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Testy Tuesday – 1,975 or BUST!

SPY 5 MINUTEI told you it was going to be a wild week!

Not that you can draw any conclusions from yesterday's low-volume action.  The Fed doves have their say for the next two days and then we go into a hawkish nosedive on Thursday and Friday, so this little drama is just getting started.  All went according to plan yesterday – per our set-up in the morning post:

As a hedge, for our Member Portfolios, we're favoring SQQQ (now $36.55) and DXD (now $24.52) to protect us from another slide but the real tilt to hawkish doesn't start until Thursday, after the Fed minutes, so we can assume they will be spun bearish from there into the weekend and we'll look to take nice, short positions against any run-up that comes from doveish Fed statements early in the week.  

As you can see from yesterday's action, that was the perfect way to play it and our short positions on the Futures gave us several quick victories as it was all downhill from the open until 1pm.  Even our oil short gave us a nice $600 win – the one that was right there in the morning post at $89.60 and oil was below $89 by 10:45, less than 3 hours for that trade idea to play out!  

That's good because we REALLY needed the money because GTAT, one of our good-sized positions in two of our portfolios, declared a surprise bankruptcy yesterday.  Bankruptcies are not supposed to be surprising but this one was and GTAT dropped 90%, essentially wiping out a $25,000 position and costing us 1/4 of our year's profits in the Long-Term Portfolio.  

There's an excellent article in Bloomberg and another one from Seeking Alpha outlining what happened and where it stands so I'll spare you the gory details other than to say that this is why we stress diversification and portion control in investing.  Even so, GTAT happened to be a stock that got weak and, because management promised a turn-around, we added to our losing position on the initial dip and maxed our allocation and then got burned so quickly that we had no chance to recover.  These things do happen in the market – you have to allow for them.  

Fortunately, it's been a good year and, despite the heartbreaking loss, our Long-Term Portfolio held on to $68,564 of it's gains (13.7%) and the Short-Term Portfolio is still up $58,403 (58.4%) for a combined $126,967, still ahead of our 20% combined goal for the year.  It's a set-back, but certainly not the end of the World

What we're more concerned about, is whether we should be cashing out the rest of the Long-Term Portfolio and that will depend on how the S&P handles it's 50-day moving average at 1,975 – as a failure there can turn things very ugly indeed.  As you can see from our Big Chart, the NYSE and the Russell are both down considerably since September 1st (7.5% and 5%) while the Dow, Nasdaq and S&P are down about 2.5% each.

The Nasdaq is still 10% over it's Must Hold level but 3 of our indexes have already failed theirs and, until one of the 3 retakes it, we're certainly going to remain on the bearish side of things.  In fact, at the moment, I'm a lot more worried about the Russell failing 1,080 than I am about the S&P at 1,975.  If we think of the indexes as tugboats, it wouldn't be possible for the Russell to pull below 1,080 if the entire ship weren't heading in that direction….

Economic Confidence Index Scores by IncomeWe had more bad numbers out of Germany (see our early morning Member Chat) and France is a disaster and Japan is falling apart along with China and, this morning, we have an Economic Confidence Rating of -15.  The only good thing you can say about -15 is that it's better than -50 we hit in the great crash but ZERO is neutral and -15 indicates 65% of the people surveyed feel the economy is currently poor and getting worse.  

In fact, if it were not for our nation's top 10% (those making $90,000+/yr), things would be very bleak indeed and even those people scored -2%!  Still, I'll put a positive spin on this by saying that people are much more confident than they were in the summer of 2012 or last September and, most importantly, Democrats are scoring +10 vs -18 for Independents and -40 for Republican voters.  

Economic Confidence Index Scores by Political Party

Why does this matter?  Because we have an election in 30 days and, even in those gerrymandered districts that are 90% Republican, 40% of the "loyal" base is very, very unhappy with the economy and, as Clinton said "It's the Economy, stupid!"  

Case in point, Senate Minority leader Mitch "Turtle Boy" McConnell is now TRAILING Democratic challenger Alison Grimes by two points.  She's gained 6 points since the August poll in a state the GOP didn't even consider to be in jeopardy.  It's just one poll but how motivated are the 90% (Ninety Percent!) of Republican voters, who feel the economy is poor and getting worse, going to be to pull the lever to re-elect their local jackasses?  

Pollsters rely on "likely" voters but, when the sentiment of your "likely" voters is this atrocious, they may not be turning out to support you in quite the numbers that they thought.  As you can see from the chart on the right, the Democrats locked in 13 more "safe" Congressional seats in this cycle while the GOP lost 4 – that's a very bullish trend for the Dems though it's still probably an insurmountable gap to take the House in this cycle but keeping the Senate will be a huge victory for the Dems this year.  

With 90 swing votes, the Dems would need to take 2/3 of the swing districts BUT, if in the next two years they add 13 more locks while the GOP loses 4 more, it will be 172 to 182 locked up with 81 swingers and THEN we'll have a horse race for the House!  90% of Republican Voters, essentially all but the top 10% that the GOP caters to, are unhappy with the economy.  

Whether they are smart enough to connect the dots and realize they are unhappy BECAUSE of their party remains to be seen…


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  1. Soda Stream warns, and also this retailer I have not heard of but interesting insight re mall traffic.  more signs the consumer is in weak condition.

  2. Good Morning everyone!

    Just a quick note about today's webinar:

    The usual Tueday webinar has been rescheduled for tomorrow at 1pm (Eastern). I'll put the link in the comment section tomorrow like usual. 

  3. Good morning Greg-Would you repost the Caesars link for the financial seminar-I couldn't find it. thanks.

  4. Things are in a downward spiral-more business's closing around here. Everyone is dreading paying for their heating & utility costs. Even our son who is a policeman & his wife who works in the medical field are struggling to keep up & disgusted with all politicians. They have been Republicans in the past when things were going better. This election season could prove to be interesting & Samsung has 50% less earnings-that's eye opening.

  5. Oil Lines

    R3 – 93.02
    R2 – 91.88
    R1 – 91.04
    PP – 89.90
    S1 – 89.06
    S2 – 87.92
    S3 – 87.06

  6. Not a good place to make money:

    Earlier this week, Google lowered prices 10 percent across the board on their Google Compute Engine cloud platform . The cost is getting so low, it’s almost trivial for anyone to absorb the costs of running infrastructure in the cloud, but you have to wonder as the cloud pricing wars continue, how low can they go and if it’s a war anyone can win.

    The end game is obviously zero, but these companies have overhead and while the Big Three cloud computing companies –Google, Amazon and Microsoft –run their Infrastructure as a Service as a side business, chances are their stock holders don’t want to see them giving it away for nothing, a point we seem to be approaching quickly.

  7. Maybe fragmentation is coming to iOS as well:

    At the same point last year, iOS 7 had hit nearly 70 per cent adoption by some metrics. Even worse for Apple, it seems that after the initial glut of users upgrading to iOS 8 (or just flat-out buying iPhone 6 or 6 Plus devices), there's been virtually no more conversion of users to iOS 8: it was at 46 per cent on September 21st, and it's at 47 per cent as of yesterday.

    Although the exact causes are difficult to determine, there's a few obvious candidates for the slow adoption: iOS 8 needs nearly 6GB of free space to install, which for most people (including me and my 32GB 5S) meant nuking photos or a music collection to be able to upgrade, although it doesn't have to. Then, there's the fact that 8.0.1 nuked cell reception for iPhone 6 owners. Add that to a seemingly above-average number of buggy apps on iOS 8, and it looks like most people are putting the update off.

  8. On the other hand, someone else is feeling the heat of the competition:

    Samsung estimated that the median forecast of its July-September operating income at 4.1 trillion won ($3.8 billion), lower than the median of analysts' estimate of 5.2 trillion won according to FactSet, a financial data provider. That is a 60 percent plunge from record-high 10.2 trillion won a year earlier.

    The Korean company's earnings preview highlights the rapid decline of its mobile business as lower sales of its top-end Galaxy smartphones hurt sales at its component businesses, such as advanced display called OLED, and heavy marketing costs undermine profits.

    "Smartphone shipments increased marginally amid intense competition. However, the operating margin declined due to increased marketing expenditure and lowered average selling price (ASP) driven by reduced proportional shipments of high-end models coupled with price decreases for older smartphone models," Samsung said in a statement.

    Mostly from other Android makers in China though as Android is not losing market share, but Samsung is!

  9. And your crazy of the day:

    Radio host Rush Limbaugh suggested on Monday that President Barack Obama is refusing to divert flights from Ebola-infected countries and close down America’s borders because he believes that the nation “deserves” to be infected with the virus given its history of perpetuating slavery.

    Always the class act looking to bridge the race divide! 

  10. It seems like yesterday when SODA was at its highs that I remember Jim Cramer basically do an informercial on his show for them and talking about how they are going to take over the entire soda market.

  11. Good Morning!

  12. Good morning!

    The Chronicle’s nationwide study, How America Gives, shows the rate of giving declining in most cities and a continued trend of greater generosity in…


    The Jacksonville Jaguars have apologized for their mascot using the Ebola epidemic to mock the Pittsburgh Steelers' Terrible Towels on Sunday.


  13. Good article on the European debt crisis:

    While short-term issues of financial stability have improved markedly, the wild ride of TARGET2 balances in recent years highlights a new problem for the ECB. As I recently pointed out here, the ECB’s approach to unconventional monetary is ultimately outside the central bank’s control, because it is driven by banks’ demand for (and decision to reimburse) the money created by the central bank. In other words, during the worst phase of the crisis, the ECB effectively outsources the central bank’s balance sheet management to banks in the private sector.

    Why is this a problem? You need only look at the recent readings of dangerously low inflation in the euro zone to understand why. If the ECB truly wants to keep the risk of falling into a Japanese-style deflationary trap at bay, it must act decisively to expand its balance sheet—as the US Federal Reserve did—on its own.

  14. Here you go again with facts Phil! Of course, repeating fiction and lies seem to have more results…

  15. Well, we're off to a poor start.  Oil right back to $89.60, indexes down more than half a point with RUT right on that fatal 1,080 line and forget 1,975 on the S&P, they are barely holding 1,950. 

    GMCR getting a pop off SODA's issues – people don't seem to understand they are essentially the same company with the same fatally flawed model – just at an earlier stage than SODA.  

