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PhilStockWorld September Trade Review – The Wild Ride Continues (Part 2)

Now things get interesting!

We made a good bottom call in late August and, in Part 1 of our Trade Review, we had 46 trade ideas in two weeks (the last week of Aug and the first week of Sept) and 36 of them (78%) were winners.  I predicted at the close of that post that it was not very likely we'd repeat that in Part 2 and now we'll see how things went during 3 weeks where the Dow went from 14,900 to 15,700 and back to 15,200.

I never know how these things will go until I do the reveiw so this is exciting for me.  These are the trades we don't track in our virtual portfolios (which are highlighted daily in our Member Chat Roomso it's a bit arbitrary to pick a certain day to see how they are doing but, as I always say during these reviews, if you use good stop and scaling disciplines, you only have to be right half the time to do very, very well.  

We left on on Friday, Sept 6th with "Non-Farm Friday – It's Next Week that Matters" and we had one of our losers that day, shorting oil at $109.50 (/CL).  Too bad we didn't stick with that one, right?  That's OK, there were plenty more…  We also had a bullish play on TSLA, of all things, the Jan $130/160 bull call spread – but that was one of many covers we used along the way up to protect our longer, short positions.

Sept 9: Monday Market Movement – Back to Waiting on the Fed Next Week

As you can see from Dave Fry's SPY chart, we went nowhere on moderate, churning volume and that's no surprise actually when you have a look at this very helpful summary from theWSJ (via Barry) that summarizes our 4-year recovery in the economy:

How can we NOT have a wishy-washy market looking at these charts?  Single Family Home Construction is STILL nowhere near what a rational person would call a recovery.  Consumer Spending (70% of our economy) is a DISASTER and Government Spending (20% of our economy) is 6.3% LOWER than it was when we had our crisis.  We haven't simply rejected the Keynesian Economics that has led us out of other major recessions – we're activly going the opposite direction!  

Try to keep this in mind – what you are looking at, the S&P chart above, for example, is an ILLUSION of prosperity.  It's what's being shown to you on stage to distract you from all the people running around backstage that are holding the whole thing up with wires and using lighting (econonic BS) to hide the wires (free money) and sounds (MSM) to make things seem bigger and better than they actually are in the real economy.  

If you are in the top 10% and you are sitting in the first 10 rows – then you can sit back and relax, because you're getting a fantastic show and, when it's over – you can just get up and leave.  If however, you are in the bottom 90%, you are either working backstage and not enjoying the show at all (and probably have to clean up after the show) or you're sitting in the cheap seats and you can barely see the show, can't understand what they are saying but it might LOOK like something good is going on up there – but you aren't able to participate.  That's showbiz!  

  • HOV 2015 $5/7 bull call spread at .65, selling 2015 $4 puts sold for .90 for net .25 credit, now .10 - up 40%
  • NUAN Sept $22 puts at $2.40, closed at $2.73 - up 14%
  • AAPL Sept $500/505 bull call spread at $2.70, expired worthless - down 100%
  • Oil (/CL) Futures short at $105.50, out at $107.50 - up $1,000 per contract

Dollar bottomed out at 81.78.  Keep in mind it was 85 in early July so down almost 5% here so nasty if it breaks lower and clearly this indicates expectations of more easing from the Fed, not less.  80.77 was the Aug low on the Dollar and 80.50 was the June low and, before that, we haven't been lower than this since Feb. 

Sept 10: Take Off Tuesday – 5 More Trade Ideas that Make 500% in an Up Market

We've been waiting to see our strong bounce lines broken and they were shattered yesteday so, as promised, it's time once again to make a few bullish bets – just in case we do take out those pesky highs.  And, even if we don't – we can still make a few bucks, right?  

We were in a similar position on April 14th, when I wrote "5 Trade Ideas That Can Make 500% in an Up Market"  …a bit of a disappointment with ABX (which means we DD on that one!) but much more than made up for by our overachieving CLF and QQQ plays.  In fact, ABX is exactly the kind of lagging play we like to make in an upturning market.   

  • ABX 2015 $13/18 bull call spread at $2.80, selling 2015 $15 puts for $2.05 for net .75, now $1.90 – up 60%
  • ABX 2015 $20/30 bull call spread at $1.10, selling $20 puts for $3.35 for net $2.25 credit, now $1.10 credit - up 51%
  • 8 QQQ Jan $75/80 bull call spreads for $3 ($2,400), selling 1 ISRG 2015 $300 put for $23.50 ($2,350) for net $50, now net $1,020 - up 1,940%
  • Oil (/CL) Futures short at $107, out at $105 - up $2,000 per contract
  • GNK April $3 puts sold for 0.70, now $1.05 - down 50%
  • HOV 2015 $3/5 bull call spread at $1.25, selling $4 puts for .90 for net .35, now net .70 - up 100%
  • EWZ 2015 $44/49 bull call spread at $2.60, selling $35 puts for $1.95 for net .65, now net $2 - up 207%
  • CROX 2015 $12/17 bull call spread at $2, selling $12 puts for $1.90 for net .10, now net .55 - up 450%

NYMOSept 11:  Will We Hold It Wednesday – Top of the Market on 9/11

Are we overbought yet?  

Not so much according to Dave Fry's NYMO chart, where it looks like we can get away with another few days before gravity takes its toll on our indexes and that will take us right into next week's Fed meeting and… uh oh…

Darn, we were so worried about International terror with Syria and China that we forgot about the Domestic Bankster Terrorists, who are celebrating 40 years of destroying the working class (since Nixon took us off the gold standard and allowed workers to be paid in scrip).

