gold is $130 and your put-to price on GDX is $24 so you can sell 5x $6 and actually have a lower net exposure than you have now (and probably less margin).  ABX, on the other hand, bottomed out at $13 and now $18.77 so a bit closer to bottom and you can sell the 2015 $20 puts for $5.20 for net $14.80 and that means you can sell 9 of those for every 1 GLD put for the same net cost if put to you.  The danger is, of course, that ABX really does implode and become worthless.  I can't make that call – I'd probably do 1/2 of each but my heart is with ABX. 

    When and if the ABX $20 puts drop from $5.20 to $3.70 (the price of the $18 puts), I'd take that $1.50 and buy something like the 2015 $20/30 bull call spreads for $2 and then you have $10 of upside if the trade ultimately works out and you won't feel like it was a total waste of time.  Also, that then gives you the ability to sell some front-month calls for income whenever you feel we are getting a bit toppy.  Same goes for GDX and that one is less likely to jump up on you as it's diversified (thought the sector does tend to move in lock-step).  

    AAPL $413 – WTF?  Wow, the media is really on the attack this morning:  

    Amazing how all this bad news just happens to come in bunches, right?  Nothing to do but ride this storm out, unfortunately – this could be the run to $400.

    Dollar flying back to 82.50 not helping any.  

    SOX right back at Monday's low (423), so watch to see if that holds – along with all Monday lows, of course.  

    VIX nowhere near as worried yet, just 15.56.  TLT 122.67 also short of $123 but not much. 

  23. Tomorrow are the big earning guns:

    UA is tomorrow morning and it's not a big name, but they move about 7.5% on average. Options are pricing about a 6% move now. Consensus is for $0.03 but the whisper number is at $0.05 which would be a big beat. But they are up 10% in the last 10 days so maybe baked in already. Not sure there is a play there.

  24. Sorry, I now have UA releasing Friday morning, not tomorrow!

  25. FCX at 3 year lows.  Of course, it bottomed at $9 in Dec 2008… 

  26. Yodi – Aren't you glad you didn't sell your weekly AAPL 405 puts at $0.58! They are $4.50 now…

  27. AAPL better have great earning numbers next week! The consensus number now is for $10.35 but the whisper number is at $11.77. To put things in perspective, last April they earned $12.30.

    If they only meet the consensus number it could be painful!

  28. TZA/Phil or Stjean:  Did we ever close the May 38/44 TZA BCS in the Income Portfolio or are those still open? Should I close it if it is still open?

  29. stjeanluc
    Don't rub it in I did not like the margin in the first place, This is the worse MOM stock on the block even gold is up 5$ if that tells you something!!!!

  30. At least IBM is pulling back a bit.  And GOOG.  

    ABX/Yshen – You are very lucky if it's new.  Prices just get better and better.

    CRUS/Albo – That's nuts.  They said revenue will be $207M vs $210 expected and AAPL loses $15Bn in market cap???  Wow, the extrapolation off of this data-point is stunning!  

    How is it that the Nas now seems to ignore AAPL's nonsense?  

    It's now $25 to roll the AAPL 2015 $400s to the 2015 $350s – It's a good use of $25 IMHO as you are buying $50 worth of intrinsic value for $25 so, painful though it may be, let's do that in the AAPL Money Portfolio.  

    In the $25KPA – We're screwed on our April short puts but let's see how the week finishes.  The Jan $425s are down to $35 and $15 more takes us down to the $390s, so let's do that for now and our next escape would be rolling to a 2015 bull call spread (the $300/400 bull call spread is $55) if earnings suck but I'd hate to get stuck in such a long-term play in the Portfolio

    QQQ/Pharm – Oddly enough $68 was our target for Friday in the $25KPM.

    RIG/Kinki – I like it in general but the markets are collapsing again so not now.  

    $405 is the 5% rule for AAPL.  $4.50 is weak bounce ($409.50) or overshoot ($400!) and I think it's very possible they are pushing for $400 today with all that news spin.  

    In $25KPM – Let's go for 1 AAPL May $370/410 bull call spread at $25 ($2,500) with a $1,500 upside at $410 or better on earnings.  

  31. Yodi – Just jesting of course… But I am sure you are making good money of the IOC short calls! BTW, they report on 5/29 so safe to sell the May monthly. 

  32. In $25KPA – Let's sell 20 AAPL May $400 puts for $17.50 and put a stop on the current short $430 puts, now $24 at $30 or if AAPL fails to hold $400.  By Friday, we kill the April puts regardless, of course.    

  33. stjeanluc
    IOC I wish I was making as much money on IOC as I am losing on AAPL . Stock is up 1$ coming close to my 77.5 caller!!!!Two days to go.

  34. phil.
    tks for your thoughts….im currently long 1000 gdx from a 45 assignment….
    so as you can see the gold debacle has not been kind………all im trying to do now is make the best of a bad situation…………
    i think i will be closing out the short jan 15 45 calls from a prev rec (already killed the long 35 calls and short 35 puts) since i own the stock and try to see if selling some short month calls vs the stk………tks again…

  35. Phil/AAPL – Good Morning Phil. We currently have the 2015 $450 short puts (sold for $77.21). Do you want to roll these down as well?

  36. Friggin' JNJ still up.  

    SOX with a big fail to $420.  Transports 5,950 not as bad as Money's 5,900 yet. 

    Dow 14,600 was Monday's low (about), S&P 1,552, Nas is failing Mon low of 3,214 but actually doing quite well against the AAPL drag (1% drag on Nas today), NYSE 8,950 was the bottom and RUT was 905 so, like Monday, we're not bear yet as those were around the April 4 lows and, if those levels hold on triple tests – that can actually be bullish.  

    AAPL cash/Samz – Currently $130M and projected to hit $170M at the end of the year and $220M at the end of 2015 so, if we are buying AAPL for net $350 in 2015 – we're paying just $170 for the company net of cash.  At $350, AAPL can buy back more than 1/2 of their own stock for $175Bn and still have $90 a share of cash remaining. 

    DAX/Kustomz – I thought they had a bad auction?  

    Earnings/StJ – Too crazy to attempt to call things at the moment. 

    Oil with a slight net build – nothing to crash them at this point.  Distillates are funny this time of year.  Dollar 82.62 is what's really crushing things this morning – that's up 1% for the day.  

    EIA Petroleum Inventories: Crude -1.2M barrels vs. consensus of +0.8M. Gasoline -0.6M barrels vs. consensus of -0.4M. Distillates +2.4M barrels. Crude -0.91% at $88.22.

  37. By Emese Bartha
    FRANKFURT--Germany's 10-year funding costs hit a record low at a bond auction Wednesday as mounting worries about the global economic outlook drew investors towards the euro zone's safer debt in spite of its relatively low returns.
    Germany sold 3.349 billion euros ($4.39 billion) in the latest opening of its 1.50% February 2023-dated Bund, the Bundesbank said. The German Finance Agency is to launch a new Bund at its next 10-year auction scheduled for May 22.
    The average yield dropped to 1.28% from 1.36% at the previous auction on March 20. The previous record-low was at an auction in July last year when 10-year debt was sold at an average yield of 1.31%.

  38. IOC / Yodi – You really have to make a choice when you are selling these calls. Either generate some additional income in which case you should sell calls with a lower delta and less risks, be ready to surrender your shares or have to roll more risky strikes. With the premiums on a stock like IOC, you can make $1 every month with little risk of your share being called away. 

  39. Pharm/QQQ's
    …nice call

  40. Painful/StJ – Earning $10.35 in a weak quarter on a $400 stock is "painful" now?  Wow, we must be spoiled by fantastic earnings…

    RUT failing 905! Dow testing 1,4600 and etc on the rest – this is our big test kids. 

    TZA/Income Portfolio, Kinki – I don't think we closed that as it was a protective spread but I could be wrong.  I would take the money and run here (net $2.60, so a stop at $2.50) and, if the RUT fails to hold 900, you can add the $42/47 bull call spread at net $1.35 as that can gain $3.65 ($18,250 on 50) if the RUT drops about 5% but costs a lot less if it doesn't.  

    Santelli rolls out the official Conservative spin on the Austerity debacle.  Commence the cover-up!  

  41. If I could borrow over 10 years like Germany at 1.28%, I would borrow as much as I could as it's in effect a negative rate since inflation in Europe is around 2% or so. Are these people expecting deflation? You are actually losing 0.7% of your capital every year… 

  42. Thanks, Kustomz.   Phil: Do we have a TLT/TBT trade on?  With German yields plummeting 30 bp below U.S. Treasuries with a falling Euro, wouldn't Tresury yields follow it down?  Especially if you think the U.S. bull run is over [for now]?

  43. ABX/ Phil – Lucky, or Patient…

  44. ABX – I will remain patient…..

  45. Seems to me that a good use for AAPL's overseas cash would be to buy AAPL stock.  Of course, they would have to set aside money to pay the taxes owed, but if they're serious about buying back stock what better opportunity. to shrink their capitalization and return money to shareholders.  I must be missing something !

  46. AAPL earnings / Phil – What is painful is earning "growth" of -15%… You can argue about the money that they are making each quarter (a lot) but I believe that is what is spooking people right now (rightly or wrongly). 

    Actually with all the cash that AAPL is making it would almost make sense to pull a Dell and go private! They might get a better valuation!

  47. Good idea STJ.  May not be enough PE money in the world to pull that one off.

  48. The market in 2013?  Already true in commodities…

  49.   And DBA goes green….

  50. AAPL – Volume – already traded more shares than on any of the last ten days of trading -

  51. GDX/Mill – Probably nothing a whole lot of patience can't cure but, if it's oversized, it is a good idea to trim it down a bit.  

    CZR taking a big hit this week – back to $13.25.  

