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Fearful Friday – Ebola in NYC Spooks the Markets

SPY  5  MINUTEHalloween is just around the corner

Already the monsters are coming out with two of NY's three papers already maxing out their headline fonts to scream EBOLA!!! to people on their way to work. As I noted to our Member in this morning's Alert (tweeted out too!) that made for easy shorts on the Futures:

Based on Ebola and the upcoming stress tests, I'd have to guess a sell-off is coming today.  Shorting /ES at 1,940 (tight stops, of course) and the Dow (/YM) at 16,600 are a lot safer than shorting /TF at 1,100 but all good lines to use and watch.  /NQ already failed 4,000.  

SPX WEEKLYIt's 7:54 and already the Egg McMuffins are paid for on nice drops off those levels and we'll take quick profits and run and hopefully get a chance to re-enter as I don't see this day going well.  

We're back to short in our Short-Term Porfolio but less aggressively so than last weekend as we can't ignore the underlying 3.5% gains our indexes have put up this week. 

As usual, the Dollar is being knocked down to support the Futures but it's not helping oil much ($81.24) so far.  Gold, however, bounced back to $1,233 and silver (/SI) went over our long line at $17.25 (very tight stops below).  Gasoline (/RB) was rejected at $2.20 – another sign that the underlying economy is much weaker than these indexes would have you believe.

In fact, GS reports today that China has shut 20% of it's Iron Ore production in the face of an inventory glus and prices dropping 40% this year.  The market is in the midst of a transition without precedent in recent commodity history as supply jumps and higher-cost mines shut, according to Macquarie Group Ltd. HSBC Holdings Plc, which cut its price forecasts this week, sees a 30 percent slump in Chinese output next year.  

“The market currently looks like a game of chicken where no player has blinked,” HSBC said. “The major producers are likely to compete heavily on production and costs, with little regard for market outcomes.”

New-home prices in China fell in 69 of the 70 cities monitored by the government last month, according to data today, adding to signs of a slowdown. The world’s second-largest economy grew 7.3 percent in the July-September period, the slowest pace since the first quarter of 2009.

If you want something to be afraid of, worry about China, worry about Europe – not Ebola!

155275 600 Dog who cried Ebola cartoons

Have a great weekend, 

- Phil


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  1. Good morning!  

    Infographic on Texas voter ID laws... Reasons why over 600,000 Texans can't get voter ID, and voter ID fees.

  2. I like this article – The Economics of Star Trek

    85 years ago today:

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  3. craigs/Ebola transmission

    Here's some info from a very well written academic source that includes the most recent data.  Take home point, direct contact with bodily fluids with some being much more infectious than others.   This virus is no joke and shouldn't be taken lightly.  We are seriously screwing this up by not being more aggressive with people we KNOW have been in contact with it recently.

    TRANSMISSION — Experiments in laboratory animals indicate that filoviruses can initiate infection via many routes, including ingestion, inhalation, or passage through breaks in the skin [13]. Nonhuman primates can be infected with Ebola or Marburg virus through droplet inoculation of virus into the mouth or eyes, suggesting that cases of human infection result from the inadvertent transfer of virus to these sites from the patient's own contaminated hands [60,61].

    Person-to-person — Person-to-person transmission occurs through direct contact of broken skin or unprotected mucous membranes with virus-containing body fluids from a person who has developed signs and symptoms of illness [62]. The most infectious body fluids are blood, feces, and vomit. Ebola virus has also been detected in urine, semen, and breast milk. Saliva and tears may also harbor the virus. Thus, contact with any of these fluids can pose potential risk. At present, it is unclear whether infectious virus exists in sweat [63]. As described below, such person-to-person transmission leads to outbreaks [40].

    ?One type of direct contact that leads to transmission is the ritual washing of Ebola victims at funerals [41]. An epidemiologic study found that family members were only at risk of infection if they had physical contact with sick individuals or their body fluids, or helped to prepare a corpse for burial [64].

    ?Healthcare workers are at risk of infection if they care for a patient with Ebola or Marburg virus disease without appropriate protective measures. (See '2014 outbreak in West Africa' above and 'Nosocomial transmission' below.)

    Ebola virus may also be transmitted though contact with previously contaminated surfaces and objects. Limited data suggest that viable virus may exist for up to several days on fomites [65,66]. Although there are no high-quality data to confirm transmission through this type of exposure [67], the potential risk can be reduced by proper environmental cleaning [63]. (See "Diagnosis and treatment of Ebola and Marburg virus disease", section on 'Environmental infection control'.)

    Ebola virus disease is rarely, if ever, spread from person to person by the respiratory route [68]. Although aerosolized filoviruses are highly infectious for laboratory animals, in humans, airborne transmission has only been reported among healthcare workers who were exposed to aerosols generated during medical procedures. (See 'Nosocomial transmission' below.)

    Prior to the epidemic in West Africa, outbreaks of Ebola and Marburg virus disease were typically controlled within a period of weeks to a few months. This outcome was generally attributed to the relatively inefficient person-to-person transmission of the virus in areas of the African rainforest where population density was low and residents rarely traveled far from home. However, the epidemic in West Africa has shown that Ebola virus disease can spread rapidly and widely as a result of the extensive movement of infected individuals (including undetected travel across national borders) and the avoidance and/or lack of adequate medical isolation centers [69,70].

    Contact with infected animals — Human infection with Ebola virus can occur through contact with wild animals (eg, hunting, butchering, and preparing meat from infected animals) [62,71]. In Mayibou, Gabon in 1996, for example, a dead chimpanzee found in the forest was butchered and eaten by 19 people, all of whom became severely ill over a short interval [38]. Since that time, several similar episodes have resulted from human contact with infected gorillas or chimpanzees through hunting [72]. To help prevent infection, food products should be properly cooked since the Ebola virus is inactivated through cooking [73]. In addition, basic hygiene measures (eg, hand washing, changing clothes and boots after touching the animals) should be followed.