  • 10 Nasdaq (/NQ) Futures short at 3,175, out at 3,075 - up $2,000 
  • 20 AAPL Nov $440/465 bull call spreads at $29,000 ($14.50), now $28.50 - up $96% (should be killed ahead of earnings, of course!)
  • TLT at $102.50, now $108.29 - up 5.6%
  • TLT weekly $103 calls at ..30, expired at .55 - up 83%
  • Oil (/CL) Futures short at $108.50, out at $108 - up $500 per contract
  • MOS 2015 $40/45 bull call spread at $2.50, selling 2015 $35 puts for $2.50 for net $0, now .90 - up infinity%

By the way, speaking of Vegas – THIS is why being able to trade Futures is so valuable.  The margin on the /NQs is $2,400 per contract and my call was to take 10 of them this morning AFTER we saw AAPL fall hard BECAUSE we KNOW that it will drag the Nasdaq down.  That's why I was able to make a SUPER-CONFIDENT call to short 10 of the Nasdaq Futures (/NQ) for the STP to offset our AAPL longs.  

My rational for why AAPL did not produce a "cheap" IPhone in this cycle and why it was a good thing for AAPL:

The reason they sell $49 IPods is because they make them for $6 and, if anything goes wrong, they just replace the whole thing in 2 seconds and have a happy customer.  Even with iPhones and iPads, they pretty much just give you a new one but that's fine because if you sell 10 $499 phones and pay $350 and make $150 and you have to replace 2 for $350, you still make $1,500 – $700 = $800.  If you sell 40 $199 phones and make $1,600 and have to replace 8 at $160 that's $1,600 – $320 so you have to sell 12 cheap phones for every one expensive phone to make the same overall money, taking service and repair into account (and not including 12x floor space, sales people, warehouse space, shipping charges…)!

AAPL will sell $199 phones when they can make them for $120 and they will eventually and then they'll own the low end of the market.  Just not today..

Sept 12:  Thrilling Thursday – Nasdaq Presses on Without Apple Support

Carl even pushed my proposal that AAPL just take their $150Bn pile of cash and buy back their own stock.  I've said this for ages (since $400) but, even at $467, AAPL has only a $460Bn market cap against $40Bn in CURRENT profits and buying back 1/3 of the company for $150Bn of cash that traders are currently ignoring anyway drops the market cap to $300Bn but has no effect on the $40Bn in sales (p/e of 7.5), not to mention their normal $12Bn dividend would shoot up to 4%.  

Hell, I say cut the dividend and borrow $300Bn at 3% and take the whole damned thing private if no one else wants to buy them with a p/e of 7.5!  The trading public doesn't DESERVE to own AAPL if they don't think it's worth more than $500 a share.  End of rant.  

  • Oil (/CL) Futures short at $108.50, out at $108 - up $500 per contract
  • WTR at $24.67, selling March $25 puts and calls for $3 for net $21.67/23.34, now $25.15 - on track
  • PHO at $23.40, now $24.71 - up 5.6%
  • MT 2015 $13 puts, sold for $2, now $1.18 - up 41%
  • MT 2015 $13/17 bull call spread at $1.58, selling $13 puts for $2 for net .42 credit, now .95 - up 126%
  • MT at $13.91, selling 2015 $13 puts and calls for $5.90 for net $9.01/11.01, now $16.17 - on track
  • LULU Jan $62.50/70 bull call spread at $3.50, selling $60 puts for $3.20 for net .30, now $4.05 - up 1,250%
  • Oil (/CL) Futures short at $108.50, out at $106.50 - up $2,000 per contract 

Yes Burr, ABX.   I just picked them for a 500% play.  So far, heading down 500% but we're at least 75 FU's from Jabob before we have to worry. 

Sept 13:  Flattish Friday – Waiting on the Fed Next Week

As to Elliot Waves (and all TA for that matter) – here's a good read on Random vs Non-Random Walk Theories which summarizes things very nicely.

This is the problem with following ANYTHING too closely – the SCIENCE of the Bell Curve.  Even if you are right, you are still going to get burned by "anomalies" 32% of the time and even if the thing you are thinking of following is completely insane – it's still going to seem right 32% of the time and, as Roulette watchers know, anything can randomly come up enough times in a row to make you swear you see a pattern. 

Spin the wheel enough times and anything can happen.  The key is more cash management than anything else.  The most valuable thing in the market – as Buffett will attest, is having cash ready to deploy when an opportunity presents itself (and they always seem to). 

  • Oil (/CL) Futures short at $108.50, out at $106.50 - up $2,000 per contract 
  • LYG Apr $3/5 bull call spread at $1.55, selling $5 puts for .65 for net .90, now $1.33 - up 47%
  • K 2015 $55 puts sold for $3.501, now $2.50 - up 28%
  • K at $60.60, selling 2015 $60 calls for $4.60 and $55 puts for $3.50 for net $52.50/53.75, now $62.43 - on track

Sept 16:  Manic Monday – Summers Out, Syria Solved, Markets Flying!

Everything we were worried about is "fixed" and most of the Global markets are snapping higher this morning.  That suits us just fine as we got much more aggressively bullish at our Strong Bounce lines on Tuesday (see "5 More Trade Ideas that Make 500% in an Up Market") and, even better, we nailed it again on oil, which is DOWN to $106.50 again this morning (/CL) for $2,000 PER CONTRACT gains! 