    AAPL/Opes – The net is $372.79 so not a big deal, even though they are currently priced at $109 for a big paper loss.  Logically, the $355 puts are $52 so a 2x roll to there would be a good thing to do but committing to 1x more AAPL is a lot so I'd say not doing anything ahead of earnings might be wise – painful though that is.  My aggressive play would be to sell the 2x $350s and put a stop on the $450s at $120 (but out ahead of earnings, of course) so worst case is 2x the $350 puts at net $25 but, again, you have to seriously consider whether you REALLY want to own that much AAPL for net $325 if worst comes to worst. 

    Germany/Kustomz – Well that's a lot of panic then.  1.3% for 10-years – those people are going to be crushed if we ever have any inflation.  

    Losing/StJ – I know, it's insane.  How dead is the economy that people can't think of anything better to do with $4.4Bn than give it to Germany for 10 years in exchange for $57M a year in interest?  I would much rather have the money under my mattress…

    TLT/ZZ – I think 1.3% is irrational.  As above, it's a fear trade and maybe Europe has plenty to fear and maybe all the money that used to be in Cyprus has to go somewhere (with other PIIGS to follow) so ANYONE selling bonds will benefit for the moment but, so far, we're just back to Monday's lows and I just find it so hard to go bullish on TLT – I'd rather short it when it's over 125.  

    By the way – notice gold is NOT falling today – AMAZING!  

    Oil $87 though, gasoline $2.72, nat gas $4.19.  Silver $23.46 also holding up and copper not so much at $3.18.  

    RUT testing the 900 line.  

    /NKD back to 13,275 – still a fabulous short when it fails 13,400 (tested 13,500 briefly last night).  

    AAPL/StJ – Too big to go private in this environment but maybe that's why they are happy to let the stock tank – so they can just buy it up for themselves.  

    CRUS down to $18.35 (-14%).  

    In honor of JRW – the TNA Friday $37.50 calls are $1 and were $3 yesterday and $7 last Friday.  RUT 900 is a good stop line for a small risk, large reward so 20 of those in both $25KPs with stops at .75 for a $500 risk.  

  52. Phil/AAPL
    The silence from Apple is disturbing to me. It makes the volatility around binary events that much greater. If there is a miss than the idiots will rule the day, and the stock will get smacked. Perhaps better communication from the top might mitigate some of this nonsense. Instead we will have to wait until their results provide enough red meat for the idiots to go the other way. This could lead to more price depression until the next cycle is fully engaged (fall?). Don't you think a little more communication from Apple would prevent the valuations of this company getting slammed to ridiculous levels?

  53. S & P /    in looking at the chart "spring peaks" over the last three years  were 4/23/2010, 4/29/2011, and 4/2/2012

  54. Phil/Bunds/ Gold not falling — You have a good point.  Wouldn't gold be a better bet than 1.3% in a falling currency? :)

  55. Phil,  At what point do we cash in the DIA June 144 Put's?  

  56. Phil // TOS hedge
    I spent an hour on the phone last night with TOS ( there are some really good guys there ) and we they were teaching me about risk profile and analysis, specifically Beta weighting and how to look at probability analysis. Pretty cool stuff for an artist ; > 
    Anyway, I was concentrating on our DIA hedges ( because they're basically golden handcuffs right now ) TOS says that with my portfolio I keep losing money until the DOW drops at least 4% – so, unless we get a real correction, I'm losin money every day, not even counting Theta. I obviously lose money if the DOW rises as well. It's a tough spot, so I see your point about 'disaster hedging'. ( You can even tell TOS to bracket P/L at 5% levels – even cooler ) This may be a good way for people to tell whether they are bull/bear, along with your 1% rule.
    My question is - 
    How do we know when to get out / modify / cash these hedges. Every other post I read is bear, but the market keeps bouncing back and we keep initiating bull positions. It sounds like we're all waiting and waiting for a correction because of our levels – is it just me ?

    I'll take the patience rap, but this is more confusion than anything else.
    I know you love zen parables so, from the Sandokai

    " If you don't understand the way right before you
    how will you know the path as you walk
    Progress is not a matter of far or near
    but if you are confused, mountains and rivers block your way "

  57. QQQs now a triple…….precious…

  58. So evidently they close out VIX options today/yesterday. I thought they'd close out Friday and my VIX 15/17 bull call spread was closed at a fraction of the full $2 I expect it to be worth on Friday. Just an FYI, VERY irritating. 

  59. Phil,
    Your reference to JRW reminds me: What ever happened to him?

  60. Gold/Phil – amazing indeed.. here's an entertaining note from Gartman:  
    "Concerning gold, let's note firstly something sent to us by our old friend John Brimelow, who had a most interesting piece in his commentary this morning regarding the violence of the recent price changes. He noted a piece written by Russell Rhoads, CFA of the CBOE Option Institute, who wrote the following:
    "'Friday was a 4.88 standard deviation move in the price of gold. For simplicity's sake let's call it a five standard deviation move. Statistically we get a five standard deviation move approximately once every 4,776 years. So we should not expect another move like this out of the price of gold until May 17, 6789. … Currently the two-day price change in GLD is $16.65, which can be converted to just over eight standard deviations. I wanted to share what this comes to, but the table I use only goes up to seven standard deviations. Let's just say the sun is expected to burn out first.'"
    Gartman continues: "We shall confidently say that we will never, ever see a day such as we saw yesterday in the gold market in our lifetime again. It will not happen. The sun will indeed burn out before we see anything such as that again. Nor shall we ever want to see anything such as that again. We can reasonably deal with deviations from the norm of 2 or 3 or perhaps even 4, but 8+ standard deviations is beyond our ken or that of anyone else anywhere. Yesterday's price action will go down in history as an aberration of truly historic proportions. "

  61. Well, there goes Europe and their huge sell-off (2.5% in France and Germany, 1% in Italy and UK, 2% in Spain) – maybe now we can cheer up a bit.  

    AAPL/DC – It's their tradition and "transparency" means they'd have to spend a ridiculous amont of time denying the latest rumor because, once you begin answering some, you confirm the others with silence so I agree with AAPL and they've never run their company in a Wall Street-friendly way.  They just like to invent things and then sell them and make money – wierd, huh?  

    Gold/ZZ – You would think but hard to make that case after having a 10% down day in gold.  That's Zimbabwe-style devaluation of a currency…

    DIA/MJj – At the point at which we're sure we're "safe".    They are insurance plays that we hope we lose overall but the best thing about them is, in a mega-crash – they pick up speed on the way down.  Taking the puts off now is like cancelling your health insurance because the Doctor tells you he's worried about that spot on your lungs and wants to do more tests…

    Wow, check your mail folks – there are suspicious packages all over the place. 

    DIA/Wombat – See above.  Hedges are INSURANCE, not bets.  Just make sure you are not over-insured.  We don't want to "win" on the DIAs – that means the market is collapsing but the main thing they do is let us yawn through a 2.5% dip and even a 5% dip without panicking out of the long-term positions we really believe in.  

    LOL – I love CNBC giving the recipe for Ricin every 5 minutes – will somebody please shut them down?!?  

    VIX/Jrom – Very important to remember VIX closes the Weds ahead of expiration.  

    JRW/Wealth – Not sure.  I was under the impression he was sick but last I heard (6 months ago) he said he expected to be back soon.  

    Nice 30% already on the TNAs as we wait for the Prez.  

  62. Standard Deviations / Scott – Of course, the standard deviations are not meant to take into account non-standard events… I would be willing to bet that we see another 7+ stand deviation move before the sun burns out….

  63. Phil's earlier point on 'it's a different market' – interesting

  64. That's it, I am going to cash now. That was the last technical signal I was looking for:


    The craze hit a high mark in June 2011, when Crumbs Bake Shop Inc.,a New York-based chain, debuted on the Nasdaq Stock Market under the ticker symbol CRMB. Its creations—4" tall, with fillings such as vanilla custard, caps of butter cream cheese, and decorative flourishes like a whole cookie—can cost $4.50 each.

    After trading at more than $13 a share in mid-2011, Crumbs has sunk to $1.70. It dropped 34% last Friday, in the wake of Crumbs saying that sales for the full year would be down by 22% from earlier projections, and the stock slipped further this week.

    Crumbs in part blamed store closures from Hurricane Sandy, but others say the chain is suffering from a larger problem: gourmet-cupcake burnout.

  65. Dow volume 65M at noon, AAPL volume 17M.

    Standard deviations/Scott – Maybe but doesn't that mean there's no quick way to get the money back either? 

    Guy on CNBC says AAPL "needs to get realistic about their margins because they are twice what anyone else in the space is making."  WTF?  So they should tank their margins to get in line with the industry and THEN he thinks they'd be a buy???

    Najarian calling for May $400/410 bull call spread.  

    BAC down 6%, XLF failing $18.  

    TNA back to $1 – that was quick! 

    CRMB/StJ – Wow, I didn't even know they were public.  What a huge waste of money those things are.   Even Jackie, who's a cupcake junkie, thinks they are ridiculous.  

    Ah, finally someone at the podium (just Carney).  

  66. QQQ puts…selling another 1/2.  UNREAL.

  67. Well, here we go…. AAPL painted a 400 handle!

  68. Nasdaq – Live with AAPL, die with AAPL!

  69. XLF puts…..lookie there.  In at 5c from the other day….5c.  Now 18c.  Gosh darn do I love volatility.

  70. stjeanluc – just hop on board Fairway – up 40% on IPO today.  

  71. Speaking of QQQ, the Apr 68 calls short in the 25KPM are now $0.40 for a 70% win and $1800 in our pocket.

  72. Anyone remember the tech stock boom of 1999 & 2000?  I remember sitting on the beach in the spring of 2000 reading the WSJ  (Yes, I actually read the physical paper, hard to believe now.).  I was telling my wife how much these stocks had soared, (QCOM, CSCO, INTC, etc.).  My wife remarked, " You know, if we don't sell some of these stocks, in two years we'll be sitting around wondering what the hell were we thinking ?
    Starting to feel just the opposite now.  Especially, AAPL.

  73. Tempted to add to my QCOM position again! But might have to wait to see what shakes out over the next couple of days.

