Dealing with an Irate Goddess - a Piece of CAKE?

Hi everyone! A new restaurant opened up near me on on February 19, 2009, called The Cheesecake Factory. The restaurant is approximately 11,000 square feet and seats 330!

The ceiling inside the restaurant.

It is located in the building that used to be home to grocery store Andronico's, which closed in December 2006 due to financial reasons.

Here is the blah, blah about The Cheesecake Factory:

The Cheesecake Factory Incorporated, incorporated in February 1992, operated 139 upscale, full-service, casual dining restaurants under The Cheesecake Factory mark in 34 states and the District of Columbia. The Company operated 13 upscale, full-service, casual dining restaurants under the Grand Lux Cafe mark in nine states, and a self-service, limited menu express foodservice operation under The Cheesecake Factory Express mark inside the DisneyQuest family entertainment center in Orlando, Florida. It operated bakery production facilities in Calabasas Hills, California and Rocky Mount, North Carolina that produce baked desserts and other products for its restaurants and for other foodservice operators, retailers and distributors. The Company also licensed two bakery cafes under The Cheesecake Factory Bakery Cafe mark to another foodservice operator. The Cheesecake Factory is an upscale casual dining concept that offers approximately 200 menu items including appetizers, pizza, seafood, steaks, chicken, burgers, pasta, specialty items, salads, sandwiches, omelets and desserts, including approximately 40 varieties of cheesecake and other baked desserts (The Cheesecake Factory Restaurant Concept and Menu). Grand Lux Cafe is also an upscale casual dining concept that offers approximately 150 menu items (The Grand Lux Cafe Restaurant Concept and Menu).

Here is the full description.

Here is their latest 10-K filing. Of interest to me is the ITEM 1A: RISK FACTORS.

Well, I had known about this restaurant just from their cute ticker symbol, and had heard mixed reviews about them over the years, so I decided to visit The Cheesecake Factory on Thursday, 02/ 26/09. I took T.G., Jr. and 2 of her friends along. They took some vids of the restaurant which I compiled into one which was rejected by YouTube for being too long, so I trimmed it and it is below.

When we first arrived, we were told there was a 35-55 minute wait to get a table and they gave us a little electronic device which lights up when they are ready to be seated. So, we went outside and fired up a couple laptops, in the hopes of using the free Internet that I had heard the city was supposed to have. We were unable to connect to anything, and there wasn't even a wi-fi network showing up that we could pay for. waaaaa!

So, we scrapped that idea, and, as it was getting chilly, we went inside to wait it out. And wait we did. After some time, I asked a server if I could order drinks and she said she couldn't serve them, I assume due to her age. So, I asked another server and she told me she would be back to take my order. 10 minutes passed. Another 5. So, I went up to another server and told her I wanted to order 2 Dr. Pepper's, a KO, and a KO and shot of rum for myself. She took the order and when she finally delivered my drink, told us that they did not serve Dr. Pepper. O.K. So we ordered different sodas which she delivered to us. We spent our time "waiting" talking about "stuff", people watching, and admiring the design of the interior of the restaurant.

Finally our table was ready! woohoo! We were seated right next to the bar area. The hostess gave us our menus and told us to enjoy our meal. We looked over the menu (book) and talked and decided what we wanted to eat. And we waited for someone to "acknowledge us". Waited for 32 minutes. No one came by. Unbelievable! wth? So, I flagged down someone who said that he was not our server and that he would tell our server we were "here". *sigh*

Well, after another 13 minute wait, we finally had our order taken by a guy that looks a lot like young Adam Sandler. heh heh. And thus the wait went on. And on. Yes, this is not a fast food restaurant, however... we did not get our dinner for a g e s and guess what? When it did come, it was delivered to us separately. One order at time - with 6 minute intervals! wth??? Do you know how long even ONE minute is? Time it now. One thousand one...

(Fresh Salmon with a Delicious Lemon Sauce,
Asparagus, and Mashed Potatoes)$19.95
While the salmon was O.K., the "sauce" tasted like pure vinegar!

Fried Macaroni and Cheese
(Crispy Crumb Coated Macaroni and Cheese Balls.
Served over a Creamy Marinara Sauce) $8.95
Yes, they were "crispy" all right. And not much taste, unfortunately.
However, we had good fun when someone said "Fried Cheese Balls", the others would say "Ah! You said "fried"! ahahaha!