$106.50 was our primary target for oil to drop, but we do expect to test $105 between now and Friday - perhaps much lower if we are lucky.  We moved our USO puts to October, just in case oil took longer to fall than we thought but our very aggressive SCO (ultra-short oil) position stayed open over the weekend and would pay off VERY nicely at $105 or lower. 

  • Oil (/CL) Futures short at $107.50, out at $105 - up $2,500 per contract
  • SCO Oct $27 calls at $2, expired at $3.56 - up 78%
  • NAK at $1.45, now $1.50 - up 3.4%
  • CZR 2015 $7.50 puts solf for $1.80, now $1.50 - up 17%

Sept 17:  Timid Tuesday – Indexes get Gun-Shy as they Re-Test the Tops

Since we already pushed ourselves a bit more bullish as we took out the strong bounce lines last Tuesday, now it's time to look at a downside hedge like the Qs because BALANCE is the key to a portfolio that lasts.  And, by the way, if you want to pay for a short hedge today with a long play tomorrow, may I suggest selling the AAPL 2016 $320 puts for $32 for a net $288 entry.  What's not to love about owning AAPL at 36% off the current price?

Meanwhile, we're just wating on the Fed and ignoring the horrific 1.6% drop in Retail Store Sales and we'll ignore the 4.9% drop in European Car Sales and we'll just sit back and enjoy the drop in oil (now $105.86!) while we wait to see which 6 words the Fed changes on tomorrow's statement. 

Yeah, that will make everything all better…  sure it will…

  • Oil (/CL) Futures short at $106.50, out at $105 - up $1,500 per contract
  • SQQ Oct $23/26 bull call spread at .45, expired worthless - down 100%
  • AAPL 2016 $320 puts sold for $32, now $17.50 - up 45%
  • ECA Jan $16/18 bull call spread at $1.20, selling 2016 $15 puts for $2.20 for net $1 credit, now 0.35 - up 135%
  • WLL 2015 $50 puts sold for $6.40, now $2.80 - up 56%
  • TTWO Dec $16/19 bull call spread at $1.30, selling Jan $15 puts for $1 for net .30, now .60 - up 100%

Sept 18:  Which Way Wednesday – Waiting on the Fed – Again

MORE FREE MONEY is chasing the same amount of stocks and bonds (consumer and corporate spending are flat so it's not going into goods and services) and that's depressing the rates bonds need to pay to attract the deluge of cash while pumping stock prices to the moon and beyond.  So much so that the McClellen Oscillatoris now pegging the most overbought it's been since mid July, the last time the S&P topped out (1,709 was the 8/2 high). 

We went over the ramifications of this our Member Chat Room this morning so I won't re-hash it here but it's something we're going to be paying very careful attention to today.  We remain bullish for the moment (see last Tuesday's post) but also skeptical that we'll be making those new highs – or keeping them, at any rate…

No, this is not a chart of One Direction fans vs how much skin Miley Cyrus keeps covered, this is a chart of the Monetary Base of US Dollars ($2.7Tn, up from $800Bn in 2009) vs the CPI (lower)over time.  As I pointed out at our Atlantic City Investing Conference in April – it doesn't matter how much SUPPLY of money you have if the VELOCITY is low – you still won't boost prices.  And here it is in red and blue.

  • CCJ Oct $20 calls at .55, selling 2015 $20 puts for $3.30 for net $2.75 credit, now $3.80 credit - down 38%
  • Oil (/CLX3) short at $106, out at $105 - up $1,000 per contract 
  • 2.5M AAPL 2016 $400 puts sold for $65, now $41.25 - up $5,937,500,000 (36%) (this was my idea for AAPL to utilize their cash reserves, rather than directly buying back stock).  
  • CZR Dec $15 puts sold for $1.35, now .85 - up 37%
  • CZR 2015 $7.50 puts sold for $1.80, now $1.50 - up 17%
  • 20 SCO Dec 24/28 bull call spread at $2.10 ($4,200), selling 10 $28 puts for $3 ($3,000) for net $1,200, now $3,600 - up 200%
  • USO Oct $40 puts at $2, expired at $3.55 - up 77%
  • IWM short at $107, now $111 - down 3.7%

AAPL/8800 – As you may have noticed, the only real move we've made on AAPL all year is to buy more when it's cheap and cover (a little) at $500.  There's been no change in my overall value supposition since they were at $600 or at $485 when I made them my buy of the year in January (with a $350/450 bull call spread, selling the $350 puts to pay for it).  So I was never shooting for the stars, just drawing a value line in the sand at about $500 where I really don't have a problem betting the farm on them.  Whether they go up or down or when they do it isn't important because I see it as a long-term play but – if you felt over-extended and are now relieved to be back at $475 – then by all means cut back to a sensible size because no position is worth the heartache you get from watching a $500 stock move up and down 20% on a regular basis if the bet is more than you can comfortably afford.  

Sept 19:  Stocks Go Parabolic Without Taper to Hold them Down

We have gone from 14,700 to 15,700(6.8%) in 3 weeks.  At this pace, we'll be at 19,000 by December 31st and over 20,000 in January and 32,000 at the end of next year!  Wow, that is so normal, right?  

