Thoughts on SPY Calls and Yet Another Housing Subsidy

I dumped all my October SPY calls bought earlier this week, throughout the day with the last 5% batch out near S&P 1066. Probably should have waited til the now traditional "post 3:30 PM ramp into the close", but it's been a good enough run for me. Spy

I will consider rebuying calls on any move over S&P 1070 in the coming days, as in the larger sense, the resistance between 1050 and 1100 is almost nonexistent - but we are at the top end of our channel, so I am going to lock in some meaningful gains.

Either way, buying the double top breakout "wins" again, big time. Mid-July it was the double top at S&P 950, and last week S&P 1040.

I also dropped some of my Meritage Homes (MHS) exposure with today's rally.

I've evaluated quite a few shorts this afternoon, my favorite ideas (in terms of best technical set up) however all have around 100-150K of daily volume, so a bit hard for me to move in and out of. Most likely I'll just buy some October SPY puts recreating what I am doing on the call side when the time comes. I'm not ready to stand in front of a freight train yet.

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Speaking of homes... on the "good news" front Reuters reports the White House is considering economic subsidization plan # 21,937. No surprise here - we've been calling for an expansion of the first-time home buyer program from $8000 to that select group, to $15,000 for all Americans. The housing lobby is for it, the realtors are for it, the banks are for it, the politicians are for it, and apparently most Americans are happy to receive free money without asking where it comes from. (answer: right next to the cherry trees in D.C. are the money trees - we just chop them down and free money arrives)

It's a "win-win-win" as all the right lobbyist groups are behind it, it wins votes, and many more news stories of gleeful home buyers who were able to escape underwater homes with the help of fellow taxpayers monies shall be posted in the local and national media. Miracles do happen in this great country - money falls from the heavens on a regular basis.

Well technically it's not a win for someone who has to eventually pay for it. But we don't talk about those things, as "cost-benefit" analysis is now "benefit-benefit" analysis". I am just wondering at what point *those* Americans whose IOUs are bursting at the seams, will call their local representative and say enough is enough. Maybe if the government said, to get your $8000 or $4500 you have to go to your neighbor's children and break open their piggy banks 1 by 1... I think only then people would understand the "source" of their giddiness.

Notwithstanding, I am sure the "evaluation" will go well, and the vote with be "yes" for more subsidization of the economy at any cost. As I said, I expect a series of more and more subsidizations to be rolled out as our "healthy economy" works wonders. Cash for Clunkers 2.0 by early 2010... and the next mega stimulus plan for the economy by next spring. (which will "save or create another 3-4M jobs") And then after that... well it's all just part of the mosaic of a very healthy economic recovery. Subsidization style! Simply ask, and you shall receive. [Jun 5, 2009: 1 in 6 Dollars of Income Now Via Government; Highest Since 1929]

WASHINGTON (Reuters) - White House economic advisers are looking at the $8,000 tax credit for first-time home buyers and will make a recommendation to President Barack Obama as he decides whether to extend it, White House spokesman Robert Gibbs said on Wednesday.

"The White House economic team is looking at the tax credit and evaluating the impact that it has had on home sales, and through that evaluation will have something to give the president," Gibbs said.

The tax credit program is to close at the end of November.

Comments

[D. McHattie:]

There is no amount of our grandchildren's money they won't spend to allow Bernanke to say "technically, the recession is over".

The only thing keeping us, technically, out of a recession is short-term, one-time consumption based on government incentives like cash-for-clunkers and the first-time home-buyer rebate.

None of these sources of economic activity will produce lasting effects. Well, except for the lasting effects on the other side of the government's balance sheet.

Sep 16 07:40 PM

[Nathaniel C:]

Why would you sell your SPY calls when the s&P 500 is at 1066 and buy them back at 1070?

Sep 17 12:34 AM

[basehitz:]

So, on the one hand Banana Ben and others proclaim the recession is over, and then pile more debt on top of an unsustainable debt. Which way is it?

Sep 17 04:58 AM

[adan:]

send the new proposed $15,000, in cash check or debit card, to each tax paying american (essentially a refund of taxes paid), and then you'll see a recovery....

Sep 17 08:39 AM

[TraderMark:]

I appear the last person in the country who believes the stock market can go up and down

My comment about 1070 simply suggested if we don't stall here, than I'd just jump back into my calls once a new leg up is being established which to me is 1070+

Of course the market could always go down (theoretically at least), although judging from recent comments it appears I am alone in that school ;)


On Sep 17 12:34 AM Nathaniel C wrote:

> Why would you sell your SPY calls when the s&P 500 is at 1066
> and buy them back at 1070?

Sep 17 09:43 AM

[Nuwanda:]

Concur with this sentiment exactly! Why should homebuyers and real estate agents get this windfall on my back? Besides, some of us are waiting for the next housing crash (i.e. wave of Alt-A and Prime mortgages) until we plop down our money for a home. Another round of tax credits only prolongs the inevitable ...


On Sep 17 08:39 AM adan wrote:

> send the new proposed $15,000, in cash check or debit card, to each
> tax paying american (essentially a refund of taxes paid), and then
> you'll see a recovery....

Sep 19 11:33 AM