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Monday’s Mixed Signals – Time to Dress the Windows?

SPY DAILYWheeee, what a ride!  

We're up, we're down and over and out – but That's Life in the markets, right?  Life is being good to our Short-Term Portfolio, now up 59.2% for the year as we caught the bearish move very nicely.  Because our STP was up, we have, so far, been able to ride out our long-term positions but we're certainly concerned about a major breakdown possibly in the works.  

As noted by Dave Fry in his SPY chart, that 50 dma is a big point of contention now and of course we're going to get a bounce off a line like that.  In fact, the new lows we hit at the end of the week led us to recalculate our bounce lines for this week and now we are looking for:

  • Dow - 17,000 (weak) and 17,100 (strong) 
  • S&P  1,975 (weak) and 1,985 (strong)
  • Nasdaq 4,475 (weak) and 4,500 (strong)
  • NYSE  10,760 (weak) and 10,820 (strong)
  • Russell 1,125 (weak) and 1,140 (strong)

SPY 5 MINUTEWe weren't too convinced by Friday's low-volume rally and we aren't going to be convinced by anything that happens on the last two days of the month (window dressing) but clearly any failure of those weak bounce lines is going to have us racing back to some bearish bets into the start of October (and earnings season).  

Speaking of earnings - the CEO of Macy's, Terry Lundren is not too enthusiastic about Q4.  After reporting weak Q2 sales that knocked the company briefly lower (but then caught up in the general retail rally), Lundgren said:

"Forget about all of the holiday projections soon to be bandied about by the legions of economists, analysts, pundits, experts and faux experts," Lewis says. "There will be no overall market growth this holiday season."

Already we're seeing US companies taking margin hits as they continue to cut prices amid intense competition.  Bloomberg notes that, in this disinflationary environment, consumer-related businesses are raising red flags on the struggling household sector, especially those at the lower end of the income spectrum.  "Being in the retail business is like being at war," said Restoration Hardware in their 9/10 earnings call.  They too sold off only briefly before the general buying spree began again.  

Federal Reserve Board 2013 Survey of Consumer Finances 4This is, of course, because of all that income disparity I keep complaining about.  How can retailers have great sales when 90% of their customers have less money than they had 7 years ago?  You would think more analysts and investors could do the math. but they are generally in the top 10% and, as far as they know – everything is great up there!  

Even if I wasn't concerned about US Consumers and upcoming Corporate Earnings – I'd still be worried about Asian Consumers and EU Consumers and Ebloa Consumers (cocoa is going through the roof as 70% of it comes from that part of Africa) and a little worried about the wars in Ukraine (remember them?) and Iraq and Syria and the mass protests in Hong Kong that dropped the Hang Seng 450 points last night (and yes, we are short FXI).  

[image]Hong Kong is essentially shut down this morning as protestors square off with the police.  Early Sunday morning, leaders of the city's best-known pro-democracy group, Occupy Central, joined students at the city's government headquarters.  Students have led the push for democracy in Hong Kong all summer, tapping into the frustration felt by their generation, which has struggled with soaring housing costs, an economy dominated by several large conglomerates and competition from mainland Chinese for services such as education and health care.

The US Corporate Media is, of course, downplaying this in the same way they pretended Occupy Wall Street was a fringe group until the Government had time to turn the nation's Anti-Terrorism Measures against them to extinguish that movement in the US (read all about it here – nasty stuff!).  

This is going on right here in your own Country, folks.  The Chinese Citizens in Hong Kong, by comparison, are being given a tremendous amount of leeway by the Government over there (so far).  Meanwhile, from an investing standpoint, when I see things are this F'd up in various places around the World – I tend to urge a little caution, and A LOT OF CASH, for our investing purposes.  

We identified a nice, long play on gold at $1,200 an ounce, using ABX as a proxy in this morning's Live Member Chat Room - it's a trade that will make 89% in 28 months or 3% per month, which makes it a nice inflation hedge that we'll be adding to our long-term Income Portfolio tomorrow in our Live Webinar (1pm – Members Only).  In last Tuesday's Webinar, we did discuss ABX, as well as shorting XRT, which dropped 5% since – pretty good!  

We are maintaining our generally bearish positions and we have some very aggressive shorts lined up for our Members should those weak bounce lines fail again – as they are likely to this morning.  In fact, if the Dollar hadn't been knocked down to 85.60 (down 0.35%), the Futures would be down over 1% as we speak.  

Be very careful out there. 

 


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  1. Oil Lines

    R3 – 95.69
    R2 – 94.77
    R1 – 94.06
    PP – 93.19
    S1 – 92.43
    S2 – 91.51
    S3 – 90.80


  2. Major Earnings for the Upcoming Week:

    Monday:

    A.M CALM

    P.M. – CTAS

     

    Tuesday:

    A.M. – COCO, WAG

    P.M.– N/A

     

    Wednesday:

    A.M. – AYI

    P.M. – GAME

     

    Thursday:

    A.M. – ATU, MKC, STZ

    P.M. – RECN

     

    Friday:

    A.M. – N/A

     

    Economic Releases (9/29 – 10/3):

    Monday:

    7:30 am CT– Personal Income & Outlays

    8:00 am CT – Fed’s Dudley Speaks

    9:00 am CT –Pending Home Sales

    9:30 am CT – Dallas Fed Mfg. Survey

                                                                                                                                                                                    

    Tuesday:

    6:45 am CT – GS Store Sales

    8:00 am CT – S&P Case-Shiller HPI

    8:30 am CT – Fed’s Powell Speaks

    8:45 am CT – Chicago PMI

    9:00 am CT – Consumer Confidence

                                                                                                                                                                                                                  

    Wednesday:

    Auto Sales – All Day

    6:00 am CT – MBA Purchase Applications

    7:15 am CT – ADP Employment Report

    8:45 am CT – PMI Mfg. Index

    9:00 am CT – ISM Mfg. Index

    9:00 am CT – Construction Spending

    9:30 am CT – Oil Inventories

     

    Thursday:

    7:30 am CT– Weekly Jobless Claims

    9:00 am CT – Factory Orders

    9:30 am CT – Natural Gas Inventories

                                                                                                                                                                                                           

    Friday:

    7:30 am CT – September Jobs Data

    7:30 am CT – International Trade

    8:45 am CT – PMI Services Index

    9:00 am CT – ISM Non-Mfg. Index



  3. Good analysis of the effect of inequality on consumer spending – a bit wonkish though:

    http://www.nakedcapitalism.com/2014/09/contra-jared-bernstein-stagnation-spending-velocity-wealth.html

    spending v net worth fred graph

    The last two measures are especially interesting because they incorporate home-equity wealth (which Bernstein tried to do, somewhat idiosyncratically, using a Case-Shiller variable in his regressions). And the last measure also incorporates household debt.

    By all these measures, we see a massive, three-decade secular decline in spending relative to wealth over 35 years — the very same period over which we’ve seen massive growth in wealth inequality.

    That’s exactly what the MPC argument predicts: as wealth concentration increases, the velocity of wealth declines. Ceteris paribus, more-concentrated wealth seems to result in less spending than more-concentrated wealth.


  4. GM!  From Gann360.


  5. Good Morning!


  6. Open not looking good, down about 1%.  Dollar bouncing off 85.60.  

    Oil $92.95 (not playable here), gold $1,220, silver is the usual long off the $17.50 line (been good for 0.05 or .10 usually), copper $3.03, nat gas $4.066, gasoline $2.495.

    Europe super-sucking this morning and think how really bad this is after we had a good Friday!  

     
    SettingsRANGE: 1 DAY

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    This week's earnings not too exciting but plenty of Fed speadk and other data plus ECB decision and Draghi speech on Thursday, so lot's of possible pivot points.  

    Those Chinese really know how to protest!  

    Good analysis, StJ.  


  7. This might hurt more than the bending phone:

    http://www.nytimes.com/2014/09/30/business/in-tax-inquiry-involving-apple-and-starbucks-eu-pushes-forward.html

    From what I read in France, Apple had a secret deal with the Irish government where they paid no taxes whatsoever between 1980 and 1991. And between 1991 and 2007, they paid 2.5% taxes! Hopefully, Irish voters get a little bit upset at their leaders. AAPL made over $36B outside the US and paid 2% taxes on that. It's not like they work with small margins. They are not alone, but it looks like Europe is taking aim at them as well as SBUX and Fiat for similar deals.


  8. And a follow up from Slashdot:

    http://apple.slashdot.org/story/14/09/29/1139209/apple-faces-large-penalties-in-eu-tax-probe?