Of course, the Fed DID put $1Tn into the market yesterday.  Actually it was more like $2Tn because they are continuing to put $85Bn PER MONTH ($1Tn per year) into the markets through QE but they also withdrew $1,000,000,000,000 – not just from your savings account – but from every single asset you have, when they devalued the Dollar by 1% yesterday.

That's right, the US Dollar responded to the Fed's complete lack of respect for the money supply by dropping a full point yesterday and now sits at 80.03, down 4% since the Dow began rising 6.8%.  Since the Dow is priced in Dollars – doesn't that then mean that the Dow is really only up 2.8% in a steady currency?  14,700 + 2.8% is only 15,111, not 15,677 and 15,111 is STILL below the 5% line.  If I'm right, then 15,200 is going to be serious resistance and we can expect the Dow to grind to a halt 89 points from now, at 15,766 so that will be our new shorting target (if they even make it there).

  • Oil (/CL) Futures short at $108, out at $106 - up $2,000 per contract
  • RAD 2016 $4/5.50 bull call spread at .50, selling $4 puts for $1.20 for net .70 credit, now net 0.20 credit - up 71%
  • TTWO 2015 $15 puts sold for $2.10, now $1.80 - up 14%
  • TTWO at $17.55, selling 2015 $15 puts and calls for $5 for net $10.45/12.73, now $17.97 - on track
  • TTWO 2015 $15/20 bull call spread at $2.50, selling $15 puts for $2.10 for net .40, now .50 - up 20%
  • CCJ 2015 $17/22 bull call spread at $2, selling $15 puts for $1.10 for net .90, still .90 – even 

This is a very good time to point out that our long-term plays (the vast majority of our trade ideas) can also be very nice short-term plays.  You don't have to make short-term risks to make very good money on spreads.  RAD is up 71% in a month, TTWO up 14% and 20% on two of our trade ideas.  Granted, that's not usual but the point is that you don't have to make all or nothing bets ahead of earnings – those well-hedged, long-term ideas can do quite nicely.  

NYMOSept 20 – Quad Witching Friday – Options Expire Amid 4 Fed Speeches

Oh boy did I tell you so – over and over again – on oil.  Again, this is physics to us, not guessing.  There were far too many contracts and they arefake, Fake, FAKE and, one day, hopefully we can just make a book collecting all my various proofs that NYMEX trading is nothing more than a massive scam perpetrated on the American people in order to massively overcharge them for the 2nd most abundant liquid on the planet.  

It's OK though, as long as you people can't be bothered to write to your Congresspeople and DEMAND ACTION, we can keep using this scam to our own advantage and short their fake rallies, like the one pictured here – which banged right into our $108.50 target (a bit over) and then plunged all the way to $106 for a $2,500 PER CONTRACT gain.  

Just go back and read my last month's worth of posts and see how many times this worked – I definitely told you so on that one.  Am I that good?  No – IT'S A SCAM!!!  It should be illegal, but no one stops it so we may as well trade it, right?  At least over in Europe they are trying to reign in the madness but, despite some of our Members sending articles like this one to their Congresspeople – we are unable to get traction against this nonsense in the US..

  • SPY Oct $171 puts at $2.05, out at $4.10 - up 100%

There was not much to do that Friday as we were already positioned more bearish, the SPY puts were just an additional short call for the drop we expected.  At the end of the day, the chart had become very ugly, very quickly:

Well, that brings this two-week review to a close.  As promised, it was a wild ride and it gets wilder over the next 10 days.  We were fortuntate to be generally bullish and we had 56 trade ideas with only 6 misses, a whopping 92% winning percentage on our trade ideas.  

A few of the trades are not so far along that they are not still playable and, of course, the losers are always interesting ones to discuss in future chat sessions as we generally play the Fundamentals so, just because we were wrong in the first month of a trade, doesn't mean we still don't like it for the next year or so.  

Looks like we'll have a part 3 as September has been a very busy month!  

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  1. CZR – Phil, only if you were short the stock on the 15th or later, which might be affected by the t+3 stock dates.  My short call was exercised on the 9th, I was short the 10th, bought back the shares which were cleared by the 13th.  Therefore I'm not short the rights.

    If you are short the rights, then yes, you will be short the new issue.  But if you are long CZR you have the option of buying the new issue too.

    That 2015 CZR short put trade is doing well though that I came up with.

  2. GOP’s Obamacare conspiracy: Sabotage from the inside

  3. SEC votes to “unleash wisdom of crowds,” approves crowdfunding rule

  4. Bank’s Midlevel Executive Becomes a New Face of the Housing Crisis

  5. APPLE EARNINGS PREVIEW: The Most Exciting Earnings Report Of The Year

  6. Governors pledge to get millions of zero-emission cars on the road

  7. The Indelicacy Of Hiding Inflation: People Get Bigger, Airline Seats Get Narrower – Wolf Richter- Testosterone Pit

  8. The fallacy of the Republican “moderate”: Stop being nostalgic for the right

  9. stjeanluc

    Is it possible to get an income portfolio update?



    Interesting article on many Republicans breaking ranks from the Tea Party on immigration, including Bloomberg, Rupert Murdoch, the Chamber of Commerce, Evangelical Churches (who include many new immigrant groups), and many business leaders.  Ironic to see the Tea Party complaining they will not be intimidated by "corporate interests."  Now they are oppressed by the socialist government and free market capitalists.  Must be time for the apocalypse, or there might just be some Republican moderates after all.  Even this Tea Party leaning farmer wants to break ranks:

    Terry Jones, a dairy farmer from Idaho who considers himself a member of the Tea Party movement and who will be in Washington next week, said he considered passage of the legislation an urgent matter.