    Submitted on 2014/01/13 at 9:57 am

    SODA/Cdel – No thanks.  I remember when Fondue pots were the rage (early 70s) and some people used them every day too.  I liked them, they were great for parties – especially if you didn't have to clean up.  SODA's growth is already slowing drastically, up from $2.09 last year to $2.78 this year but projecting 10% growth, to $3.08 the next year and that's based on very healthy growth estimates that may not pan out and RAISED outlook from last Q.   People have been able to make their own soda since soda was invented.  KO or PEP could crush SODA tomorrow by releasing home machines as could any competitor who builds a better mouse-trap.  The only "moat" SODA has around their business is than anyone analyzing the market would conclude that it's neither profitable or defensible and SODA is already there so what's the point.  Meanwhile, for a company projecting to make $2.78 in 2013, making .32 in Q4 2012 is not a good start, is it?  They are not priced to disappoint and they are, indeed growing – but is it really fast enough to sustain a p/e of 24 (and that's AFTER the pullback) when the p/e of GMCR is 19.6 (with triple the growth) along with KO and PEP, also around 19?  

    That's the problem with FA – it takes a long time to be right sometimes…

    I'm pissed because I was in BBBY and SPLS this weekend and, in both stores, I noticed the SODA machines were fully stocked AND the consumables were fully stocked on the shelves – indicating very few people were buying them on a random weekend.  GMCR was looking better but I still contend that, in the long run – it's essentially the same company.  Today the demise of SODA is giving them a nice pop but I doubt earnings (mid November) will justify it as now their p/e is in the 30s (up 50% this year).  

    Don't forget, I'm only here until noon today, doubt I'll make it back before the close.  

  16. No, I've already signed up-thought there was a link just for Caesar's with room rates etc. Will go on line & get this done.

  17. RIG- up two days in a row! Wowee, could this mean that the bottom has been found?

  18. Spiral/Pirate – Is that Wisconsin?  I heard it was rough over there this year.  If you could get rid of Paul Ryan in November, you'd be doing America a huge favor!  Although that's almost impossible because he already rigged it:

    Scott Walker and his army of right-wing zombies in the Wisconsin Republican Party were eager to accomplish several things affecting elections before the recall votes expected to end his absolute power in Wisconsin by returning the state Senate to the Democrats. [Last night Democrat Dave Hansen routed Walker puppet David VanderLeest with a 66-34% landslide blowout.] First, they passed legislation that drastically reduces the number of people who will vote, targeting students, African-Americans, seniors and poor people, none of which are GOP constituencies. And now they have rushed through a plan to gerrymander the state's legislative and congressional districts by lumping as many Democrats as they could into as few districts as possible, leaving few contestable districts and as many GOP-leaning districts as they could. 

    The Midnight Review: Paul Ryan Admits To Gerrymandering?

    Paul Ryan says congressional districts in Wisconsin are competitive after redistricting

    Samsung/Pirate – That's what I kept saying about AAPL's "competition" – it doesn't matter if AAPL only has 15% of the market because it's the profitable 15% that they want.  Their lack of growth is wise restraint in not going after low-margin sales.  Over time, Moore's law takes care of price and I was just looking at the $99 IPod Nano this weekend (no contract, of course) and, if they can get the memory up to 32Gig and put phone functions and WiFi in it, they'll sell a billion of them too.   Obviously, they'll get there, the Nanos didn't come out until 6 years after the IPod and it's just coming up on 6 years after the iPhone (2008) now.  

    Cloud/StJ – Another commodity disguised as tech.  

    IOS/StJ – A lot of people don't have the free space for a WiFi upgrade (you don't need any space if you upgrade attached to a computer with ITunes).  It does take about 5G of space to swap the files while it's loading.

    Cramer/Rustle – From the day they IPO'd Cramer has been pumping them through thick and thin.  

    ECB/StJ – Very dangerous ground at this point.  France is really going to hurt if they keep getting worse.  

    Facts/StJ – I read a study over the weekend that showed that lies did, in fact, spread twice as fast as facts, mostly because the lies can be so absolute (like Obama purposely causing ebola) while the truth (Obama should be more aggressive in stopping the spread of ebola in the US but without needlessly panicking people or turning airports into clusterfucks) is simply not as exciting.  I don't remember if I posted it or not as it wasn't a well-written study, but it did raise a good point. 

    Rooms/Pirate – Greg is finalizing those this week.  Should be out no later than Friday. 

    RIG/Craigs – IMF cut Global Outlook but raised our outlook, good for US materials suppliers – even CLF is up 1.7% today.  

    • The IMF calls for policy makers to be "on the lookout" for downside risks as it cuts its world growth forecast for this year to 3.3% from 3.4% (made in July), and for next yar to 3.8% from 4.0%.
    • Among those countries posting decent growth are the U.S. and the U.K, but the IMF's Olivier Blanchard says potential growth in those nations remains lower than it was a decade ago.
    • Germany industrial production fell more than economists forecast in August, dropping 4%from July, when it expanded 1.6%, the biggest decline since January 2009.
    • As sluggish growth plagues the euro zone, Germany faces a slimming export market in addition to political tensions with Russia.
    • Output of investment goods -8.8%; intermediate goods -1.9%; consumer-goods production -0.4%; construction -2%. Only energy output rose, climbing 0.3%.
    • Der Spiegel magazine reported on Sunday that the IMF would cut its German economic growth in 2014 and 2015 to around 1.5% per year from previous 1.9% and 1.7% estimates.
    • DAX is down 0.8%.

  19. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights.

    I think this is very bad news.  The Euro is toast.

    From FT: "German industrial output suffered its biggest monthly decline in more than five years in August, raising fears that Europe’s biggest economy might be heading for recession and prompting renewed concern about the economic health of the eurozone.
    Output plunged 4.0 per cent from July, data published on Tuesday show, far more than the average 1.5 per cent drop forecast by economists and the largest decrease since February 2009, when the global financial crisis first hit Europe’s factories."

  20. Sorry , Phil, was cutting and pasting when you posted.

  21. Pirate – we're going to use the same link for the updates too (schedule, room rates, etc.). I will definitely have room rates locked this week. (I'll update that page as soon as I can, and I'm sure Phil and I will post it up in comments, etc.)

  22. No worries, ZZ, I do the same on occasion.  

    1,080 held so far on /TF with a nice bounce back to 1,085.  Others are 16,802, 1,946 (very bad below 1,950) and 3,987 (ditto below 4,000).  

    We're not bearish enough for a major correction in the STP, despite adding 50 DXD Oct $24 calls on Friday.  Those are a double, but that's up just $3,000 so we'll have to get more aggressive if 1,080 doesn't hold today.  

    Otherwise, we have 50 DXD Jan $23/27 bull call spreads, 30 SQQQ Nov $35/40 bull call spreads and 40 SQQQ Jan $33/40 bull call spreads as our main protection.  Those won't LOOK good until the premiums on the short calls wear down and they currently show net $18,600 out of a potential $63,000, so it's GOOD protection, but only if we go down and stay down to the expirations.  

  23. Phil,

    Like many I lost on GTAT but I also have CLF, ABX, GMCR, IRBT, XCO, SLW, TASR which are under water. Took the portfolio down 30%.  AAPL and DECK are the only ones holding it up.  Tempted to just cash in and wait.

    Your advise is much appreciated

  24. Phil/JNS

    I'm thinking to wait until the end of this week to see where they end up as far as the October 14 puts are concerned.   What do you think about them with time running short?

  25. Anybody who took an initial position in GTAT yesterday, congrats.  Nice move on it today.

  26. Thanks-I thought I had missed it. Yes, it is Wisconsin & Walker is as dirty as they come along with Ryan. In the Koch's back pocket & both are just puppets. We have 2 Repub's for representatives in this district because of the way the gerrymandering is. It is the same in Fla, another state that is in the toilet. The level of education & intelligence is very lacking as people seem to be incapable of looking at the facts. No one mentions politics, or politicians to me because I come back with FACTS not fiction & they hate that! We also have vaginal ultra sounds for women who need to terminate pregnancy with no exceptions. So rape victims are subjected to more torment because of politicians! Insanity for sure on all fronts.  Walker threw 40K+ people off Badger care & then turned down the federal funding for the Affordable care act. The list goes on & on. Sadly, we are losing our professional, well-educated people who are leaving in droves & we need them here. Rural areas struggle & a big void is made when more & more homes & farms are sitting empty & good medical care is an hour, or more away. I'm sure there are many other states with the same scenario.

  27. Things are turning back up-they are not going to let things go down =they haven't fleeced all of us yet!

  28. Interesting: contrary to the GTAT CEO selling his shares all year! – (don't know why I missed that!)

    Beegle Ronald R, who is Director at Aeropostale, bought 14,600 shares at $3.44 on Sept. 30, 2014. Following this transaction, the Director owned 73,702 shares meaning that the stake was boosted by 24.7% with the 14,600-share transaction.

    The shares most recently traded at $3.42, down $0.02, or 0.58% since the insider transaction. Historical insider transactions for Aeropostale go as follows:

    4-Week # shares bought: 30,000
    4-Week # shares sold: 7,721
    12-Week # shares bought: 85,000
    12-Week # shares sold: 7,721
    24-Week # shares bought: 85,000
    24-Week # shares sold: 7,721
    The average volume for Aeropostale has been 3.5 million shares per day over the past 30 days. Aeropostale has a market cap of $267.3 million and is part of the services sector and retail industry. Shares are down 63.81% year-to-date as of the close of trading on Tuesday.

  29. LOL – GTAT up 65% over yesterday's close!

  30. How did we miss that 41% short on GTAT? When I checked it was nothing near that when we bought. I'm hanging on to my 15 calls that I sold as they don't expire until 1/16. I held on to my Tasr when it tanked and it came back. Phil said not to worry-there was a lot of time to make up & it was a long term trade. Charlie Munger's advise is "Sit on it." I keep telling myself that when I want to panic.

  31. appl triangle looks to be very close to resolving itself now .. should be a decent move whichever way it goes

  32. Guys, as I've amply demonstrated, I'm not right about much.  But occasionally:

    September 22nd, 2014 at 1:47 pm | Permalink Tweet thisIgnore this user 
    This is strictly Monday morning quarterbacking, but the extremely high short interest in GTAT should have been a warning sign.  On June 30th, the short interest was 41 million shares about 30 % of the float. On August 15th it had risen to 51 million shares.

