Striking At the Core of Apple

As we head into earnings for Apple, Inc., investors, short sellers, and traders await anxiously for the report on tuesday afternoon. Of interest, since the run up of Apple from the 430 level to 644 level in a short period of time, a number of catalysts has pushed the stock to an area that requires further due diligence. What is most interesting is that the sell down of Apple by 10% or so represents the worst sell off of Apple in its history. The question that remains and will be answered on Tuesday is the sell off due to worries about different suppliers' issues having a materially effect on Apple OR is it due by by slick algo traders (HFT) who know (somehow in advance) that the selling down of Apple in the fashion that we have just seen (a yo-yo sell down - up - down) is to ensure that weak hands (i.e. retail and other funds who can not stand this volatility)let go of their shares, so that the big boys (insiders) can enter in at a better price. There is almost a perverse sense of joy by different commentators on a well known media station that talk non-stop in almost every segment about Apple seeing its decline. Gone were the comparisons only a few weeks ago that on a ten year chart, the move up by Apple hardly looks parabolic but of course on 1 quarter chart, it looks extremely parabolic. Gone are the days that the PE is below the PE of the SPX, and instead in its place, that all great stocks/companies must take a breather. Oddly, the focus on Apple is beyond anything I have ever seen. It is as if none of the many other amazing companies exist or are worthy to talk about. The fixation on this stock is an addiction by this media company. I did a study today on how many times that this media station talked about Apple and it was over 100 times for the day. Well, here are my thoughts. My study shows that when a stock appears that it will beat significantly earnings, the large players who have the capital to both knock it down and buy it back at a cheaper price will do so and in hopes of getting an even cheaper price by scaring off other investors who perhaps got in around 430 and don't want to get out at 470 or 500 or 550 so they will sell and the stock will move lower to about that range. The truth is that Tim Cook nor Apple will disappoint. The numbers of 41 billion in revenues and 11.99 earning per share will be handily beat. Cook will also not lower guidance and look to China as proof positive that this stock is on an upward trajectory. The stock will drop immediately after the numbers are announced but then climb back to above 600 plus by Wednesday and open about 50 or 60 points higher. If Apple disappoints, you can expect the entire market to fall as well too. Now, what is even more exasperating is dealing with all the noise leading up to the trade. You have people that are exhausted from this yo-yo trading and that is topic of another blog entry. As the Wall Street Outsider, I am not privy to dark pools, or secret pal handshakes, or any kind of special programming that others spend millions on to ensure that they can either move the trade in their direction, I call it as I see it, feel it, and know it to be true. Trust your instinct. - The Wall Street Outsider

Dancing with the Wolves: The Vix'n lives

The last few weeks of action since Bernanke last spoke, is enough to turn everyone on their head. With exaggerated moves up and down by about 400 points on almost a daily basis, one must question why is the VIX still in the mid to high 40's one day and never going much below the mid to low 30's. When will the VIX return to below operating levels of 20. The truth is that until Europe gets back on track and provides a believable level of financial sustainability, one might expect the VIX to be on the high side for quite some time. This is a trader's delight for when the VIX is this high, it is predicting that 2 - 3% moves on the SPX. Of course, now that Bernanke made no mention of any QE-3, I believe this will give the impetus for the U.S. to get their own financial house in order and have the politicians stop acting like three years old fighting over a bucket in a sand box. As luck would have it, now that we are starting to get back on track, albeit, at a slower rate than anticipated by all, we have Mean Hurricane Irene, which may wallop the entire Northeast of the U.S. and cause up to 100 billion dollars in damage. Even mother nature has decided to give the U.S. a run for its money literary and figuratively.
Here's to a safe weekend to the more than 65 million threatened by the 200 mile Mammoth Hurricane moving up the coast. In the interim, thankfully I purchased a raft from Rite Aide and have two paddles from my crew days which I plan to use to make my way down to Wall Street. Though I am outsider, chances are no one is getting in on Monday but those on boats - maybe by Monday, I will be an insider again.

Bernanke to the Rescue

From one of my trading colleagues, I was told of the story of one professional who was force to sell out his entire account and take 3.5 million loss. The colleague said to me, "you make it slow, and you lose it fast." Those words sent shivers down my spine as I watched my own margin calls pounce upon me and demands from my brokerage to put up or sell out. I was out of capital. I told them that the VIX never gets to 48 and the last time it was there, there was a reversal of massive proportions by the next day. I have sold naked the VIX 25 August Calls @ 1.20 and they had gone against me to 12.10 and by the end of the day, today, they were still against me by only by about half of yesterday which meant I could get a half night of sleep tonight as oppose to yesterday when I was so bugged eye that I swore that should I ever get into the black that I would never ever trade again - I have made that promise to myself more than once and I always break it. With Bernanke's clear and concise statement of keeping interest rates low until the middle of 2013. One can only imagine what this means for companies - the goal of hitting 1400 seems like a very real possibility and by the end of the year. The VIX still has a chance to retrace back to normal levels as in under 25 or closer to 20 and 19. We shall see.

