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Preparation for Options Expiration Racketeering Week
Now that we have last Wednesday's the rollovers over with, now it is time to start thinking like a criminal and figure out how Goldman is going to make its $500 million this week by vaporizing 90% of all the potential put/call profit in current period's open interest .
The standard strategy is to identify stocks or sectors which have been on relentless meltups, or recent breakouts, where there are likely to be massive call positions.
And on the other side, look for beaten down, broken stocks which have not participated in the recent buying melee, because that is where most of the frustrated bears have been pyramiding their put positions, because its the only play that seems to be working.
My guess is that the calls on many of the retail names are going to get smoked, so look to get short this sector:
And the worst sector on the planet right now are the solar stocks, so you could see a fantastic squeeze. Note that 20% of FSLR's shares are still sold short. And at least 5 Chop Houses downgraded that group over the last 3 weeks. Probably a good idea to go long here:
As far as the techs go, probably a mixed bag. I heard Fast Money's Najarian last week talk about somebody buying huge puts in the QQQQ's two days in a row as it was approaching the oft-discussed double top.
More than likely, the "Fab Four" (AAPL, GOOG, BIDU, RIMM, etc.) are due to get shanked since they are loaded up by momentum players. But some of the dogs in the NDX like AMAT, MSFT, FLIR, KLAC could be prone to some epic squeezes, which could keep the QQQQ's flat on the week.
Another idea is to find the most over-extended stock on the Investor's Business Daily Top 100 list that has not had any correction in the last 6 months. There might be a mountain of calls pyramided in those names.
Here's one example:
Everybody and their brother keeps shorting the banks, so I expect to see some of the names in that sector really get jammed up. Except for Citigroup, because the entire planet bought millions of calls last week after the breakout. Najarian mentioned some absurd number of contracts traded on Thursday.
And to make this especially complicated, isn't another FOMC "Politburo" meeting scheduled for the 16th?
No doubt, billions of eyeballs will be staring at the screens that day, attempting to parse and translate the "words" uttered from Bernanke's pie-hole.
Imagine the stress levels among the 24-yr. old "portfolio strategists" at their Grand Cayman trading desks wondering what is going to happen next with options expiration volatility and a Fed statement...
LOL....
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And now, the latest from Rasputin.....
Rasputin
- Fri, Mar 12, 2010 - 08:40 AM
Hey, I hate this situation more than anyone...as I again have had my rat-like Rasputin snout rubbed
in the Infinite Fiat dogpile by TPTB.
Two years ago, when Bear Stearns failed, I was sending
e-mail blasts to my sheeple peers that "Sell your stocks! We are scroomed!".
Same thing a year and one-half ago when EVERYONE failed in
September, 2008.
And one final time thirteen months ago, when B of A and
Citi were collapsing simultaneously.
Three and one-half months ago “General
Jim”, the fearless leader of the lily-livered, paper pushing, wanna-bee GHSer
CIGAs was screeching:
"This is it!"
...and:
"It is NOW!"
And
any minute now, he swears, buggy whips will fly to
1650, then onto Armstrong's, Alf's, E.T.s, and Buzz Lightyear's to infinity and
beyond!...but really it wasn't "it" and it certainly wasn't
"now".
In the ensuing ten weeks, the poor, hapless CIGAs have
watched in horror as their precious buggy whip prices have been DESTROYED to
the tune of approximately ONE-HUNDRED TWENTY FIATSCOS PER OUNCE!
And now "General Jim" has had to once again shut
down his fax and e-mail lines because they were probably overwhelmed by the
near-suicidal hoarders.
Speaking of useless
"end-of-the-world" hysteria, it was TWO years ago this weekend
(actually, the weekend of March 16th, 2008) that Bear Stearns imploded, kicking
off the start of the entire financial system collapse over the ensuing six
months.
It was also at this time that the Fed and Uncle Gorilla
began to go into overdrive regarding monetizations, stimulations and
nationalizations--while a mortified Ras was running around with his hair on
fire screaming "We're scroomed!" and urging his Boomer peers to join
him in the bunker.
Alas, but just like "General Jim" and the
esteemed Doug Noland, a ranting Ras was proven again to be incorrect in his
TEOTWAWKI call.
Just as they have been wrong for DECADES now.
Which is why you will never again see ol' Ras stick his
foot in his mouth again, no matter how dire the situation seems.
For, even the slowest, densest, dumbest Rasputins
eventually catch on that "The Age of Infinite Fiat" is truly
infinite. Never again will I screech
"Scroomage!". I have learned my lesson.
Color me cynical, but I consider it no
small coincidence that with only a week or so to go before Uncle Gorilla is
slated to begin exiting his position in Citi, suddenly there are massive
"BUY!" recommendations being issued to the sheeple by analysts.
This is especially curious timing since a scant three
months ago, Citi could barely give away their stock in that secondary offering
in December.
This soon-to-be profitable "investment"
(translation: taxpayer bailout) of Citi by Uncle begs the question:
Why even bother with imposing taxes on the proles when
Uncle can just play "Government Sachs" and make enormous profits by
trading?