    Heavy short interest isn't always a negative, but it certainly means that the stock Is controversial, esp. with those lofty numbers of shorts.

    September 22nd, 2014 at 2:19 pm | Permalink Tweet thisIgnore this user 
    GTAT – Another Monday morning look at GTAT also reveals a disturbing practice (IMHO) by the top executives of GTAT to sell off optioned shares almost as quickly as they get them.  In the past 3 years, the CEO, who makes $2 million a year in salary and generous stock options, has sold off hundreds of thousands of shares, and has fewer shares now than he did in November 2011.  Again, it doesn't prove anything but if I had been a long term investor accumulating shares in this compay, it would be a definite red flag.

  33. Glad to see the stock going up.  Hopefully, there's more recovery to come.

  34. Albo

    I am having my eyes checked.  It seems I can't see RED! :)

    Important axiom for the day: Don't fall in love with any stock you own!

  35. Phil/ GTAT

    Considering the source, I hesitate to even post this, but do you think there is any merit to this guys thoughts?

  36. Losses/Rookie – Well I certainly hope you had some gains from offsetting hedges but, either way, you have to look at stocks based on how you feel about them now going forward, not based on their performance so far.  Long-term, CLF, ABX, XCO and SLW are cyclicals – sounds like you might be overweight there but, eventually, they should come around.  IRBT you know we like long-term as well as TASR but neither are having a good year (though neither is the broad market).  GMCR, I suppose you are short on and today's 5% jump doesn't help that.  The issue is – do you still have faith in them and, if not, then you should at least lighten up.  Our big portfolios are 80% cash already – that's why we haven't cashed out – even if the positions we have drop 40%, we're still happy to double down and ride out the next crash – but I'm not expecting a big crash yet – the Fed has a little dry powder left but, after the next save (more QE or whatever) – I'll be getting much more bearish.  

    JNS/Jeff – Well, they are up on a bad day and that's a bad sign but yes, I'd rather give them another day at least.  

    GTAT/Rustle – Once again I'm pissed I didn't pull the trigger at 0.80!   At least it will be good for the short 2016 $3 puts ($2.45 for net 0.55) if they can pull it together a bit.  

    Wisconsin/Pirate – Sounds like it is time to abandon ship!  

    Indexes turning back down now – not looking good at all.  

    ARO/DC – People sell for all sorts of reasons (diversification, taxes, estate planning) but they only buy for one reason – because they think they will make money!  

    GTAT/StJ – See, if only we'd spent another $25,000 at 0.80, we'd now have +$15K.  Too bad it wasn't the kind of drop we could reflexively double down on but I really wanted to at 0.50.  First reactions are almost always overreactions, even in bankruptcy.  

    GTAT/Pirate – It's past panic, it would be a miracle if they come back from this.  As noted yesterday, I think $3 is the best we can hope for but that's why we transitioned short puts to the $3 short puts in both portfolios (haven't gotten a good price on the old short puts yet, so in both but will try to get out on this pop.  Doesn't matter much since can only lose $1 more).  

    AAPL/Toe – I don't think they can go up if the market is dragging them.

    GTAT/Albo – Very good call at the time.  Unfortunately, the execs lied about the situation.  You would think lawsuits and possible jail time would prevent that sort of behavior but apparently not.  This, of course is why I avoid Chinese companies like the plague but what do we do if we can't trust US executives either?  This is why we NEED strong market enforcement – without trust, this whole thing begins to collapse.  

    GTAT/DC – That may be how they ultimately settle things but I very much doubt this guy knows anything and is just speculating.  GTAT shareholders would sue the crap out of AAPL if they cause the stock to crash and then buy it on the cheap – they don't need that headache but, at this point, AAPL would look like a hero to investors if they pay $7.50.  With 150M shares that's $1.125Bn, a drop in the bucket for AAPL and only double what they were going to give GTAT anyway so AAPL shareholders wouldn't be too upset – IF Sapphire glass does in fact work and can be used by AAPL in quantity.  If not – it's never going to happen.  

  37. BDSI-It is a pharma stock that got FDA approval for basically a patch for pain & opioid addiction. It has a investor update today & is on the move up. Perfect buy out candidate. It's called BEMA technology which makes it a no pill alternative. I am getting a small stake to start as it seems all positive. Earnings should be good. I use  the LIdocaine patch for back pain & it works great.

  38. Looking at the pivot points on TOS, all the other indexes are testing S2 (the lowest line) while the RUT is at S1 at 1,080 with another 5-point drop to S2 so watch out for that breaking down this afternoon.  

  39. Europe closing down 0.75% in UK, -1.1% in Germany, and -1.5% in the smalls.  

  40. 16,750 on /YM is the first S2 line that is likely to fail, if the Dow goes significantly below that, then you can short /TF below the 1,180 line until it or the the Dow turn back up (16,700 should be some support).  

    It is possible that the Europeans have been dragging us down with their selling, we'll have to see what sticks here.  

  41. Dclark41 – Good advice on not falling in love.  Easier said than done.  I usually think that I know more than the street.  WRONG !

    Phil – I agree that AAPL would be subject to huge class action lawsuits if they end up buying GTAT.  Certainly think they are smarter than that.

  42. Phil / GTAT.


    Based in a technical point of view how do you perceive the next 10 days is should be going to $2 or going to $0.1.

    In a fundamental point of view it seems that is a great value in assets, it all depends in what the real story is…. Emron or AA

  43. GTAT/ Albo

    Excellent warnings, well done & pls keep your posts coming…….I do follow your posts and would have acted, had I not missed it on the 22nd….would have saved me a lot of agony!

  44. Looks like we're hanging on above the previous (non-spike) lows so far.

    GTAT/Advill – Could easily go either way, we don't have facts yet, just lots of speculation.  My $3 target (see yesterday's chat) comes from basic suppositions on the nature of their bankruptcy and the debts we THINK they have – without facts, it's just guesswork, they could owe AAPL a $1Bn non-performance penalty for all we know.  As I said yesterday, at 0.50, I was willing to take a chance but at .80, I didn't pull the trigger as the $2.20 potential reward wasn't likely enough to offset the 0.80 risk – so I guess that means I think the odds are 75% they go lower.  

    OK, don't let 1,080 fail while I'm gone but, if it does, SQQQ has a LONG way to go and DXD has barely moved either.  

  45. Thanks, Checho.

  46. Albo

    What do you make of the latest XCO asset sale? It will reduce debt, but will also reduce earnings.

  47. From Bloomberg, Oct 7, 2014, 7:31:24 AM

    A senior banker from a leading British bank pleaded guilty to conspiring to manipulate London interbank offered rates in a U.K. court last week.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  48. From Bloomberg, Oct 7, 2014, 12:00:01 AM

    Marc Andreessen likens bitcoin to technology that’s arrived from Mars. He sees that as a very good thing. Photographer: Timothy Archibald

    Twitter. Facebook. AirBnB. Marc Andreessen, co-founder of the $4.2 billion venture capital firm Andreessen Horowitz, has backed them all — along with dozens of others. His latest project? Upending finance. Bloomberg Markets magazine interviewed Andreessen at the firm’s headquarters in Menlo Park, California.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  49. From Bloomberg, Oct 7, 2014, 11:48:03 AM

    Oct. 7 (Bloomberg) — Olivier Blanchard, chief economist of the International Monetary Fund, speaks about the outlook for the global economy.
    The IMF’s Rupa Duttagupta, Thomas Helbling and Gian Maria Milesi-Ferretti also speak at the news conference in Washington. (Video courtesy of IMF. Source: Bloomberg)

    The International Monetary Fund cut its outlook for global growth in 2015 and warned about the risks of rising geopolitical tensions and a financial-market correction as stocks reach “frothy” levels.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  50. From Bloomberg, Oct 7, 2014, 9:39:16 AM

    Oct. 7 (Bloomberg) — Vadim Zlotnikov, chief market strategist at AllianceBernstein, discusses Europe’s growth prospects as German industrial production fell more than economists forecast in August.
    He speaks with Jonathan Ferro on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

    German industrial production (GRIPIMOM) fell more than economists forecast in August in the latest sign that the outlook for Europe’s largest economy is deteriorating.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  51. From Bloomberg, Oct 7, 2014, 3:13:50 AM

    A police officer walks past a barricaded area occupied by demonstrators in the Causeway Bay area of Hong Kong, China, on Oct. 7, 2014. Photographer: Tomohiro Ohsumi/Bloomberg

    Hong Kong’s protest leaders held a second round of talks with government officials, easing tensions in the streets as the city began to assess the impact of almost two weeks of demonstrations.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  52. From Bloomberg, Oct 7, 2014, 12:56:16 PM

    Oct. 7 (Bloomberg) — BlackRock’s Ewen Cameron Watt talks with Guy Johnson about the state of the European economy, the impact of European Central Bank policy and how global economic risks shape investment strategies. He speaks on “The Pulse.”

    U.S. and European stocks fell with
    oil as the International Monetary Fund cut its outlook for
    global growth and German industrial production plunged.
    Treasuries climbed with gold futures.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  53. From Bloomberg, Oct 7, 2014, 11:08:30 AM

    Wal-Mart Stores Inc., the world’s largest retailer, plans to stop offering health benefits to U.S. employees who work less than 30 hours a week. The change affects about 30,000 workers. Photographer: David Paul Morris/Bloomberg

    Wal-Mart Stores Inc. (WMT), the world’s
    largest retailer, plans to stop offering health benefits to U.S.
    employees who work less than 30 hours a week, becoming the
    latest company to cut coverage in response to the Obamacare law.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  54. From Bloomberg, Oct 7, 2014, 9:49:55 AM

    President Vladimir Putin is suffering the consequences for shaking up the post-Cold War order in eastern Europe as the U.S. and European Union impose sanctions on his economy and investors pull money out of the country. Photographer: Andrey Rudakov/Bloomberg

    Russia’s central bank spent as much as $1.75 billion to prop up the ruble over the last two trading days, its biggest market intervention since President Vladimir Putin’s incursion into Ukraine in March.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  55. From Bloomberg, Oct 7, 2014, 11:37:42 AM

    Job openings in the U.S. climbed to a 13-year high in August as employers gained confidence about the outlook for demand in the world’s biggest economy.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  56. From Bloomberg, Oct 7, 2014, 11:56:49 AM

    Scientist Shuji Nakamura demonstrates a blue laser diode in Santa Barbara, California. Nakamura, Isamu Akasaki and Hiroshi Amano were awarded the 2014 Nobel Prize in Physics for “the invention of efficient blue light-emitting diodes which has enabled bright and energy-saving white-light sources,” the Royal Swedish Academy of Sciences in Stockholm says in statement. Photographer: Rod Rolle/Getty Images

    Three Japan-born scientists won the Nobel Prize in Physics for inventing energy-saving LED lights, which have upended a multibillion-dollar industry while offering the promise of lighting to people living far from an electricity grid.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  57. From Bloomberg, Oct 7, 2014, 11:34:31 AM

    Deutsche Bank AG is exploring the
    sale of about $2 billion of U.S. commercial real estate loans,
    according to a person with knowledge of the matter.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  58. Today is what you call a full fledged bull trap in GPRO, love it.