    Exposure to bats — Exposure to bat secretions or excretions may be a potential route for acquisition of Marburg virus. Two outbreaks of Marburg disease in the Democratic Republic of Congo (DRC) and Uganda have involved men exposed to bats while working in abandoned gold mines [74,75]. Further support for the bat hypothesis was provided by a case of a Dutch tourist who developed fatal Marburg disease after visiting a bat-infested cave in Uganda, during which time she was "bumped" by a bat [76]. Six months after the report of the death of this tourist, another woman from Colorado, who had visited the same cave in Uganda, requested serologic testing for Marburg virus [77]. Convalescent sera, which had been archived after the patient had an unexplained febrile illness with hepatitis, coagulopathy, and encephalopathy, demonstrated evidence of prior infection with Marburg virus.

    Nosocomial transmission — Transmission to healthcare workers may occur when appropriate personal protective equipment is not available or is not properly used. As an example, during the outbreak in West Africa, a large number of healthcare workers developed Ebola virus disease, due in part, to shortages of personal protective equipment and/or exposure to patients with unrecognized Ebola virus disease [19,49,70]. (See '2014 outbreak in West Africa' above.)

    Medical procedures have played a major role in some of the largest Ebola and Marburg epidemics by amplifying the spread of infection.

    ?A tragic example of an iatrogenic point-source outbreak occurred in 1976, when an individual infected with Ebola virus was among the patients treated in a small missionary hospital in Yambuku, Zaire [78]. Because the medical staff routinely injected all febrile patients with antimalarial medications, employing syringes that were rinsed in the same pan of water, then reused, virus from the index case was transmitted simultaneously to nearly 100 people, all of whom developed fulminant Ebola virus disease and died [79]. Infection then spread to family caregivers, the hospital staff, and those who prepared bodies for burial. The Marburg epidemic in Angola in 2005 may have been initiated in similar fashion, through the reuse of contaminated blood bank equipment.

    ?A different type of iatrogenic amplification occurred in 1995 in Kikwit, DRC when a patient was hospitalized with abdominal pain and underwent exploratory laparotomy [18]. The entire surgical team became infected, probably through unprotected respiratory exposure to aerosolized blood. Once those persons were hospitalized, the disease then spread to hospital staff, patients, and family members through direct physical contact.

    Despite these dramatic episodes of nosocomial transmission, other hospital-based experiences have demonstrated a much lower incidence of secondary transmission [33,80-82]. In the 1967 outbreak in Marburg, Germany, 25 severely ill patients were treated over the course of several weeks, resulting in only six secondary cases and no tertiary spread [33]. In South Africa, only one of 35 doctors and nurses who participated in the care of two patients with unrecognized Marburg disease became infected [80]. Similarly, when a patient with unrecognized Ebola virus disease was treated in a South African hospital in 1998, only one person became infected among 300 potentially exposed healthcare workers [81,82].

    Assistance from the international medical community has played an important role in controlling large epidemics in Africa. Intervention strategies have focused on helping local healthcare workers to identify patients, transfer them to a central medical facility for treatment, monitor all persons who have been in direct contact with cases, and rigorously enforce infection control practices [41,83-87]. (See "Diagnosis and treatment of Ebola and Marburg virus disease", section on 'Infection control precautions'.)

    Other routes — Other potential routes of transmission include the following:

    ?Accidental infection of workers in any Biosafety-Level-4 (BSL-4) facility where these viruses are being studied.

    ?Use of filoviruses as biological weapons [88,89]. (See "Diagnosis and treatment of Ebola and Marburg virus disease", section on 'Bioterrorism'.)

    There is no evidence to date that filoviruses are carried by mosquitoes or other biting arthropods. Past epidemics of Ebola and Marburg virus disease in Central Africa would probably have been larger and more difficult to control if the virus were transmitted from person to person by these mechanisms.

  4. Phil;  Any thoughts in EQI as a long term play?  Thx

  5. EU bank stress tests: An interactive preview ahead of results Sunday

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    Facts about "floating trains" – which would mean Washington to New York in 1 hour:

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  6. Craigs/Ebola

    To your question if it can be detected before people are symptomatic:

    Incubation period — Patients with Ebola virus disease typically have an abrupt onset of symptoms 8 to 12 days after exposure (range 2 to 21 days) [90,114]. There is no evidence that asymptomatic persons still in the incubation period are infectious to others. However, all symptomatic individuals should be assumed to have high levels of virus in the blood and other body fluids and appropriate safety precautions should be taken [115].

  7. No, I don't have Ebola… but that doesn't mean YOU don't have Ebola… PANIC!!!!! FEAR!!!!


  8. Oil Lines

    R3 – 84.85
    R2 – 83.61
    R1 – 82.61
    PP – 81.37
    S1 – 80.37
    S2 – 79.13
    S3 – 78.13

  9. Good article about why Blue Chips sometimes get crushed:

    What is interesting is that these companies are not necessarily losing out to direct competitors. McDonald’s isn’t getting crushed by Burger King ($BKW)Coca-Cola isn’t losing big chunks of market share to Pepsi ($PEP). They are losing out because the market they are targeting are undergoing dramatic shifts. Everyone today knows soda, even diet, isn’t good for you. Coke can buy as many non-soda brands its can but that will not prevent the long term decline in its core sugar water business.

    Consumer non-durables are clearly different than technology but the prospect for companies big technological shifts is now a common refrain from history. Ben Thompson in a recent post at stratechery looks at the potential for current darling Google ($GOOG) to get outflanked by competitors. The whole piece is worth a read because the argument about Google is a subtle one. Thompson traces the story of how IBM, first in mainframes, and then Microsoft ($MSFT), in PCs, were eclipsed by waves of new modes of action.