Stuffed Mushrooms $4.95
I ate one. Bland.

THE FACTORY BURGER $9.95
(Charbroiled with Cheddar Cheese, Tomato and Grilled Onions.
Served on Sourdough French or Wheat Loaf with Fries)
This is how it was served.
Whatever happened to "plate presentation"?
And is there a hamburger in there somewhere? lol!

I was peeved beyond belief when T.G., Jr.'s petite filet mignon steak ($24.95) finally arrived. Sort of the "cheesecake that broke the camel's back moment" for me. She had cut into it and it was dark and cold in the middle, despite me ordering it medium. So, I flagged someone down, who said they would tell the manager. I said I just want this to be cooked more! sheesh! So the plate was whisked away and returned later cooked medium.

And about the time that T.G., Jr. was trying to eat her steak that had a lot of fat on it (wth? filet mignon with fat?), Lance Laxson, the General Manager for The Cheesecake Factory (quite a handsome man and is seen in the vid above! heh heh), arrived at the table and talked to me at length about the problems we had encountered. I was extremely irate, to say the least! I told him that we had waited for ages to even be acknowledged. I said that I realized that the restaurant was newly opened, but why seat us if no one was able to wait on us? I said that our dinner was delivered individually and that the timing in the kitchen sorely needed help! He apologized many times and said he didn't know how that could have happened. I asked him if the reason we got crappy service was because I was with 3 kids - to which he replied was definitely not the case. (The reason I asked that was that I have been to thousands of restaurants and truly have noticed over the years that the servers have a belief that if you have children, their tip will be less, and so they do not pay much attention to you. Tis true!)

At any rate... Lance was a true professional, keeping his cool while I railed on. He mentioned how all the food is made from scratch, that there are 200 items on the menu, that we should have been at least "acknowledged" upon seating, and that he would check with the kitchen regarding the timing of orders. He even went so far as to comp our entire dinner for our poor dining experience that evening.

And yes... I did give him my Trading Goddess business card, asked him if he had seen the stock price, as well as asked him if he owned stock in CAKE, to which he replied that he did. I would have to assume it is through a 401k, because I don't see anyone holding the stock through this:

Max Chart

Granted, a gazillion stocks have been hit by current economic times. However, I don't see CAKE, with its terrible service, mediocre taste in food, and highish pricing going up any time soon in this environment. They need to put their restaurant back in the oven and bake it a little longer, imo, to improve the quality of everything about it.

Bottom Line:

Yes, the stock is down 62% in the last twelve months, however, I see it going lower due to the reasons stated above.

3 Month Chart

I will be looking to buy CAKE Jul 2009 7.5000 put (CFQSU.X).

And as always, be sure to do your own due diligence before purchasing any stock! Good luck!

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AIG Receiving $11 per Share from the Feds

The insurance company, American International Group Inc. (AIG) will be receiving another $30 billion in Federal aid. Based in the 2.69 billion in shares they have outstanding, that works out to $11.15 per share, and the stock only sells for 42 cents per share. This is on top of the $150 billion in loans that they have already received from the government plus the $40 billion from TARP funds.

What is wrong with this picture? Are there union auto workers that work for AIG that need their jobs preserved? Did the United States invent insurance so we cannot walk away from the company?

Why aren't we supporting the insureds instead of the company, guaranteeing that all life insurance policies and annuities will be paid off, and forget about the company that spent almost $500,000 at the St. Regis Monarch Beach Resort in California after receiving bailout funds?

If you think this article sounds a lot like my rant about General Motors (GM) asking for $51 per share from the government, then you are right.

Disclosure: Author owns AIG, what a piece of ...

By Stockerblog.com

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The EU

Angela Merkel is putting her country of Germany ahead of the good of the EU.

Expect everyone else to be forced into the "every man for themselves" strategy going forward.

Seems like it was just yesterday the Euro was supplanting the dollar as the reserve currency of the world.

My how things change.

You see several of the EU countries are already levered up several times their GDP. As bad as things are in the US we will still be comfortably under 50% of GDP even with the almost 4 trillion in new spending that is pushing through Congress.

http://online.wsj.com/article/SB123591435325503221.html

On the total collapse of the EU it's time to get short the Euro...