Heh, does anybody else see a dangerous precedent here?
Once again, my little Rasputin head is
left spinning from the schizophrenic signs being sent by the Fed's "Z1
Flow of Funds Report".
Yet, I believe I can safely make a couple of predictions
going forward based on Doug Noland's latest "Credit Bubble Bulletin"
analysis of this report.
So, below please find excerpts from Doug's latest missive,
found here:
http://www.prudentbear.com
...followed by my comments, then my final predictions.
To wit:
"Credit Bubble Bulletin" excerpts:
"During Q4, Total System Credit (TSC) declined $132bn
to $52.417 TN. TSC has declined for three consecutive quarters. Yet it has
still increased 52% during the past six years, increasing from just over 300%
of GDP to over 360% today. Over the past six years, Non-Financial Credit is up
57% and Financial Sector Credit has gained 42%."
(Ras): What's this?
Despite the most massive, unprecedented, desperate fiatsco-flinging program
ever seen by mankind over the last two years, total credit has declined? Oops.
This is unacceptable under a "Ponzi Pyramid of Debt and Derivatives
Death" monetary scheme. (More on this in the "Ras Conclusions"
section of this diatribe.)
Now onto the Mc Mansion meltdown:
"Total Mortgage Debt (TMD) declined 2.1% during 2009
to $14.307 TN. TMD is flat over two years but is still up 72% over seven years.
TMD contracted at a 3.2% rate during Q4, the same pace as Q3."
(Ras): Another
oopsie there. Despite all-out war being declared by Uncle Gorilla and the Fed
against the McMortgage collapse, credit in this sector is still falling? Hmmmm,
this can't be allowed to continue. But wait, there's a bright side:
"Importantly, Household Assets rose $657bn during Q4
to $68.188 TN. For the year, Assets jumped $2.579 TN; recovering a chunk of
2008’s $13.226 TN drop."
(Ras): Go figure.
In direct contrast to all the hysterical shrieking by the perma-deflatonists,
sheeple net worth has again been rising.
No "Great Disintegration" can be found here.
Let's see if there is any confirmation of this:
"Household Net Worth gained $682bn during Q4 to
$54.176 TN. For the year, Net Worth jumped $2.772 TN. For the year, Household
Real Estate holdings were down $905bn (to $18.207bn), while Financial Assets
were up $3.407 TN (to $45.115 TN)."
(Ras): Sure enough,
and just as I have been warning this board for months now, TBTP have incited an
asset reflation for the record books. The sheep's net worth has been
INCREASING, not decreasing.
However, there is a price to pay for pumping up Joe Six's
401(k). Let's see what that price is...
"Over the past 6 quarters, Treasury debt has jumped
$2.531 TN, or 48%, to $7.782 TN. During the same period, federally-backed
GSE-MBS expanded $624bn, or 13%, to $5.383 TN. Combined federal finance ballooned
an incredible $3.155 TN in just 18 months. At the same time, the Federal
Reserve’s balance sheet jumped $1.315 TN, or 138%, to $2.267 TN. "
(Ras): Wow! Talk
about putting "the pedal to the metal"! Uncle Gorilla and the Fed
really jammed it to the floor, yet despite an increase in sheeple net worth,
total system credit is STILL is lower? This doesn't bode well and will be a
major point in my prediction to follow.
And what about national income? Surely in this "Great
Recession" it has fallen, right?
Right?
Let's see...
"National Income posted strong Q4 gains ($152bn). For
the year, National Income was down only $22bn, or 0.2%, to $12.412 TN. Total
Compensation declined slightly ($17bn) during Q4 to $7.735 TN. For the year,
Total Comp was down $296bn, or 3.7%. National Income ended 2009 51% above where
it began the decade, with Total Compensation 44% higher."
(Ras): Hardly a 1930's
style income drop, wouldn't you agree? Again, we look to the root cause of the
proppage of incomes (and everything else) and it, of course, is:
"Federal Expenditures were up 15.1% y-o-y to an
annualized $3.595 TN. Expenditures jumped to $3.466 TN for all of 2009."
(Ras):...Uncle Gorilla and the Fed. But these guys aren't
carrying the load all by themselves. Who else might be stepping up to keep the
"Ponzi Pyramid" from toppling?:
"Rest of World (ROW) Holdings of US assets jumped
$290bn last year to $15.423 TN. ROW is up $3.90 TN over four years (despite
2008’s $960bn decline). For 2009, total Treasury holdings jumped $503bn to
$3.713 TN. Agency holdings dropped $130bn y-o-y to $1.315 TN. "
(Ras): Of course,
our foreign debt enablers, whom every bear screeches are gonna pull out any
minute now, they swear. Yet the bagholders keep sopping up Uncle's debt like it
was fresh maple syrup.
(Ras Conclusion and Predictions): Despite the
contradictory messages given off by this latest "Z1" report, this
much is clear:
Uncle, the Fed and foreign governments and central banks
are the providers of first, last and only resort of credit and securitization.