  74. America Needs a New War.….okee dokee.

  75. X $16!

    Well, I don't think it's a good thing when the official word is "We don't know who bombed us in Boston, we don't know who's sending toxic mail to Congresspeople, we don't know who's sending toxic mail to the President."  Not inspiring a great deal of confidence here.  

    Oil just failed $86.50! 

    Done with TNA back at $1 – no point now ($25KPs). 

  76. Banks led the way up….

  77. pharmboy
    Good thing I overslep, would had jumed out about 9:45. Just sold 1/2 QQQ puts up $1, will do the same with IWM but that price was about 11:00 but less than a dime! They are not even doubles but AAAAAAHHHHHHH!

  78. TRIN just went parabolic.  Read about TRIN here, but it means in essence…Selling.  < 1 buying, > 1 selling.  3.4 was the last reading now it is falling a bit to 2.9.

  79. Hard to understand, Just send a suspicious letter to Obama and the bottom falls out of the market. Nice move to make money!!!! Some one had a good pocker hand.

  80. Shadow –

  81. back from the marathon and back to work.
    AAPL is down a little too much. Calls are needed. What is 400 versus 400 M?

  82. GDX and ABX seem to have no bottom. this is unreal.

  83. $400 on AAPL is just about -6% so as low as we'd expect for a day.  Weak bounce remains 

    Fairway/Terra – I love that store.  We got one by my house – very convenient. 

    QQQ/$25KPM, StJ – I agree – better safe than sorry, let's buy those short calls back ($68s, now .45).  Nas pretty strong against AAPL disaster

    Good analogy Albo.   Like those 2008 comments I went over last night – there's only so many times I can say I think something is oversold before I get tired of arguing with people.   Unfortunately, you can't "prove" you were right until a year or so later and, by then, it's way too late for people to jump on board. 

    War/Pharm – I'm all for taking over Canada.  They hardly do anything with it anyway.  

    Just/Yodi – Yes, very scary how easy it is to manipulate the markets.  

    BTU $18.65.  Did the World end and they are hiding it from us? 

  84. DIA Puts – as i incurred some damages, i placed a 'claim' with my 'insurance' policy. i rolled the Jun puts forward to May and down a couple strikes to get to same delta had when started them. This took back 95% of the original premium paid, and still have a set of puts if market goes down more. If it reverses, little left there to lose, and if looks toppy again, can reenter with new and/or more.

  85. Canada – will they be the next crash?

  86. ABX/Jabo – hang in there. this guy says bullish GDX sentiment has hit zero!

  87. Wow, did AAPL print 398? Some idiot probably wanted to be the first one under $400!

  88. scott, with the VIX moving now, the OTM puts will not be as much fun to play.  Calls for that matter as well.  I have been playing those OTM calls and puts for BIG moves, and rolling along has been fun, but now VERY rewarding.  Looking at deltas in the 7-10 area and starting at a 1/10 or 1/25 buy in until I am fully loaded.  Direction is very important, and we are starting, I believe and all I have read, wave B down.  So, WHEEEE…….

  89. US corporate CDS are tightening to new lows, as the Fed continues to pump liquidity into the market. The JPMorgan CDX indices which measure spreads for the "on-the-run" CDX (and include rolling into the most current series) are showing the tightest spreads in years. In fact the HY CDX spread is now at levels not seen since 2007.  Article here.

  90. Other than my VXX position, which I am making money on for the first time, LULU is my only position in the green, because ladies will look nice no matter what.

  91. Phil- re gel- still working on trying to convince home to come back!!! He did pay the election bet we made 3 years ago and I was able to pay for half the cost of taking my little one to Disneyland when I got back with the $$$. I think he's out of stocks and focusing on forex for the most part. 

  92. Home=him.

  93. US ten year at lows of the year..

  94. Looking at AAPL, I was just wondering if the weak hands are not now thinking of bailing out before the earnings next week and a day like today might precipitate that. As it stands now, our AAPL Money is down like $140K. If you bail now out of fear, that's your max loss. If AAPL is at $450 next Friday and you bailed, you look foolish. But you also have to think, what happens if AAPL is at $375. I am now down $175K. Some people might not have the mental fortitude to press that bet…. forgetting the fact that it's a 2 year play with time to recover. Not that I don't understand.

  95. If Peter is around, the higher VIX might be helpful in selling May premium in the strangle portfolio. All the positions expire this week and all are somewhat safe unless we lose more than 5% tomorrow.

  96. Phil / GLD – I am long Jan '14 145 calls at around $13 (now $4) and short July '13 156 calls at $3 ( now 20 cents).   whats best way to roll this?  Thx.  I am also short GDX Jan '14 35 strike puts for $2.  I'm okay  to hold but let me know if you have better idea – perhaps go out to '15.  

  97. Now they are saying they have the bomber.  

    TNA $37.50s at $1.10 and worth a toss with 20 again in case this rallies us – both $25KPs.  

    Also, in FAS Money – let's sell 5 May $50 puts for $2.05

  98. Boston marathon runners get three month tax extension! Damn — I could've waited.
    Phil - I hope they've nailed this guys already! 

  99. And to add to what I was saying earlier about the German bunds rate – here is Brad DeLong who is much more qualified than I am:

    When the average interest rate on U.S. Treasury debt is and is expected to remain lower than the economy's trend growth rate g, the U.S. Treasury is not a cost center--debt amortization is not an expenditure category--but rather a profit center--analogous to the medieval Medici Bank, which Florentines and others paid handsomely to safeguard their money…

    Screenshot 4 16 13 2 22 PM

    It's just ridiculous that we would not borrow another $1Tn to fix our infrastructure when we know that the GDP multiplier would be bigger than 1. Maddening!

  100. jromeha
    Hope you get gel back on board but your causing Phil  health problems. BP 300/200 plus gel would have to also pay for his shrink

  101. UCO strong 1-day buy

  102. DIA/Scott – Not sure why you wanted to give up the time.  

    Canada/Scott – Lower materials prices are a big problem for them. 

    Gel/Jrom – I hope he's out of all that gold. 

    AAPL/StJ – I think we made the decision to stick out this earnings (and the next) quite a long time ago. This would be a bad time to change our minds – especially just out of fear.  

    GLD/Terra – So you have a net $10 position, now net $4, that's the bottom line.  Not much money in selling July calls at the moment.  Jan $145s are $4.30 and you can sell Jan $140s for $5.90 and roll down to the $125 calls ($13.80) for your $4.30 plus the short call money plus $3.60 and then you're in a $15 spread for net $13.60 that's $8.50 in the money and the key then is to sell calls over time to whittle down the basis on your longs which, of course, I'd wait for a bounce to sell.  As to GDX, they're at $28.20 so not so far out of the money and the Jan $35 puts are $8.30 so still about $1.50 of premium in them and the 2015 $30 puts are $6.50 so that's your eventual roll but no hurry.  

    I'm not seeing official news yet but I got a note from someone who should know that bomb suspect is in custody.  I think if it's right we'll see a move up. 

  103. STJ – No matter how you color it, that's a huge loss.  Some months ago I used the analogy of continuing to roll down naked puts to playing blackjack and doubling your bet after a losing hand.  You can do that a number of times, but eventually you hit the house limit and you're dead.  With rolling down naked puts the killer comes when you reach your "choke" limit or get a margin call.  Very dangerous, unless done judiciously.

  104. arrest made

  105. Phil….Fun day in TNA   I did 3 reloads…all very profitable.  Thanks!

  106. BTW – Phil has been very clear about the risks.  Sometimes we tend to dismiss such advice if we're focused on the potential profit opportunity.

  107. DIA time/Phil – when bot dia puts, not sure 'when' a drop would strike.   Well, initial drop has struck. Roll foward and down preserved the inital delta, and got my premium back out.  as this has been a pretty sharp move, expect that it either continues (and i'm covered) or it bounces. if bounces, i still have all my original premium for the insurance ready to deploy again, and can enter june again. then would have june and (free) may coverage.  that's the plan anyway.

  108. Should have stuck with the QQQ on the 25KPM – Since we started that QQQ calendar on 10/24, we have now collected $6635 of premium against $14,975 of Jan 14 calls and these are still worth $14,875. That's a 44% return in 6 months and we have been selling 1/2 positions most of the time! And another 8 months to sell premium although if we keep going down, decay will speed up on these Jan calls. But still, we could have a true double there if we hold! I just love these calendars – and IRA friendly as well! And by the way, if you have PM, close to a double already.

  109. Hi folks/Virtual Short Strangle Portfolio
    It's a good time to check in for selling additional shorts.  Actually, just an hour or two late.  So let's sell something and see if we could get a better pricing at the end of the day or in the coming days.
    - Buy 10 SPX May 1370 puts for $2.1, Sell 20 SPX May 1365 puts for $1.975
    - Buy 10 SPX May 1625 calls for $1.375, Sell 20 SPX May 1630 calls for $1.225

  110. Energy: Likely this article was previously noted here, but if any of you missed it, here's an Interesting read in the NYT.  It turns out recessions, cheap nat gas, and fracking are the winning combination for saving the planet. A Model for Reducing Emissions

  111. Tax Loss – If anyone wants to take a tax loss on ABX, but doesn't want to be out of the stock, might consider selling ABX and buying AU. In 31 days you could switch back.  Very different companies, but very high correlation of stock prices.  Look at their charts. 

  112. - Buy 5 RUT May 795 puts for $2.15, Sell 10 RUT May 790 puts for $1.975
    - Buy 3 RUT May 960 calls for $1.775, Sell 10 RUT May 965 calls for $1.3

  113. Damn, now they say no arrest made yet – just identified suspect but I'm not sure that's true – just official. 

    Still, fortunately getting some improvement in the RUT but not much.  

    BCS is floating bonds that pay 7.6% – seems like a lot these days.

    TNA/Wilsons – Congrats – Was a great line to play off – very good when things line up like that.  

    DIA/Scott – Not a bad plan but, as a rule, I much prefer to have more time.  