    “You wake up and it is 25 degrees, and a cow that is giving birth, and you have 400 cows to milk that day, and you don’t have the help you need — that stinks,” Mr. Jones said, citing a shortage of labor that he says could be eased through a new immigration law. “I bet not one of those legislators back there have been in that position.”

    Lets get the cows milked!


    The widely divergent fortunes of the rich and poor in this country are an unsustainable imbalance.


    The mayoral candidate Bill de Blasio’s proposal to raise taxes on the city’s wealthy won’t touch many of the wealthiest.


    The Affordable Care Act doesn’t seem a negative for big insurance companies, if their stock prices are any indication. They’re outpacing the broader market.

  14. From Weather Underground, for all you DBA players:


    "Earth's 4th Warmest September on Record; 32 Billion-Dollar Disasters so far in 2013

    By: Dr. Jeff Masters, 2:26 PM GMT on October 25, 2013


    September 2013 was the globe's 4th warmest September since records began in 1880, according to NOAA's National Climatic Data Center (NCDC). The year-to-date period of January – September has been the 6th warmest such period on record. September 2013 global land temperatures were the 6th warmest on record, and global ocean temperatures were the 4th warmest on record. September 2013 was the 343nd consecutive month with global temperatures warmer than the 20th century average. Global satellite-measured temperatures in September 2013 for the lowest 8 km of the atmosphere were 11th or 3rd warmest in the 35-year record, according to Remote Sensing Systems and the University of Alabama Huntsville (UAH), respectively. Wunderground's weather historian, Christopher C. Burt, has a comprehensive post on the notable weather events of September 2013 in his September 2013 Global Weather Extremes Summary. "

  15. Good morning!  

    Not much going on this weekend so far:

    U.K. government to stop short of RBS break-up

    • U.K. Finance Minister George Osborne reportedly plans to tell state-owned RBS (RBS) to create an internal "bad" bank of £40B of toxic assets rather than break itself up.
    • The strategy would negate the need for a vote of independent shareholders, some of which oppose a full break-up into "good" and "bad" banks.
    • Osborne may also order RBS to float its U.S. retail bank, Citizens, earlier than a previous target date of 2015, while the international division of RBS's wealth management firm Coutts could also be sold.
    • The bank could announce the shakeup when it releases quarterly results on Friday.
    Berlusconi revives old party, could undermine government
    • Italian markets are expected to be in focus this week after Silvio Berlusconi again undermined the stability of the ruling coalition, of which his center-right grouping is a member, by reviving his old Forza Italia party and suspending his existing grouping, the People of Freedom (PDL).
    • The move could split the right: Berlusconi and his supporters – who tried to bring down the government following the former prime minister's conviction for tax fraud – would be in Forza Italia, while the more "dovish" members of the right-of-center group – who blocked Berlusconi's efforts – would remain in the PDL.
    • The doves probably have enough members to stop the government from falling if the former Prime Minister were to withdraw his support, but it could be more difficult to force through economic reform.
    • ETFs – Stocks: EWI. Bonds: ITLTITLY

    China September industrial profits: +18.4% Y/Y versus +24.2% in August and +11.6% in July.

    $5T Permian Basin boom threatened by falling crude prices
    • The Permian Basin is all the rage on Wall Street, but oil prices need to stay high enough to support the current rate of exploratory drilling – and prices for West Texas crude have dropped below $100/bbl for a third straight weekly decline.
    • The Permian remains the largest U.S. oil producer, with output averaging ~1.3M bbl/day and rising, but it's also the most expensive U.S. shale formation in which to drill – meaning the boom could become a bust if crude moves near $70/bbl, as some analysts predict.
    • If oil drops to $80, wells in some parts of the Permian will become money-losers; wells drilled in the Cline Shale and Northern Mississippian Lime layers of the Permian need $96 oil to break even.

  16. Phil, PETS….like them here with nice dividend. Selling mar 12.5 puts. 

  17. Amazon spent $1.4 billion in the past 12 months to build a company town

  18. 4 Out Of 5 Valuation Methodologies Agree: The “Market” Is Overvalued

  19. Gold Traders Watching $1,350/Oz Level, FOMC For Next Week’s Action – Kito News Metals Outlook

  20. Market’s Bill of Health – The Only Thing We Have to Fear Is a Lack of Fear Itself! | Chris Puplava

  21. Ordinary Americans Priced Out Of Housing: Institutional Purchases Hit Record, Half Of All Deals Are “All-Cash”

  22. ANALYST: We Can’t Ignore The Chance That The Fed Increases QE Next Week

  23. Albert Edwards: “At A Record High Median Price To Sales Ratio” There Is “Nothing Worth Buying”

  24. Yes, I Know, But It’s Not Just Earnings — Lots Of Measures Suggest Stocks May Crash

  25. Almost No Risk Is Priced Into Financial Markets, And There’s Virtually Nothing On Investors’ Radar

  26. Mobile Is The Future Of Payments — Here’s Why There’s Virtually No Ceiling To The Opportunity

  27. GARY SHILLING: The Forces Are In Place To Propel The Economy Past Full Employment And Into Serious Inflation

  28. HAWKS AND DOVES: Here’s What Janet Yellen’s New Fed Will Look Like

  29. BofAML Warns “US 10Y Yields Have Reached Massive Resistance”

  30. The Inner Crisis of American Society: Civil Liberties, Militarization, Economic Inequality

  31. It Will Be An Unusually Heavy Week For The Economy — Here’s Your Complete Preview

  32. Al Gore On Solving The Climate Crisis: ‘You’re Damn Right I’m Passionate About This’

  33. That Time Republicans Thought You Shouldn’t Repeal Health Care Reform Because Of Enrollment Glitches

  34. George Washington University Wait-Listed Low-Income Students, Replaced Them With Wealthy Ones

  35. Amazon and the “profitless business model” fallacy — Remains of the Day

  36. GOLDMAN: Halfway Through Earnings Season, Here’s How Corporate America Is Looking

  37. Good morning!  

    Futures up a bit with the Nikkei up 2%, Hang Seng up 0.5% and the rest of Asia flat. 