    Thompson isn’t calling for a collapse at Google but a more subtle shift where the business they dominate becomes less relevant.

  10. This is exactly how it gets out of control.  People are just irrational and uneducated about the problem, and the media is going to have field day with this.

    We are still to blame, weak protocols, insufficient prepardness, etc.

  11. Are cheap oil prices good or bad? It depends on the state where you live – lessons from 1986:

    Screen Shot 2014-10-21 at 4.23.34 PM

  12. EQL/Options – Nothing wrong with it as it's nicely diverse:

    So you're never going to underperform the market with EQL and it pays a 1.65% dividend but it has no options so, on the whole, I'd rather play the S&P and just hedge that.  For example SPY is at $194.93 and you can sell the Dec 2016 $190 calls for $20.80 and the $160 puts for $10.50 for net $163.63/161.82 so, rather than buying $100,000 worth of EQL and crossing your fingers in hopes the market goes up 20% ($20,000) in two years, you buy 400 shares of SPY with the hedge for $65,452 and they get called away at $190 for $76,000 so you make $10,548 if the S&P is flat to up.  

    The real benefit comes if the S&P goes down because, at $160 (down 18%), you end up owning 800 shares at $129,456 but your loss is only $1,456 vs $18,000 if you held the unhedgable EQL.  Of course, the SPY short puts are rollable and you'll be able to sell more calls so you could play more aggressive than just 400 shares with that allocation (given the more limited downside) but the point I want to make is I'd rather have an 80% chance of making 5-10% with a 20% chance of losing money than playing 50/50 whether I make or lose 20%.  Over the years, those small gains compound while each loss – even if you think it's a black swan – erases an entire year's worth of gains.  

    Oil/StJ – Sure, but if you weigh out the overall GDP benefit, it's no contest.  also, how the Hell is Vermont negatively affected by low oil prices?  Are you sure that's not a Maple Syrup chart?  

  13. Toyota selling TSLA shares !!!

  14. Ted Cruz adviser tells the truth for once:

  15. TSLA/Yodi – Shows you how awful these corporations are as traders.  They could have gotten out when TSLA was testing $300 in Sept – 20% ago!  ALWAYS sell into the initial excitement!  

  16. Good Morning!

  17. Nice little pop into the open may give us another shorting opportunity but let's not jump the gun and see how the levels play out.  Same crosses below can be played, of course but above there is generally bullish and makes for dangerous shorts.

    If you want a long, /CL over the $81 line is still good.  /SI already popped 0.10 for a $500 per contract gain (and don't be greedy on a Friday!).  

  18. TSLA/Phil, Yodi

    Toyota and Mercedes are both selling TSLA shares this week and the stock is still up.  What's that say about the retail investors in it?  You can only put your head in the sand for so long.

  19. TSLA/Rustle – Maybe their selling has been keeping it down?  Still generally a stay-away stock for me, though we did sell those Jan $275 calls because they were just silly at the time.  

  20. LOL.  That was a fast and furious pump job.

  21. I've taken all profits & only have the shorts left. I'd say the rug is going to be pulled out of this market over the weekend for whatever reason. Most people are so irrational, "I'm not getting on an airplane" when the most dangerous place to go is probably a hospital! The people I know who went to a hospital for a "simple" procedure and died is what gives me pause. All those germs & bacteria in one place! And the outright mistakes. Yikes.

  22. rustle123

    But shows you how traders are TSLA still up 2$ AAPL up .50 and GOOG down some 4$

  23. Big scandal in new home sales with huge downward revision to last month – time to hit the Futures shorts again (same levels):

    • September New Home Sales: +0.2% to 467K vs. 470K expected, 466K prior (revised from 504K).
    • Median sales price $259,000.

  24. Good call on pump job, Pharm.  Someone had to know those home numbers from last month were BS.  

  25. Dollar down 0.4% is holding us up so far.  

  26. In STP, let's sell our TNA Nov $63 calls ($5.35) to get more bearish.

  27. Phil Just for some not reading your brain what stock ??

    In STP, let's sell our Nov $63 calls ($5.35) to get more bearish.

  28. Yodi – Aren't those TNA?

  29. Phil / bearish – Any recommendation for a weekend bearish hedge?

  30. GPRO has a 45 target on it from Oppenheimer. It might not get that low.

  31. Yes, TNA is the stock above.  

    Hedge/Pfehl – Those SQQQs in the STP are much cheaper than where we picked them up – that's the way to go.  

  32. good call on gtatq phill….

  33. thanks!

  34. Phil,

      Sorry if this is repetitious, but I have 10 sold Apr TNA $73 calls, which was a mistake. Just buy them back, or is there a better alternative at this point? Obviously there is more to it, but I noticed that TNA is down since I sold the calls, so I would expect the option premium to go down as well, yet it has increased. Why is that?

    Thanks for your help

  35. Phil// What is our official position on T Jan 2015 30/35 BCS?  I still have that position and I paid $.340 for the spread.  Since long side of the call is around $3.45 should I move out the long calls and let the short calls expire? Thanks.

  36. Oil hit $81.25 before failing, now back to $80.50 - so pathetic.  Gasoline failing $2.18, nat gas $3.57. Copper $3.04 – weakness all around.  Dollar held 85.60 and bouncing – not too much damage to the indexes other than giving back their gains so far.  

