Philip Davis

Friday Roundup: Commodities, Emerging Markets

We're bearish too but it sure isn't getting us anywhere this week.

Dave, I'm curious, what do you make of the materials acting like AA has opened the floodgates to higher levels when AA itself fizzled out? Shades of things to come for the sector perhaps?

Options Trader: Tough-Decisions Tuesday

David, your idea is interesting but, like Cover says "who would do it." Actually the answer is English people, who still have 100-year lease-holds when they buy property sometimes but I don't think people would like it here, although they do go for reverse mortgages, which give you a little money until you die (as long as you are expected to die soon, actuarily).

I do not disagree with DC - enough with the bailouts but we will bail out bank after bank after bank if we don't do something about the reason they are failing. Buffet stopped insuring accounts over the FDIC limit in Kansas - that's not a good sign! The FACT of the matter is the FDIC simply doesn't have enough money to cover one major failure, yet alone something on the scale of the last S&L crisis.

This is not about fiscal discipline anymore. This is coming home and finding your basement flooding from a broken pipe and the Feds solution is to keep going to the store to buy more paper towels. It just isn't addressing the problem. The loans have been sold, people are in homes they never should have been allowed to occupy at appraised values that never should have been put on a form (that is not the homeowner's fault).

Junk (thanks for nice words yesterday by the way), I don't think you can clear this brush without losing the forest. What would happen to your home's value if one in 5 around you were empty with foreclosure signs?

This is a national crisis and kicking 5M families onto the streets, even if 2M of them were greedy and knew they were getting in over their heads, is not going to solve anything.

Options Trader: Friday Outlook

Oh Muzie, you got me! Per capita consumption is a fairly tale wovern by people who want to fool you into thinkng that businesses only consume oil because they make stuff that is used by the population in some warped way of trying to shake your pre-conceptions.

Options Trader: Tuesday Outlook

Cool Junkyard! Thanks, that really makes my day.

Options Trader: Thursday Outlook

Hidilip - I assume you know this better than me. I was summarizing the linked WSJ article which perhaps is blaming the Left because the paper is controlled by Murdoch now and loves bashing communists, if you have links from that perspective, I'd be very interested to read it as it fascinates me to see the WSJ spinning a story that way. You'll notice that I did not directly connect the Leftists with the strike as I wasn't sure, but it was the same sentence separated by an "and". In the WSJ, the original text read:

"Wednesday's strike by workers in government-owned banks, post offices, airports and railways was backed by the Leftist parties that withdrew support from the ruling United Progressive Alliance government."


FRE/Vermont: Check out the post entitled "Wednesday Rebound" on philstockwold.com - it should be available for free tomorrow morning and let me know what you think of the trade..

What's Driving Fannie and Freddie

I love it Jack, lots of good actionable ideas.

Options Trader: Tuesday Outlook

Oh sorry Mmarrkk, as to storage, I mean for this time of year (see chart) not compared to the 3Tn+ level we usually get to by the year's end. What I said was right next to the picture I was talking about, the green dot of 2008 storage is above the midpoint of the 5-year average. 350 out of 2,903 lower than last year's extremely high August storage level.

Options Trader: Tuesday Outlook

Mmarrkk, you are right, I linked to him through the wonder of GOOG and he had links to lots of crap about LNG that I gave a quick look at so I should have vetted his arguements more thoroughly. I will note to SA if they can remove link.

That doesn't change the fact that I think LNG is a scam. If as you say, there is no point shipping gas here when we pay less, then why build the terminals? I really believe that the whole thing is to find a way to shove nat gas into the ground, kind of like the SPR. Let's say we build terminals that can hold 10% of the nations' annual demand. Filling it would cause other inventories to dip and prices to go up. Once they are filled, then our best case scenario is the same case we have now - gas is sent to market as it's produced.

Of course, having LNG terminals does allow our Nat gas producers to SEND gas to other countries,taking it out of the American market and driving up the prices at home. If I were to tell you I was making a warehouse and intended to fill it with 10% of the world's annual gold production - in what scenario do you think that would cause prices to come down?