    Qs/StJ – That's why it's the conservative play.  On the other hand, QQQ will never pay for a house if it works either (nor will it lose a house).  

    Hey Peter!  Things working out down to the wire.  

    Interesting, Mr. M.  

    Good tax idea Albo.  

    Dollar 82.69 keeping a lid on everything.  Euro $1.303, Pound $1.523 and 97.78 Yen to the Buck. 

    TNAs at $1.30 again – Fun, Fun, Fun!  

  114. House / Phil – Some people are actually paying the government to keep their money! I'll take my 44%… In any case, QQQ could pay for your house – it depends on your initial investment and the size of the house. $1000/month pays for a $200K mortgage.

  115. 2:03 PM Fed Beige Book: The economy continues to grow at a moderate pace, with Dallas and New York noting a slight acceleration in activity. Particular strength is noted (across most Districts) in industries tied to residential construction and autos, while those in defense-related sectors reported weakness (sequester). Employment conditions are reported as unchanged to somewhat improved.

    More from Beige Book: The homebuilders (XHB) might like to know most districts reported strong homebuyer demand with sales being restrained by low inventories. New Jersey noted a "marked reduction" in distressed properties. Home construction is picking up in most districts though tight supplies of building materials are stalling things. The NAHB reported a similar issue.

  116.   police clearing street in front of boston courthouse..ha! black suv arrives…this is ridiculous

  117. Sheesh, currently the only people making income on my Income Portfolio are the brokers as I roll down and down.  Let's hope the world needs raw materials by JAN 2015!

  118. So annoying on TNA – Gotta stop out at $1.15 again ($25KPs).   

  119. Good article (in French) where they show that official growth predictions for the economies are wrong more often than not (and also too optimistic):

    The best ones are in Sweden and they are correct 66% of the time! The other countries are between 25% and 35%! Even previsions for the year in progress are wrong 50% of the time. Tough to make any plans I guess.

  120. Phil,
    With this slow down in growth, and miners / materials taking it on the chin, would you recommend CAT Jan 2015 55 Puts for $3.45. I have a Jan 2014 put 60 which I sold for 3.85 in November 2012. talking about 5 contract each. Thanks again.

  121. Good thing we have the DIA puts and the TZA spread in the Income Portfolio…  Good for about $9000 of protection now!

  122. Subject: Russell 2000 Index (IWM) December 60 put paper pays .62 for 92,370

    Bought about an hour ago. Underlying (89.92) hasn't moved much since the puts
    were purchased. Delta of 5 percent. Open interest in the strike going into
    today was 858. Follow market is .54x.61. Expiration is December 31st, 2013.

  123. 1:19 PM The 10-year Treasury yield touches a YTD low of 1.67% as the world's most hated asset confounds the bears again. How long before TBT is renamed the widow-maker trade a la JGBs? Trailing the S&P 500 in 2013 by 1500 basis points not long ago, TLT has narrowed the margin to about 650 bps. 

    Contrary to the popular "tapering" term being thrown about of late (including by himself), St. Louis Fed chief Jim Bullard says the Fed could increase the size of its asset purchases if inflation softens further. "I'm very willing to defend the inflation target from the low side."

    Stocks continue to slide with the Fed's Bullard's suggesting the bank's QE program could be expanded having little effect. Leading the slump are Apple, -4.5% and threatening a "3" handle, and Bank of America -4.4% after missing earnings estimates. S&P 500-1.6%, Nasdaq -2%. 

     "Too little has been changed to avoid a repeat of the problem," says the Boston Fed's Eric Rosengren, arguing banks with broker-dealer units continue to hold too little capital. "The status quo represents an ongoing financial stability risk." The largest ones still standing are MSUBSGSCDBCSBACBCS, and JPM, and each of the U.S. ones passed the Fed stress test and are returning capital. 

    Smoking the euro (FXE -1%) but offering no help to European stocks (FEZ -3%) is the ECB's (and Germany's) hawkish Jens Weidmann suggesting the central bank could slash rates if punkish economic data keeps rolling in. He brushes aside the idea the region's debt crisis is anywhere near over. "The calm that we are currently seeing might be treacherous."

    Falling hardest today is Germany's DAX, -1.9% as rumors the country could lose its AAA rating make the rounds. Slumpingeurozone auto sales certainly aren't helping either. EWG -3% as investors bid up the ETF in U.S. trade yesterday expecting a DAX rally today.

    Often a spot to hide during big selloffs, mortgage REITs (MORT -2.3%) slide sharply as well, particularly the hybrids (exposed to credit risk through non-agency MBS holdings). IVR -2.3%TWO-3.3%DX -2.5%. The sector giants: NLY -2.2%AGNC -1.3%. One trader reminds mREITs are small caps and the Russell 2000 (IWM-2.2%) has been particularly hard hit of late. The 10-15% yields offer a nice palliative.

    Energy stocks (XLE -2.8%) trade well below the broader market as crude oil futures plunge after a surprising drop in U.S. distillate supplies and a smaller drop in crude supplies than API datashowed. With the U.S. dollar substantially higher, analyst Tariq Zahir sees crude continuing its downward trend. Refiners: VLO -3.9%TSO-5.6%PBF -6.3%CVI -6.8%. Big losers: LPI -5.4%HLX -5.9%,PDS -6.5%PWE -5.8%KOG -4.4%. 

    ConocoPhillips (COP -1%) tells investors in a slide presentation it sees a 3%-5% compound annual growth rate through 2017, with net production growth of ~400M boe/day 2017, with "visible growth" by the end of 2013. COP says its priorities for cash flow are "unchanged," and will continue to evaluate share repurchases as an alternative to increased investment.

    Rubber-related stocks are having a tough day with Goodyear Tire & Rubber (GT -3.4%), Cooper Tire & Rubber (CTB-2.6%), Berry Plastics Group (BERY -4.4%) and Titan International (TWI -3.6%) all dipping lower. Macroeconomic concerns and news onhigher rubber duties could be swaying sentiment. 

    Railroad stocks are mild under-performers after CSX Corporation (CSX -0.8%) issues a soft outlook on demand for coal transport. The company sees relatively flat earnings in 2013 before 10% to 15% growth is seen in 2014 and 2015. Sector watch: NSC-1.6%UNP -1.3%CNI -1.2%CP -1.5%. 

    Fairway Market (FWMsoars 28% on its first day of trading after setting its IPO price at $13. The grocery store chain is seeing a round of unexpected buying after its SEC filing revealed it posted a $56M loss over its reporting period. (S-1)

    The big surge in health care stocks earlier this month just prior to the government's decision on Medicare Advantage rates may have been due to an email to sent by a former top congressional aide who now happens to be an outside lobbyist for Humana (HUM -1.9%). The email, which is now subject to an SEC probe, was sent to a Washington investment-research firm and circulated to clients just minutes before the close of trading, saying that "credible sources" had told them a decision had been made to restore the payments.

    Another micro-cap ramping higher on the ricin scare is Soligenix (SNGX +13%), whose lead biodefense products in development are a recombinant subunit vaccine called RiVax, which is designed to protect against the lethal effects of exposure to ricin, as well as VeloThrax, a vaccine against anthrax exposure.

    Movie studios (DISTWXCMCSALGFVIAVIABSNE) might be asleep at the switch, according data compiled from an industry trade group. While movies rated PG-13 almost doubled the return of R-rated movies in 2012, studios released twice as many of the R-rated variety. If box office numbers for Q1 are any indicator, execs haven't learned the lesson yet. 

    Chip stocks have a rough day (SOXX -2.8%) followingCirrus Logic's warning, light guidance from Linear Technology (LLTC-4.6%) to go with a Q1 beat - Linear sees 1%-4% Q/Q revenue growth for calendar Q2, below a 4.7% consensus – and ho-hum Q1 results/Q2 guidance from Intel. Apple suppliers Broadcom (BRCM -4%), Avago (AVGO -5.5%), STMicroelectronics (STM -6.7%), NXP (NXPI -7%), RF Micro (RFMD -2.8%), and OmniVision (OVTI -3.3%) are among the casualties, but they're far from alone. ANAD -6.2%STM -5.7%.FSL -5%ADI -4.5%TXN -4.4%.

    Though Micron (MU -4.4%) and SanDisk (SNDK -4.2%) have joined a general rout in chip stocks and Apple suppliers, a report from Taiwan's Commercial Times indicates DRAM and NAND flash prices continue to trek higher (previous). Contract prices for mainstay 4GB DDR3 PC DRAM modules are said to have risen 8%-10% in early April, and contract prices for 32Gb (4GB) MLC NAND chips reportedly rose 5%-12%. Samsung (SSNLF.PK) is another beneficiary of this trend. SanDisk reports after the close. (

  124. Phil

    H-P (
    HPQ -2.1%), Seagate (STX -2.6%), and Western Digital (WDC -2.8%) underperform after UBS' Maynard Um argues Intel's (INTC -1.3%Q1 report backs up his thesis that "PC pricing needs to come down … to entice upgrades." Um thinks this will lead to margin pressure for OEMs, and an unfavorable mix shift for hard drive vendors. He also notes H-P/Dell might not benefit from Intel's server CPU strength, since it's fueled by cloud buyers who often rely on white-label gear. Also: Paul Otellini stated on Intel's Q1 call he eventually expects Window 8 (MSFT) touch devices (7" tablets?) using Intel's upcoming Bay Trail Atom CPU to sport ~$200 price points.

    Facebook (FB -1.4%) roundup: 1) Facebook is testing its first graph search ads. However, for the time being, the ads are targeted based on user info (age, gender, location, etc.) rather than the content of a query. Merrill has argued graph search could yield $500M/year in revenue, but its dependence on the "likes" of friends has yielded some criticism. 2) Facebook has hired former Apple exec Richard Williamson to be its Director of Engineering. Williamson was in charge of the infamous Apple Maps before getting fired for it. Before that, he was Apple's director of iOS software. 