    Report: 25 smaller banks served up in ECB stress tests

    • The results of the ECB stress tests aren't to be made public until this weekend, but an early leak from Bloomberg suggests 25 of the 150 or so lenders tested have failed – roughly inline with what was expected (and those failing are likely smaller names). Ten lenders, says Bloomberg, are in talks with regulators regarding capital shortfalls.
    • Previously: European bank stress test results due today
    • EUFN flat premarket

    Subdued quarter for Ford ahead of F-150 launch

    • Ford Motor (NYSE:F): Q3 EPS of $0.24 beats by $0.05.
    • Revenue of $34.9B (-2.5% Y/Y) beats by $1.79B.
    • Shares +1.1% PM.
    • Press Release
    • Ford (NYSE:F) reports total wholesale volume decreased 3% in Q3 due in part to timing with product launches.
    • The company's operating margin in the automotive sector was 2.5%, compared to 7.0% from a year ago. Warranties and recall costs factored in.
    • North America: Revenue -6.1% to $19.9B; operating margin 7.1%.
    • South America: Revenue -17.9% to $2.3B; operating margin -7.3%.
    • Europe: Revenue +7.8% to $6.9B, operating margin -6.4%.
    • Asia Pacific: Revenue +4.0% to $2.6B; operating margin 1.7%.
    • F +0.7% premarket to $14.50.

    Volume growth and margin gains at UPS in Q3

    • UPS (NYSE:UPS) reports global shipments rose 6.9% to 1.1B in Q3.
    • Package volume in the U.S. rose 6.9%, while international export shipments tracked 9.4% higher.
    • U.S. Domestic segment: Revenue +5.3%; operating margin +30 bps to 14.7%; total revenue per package -1.5%.
    • International package segment: Revenue +5.5%; operating margin +70 bps to 14.5%; revenue per package -1.0% (ex-currency).
    • Guidance: UPS retains its view for FY14 EPS of $4.90-$5.00 vs. $4.95 consensus.
    • UPS +2.1% premarket

    DryShips prices secondary; down 21%

    • The company sold 250M shares for $1.40 each, with CEO George Economou buying 57.1M shares ($80M).
    • Proceeds will be used to repurchase some of the $700M principal amount of convertible notes coming due in December.
    • Source: Press Release
    • DRYS -21% premarket to $1.58

    Macau traffic up 3% in September

    • Visits to Macau rose 3% to 2.41M, according to the Statistics and Census Service.
    • The number of visitors from Mainland China was up 6%, while traffic from Hong Kong and Taiwan was lower during the period.

    More on Procter & Gamble's Q3

    • Procter & Gamble (NYSE:PG): FQ1 EPS of $1.07 in-line.
    • Revenue of $20.8B (-0.1% Y/Y) misses by $30M.
    • Shares -1% PM.
    • Press Release
    • Procter & Gamble (NYSE:PG) reports organic sales rose 2% in Q3.
    • Volume was flat during the period for P&G, while pricing was up 1%.
    • SG&A expense ratio +3% to $6.327B.
    • Gross margin flat at 49.2%.
    • Operating margin -570 bps to 14.1%, due largely to impairment charges.
    • Segment sales growth: Beauty/Hair/Personal Care -1%, Grooming -1%, Health Care +6%, Fabric Care/Home Care -2%, Baby/Feminine +1%.
    • Guidance: P&G expects low-to-mid organic sales growth for FY15.
    • PG +1.4% premarket

    Lion's Gate on an Alibaba-fueled rush

    • Lion's Gate (NYSE:LGF) is on a rush with reports out that there is serious interest from Alibaba in picking up a large stake of the studio.
    • Shares of LGF are up 8.5% to cross the $34, a level where the stock hasn't closed at all year.
    • Alibaba (NYSE:BABA) is considering scooping up MHR Fund Management's 37.4% stake in Lion's Gate (NYSE:LGF), according to the New York Post.
    • The stake is worth close to $1.6B at LGF's current share price.
    • Previous: LGF moves higher after Jack Ma sets a meeting.
    • LGF +2.7% premarket to $32.30.

  37. Very surprised the market is holding up right now.  Oil down big, market overbought in short term, housing flat and another ebola case in NY.  Masterful job they are doing today.


    Something to keep in mind when watching coffee and sugar prices. The largest water reserve for Sao Paulo is under 4% and there's not much rain predicted until December. A lot of cities around Sao Paulo have already gone to "every other day" polices with water…some have gone to water every two days. The city of Sao Paulo itself has been spared from any water cut-off so far, but for how long….

  39. GPRO/Silent – Too bad the puts are so ridiculously priced.  

    GTATQ/Tri – Damn, just short of the $1 target after all.  

    I think people's take-away on this is we should always take a good look at companies that ask for chapter 11 (hopefully not ones we already own!) in case there are opportunities like this to play them for a bounce.  

    You're welcome, Phehl. 

    TNA/Kevin – Well if it was a mistake, just buy them back – why try to turn a mistake into a trade?  Though TNA is at $65, April is a long way away and even a normal 5% gain in 6 months would be 15% on TNA and that's $75 right there but, since we have a Santa Claus rally to look forward to, unless you have a lot of conviction that the Russell can't even take back it's recent highs (and a lot of margin to spare – just in case) - this is not going to be a fun bet for you.  The reason the premium increased is because the VIX bumped up and more people are making bullish bets at the same time (since our strong bounce lines held).  Those are all bullish signals that SHOULD make you a bit too nervous to sit on naked short ultra-long calls though you could just follow our STP move, as we just uncovered our short TNAs this morning, hoping for a sell-off.  

    T/Rookie – I don't remember where that spread is but I'm sure there are also short puts if its in one of our portfolios.  I wouldn't sit on Jan $30s as they are $3.75 with T at $33.50 so it would be time to roll them out to the 2017 $28s at $5.90 for + $2.15 so you buy $2 of position and 2 years of time for $2.15 – a good deal.  Then, when the short $35s (now 0.28) expire, you can sell the July $33s ($1.75) and PRESTO!, your roll is paid for and now you have a better (because you have more time on your longs and the strikes are lower) $5 roll than you started with. 

    Holding up/Rustle – SPY volume 40M at 11 – not too impressive.  

    Good point on drought Brill.  