    Abe Warns China on Island Spat as Japan Dispatches Fighter JetsPrime Minister Shinzo Abe warned he wouldn’t permit China to use force to resolve territorial spats, as the renewed presence of Chinese aircraft near disputed islands prompted the dispatch of fighter jets from JapanJapan sent up fighter jets for a third day yesterday after Chinese aircraft flew between its southern islands without entering Japanese airspace, the Self-Defense Forces said on their website. Abe said yesterday the country would not allow any shift in the status quo regarding islands both governments claim in the East China Sea. Abe made similar comments in an interview with the Wall Street Journal on Oct. 25.

    Hong Kong Home Prices to Drop 30% by 2015-End, Barclays SaysHong Kong home prices will drop 30 percent by the end of 2015 as growth in household income and rents slow while housing supply increases, according to Barclays Plc. The bank is assigning a “negative” rating on the Hong Kong property sector, analysts Paul Louie and Zita Qin wrote in a report today. They also forecast office prices to fall 20 percent and retail property prices to remain unchanged over the period, according to the report.

    China Seen Losing Sheen for IBM(IBM) to Nike(NKE) as Hurdles MountCompanies from IBM to Starbucks are struggling with new obstacles in China as Communist Party officials tussle over the direction and depth of economic reforms.

    China's Banking Crisis Begins.

    Europe, like us, is up about 0.3% early on but our whole gain in the Futures was a big spike up at last night's open and nothing since so I'm a little skeptical.

    PragCap-SP500-GNP-102413Oil $97.66, gold $1,348, silver $22.50, copper waking up at $3.28, nat gas $3.62 and gasoline $2.57 with the Dollar going nowhere at $79.25.

    Monday's economic calendar

    U.S. Cities Grapple With FinancesUrban Centers Are Struggling Even as Recovery Takes Shape, Data Show.

    Stocks & Gold Soar As Macro Slumps. (graph)

    Will The U.S. Suffer Japanese Lost Decades?


    LBO Multiples: The Latest Credit Bubble 2.0 Record.

    The ‘No Exit’ Meme Goes Mainstream.




    • Some at Fed Want Rule for Action

      With the Fed unlikely to change its bond-buying program at its policy meeting this week, discussion is likely to focus on issues such as whether to set a rule determining when and how to trim bond purchases.

    • Hilsenrath to Wall Street: You don’t know Fed. Investors may be right to anticipate that no bombshells will emerge from the Federal Reserve meeting this week—but as they look into next year, it will be very difficult to predict when the Fed will begin to taper its quantitative easing program, Jon Hilsenrath told "Futures Now."
    • Fed Loan Warning May Hurt Riskiest Borrowers, Trade Group SaysRecommendations by top banking regulators that lenders strengthen underwriting standards for leveraged loans may decrease funding to the neediest borrowers, according to Loan Syndications and Trading Association. The Federal Reserve and the Office of the Comptroller of the Currency sent letters to some of the biggest U.S. banks asking them to avoid arranging debt that may be classified by regulators as having some deficiency that may result in a loss, according to nine people with knowledge of the communication.

    • Big Banks Are Padding Profits With 'Reserve' CashAs Revenue Slows, Some Banks Increasingly Use Loan-Loss Reserves to Boost Income. Federal regulators have warned banks to be careful about padding their profits with money set aside to cover bad loans. But some of the nation's biggest banks did more of it in the third quarter than earlier this year. J.P. Morgan Chase JPM +0.55% & Co., Wells Fargo WFC +0.40% & Co., Bank of America Corp. BAC +0.64% and Citigroup Inc., C -0.18% the nation's largest banks by assets, tapped a total of $4.9 billion in loan-loss reserves in the third quarter, up by about a third from both the second quarter and the year-ago quarter after adjustments. All the banks except Citigroup showed significant increases compared with the second quarter.

    Fed scrutinizes bank exposure to MReits
    • The New York Fed has reportedly been taking a "deep dive" into banks' exposure to mortgage real estate investment trusts (MReits) (REM), which fund acquisitions of long-term mortgages with short-term repo borrowings.
    • The fear is that a rapid increase in interest rates could force the MReits to quickly cut their holdings of mortgage-backed securities (MBS) and spark a wider sell-off.
    • The vehicles have proliferated since the financial crisis, and have raised their holdings or MBSs to $460B at the end of March from $160B in 2009.
    • News of the Fed scrutiny comes after the IMF argued earlier this month that MReits pose systemic risk and called for boosted regulation of the sector.
    • MReit giants include Annaly (NLY) and American Capital (AGNC).
    • Related ETFs: MORTMORL.