    If the ruling is upheld, Apple could owe billions in back taxes. Interestingly, it seems that the Irish government would actually get the extra money and suffer little for its part in the scheme.


  9. Even the other CNBC announcer is confused by all of Cramer's double-speak this morning.  Same CNBC crap as the last crash – telling people over and over to stay the course and hold their investments and buy the dips.  It's just amazing how they barely even allow a dissenting voice on the show.  

    2 of the S&P 500 are green at the moment but oil is now $93.34 – AMAZING! 

    Nonetheless, playing /TF bullish at 1,100 has been a good play and 4,000 on /NQ confirmed by 1,960 on /ES and 16,850 on /YM – those are bull plays that are good until one of those levels is lost.  

    AAPL/StJ – The timing of all these "issues" is just so suspicious.  This arrangement has been on for years and, only now there is suddenly a big deal?  

    Meanwhile, poor TSLA testing $240.  

    BTU back at $12, in case anyone missed it last week.  

    GRPO $84!  


  10. Thanks DC, that makes more sense.  


  11. Sold GPRO too soon.  Still holding AMBA, a major supplier to GPRO.


  12. Monday's economic calendar

    On the hour

    • Dow -0.76%.
    • 10-yr +0.27%.
    • Euro +0.16% vs. dollar.
    • Crude -0.29% to $93.27.
    • Gold +0.35% to $1,219.60.

    At the open

    • Dow -0.95% to 16,950.50. S&P -0.96% to 1,963.90. Nasdaq -0.99% to 4,467.68.
    • Treasurys: 30-year +0.5%. 10-yr +0.25%. 5-yr +0.13%.
    • Commodities: Crude -0.63% to $92.95. Gold +0.41% to $1,220.40.
    • Currencies: Euro -0.63% vs. dollar. Yen +0.68%. Pound +0.5%.

    Pending Home Sales

    Evans suggests June as time of first rate hike

    • At his Delphic best this morning, leading Fed dove Charles Evans tells CNBC it will be "quite some time" until the FOMC tightens policy, and then suggests June 2015 as the date of the first rate hike, though a delay until after that is a possibility.
    • It's important, says Evans, to see 2% inflation on a sustainable basis.
    • 30-Day Fed Funds futures are pricing in a 25 basis points rate hike by the end of June 2015.

    Hang Seng tumbles as protests expand

    • HSBC and Standard Chartered are among the banks shuttering some Hong Kong branches as protesters remain on the streets following massive weekend demonstrations. The closures marked the biggest disruptions to banks' operations there since at least the 1970s.
    • “I have not seen anything like this before,” says finance professor Ma Yue. “While Hong Kong had experienced social disturbances in the ’60s, those are not comparable with today’s situation because Hong Kong was not an international financial centre.”
    • The Hang Seng fell 1.9% overnight. The iShares MSCI Hong Kong Index ETF (EWH-3.8%).

    Brazil's real tumbles, Petrobras plunges as Rousseff support rises

    Banks eyed for move to help hedge funds cut taxes

    • The usual banking suspects are falling under the gaze of regulators for a trading strategy known as "dividend arbitrage" which helps their hedge fund clients reduce taxes, and from which the banks earn more than $1B in fees annually.
    • The strategy – typically run from London – involves banks temporarily transferring ownership of stock to a lower-tax jurisdiction about the time when the client expects to receive a dividend on those shares. It's perfectly legal say the banks and hedge funds.
    • Bank of America (NYSE:BAC), however, has been questioned by the Richmond Fed (Charlotte comes under its purview) about the legal and reputational risks of such maneuvers, reports the WSJ.
    • It isn't clear if other banks have been similarly questioned, but a number of other lenders do the same thing. Among the hedge funds which benefit from dividend arbitrage is Och-Ziff Capital Management (NYSE:OZM).
    • UBS (NYSE:UBS) has entered settlement talks over allegations it was involved in manipulating foreign exchange rates.
    • Although the bank did not identify a regulator, Reuters was informed by sources on Friday that Britain's Financial Conduct Authority was talking to UBS and five other banks – Barclays (NYSE:BCS), HSBC (NYSE:HSBC), Royal Bank of Scotland (NYSE:RBS), JP Morgan (NYSE:JPM) and Citi (NYSE:C).
    • A settlement could result in each bank being fined hundreds of millions of pounds, depending on the severity of the misconduct.
    • As well as the FCA, authorities in the U.S., Switzerland and Hong Kong are investigating the $5.3T a day foreign exchange market

    Encana buys Athlon Energy for $7.1B in shift to oil

    • Encana (NYSE:ECAagrees to acquire Athlon Energy (NYSE:ATHL) for $58.50/share in cash plus assumption of $1.15B of senior debt, bringing the total transaction value to ~$7.1B.
    • The deal gives the no. 2 Canadian gas producer a large stake in Texas' oil-rich Midland Basin.
    • ECA says the deal adds 140K net acres of land and production of ~30K boe/day, and that it will spend $1B next year to boost drilling in the new play.
    • ATHL +24.3% premarket.

    Just wait until someone bends it!   Ford introduces new F-150

    • Ford (NYSE:Fdelivers the new aluminum-bodied F-150 to consumers at retail outlets in 38 cities in a test drive initiative.
    • The automaker says the light F-150 has been "tortured-tested" for more than 10M miles to ensure reliability and durability.
    • A 5% to 20% improvement in fuel economy is projected by Ford with the new F-150.

    Macy's to hire 86K workers for holiday crunch

    • Macy's (NYSE:M) plans to hire 86K workers for the holiday season.
    • The mark is 3.6% higher than last year's hiring tally.
    • Close to 10K of the seasonal workers will go to add depth at the department store chain's online fulfillment center – a higher mix than last year.

    Lion's Gate on watch amid M&A buzz

    • Shares of Lion's Gate (NYSE:LGF) are on watch with Softbank's reported interest in DreamWorks Animation stirring up M&A speculation across the sector.
    • Stifel Nicolaus says a similar frothy valuation on Lion's Gate would put shares in the $42-$48 range.
    • LGF +2.3% premarket to $31.92.
    • Shares of DreamWorks Animation (NASDAQ:DWA) run higher in early trading on reportsSoftBank is interested in making an acquisition at $32 per share.
    • DWA +22.99% premarket to $27.50.

    Dave & Buster's sets IPO terms

    • Dave & Buster's (Pending:PLAY) says it will offer 5.88M shares in a range of $16 to $18 per share.
    • The company expects to use the IPO funds to help it pay down debt.
    • Shares of PLAY will trade on the Nasdaq.
    • SEC Form S-1

  13. 1,110 on /TF, 4,035 on /NQ – don't be greedy – we can always get fresh horses later!  /YM 16,925 and /ES 1,965 so far.  On the S&P, it's 1,975 on the button so maybe we fail here (weak bounce) and also it's 4,500 on the Nas (strong bounce) with the Dow, NYSE and Russell still below weak bounce lines (see post above) – so they would be the laggards if we break over.  


  14. 14 handle recovery.  Nice Algo program.  Who's buying?


  15. phil, morning,

    my aapl pos today is

    21x jan6 64.29 @ 19.70

    14x jan6 78.57 @ 9.65

    -35x jan6 100 @ 11.35

    -35x jan5 91.43 @10. (present from rolling from about 540)

    35x jan6 bcs 100-120 @ net 5.70

    -35x jan6 81.03 puts @ 5.03

    i have covered the jan 5 sht calls with the second bcs and was thinking of rolling the 21x and 14x in the first bcs up to higher strike to protect some gains and wanted to get your thoughts to the thinking and the strikes…tks


  16. Phil/ too late to short FXI ? how about 38.00 oct 18th puts ? 

    I'm guessing the demonstrations will either expand, or the police will crack down, either way another level of hysteria to come…?