Short FXE

Or if you want to get more aggressive try the DRR.

Seems to be tracking well so far this year.

I plan on starting a position shortly.

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Transocean (RIG) - Ascending triangle trade / Operacion en tiangulo ascendente

English-
RIG - Battle can be seen between buyers and sellers at the lateral resistance line of this triangle formacion. A break above the line (62.40) would signal a buy with a target 68.00 for the near term. One can also trade inside the triangle, a buy above 60.00 for a scalp trade to 62.00. If RIG fails to break out of the resistance line, you can look for shorting opportunities once the uptrend line (green line) is broken.

Español-
RIG - Se puede ver la lucha de compradores contra vendedores en la linea de resistencia de este triangulo. Una ruptura por encima de la resitencia (62.40) da la señal de compra con el objetivo de 68.00 al corto plazo. Uno tambien puede operar adentro de este triangulo, una compra por encima de 60.00 para intradia con objetivo a 62.00. Si RIG falla en resistencia, se puede buscar oportunidad para operaciones en cortos cuando la linea alcista (verder) sea rota.

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Pepsi (PEP) - Breaks Support / Ruptura de soporte

English-
PEP - Major lateral support level has been taken out. Expecting a continuation on the downside. Two short strategies offered. First, short under the 48.00 level with a 45.00 price target for the near term. Second, a move up to test the break (49.00 level) will also offer a shorting opportunity. Stops on this trade will be on close above the support line (blue line).

Español-
PEP - Ruptura de nivel importante de soporte. Se espera continuacion a la baja. Se ofrece dos estrategiasen cortos. Primera, operacion en cortos por debajo de los 48.00 con el objetivo de 45.00 al corto plazo. Segunda, una movida alcista a por la linea de resistencia (anterior soporte, linea azul) ofrece oportunidad para cortos. Stops en cierres por encima de la linea de resistencia (azul).

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Another Weak Weekly Wrap-Up

This is getting tedious!

We were bearish going into the week but not this bearish. It is unusual though that we have a weekly wrap-up with nothing but negative plays as we did last week but there was nothing very positive in the outlook after the action of the week of the 16th through the 20th, pictured here on this chart.

As I said in the last Weekly Wrap-Up: "Of course nothing beats sector specific covers against your own mix of positions but we like using the DIA puts as general portfolio coverage although, as I mentioned last week, both the DAX and the Qs may now have farther to fall." The Qs ended up dropping 8.5% for the week while the DAX tumbled 6%, underperforming other global indexes as we had expected it would. Our hedge play , the DIA June $77 puts, which we went with at $8.22 on Friday and half covered with March $75 puts at $3.85 ended up at $9.85 and $5.40, not much improvement but accomplishing it's goal of converting a net $6.29 entry into puts that are now 100% in the money to our net entry. At this point, every point down on the Dow is a penny we realize in intrinsic value. Per our original plan, the $75 puts can still be rolled to 2x the Apr $66 puts, now $2.32, allowing for our long puts to be $11 in the money against the puts we sold. The reality is more complex than that as we day-traded the covers around and rolled up the longer puts but we went into this weekend with the same bearish half-cover, not wanting to take chances after Friday's poor performance.

On Monday morning, I was not at all enthusiastic about our prospects for the week as we had the Bernanke testimony Tuesday and Wednesday and Trichet started us off with a thud by stating: ""In recent weeks we have seen the first signs of falling credit flows. An important part of this fall is demand-driven. However…there are indications that falling credit flows reflect also supply-side factors and tight financing conditions associated with a phenomenon of deleveraging. If such a behavior became widespread across the banking system, it would undermine the raison d’etre of the system as a whole." Perhaps he was channeling Nouriel Roubini, who on Saturday had told the Wall Street Journal: "J.P. Morgan took over Bear Stearns and WaMu. BofA took over Countrywide and then Merrill. Wells Fargo took over Wachovia. It doesn't work! You can't take two zombie banks, put them together, and make a strong bank. It's like having two drunks trying to keep each other standing."