  59. GTAT / PHIL: Hello phil hope all is well

    i had sold 10 JAN 16 $12 P for $4 (now $10.85)

    yesturday i bought 1000 stock for .91 (now $1.66)

    and sold -20 OCT2 14 $3 P (weekly) for $1.98  (now $1.45)

    so made back $2700 since yesturday but still a $1000 loss. should i close it out and count my lucky stars or wait ?


    what would you do ?




  60. Watch this video at

    Fed Is Sounding Increasingly Hawkish: Marinov

    Oct. 6 (Bloomberg) — Citigroup Chief of G10 Fx Strategy Valentin Marinov discusses worldwide central bank policies, the global economic outlook and his subsequent investing strategy . He speaks with Jonathan Ferro on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

    Sent from the Bloomberg iPad application. Download the free application at

  61. From Bloomberg, Oct 6, 2014, 11:56:16 PM, the crowd-funded Super PAC launched by Larry Lessig to back “anti-corruption,” and pro-campaign finance reform candidates is beginning a $1 million ad buy in South Dakota’s heretofore sleepy Senate race. It’s on behalf of Rick Weiland, the Democratic candidate and two-time loser of statewide races who, up until now, has been considered an afterthought. Here’s the ad, which will start appearing on airwaves today:

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  62. From Bloomberg, Oct 7, 2014, 11:48:25 AM

    Builders in Phoenix and areas from Sacramento, California, to Orlando, Florida, are sweetening offers as sales slow in some of the country’s most volatile housing markets. Photographer: Joshua Lott/Bloomberg

    Joseph Beben wasn’t in the market for a house until he heard about a year-old community in suburban Phoenix where 10 homebuilders are offering buyers incentives such as swimming pools, built-in barbecues and subsidized mortgage rates.

    To read the entire article, go to

    Sent from the Bloomberg iPad application. Download the free application at

  63. GTAT / PHILL; thats $2000 loss in my small humbl;e portfolio

  64. Rj-jarboe – This pretty well sums up what I think about XCO.  The fact that Ross, Marks, and Watsa have more than $500 million invested at prices north of $5 gives me a lot of comfort.  Doesn't mean that they can't cut bait, but these are value managers.  All three invest in distressed companies.  I continue to believe that selling the Jan 16 $3 puts (now over $1) is a good play.  We'll see.


    October 3rd, 2014 at 10:21 am | Permalink Tweet thisIgnore this user 
    XCO hedges took away some upside, but also took away some downside.  The downside is all I care about as I have been selling the Jan 16 $3 puts at an average of .60.  I also draw some solace from the fact that three of the best value managers in the world own more than 40% of the stock.  They are Wilbur Ross (18.74%), Howard Marks of Oaktree Capital (16.56%), and Prem Watsa of Fairfax Financial (6.43%).  Their average cost is well above $5.  So the stock might not have much upside, but I feel good about my $2.40 entry price.

  65. GTAT – Today's move up is probably the combination of significant buying by those who were short and just made a killing and those buying on speculation (buying from those who have given up and see the bounce today as a "last chance" to get something back)….imho

  66. RGR – might turn out to be a good year after all.. "Gun sales are set to match their 2013 run rate of 21 million units this year.  Through 8 months, the FBI has run some 13.8 million instant background checks for gun stores with Federal Firearms Licenses as well as pistol permit renewals in select states.  That works out to about 21 million background checks by December 2014.  For reference, the pre-Financial Crisis counts were more like 8 million annually."

  67. GTAT:


    Reading the Chapter 11 petition this call my attention

    I can´t paste the paragraph, but it seems that  one of two:

    1. GTAT passed Apple patents or know how to competitors

    2. It´s a difference in what is propietary from Apple anfd what of GTAT for use in other lines of businesses or clients..

    But reading it it seems ( for me at least) that problem is focused to Apple somehow.


    consumer applications including, medical devices, dental, oil and gas, watch crystals, andspecialty optical applications such as low absorption optical sapphire for advanced optics andtitanium-doped sapphire material for high power lasers.18.


    As a result of a series of transactions with a key customer in 2013, the GTATGroup’s sapphire business model shifted from being primarily an equipment manufacturer toalso being a sapphire materials manufacturer. GTAT also continues to market and sell ASFfurnaces to current and new customers for applications not prohibited under the agreementsentered into in 2013 with a key customer. All of the components and assemblies for ASFfurnaces sold to customers are manufactured by third party vendors using GTAT’s designs.These components are shipped to GTAT where they are crated for ultimate shipment to ASFequipment customers. GTAT’s service personnel focus on final assembly, integration andtesting of the ASF furnace at the customer s

  68. If that is so then there is a lawyers problem with Apple, and a loss of contract, it seems the GTAT people has been playing poker with the gun in the table.

  69. Market is discounting 93%  company value the cost of litigation.

  70. Phil / question


    Is any GLW   interesting thing, I can´t find a good one.

  71. GTAT is undervalued because there was a existing activity before Apple that is discounted to almost zero value. Problem is if the remaining value after Apple litigation could be $4 dollars and when.

  72. GPRO is like a scary broken slot machine.  You think you're going to lose money then bam, payout.

  73. phil.

    props on the damage control yesterday….i looked at the whack of the gtat filing and was agitated to say the least……then i read your trade i.e. rolling my ten put to 4 x the 3 put and it looked like a good risk/reward to salvage part / of the ten dollars……….only time will tell but again props for the work around….

    didnt have the stones to buy more as i remember you saying sometime its good to get out with smaller loss or even………

  74. Rustle123 – Never a dull moment, for sure. ;-)

  75. advill 

    Do you know this company

    Biosurfit is a Lisbon-based biotechnology company 

    This company looks interesting, there product Spinit would have big market or they would get brought out


  76. BTU is being bludgeoned again today.  No bottom in sight for this stock, much to my chagrin.

  77. Does anyone have any suggestions for hedging these cyclical stocks (XCO, BTU, CLF, ABX, RIG, SLW)?  I'm clearly a little too heavy in this sector.  I'm wondering if there is a ultra short etf that I should be using to hedge them a little.

  78. Shorting GPRO now.  Oct 90/85 BPS.  2.05 debit.

  79. Can anyone tell me what our most recent hedge using SQQQ was?

  80. Resource/Palo – might be a bit too late for that? Though it seems they just keep. going. down. If you are still in them it is because you believe in them, right?  Seems to me, the decision is to "hold."  "buy more," or "sell half."  Though very tempted to sell off in sixths, these levels really almost scream "buy," I'm not going to buy more until I see them stop going down, so for now, am just holding these dogs.
    Can gold and silver and coal miners really get any cheaper? (yes).  :-(
    BTU is half of the year's high, 1/3 the 2 year high, and 1/7th the 5 year high. I've recently closed half my short calls on BTU. 

  81. scottmi:  Europe is tipping into deflation, and it won't be over soon if it does.  Materials are toast for now, my guess.  Gold may be some kind of panic-driven exception, but coal?

  82. Deflation/Zero – yes, that has me very concerned. more years of dead money with these?  Rawhide strategy is getting very old.

  83. There goes 1080 on the Russel.  

  84. Scott/Zero – But is the current price sustainable?  Most of these names are down because the commodity price is down, Iron, Coal, Oil, gold, silver etc.  Won't all of the producers cut back production because they can't make money at this depressed price, and the larger better capitalized ones will be able to weather the storm, and then come back much stronger once demand improves?  I think that is what Phil would probably say. 

  85. palotay:  ""Markets can remain irrational a lot longer than you and I can remain solvent."  J.M. Keynes

  86. Piper Jaffrey who just upgraded GPRO with a 90 PT last Tuesday, just downgraded them to a neutral.

  87. A statistical curiosity.  The NASDAQ, S&P, Dow and Russell seem to be moving very much in tandem — today they dropped 1.6, 1.56, 1.58 and 1.68, eg.  But looking at this longer-term chart of the four indices, the NAS has outpaced the other three by as much as 40-50% since the beginning of 2012.  If the markets are indeed toppy, as Phil [I believe] has been suggesting all year, shouldn't a long/short based on this discrepancy work?  In recent selloffs, I haven't noticed any such tendency.  Inquiring minds….

  88. Here is the best info available on coal (but its from the government so take it with a grain of salt).  It supports BTU's statements that coal demand in India is rising, and pricing is solidifying across the US.

  89. Well I for one had a real rough day.  I don't know about you guys.  Portfolio was down about 2.3%.  I have heavy TZA, DXD and SQQQ hedges, which prevented an additional 1.2% haircut.  I'm assuming the major damage was from the rising VIX hurting all the premium I have sold.  Not to mention the relentless weakness in the cyclicals.  GM and F didn't help either.  

  90. Qcmike  /   Surfit;


    Let me see what I found, my daughter is a PhD. candidate in human molecular biology and perhaps can tell me something not of the company but about the logic of the scientific fundamentals.

    Will post you.


    Will tell you 

  91. Palotay – one of the things I always find useful is a sober look at each position – considering the intrinsic values of each. When volatility expands, you are seeing losses in your account which are not realized until you close the position out. If you can look at the positions with this perspective, it will keep you from panic sales. That said, every day I consider how much cash I have, and is it enough. Stocks are of some value at these times, but cash … indispensable.

  92. This article provides a good look at what's happening to cause iron ore prices to collapse.

  93. CLF bonds cut to junk.  Borrowing costs are going up.  Incidentally, that 11.1 % yield quoted must be  yield to maturity, not current yield.