  17. OK, good time for a very tough look at the Income Portfolio – keep, press or kill.  We have to consider whether or not we're willing to ride out a 20% correction or not on each position:

    • DIS – Net $65 @ $88 – no worries.
    • FCX – Net 25.30 @ $32.56 – no worries
    • GOGO – Net $14.85 @ 17.80 – no worries
    • HOV – Net $3.70 @ $3.85 – a bit worried but the potential for a net $14,800 assignment in 2016 is not too threatening.  2017 is not out yet but 2016 $4 calls can be sold for 0.80 and, if we bought the $2 calls for $2, we'd net a 0.10 credit on that spread and break-even at $3.05 without committing to more longs on the put side.  Since that drops our basis another 40%, it's clearly too early to worry about this one.
    • SBUX – Net $58.65 @ 74.75 – no worries
    • ABB – Net $20.80/21.40 with the stock at $22.54 on 1,000 shares.  That's only out to March so we have 5% to go before real trouble.  They only pay their .78 dividend once a year (May) so we'll have to roll out before we see it.  
    • CLF – Net $9.68/11.34 @ $10.57 on 1,000 shares.  What a train wreck these guys are!  Showing a massive $8,000 loss in the portfolio on these, even though they are not, in fact, out of the money.  Here we do have 2017, so let's rol the 10 2016 $13 puts ($5.10) to the 2017 $12 puts ($5.10) even and we'll roll the short 2016 $13 calls ($1.65) out to the 2017 $15 calls ($1.40), so we'll spend net .25 to widen the spread by $2 and lower our puts by $1.  
    • GTAT – Net $7.80/9.90 @ $11.14 on 2,000 shares.  This is showing us a $5,000 loss at the moment (because we sold a lot of premium and the VIX is up) and there are no 2017s to roll to yet but not worried.
    • NLY – Net $9.71/9.86 @ $10.87 on 1,000 shares.  These are worth rolling as the short 2016 $12 calls are .32 and the short 2017 $10 calls are $1.25 and the short 2016 $10 puts are $1.08 for net $8.92 and the short 2017 $12 puts are $3.40 for net $8.60 so we drop $2.49 in our pockets and our net goes to $7.22/9.61 so not much difference if put to us (and we REALLY would like more shares at $9.61) but less money on the table and we make $2.78 if called away at $10 vs $2.13 if called away at $12 – much smarter!  
    • OPTT – 0.79/1.65 @ $1.13 on 4,000.  These are showing an $8,000 loss on the short options when in fact, $1.13 is $4,160 down if we expired here.  These are Jan calls so they do, in fact, expire in 3 months and we will, in fact, be down $4,000 less if we're still at $1.13 and, hopefully, we'll get some June/July options to roll to and we should be able to pick up 0.30, which is a lot off a 0.79 current net (if called away at $2.50 +, which looks iffy).  
    • XCO – $2.70/3.85 @ $3.71 yet we're showing a $10,450 loss on the stock and short puts.  No 2017s yet, so we wait. 

    That's the first half – now comes the complicated part!  

     


  18. Piper Jaffrey raised their PT to 90 on GPRO, on Sept 5th they raised it to 60.  So a 50% difference within a month on a new camera they new was coming out. 


  19. Sold 1/2 of ANET & AMBA.  Both up big today.  Window dressing, I suppose.


  20. Lesson #427
    Never ever go long on /TF – just wait until it runs out of gas. ; >  $500 – BAM !
     
    Phil / Pervious posts
    Any plays on JNS or GPRO ?
    Russel – how exactly are you playing these guys ?


  21. JNS
    Theres 2.7 Million contracts at $15.10 !!!???


  22. I covered the 85's twice at a profit on Friday so I was flat today, and wrote some 90's for this week at an avg price of 1.85, so down on them, but it's almost an 87RSI, I'll hold, don't think I will have to roll them.


  23. /CL 93.84


  24. /CL 94


  25. AEO/Phil – has come back smartly from the clearance sale.  still like them for more upside or take what profit you can and get to cash on this?


  26. Yodi / /CL

     

    Are you shorting here?


  27. rustle // GPRO
    Sorry for the confusion – how are you covering ? So, you're selling naked calls, and then covering with lower calls when you get in trouble ? or you have a bull spread that you're rolling ?


  28. advil shorted at 94.05


  29. STJ – FWIW.  Put on another small FNSR spread.  Bought the Jan16 $13 call.  Sold the Jan 16 $13 put and the Jan 16 $25 call.  $3.13 debit.  I have some FNSR in a couple of taxable accounts.  Will look to take tax loss before the end of the year.  Meanwhile, am over weighted and exposed.  Wish me luck.


  30. I writing naked calls and covering when they are lower than where I sold them.  Twice on Friday it went from 1.30 to .60-.70


  31. FNSR / Albo – This will require a lot of patience… I am short the 2016 15 puts and long some LEAPS in my IRA so OK for now, but hopefully some good news in the pipeline.


  32. Today I saw the news on the new camera and waited, just didn't wait long enough to write 90's.  If I did it now, would write 95's for this week instead.  I definitely think most of this is short covering as I am looking on level 2 and see large blocks being bought near the recent highs before it comes down again.  That's usually what short covering looks like.


  33. I'm stuck today on the GPRO short that expires this week – 85 strike.


  34. /CL out at 93.93


  35. ABX, CLF, RIG… calling like the Sirens..  


  36. Who/Pharm – The window dressers, of course.  

    AAPL/Mill – I'm just about to deal with AAPL in the Income Portfolio and not sure about that either.  I'd LIKE to buy back the short calls because AAPL seems to be very strong in the face of everything including the kitchen sink being tossed at them this past week.  Like us in the Income Portfolio, you need to be careful not to under-protect those 35 short Jan $91.43 calls.  We're double covered to the upside, you are not, though you have a wider spread.  

    If I were going to do anything with that position, I'd cash the 21 2016 $64.29s ($36.50) for $76,650 and the 14 2016 $78.57s ($24.60) for $34,440 and then you'd have $111,090 and you can pick up 70 of the 2017 $90/120 bull call spreads at $11 ($77,000) and pocket $34,000 and then you have $30 of upside protection to the 35 2016 short 91.43s ($16.20) for $56,700 and the 35 short 2016 $100 calls ($12) for $42,000 plus the other 35 bull call spreads you already have (which I'd roll to the 2017 spreads to simplify), which would give you 105 2017 $90/120 spreads for a potential $315,000 against the 70 short positions you were paid about $50,000 for so a very long way to a loss.

    The short 2016 $81.43? puts are $5, did you just sell them and, if so, why?  You have no more downside risk by selling the 2017 $90 puts for $12.25 for net $77.75 but you put $24,500 more in your pocket for upside protection.  Of course you need to use stops to the upside (and you never seem to do it).  With 7 short calls and a ton of cash on the side, you should be buying back 10 at $102 and 10 more at $104 and 10 more at $106, etc.  If AAPL retraces back below $100, $102.50, $105, etc after you bought some back – then you sell some more again but, otherwise, you should be lightening up on the way up.  

    FXI/Sn0 – It's no longer an obvious play so I wouldn't chase it.  We didn't short it over the protests, we shorted it on the overall conditions in China that are causing the protests.  I do think it can get worse but this is already the target of our spread (8/18 main post) - we just got lucky it deteriorated faster than I thought.

    We shorted India last week (EPI) and now FXI has got my mouth watering as a potentially good short.  I'd feel better about taking up a short on FXI at $45, not $42 but the Jan $42/38 bear put spread is just $1.80 on the $4 spread and that makes it very interesting as it pays 122% on a less than 10% decline in the Chinese markets – a nice way to hedge your bullish China bets! 

    The spread is only $2.80 so far, still another $1.20 to go (42%) but, for those who got in at $1.80, it's already up 79% with another 66% left to go.  This is why I mention trades like these several times – at first, it went against us and gave people even better entries.  All the protests did is force the issue.  Don't worry, I'm sure we'll find something to trade tomorrow (cough, CLF, cough BTU, cough cough HOV…).

    Trade/ZZ – That's because, if the bottom 99% knew the details, the whole World would look like Hong Kong.  Notice how the media never seems to notice that NATFA was the beginning of the end for the American worker?  There are less "economists" who think free trade is a bad idea than there are "scientists" who don't believe in climate change, apparently.   

    GPRO/Rustle – Wow, $89.  Piper better go back and check those projections again – or did they mean by day's end?  

    GoPro A No Go, According to Barron's

     

    Some of the notable cautionary highlights from that column regarding GoPro:

    • At $82.10, it trades at a remarkable 100 times analyst expectations of $0.81 in 2014 earnings per share
    • GoPro is now worth about $10 billion, 10 times last year's sales
    • GoPro's competitive edge isn't particularly insurmountable
    • The vaunted revenue growth decreased this year
    • A large overhang of shares could hit the market in the next couple of years

    The column admitted that, "So far we have been wrong on GoPro, but we still think it will end badly."

    JNS/Wombat – We're already short in the $25KP.  On GPRO – it's a crazy MoMo stock with completely irrational pricing – just stay away.  

    Oil/Yodi – That's why we don't usually play them on Monday.