Now THAT made the front page of the WSJ and Time Magazine, but when Mr. Roubini's assertions on WFC were challenged by Bankstocks.com's Tom Brown (who has actual facts and figures, rather than exaggerated pronouncements), Roubini retreats by saying: "I never made any prediction about credit losses in individual US banks. I only used macro variable to forecast average losses on tranches of different types of loans and securities for the AGGREGATE of US banks. So you may or may not be right about what is happening at Well Fargo; but the comments you make have NOTHING to do with what I have written. So you should correct the record on this. I never wrote that Well Fargo has an additional $117 billion of losses. I have provided an estimate of aggregate credit losses for all US financial institutions based on standard estimated of average losses from macro assumptions." THAT statement, unfortunately, is buried in the comment section at Seeking Alpha and WFC got hammered on Monday's open and was again attacked on Friday by the hyenas, who smell blood once again.

We sold $12 puts on WFC for $1.75 and we'll stop at $2.50 (the price we sold other puts for on Monday in a spread) as we don't want to be holding another bank that is going to zero, whether for good or bad reasons. Hopefully one day the madness will end but I'm way ahead of myself as that was a Friday move and we only just started talking about Monday. Focus, focus... I pre-summarized the week on Monday morning, saying: "It’s going to be a busy and scary data week... I guess you can call this a "wall of worry" and we’ll see how high we can climb this one before slipping back." As it turned out, our pre-market pop on Monday was all there was before the big slip! My morning play at the bottom of the post anticipated this: "We were a little bearish going into Friday’s close with 1/2 covers on our long DIA puts and I will remind all that the strategy is to roll up the long end first, then add more cover with tight stops on the new half, we’re certainly not going to be impressed by anything under 1.25% today (a 20% bounce off last week’s drop) and it will take a full 2.5% move higher by Wednesday for us to break the overall downtrend. We have a lot of rough data to get through and still plenty of earnings so let’s continue to be careful out there!" As you can see from the chart above, we had just about a 1% jump at the open before failing miserably for the day.

I rarely pick an unhedged stock play but I was very pleased with F this week. We were in at $1.60 and out at $2.10, not bad for a few days and back in at $1.90 as we only got out because we were worried about GM scaring everyone out of Ford. The original idea of the play was to just stick it under our mattress for 10 years and see what happens but 37% in a week on a stock is a lot to leave on the table, especially in this market! I thought we were getting a bargain on UNH Monday morning but the Jan $20s already fell 40% to $4.60 and the Apr $26s sold as cover at $1.50 covered very little of the damages but they do pay for a roll down to the July $15s at $5.85 and that's still a good looking price as we assume the panic in health care may have run its course. We also bottom fished on X but there was no bottom and hedged a DDM entry that's working (so far) and, of course GOOG $350s at $10.40 were too much to resist in the afternoon, those jumped 60% the next day but for the rest of the week we resisted temptation.

We were pretty well balanced overall. Right next to the UNH play Monday morning was an FXP (ultra-short China) play for the April $35s at $8 (hedged), those jumped to $10.10 already. That's all we're looking to do with our hedged positions, make enough money to improve our longs at each leg down. If we keep adjusting back to 50/50, it leaves us with a large amount of cheap positions, which will be nice if the market ever does turn up (one can always hope). We kept trying to get positive on the financials Monday (I picked FAS at $4.76) but it was too hard to hold onto although we did finish the day 55% bullish.

Monday evening we ran a Big Chart Review and I said: "Once again we are in a market that environment that reminds me of the Simpsons episode where Homer jumps over a gorge, crashes, is taken up by a helicopter (Ben) smashing against the wall along the way only to fall all the way from the top again. Pain, pain and more pain every time we try to get long." I reiterated the need for downside protection and noted our QID March $65s and short EWG plays (from the previous week) were still working: "These are the ways you need to protect your portfolio - we need to identify the stocks or sectors that will underperform the market and use them as a bearish balance to our bottom fishing plays, where the bottom seems to get lower and lower every single day." There is no need to watch your portfolio value shrink every day when there are so many good ways to play the downside as well.

I added XLU to the short side on Monday evening although they didn't fail our level test at 25.60 until Friday, MDY was in the same boat as our watch level held until Friday and the June $60 puts got cheaper, now $1.90 and still good "just in case" protection. While the indices were failing, we did hold our commoditiy levels (Copper $146, oil $37.50, DBC $18, BDI 1,800), which means the economy still isn't totally dead but perception is everything. We were expecting a bounce on Tuesday, of course, as I said in Monday night's post: "Keep in mind we are now 55% bullish - these are just in case we need to flip…" My closing comment for that post: "I wish I had something optimistic to say here but I don’t."