    /NQ almost back to yesterday's highs (4,024) but /YM still 50 points from 16,693.  /ES was 1,956, now 1,949 so also close but /TF still 1,111.40 vs high of 1,120 yesterday. 

    Wow, /SI took a massive dive from $17.35 back to $17.16 – too violent to touch now.  Gold held $1,230 so far.  

  40. Draghi to EU leaders: Joint effort needed to avoid ‘recession’; calls for stimulus

    Please check back for further updates..

    Read more:

    Sent from the CNBC app. Available on the App Store

  41. Apple or Samsung? Ask these pint-sized analysts

    Turney Duff worked at billion-dollar hedge funds. But when he wants to know what’s hot-like Apple or Samsung?-he consults these pint-size analysts.

    Read more:

    Sent from the CNBC app. Available on the App Store

  42. World faces $650 billion housing problem

    A staggering 330 million urban households around the world live in substandard housing or are so financially stretched by housing costs they forgo other basic needs like food and health care, according to McKinsey.

    Read more:

    Sent from the CNBC app. Available on the App Store

  43. Wall Street less confident than Main St. investors

    The stock market is acting as if the mid-October swoon never happened, despite a general-and fairly recent-sense of caution on Wall Street.

    Read more:

    Sent from the CNBC app. Available on the App Store

  44. A US port squeeze could ruin holiday shopping

    A shortage of transportation equipment at ?the Los Angeles/Long Beach port complex could cause holiday shopping issues.

    Read more:

    Sent from the CNBC app. Available on the App Store

  45. MCD – wow, maybe the end of the world really is nigh..

    "McDonald's franchisees are furious that the company's aggressive promotions and costly restaurant upgrades are squeezing their profits, according to a new survey.

    "Growth for McDonald's is over," one franchisee wrote in response to the survey by the financial services firm Janney Capital Markets.

    "I am just hoping to be flat," another franchisee said. "[The] customer has lost faith in the brand."

    "We are leaderless," said a third. A fourth franchisee complained, "They are being successful in bankrupting us."

  46. phill we havent mentioned bkw for quite a while, are ur though still the same… may not happen…

  47. macdonals… give me steak and shake any day…

  48. phil/article about pint size analysts ..

    turner duff stole your approach :)

  49. Wow, that pump job has a little more legs now!

  50. I guess S&P making another attempt at the 50 DMA line now… Still 9 points to go.

  51. phil, to continue your thoughts on selling / when……..from an old port i am short 10x jan 5 mcd puts. sold for 2.15 now .20…… pros and cons re winning trades and also why buy premium so maybe you can share the pros/ cons and more importantly the thinking of either leaving or closing…tks…its not so much the dollars involved but the when

    as you know i have been chided for not taking / doing things / sooner……;)

  52. Have we re-sold any calls on the OIH butterfly yet?  It has recovered a little bit off the lows.  

  53. Phil,

    Seems like the RUT is not sharing the market love of the Dow and S&P…….Who is right?

    /TF has been 1109.5 to 1113 all morning!

  54. tryboy2 – In and Out burger, here on the left coast….. :)

  55. Now we have the highs, we'll see what happens here.  Draghi's weekly stimulus talk still does its trick.  

    Oil shot back to $81.25 again, what a joke!  

    MCD/Scott – They spend Billions (forced franchisees to spend) to change the look but it never occurred to them to change the friggin' food!  They added coffee to be like SBUX an DNKN and smoothies to be be like SONC and JMBA but they did nothing original.  

    BKW/Tri – My thoughts on them?  Same really, our only play was to take advantage of the pop to sell into the excitement back in Aug:

    August 25th, 2014 at 12:34 pm | (Unlocked) | Permalink 

    BKW/Pfeh – $10Bn for THI?  They were  $5Bn last year, what have the done to earn another $5Bn in value?  I guess it's all about the tax inversion for BKW but they will get such backlash for this that I doubt it will go through so I'd lean towards shorting THI initially but BKW popped 20% today as well so, couple that with the overpaying and the fact the deal is likely to fail and that means we can sell 5 BKW Jan $30 calls for $3.25 ($1,625) and buy 4 April $30/34 bull call spreads for $2 ($800) for an $800 credit per set.  BKW is at $32.50 now, up from $27 yesterday so it would take another $5 pop before you get in real trouble on the trade.  

    It's a drawn out process, whether it goes through or not and, at the moment, the 5 short Jan $30s are $2 ($1,000) and the 4 long Apr $30/34 bull spreads are $1.60 ($640) for net -$320 off the $800 original credit so up $480 so far (60%).  Other than seeing that opportunity at the time, I could care less about BKW/THI.  I do like WEN on the Buy List, however:

    Steak and Shake/Tri – I didn't think the Burgers were that good.  We have Zinburger around here – people love that.  My kids and their friends (12-15) don't go for MCD or Taco Bell (YUM) or BKW anymore, they like PNRA (not CMG), California Pizza Kitchen and CAKE and those places that give you 3 Asian courses in food courts.  

    I think it's Michelle Obama's fault – these kids actually are starting to understand how unhealthy certain foods are. 

    Duff/Toe – I agree with his logic – those are the current and future consumers.  

    MCD/Mill – You need to look at a put and decide if the amount you can still collect (0.20) is worth the margin you are tying up. In the Income Portfolio, for example, we sold 5 SBUX 2016 $65 puts for $6.35 and now they are $3.40 and up almost 50% with a year to go and the margin is $2,200.  It doesn't matter what we sold them for – what matters is, is it worth tying up $2,200 to make the $1,700 that's left?  

    Obviously it is and then you need to consider how confident you are in the strike (extremely) and how much you REALLY want to own 500 shares of SBUX for $65 (absolutely).  The last factor is, of course, how much spare margin you have and, in the Income Portfolio, we have over $800K to spare so it would be idiotic to close those puts (and you could easily argue that we should sell more). 

