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Buzz Bits: Dow, Nasdaq Head Up

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Diminishing Crash Scenario - John Succo - 2:36 PM

I have seen put buying all day long, especially in the XLF, an ETF representing large capitalization financial stocks. Three months ago people were selling 11 vol in this ETF. Today they are paying 27 vol to get hedged.

What has changed during this time? In my opinion nothing but sentiment and the realization of things I have been talking about for some time.

Option prices in general are now fair in my opinion, that is, given a normal set of circumstances. As you know, I don't believe the current macro backdrop is anything but normal. That being said, with the rise in option prices, the gamma embedded in the market is much lower. This changes nothing about the fundamentals I consider extremely negative, but I have to respect the fact that the probability of a "crash" scenario has diminished. This does not mean to go out and buy stocks, just that I think things unfold less quickly.



Lunch Meat! - Todd Harrison - 11:47 AM

  • I was this close to buying the market for a bounce (when I punted my puts) as I watched the sticky green Goldman (GS) action.

  • Why didn't I? 2:1 negative breadth, which coincided nicely with my need for a deep breath.

  • Sure enough, the S&P immediately snapped ten handles higher as I balanced the relief of selling my puts with the angst of missing the quick fix.

  • Then came the news that KKR's banks (led by Deutsche Bank AG) failed to sell $10 bln of senior loans to fund the LBO of Alliance Boots Plc. That immediately fanned the fearful flames as this dynamic is the root cause of market concern.

  • Which brings us back to the banks--they're sticky still in the face of this news. While I think the risk outweighs the rewards in this arena, the traction could prove to be a prescient daily market tell.

  • Ahead of earnings, Baidu.com (BIDU) options are implying a 20% move and Apple (AAPL) options are implying a 10% move. I think the best option, on both, is to stay away from the options.

  • One of my better sales guys tells me that he was house-hunting in the Hamptons this weekend (must be nice) and he saw a ton of supply. While anecdotal, at best, that represents a marked shift in the context of the haves versus have nots. Thus far, the former has suffered while the latter have been insulated.

  • Is it Wednesday already? Is it really almost August? Are we really in 2007? My grandfather Ruby used to say that time is the most precious commodity and, as usual, he was spot on. Don't waste a day, Minyans--tomorrow is promised to nobody.


R.P.



I guess Plosser must be getting nervous? - Lance Lewis - 9:55 AM

"If I started to see some of the spillovers occur in some of the prime mortgages, I'd get more nervous," Federal Reserve Bank of Philadelphia president Charles Plosser said in an interview with The Wall Street Journal Tuesday.

Meanwhile on the same day, Countrywide Financial (CFC) says the credit rot has spread to its prime loans as well...

I can hear the Fed's printing presses being warmed up already... And it's going to send gold through the roof when the FOMC eventually panics, which they will...

The next FOMC is August 7th. I would expect an "official" move to neutral on the 7th to set the stage of an eventual easing, even though we all know that the Fed has unofficially already been at neutral for over a year now. I guess it's a good thing that there's "no inflation" in the core, right? (wink, wink...)

Position in gold shares.



These Things I Believe - Jeff Macke - 9:02 AM

I believe...

  • I love Boeing (BA). I can't find anything wrong with Boeing's quarter. Boeing is a Dow component. I'm still a seller of up-100 pt Dow Futures, after the damage we did yesterday.

  • Amazon (AMZN) won't go down much until the last Amazon short is dead. We're not there yet, obviously, but it's looking like Pickett's charge for the Bezos haters this morning.

  • Apple (AAPL) will crush earnings estimates tonight. Beat 'em like a gub'ment mule and will hype the i-Phone like it's the greatest thing since sliced bread (or the Iomega (IOM) zip-drive, depending on how you feel about Steve Jobs).

  • 1.) Commuter airlines are the portion of the sector hardest hit by the over-burdened American flight-grid. 2.) You can't satisfy customers left on the tarmac for 8-hours, no matter how polite you are. 3.) Running an airline is a horribly costly way to trade jet fuel. QED: I was a seller of JetBlue (JBLU) even before the CEO called me Chuck on TV last night.

  • "Billy Don't be a Hero" wasn't just a war protest song; it was a subtle bit of trading advice to dip-buyers in the homebuilders or financials.
No positions in stocks mentioned.

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