    AEO/Scott – I like ARO better as there's less downside at $3.36 and we just moved them to the LTP (still playable) because they seem to be out of danger.  I don't recall having a play on AEO but they are MUCH more expensive than ARO ($3Bn for $3.3Bn in sales vs $264M for $2Bn in sales) so I don't see the sense in playing them for 8x more per $1 sold.  If you are already in them, I'd certainly make sure I had tight stops on those recent gains.  


  37. GPRO is actually now 11B and trades at 126x 2015 earnings with first lock up ending 12/23


  38. Phil Oil Well I am up 880.00 on a Monday still practising wonder how a Tuesday will look like? 


  39. Phil // Sage
    GPRO – ok, ok, ok. I know you're just looking out for me ; >

    /TF – see ? Another $500 – wham.

    My JNS Oct $14 puts filled at .30


  40. /CL short again at 94.25


  41. and now I am up slightly on GPRO again, let the profit taking begin.


  42. /CL out 94.07


  43. Phil the Oct 25c DXD shall we roll them?


  44. Phil, Is it time to pick up some energy stocks? How about CHK or SLB? 

    And speaking of energy stocks what can I do with RIG:

    -5 jan16 28 put, 10 jan16 35/50 bcs, -10 jan16 43 put

    thanks


  45. RIG/Phil- what was the last adjustment to RIG positions . I can't seem to find them and I thought you had posted something Friday.


  46. Looks like the rally ran out of gas once Europe closed. 

    Sirens/Scott – And they keep playing my favorite song:

    Submitted on 2011/12/20 at 11:58 am

    RIG/Jrom – Still a lot of choppiness ahead but I do like the 2014 $30 calls for $13, selling the 2013 $40s for $6.50 and the May $35 puts sold for $2.60 for net $3.90 on the $10 spread with lots of time to roll on both ends.  If RIG heads lower, the 2013 $25 puts are $2.10 so, as long as you can make that roll for $1 or less it’s not a problem.  If RIG heads higher, you have a $2.60 contribution from the short puts to put towards rolling the short calls to a higher strike.  

    Submitted on 2013/08/15 at 1:00 pm

    RIG/Scott – I'd really like them except I think oil will collapse and, for good or bad reasons, that will hit RIG and the rest of OIH very hard, so I'd rather wait and, if not, there's always going to be another platform that catches fire or falls into the ocean or whatever to give you a discount, no matter how many tweets Icahn puts out.  

    Submitted on 2014/03/17 at 4:32 pm

    RIG/DM – Could go lower as lower oil prices mean deepwater wells that RIG services become less economical to drill, which then idles some of their rig rentals.  Long-term though – we are going to want that oil – one way or the other.  I'm not thrilled with them paying out a bigger dividend when they are spending $600M to service their debt but I do still like them and you can capture the dividend ($2.24) by buying the stock for $38.91 and selling the 2016 $33 calls for $7.50 and the $33 puts for $4.20, which nets you in at $27.21/30.11 so a nice 26% discount to the current price, even if put to you and that makes the $2.24 dividend 8.2% while you wait.  

    RIG/StJ – I'm sure they can manage the dividend, or they wouldn't be raising it.  I just would rather see a cleaner balance sheet first.  Debt is $10Bn-$12Bn (depending what "other liabilities" are) and cash is $3Bn but $1.4Bn dropped to the bottom line last year despite $525M in interest payments.  They also bought back $600M of their own stock (4%) and that failed to support it, mostly at $45-$50 last year.  Of course, with a conservative $27.21/30.11 buy/write, we're simply looking for them not to have a catastrophe to net back $3+3 (assuming new dividend) + $5.79 (called away at $33) over two years – that's 43% of upside if RIG doesn't fall below $33 (-15%) and another 10% of cushion to break-even.   This one is certainly going in the new Income Portfolio, once we get a clear indication they have stopped falling. 

    RIG/Ging – We just added RIG in the Income Portfolio last Tuesday - it's even cheaper now:

    Oil Service/Willsons – RIG is my favorite in the group and cheap enough after testing $40.  At $43.45, you can sell the 2016 $40 puts for $6.32 and that mostly pays for 2x of the $40/50 bull call spreads at $3.50 for a net cost of 0.34 per long spread with $9.66 of upside (2,841%) at $50 and 5 short puts ties up just $2,500 of ordinary margin against 10 spreads with potential $19,XXX gain – very efficient!   Let's do 10 longs and 5 short puts in the Income Portfolio!

    The last time they were this low, BP had their oil spill and people thought RIG would be liable for Billions of Dollars. Since that time, oil has been as low at $77.28 in June of 2012 and RIG STILL wasn't this low and, at the time, they STILL had the lawsuit hanging over their heads.  Is the global economy really 10% or more worse off than it was in mid-2012?  Will oil plunge below $80 and RIG, which still made $587M last Q ($1 per $32.50 share PER QUARTER) also paid a 0.75 dividend for a quarterly return of $1.75 per $32.50 share (5.4% PER QUARTER).  

    So, if that's what you consider a "sirens song" then cover your ears and lash yourself to the mast – I guess it's easier than taking a stand…

    Oil/Yodi – Very nice.  $94.30 again is a tempting short.  

    /TF/Wombat – Nice channel trading.  

    DXD/Yodi – We did roll them to the $24s in the STP and we cut back to 100 but I'd like to see what happens as the month ends and then Weds before making a change. 

    CHK/JMD – I always like those guys and SLB are good too but no compelling deal on SLB just yet and CHK is a little tough to measure (because they spun off units) so I think I still like RIG the best at the moment. 

    That's sad, Nicha. 

    RIG/Craigs – In the LTP, we have short 2016 $35 puts and 2016 $33 puts and both are in the red.  In the Income Portfolio we have 10 2016 $35/45 bull call spreads and the short $35 puts and those we'll have to adjust when I get to it in a while (I'm working on those now).  


  47. Phil thanks on DXD Oil 94.54 and still waiting going for the sky it seams 


  48. /CL in at 94.47


  49. DBA starting to shape up 


  50. /CL out at 94.42


  51. /TF
    and up we go again >> this is fun : >


  52. Income Porftfolio Review (continued):

    AAPL – We have 70 2016 $85.71/107.14 spreads at $4.50 ($31,500) against which we sold 20 $87.41 puts for $10.20 ($20,400) for net $11,100 on $150,010 worth of longs that are 3/4 in the money.  Against that, we sold 35 Oct $84.29 calls for $9.25 ($32,375) and they are currently $16.25, so down $24,500.  

    That means this position, if it all expired today, would be good for about $75,000 but, currently, it's showing $22,000 and there are all of our profits in the Income Portfolio – locked up in yet to expire margin!  

    Annoying as that may be, it certainly doesn't stop us from liking the position that's 3/4 in the money and with most of the uncertainly behind us.  With AAPL at $100.30, our fear is still to the upside and we have plenty of cash ($495,000) and buying power ($881,000) so let's add 30 of the 2017 $90/120 bull call spreads at $11 ($33,000) and that gives us more room to do a 2x roll on the short calls OR, if AAPL gets weak, we can take some of our long calls off the table (now $20.50) and substitute the cheaper spreads.  

    ABX – 10 2016 $15/22 bull call spreads with short $17 puts at net 0.10 @ $15.10 so right on the money.  It's a small entry and we like ABX so we'll invest $1.85 to roll the 2016 $15 calls ($2.15) to the 2017 $13 calls ($4) and we'll buy back the 2016 $22 calls for $0.50 but there's not enough money to make the puts worth rolling.  

    ARO – 50 2016 $3.50/5 bull call spreads with short $3 puts for net 0.60 credit @ $3.35.  Our break-even is $2.95 so no worries and not worth rolling to 2017 as the spreads are still wide and messy.  

    BTU – 10 2016 $10/15 bull call spreads with 15 short $13 puts for net 0.62 credit @ $11.98.  Happy to double down on these but no 2017s yet, so patience.  

    CCJ – 10 2016 $13/2015 $24 bull call spreads with short $20 puts for net $2.40 @ $17.86.  Break even is $15.40 ignoring the puts and I'm pleased the Jans will expire so we can roll and sell the 2017s when they come out.

    CLF – 20 long 2016 $15 calls with 10 short 2016 $18 puts for net $1.28 @ $10.52.  Good thing we didn't sell more puts yet and we can salvage $1.15 from the $15 calls and roll them to 30 of the 2017 $8/15 bull call spreads at $2.25 and roll the 10 short 2016 $18 puts ($9.40) to 20 short 2017 $10 puts $3.90.  So that's $2,300 – $6,750 – $9,400 + $7,800 = $6,058 + the $2,560 we spent already is $3,490/30 spreads is net $1.16 per $7 spread – not a bad fallback position!  Now our worst case is owning 2,000 at net $11.70(ish).  