    Standard & Poor’s cut to junk its rating on Cliffs Natural Resources Inc. (CLF), the largest U.S. iron ore miner, after the commodity tumbled about 40 percent in 2014.

    S&P lowered its rating three steps to BB- from BBB- with a negative outlook, it said in a statement today.

    Cliffs shares fell 5.8 percent to $7.77 in New York, the lowest since 2004. The Cleveland-based company’s $500 million of 3.95 percent bonds due January 2018 dropped 4 cents to 81.5 cents on the dollar at 12:14 p.m., the lowest on record, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities yield 11.1 percent.

  94. I know very little about GPro as a product, and even less about their finances — playing hot companies is not part of my setup.  But I received an email from Guitar Magazine with an ad for a GPro Music-thingy,  and it's really quite innovative.  P/E ratio may be absurd, but as J.M. Keynes points out, above, maybe it's not such a good short.

  95. Palotay – right about 2% here too. and started positive about the same. frustrating. yes, the constant erosion on the resource stocks, and the vix rising causes ridiculous swings in some of the option pricing.  Take TASR for example. I have an in-the-money vertical bull call spread, and it regularly swings from up a few hundred dollars one day, to down a few hundred the next.. and the stock maybe moved a nickel, with no correlation with direction--just fluctuations in the pricing.  

  96. Deano – Thanks for the info.  I am doing the same thing.  I also find solace by doing a portfolio analysis within TOS.  It has a handy feature for showing how your portfolio will look in the future, based on beta weighting and premium decay.  If all my positions are at this price at the end of the year (fat chance), my portfolio will be up close to 14% from these levels.  Due to premium decay.  So as long as that is looking ok, I'm going to try not to worry too much.  

  97. NYSE now joining the Russell at making lower lows! Other indices still above their August lows. For now!

  98. Holy cow, what did you guys do???

    It's like my kids – I leave the room for 5 minutes and everything is suddenly chaos!  

    I'll catch up later but… damn!  

  99. Jobs still coming back:

    The Job Openings and Labor Market Turnover Survey (JOLTS) released today by the Bureau of Labor Statistics suggests that demand for labor continues to grow, confirming the strong payrolls growth reported last week in the Employment Situation Report.  While wages are still flat (average hourly earnings were flat month-over-month for September), demand for labor is very strong, as shown by the job openings rate.  Employers have more unfilled positions now than ever, and after adjusting for labor force growth, the rate is as low as it has been since 2001.

  100. ALL: This month has been pretty ugly with my having to close out of positions which have hit their stops. I harvested some profits but the net is a loss of $26k. That said, on my $500K portfolio, my profits on closed positions is $182K. I think there will be more pain but with hard stops profits will hit the 20 % target at minimum.

  101. IHS4GOD – Were you doing a put selling strategy?  Or doing the typical PSW buy-writes? 

  102. GTAT- Almost every analysis I read says that the action today is all those 55 million short sellers covering and taking their gains. They go on to say that in these scenarios it is nearly inevitable that the restructuring will wipe out any equity for stockholders prior to BK, and advises to get out and take whatever can be gotten in the next day or two before all of this short covering is finished and shares become worthless. Since I have never been in a situation like this, I would like to know if that makes sense and what others think. I am holding some $10 calls and sold some $12 puts. How do I minimize the damage at this point? From everything I have been reading also it seems management of this company is not to be trusted, which leads me to wonder how I ever got into this one with all the red flags that were being flown. 

  103. craigsa620,  I'm taking my licks and moving on before someone decides to put their shares to me.  I don't know exactly how that works  but I believe ( not sure ) that if you own the puts you can exercise them at any time.  My puts are sold Jan 2016's and I am not waiting around till then to see what happens.   Just my thoughts.  If anyone has something to add to the discussion , please chime in.

  104. Grant – I hope also applies to our resource sector: 

    "I think that ‘safety’ is not inherent to any asset – rather, ‘safety’ is a function in large part of valuation."

  105. Grant – the rest of the pertinent bit: "Towards the tail end of the great bond bear market of 1946 to 1981, people were fed up with fixed-income securities. They only seemed to go down in price –investors were always disappointed. They slapped various labels of scorn on the entire asset class. "

  106. from TMQ on ESPN on Thomas. Piketty's new book

    "Framing the Guilty in Political Debate: The latest job data — unemployment below six percent for the first time since the 2008 recession began — is fantastically good. The latest on inequality continues to be bad.

    [+] Enlarge

    Justin Sullivan/Getty ImagesRising income inequality is all too real, but so are lower taxes and higher benefits for most people.


    Last week this chart generated a lot of economics buzz — there is such a thing — by showing the recent extreme shift of income growth to the top 10 percent. Last week Ben Casselman of FiveThirtyEight showed that even adjusting for declining household size, median income peaked in 1999 and has gone down somewhat since. Still not convinced? Most post-recession gains in household net worth are caused by rising values of stocks, which are held mainly by the top quintile; this analysis shows most post-recession income gains have gone not just to the top decile but to the top one percent.


    Elsewhere, this column proposes that the worst aspect of the U.S. economy is socialized cost but privatized profit; ever more, inequality is the second-worst aspect. (Job creation and rising standards of living for almost everyone are the best aspects.) Higher top-rate federal income taxes — asking those most rewarded by current economic trends to give back more — seem justified.


    Inequality is likely to be a major theme of the 2016 presidential contest, and that means we're all going to keep hearing about Thomas Piketty's new book, "Capital in the 21st Century." Social critic Mickey Kaus memorably said that intellectuals sometimes engage in "framing the guilty." On inequality, "Capital in the 21st Century" frames the guilty. Piketty is right that CEOs are overpaid, that the system is rigged by, and for, the rich and that U.S. law favors capital over labor when it should be the other way around. But he uses such phony reasoning that in every way except sales, the book is a huge disappointment.


    Piketty's claims — both in his book and in elaborate stats he and partner Emmanuel Saez offered in Science magazine — concern pretax income. This, he says, is the "simplest and most powerful measure" of inequality.


    But income minus taxes plus transfers (government benefits) is the number that matters to people's lives. There, the indicators are declining federal taxes on average people coupled to rising state and federal taxes at the top, plus rising benefits for average people. Since the full calculation does not show an inequality emergency, Piketty ignores tax rates and benefits. A thesis is certainly "most powerful" if you pretend there is no counterevidence!


    Harvard economist Martin Feldstein — a conservative, but one who tirelessly advances the notion that poverty is the great fault of the American way — has slam-dunked Piketty's ignoring of tax cuts for the middle class. The Vox and FiveThirtyEight analyses above, insightful as they are, also concern only pretax income, not the far more important income minus taxes plus benefits calculation.


    Gary Burtless of the Brookings Institution, the country's leading center-left think tank, has shown how Piketty's larger argument simply ignores any counterevidence. Burtless notes that while pretax income inequality is the highest since the Roaring '20s, "Progressive income taxes and government redistribution [benefits] are far more important in determining Americans' real incomes today." Adjusting for tax cuts for the middle and working class, for benefit increases and for smaller households, Burtless — among the few truly original thinkers in Washington, D.C. — finds that since 1980, "Americans in the bottom one-fifth of the distribution saw their real net incomes climb by almost 50 percent [while] those in the middle fifth saw real net incomes grow 36 percent."


    [+] Enlarge

    AP Photo/Janerik HenrikssonThomas Piketty, an economics expert who hasn't heard of government benefits.

    And what about purchasing power — after-tax income compared to prices? Here, economic trends (especially lower costs for electronics and energy) favor average people, so Piketty and many others ignore purchasing power. Since the 2009 trough of the recession, disposable personal income is up around five percent — see the chart on page 119. A five percent increase in the purchasing power of your dollar is like a seven percent increase in your pretax income.


    The three tax cuts under George W. Bush and Barack Obama have nearly eliminated federal income taxes on close to half the U.S. population (Mitt Romney's "47 percent"), while federal benefits are steadily rising in many categories. That is to say average people are paying less for federal government while getting more from it — an anti-inequality trend that doesn't fit Piketty's analysis, so he ignores it. He also averts his eyes from the arrival of Obamacare, which will transfer many billions of dollars per year downward from the top decile. New Obamacare benefits for the average person, funded by new taxes on the affluent, have already reduced overall inequality, as Zachary Goldfarb demonstrates.


    But Obamacare is a benefit, and, in the Thomas Piketty universe, benefits don't exist. And that's setting aside that the ultra-sharp Neil Irwin believes a lot of Piketty's data are wrong, especially Piketty's mysterious "adjustments" that cause marching columns of numbers to reach the desired conclusions.


    Even as the income-minus-taxes-plus-benefits situation improves for most Americans, by taking into account only pretax income, Piketty will be able to say that inequality grows worse. Any 2016 presidential candidate who cites him as an authority will be citing someone whose work borders on intellectually dishonest."


  107. sorry about the length, it was in the middle of of a football blog

  108. Good morning!  (almost)

    Asia not down too badly, Nikkei off 1.5%, Hang Seng down 0.7%, Shanghai up 0.25%, India down 1% and Singapore down 0.5%.  WSJ is blaming Europe for the whole thing:

    Our Futures are flattish on the green side.  

    GTAT/Micro – Well I sure would have taken the 50% off the table on the stock!  Net down $1,000 after selling 10 $12 puts for $4 was a fantastic recovery, why chance it.  You can always reload AFTER you cash out.  They have $1 and $1.50 and $2 calls now – you can buy the stock for $1.21 and sell the 2016 $1 calls for 0.75 and net 0.46 to risk $1,000 on 2,000 to make your last $1,000 back at $1.  

    XCO/Albo, RJ – I agree, worth sticking with.  

    Oil $87.91, by the way. Almost at goaaaaaaaaaaaalllllllllllllllll!  

    MCD/ZZ – They are certainly falling out of favor.  I stopped at a highway MCD on the way to a meeting and I thought I must have had my time mixed up because I thought it was 12:15 but there wasn't a single customer in line.  That was really strange.  My kids don't usually care what things cost but mention McDonald's to them and their friends and they say "they don't even have a Dollar Menu anymore" – big missteps but not a company I want to bet against.  