    So the real answer here is that you need to understand what it is you are risking and have a criteria check-list you go through to decide which positions to leave open and which to pull back.  Of course, you also need to consider your overall view of the market as well as whether or not, if the market does plunge 20% overnight, you would end up too overweight in that sector – that's a factor as well.  Then the last thing is, since you are up 90% on the short MCD puts – if you let them go to 80% and don't stop out – I shall chide you a second time!  

    That being said, if you are in a volatile position that is up 90% with a year to go (or even a few months) and you intend to stop out at 80% (as you should) and you think there is anything more than a 33% chance that you'll end up stopping out, then why not take the 90% gain and be happy?  

    OIH/Butterfly, Palotay – We sold the Jan $50 puts ($1.85, now $6.50) but I think we were waiting for a bounce to sell some calls.  $42 to $46 was 10% so we expect a $1.60 pullback (strong) to $44.40 and, as long as that's holding, we can hope to move past this weak bounce (down from $56 to $42 (down 25% is down 20% with a 20% overshoot) is $12 so $2.50 bounces to $44.50 (where we are now, weak) and $47 so $47 would be our target sale if we look at all weak there.  

    Since we actually expected a 20% pullback on OIH, that would be $44.80 – so you can see why it's such a magic number.  That's an $11.20 drop and that makes the weak bounce $2.20 to – Ta Da! – $47.  Isn't math great?

    RUT/Jasu – Notice /TF is back at our 1,113.50 shorting target.  I think it's the leading indicator, not lagging.  

  56. If your PC suddenly loses functionality after a windows update,,,

    wish I could short FTDI.

  57. New York mayor talking on TV – seems like what we'd, in Australia, call a 'wanker.'

    Yadda, yadda, yadda  -  Not impressed.

  58. Phil/MCD – Just a thought – if kids starting to realize most of the stuff sold at MCD and similar restaurants are bad for you, they're generally going to eat better. If they're eating better, they won't have to take as many trips to the doctor later in life for joint replacements, bypass surgeries, type II diabetes treatments, etc. Which means the doctors are making less and health care bills are less. Also, Nutrisystem and Jenny Craig and all of these other weight loss businesses have less customers.

    Of course this doesn't matter now because we're not 20-30 years out from Michelle Obama screwing up these guys' businesses, but may it's something to keep in mind for future investment opportunities.

    Personally, I'd take Panera over some burger joint any day.

  59. GTATQ / 

    I see this article as rational about what  could be the near future of GT , still a high risk but worth playing $3k.

  60. On the subject of burgers, I can't understand why In 'n Out isn't everywhere. Hands down the best fast food burger I've ever had. I guess it stays that way because they stay local and privately owned. You would think  they would at least try one in NYC. It would be huge.

  61. Kwan 

    This MCD reminds me of the roads in Mexico if they would repair them the tire companies would run out of business.

  62. Phil;  Should we add F to the buy list. Retooling truck plant for new aluminum bodies impacted Q3.  I think it has been oversold.  Thoughts?

  63. Phil- if you think /TF is leading indicator, is there any chance on a Friday that this market could head lower or is that a next week call? 

    As for healthier kids, sure blame Obama, or perhaps we can find a way to tie it to Benghazi and blame Hillary too! 

  64. in'n out is the gold standard! 

    anyone been to culver's?  huge here in wi .. i call it the in 'n out of the midwest.

    ate at red robin saturday for the 1st time — surprisingly good burger .. excellent quality

  65. Phil / OIH Butterfly

    We actually sold both January puts and calls.

    The calls were the Jan $52.00's for $2.25

  66. a healthy dose of obviousness

  67. Akademia – I believe there was another update since then, where we bought back the calls.

  68. yodi – that's a pretty darned good comparison!

  69. FTDI/Scott – That's brutal.  

    De Blasio/Hkgt – Yep, he's a very annoying guy.  

    Lifestyle/Kwan – It's interesting how fast you can change people's attitudes by educating the kids.   I've watched my kids get indoctrinated to the concept of healthy eating and now that they are older, they are having serious nutrition education courses in school – something we never had when I was a kid.  I think it's a great thing but I'm sure the fast-food industry disagrees.  And don't forget the disruption to our farming industry as well.   One reason we have such a corn glut is people are cutting back on high-fructose corn syrup.  

    GTATQ/Advill – I agree, they simply needed to reorganize to get out of that onerous AAPL contract.  Mission seems to be accomplished there.  

    In N Out/Craigs – Same with JACK, who are huge West of the Mississippi but don't exist East of it.  Of course, with Jack, that's because they killed people back in the 70s (and again in the 90s) and were never forgiven.  

    F/Options – I certainly do like them down here but I'll like them more if they drop another 10%.  Let's see how the market holds up next week first but very good idea.  

    Market/Craigs – I think we sell off into the close but there seems to be quite an effort going on to avoid that at the moment.  Don't forget we have a Fed meeting next week, so anything can happen.  

    OIH/Akad – Yes but we bought back the Jan $52.50 calls for 0.20 on 10/15, since then we've had no cover on the bull side (good timing too!).  

    Good article BDC.  

    Those highs are failing, good shorts at 16,700, 1,950, 4,010 and 1,113.50 (of course).  Also /NKD 15,400 is a nice short.

    Dollar 85.80, oil $80.90, gold $1,231, silver $17.20, nat gas $3.61 and gasoline $2.192.

  70. phil….those two paragraphs were great in being able to wrap my head around the process…tks

    fwiw…i do believe im way past my second chide……….have a good weekend………

  71. Near term premium/Phil – just looked at my entire trading portfolio using TOS analyzer, show all beta-weighted.. and I am currently quite bearish tilted with about 2% of portfolion value in premium set to burn off by November expiration, but if SPXC goes over 2010, will start losing value. I'd like to sell a bit more premium, without getting more bearish, perhaps as a calendar spread for expiration anytime between next week and end of year, and thinking to do it against an index. Any goto/default play or vehicle jump to mind?