Therefore, since DESPITE their massive efforts to date, we
still see overall credit--and specifically McMortgage credit--contracting, look
for EVEN MORE monetization, stimulation and nationalizations going forward.
These guys haven't come this far only to throw up their
hands and walk away now.
Therefore, despite every fiber of my being screaming
"Sell your whips and spoons! Deflation is winning!", and despite
yet-another FOMC politburo meeting next week (where Bernanke is certain to
release a statement saying "We're gonna raise rates AND drain liquidity
any minute now, we swear), I'm gonna hang on to my PMs for the foreseeable
future.
Furthermore, at the risk of sounding
"Ravenesque", I'm gonna have to go with the theory that the equities
markets will continue to be pumped up by TPTB. The sheeple have been lulled
back to sleep by rising mutual fund statements/401(k)/IRAs and Uncle and the
Fed won't risk awakening the proles from their slumber.
Which brings up my final point: it has been two full years
since Bear Stearns failed and the Fed began stomping out the contagious
brushfire by creating all sorts of nefarious schemes to absorb dead, toxic
"assets".
Putting aside the egregious issues of there being ZERO arrests
or convictions of the Wall Street criminals and ZERO reform, the even MORE
outrageous fact is that the Fed is now in the same position as Uncle Gorilla in
that they also are bragging about all the "profits" they are making
on their "investments" as well.
(Ras Conclusion):
Is it any wonder now to anyone, anywhere as to why stock markets have been
skying? The two biggest "hedge funds" in the world (Uncle and the
Fed) have a direct interest in ever-rising equities and MBS prices.
To say that we have entered a "Brave New World"
would be the understatement of the century.
And don’t forget about Karl Denninger ,
who also screeches, day-after-day, in missive-after-missive, that "This
can't go on!"
Sheesh, why can't these guys just join a humbled and humiliated
Ras in "Camp
Capitulation"?
"Infinite Fiat" schemes, scams and shams will
continue unabated: learn it. Live it. Love it.
Because it's the only game in town.
…………………………
Glossary:
TPTB:
“The Powers That Be”, aka (Working Group)
GHSers: “Gold
Hoarding Seditionists”
Buggy Whips: Gold
Spoons: Silver
Uncle Gorilla: The
U.S. Government’s Treasury Department
Thanks for posting Rasputin's writings. Not sure if you have read Mogambo Guru's stuff - they both crack me up and provide quite the antidote du jour.
http://dailyreckoning.com/author/mogamboguru/
All the manipulation by TPTB will eventually backfire for the simple reason that people have lost all faith in the system, even if it is the only game in town.
Denninger is tarded.
SPY TO DA MOON!!!!!!!!!!!
WEEEEEEEEEEEEEEEEEEEEEEEEE!
Retail to get smoked! Roll it up! Also, Leo will love next week.
that sounds interesting, especially out of context.
I heard Fast Money's Najarian last week talk about...
a bottom in Lehman (@2;00)
http://www.cnbc.com/id/15840232?video=765522703
INTC through 21.50 is black box love.
http://www.cammaart.co.uk/images/mediumImages/sexyRobots2.jpg
I heard Fast Money's Najarian last week talk about...
a bottom in Lehman (@2;00)
LMAO
i would watch Fast Money but my wife does not allow me to watch porn....
Dude, where are the babes? Are you depressed or something?
Ras in "Camp Capitulation"?
Definitely signals a Market top...
Great article Robo, I enjoy reading Ras...
Totally onside with Rasputin - pointing out the absurdity of the 'recovery' and its attendant rally just leads to continued losses as the power of the press (printing and the sold-out MSM) drives the markets up, regardless of reality.
Love the 'think like a criminal' line. Hows this - they jam Citi (probably by aggressively closing out short positions) as the rest of the BKX runs out of steam, triggering an obvious buy on 'breakout above resistance' and use the opportunity to unload all those long positions before the next wave of ARM resets, or forced recognition of defaults, (or pick your favorite banking catastrophe) hits.
Look at the put/call positions - WFC - big incentive to drive the price between 27 and 28, BAC - 16- 17, JPM under 41, C most likely below 4.
Can't wait to see what the week brings.
Robo, thanks, always enjoy your posts.
This is the week I purchase my first buy of real PM and get out of the markets for good. Whether the ppt melts it up or GS selectively demolishs deep in the money puts, it is passed time to recognize your 401k is part of a gigantic ponzi scheme.. Yeah you are almost back to even, and they"ll even more quickly you out... For the 3rd time in ten years. Learn the lesson of history, froth signals impending crash...
Nikki in Detroit... Swiss bank accounts while giving their secretary the slam...
Next week.. Ak47.
purchased real pms... good call. Every time I think about the markets today, it makes me think the only safe place to be is real (in my possession) pms. The games are beyond my ability to play successfully, my best bet is to try and preserve what I have.
That's why I don't trade fed days.
I hesitate to ask, but what are 'PM's (that you state you're going to buy)? Sorry i don't know the acronym.
I hesitate to ask, but what are 'PM's (that you state you're going to buy)? Sorry i don't know the acronym.
Precious Metals.