Tuesday morning I drew lines in the sand at 7,245 on the Dow, 738 on the S&P and 1,352 on the Nasdaq, all 15% drops from the 9th. We did manage to hold them for the week but the NYSE (4,675) and the Russell (400) finished below their marks at 4,617 and 389, worse than we started Tuesday at. Keeping a strict eye on our breakout levels helped too as NOT breaking them in Tuesday's "rally" kept us bearish overall.

Despite our expectations of a bounce my overall outlook was no better on Tuesday as I closed with: "Our wall of worry continues to be a steep one. After yesterday’s failure we do not expect too much out of today, we’ll be happy to just see a bottom at this point but it’s looking a little more likely that we’re heading into a capitulation event that can take us down to frightening levels. The 60% line is a line the markets dare not cross but, as I pointed out yesterday, we already lost the SOX and the Nikkei, with the Hang Seng and the BSE hanging on by a thread. Let’s take these levels very seriously, if the administration can’t turn it around this week - the downward momentum can easily pick up steam."

Being pessimistic doesn't spoil all our fun and we grabbed JPM as our first play of the day, sold X Jan $10 puts for $2.05 as a bet they don't go bankrupt (still $2), picked up IP at $5.62, which jumped up and but is back there again all within a half hour of the open. After a break, at 11, we sold the VNO $30 puts for $1.90 (now $2), bought AIG for .40 (just a gamble) and a well-hedged position on HMY. M was a hedged entry in the afternoon, an IYR spread is certainly not working so far but if we get another shot at the SKF bear put spread, we should take it as that turns out to be a huge payoff if we time it right. BAC was a good gamble at $4.40 at they topped out at $5.80, which is pretty good movement for a stock. Now they are back at $3.95 but we didn't want them the second time around.

By 1:34, as the Dow was rising, I was done being bullish and we upped our covers by rolling up existing ones setting stop outs on our short covers. Making these adjustments DURING the rallies helps keep you balanced. We were back and forth about covers into the close and ended up with a 1/2 cover (55% bearish) into the close as we weren't sure what, if anything, Obama would accomplish in his speech to Congress but his track record to date did not give us much confidence.

Wednesday morning I was happy with Obama's speech but I said in the morning post: "As we expected, there is no "quick fix" in Obama’s speech and we’ll see how well the markets hold yesterday’s gains... We also want to see the SOX over 200, still pathetic but something and let’s not even consider being bullish with the Transports below 1,600 (7% to go)." We expected Bernanke's second day to go worst than the first, a combination of him being tired and the poor quality of questioners he was going to face in the house. Not surprisingly to us, Ron Paul's opening statement set the tone for the hearings and CNBC anchors were caught so off guard by what apparently was a change is script (they actually said "this is not going as planned", that they cut away from the hearings! Congressman Paul continued his attack with his next 5 minutes, sounding the warning on hyperinflation that can come from increasing the money supply (our gold premise).

My first comment of the day to members on Wednesday was: "There is nothing at all encouraging on the Dow in 15, 30 or 60 min charts - be very careful. I’m going full naked on DIA puts until we cross back on NYSE and RUT." That tilted us back to 60% bearish for the ride down as we dropped 200 points from the open. By 10:14, having had a chance to look over the internals, I decided to re-run Tuesday's very successful game plan saying: "ON THE OTHER HAND - We were clearly oversold at 7,100 yesterday so I’ll be looking to do the same kind of bottom fishing today, using all the lovely cash that is building up on the DIA put play. We missed FAS yesterday so maybe a second chance today. This was our spike low time yesterday as we got Case-Shiller. We shook that off and we will very possibly shake this off so I’m going to take a chance here and cover the DIA puts with 1/2 the $74 puts at $4 and I will cover with more at $3 if we head up or roll those to 2x the $70s if we break 7,000 but I think we hold this bottom."