  72. SPXC should read SPX..

  73. Phil / OIH

    I missed that! Well I just corrected it and those calls are still $0.20, so no harm done.

  74. yes zinburger looks very good… el diablo… yes

  75. You too Mill – you are indeed way past the 2nd chiding but, on the bright side, much less in need of them.  

    SPX/Scott – So you want to protect yourself against a move over 2,100?  That's a pretty big move (7.5%) so, you could look at something like SPXL, which would go up 21% by then and is now $75 so $105 in that ETF.  The Jan $90 calls are just 0.95, which shows you how unlikely it is that the S&P would make such a move by Jan and, if you really aren't worried until 2,100, SPXL should pay 15x by then – so it's easy to calculate how low your hedge has to be.  Longer-term, the 2016 $70s are $16 and you can sell the $90s for $8 so net $8 on the $20 spread that's $5 in the money so the only way you lose is if the S&P is lower and, if that's your bet – then all good.  

    OIH/Akad – Yep, they've made no progress to the upside at all.  

    Futures back to the tops again after that nice dip – good action if you are not greedy.

    Oil still weak ($80.75) with an hour to go and gasoline $2.17 also weak so no reason the markets should be so excited other than Draghi statement and rumors that the ECB stress test is another joke and all will pass.  In other words – it's Friday.   

  76. GILD – All-time high.

  77. zxzzzzzzzzzzzzzzzzz………….

  78. We are approaching the election cycle sweet spot.  November begins the six month period that hasn’t had a down period since 1940 and averages over 15% returns.

    Guess there's always a first time.

  79. SPX/Phil – not 2100.. 2010.. but not so much that, as to increase the sold premium that can burn off right now, without getting more bearish, and without consuming margin (so no naked short puts or calls).

  80. If all of us, and all the world thinks we're oversold and on the edge.. we are all fat targets for a big upside squeeze, yes? I have to wonder if the rug that is going to be pulled out is the one under US. :-(

  81. Are we gonna get one of those low volume rally end of day sticks?  Stupid /TF won't get off the 1300 line…

  82. I meant 1113

  83. Oil closed out a bit over $81 and it looks like the indexes are trying to stay up for the close.  

    Election/Albo – If we go up 15% from here I'll be shorting the crap out of everything.  

    SPX/Scott – Well, then the same concept only lower.  There are no magic beans here – you can sell SPY puts or sell puts on a stock you REALLY want to own if the market does fall 20-40% because, if you are generally bearish, you'll be able to afford it.  Those short AAPL 2017 $75s are still $6 or CAT 2017 $80 puts can be sold for $6.50 or IBM 2017 $120 puts are $6.80 – all good ways to sell premium against a bullish outcome and, if the market does fall – you have cheap stocks.  Getting bullish without more margin, however, leaves you with simply with buying SPY calls or SPXL calls and you simply have to decide how much money you want to burn on your hedges or, MAYBE, if you are so unsure of the market that you feel the need to play it both ways – why not just get to cash, free up your margin and wait until you ARE SURE before making bets?

    CASH!!! is a very valid position to be in.  You can be 1/3 cash, 1/2 cash, 2/3 cash, 3/4 cash (both our long portfolios are) or whatever but, unless you are 100% certain about which way the market is going – not having at least 1/3 of your margin free is a ridiculous position to put yourself in.  

    Squeeze/Scott – Yes, just because some people are wrong on the markets, there will be a squeeze that magically drives $10Tn worth of value (10%) into equities for no reason at all and we'll say there – just because…  {end sarcasm font}  

    If you have so little idea of what stocks are really worth that you fear huge upsides and huge downsides at the same time – again — CASH!!!!  You are essentially saying "I have no idea what's going to happen but I'm going to bet heavily on the outcome."  

    Speaking of value:

  84. Phill I was wondering where I see the buy list on the site??? thanks

  85. Squeeze/Phil – good points.. just that we have comments recognizing the masterful way *someone* with much deeper pockets is so adroitly moving the market where they want.. it doesn't matter what I believe stocks are worth.. it's Fanstasy Markets. so.. as you often say, "if we know it is rigged…"

  86. Phil – As this article points out, ABX not only has a high debt/equity ratio, but also management seems less than brilliant.  Obviously, all gold stocks are way down with the weak gold prices, but I wonder if there aren't better gold plays going forward.  I want exposure to the gold market, but is this still the best play ?

    I'm sure there are those of us who have losses in ABX and could use those losses.  I know I could.  Any other plays that you can think of for new money ?

  87. GPRO – did Santa say "No GoPro this xmas!"?

  88. Phil

     CASH!!! is a very valid position to be in.  You can be 1/3 cash, 1/2 cash, 2/3 cash, 3/4 cash

    Should we keep part of our cash reserves in something like?

    PowerShares Financial Preferred ETF (PGF)

     PowerShares Preferred 

  89. VNO – again coming up to test it's so far unbreakable 108-handle ceiling…

  90. ONTY…something is brewing.  Swing looks to be up.  So one could risk $184 for 100 shares, or buy the February $2/3 BCS for about $25/option. Payoff is $75. 

    I went with shares for now, but less risk is the BCS.  Not a bad way to play since the Feb $4/5 BCS is 15c.

  91. Phil.

    I think the Top Trades tab at top is great.

    Have you considered putting the current portfolios on a similar tab.

  92. Come on, bring on the stick.  Monday is the last day for your bankers to dip their hand into the jar.  Then, POMO is done.

  93. MiM reading: 92.00% with a Buy-side imbalance of $637,669,981 decent size…jacking it up.

  94. Looking at the buy list, it looks like AKAM, CCJ, CLF, HOV, RIG, UBNT all appear to be consolidating from bounces off some pretty deep lows.  Any 25k plays you might suggest?