    ELON MUSK: Tesla(TSLA) Stock Is Overvalued.


    DirectTV And Time Warner Cable Might Stream Live TV Over The Internet Just Like Aereo.

    APPLE(AAPL) EARNINGS PREVIEW: The Most Exciting Earnings Report Of The Year.


    Crime Is Getting Worse: Violent Crime In America Increased By 15% Last Year.

  38. US Manufacturing Output PMI

    Chris Williamson (Chief Economist)/Markit: – The flash PMI provides the first insight into how business fared against the backdrop of the government shutdown in October, and suggests that the disruptions and uncertainty caused by the crisis hit companies hardThe survey showed the first fall in manufacturing output since the height of the global financial crisis back in September 2009.

  39. Phil // CROX
    I'm going to log this here although its recycled, and I'll rip it and post it again if you miss it. I'm looking a the trade reviews and I'm always astounded by the numbers you post as profits. However some of them I just cant figure out. Let me give an example //

    CROX 2015 $12/17 bull call spread at $2, selling $12 puts for $1.90 for net .10, now net .55 - up 450%

    I bought the very same spread at $1.95, sold $12 puts at $1.90 for a .net of .05 - follow you.
    The spread is down to $1.65, and the $12 puts are still at $1.90, for a loss of 7%
    So, where are you getting a new net of .55 that your translating into 450% "profit"

  40. Phil / I know you wont sleep in LVS, so I'll hit you with another one. You mentioned 'layering' spreads sometimes to get more cash out them. I've also questioned whether I'm calculating profit correctly.
    Here's the real example // AAPL

    -20 Nov13 $440 /465 Bull Call spread ( bought at $12, now $25 )
    -10 Nov13 $540 short calls

    If I were to cash out the $440 longs before expiration it would seem they would be worth MORE than if I let the spread expire. To calculate this I'm merely looking at what the spread is worth ( $25 )*( # contracts )

    So, I would think that I would cover the short $465's with a +20 ( whatever ) Dec spread and just let $465's expire ?
    Is my thinking correct, and if so is there any process in picking the new spread ?

    Thanks – I think I'm about 3,000 hours in. 
    Stay away from girls, and don't forget to drop one in the 'The Wheel of Fortune' on your way out.
    Last time I walked out to my cab with 3K ; >

  41. Wombat / casinos ….

    Relax, you are right, do your things …..fell free

  42. CROX/Wombat – I wrote that last week, before the big fall, that's all (I first started this post on 10/13).  Today is just the final update as it takes ages to go through these things.  In the case of CROX, the stock dropped drastically since I reviewed it and got that number.  On the whole, it's a great opportunity for another entry. 

    AAPL/Wombat – There are a lot of ways to handle it but you took the $540 short calls so you don't want to do anything rash until you know whether or not you still need the protection.  Of course, if you can get $25 for a $25 spread, then what's the point of leaving it open?  At the moment, the $440s are $80.18 (last sale) but you can't leave naked $465s, they have no premium either and can kill you if APPL flies up.

    When you say "a news spread", what time-frame are you looking for.  I don't generally do short-term ones like that as you have no wriggle room if it goes bad on you.  Essentially though, whatever you do will just be a new spread after you cash this one in. 

  43. Phil // CROX
    Fair enough. I thought I was doing something wrong. But just to confirm, you are getting the percentage gain by ONLY using the money 'put out' – not short money collected.

    AAPLE // Correct on all fronts. I was thinking that if I cashed in the longs and then recovered the remaining shorts with a new spread I would receive more – I guess when a $25 spread makes 25$, theres really no where to go ; >
    I just wanted to replace it with a new AAPL spread since I'll have power opening up – I'm pretty loaded for Jan. Perhaps just buy some more puts and forget about it ?
    Enjoy Vegas – surprised you're not a craps player.

  44. BA: Jan 15 spread  - closing early, selling covers.

    There was a question whether closing a Jan 15 95/105 BCS now made sense. A couple of weeks ago I did not think so, but now I am not so sure. The original ABW was the above spread financed by the sale of Jan 15 87.5 put. The net cost was around $2.15. Currently, the BCS can be closed out for $8.50 – leaving $1.50 on the table (but you would have to wait until Jan 15 to call it your own). So in terms of finding ways to make $1.50 on BA a tad earlier, how about the sale of the Dec 14 $140 calls for $1.13 (BA is currently trading at $133). I am long on BA with other positions so I would be happy to roll this if needed. Seems a good trade off between time, bird in the hand, and alternative means of capturing some premium. Of course, no need to get your money on BA – there must be plenty of similar opportunities especially after this recent bout of euphoria.

    Now is a good time to review BCS, to see how to balance gains and time. 

  45. Sunday // CL
    So, oil broke every resistance point on Friday – wondering if anyone is up on futures and their read >>>
    I can't find any news either way

  46. I'm doing another seminar next Friday in a new partnership with Wealth Creation Investing.   It's going to be a regular, weekly or monthly thing. 

    To start with, they are asking for 3 current fundamental plays.  I'm using this comment section to transmit it to them to make a PowerPoint, so that's why the strange comment:

    Barrick Gold (ABX) – Currently trading near multi-year lows at $18.18.

     Barrick has a lot of debt ($16Bn) and that spooks investors but there's something else ABX has a lot of – Gold!  ABX has 140M ounces of gold reserves, worth (at $1,300 an ounce) $182 BILLION!  They also have $1Bn ounces of silver which, at $22, is another $22Bn and 14Bn pounds of copper for another $42Bn at $3 per pound.  