    CZR – 20 2016 $15 calls with 10 short 2016 $22.50 calls and 10 short $12.50 puts for net $3,300 @ $13.37.  No 2017s yet, so we're better off waiting. 

    EBAY – 5 2016 $50/60 bull call spreads with short $50 puts for net $2 credit @ $52.73.  The 2016 $60s are just $3.75 and the Jan $52.50s are $3.15 so let's do that roll and salvage $8 from the 2016 $50 calls and move to the 2017 $45/57.50 bull call spread at $6.15 and we'll roll the 2016 $50 puts ($4.80) to the 2017 $50 puts for $6.50.  That's a few bucks in our pocket and plenty of room to DD on this small position.  

    HPQ – 10 2016 $32/40 bull call spreads with short $32 puts for net 0.70 @ $35.06.  No 2017s yet so we wait.  

    LULU – 5 2016 $35/50 bull call spreads with short $35 puts for net $1 credit @ $42.42.  On track and no 2017s yet.  

    One more set coming. 



  53. Solar power is making utilities nervous:

    http://www.vox.com/2014/9/29/6849723/solar-power-net-metering-utilities-fight-states

    It's getting pretty cheap:

    solar price plummet

    To older electric utilities, this is a big potential problem. As rooftop solar becomes more popular, people will buy less and less electricity from their local power company. But utilities still have fixed costs for things like repairing the grid. So, in response, they'll have to raise rates on everyone else. Yet those higher electricity rates will just spur even more people to install their own solar rooftop panels to save money. Cue the death spiral. [...]

    That's just the beginning. If the penetration of distributed solar reached as high as 10 percent — an especially aggressive goal — utilities in the Southwest could see their earnings drop 5 percent to 13 percent, while utilities in the Northeast could see their earnings decline 6 percent to 41 percent. This is similar to what's already happened in Germany, where distributed solar has halved the market value of some utilities.


  54. Phil,

    no 2:15 buy express today?! just a slow grind down on /TF


  55. All these telecoms guys are just crooks:

    http://arstechnica.com/information-technology/2014/09/att-congestion-magically-disappears-when-its-signing-up-new-customers/

    You see, when you use data on a Grandfathered Unlimited Data Plan, that's called "congestion," so you're throttled at 5GB to EDGE-like speeds to "prevent" it.

    Note this "congestion" doesn't occur when you double a shared 15GB data plan to 30GB, or a 20GB plan to 40GB, or a 30GB plan to 60GB, or a 40GB plan to 80GB, or a 50GB plan to 100GB. It doesn't occur if you let both new and current customers keep this "doubled data" in perpetuity, or at least until they change their plan.

    So basically, if you are loyal long term customer, you get throttled, but new customers don't have the problem. I guess until they start showing loyalty! I had an argument one time at a T-Mobile store – they were giving away new phones to new customers, but I had been a customer since 1999 for over 10 years with 6 lines and they would not give me a new phone for free. No wonder people switch every 2 years! Customer loyalty is worth nothing for these guys.


  56. Here is a good source of information of drilling platform utilization and lease rates.  Deep-water utilization continues to trend down slowly suggesting the Trefis share-price estimate for RIG may be 15%-20% too high.  The business will definitely come back, the question is when.  Oil at $90 or less and lots of price volatility isn't going to make it very attractive.  But, like coal, the world needs this energy source so as a long-term investment RIG seems like a very logical bet to me.

    https://www.rigzone.com/data/utilization_region.asp


  57. SLW – Jan15 $20 puts can be sold for 1.34. Nice entry net $18.66 or sweet dividend on $513 regular margin.


  58. anyone have any info on the Lending Club IPO ?


  59. I'm glad I don't have a GPRO camera here because I would've broke it today.


  60. GPRO – I think Elon is buying shares…


  61. Income Porftfolio Review (continued):

    • PFE – 10 2016 $23/30 bull call spreads with $30 puts for net 0.60 @ $29.79.  On track and no 2017s yet. 
    • PNRA - 5 2016 $140/155 bull call spreads with $125 puts for net $4.95 credit @ $157.30.  On track and no 2017s yet. 
    • RIG – 10 2016 $35/45 bull call spreads with short $35 puts for net $1 credit @ $32.50.  No 2017s yet, so we wait but let's buy back the 2016 $45s for 0.65 to clear the decks.    
    • TASR – 20 2016 $10/15 bull call spreads with $15 puts for $2.20 credit @ $15.30.  No 2017s yet but on track. 
    • TEX – 5 2016 $30/40 bull call spreads with 10 $35 puts for 0.45 credit @ $32.30.  The $30 calls can be salvaged for $6.20 and rolled to 10 of the 2017 $28/37 bull call spreads at $4.20 and the short 2016 $35 puts ($6.50) can be rolled to the 2017 $30 puts at $5.60.  
    • TM – 5 2016 $110/135 bull call spreads with short $100 puts for net $3.50 @ $117.84.  Jan $110 calls still $13.80 can be rolled to 2017 $115 calls at $15 and short 2016 $135 calls at $4.10 can be rolled to Jan $115 calls at $6 and short 2016 $100 puts @ $4.20 can be rolled to 2017 $105 puts at $9.70.
    • TWTR – 5 2016 $23/40 bull call spread with 10 short 2016 $30 puts for net $4.05 credit @ 51.85.  On track with no 2017s yet.  
    • UBNT – 10 2016 $45/55 bull call spreads with short $35 puts for net $5.45 credit @ $38.69.  Waiting for 2017s. 
    • WFM – 5 2016 $35/45 bull call spreads with short $33 puts for net 0.20 @ $37.48.  Waiting for 2017s.  

    So, on the whole, not too many changes to make as we're still waiting for a lot of 2017 options to print.  As with the LTP, there really aren't any positions we don't have long-term faith in, so we'll just stick with them and see how it goes.

    If, however, you are not using the STP to short this portfolio, you do need to have some sort of short position to cover against a major downturn.  Though we are not tech-heavy here, I would like the SQQQ Jan $33/40 bull call spread at $2.25 and we already sold AAPL puts so no worries.  $5,500 of these (20) pays back $14,000 if the Nasdaq dips (and SQQQ is $36 now, so $3 in the money) – so let's add those specifically to this portfolio and 40 to the Short-Term Porfolio for $11,000 but not if you already have the STP and the Income Portfolio, then just those in the STP would be sufficient to cover the Income Portfolio! 


  62. NLY, Income Portfolio/Phil:  I think in the NLY adjustment you might be referring to selling the 2017 $12 puts as opposed to the 2016 $12 puts?


  63. Manufacturing/StJ – Sadly, that no longer correlates to manufacturing jobs.  

    Those two graphs together are a great preview of how Corporate America will be able to grow for the next 20 year without adding a single human job!  

    Death spiral/StJ – Couldn't come soon enough!  

    Buy program/Jasu – Into the EOQ – of course we get a buy program….

    RIG/Sibe – Don't forget, we pocketed a few thousand shorting OIH and XLE as well, which lowers the effective cost of RIG on the way down.  As I keep saying, it's a long-term play.  Eventually, that oil will have to come out of the ground – at whatever price.  

    Lending Club/Wombat – They only filed a vague S1 last month, I haven't heard details yet.  

    GPRO/Rustle – Holy COW! 

    I guess they do have a channel – the bottom of it is the right side of the stick and the top is the left side…

    NLY/Income Portfolio, Kinki – Thanks, that is the 2017 $12 puts to sell, thanks. 


  64. Watch this video at http://bloom.bg/1Bveg3y

    Hong Kong Demonstrators Return as Protests Swell

    Sept. 29 (Bloomberg) — Council on Foreign Relations President Richard Haass and University of Pennsylvania Ethics and Health Policy Department Chair Ezekiel Emanuel discuss pro-democracy protesters in Hong Kong demanding for free and open elections and the resignation of Chief Executive Leung Chun-ying. Haass and Emanuel speak on “Bloomberg Surveillance.” (Source: Bloomberg)

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  65. Manufacturing / Phil – I was making the comments because it's good for us investors! Who cares about the middle class rabble! Remember, what's good for GM is good for the USA. Sheesh Phil – get it together :-)


  66. Pharm/ Any thoughts on SGEN decline today?


  67. Someone should overlay the TSLA charts and GPRO charts with the same starting stock price.  


  68. From Bloomberg, Jul 31, 2014, 4:43:28 PM

    Source: Brad Rippey/U.S. Drought Monitor

    California’s three-year drought just went from bad to dreadful. In the course of the last week, the crimson expanse of “exceptional drought” grew to engulf the northern part of the state.