Using our DIA long puts and covers (along with mattress layers if necessary) allows us to quickly adjust our stance between 60:40 bullish and 60:40 bearish. Of course, timing is everything but the key is to work out your point of equilibrium in your portfolio so you know exactly what single adjustment you can make to change direction. AS LONG AS YOU CAN GET TO NET NEUTRAL WHEN YOU ARE NOT SURE, YOU HAVE WON HALF THE BATTLE! Not losing money on the bulk of portfolio allows us to pick up quick day trades like the FAS Apr $4s at $1.88 at 10:21, which shot up to $3 by the day's end and is back there now so hopefully we'll have reason to take another swing next week! The oil report at 10:30 was bullish for crude and I called that one before the timer even ticked to 10:31 on the chat, putting us 60% bullish again.

WFR was a great hedged entry, MSFT was a spread, we missed HOV (target entry was .80) , CY took off like a rocket from out $5 entry (hedged to $3.40) and IWM $37s were a quick momentum play but at 2:05, the DIA put covers stopped out, flipping us once again bearish at 7,275 as we were getting too many mixed signals to keep riding the bull uncovered. Even after that, HCBK still seemed like a good idea (hedged to $9.50) but we gave up on FAS at 3:37, pretty much the high of the day. After the close, I set up a QID (ultra-short Nas) spread for the next day as I still thought the Nasdaq looked weak. QID jumped from $57 Thursday morning to $62.65 at Friday's close (our upside cover was the Apr $67s, now $9.20). It didn't take a genius to figure out that Thursday was going to be a rough one as I had been warning all week that a $1.75Tn deficit, officially to be announce on Thursday, would not sit well with investors.

We had a bullish open on Thursday but I warned that anything less than: "Dow 7,400, S&P 780, Nasdaq 1,450, NYSE 4,850, Russell 415" would not be good and the Dow topped out at 7,400 on the dot, S&P just under 780, Nasdaq couldn't make 1,445 and the NYSE very briefly spiked over 4,850 but fell right back, dashing all of our hopes and dreams for a rally by 11 but I had already made my mind up at 9:40, when I said to members: "Gold is off $24 this morning while oil is up 3.5% so interesting dynamics. V is down a bit, LVS shot up but, overall, it looks weak to me so I’m taking out DIA putters and going naked on the long puts into the 11 am budget." We layered on the bear plays with XLF March $10 puts at $1.90, which hit our $2.50 target the next day.

The big mistake of the morning was thinking ISRG was cheap at $99.50. We took a bearish hedge with the Apr $90 puts and calls sold, netting $78.55/84.27 but ISRG fell all the way to $90.96 and that same play now nets $72.76/81.38 - $3 lower on the assignment side and I still like them! On the brighter side, we jumped all over IBM's positive announcement at 10:44 and made a quick play on the Apr $95s at $2.40, which are now $3.95 but I took a very quick .50 (20%) and ran. I would have stuck with it but I was so down on the overall market I didn't want to chance throwing away a good profit. As I said to members just after the Budget announcement at 11:20: "I do expect a big temper tantrum this week. I know I threw one at Bush’s last budget (in fact it was BECAUSE it hid so many costs) and the GDP is going to back up the Doom and Gloom squad tomorrow so still balanced bearish off this level as we haven’t hit one of our goals yet: Dow 7,400, S&P 780, Nasdaq 1,450, NYSE 4,850, Russell 415. Keep that in mind."

At 11:43 I reiterated my QID play, catching it just off the bottom at $58 yet we continued bottom fishing with BKC at a very attractive $20.30 (hedged entry). At 1:33 I decided we had confirmed the downtrend and said to members: "Not good on XLF - see they tested $8.40 to upside and failed. That puts them on path to test $8.20, which is light resistance on the way to a real test at $8 and below that we are back to $7.60 so be careful if this starts breaking down" and XLF finished the next day at $7.60 to the penny, but we also tested it first thing Friday morning. I often say to members - No, I don't MAKE the markets do this stuff, I can only tell you what is going to happen... 8-)

To offset what was becoming some extreme bearishness, I picked the FAS Apr $7.50s at $1.05 but XLF didn't hold our level and we only took some on Thursday, with more at Friday at .85 (and those aren't working either!). At the end of the day I found 3 naked puts I wanted to sell for sure: RAH, APOL and GMCR along with AMGN once we were sure they were done going down. The first 3 held up nicely on Friday but we're still wondering where the floor is on AMGN. I wasn't upset about the markets on Thursday but I was really upset about Mad Money, where I found out Cramer was peddling my mortgage solution as his own - something I discussed in Friday Morning's post.