    Amazon (AMZN -2.3%) roundup: 1) Amazon has reportedlypaid $26M to buy Evi, a British developer of a Siri alternative that users a proprietary natural language search engine and voice recognition tech licensed from Nuance (NUAN). If true, look for Evi's software to soon be bundled with Kindle hardware. 2) Amazon's Appstore for Android is now available in nearly 200 countries, including major emerging markets (the source of much of Android's growth) such as India, Brazil, and Mexico. 3) Amazon has filed a patent application for an anonymous mobile payments system; expect PayPal (EBAY) to take a close look. 

    Sterne Agee's Shaw Wu slightly raises his Q1 estimates for Google (GOOG -1.7%) ahead of tomorrow's report; he cites comScore/RKG data that indicates improving ad prices, and positive supplier checks for Motorola and Nexus hardware sales. However, Wu, who reiterates a Neutral, still expects below-consensus Q1 EPS on account of "a mix shift towards lower margin areas" such as mobile ads, hardware sales, and Google Shopping ads. Stifel issued a cautious note about Google, whose shares remain up 10% YTD, on March 27.

    Apple (AAPL -5.8%) has hit levels last seen in Dec.'11 following Cirrus Logic's warning and a Digitimes report about declining iPad Mini shipments. Cross Research calls Cirrus' warning "a reminder of weakening demand, and the challenges around product transitions" for Apple. Tero Kuittinen, noting sub-30M June quarter iPhone sales estimates and worries about the margin impact of emerging markets promotions, thinks "several nightmare scenarios have been priced in." "The naked fear of former Apple bulls is exactly what we need just before the earnings come out."

  125. Plans/StJ – The best laid ones..

    CAT/Jasu – This is where we start liking them ($80) but I am worried it's a bit of a falling knife as far as getting the best price at the moment though you aren't likely to wrong at net $51.55 if you don't mind riding out a dip.  

    Now the courthouse in Boston is being evacuated?  Craziness!  

  126. Put on KBH bull call spread, strongest among builders, inspired by Fed comments and housing activity, FWIW.

  127. TBT widow maker / Phil – I would like to take credit for this one… I do recall some conversation about TBT being only good to sell calls against over the past couple of years!

  128.  code red inside boston court house, court house and brigham hospital being evacuated…MCI declared

  129. Angel:  What, a suppository bomb?

  130. stjeanluc – Just saw your earlier post on the virtual Short Strangle Portfolio.  Those April strikes worked out well at the end.  Thanks!
    Phil/going down to the wire,
    It certainly was.  Actually, by not touching those positions every day, we didn't make silly moves for the April positions in the portfolio.  Doing nothing can be a good thing occasionally.

  131. ZO/ i think its a little gel cap with a drop of C3H5N3O9…in there 

  132. TBT/StJ – Yep, a very useless ETF except for shorting. 

    Boston/Angel – This is getting nuts.  "An unrelated bomb threat" they are saying.  How do they know?

    Oh great – NOW TNA hits $1.50 on the $37.50s…  

  133. Phil/TNA
    Soon as you recommended getting out of them they shot up! This day is for the birds!


  135. Phil – do you think its too early to add some LT positions in TOT? The div is almost 7% at this price and looks tasty for a buy/write.

  136. This has been one cluster of a day, that's for sure.

  137. There might be some very big orders around $400 for AAPL. At 12:51 when we dipped below $400 for a minute, 600K shares changed hand in that same minute. That's 3x the average volume today in a minute.

  138. TNA/DC – Too close to expiration to risk it into the close, unfortunately.  

    Here's a fun play with AAPL – you can buy the May $400 put and calls for $41 and sell the Friday $400 puts and calls for $11 and then sell the next week $400 puts and calls, currently $32.50.  If all goes well, you collect more than you spend and you can't lose as you're covered on both ends.

    Suppository/Angel – That pretty much sums it up.  I think the arrest leaked (I heard about it) but they don't want possible conspirators to know but no one seems to know for sure at the moment. 

    TOT/Deano – So many things look attractive but market is too weak (I think) to make new commitments at the moment, unless something is testing 2009 lows already which, we assume, is a good bottom.

    AAPL/StJ – If they are defending $400, they are just barely doing it.  

  139.  the main guy that i know that studies hft…is saying massive hft quote stuffing today..egan jones downgrades germany

  140. Phil,
    What would be USO long play in anticipation of Memorial day?

  141. 400 / Phil – Happened again at 3:30 – volume spike when we reached 400!

    Wasn't there a movie about defending 400? Oh my bad, it was 300… Let's hope it doesn't get to that!

  142. VZ should tell us tomorrow morning how many iPhones they sold! We can only hope it helps now…

  143. /YM tested 14,500 3x today…testing testing 1..2..3

  144. GG new lows, SLW new lows, AU… Just not stopping. 

    Dollar 82.75 – primed for being knocked back down tomorrow so we can rally again?  

    126M on the Dow at 3:47.

    ROSENBERG: There's Big Trouble Coming For Corporate Profit Margins.

    GOLDMAN: The US Consumer Has Suffered A Setback (Business Insider)

    Cleaning ‘Toxic’ Assets Slovenia’s Primary Concern, Moody’s Says

    Another great victory for Corporate Persons everywhere:  The U.S. Supreme Court's decision to shut down a lawsuit filed by Nigerians against Royal Dutch Shell (RDS.A) over claims the company was complicit in crimes committed by Nigeria's government is a major victory for corporations that have been sued in the U.S. for their alleged role in foreign atrocities. The ruling could affect other cases, such as those against Rio Tinto (RIO) and XOM over activities in foreign countries.

    Gold’s fall costs Paulson $1.5bn this year (

    And you know we should always TRUST Nomura:  One of the stranger outcomes of gold's collapse is to make gold miners look more expensive, which Nomura says means more downside for the miners. "Lower levels of investment demand have the equilibrium point for the gold price at still lower levels. [If so], the equities should still have further to retrace." It's another down day for South African miners: HMY -5.6%GOLD -4.5%AU -4%GFI -1.2%. (also) 

    Monte Paschi Prosecutors Seek Seizure of $2.4 BillionProsecutors in Italy are seeking to seize 1.8 billion euros ($2.4 billion) of assets from Nomura Holdings Inc. (8604) as part of an investigation into Banca Monte dei Paschi di Siena SpA’s use of derivatives to hide losses.

    Francois Hollande faces austerity revolt from own ministersFrench president Francois Hollande is facing an anti-austerity revolt from his own ministers as he pushes through a fresh round of tax rises and austerity to meet EU deficit targets.

    How The Deadly New Bird Flu Is Spreading Across China

    Bird Flu Fears Mount in China as Herbal Remedies Run Out.

    Hog Glut Gains as U.S. Exports Drop Most in Decade: CommoditiesU.S. hog farmers are poised to produce a record amount of pork at a time when exports are slumping the most in more than a decade, prolonging a global glut into a fifth consecutive year

    Europe Car Sales Heading for 20-Year Low on German Slide (Bloomberg)

    Jeremy Grantham, environmental philanthropist: ‘We’re trying to buy time for the world to wake up’ (theguardian)

    Grantham: Capitalism Is Great, But It Assigns No Value To Your Grandchildren (Business Insider)

    Who’s Winning, iOS or Android? All the Numbers, All in One Place (Time)

  145.  lew says to g-20…countries must not target fx for competitive purposes…hahahahaha  that is one of the funniest things ive read in awhile

  146. what he meant to say is how is the world are we going to destroy the US dollar as fast as we want to with the rest of you guys destroying yourselves…damn!

  147. I guess we should pass austerity measures like the rest Angel… Oh wait!

  148. Hog glut:  They can just export it to Washington D.C., where there's always a bull market for pork.
    Phil / Dollar priming:  We better hope so.  But I rather think the Euro is moving toward "the final countdown", and shorted the crap out of it as a hedge at the close.  With Germany taking a hit and French legislators revolting against austerity, the Euro may be taking a submarine tour this spring — overdue, IMHO.

  149. Looks like 170M on Dow at close

    VIX 16.59 – not worried, TLT 122.79 – same as this morning.  XLF back at $18. 

    USO/Lol – Not a bad idea from the historical context.  June $29.50/31.50 bull call spread is $1.20 with USO currently at $31 and oil at $96.75.  I'd go for that and sell puts perhaps if they go lower but, otherwise, it pays 66% if you collect the $2 – that's not bad for 2 months. 

    300/StJ – Then you would need a bunch of Spartans to keep people from buying AAPL stock for less than the price of an iPad Mini – and they'll sell 1Bn of those too!  

    AXP disappoints – another one for the pit.  

    Lew/Angel – It's like a cold war with money-printing. 

    French/ZZ – This is what I expect.  With that study debunked, the anti-austerity party will be able to make a putsch that I doubt many of the EU states have the stomach to stand against.  

    Cry havoc, and let slip the dogs of inflation!  

  150. Uh, does that inevitably mean "Adios" for our little spring rally?

  151. Democracy at work – the background check bill is defeated in the Senate : 54 yea and 46 nea. The neas have it… Just so frustrating! 

  152. More on the R-R disaster:


    The chart below, from the paper, shows this fairly dramatically. GDP growth falls fairly steeply between debt levels of 0 and 30 percent, and then declines rather gently above 70 or 80 percent:

    Needless to say, nobody argues that debt levels of 20 percent are dangerous. But if you take the R&R result seriously, why wouldn't you?

    Generally speaking, this is evidence that most interpretations of R&R get things backward. Causality doesn't go from debt —> slow growth, but from slow growth —> debt. Countries that grow slowly tend to pile up debt faster. Debt is a symptom, not the disease itself.

    On the other hand, I guess I wouldn't throw out R&R's results completely. Debt is a symptom, and although 90 percent isn't some kind of magical barrier, it does suggest that maybe you're doing something wrong. If you keep doing it wrong, investors might very well lose confidence and start demanding higher interest rates for your bonds, which could lead to a death spiral of sorts. The problem is that you never know just when this might happen. Maybe tomorrow, maybe ten years from now.