    GLW/Advill – You would think, with GTAT almost out of the running, that GLW would fly.  We added them to the STP yesterday:

    October 6th, 2014 at 2:51 pm | (Unlocked) | Permalink

    Meanwhile, GLW anyone?  Their main competitor just went bust.  At $19.18, the Jan $18/20 bull call spread is $1.07 and the short $18 puts can be sold for 0.50 for net 0.57 on the $2 spread.  I'm for doing 20 of those in the STP ($1,140) in the hopes of winning some of that GTAT money back ($4,000 if all goes well).  

    0.50 cheaper today!  

    GTAT/Mill – Fantastic job adjusting.  I like it because now, even a cheap buy-out can help us a lot.  

    Cyclicals/Palotay – Well, I would have said short oil but a bit late on that.  In fact, we were very short oil and so we started buying into the cyclicals to hedge.  You could play gold or copper down or OIH would hedge your XCO, BTU and RIG nicely but really it's an S&P or Dow hedge that works just as well (back to DXD).

    SQQQ/Jeff – In the STP, we picked up 30 of the Nov $35/45 bull call spreads last Thursday for net $2.55 and Friday we added 50 straight Oct $24 DXD calls at 0.60 (now $1.20)

    Sustainable/Palotay – That's right but keep in mind that this can take many months, maybe years to play out.  The mistake most people make is expecting some sort of definitive bottom and a quick turn.  If you want that, just wait until they do actually start shutting down mines – you may still be 6 months away from working off a glut.  

  109. And what ZZ said.  

    Long/short/ZZ – Why play neutral when just short is so easy?

    2.3%/Palotay – Not too terrible considering the market sell-off and the leverage you have.  As I said earlier today, the trick is to add more DXD or whatever when you see a significant line (like 1,080) break down.  You can just play then like momentum, you don't have to make a long-term commitment to a hedge.  

    Iron ore/Albo – The question is, how long can they keep it up (down)?  

    CLF/Albo – That's annoying. 

    Nice job IHS.  I regret not cashing out last week – so much neater than riding it down.  

    GTAT/Craigs – I agree that it's safer to get out.  If I were here when they hit $1.80, I sure would have taken that and ran.  

    Good summary Doro. Fine after hours.  

    Corn/Scott – That really bounced back lately.  

  110. From Bloomberg, Oct 8, 2014, 3:33:06 AM

    European stocks fell, extending a
    seven-week low, as investors awaited minutes from the Federal
    ’s last meeting. U.S. index futures rose, while Asian
    shares declined.

    To read the entire article, go to

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  111. From Bloomberg, Oct 7, 2014, 7:00:01 PM

    Concern that Sears Holdings Corp. (SHLD) is
    running out of ways to halt a sales slump has driven bearish
    bets on the unprofitable retailer to a record.

    To read the entire article, go to

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  112. From Bloomberg, Oct 8, 2014, 4:00:28 AM

    The U.S. shale boom is producing
    record amounts of new oil as demand weakens, pushing prices down
    toward levels that threaten to reduce future drilling.

    To read the entire article, go to

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  113. From Bloomberg, Oct 8, 2014, 3:15:40 AM

    Oct. 7 (Bloomberg) — Olivier Blanchard, chief economist of the International Monetary Fund, speaks about the outlook for the global economy.
    The IMF’s Rupa Duttagupta, Thomas Helbling and Gian Maria Milesi-Ferretti also speak at the news conference in Washington. (Video courtesy of IMF. Source: Bloomberg)

    Stocks fell in Europe and Asia (MXAP) and
    oil slumped amid concern that the global economic outlook is
    worsening. Treasuries fell and Standard & Poor’s 500 Index
    futures rose with the dollar before the Federal Reserve releases
    minutes of its last meeting.

    To read the entire article, go to

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  114. From Bloomberg, Oct 8, 2014, 2:02:16 AM

    Metal rods used to shape car door panels are pressed by hand on the production line at a plant in Geelong, Australia. “Labor market data have been unusually volatile of late,” RBA Governor Glenn Stevens said in yesterday’s statement. Photographer: Carla Gottgens/Bloomberg

    Australia’s record jobs growth in
    August was too good to believe.

    To read the entire article, go to

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  115. From Bloomberg, Oct 8, 2014, 2:19:16 AM

    Gold rose as the drop to this year’s
    low lured Chinese buyers returning from a weeklong break, while
    investors awaited minutes of the Federal Reserve’s last meeting.
    Platinum extended a rally from a five-year low.

    To read the entire article, go to

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  116. From Bloomberg, Oct 8, 2014, 12:01:00 AM

    Texas Health Presbyterian Hospital Dallas on Sept. 30 in Dallas. Photographer: Mike Stone/Getty Images

    Caring for Thomas Eric Duncan, the Dallas Ebola patient, may cost as much as half a million dollars, a bill that his hospital is unlikely to ever collect.

    To read the entire article, go to

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  117. From Bloomberg, Oct 7, 2014, 11:40:46 PM

    U.S. prosecutors are pressing to
    bring charges against a bank for currency-rate rigging by the
    end of the year, and actions against individuals will probably
    follow in 2015, according to people familiar with the probe.

    To read the entire article, go to

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  118. From Bloomberg, Oct 7, 2014, 7:01:01 PM

    Oct. 8 (Bloomberg) — Seventeen years after their first jobs summit European Union leaders are divided on how to create employment and a fifth of young people are still out of work.
    Marcella Panucci, director-general of Italy’s employers’ lobby Confindustria, told Bloomberg’s Flavia Rotondi that reforms are needed in Italy. Mark Barton, Anna Edwards and Manus Cranny also appear in this report from Bloomberg Television’s “Countdown.” (Source: Bloomberg)

    Seventeen years after their first jobs summit European Union leaders are divided on how to create employment and a fifth of young people are still out of work.

    To read the entire article, go to

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  119. From Bloomberg, Oct 7, 2014, 6:18:39 PM

    Oct. 7 (Bloomberg) — Olivier Blanchard, chief economist of the International Monetary Fund, speaks about the outlook for the global economy.
    The IMF’s Rupa Duttagupta, Thomas Helbling and Gian Maria Milesi-Ferretti also speak at the news conference in Washington. (Video courtesy of IMF. Source: Bloomberg)

    Everyone has an opinion on the stock
    market nowadays.

    To read the entire article, go to

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  120. Watch this video at

    China Expects Heavy Casualties From Earthquake

    China said it’s expecting “great casualties and heavy losses” from a strong earthquake that shook Yunnan province in the nation’s southwest, with the toll now given as 1 dead and 38 injured.

    Sent from the Bloomberg iPad application. Download the free application at

  121. From Bloomberg, Oct 8, 2014, 4:19:02 AM

    Elvira Nabiullina, chairman of Russia’s central bank, sits and listens during the VTB Capital Investment Forum “Russia Calling” in Moscow, Russia, on Oct. 2, 2014. Photographer: Andrey Rudakov/Bloomberg

    Russia’s central bank sold $420
    million of foreign currency in its third day of interventions
    this month to slow the ruble’s world-beating decline.

    To read the entire article, go to

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  122. From Bloomberg, Oct 7, 2014, 4:52:55 PM

    Oct. 7 (Bloomberg) — Olivier Blanchard, chief economist of the International Monetary Fund, speaks about the outlook for the global economy.
    The IMF’s Rupa Duttagupta, Thomas Helbling and Gian Maria Milesi-Ferretti also speak at the news conference in Washington. (Video courtesy of IMF. Source: Bloomberg)

    U.S. stocks declined, with the Standard & Poor’s 500 Index slumping to an eight-week low, as the International Monetary Fund cut it growth forecast and warned of “frothy” equities amid signs of slowing growth in Europe.

    To read the entire article, go to

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  123. From Bloomberg, Oct 7, 2014, 11:19:23 PM

    Oct. 8 (Bloomberg) — Sam Le Cornu, senior portfolio manager at Macquarie Investment Management, talks about investment strategy for China and South Korea stocks.
    He speaks in Hong Kong with Angie Lau on Bloomberg Television’s “Asia Edge.” (Source: Bloomberg)

    As Hong Kong protesters were blocking roads and forcing shops to close, a record number of Chinese tourists were occupying the streets of Macau.

    To read the entire article, go to

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  124. From Bloomberg, Oct 8, 2014, 1:28:50 AM

    People shop for gold at a jewelry store in Beijing. Consumer demand in China rose to a record 1,065.8 metric tons last year, or 28 percent of global use, and may climb to at least 1,350 tons by 2017, the World Gold Council estimates. Photographer: Stefen Chow/Bloomberg

    Gold and iron ore will extend losses
    into 2015 as the dollar’s strength hurts bullion and a global
    glut pushes down the raw material used to make steel, Morgan
    Stanley said, listing the two as its least preferred metals.

    To read the entire article, go to

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  125. From Bloomberg, Oct 7, 2014, 4:56:14 PM

    Aerial view of the Manhattan skyline at night, looking southeast down Fifth Avenue, from the RCA Building Rockefeller Center, New York City. (Photo by Lawrence Thornton/Getty Images)

    As the sun set over Central Park on Monday night, a parade of black town cars arrived at 834 Fifth Avenue, depositing well-heeled Republican donors in front of the Upper East Side apartment of Jets owner Woody Johnson. (Real estate side note: The 14-room, 5.5-bath duplex—site of many a GOP fundraiser over the years—is currently listed for $75 million—cash only—and features an “elegant curved staircase” that spans floors 11 and 12 of the illustrious co-op. Have at it!)

    To read the entire article, go to

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  126. From Bloomberg, Oct 7, 2014, 12:38:54 PM

    Oct. 7 (Bloomberg) — Warren Buffett, the billionaire
    chairman of Berkshire Hathaway Inc., said he thinks Hillary
    Clinton will be the next U.S. president.

    To read the entire article, go to

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  127. From Bloomberg, Oct 8, 2014, 4:23:18 AM

    Workers sort through green robusta coffee beans for defects that cannot be removed mechanically in Ho Chi Minh City, Vietnam. Photographer: Jeff Holt/Bloomberg

    Coffee growers in Vietnam, the
    biggest producer of robusta beans used by Nestle SA, are set to
    reap an almost record harvest, helping to ease a global
    shortage. Futures fell the most in about two weeks.

    To read the entire article, go to

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  128. From Bloomberg, Oct 7, 2014, 4:00:00 AM

    A study reported today in the journal Molecular Psychiatry found six genetic variants associated with coffee drinking. Photographer: Simon Dawson/Bloomberg

    Whether coffee makes a person anxious
    or helps boost their memory may come down to their DNA,
    according to research that suggests further studies on caffeine
    should be customized to a person’s genetic profile.