Al - as you asked, the XLF longs dropped back to $4.85 so we're up just 2.7% now, not including the callers we took out for huge profits of course. FRE was well covered and we took out the callers and actually added down at $4 so we'll see how that goes.

Nat gas did have a good day, making back 3.5% of the 25% drop. I was pleased that it didn't break back over last week's high yet and oil had trouble at $115 so inventories will be critical tomorrow.

Options Trader: Friday Outlook

One very important rule we teach is that, once you are ahead 50% on a caller, you set a very tight stop on him. With more than 2 weeks to expiration, we generally buy back any caller that is down 50% or more (assuming nothing bad happened to the stock's outlook) and then we wait for a recovery and, failing that, look to sell the next lower strike and use that money to roll down our long position.

Options Trader: Friday Outlook

Cover - you do realize that this article is Friday the 8th, not the current day's article right?

WMT - at 9:41 yesterday, my comment to members was: "WMT so going the wrong way. What a relief as I thought my $57.50 callers were going to blow me out. This is so great! Let’s pick up 5 Sept $55s at $3 in the $10KX and the $25KP XXX"

So the adjustment to this play was that we had the coverage through earnings and, on the dip, we took out the caller at just .40 and then flipped bullish becuase it was silly for them to go down (see this Thursday's post for my general take on the morning sell-off).

Meanwhile, the March $57.50s were bought for $4.75 and we sold calls for $1 and bought them back for .40 so the net basis on the leaps is $47.15 and they are now worth $6.25, not a bad gain for a week!

Had you not bought back the caller, your basis would be $3.75 on the March $57.50s and you would owe your August caller $1.87, for a net profit of .63, still 17% in one week and not so awful but you can spend just .40 to roll your caller to the Sept $60 calls, now $1.50, which would leave you in the March $57.50s at $6.25 and about 25% covered with the Sept $60s. You can do that month after month so, even without the good timing (and luck) we had, it's a nice little income producer.

Options Trader: Thursday Outlook

JPM/WM: www.marketwatch.com/ne...

Options Trader: Friday Outlook

I do apologize to Bush fans as I had no intention of ranting against the President and just got very pissed off at what he said a 8am. Apparently the Russians are pissed too: www.thepeoplesvoice.or...

Anyway, I do write my blog for for my "family" of members and it doesn't always translate well for me to have a temper tantrum in a morning post which gets syndicated on Seeking Alpha. I will try to keep politics out of the mornings but they do affect the markets - why do you think the markets were flat on a day when oil fell to $111?

So I pledge to do my best to ease off on Bush, it should be easy as he decided that this would be a good time to take a 2-week vacation in Crawford while the World sorts things out on its own. Also, I pledge to stop talking about politcs altogether when you guys get Kudlow to do the same...

That link was very interesting Blackbody, check out this one: foxattacks.com/virus/?...

As to Russia nuking Poland - that would be way bad. What do you conservative guys think would have happened if Georgia had been admitted to NATO and we were obligated to defend them. Would we? Should we? I'm interested to hear thoughts on that.

There was one pick today - RYAAY did go well as expected.

Have a good weekend all!

Options Trader: Thursday Outlook

Not at $4! That's our magic number. JPM was going to buy them at $8 before the BSC thing hit the fan and diverted them so I like the risk/reward of WM at $4, which has been our buy point 2 other times with outs at $5ish. Buying the stock for $4 and selling the Sept $4 call for .71 is also very attractive and you can add a sale of the Sept $4 put at .60 which gives you a $2.69 basis if you get called away at $4 on Sept 19th or forces you to buy another round at $4 for an average purchase price of $3.35 - that's my kind of play!

Options Trader: Monday Outlook

Ruby - All fake or just that article? I've heard about it all over the place...

Options Trader: Thursday Outlook

SF94... - We agree GOOG is pinned for the month. We took a buttefly to that effect today, expecting them to hold $465 but have trouble getting over $485 by expiration. Today's finish was very depressing though.

JJason - Excellent site, thank goodness people are able to let Congress know how we feel about things!