    So growth is the answer. The question is how to get it. In the short term, more debt might be one piece of the puzzle.

  153. StJ // DIA TZA
    Two disconnects
    I thought we broke the TZA spread, and are sitting on the 38 longs. I unfortunately closed the spread entirely. Did we open a new spread and I missed it ?
    I could have sworn that Phil asked us to DD 1/2 on the $144 DIA's a week ago. ( so, 150 total )


  154. Income Portfolio / Wombat – Possibly! I don't update the Income Portfolio every day but I'll look for these adjustments!

  155. NASA is launching a new Antares rocket from OSC (private company) from Virginia now. Can be seen in a lot of places:

  156. Launch scrubed! The company making that rocket is Orbital Sciences Corporation (ORB)

  157. STJ:  You can't really blame the Congress for not passing that background check bill, it was a very restrictive piece of legislation; here's the synopsis:

  158. LOL Zero… It's just so maddening now. You win the presidency by 5 millions votes, Democrats actually got 1 million more votes that the GOP in Congress (only gerrymandering saved them) and have 55 senators (not forgetting the fact that the average democrat senators represents more citizen – we have 2 senators for 9 million people in NJ and they have 2 senators in Wyoming for 576,000 people) and yet we can't even pass a law supported by a large majority of people. What do you need to do get anything done!

    I think that Jefferson and Co. are turning in their graves now. This surely is not what they had planned!

  159. I am sure you all missed me today!  A sign of old age on a sailboat all day with ear splitting loud house music….allllll day……and I did NOT enjoy.  My girls did though.  sigh
    VIX-Jrom—I keep a VIX expiry calendar on my desk as I trade it very actively.  Go to CBOE web site.  One thing is this market is extremely manipulated and it is disgusting what number the market makers want to print gets printed…they stick the number sometimes by $.05!  Wed no trading on expiry day (which I found weird) so all the crazy activity happens Tuesday.  Oftentimes it can move completely disconnected from VIX coming into expiry.
    Gold-Phil, agree China can't prop up the market alone but India and Albania (if you can believe it) are big buyers.  Encouraging that gold is looking at carving out a floor even as the $DXY gains steam. 
    Somewhere in the thread Phil mentioned not changing positions too hastily and I have to tell ya being away from my screens here is really an eye opener to me (has not been by choice, having connectivity issues)…normally I can spend 10hrs a day at the screen and hours more reading/researching afraid to leave my 'babies' alone.  But before I left Fri I hedged the book and in totality I am having a great week! (except FU AAPL and ABX of course).  Positions I would have normally fiddled with or scalped are better left untouched.  I went long SQQQ.
    With that said, signs of withdrawal are creeping in as my hands dying for the buy/sell buttons!

  160. (not sure if this was posted…still catching up)
    Paulson Down Almost $1 Billion On Gold Rout
    Apr 16 2013 | 1:16pm ET

    If John Paulson thought his gold woes were over after Friday's swoon, he was in for a rude awakening yesterday.
    Gold suffered its biggest loss in more than 30 years yesterday. Between Friday and yesterday, gold has fallen 13%, cutting into the Paulson & Co. founder's personal wealth by about $973 million.
    Since the beginning of the year, Paulson, who has 85% of his fortune invested in his firm's gold-denominated share classes, has lost $1.52 billion on gold, Bloomberg News reports.
    Paulson remains up over the life of the gold bet, however, having established it four years ago, when gold sold at an average of $950 per ounce. Gold closed yesterday at $1,361.10 per ounce.

  161. Gold…who owns it…just bumped into this on WSJ

  162. Chris Hayes on MSNBC had some great numbers – over the last 40 years we lost 7,000 people to terrorism in the US but we lost 900,000 people to gun violence!

    And yet we passed the Patriot Act, we have a no-fly list, in essence a background check to fly as a passenger in a plane, we read emails, we listen to phone conversations, we suspend people's rights but somehow doing a background check when you buy a gun infringes on the constitution. The same people who voted against the background check for guns were the ones who actually pushed for the other laws! I guess terrorists need better lobbyists… Truly, truly maddening!

    End of rant – there I feel better!

  163. FU Bullish Harami!

    Amazing how the Nasdaq and NYSE mirror each other! In the meantime, the 50 DMA in these 2 indices as well as the Russell, gone! SPX barely holding it. On the bright side, we closed off the lows. Interestingly enough, earnings have not been bad so far. But we also needed a pause.

  164. Speaking of earnings, SLM raised guidance for year from $2.30 to $2.49 for the year. They closed at $20.37 which would make it a P/E of around 8. But they are already up from 13 to 20 over the last 12 year… But the numbers look pretty good. They have close to a 3% dividend. They seem to have some growth potential as well. It's not the old Sallie Mae anymore it seems.

  165. SLM/STJL,
    I'd be careful with that one.  Lots of rumours of robo-signing of student loans ala sub-prime crisis.  Over-promising job prospects…  what happens when these people can't get jobs and then can't pay back their loans… wait, we've seen this before.

  166. Gold down another 2.5% now?
    When will these miners see any support?

  167. SPX – Back to a strong sell off (40%) of the latest 7.5% run (1485-1597).  A strong sell off (40%) of the 19% run (1340-1597) lines up 50% Fib retrace at 1500.  I doubt we see that but the 50dma lines up with the weak retrace of 19% run (20% of that run) at the 1540 area which the low of the was 1543.  FWIW!

  168. Patent Attorney – My dad is looking for a patent attorney.  All he is finding in his search are people to be the go between.  Can anyone help/recommend?  He is in central Illinois about 2 hours out of downtown Chicago.  TIA.

  169. Thanks Canuck!


  171. Explosion at a fertilizer plant in Waco Texas…

  172. Good morning!  

    Futures are flat and uninspiring so far but better than down after Europe's melt-down yesterday (just catching up with our bad day that they never had).  Now they're up half a point after the Nikkei dropped 1.2% (13,300) with the Yen rejected at 98 while China was pretty flat.  

    Dollar calming down a little at 82.65, Euro $1.305, Pound $1.525.

    Oil $87.20, gold $1,384, silver $23.23, copper $3.15, nat gas $4.19 and gasoline is a good up play into the weekend at $2.735 with a tight stop below (/RB).  

  173. Guns/StJ – Only 4 GOP Senators ended up voting on what was supposedly a bi-partisan bill.  There were 5 Dems who voted no (out of 55) but it wouldn't have helped as they needed 60 people and the GOP guaranteed they wouldn't get it.  Fortunately, such bi-partisanship is the GOP shooting themselves in the foot as there will be no question at all as to who will be blamed for the next mass killing.  

    This bill would never have passed the house anyway but it shows you how hard the gun lobby works to kill any sort of legislation from even getting its legs.  

    Here's the SNL sketch on gun control

    GDP/StJ – Keep in mind that, to be accurate, the study should take into account which countries have their own CB and which ones are slaves to foreign CBs or, even worse, the ECB.  It's a very, very different situation when you take on debt but can't expand your money supply or float your currency – as we've been seeing.  

    TZA/Wombat, StJ  - Please let me know, when you have a chance, what the official positions are as I'm now confused too.  On the DIA's, if we DD'd to 150 then we should have been 1/2 out when the basis got even too.  

    OSC/StJ – I barely trust SpaceX to build a rocket – it really bothers me how many people think they can just build rockets.  SpaceX was the result of 20 years of design competitions and is funded by a Billionaire who's a tech genius, ORB is a bunch of ex-military contractors who are looking for a payday.  They should get it right eventually but their experience is in launching satellites from rockets that get starts on planes.  This rocket is just a re-hash of the 1960s Russian moon rocket – not exactly break-through technology.  

    I'm surprised it doesn't bother people that private companies are allowed to send private payloads into space.  It's like the plot to every James Bond movie where the World is in danger…  90% of the payload on this rocket is private – we have no idea what they are sending up – someone could be placing a nuke in orbit and you wouldn't know it until we get the ransom note.  You don't even need a nuke – just wrap a rock the size of the space shuttle in some shielding to keep it intact on re-entry and put a couple of small boosters on it for aim and you have a hell of a weapon – a do-it-yourself attack meteor!  

    Ear-splitting/Dawn – Uh oh, you're dangerously close to banging on a neighbor's door at 8:30 pm and telling them to turn that darned music down because you're trying to sleep…  8)  Glad you're enjoying the rest otherwise – it's hard to let go of old habits but look how nice it is to be able to walk away from a crazy market like this for a week and be fine.  Looking forward to having you back in the fray next week.

    Thanks for gold list. 

    I guess terrorists need better lobbyists…/StJ – Do not give them any ideas!  

    Big Chart – Yes, so much for 1-day "signals" – this is why I have such disdain for TA.  Anyway, Dow and S&P looking very strong and Nas (despite AAPL) and NYSE holding their own so far – it's just an overshoot of the normal consolidation zone and now back in the zone but the RUT is certainly disturbing with the much sharper pullback.  It's up to AAPL and GOOG to keep the Nas from doing the same.  

    And what a great example of why the 5% Rule (it's not TA, it's math!) requires 2 closes over a mark (or below) to confirm.  

    SLM/StJ – I guess that record Student Loan debt is good for them for the moment but they could drop really hard and fast if delinquencies kick up so I only like these guys AFTER they have some disaster and get cheap. 

    And what Canuck said.  

    Miners/Jabob – NEVER!  They will never see support and they will fall and fall and gold will fall to $400 even though it costs them $1,200 to extract it and they will keep mining it and lose $800 an ounce producing it but they will attempt to make it up on volume and flood the World with gold and all the Central Banks will decide it's time to dump their gold on the open market and GLD will collapse and everyone in India will melt down their jewelry and Donald Trump will switch to wood — there will be no bottom – EVER!!!!