    To read the entire article, go to http://bloom.bg/1pJv5BL

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  69. From Bloomberg, Sep 18, 2014, 6:14:55 PM

    A scene from “The Day After Tomorrow.” Photograph: 20th Century Fox Film Corp/Everett Collection.

    The iPhone 6 is the measure of all things, so we should measure all things by it.

    To read the entire article, go to http://bloom.bg/1yiJ8rY

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  70. From Bloomberg, Sep 29, 2014, 11:24:20 AM

    Speculators increased wagers on
    higher U.S. gasoline prices by the most since February as
    refinery closures constricted supply.

    To read the entire article, go to http://bloom.bg/1u5xFrM

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  71. From Bloomberg, Sep 29, 2014, 2:57:01 PM


    Henry Poulson, Timothy Geithner and Ben Bernanke. Photographs by Bloomberg

    The U.S. extorted American International Group Inc. shareholders when it extended a $182 billion taxpayer bailout at the height of the 2008 financial crisis, a lawyer for Maurice “Hank” Greenberg said.

    To read the entire article, go to http://bloom.bg/1voNDM4

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  72. Phil

    Should be PNRA

    §  PNRE – 5 2016 $140/155 bull call spreads with $125 puts for net $4.95 credit @ $157.30.  On track and no 2017s yet. 


  73. From Bloomberg, Sep 29, 2014, 8:13:39 AM


    Sept. 29 (Bloomberg) — Nicola Marinelli, portfolio manager at Sturgeon Capital Ltd., cites research which says European Central Bank efforts to weaken the euro might not boost exports until the shared currency falls to parity with the dollar. (Source: Bloomberg)

    Mario Draghi’s strategy for reviving the euro area looks like devaluation.

    To read the entire article, go to http://bloom.bg/1BsDxeZ

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  74. From Bloomberg, Sep 29, 2014, 7:53:07 AM


    Patrons dine at a sushi restaurant in the Ballard neighborhood of Seattle, Washington, U.S. The dollar’s appreciation has caused Fed officials to voice concern it will have a negative impact on the economy. A too strong currency may hurt the Fed’s goal to spur growth and avoid disinflation, New York Fed President William C. Dudley said. Photographer: Mike Kane/Bloomberg

    The dollar, already enjoying its
    best year since 2008, is showing few signs of letting up as a
    growing number of strategists say it’s a relative bargain amid
    signs the U.S. economy is gaining traction.

    To read the entire article, go to http://bloom.bg/1sJW5sr

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  75. From Bloomberg, Sep 29, 2014, 8:00:00 AM

    German inflation beat economists’
    estimates in September as the European Central Bank prepares to
    implement more stimulus in the euro area.

    To read the entire article, go to http://bloom.bg/1sK8tbU

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  76. From Bloomberg, Sep 28, 2014, 7:11:09 PM

    Photo Illustration: Sean Gallup/Getty Images

    The euro will weaken more than 5 percent against the dollar by June in a slide that option traders forecast will be slower than the tumble during Europe’s debt crisis in 2012, according to Nomura Holdings Inc.

    To read the entire article, go to http://bloom.bg/1BsHgsP

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  77. SGEN decline – just waiting to see where the dust settles.  Manufactured, as 'they' are attacking it for something that has been known for years.  SGEN will be fine. 


  78. From Bloomberg, Sep 29, 2014, 9:03:21 AM


    Break out the carbon tax banners.

    Most economists agree that a carbon tax is the best way to slow climate change. Make energy derived from fossil fuels more expensive, they say, and let the market do the rest.

    To read the entire article, go to http://bv.ms/1xtMCGL

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  79. VIX up 7%, there's more worry than the levels indicate.  

    Manufacturing/StJ – Oh, silly me, sorry….

    Thanks QC.  


  80. PBR – if you are a holder, note this article that targets $9 for it.  Yikes.


  81. Not bad, only slightly down overall but, on the other hand, no improvement on the bounce levels, so nothing to get excited about. 


  82. F – what the hell. not even an earnings day and they have to come out and guide lower? did they have a planned buyback for EOD?


  83. Tesco/ Phil … Ticker for the ADR's is TSCDY .. Buffet owns 4% i believe at price in high teens with current price only $9 after sales decline trend, profit warning, divend cut and accounting error and change of management … Worth dipping toes in or stay away as too many red flags … I think i might have answered my own question .. There are many other cleaner opportunities out there.. thanks


  84. It's not just that, DM, I also don't like owning stocks where, if something does happen, it may not make the headlines in Bloomberg.  That's the problem with many ADRs, it's harder to keep on top of them.  


  85. TEX, Income Portfolio/Phil:  I just wanted to point out that we also went long 5 2016 $35 calls on Sept.16. 

    http://www.philstockworld.com/2014/09/16/testy-tuesday-will-the-russell-survive-the-death-cross/#comment-4688091

    http://www.philstockworld.com/2014/09/16/testy-tuesday-will-the-russell-survive-the-death-cross/#comment-4688311

    "TEX/Kinki – Yes, I didn't want to buy back the 5 short $40 calls (still $2.75) but adding 5 long $35s puts us more bullish and also lets us stop out the $30s if we get a good run up.  Keep in mind we sold the $40s for $7.05 so, if we end up in the $35/45 bull call spread it's a net $2.55 credit and then anything over $5 we sell the $30s for (now $7) is profit with a $5 kicker on the remaining spread (and the short put money). "


  86. Phil – Please email part 3 of income port adjustments, thanks ..


  87. Could have been worse…


  88. A pieced-together excerpt from a book I've been reading by Wm. Poundstone [no, I hadn't heard of him, either] which I found quite interesting, about William Sharpe, prof. U.C. Irvine & Stanford, famous for his development of the Capital Asset Pricing Model:

    .  "Collectively, the world's investors own 100% of all the world's stock…that means that the average return of all the world's investors [before mgmt. expenses, brokerage fees & taxes] is identical to average return of the stock market as a whole.  It can't be otherwise."

    "Even more clearly, the average return of just the passive investors is equal to the average stock market return. This is because these investors keep their money in index funds or portfolios that match the return of the whole market."  [one can quibble about the set of investors, but it's certainly true within the developed world markets - zz].

    "Subtract the return of the passive investors from the total.  This leaves the return of the active investors.  Since the passive investors have exactly the same return as a whole, it follows that the active investors, as a group, must also have the same average return as the whole market.  This leads to a surprising conclusion  Collectively, active investors must do no better or worse [before fees and taxes] than the passive investors."

    "Some active investors do better than others, of course…One thing's for sure.  Everyone can't do "better than average. Active investing is a zero-sum game. The only way for one active investor to be better than average is for another active investor to do worse than average.  You can't squirm out of this conclusion by imagining that the active investor's profits come at the expense of those wimpy passive investors who settle for average returns… [because] the average returns of the passive investors is exactly the same as that of the active investors….".  

    "Factor in brokerage fees, management fees, or capital gains taxes [they rarely have to sell]….For the most part, active investors will pay a percent or two in fees [hedge fund investors pay much more]….  In the Twentieth Century, the average stock market return was something like 5% more than the risk-free rate.  [Hence] an active investor must return @ 2% more that the risk-free rate just to keep up with the passive investor." 

     Which, Sharpe concludes, a smart or lucky few definitely accomplish, but the majority who think they can beat the market do worse than the market, based not on economic theory, but the laws of arithmetic."  Something I shall take into account when overtake by the impulse to bet the ranch.


  89. From Bloomberg, Sep 29, 2014, 11:46:19 PM

    Sept. 30 (Bloomberg) – Bloomberg’s Rosalind Chin reports on the tens of thousands of protesters in Hong Kong pressing for open elections and the resignation of Chief Executive Leung Chun-Ying, as student leaders set an October 1 deadline for their demands to be met. She speaks to Angie Lau on “First Up.” (Source: Bloomberg)

    Asian stocks fell, with the
    regional index headed for its biggest monthly drop since May
    2012, amid tensions in Hong Kong and as a Chinese manufacturing
    gauge missed estimates. The dollar pared its largest quarterly
    advance
    since the global financial crisis.