    To read the entire article, go to

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  129. From Bloomberg, Oct 8, 2014, 2:32:51 AM

    Thailand’s government is trying to
    bolster a struggling economy that is at risk of trailing its
    peers with a stimulus package that analysts say is insufficient
    to counter the damage from falling exports and weakening
    domestic demand.

    To read the entire article, go to

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  130. From Bloomberg, Oct 8, 2014, 4:20:39 AM

    Oct. 8 (Bloomberg) — Robert Feldman, head of Japan economic research at Morgan Stanley MUFG Securities Co. in Tokyo, talks about the nation’s economy, government policies and the yen.
    He speaks with John Dawson on Bloomberg Television’s “On the Move.” (Source: Bloomberg)

    Japanese lawmakers are flagging the
    need for discussion of an exit strategy to a monetary policy
    program that’s driving the yen lower and hurting parts of the

    To read the entire article, go to

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  131. From Bloomberg, Oct 7, 2014, 6:01:00 PM

    Oct. 8 (Bloomberg) — Seventeen years after their first jobs summit European Union leaders are divided on how to create employment and a fifth of young people are still out of work.
    Marcella Panucci, director-general of Italy’s employers’ lobby Confindustria, told Bloomberg’s Flavia Rotondi that reforms are needed in Italy. Mark Barton, Anna Edwards and Manus Cranny also appear in this report from Bloomberg Television’s “Countdown.” (Source: Bloomberg)

    Chancellor Angela Merkel’s government
    is flirting with measures to stimulate growth, reviewing its
    options amid evidence that Europe’s largest economy risks
    plunging into recession.

    To read the entire article, go to

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  132. From Bloomberg, Oct 8, 2014, 12:00:01 AM

    Most times when the dollar
    appreciates, the National Association of Manufacturers is quick
    to express its concern that a stronger currency will hurt
    exports. Now, it’s more worried about the state of the world

    To read the entire article, go to

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  133. From Bloomberg, Oct 7, 2014, 11:37:06 PM

    A customer selects processed meats hanging in a cabinet inside a store in Moscow, Russia. The surge in food prices accelerated after Putin placed a ban in August on some imports from the U.S. and Europe in retaliation for the economic sanctions against Russia. Photographer: Andrey Rudakov/Bloomberg

    There are many ways to measure the deepening financial crisis spreading across Russia. The ruble is sinking more than any other currency in the world, policy makers have burnt through some $55 billion of foreign reserves and the economy is teetering toward recession.

    To read the entire article, go to

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  134. From Bloomberg, Oct 7, 2014, 7:01:00 PM

    Belgian negotiators formed a four-party government, the first without Socialists in 26 years, and
    agreed to push back its main European Union budget target by two
    years to cut Europe’s highest labor taxes.

    To read the entire article, go to

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  135. From Bloomberg, Oct 7, 2014, 4:15:01 PM

    If only the spreadsheet the court wanted was here.

    Class action lawsuits are big business. The U.S. Chamber of Commerce — admittedly, not the most objective source — estimates that securities class actions alone cost shareholders $39 billion a year. When you add in all other class actions — for accidents, accounting errors, you name it — you can understand why potential corporate defendants as well as plaintiffs’ lawyers fight tooth and nail over every inch of the legal terrain. When the U.S. Supreme Court takes up an important question of how these class actions will proceed, as it is doing in the case of Dart Cherokee Basin Operating Company LLC v. Owens, it’s worth taking notice of what the court is doing — and why.

    To read the entire article, go to

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  136. From Bloomberg, Oct 7, 2014, 9:10:28 PM

    Confucius Institutes should be harmless.

    (Corrects month of Toronto District School Board Decision.)

    To read the entire article, go to

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  137. From Bloomberg, Oct 7, 2014, 2:47:19 PM

    Shopping, minus the dropping.

    If anyone was unaware of the challenges facing the global economy, the International Monetary Fund lays them out well in a new report. The extraordinary stimulus efforts of some of the world’s largest central banks haven’t been enough to produce a healthy global recovery and could be setting the stage for another financial disaster.

    To read the entire article, go to

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  138. SPY 5 MINUTEGood morning!  

    The downtrend continues, unfortunately.  Asia finished mainly down except Shanghai (the most manipulated), which was up 0.8% on their first day back in a week.  Nikkei down 1.2%, Hang Seng down 0.7% despite protests winding down, India down 0.37% and Singapore down 0.5%.

    Here Are All The Reasons People Think There's Something Big Happening In North Korea

    Europe tried to rally but all red now with FTSE down 0.6%, DAX – 0.9%, CAC -0.4%, Italy flat and Spain down 0.15%.     

    Bundesbank’s Weidmann Criticizes ECB’s Stimulus MeasuresWeidmann Warns That ECB Policy Risks Being ‘Held Hostage’ by Politics. German Bundesbank President Jens Weidmann criticized the European Central Bank’s decision to buy private-sector bonds and chastised France for budgetary laxness, taking a hard line against new stimulus just before high-level International Monetary Fund meetings. Mr. Weidmann’s comments, in an interview with The Wall Street Journal, expose some of the deep rifts that have plagued the 18-member eurozone since its debt crisis erupted nearly five years ago. While France and Italy, struggling with stagnant…

    UN warns of pending 'massacres' as ISIS closes in on Syrian cityA UN official warned of pending "humanitarian tragedies" and pleaded desperately with the world to intervene on behalf of Kurds trapped in a Syrian city near the Turkish border, as Islamic State fighters stood on the brink of taking it. Kurds from villages throughout northern Syria have fled to Kobani for a final stand as the terrorist group has marauded across huge swaths of land, leaving a trail of death and destruction. With the city under siege for three weeks, the black-clad fighters have begun to raise their flag over neighborhoods and UN Special Envoy for Syria Staffan de Mistura said the city was about to fall.

    Turkey's President Warns That A Key Syrian Border Town Is 'About To Fall' To ISIS

    Hezbollah Just Took Credit For Attacking Israel For The First Time Since 2006

    Our Futures are down just a touch but /TF 1,069.9 is NOT GOOD.  Others are 16,636, 1,927 and 3,852 with the Dollar at 85.69, oil $87.79, gold $1,220, silver $17.45, copper $3.035, nat gas $3.90 and gasoline continues to die at $2.328.  

    The VIX popped to 17.20 yesterday.  Let's watch that as 17.57 was the top in Aug and 17.98 was the top last week and the last time before that over 18 was when we hit the 200 dma (now 1,903) early this year.  That's right, we're actually looking at the 200 dma on the S&P – below that, CASH!!! is your only friend!  

    Dudley Calls Forecast for Mid-2015 Rate Rise ‘Reasonable’Forecasts for the Federal Reserve to raise interest rates in mid-2015 are “reasonable” as policy makers wait for unemployment to fall further and inflation to rise, New York Fed President William C. Dudley said.

    The Fed’s Mortgage Favoritism by Jeffrey M. Lacker and John A. WeinbergWhen the central bank buys private assets, it distorts markets and undermines its claim to independence?

    Welcome To A 'New' New Normal Earnings Season

    The "Dash-For-Trash" Is Over, Goldman Flip-Flops

    Small Caps Slammed To 12 Month Lows; Russell Down Over 7% In 2014

    Student And Car Debt Exponential; Credit Card Debt Declines

    Looks like there's a crisis brewing and they are changing the rules:  Banks to change rules governing derivatives market -FTThe world's biggest banks have agreed to change rules that govern the $700 trillion derivatives market, the Financial Times reported on Tuesday. Eighteen banks, ranging from Credit Suisse Group AG to Goldman Sachs Group Inc, have agreed to give up the right to "close out" deals on derivatives contracts if a financial institution runs into trouble, the newspaper said, citing people familiar with the matter.

    Yum(YUM) profits, sales miss Street; Outlook disappoints. Yum Brands reported disappointing full-year guidance and quarterly results on Tuesday, sending shares lower in after-hours trading. The company said it expects full 2014 earnings growth of between 6 percent and 10 percent, versus Wall Street expectations of 14 percent.

    MUNSTER: Teens Aren't Interested In The Apple Watch







    Forgot about XLB – there is a materials ETF!  













    Dave's words, not mine!  Though, in a Recession, maybe.  









  139. Here we have a typical example of earning a div with a stock. I personally hold an amount of shares with T (AT&T) which have dropped just overnight by .46 cents / 1 shares in my portfolio. I actually lost my quarterly div due now being as well .46 per quarter. Nice to be a stockholder I would say.

    The stock has dropped to 34.87 and one ask the question shall I add some more shares or wait still before the storm sets in?

    Buying 100 shares will cost me 3487.00 expected to bring me 1.84 PA or 5.28%. Until I receive the full amount 1.84 I have to patiently wait for .46 each quarter!

    Let’s look at the other side of the coin.

    I sell 1 Jan16 35 put @ 3.95 would be the same as buying the stock for 31.05. The cash secured put would be: holding 3500.00 in a cash acc., should I get called. However my margin requirement on this transaction is in a PM account only 338.00, in my paper acc. it shows margin is 700.00 So however you will look at it.

     My return by selling the 35 put, I received over 463 days 3.95 and over 360 days 3.07 dollars per share (in this case per option (1/100) I am dividing my 3.07/ 360 cash already received  (not waiting over 4 quarters @ .46) Actually it works out to .77 cents per quarter.

    So on my 3500.00 cash holding in reserve in case being called at the strike price of 35, my return is 8.8% PA.

    On normal margin of 700$ it would show a return of 43.9% and on my PM margin of 338$, 90.8%.

    So my question to you is, : do I buy the stock at a cost of 3487.00 with a return of 184.00 PA

    Or put up 700$ on margin and receive 307.00, with the promise to buy the stock at 3500.00 if it stays below 3500$. Or even as it is now 3487.00 where I would have to spend 13$ more in the present situation, or 13$ in the money.

    There is one more thing to consider! Say Jan16 the stock would be 31.05 I would have for footed (lost) all my cash received now of 3.95 (35.00 – 3.95 = 31.05)

    In case I bought the stock at 34.87 – 2.37 ( div over 463 Days to Jan16) = 32.50.

    Now if the stock would be trading in Jan16 for 31.05 (my net cost on the option above) I would have lost on the stock purchase 1.45. 