    FWIW/Jfaw – What really matters on the S&P is the mega-rally, from 1,200 (consolidation between April 2010 and Dec 2012 and 50% up from 800 bottom consolidation) and the subsequent move to 1,600.  As you know, 1,440 is a very significant line and that marks the 20% correction we expect from the 800-point run to 1,600.  We have no reason to think things are likely to get worse than that and we'll become very bearish if 1,440 does not hold on a pullback but, for now, that's our proper Must Hold line.  Given that we had good consolidation around 1,200 – our attention should then turn to the 400-point run and then we look for 80-point pullbacks off 1,600 and, what do you know – it's 1,520 and 1,440!  Isn't math fun?


     So anything over 1,520 is bullish consolidation for an eventual breakout over 1,600 and, even if we fail 1,520 – that 1,440 line should be huge support.  Also, that's the 22-week moving average heading up for support at 1,520 – also going to make it very hard to break and the 50 dma is already at 1,542 and was tested yesterday (mid-day) but ended up making a very supportive candle if we can print another Harami today.  

    Patents/Jfaw – Perkins Coie is out in Chicago, they're pretty good.  Holland and Knight also a good firm out there.  Don't forget – it's not about getting a patent but about defending it after the fact – you don't want to go with one-man operations.  

    Waco – Whole town had to be evacuated (2,600) and looks like 60 were injured.  But the plant has anhydrous ammonia, which is very bad for people if it gets thrown around by the blast. 

  174. Patent / Phil – Thanks.  I passed your message on.

  175. JFawcet – Regarding a Patent attorney – Winston & Strawn – Peter Mccabe

  176. Thanks tshroyer!

  177. Is the /CL signalling an uptrend (SPX) today with that $2.00 move from the close yesterday?

  178. At the close: Dow -0.93% to 14620. S&P -1.48% to 1551. Nasdaq -1.84% to 3205.

    Treasurys: 30-year +0.33%. 10-yr +0.12%. 5-yr +0.01%.

    Commodities: Crude -2.26% to $87.02. Gold -1.01% to $1373.45.

    Currencies: Euro -1.13% vs. dollar. Yen +0.62%. Pound +0.81%.

    Market recap: Stocks fell sharply across the board following a batch of disappointing earnings and as commodities resumed their selloff on worries over global growth. Big banks fell as BofA (-4.7%) reported a bottom-line miss. Techs also tumbled after weak results from Intel and Yahoo; Apple, -5.5%, now trades at late-2011 levels. WTI crude slid below $87; gold fell only slightly but copper dropped 4%.

    4:04 AM Asian markets are mixed, with sentiment hurt by the volatility in the commodity markets and the bearishness encompassing Apple, especially after one of its suppliers, Cirrus Logic, reported aninventory glut. Japan -1.2%, Hong Kong -0.4%, China +0.2%, India+0.8%

    4:10 AM European shares are higher mid-morning, putting them on course – so far – to break a four-day losing streak. EU Stoxx 50 +0.8%, London +0.1%, Paris +0.8%, Frankfurt +0.4%, Milan +0.7%, Madrid+1%.

    Thursday's economic calendar:

    8:30 Initial Jobless Claims

    9:45 Bloomberg Consumer Comfort Index

    10:00 Philly Fed Business Outlook

    10:00 Leading Indicators

    10:30 EIA Natural Gas Inventory

    4:30 PM Money Supply

    4:30 PM Fed Balance Sheet






    6:57 AM S&P 500 (SPY+0.35%, Nasdaq 100 (QQQ+0.4%following yesterday's ugly session, with the two downside leaders – Apple and BofA – up marginally in the premarket. Helping is amoderate rally in Europe, which has really struggled of late – Germany's DAX's bad string has returned it to flat for the year.

    G-20 finance ministers and central bankers are due to meet in Washington today and tomorrow, when they will reportedly reiterate their commitment to avoiding weakening their currencies in order to gain trading advantages. Japan will again escape criticism despite the yen's rapid fall as a result of the country's aggressive monetary easing policies and rhetoric.

    Without necessarily saying so explicitly, central bankers have acknowledged that they're flying blind as they try to spark growth with aggressive monetary easing. "We don't fully understand what is happening in advanced economies," Lorenzo Bini Smaghi, formerly of the ECB, told the IMF's Spring meeting. The major question is whether the banks' policies are storing up serious trouble for the future. 

    Bull Markets Since 1871: Duration and Magnitude (Greenbackd)

    For Stocks, Fed Stimulus Wearing Thin

    More Evidence That The Economic Peak Is In. (graphs)

    Beware the Transports’ weaknessCommentary: A potential Dow Theory non-confirmation brewing.

    Egan-Jones Downgrades Germany From A+ To A, Outlook Negative.

    A Closer Look At Yesterday's German Stock Market Flash Crash.

    Audi's Stadler Warns German Consumer Uncertainty Growing. Audi Chairman Rupert Stadler says increased insecurity driven by debt crisis in southern Europe, citing interview. Says massive concern over reforms needed to cut debt in many European countries behind slump in sales of cars in Europe.

    Cyprus' €10B bailout is once again in doubt after it emerged that the country's 58-seat parliament will vote on the deal. With the chamber having already overwhelmingly rejected an initial set of measures, it's far from certain that the new rescue package will be authorized.

    Italian police have visited JPMorgan (JPM) offices in Milan as part of an investigation into the acquisition by troubled bank Monte dei Paschi di Siena of rival Antonveneta in 2007. The police were "carrying out a (court) order to provide documents," a source says.

    Japan racks up its ninth-straight monthly trade deficit in March, coming in at ¥362.4B ($3.70B), though narrower and smaller than February's ¥779.5B. Exports swung to a 1.1% gain from the year-earlier period after shrinking by 2.9% the previous month, roughly in line with estimates. Imports rose 5.5%, largely due to a weaker yen and higher fuel-imports. Shipments to China fell 2.5%, easing off from a 15% plunge the previous month. Exports to the European Union fell 4.7%, but those to the U.S. rose 7%. The yen strengthened slightly after the data was released.

    The People's Bank of China intends to further widen the yuan's trading band "in the near future," PBOC Vice Governor Yi Gang has told the IMF's Spring meeting. Yi's comments have been interpreted as an attempt to avert criticism of China ahead of a G-20 meeting today and tomorrow. The yuan has climbed 0.9% vs the dollar since the start of the year, adding to a 1% gain last year. 

    Li Ka-Shing Port Workers Widen Protests After New Wage Offer. Hundreds of port workers at Li Ka- shing’s Hong Kong terminals surrounded his Cheung Kong Center headquarters in the city’s business district after rejecting a pay raise aimed at ending a three-week strike.

  179. Phil

    Foreign direct investment
     in China rose 1.4% in Q1 to $29.9B, snapping a long period of decline and providing a bit of positivity after data showed GDP growth slowed during the quarter. Investment from the EU jumped 45% on year to $2.1B, while FDI from the U.S. climbed 18.5% to $1.1B. Outbound direct investment from non-financial firms soared 44% to $23.8B.

    China Shenzhen Firms May Have Falsified Trade Data. Some trading houses in the southern Chinese city of Shenzhen may have falsified exports data to bring in "hot money," citing government officials.

    The price of new homes in China rose in 68 out of 70 cities in March, suggesting that the government's attempts to cool the property sector through various restrictions are having little effect so far. The average price rise in all 70 cities was 1.02%, the WSJ calculates, with costs rising particularly strongly in Beijing and the southern city of Guangzhou.

    Heading off a China-style subprime crisis. Warning of local governments’ high exposure to bad debts, the credit agency Fitch recently downgraded China’s long-term local-currency rating from AA– to A+. Officials should take note: the downgrade underlines how closely international markets are watching developments in the country

    China Economic Growth May Slow in 4Q. China's economic growth may slow in 4Q, Li Zuojun, vice director of resources and environment at the State Council's development research center, wrote in an article. Fading stimulus effects started last May and new policies likely beginning in 2Q-3Q will contribute to slowing 4Q growth.

    China is repeating Japan’s economic mistakesCommentary: Wasteful investment and spending stunts growth.

    China Bird-Flu Outbreak Seen Adding Risks as Growth SlowsChina’s deadly bird-flu outbreak is rippling through industries from restaurants to travel, adding economic headwinds after last quarter’s unexpected slowdown. The disease “may suppress domestic consumption in the near term,” Goldman Sachs Group Inc. said in a report this week. Ding Shuang, a Citigroup Inc. economist in Hong Kong, sees a danger of “short-term volatilities” in growth and inflation and of bigger effects if found to transmit between humans

    Coming alongside a rise in lender earnings are calls for tougher regulation, including even more stringent capital requirements. Bank profits have thrived the past few years even with all the new rules, but maybe at the expense of economic growth. "The government aimed a Stinger missile at the banking industry and missed and hit the consumer as well," says Dick Bove. The XLF has about matched the S&P's 120% rise since the March 2009 bottom.

    Déjà vu: Royal Bank of Scotland Group (RBSbuys 4,000 "cheap" mortgage loans at auction in March for around half of the value of their unpaid principal. Why so cheap? Because the loans are "to U.S. borrowers who are having trouble paying them back," according to WSJ. To some, this undoubtedly seems like a case of an investment bank's short memory as RBS' ~£1BN in losses on sub-prime assets during the crisis ultimately precipitated its demise. Time will tell.

    More on Morgan Stanley (MS) Q1 earnings: Excluding DVA, revenue of $8.5B fell 4.5% Y/Y, but beat expectations by about $160M. Earnings would have been a beat as well. Wealth management is a focus now, and revenue grew to $3.5B from $3.3B in Q4, with pre-tax margin of 17%. "Program to reduce non-strategic risk-weighted assets in (trading) remains on schedule." Indeed: FICC revenue of $1.5B, off 42% Y/Y. Shares flat. (PR)

    More on American Express (AXP) Q1 earnings: Revenue net of interest expense +4% Y/Y. Average cardmember spending +4% Y/Y. Net write-off rate of 1.9%, about steady with the last couple of quarters, down from 2.3% a year ago. 30-days past due flat for the last year at about 1.3%. Total expenses of $3.145B up 1% Y/Y – marketing and promotion expense as a percent of managed revenue back down to 7.9% (was 9.3% in 2007). Earnings call at 5PM ET. (earnings slides) Shares -1.1% AH. (PR)

    Oil Slide Could Continue As Demand Picture WeakensOil prices have cascaded lower in the global commodities rout and may still have further to go before finding a floor, analysts say.