  95. NVIV has been inching up slowly too. This is a company that does platforms for spinal injury.

  96. AAP – made and has held new ATH this week..

  97. And I'm still curious about IRBT, but I think I want a bounce out of them since they already swung past a strong retrace off the recent spike.  Maybe they're in an overshoot off the retrace?

  98. POMO – good call, Pharm. what will happen?

  99. Buy list/Tri – Under the Virtual Portfolios tab at the top.  

    Rigged/Scott – There's "rigged", which does happen but then there's physics.  Stocks or indexes can be pushed around within a range and even the range can be stretched but, as evidenced by years and years of our Big Chart – you can't change the true values and, eventually, we get back to them.  When we saw the markets topping out in Sept, what were the signs?  Narrow participation, poor volume, most of the gains coming in the Futures or at the close…  Yes, the markets were manipulated higher but the manipulation was not only obvious but doomed to fail when it got to a certain point.  

    You have to learn to UNDERSTAND the fundamentals of value and then you'll see the limits of the manipulation and you won't fear the magician anymore.  Just because he can make a puff of flame burn up in his hand doesn't mean he can incinerate you where you stand, does it?  These are nothing but tricks and they are limited by physics and learning those physics means no one will be able to trick you with a bit of flash paper anymore…

    ABX/Albo – Well, I guess I could pull up an article that says the opposite, that's a very one-sided way to look at the company.  In the bigger picture, the mix at ABX, though different than other gold majors, is no more burdensome:

    AISC COmposition

    As I have often said, I like ABX because they are sitting on 140M ounces of proven gold reserves and that's $172Bn at today's $1,230.  Now, granted it costs them about $1,100 to pull it out of the ground, so their profit is only $130 an ounce at this price BUT, if gold goes up in price, then another $100 makes for $14Bn more value in the ground, $200 = $28Bn, $300 = $42Bn… that's not bad for a $16Bn investment.  If you don't think gold is going up in price – why are you buying any miners?  If you think gold is going up in price over time, ABX has, by far, the greatest upside leverage to the price of gold.  

    GPRO/Scott – About time

    PGF/QC – In 2008, PGF fell form $25 to $5.  Is that the same as cash to you?

    ONTY/Pharm – Fun way to play.

    Top trades/DM – Thanks.  The portfolio reviews I'm putting monthly under the Virtual Portfolios tab – that's enough work for now, thanks.  

    $25KP/JPH – Remind me on Monday, if we're not selling off, it will be time to find more longs.  

    IRBT/JPH – People are bound to take profits off a 20% move.  $30 to $36 is $6 and 20% is $1.20 and 40% is $2.40 (strong retrace) and $36-$2.40 is – Ta Da! – $33.60.  Where is IRBT now?

    I don't know how you guys can be baffled by the same thing happening over and over and over again…

    Well,, that was  a fun day, I think we're up near 5% for the week,  which is very impressive – even though the RUT is flat.  

    Have a great weekend folks!  

    - Phil

  100. Phil – Thanks for info on ABX.

  101. Phil today:  1/ "If you have so little idea of what stocks are really worth that you fear huge upsides and huge downsides at the same time – again — CASH!!!!  You are essentially saying "I have no idea what's going to happen but I'm going to bet heavily on the outcome."

    2/  There's "rigged", which does happen but then there's physics.  Stocks or indexes can be pushed around within a range and even the range can be stretched but, as evidenced by years and years of our Big Chart – you can't change the true values and, eventually, we get back to them."

    "Eventually" leaves a lot of wiggle room, sad for us non-professional traders to say.  But based on this evening's reading, I would have to say that we have not reached "eventually" yet, simply because I associate the word with the idea of "normalcy" and I don't see much evidence of that in the global economy.

    I do, however, see evidence of the U.S. dollar moving from strength to strength over the next six months or more.  China's currency will over time gain international convertibility as an "investable" currency, but the opacity of the China's financial status won't see that happen in less than a year at best.

    Europe, and it's Euro, are what I'm focusing on right now, and it doesn't look pretty.  The EU has just picked a fight with the UK by demanding an extra contribution to the EU budget equivalent to USD $2.7 Billion, based on a calculation method the EU hasn't bothered to disclose to the UK, as the price of having recovered faster than the rest of the EU, and had a stronger-than-estimated economy, since 1995. 

    Even nuttier — the Netherlands, Italy and even Greece are being asked for more money.  Cui bono?  The beneficiaries – unsurprisingly  – will be France and Germany, because of the relative size of their economies [smaller than Greece?] and they will therefore receive rebates.  This is all apparently based on new accounting standards — the European System of Accounts 2010 – which changes the way certain activities are measured, and includes new categories that were not previously counted in the grey economies, such as drug dealing and prostitution. Lotta hookers in London, I guess, but no sex trade to speak of in Germany. 

    The new rules also require rapid payment by the UK of the revised amount, rather than over the course of the next 7 year budget.  Margaret Thatcher stood up to this kind of bludgeoning in 1994, and I would expect Cameron to do no less.  Disclosure:  already short Euros, and planning to add further to short positions vs. the dollar. 

  102. Impressive week if this holds! Mission accomplished on the Nasdaq where both 200 and 50 DMA were crossed back this week. And so close on the S&P (about 2 points). NYSE and Russells are the laggards.

  103. Political correctness run amok ?

  104. It turns out that the countries being asked for net contributions in the EU are the ones who have had the most banks fail their stress tests.  None of of the German banks failed, one had to top up its reserves.

  105. ZxZ / banks:


    As as as I remember german government allowed certain banks no to perform the stress tests which could be troublesome because they are not reaching the  7,5% limit.

  106. ….As far as….    the Ipad  corrector sorry.