  140. When the indexes are testing their 200 dmas, it's foolish to buy a stock that's above it's 200 dma.  They do all tend to flow the same way eventually.  The drop in T today is, of course, the dividend payout, it doesn't affect the overall value of the stock – it happens every Q but T isn't a growth stock by any stretch, just a solid, steady dividend payer.  

    For my own position plan, I generally prefer to start with a put sale because, of course, a stock might go down.  At the moment I'd sell the 2017 $30 puts for $2.95 for a net $27.05 entry and ordinary margin looks like $2.95 as well so 100% return on margin over 2 years and the dividend is $1.84 so I'm collecting 0.43 less than the dividend without all that messy owning the stock.  

    So wash, rinse, repeat on that strategy and, if they ever put it to me, then I sell puts and calls to cover.  For instance, if you had been assigned at $35 and T is now $34.87, you have the $1.84 dividend coming to you each year plus you can sell the 2017 $32 calls for $4.10 and the 2017 $28 puts for $2.10 and now you have a buy/write at $28.80/28.40 and you've already given yourself another 17.7% discount and you have $3.68 in dividends coming and that's another 12.7% and, if you get called away at $32, that's another 11%.

    Wash, rinse, repeat.  Unfortunately, in the Income Portfolio, we're only one year into this strategy but, if you can knock just 15% off your basis every two years, in 12 years you have free stock (that still pays a dividend).  

    This is a strategy, of course, for blue-chip investing.  If you aren't pretty certain you'll REALLY want to own the stock for 20 years – why start now?  

  141. Phil- On the strategy you are talking about above, you talk about getting shares at a discount, but in order for that to happen it assumes the stock price is dropping over that period of time. The discount is relative to the current price, right? Also you will need to have the cash on hand to pay for shares if you do get assigned, so that ties up a chunk of cash that has to be kept available earning next to nothing unless you plan on liquidating something in order to pay for the shares, in which case you have to hope the market isn't way down when that happens. In the example above, if the stock price goes up, won't the value of the calls you sold go down? I am having trouble understanding this example without knowing what exactly it looks like if the stock values go in different directions. You start with selling $30 puts, but if the value of the stock is $31 at expiration, you don't own the shares and you puts are worth less, so how do you make money in that scenario? I know I am missing something, so can you please use this example to really give us a full picture of how we make money using different scenarios of the stock value in Jan 2016 being $26, or $31, or $36? I think it will help many of us to really understand how your system works down the road under various outcomes? Perhaps after hours you could spend a bit of time on this. Thanks. I also don't quite get how we sell calls and puts to make money in the buy/write strategy? Every time I think I get it, I realize I don't quite understand what happens down the road and how we adjust under various scenarios. Any help will be appreciated to further explain all of this. I really wish I could be at the Vegas conference to ask these questions and see this expained in more than a paragraph. 

  142. To any one

     I have not seen any comments from Shadowfax lately. I hope he is doing well. I have seen quite a lot of comments on the bust of GTAT. I am as well one of the suckers which fell for the option play not the stock and lost 14K.

     However why I ask for Shadowfax as he was the one who pointed out BEFORE the crash that the stock had faults and should not be traded. But regretful I guess most blew his warning to the wind.

    Now looking at AAPL from a business point. What do they really have to offer, here again I could not fail seeing some warning signs of Shadowfax.

    Here in Germany they put out the new so called Handy here it was on one of the major TV stations and was compared to other mobile phones. Not very positive. The lady holding the phone in her hand complained that she now needed both hands to operate this larger Handy as her thumb could not reach to the other side of the phone!!!! This actually remained in my head.

    What has AAPL actually in their warehouse on armor? Two mobile phones and a wrist watch to fight the competition. Leaving out the laptops and Macs.

    Well the new great invention of a wrist watch, which possible can switch on your coffee machine, is already on the market by the competition, and is in jeopardy , as we now do not have a glass to cover the watch. Surely Rolex could have helped out with a better job, even that I not wear one, I am sure they have a good scratch resistant glass. Reading to the comments of the contract between AAPL and GTAT my tee boy could have done a better job. Surely from a manufacturing standpoint you make sure your supplier can produce what he promises.

    If my memory not fails it was one of our members , possible as well Shadowfax, who mention some F. up in the production line of GTAT, and by mistake they threw one of the sample away.

    Let us admit, in this case we have been running with the herd and not done our homework. It is always good to pull the thing to pieces before entering a trade and not run with the herd.

    My question is, comes mighty AAPL next? 

  143. Fun bull play on /TF over 1,070.  

  144. Yodi- I don't think you can compare GTAT to Apple in any way. The Iphone 6 is by all accounts a tremendous success, with huge numbers being sold everywhere. Also the Iphone is an incredible piece of equipment that even with a few glitches out performs the android rivals quite handily. It has more apps, less problems and just plain works! People who have owned the Apple products are almost universally satisfied and happy to own them and pay a premium for them. In China where there are 100's of cheaper competitors, the Iphone is still in demand in large numbers because a) it is a status symbol, and b) it works, as I said. Anyone under 40 has pretty much been raised using Apple products in their schools. Apple was very smart to supply their computers to school children since their early days, making for a generation of loyal customers who identify the brand as easier to use, reliable and most importantly,,,COOL! The Iwatch may not be a success out of the gate, but I am certain that like the Ipod it will somehow become a product that will need to be owned and it will be the wearable that defines the category. It may take a few years, but it will happen. Apple just continues to make money hand over fist and that is the bottom line.

  145. Craig,

    I am sorry you did not understand Phil's nor my example. Phil took the Jan17 lower strike price for less cash. I took the jan16 35 strike for more cash, as in detailed explained. Now if you like the stock and AT&T is nothing to sneeze at I felt the stock as pointed by Phil is still high most of them are, but by selling the put you get cash on hand now! by buying the stock you have to wait for the cash every quarter. 

    Selling the put in a reasonable acc. you do not pay out the cash in this case 3487$ but only 700$ worth of margins debited to your margin acc. If the stock drops you will lose, if bought the stock for the value of the stock, with the option you will only lose if you below the net option price see my example above!

    Making money on a BCS it normally cost you say you have a spread of 10$ I like to pay max 5$ and possible still sell a put to reduce the 5$ Now at the end of the contract you hope you collect the spread of 10$ – the 5$ you paid so you made 5$ it does not matter how high the stock will run as long as it is over callers strike price at exp. Did you sell a put as well this you can pocket as well.

    This is the so called tree planting process and requires patients like planting trees they do not grow overnight. To complement this type of play you can sell 1/2 monthly callers against the leap BCS 

    Trust this helps  

  146. Craig,

    I sincerely wish you are right, but I have my feeling about a sloppy job. Something smells funny, and I do not feel good about it

  147. Craig

    You are selling the $30 puts, so if the stock ended up at $31 the puts would expire worthless and you would get to keep the full $2.95 profit. Then you would sell a lower leap put and wait to see how that trade turned out. You would either keep getting the premium you sell each time or you would finally expire at a price below the put sale and be assigned the stock. From that point you start selling calls against your stock and you sell more lower priced puts until you are eventually assigned on a full allocation of stock. A full allocation (how many dollars worth you would like to own) should have been established before you started. 

  148. Discount/Craigs – This is a conservative strategy.  Since I ultimately want to own T for the dividend, my worst-case to the upside is the stock goes higher and the short puts expire worthless and I effectively collect the same dividend I would have had if I bought the stock.  Of course you need the cash – these are not magic beans!  You should never sell a short put against a stock you don't REALLY want to own – it's a serious obligation to sell a put (as GTAT players are painfully aware).  

    As to your example, if we sell the 2017 $30 puts for $2.95 and T goes up, the puts expire worthless and we keep the $2.95 we have in our pocket.  $2.95 is essentially the dividend so we get paid the T dividend without ever owning the stock.  If you have an IRA and are being charged 100% margin, this strategy is nowhere near as fun as if you have PM and your net margin is $1.  If you want examples, look at the LTP and Income Portfolio, there are dozens of them in progress.  ANYTHING over $30 means the short puts expire worthless – it doesn't matter if it's $30.01 or $30,000 – same worthless.  

    As to the buy/write – there's a video for thatas well as articles.  

    AAPL/Yodi – What?  AAPL made $40Bn last year on $170Bn in sales – what do other companies have to offer for your investment Dollar?  Even at $591Bn in valuation, they still return $6.50 per $98.75 share which is 7% PLUS they pay a 2% dividend.  You have been talking to Shadow too much, I suppose.  He's off the board as his extended free membership expired and no one has offered to pay for him (volunteering?) and, frankly, more than half the Members have him on ignore anyway and many have complained about his rants to the point where he was becoming a huge distraction and detracting from the board.  He's been off for a week and you are the first person to mention it – though it doesn't stop him from Emailing me several times a day, especially now that he was "right" about GTAT.  

    Oops, actually, now that you made me check, his last comment on GTAT was 9/17:

    Phil I know you recommended GTAT on the drop and I think sapphire glass has uses. Ever notice windshields get chipped eventually every inch from dirt to bugs, hard to see in bright sun or at night. If a thin coat and it is a sandwich, on the outside and no more pitting. Insurance says average use before visibility restriction is 3 years. That would end although a rock would break it easier.

    Well, that was since the beginning of Sept – I guess he told us, right?  This is why I don't want him back – I bet he was also ranting and raving to you about how right he was but he didn't actually say any such thing – at least not in the last month (feel free to look back further).  

  149. phil, would you suggest rolling the Oct JNS $14 puts?

  150. Thanks Yodi and Phil. Like I said, every time I think I get it, something will come up to confuse  me about it. I guess I just need some time to see some of these play out. I will look at theose articles and videos and I truly hope I can fully wrap my arms around it. I think the biggest obstacle I have is understanding how the options change in value over time with fluctuations in share price and how you then will roll to take advantage. This will hopefully be more clear as I get further along and see how the plays in the virtual portfolios play out.  Also the idea of selling both puts and calls seems to have me confused, so this is the strategy I need to read about again now that I have more experience and maybe it will finally sink in. For some reason this just doesn't click for me like my experience in accounting where the debits and credits always match up in the end! 

  151. Craig/Future Prices – in TOS, if you change the Option Chain display to "Theoretical Price" you can input various dates and stock prices to see how that would affect the option strike prices at that date and mark.