    Shell (RDS.Amakes the case for gas, telling the LNG 17 conference global demand for liquefied natural gas will reach 400M metric tons/year by 2020 and 500M by 2025. Gas is the "ideal fuel" to satisfy demand – clean and easy to transport – and will replace coal over the next 20 years, says Shell’s manager of integrated gas strategy. On European LNG demand: "We may be close to the bottom."

    A widely expected Q1 rebound for oil services companies (OIH) is not materializing, analysts say, as the U.S. land rig count fell ~3% Q/Q in Q1 and was 13% lower Y/Y. Now the view is that recovery will be slower rather than faster. Fresh off a wave of downward analyst revisions, Schlumberger (SLB) and Baker Hughes (BHI) report on Friday, while Halliburton (HAL) posts earnings next week.

    Deutsche Bank lowers its stock target prices on several refiners, expecting weak margins to weigh on earnings in Q2 and in 2013 as producing gasoline gets less profitable. The new target for Buy-rated Holly Frontier (HFC) is $58, down from $68. Hold-rated refiners with reduced targets: ALJCLMTCVIDKMPCPBFPSX,TSOVLOWNR.

    Kim Says World Bank Can’t Reject Coal If People Freeze. The World Bank, which has boosted investment in renewable energy, cannot refuse to finance a coal- fired plant in Kosovo if the alternative is having people there “freeze to death,” the lender’s president said. 

    China's 'Golden Decade' for Coal Ended in 2011. Cleaner-burning natural gas to develop rapidly in coming decade, citing Liu Xiangdong, deputy director-general of China Electricity Council's dept of planning and statistics. China's market for coal-fired electricity to suffer "structural oversupply". Annual growth of coal fired-power to be less than 5% in coming decade, compared with 11% in previous 10-year period.

    Next wave of renewables – Power Felt

    Fed and Bank of Japan caused gold crashCommodity prices have been falling since September, culminating in a rout over the past two weeks. That is a classic warning for the global economy.

    Gold crash is an instructive whodunit of financial markets (theguardian)

    Gold retakes $1,400/oz. after falling as low as $1,337 overnight. Coincident with any big macro move are rumors George Soros is on the right side of it to the tune of hundreds of millions in profits. "Gold was destroyed as a safe haven, proved to be unsafe."GLD +1.5%SLV +0.9% premarket.

    A key barometer for the global economy, copper, broke through key support yesterday, sending out a danger signal for the metal and possibly stocks and other risk assets as well. The metal finished the day at $3.1875, its first close below key $3.20 support since October 2011. "It reminds me a lot of gold before that big breakdown," says Auerbach Grayson's Richard Ross. "This is the first significant break in two years," Ross says, and when gold broke below that level it broke hard. Ross thinks copper is setting itself up for precisely that type of move.

    An explosion at a fertilizer plant near Waco in Texas has left an undetermined number of people dead and dozens injured. The blast also destroyed homes and damaged other buildings. The facility is operated by Adair Grain. 

    The FAA has notified Japanese officials that it could lift its ban on Boeing (BA) 787 flights as early as this month, Nikkei reports. Authorities in the far eastern country would then follow suit. Meanwhile, Reuters reports that the FAA is close to authorizing a key document called a Project Statement of Compliance, which would be a major step in the process of allowing commercial Dreamliner flights to resume.

    Cars Are Becoming So Expensive Auto Loans Take Record Time To Pay Off.

    AutoNation (AN): Q1 EPS of $0.68 beats by $0.04. Revenue of $4.1B (+12% Y/Y) beats by $0.07B. (PR)

    Investors sound alarm over AAA ratings on subprime auto bonds. While many new subprime auto bonds are getting the highest Triple A ratings, the ratings agencies themselves admit standards are loosening – and some in the market say that needs to change soon. Skeptical investors are increasingly warning that ratings for the white-hot asset class should become more conservative, especially regarding smaller, second-tier lenders with no long-term record in issuing asset-backed securities (ABS). The issue is particularly pressing, as subprime auto bond issuance has skyrocketed over the past year. So far in 2013, nearly US$7.5bn of new subprime auto ABS has been issued, roughly 32% higher than in the same period of 2012, according to Deutsche Bank data. There was only US$18.5bn in issuance for all of 2012, and just US$11.75bn the year before that. As supply expands, however, there is a marked difference in the quality of issuers – even among those getting similar ratings from the agencies.

    More on PepsiCo's (PEP) Q1: A large focus by the company on its operating system and price realization helps it manage to squeeze out more profits on tepid overall sales growth. A 4% gain in revenue for Frito-Lay North America helped offset a slip with PepsiCo Americas. On an organic basis, international beverage volume grew 6% and international snack volume rose 5%. The company sees growing profits by 7% in 2013 on organic revenue growth in the mid-single digits. PEP -0.1% premarket. (PR)

    Select Comfort (SCSSslides 7.2% AH as the company's guidance disappoints. SCSS says it will earn $1.30-1.45 per share in FY2013 versus previous guidance of $1.65-1.80. The Street meanwhile, was expecting $1.52. (See: SCSS misses)

    More on eBay: Q2 guidance is for revenue of $3.8B-$3.9B and EPS of $0.61-$0.63, below a consensus of $3.95B and $0.66. 2013 guidance unchanged (previous). Q1 PayPal revenue +18% Y/Y, payment volume +21% (both were +24% in Q4). PayPal active accounts +4% Q/Q and +16% Y/Y to 128M. Marketplaces revenue and GMV +13% (were +16% in Q4), driven by 16% U.S. GMV growth and 17% growth in fixed-price item GMV (68% of total). Marketplaces active users +3% Q/Q and +13% Y/Y to 116M. $476M in buybacks. Opex +9% Y/Y, less than rev. growth. 2.8M customers added via mobile. EBAY -2.5% AH. CC at 5PM ET (webcast). (PR) (slides)

    A little more on eBay's Q1: Both 55% of PayPal and Marketplaces' revenue was international. PayPal's take rate was 3.77% vs. 3.72% in Q4 and 3.87% in Q1 '12. Transaction expense (worth watching) was 1.05%, up from 1.03% in Q4. PayPal's eBay transaction volume rose 13% Y/Y, and was 32% of total volume. 3rd-party volume rose 25%. Bill Me Later payment volume +31% Y/Y to $849M (same growth rate as Q4), charge-off rate even Q/Q at 5.3%. Marketplaces sold items +11.7% (a little below rev. growth). Capex 8% of revenue. Marketplaces segment margin 42.1%, much higher than PayPal's 24.1%. EBAY -2.6% AH. 

    SanDisk (SNDK) now -5.8% AH and Micron (MU-1.5%following SanDisk's Q1 beat. Expectations were high following SanDisk's 2013 run-up. Also, given strong NAND flash pricing, the Street may have been looking for a bigger gross margin improvement – GM rose 60 bps Q/Q and 460 bps Y/Y to 40.5%. SanDisk says SSD products accounted for 20% of sales. R&D spending rose 21% Y/Y, as the company ramps investments in proprietary SSD and embedded mobile offerings. CC at 5PM ET (webcast), guidance should be provided. (PR) 

    SanDisk (SNDK) guides on its Q1 call (webcast) for Q2 revenue of $1.35B-$1.4B and 2013 revenue of $5.6B-$5.75B, largely above a consensus of $1.34B and $5.63B. Gross margin is expected to rise to 41%-43% in Q2, and 2013 gross margin guidance is now at 42%-44% (a 200 bps guidance hike). Q2 GM will benefit from higher prices and a weak yen, partly offset by lower royalties. SanDisk still forecasts 30%-40% NAND industry bit growth in 2013, and expects its own growth to be much lower, as it refrains from major capacity expansion. Shares now -0.6% AH. MU -0.4%. (previous)

    More from SanDisk's call: Retail sales +34% Y/Y in Q1 and now 38% of revenue – SanDisk cites share gains and strong demand for memory cards for smartphone use. Commercial sales only +1%, as strong SSD and embedded mobile sales (iNAND) were offset by weaker sales of bundled cards to OEMs. ASPs +2% Q/Q, with higher NAND prices and a greater mix of SSD sales partly offset by retail price declines. SanDisk's average retail card capacity stands at 11GB, whereas average OEM card capacity is only at 6GB. $90M in Q1 buybacks at an avg. price of $50.97.

  180. Nokia (
    NOK) reportedly intends to launch several new flagship smartphones this year as it looks to generate faster sales momentum. New devices will include a "phablet" similar in size to Samsung's Galaxy Note but with more advance specifications, and a handset that incorporates the company's advanced Pureview imaging technology and 40 megapixel camera. Shares -1.4% premarket ahead of Nokia's results.

    Nokia (NOK): Q1 EPS of -EUR0.07. Revenue of EUR5.9B misses by EUR1.45B.  More on Nokia (NOKQ1: net profit adjusted for non-cash items €323M; net sales -20% on year and -27% on quarter. Operating loss €150M vs loss of €1.34B a year earlier; non-IFRS operating profit €181M vs loss of €258M. Lumia volumes +27% on quarter to 5.6M units. Mobile phones Q1 volume -30% on quarter to 55.8M, "reflecting competitive industry dynamics and an estimated higher than normal seasonal decline." Shares -5.6%. (PR)

    Time for AAPL to go private?  

    Apple Now Valued at Less Than Exxon Again: Megacap Update (Barron’s)

    The Bipartisan Origins of the Income Tax (Echoes)

  181. aapl going private/ Phil : Didn't know aapl was going bankrupt.  Oh, that's right.  They have $130+ billion in cash.  This  nonsense must mean a bottom is near…