While it was somewhat encouraging that things did not get singificantly worse on Friday, putting it that way in itself tells you how terrible things are. On the bright side, the financials did not lead us down and we did hold out 20% off levels that I posted in the morning of Dow 6,995, S&P 724, Nas 1,260, NYSE 4,600, with the NYSE coming closest to failing during the session. The Russell was already over the cliff at 400 and must lead us out next week or we're not going anywhere. We did pick up some long RUT calls just in case but it's hard to get enthusiastic about anything after a week like this.

In addition to the FAS bottom fishing we went for BAC $4 calls at .98 (now .81) and DDM $20s at $1.85, now $1.83. We repositioned out long put spreads to take some profits off the table but rolled up into a still-cautious stance into the weekend. VLO was an irresistible bargain at $19.35 (hedged), NYX looked cheap at $17 (hedged) but got a little cheaper by the end of the day. We added SKF puts and IYT calls, blew day trades on XOM and DXD but no real damage as I nailed it right at 12:41 saying: "Damn, time to cover for a pullback!" A few minutes later I said to members: "Watch XLF $7.80, if that breaks the market will likely follow until they find a floor. Nas went red, that’s our on/off switch at the moment and the RUT is barely holding it together and must hold 393, which isn’t very impressive anyway. C needs to retake $1.60 (is that so much to ask?) and BAC needs $4.40 - something is wrong in financials." $7.80 held for another hour but then began to break down. It turned out to be a new batch of WFC rumors taking the financials down but, as we've been following this one all week, we were happy to sell the $12 puts for $1.90 with a stop at $2.50 (we like them but we've been burned too often to let a bank stock ride!).

Our final move was a to go naked on our long puts and 60% bearish into the weekend. We hope our lower levels hold but it was such a sickening week and we had plenty of new upside plays that we'd rather take a small hit on our short side for a change than watch another round of longs hurt us. Notice the balance as it played out over the week - we get bearish, the bear side pays off, we look for offsetting bullish plays. The bull side begins to pay off and we look for more bearish plays to balance out the other side. As we are long-term (very long-term) bullish, our goal is just to have a nice base of stocks down at the bottom and let them run when we do finally turn around (if ever). Meanwhile, we ride the waves on the way down and pick up what profits we can.

If I didn't think we were way oversold here, my strategy would be different but I do. As I said in my review of Berkshire Hathaway's Annual Report, I have to go with Warren on this one, there's bargains to there to be had and no one ever made a dime by panicking BUT - a little cautious hedging goes a long, long way!

read more “Another Weak Weekly Wrap-Up”

Currency Markets week of 2/27/2009

Daily EUR/USD - EURO

Daily GBP/USD - British Pound
Daily AUD/USD - Aussie Dollar

Daily USD/CAD - Canadian Dollar

Daily USD/JPY - Yen

Daily NZD/USD - NZ Dollar

Daily USD/CHF - Swiss Franc

Finally the charts are giving some more setups and tradable action.

The Loonie triggered going long. You should be long the Yen and very happy, long the Swiss Franc and getting nervous and short the NZD Dollar.

The other majors have formed patterns I think are close to providing swing trade entries. Those I think are long the Aussie and Pound. The Euro is a little harder.

The bottom line is to look at the EURO. So goes the EURO, so goes the World. If the EURO heads to new lows, that means to me the whole world is getting worse and that is the last thing I want to see. I believe once the markets get their stuff back together; the US Dollar will get hammered.

The Denarii Trader.

read more “Currency Markets week of 2/27/2009”

Does it Get Worse?

Cars Sitting Parked
See the rest here: The Big Picture

Like to buy a house? How about putting it on your credit card? Well in Detroit, that's a possibility.

"DETROIT — It may be tough to get financing for a new car these days, but in Detroit you can buy a house with a credit card.

The median price of a home sold in Detroit in December was $7,500, according to Realcomp, a listing service.

Not $75,000. Remove a zero—it's seven thousand five hundred dollars, substantially less than the lowest-price car on the new-car market."

Link:
Chicago Tribune

read more “Does it Get Worse?”