    So of course they want to borrow $16Bn to buy leases and equipment so they can extract the gold from the ground, right?  It costs Barrick approximately $920 an ounce to extract the gold, the rest is profit and, in 2012, they produced 7.4M ounces.  At $400 an ounce in profit, that's good for $3Bn in profits. 

    Gross profit in 2012 was, in fact, $6Bn but they wrote off $7Bn on a delayed mining project (not included in reserves) in Chile and Peru, which gave them a loss (and a tax write-off) and depressed the value of their stock so they were able to buy back 5% of it from impatient investors.  

    Gold prices also dropped from $1,600 to $1,300, which is why we're figuring $3Bn in profits but last year they had $6Bn in profits.  Without even assuming an increase in the price of gold, ABX has a p/e below 6.

    While we're comfortable buying this stock for $18.18 and waiting for gold to come back in price or for ABX to open their new mine (2-3 years, if all goes well) and double production, it's more fun to practice our core strategy of BEING THE HOUSE and selling risk by promising to buy ABX if it hits $15 by selling the 2016 $15 put for $2.60.   By itself, that sale either nets us into the stock at $12.40 (31% below the current price) or, if ABX does not go lower, the margin on the short sale is just $1.50, which makes the return on margin a very nice 173% in 27 months.

    A more aggressive way to play this would be to add a bull call spread, buying the 2016 $15 calls for $5.80 and selling the 2016 $20 calls for $3.80 for net $2.  Combined with the sale of the short calls, we create what we call an Artificial Buy Write and we have a net credit of .60 and our maximum gain at $20 is $5.60 against the same $1.50 in margin plus $2 in cash for a 224% return on cash and margin over the same 27 months. 

    All ABX has to do for us to make $5.60 is rise from $18.18 to over $20 (up 10%) in Jan 2016 and you make 224% on your investment – how's that for LEVERAGE?

    What's the downside?  Well, you only have a .60 credit so, if ABX is below $15 and the stock is put to you, your net entry is $14.40, which is only 20% off the current price. No, I am not joking – this is your WORST case scenario.   Now do you see why you should learn to BE THE HOUSE – Not the Gambler? 

    Another commodity play we like is DBA, the Agriculture ETF.  Here you are diversifying your risks into the following groups:

    Top 10 Holdings (91.69% of Total Assets)  
    Company Symbol % Assets
    Sugar #11(World) Jul12 N/A 13.36
    Live Cattle Futr Jun12 N/A 12.68
    Corn Future Dec12 N/A 12.17
    Soybean Future Nov12 N/A 10.69
    Cocoa Future May12 N/A 10.05
    Coffee 'c' Future May12 N/A 9.52
    Lean Hogs Future Jun12 N/A 7.64
    Wheat Future(Kcb) Jul12 N/A 6.38
    Soybean Future Jan13 N/A 4.66
    Cattle Feeder Fut May 12 N/A 4.54

    Note that, at Philstockworld, we are long on the Coffee Futures (/KC) at the $100 mark for December 2015.

    DBA is essentially a hedge against inflation at $24.80 and can go a bit lower but we are playing the long game here.  Back in 2012, DBA went from $25.70 in May to $30.87 in September and has drifted down ever since.  

    In this case, we don't want to get fancy, simply buying the 2015 $25 calls for $1.50 let's us cash out on any good move up and, against those, we can sell the 2016 $23 puts for $1.35 for net .15 on the spread.  We still need DBA to move up over $25.15 by Jan 2015 to make a net profit on the calls but a spike to $30 at any point can allow us to cash out the calls for more than $5 and cash out the short puts (buy them back) for less than $1 and that would be net $4 against our .15 cash investment for a 2,667% return.  Worth playing for?  

    Worst case is, once again, owning the ETF for net $23.15, only about 5% below the current price so consider this an aggressive spread and, from an allocations perspective.

    For our third play in this set, let's go with a classic.  FTR (Frontier Communication) just turned in very nice earnings and it looks like their 0.40 dividend is in no danger of being cut.  While 0.40 may not sound that interesting, it is because FTR trades at just $4.64

  47. That makes the 0.40 dividend almost 10% and we can improve that by giving ourselves a discount entry with our classic Buy/Write Strategy.  Keep in mind there's nothing wrong with simply buying the stock and collecting the dividend but we can also buy the stock and sell the 2015 $4.50 calls for .45 and the 2015 $4 puts for 0.45 which drops the basis to $3.74 but you are also obligated to buy another round at $4 if the stock should fall, which would give you twice as many shares for an average of $3.87, a 16% discount off the current price. 

    That makes the 0.40 dividend 10.3% while you wait to see if you get called away at $4.50 for another 20% gain so our trade idea here is to risk owning 2x FTR for 16% off the current price or, if all goes well, to make over 30% on our 1x purchase.  

  48. There will be many trade ideas we discuss over the course of the year and each month we will add 3 more to our model portfolios.  We will set up a short-term portfolio, for trade ideas that have quick returns, usually playing off the current news or market environments and we'll have a long-term portfolio for well-hedge trade ideas like the ones we're discussing today – that we generally leave alone and let mature over time.  

    We will allocate $100,000 to each portfolio and that means we generally want the average allocation to be no more than $10,000 or 5% of our $200,000 buying power (using ordinary margin).  See our articles on "Smart Portfolio Management" but these will be discussions for another day.