    To read the entire article, go to http://bloom.bg/1nBI0uZ

    Sent from the Bloomberg iPad application. Download the free application at http://itunes.apple.com/us/app/bloomberg-for-ipad/id364304764?mt=8


  90. From Bloomberg, Sep 29, 2014, 6:00:01 PM


    A Ukrainian soldier looks on at a camp base near Debaltseve, Ukraine, on Sept. 29, 2014. Photographer: Anatoli Boiko/AFP/Getty Images

    Ukraine’s army suffered its highest
    casualties since signing a Sept. 5 truce in new clashes with
    pro-Russian fighters that are threatening to shatter a cease-fire that brought calm to the six-month old conflict.

    To read the entire article, go to http://bloom.bg/1vperM7

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  91. From Bloomberg, Sep 30, 2014, 12:00:01 AM

    U.S. law enforcement officials are
    urging Apple Inc. (AAPL) and Google Inc. (GOOG) to give authorities access to
    smartphone data that the companies have decided to block, and
    are weighing whether to appeal to executives or seek
    congressional legislation.

    To read the entire article, go to http://bloom.bg/1osDyK2

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  92. From Bloomberg, Sep 30, 2014, 12:01:01 AM

    Tracy Morgan onstage at Spike TV’s “Don Rickles: One Night Only” on May 6, 2014 in New York City. Photographer: Kevin Mazur/Getty Images for Spike TV

    Wal-Mart Stores Inc. (WMT) said actor-comedian Tracy Morgan is to blame for injuries he sustained in a June highway crash because he wasn’t wearing a seatbelt.

    To read the entire article, go to http://bloom.bg/1ornoAD

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  93. From Bloomberg, Sep 29, 2014, 10:58:35 PM

    Indonesia’s rupiah fell the most in
    Asia this month as foreign funds pulled money from local stocks
    in preparation for an increase in U.S. interest rates.

    To read the entire article, go to http://bloom.bg/1oss499

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  94. From Bloomberg, Sep 30, 2014, 12:45:52 AM


    Sept. 30 (Bloomberg) — Jesper Koll, head of Japan strategy at JPMorgan Chase & Co. in Tokyo, talks about the nation’s economy.
    Japan’s unemployment rate and industrial production unexpectedly fell in August. Koll speaks with Angie Lau on Bloomberg Television’s “First Up.” (Source: Bloomberg)

    Japan’s output unexpectedly fell while stronger retail sales and an improving job market showed resilience in the world’s third-biggest economy as Prime Minister Shinzo Abe weighs another sales-tax increase.

    To read the entire article, go to http://bloom.bg/1orTNXu

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  95. From Bloomberg, Sep 29, 2014, 10:55:18 PM

    Iron Mountain Inc. (IRM), the Boston-based data storage and information management company, is considering an offer to buy Recall Holdings Ltd. (REC) for more than $2 billion, people with knowledge of the matter said.

    To read the entire article, go to http://bloom.bg/1oqyt4J

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  96. EUR/USD – Interesting to compare the /DX weekly chart and the weekly EUR/USD, and the RSI on the EUR/USD. Dollar is looking fully extended on the /DX, while the EUR/USD suggests the EUR could go lower, but RSI and stochastics show it already been running very weak.. /DX 88 sure looks like a target, resistance, and springboard.  


  97. make that /DX 86.


  98. From Bloomberg, Sep 29, 2014, 10:46:16 PM

    Photographer: Tomohiro Ohsumi/Bloomberg

    A Chinese manufacturing gauge fell from an initial reading a week ago as a property slump weighs on the world’s second-largest economy.

    To read the entire article, go to http://bloom.bg/1DTpgMc

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  99. From Bloomberg, Sep 29, 2014, 8:04:44 PM


    Mark Fields, Ford’s chief executive officer, will meet with investors Sept. 29 in Dearborn, Michigan, to update them on the company’s progress in meeting goals to sell 8 million cars and trucks globally, up from 6.3 million last year, and boost global automotive operating margins to 8 percent or 9 percent, from 5.4 percent last year. Photographer: Bradley C. Bower/Bloomberg

    Ford Motor Co. (F) said it will earn a pretax profit of $6 billion this year, missing its goal of $7 billion to $8 billion, as recalls rise and results in South America and Europe are looking worse than when the year began.

    To read the entire article, go to http://bloom.bg/10fucvF

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  100. From Bloomberg, Sep 29, 2014, 5:37:54 PM

    Detroit can continue to shut off
    water service to customers who don’t pay their bills, a judge
    ruled, rejecting a request from advocates for low-income
    residents and removing another hurdle from the city’s path
    through bankruptcy.

    To read the entire article, go to http://bloom.bg/1sKnEBR

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  101. From Bloomberg, Sep 29, 2014, 11:27:11 PM


    A man sits by a stack of boxed Apple Inc. iPhones 6 and iPhone 6 Plus smartphones as he tries to resell the devices outside the company’s Central district store in Hong Kong, China, on Sept. 26, 2014. Photographer: Jerome Favre/Bloomberg

    Apple Inc. (AAPL) received Chinese
    government approval to sell the iPhone 6 and iPhone 6 Plus after
    agreeing to improve user security and privacy.

    To read the entire article, go to http://bloom.bg/1DTEZuL

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  102. From Bloomberg, Sep 29, 2014, 7:00:01 PM


    Asia Pacific Resources Development Investment Ltd. founder Zheng Jianming speaks during an interview at the Next Generation Solar PV Finance conference in New York, on September 29, 2014. Photographer: Michael Nagle/Bloomberg

    The Hong Kong property tycoon who
    gathered almost $20 billion in Chinese solar manufacturing
    assets is expanding his reach in other green energy technologies
    and may seek Wall Street money to do it.

    To read the entire article, go to http://bloom.bg/1DT11xD

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  103. From Bloomberg, Sep 29, 2014, 6:00:02 PM


    German Chancellor Angela Merkel waits for Finnish Prime Minister Alexander Stubb to arrive for talks at the chancellery in Berlin, on Sept. 29, 2014. Photographer: Tobias Schwarz/AFP via Getty Images

    Chancellor Angela Merkel said the
    European Union and the U.S. may be in for a long haul in their
    face-off with Russia over its actions in Ukraine, citing the 40-year history of communist East Germany as evidence.

    To read the entire article, go to http://bloom.bg/1sL1wHm

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  104. From Bloomberg, Sep 29, 2014, 6:01:08 PM


    Sept. 26 (Bloomberg) — Emergency crews respond to a fire at the Chicago En Route Center, one of the nation’s busiest air traffic-control centers.
    The facility in Aurora, Illinois, oversees high-altitude traffic across the northern Midwest states including Illinois, Indiana, Wisconsin and Iowa. The center was evacuated, and the Federal Aviation Administration has halted flights in the Chicago area. (Source: Bloomberg)

    The head of the Federal Aviation
    Administration
    ordered reviews of emergency procedures and
    security as lawmakers questioned how one man armed with gasoline
    and knives crippled the U.S. air-traffic system last week.

    To read the entire article, go to http://bloom.bg/1sKLD3R

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  105. From Bloomberg, Sep 29, 2014, 7:50:57 PM

    Customers can get a 3-D-printed figurine of themselves from Artec. Source: Artec

    Those bobble-heads on your desk may soon get some competition — from you.

    To read the entire article, go to http://bloom.bg/1DT6K6O

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  106. From Bloomberg, Sep 30, 2014, 12:01:03 AM


    A builder climbs a ladder attached to scaffolding outside newly constructed houses in the Uxbridge district of London, U.K. The global consulting company says governments should release parcels of land at below-market prices, put housing developments near transportation and unlock idle property hoarded by speculators and investors. Photographer: Jason Alden/Bloomberg

    Replacing the world’s substandard housing and building affordable alternatives to meet future global demand would cost as much as $11 trillion, according to initial findings in a McKinsey & Co. report.

    To read the entire article, go to http://bloom.bg/1osDg5K

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  107. From Bloomberg, Sep 30, 2014, 12:00:01 AM

    Christian Martin and Leonard Nuara
    go to a lot of bitcoin conferences, and, at 49 and 55,
    respectively, they invariably feel old.

    To read the entire article, go to http://bloom.bg/1DTMwtr

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  108. From Bloomberg, Sep 30, 2014, 12:00:01 AM

    Bitcoin is digital, yet this image showing physical bitcoins ranks as the most popular photograph of the virtual currency on Gettyimages.com. Photographer: George Frey/Getty Images

    Dollars, euros and pounds are easy
    to visualize: They’re physical objects. Being digital, bitcoins
    aren’t tangible — which has become a boon for George Frey.

    To read the entire article, go to http://bloom.bg/1osDAkW

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  109. From Bloomberg, Sep 29, 2014, 6:27:04 PM

    Armed police stand by as pro-democracy demonstrators during a rally outside the Hong Kong government headquarters on Sept. 29, 2014. Photographer: Dale de la Rey/AFP via Getty Images

    The most violent protests in Hong Kong in almost 50 years pose a dilemma for President Xi Jinping: clear the streets and risk embedding anti-China sentiment in a city that has prized its relative freedom, or make concessions and appear weak at home.

    To read the entire article, go to http://bloom.bg/1orDji5

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  110. From Bloomberg, Sep 29, 2014, 10:19:34 AM

    Hedge funds are finally getting
    something right in the equity market.

    To read the entire article, go to http://bloom.bg/1BsIsfK

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  111. From Bloomberg, Sep 30, 2014, 12:01:03 AM

    Kevin Yearout has added about 80 jobs to his Albuquerque, New Mexico, contracting company since July of last year. That still leaves him with less than half the number he employed in 2009, at the end of the deepest downturn since the Great Depression.

    To read the entire article, go to http://bloom.bg/1DTMi5I

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  112. From Bloomberg, Sep 30, 2014, 12:01:01 AM

    Argentina was found in civil contempt of court by a U.S. judge as it prepares to shift control over payments of its restructured debt from New York to Buenos Aires.

    To read the entire article, go to http://bloom.bg/10fpPR9

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  113. From Bloomberg, Sep 30, 2014, 12:25:13 AM

    A truck carries excavated iron ore from the open pit of an iron ore mine in Stary Oskol, Russia. The worldwide surplus will increase from 52 million tons this year to 163 million tons in 2015, according to Goldman Sachs Group Inc. Photographer: Andrey Rudakov/Bloomberg

    Iron ore will complete a third
    straight quarterly decline today to post the longest losing run
    on record as a slowdown in China’s economy curbs demand growth
    in the largest buyer and worsens a global surplus.

    To read the entire article, go to http://bloom.bg/1os34Po

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  114. From Bloomberg, Sep 30, 2014, 12:00:00 AM

    The dollar’s strongest year since
    2008 is a source of growing concern among some Federal Reserve
    policy makers, who say further gains have the potential to curb
    economic growth and keep inflation too low.

    To read the entire article, go to http://bloom.bg/1osDZDX

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  115. From Bloomberg, Sep 29, 2014, 6:00:00 PM

    Buildings at Lujiazui are shrouded in heavy smog in Shanghai, China, on Dec. 8, 2013. Source: ChinaFotoPress via Getty Images

    Shanghai is cracking down on
    polluters with the introduction of stricter fines to combat the
    hazardous smog levels that are testing its drive to become a
    global financial center.

    To read the entire article, go to http://bloom.bg/1DSX8ZE

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  116. From Bloomberg, Sep 29, 2014, 4:28:31 PM

    Sept. 29 (Bloomberg) — Consumer spending in the U.S. rebounded in August as further job gains encouraged households to loosen their purse strings.
    Purchases increased 0.5 percent last month after little change in July, Commerce Department figures showed today in Washington. Incomes increased 0.3 percent. Betty Liu and Michael McKee report on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

    Consumer spending rebounded in August as employment gains revived household earnings growth and encouraged Americans to return to shops and car dealerships.

    To read the entire article, go to http://bloom.bg/1vplOmM

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  117. From Bloomberg, Sep 29, 2014, 4:00:30 PM


    Sept. 29 (Bloomberg) — Federal Reserve Bank of Dallas President Richard Fisher talks about the outlook for the Fed to raise interest rates, the value of the U.S. dollar and inflation in the U.S.
    Fisher speaks with Kathleen Hays and Vonnie Quinn on Bloomberg Radio’s “Hays Advantage.” (Source: Bloomberg)

    For bond investors who are
    convinced a lack of inflation will keep the Federal Reserve from
    upending Treasuries when it begins to raise interest rates,
    there’s one parallel in history that suggests they still have
    cause for concern.

    To read the entire article, go to http://bloom.bg/1vqA2Vi

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  118. From Bloomberg, Sep 29, 2014, 11:27:25 PM


    Lee Ju Yeol, governor of the Bank of Korea, kept the benchmark rate unchanged at 2.25 percent on Sept. 12, after cutting it from 2.50 percent in August. e said the same day that one of the seven board members opposed the decision and called for a reduction. Photographer: Seong Joon Cho/Bloomberg

    Bets that the Bank of Korea will cut interest rates for a second time this year have slashed the yield premium on the nation’s bonds to a seven-year low, risking an outflow from won debt.

    To read the entire article, go to http://bloom.bg/1rzVgzM

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  119. From Bloomberg, Sep 29, 2014, 10:50:45 AM


    Is the price right?

    A bit more than two years ago, the European Central Bank performed an amazing magic trick: With the promise that he would do “whatever it takes” to hold the euro area together, ECB President Mario Draghi managed to bring Europe back from the brink of financial and economic disaster.

    To read the entire article, go to http://bv.ms/1rEYHph

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  120. Apple London;  The store on Saturday was packed as usual with a large section of the ground floor roped off for people to queue to collect their phones. The queue was massive and this was 2 in the afternoon.

    Phil:  I love the fact that you can charge your own Iphone whilst playing with the new Iphone six and the staff let you be.  Like you, I have to wait for the holidays for a new toy but I absolutely want one!  Its the first Iphone that feels comfortable in my hand without a case since the Iphone 3G.  I actually think it feels less fragile that the 4 or 5.


  121. Good morning!

    The Dollar is the story of the day, up about 0.7% this morning at 86.23 and that has crushed commodities  with gold plunging to $1,208, silver $17.25, copper $3.035, nat gas $4.115, gasoline $2.517 and oil hit $94.90 but now failing $94.50 where /CL makes a good short below the line as long as the Dollar is over 86.20.

    Same goes for /NKD at 16,250 – that one is a good short if the Dollar is below 86.25.  Our Futures are up about 0.4% this morning, not hurt by the Dollar – that's interesting.  On the whole, we'll just have to see how the lines go by my theory is they are pumping the Dollar up pre-market, while they can keep control – so they can tank the Dollar and boost the markets later.  

    That's why I like /SI long at $17.25 and, if that fails, I'll like $17 too.  Also, /YG at $1,210 if they take that back or $1,200 if they fall more.  


  122. That's a shame because I was up at 3 but I went back to sleep because it's a Webinar day and I didn't want to be tired at 1pm.  

    TEX/Income Portfolio, Kinki – Right you are, we also have 5 of the 2017 $35 calls that we bought for $4.50 and are now $5.50 so we'll also roll those into 5 more of the same spreads, taking a little off the table.

    Part 3/Edro – Hmm, forgot to do that.  Can't do it after the fact but I guess I can reprint it and send.. 

    Big Chart – Still a downward pattern – we'll see if they can break it today.  

    Zero Sum Game/ZZ – Well, you can use the same logic to prove that there are no tall or short humans because, statistically, they all end up the same height no matter what their genetics are or how they are nourished.  With hundreds of Trillions of Dollars being tossed around, it only takes an anomalous .000001 variation for you to make a Billion which is one in a Million, which is about how many Billionaires we have.  

    If your goal is only to make an extra $100,000 on your own $1M pile, well we can add 6 more zeros to to that decimal.  Of course, our system of Being the House, depends on that same statistic as we do assume the average investors, for all their machinations, are not going to outperform the market at our expense (since we sold them the risk) but, fortunately, the math isn't so strict that it prevents us from outperforming the markets fairly consistently.  

    Dollar/Scott – I suppose the upcoming ECB on Thursday has got people panicking out of Euros in case Draghi goes bat-shit crazy(er).  

    IPhone/Malsg – I don't know what it is but holding that thing makes you want it.  I guess we're well-trained to love electronics and AAPL understands that they can charge a premium price for a sexier phone, leaving the low-cost, low-margin market to their competitors (for now).

    Oil reversing already, $94.25 was the bottom but we'll take it, now back towards $94.50 – maybe we'll see $95 again before re-shorting.  

    Dollar 86.31 and /NKD still 16,250 because the Yen is 109.75 (almost 110!) as the Euro plunges to $1.255 and the Pound is $1.62 – craziness.

    Silver bottomed at $17.08, copper $3.02, gold $1,204 and we're still going to like them long if the Dollar ever comes back.  


  123. EBAY spinning off PayPal!  Up a quick 10% already. 


  124. zero sum Dogbert – The point was the relationship between index and active (stock picking).  Selling premium works, b/c the % of calls that expire unexercised is north of 75% – stats I saw last week were in the 80+% region in the U.S. market.  That puts us on the sunny side of active.