The Great Magician Continues To Pull More Bunnies Out than Ever From an Invisible and Make-Believe Hat

First part from an article in Yahoo July 28:

Markets have been rattled lately by figures pointing to a slowdown in the U.S. but analysts say initial fears that the world's No. 1 economy was heading toward a second recession have subsided.

"Two weeks ago, people were wondering whether the U.S. was slipping back into a double dip," said Howard Gorges, vice chairman of South China Brokerage in Hong Kong. "In fact, corporate results are very good. The market is starting to get the message that the economy is not so bad. It's not a pretty picture, but it seems to be a slowly improving outlook that's ahead."

My take:

-- on what basis, when you have falsified accounting practices from FASB permitted by the US government, within two weeks, all is coming up roses again - incredible - the greatest legacy of the Obama administration is to build up such smoke screens and charades to convince the majority of the mindless American to re-invest their remaining dollars into corporations and entities that surreptitiously acquired Americans old dollars (hence the reason that US corporations and US Banks NOT individual Americans are sitting on 3 Trillion dollars of cash) because "they (Individual Americans) can't stand their dollars to earn zero interest" - This has to be the biggest financial ruse in the history of the United States - even besting the Great Depression by failing to even acknowledge that this too is a Great Depression - I am wondering how much longer the media will continue to play into this ruse - I have now spoken to three respected colleagues that believe much like everything else that this administration does, they will inflate the economy with numbers to ensure through November that as many democrats as possible are all re-elected and Obama's base is not shrunk. The whole process sickens me because in between we all know that the political aspect of how the market is perceived ("It's the economy, stupid") is the "Unknown factor" and can quickly derail years of technical and fundamental analysis.

That is why nothing makes sense whatsoever in investing. Therein, also lies the answer to the question of how come the Obama administration has significantly laid off on the attacking of banks, black pools, hidden hedge fund tricks, and high frequency traders even BP as well to ensure his media based global plan entitled "Recovery Summer" goes off without a hitch (just like his famous "Green Shoots" plan of March 2009). Obama is one hell of a magician and hypnotist making Americans think he has their back, while his administration most likely is cutting backroom deals with corporations to inflate the economy. This way, Bernanke aka the Fed nor the Obama Administration have to reach into their pockets to stimulate the economy and give the appearance that they are not increasing the deficit.

Very few Americans (who can think for themselves) see right through this, but the vast majority either do not see, do not care, feel hopeless, or have become lost souls of the American Dream.

One of the "recovery keys" is to prove that Europe is stabilized between the bogus bank stress tests (check), to numerous Europeans saying, "hey, we are not as sick as you think we are, in fact, we are far better off (cough, cough, cough) than you might believe.

How the US spins the unemployment numbers will be a feat - but knowing the Obama administration they have some trick up their sleeve already to give the perceived notion that unemployment and underemployment must be lower while excusing the fact that they have now extended unemployment benefits for a record 7 times. They need this final key in place to ensure re-election of as many democrats as possible.

The real question is "How long is Obama Administration going to spin numbers in either government reports or falsified corporate earnings back room deals to present a far rosier picture than actually exist" or "a not so rosy picture but much better than we expected picture".

Why can't anyone believe that America would be far better off if severe austerity measures were put in place and while perhaps painful at first, would improve the economy that much more quickly than this self-indulgence of spin at the ultimate expense of the every day American?

America Will Never Be the Same

The SEC and US Government should be ashamed of itself by letting Goldman Sachs off on 550 million fine over a least one known fraudulent transaction magnitude of which dwarfs this fine. This fine is the equivalent of a mere parking ticket for the company and represents a little less than 5% of Goldman's 2009 net income of 12.2 billion after payment of dividends to preferred shareholders or approximately a mere two weeks of net income.

By the SEC (thereby the US Government) using Goldman Sachs as an alleged scapegoat a few month ago and bringing charges against them when FINREG was in jeopardy, and then passing FINREG on Thursday, and announcing the same day two hours later that GS and SEC had reached a settlement speaks volume of corruption. Even before the announcement, clearly the corruption had already hit the trading floors as over 100,000 call options in GS traded prior to the announcement that some type of settlement between GS and SEC was coming.

There is not a single American (Goldman Sachs alum and current members of this company withstanding) who does not believe that what happened yesterday with GS represents a new low in fighting corrupt banks who have stolen billions from hardworking individuals with their clever schemes and their anticipatory hopes that most Americans are either too dumb to realize what just happened, don't care, feel hopeless to stop it, and if none of the three mentioned, will most likely have a short term memory and quickly forget about it.

This is a complete outrage. GS has committed the equivalent of the greatest bank robbery in the history of modern times, and gets off scot free.

They put together at least one known investment structure that was known to fail from the beginning, collected fees, bet against the own interest, collected more dollars, let the whole structure go belly up. Thereafter, they get bailed out by the government, AIG gives them additional money from its bail out money, GS uses all that money to trade with (interest free courtesy of the US government) and reports record earnings through out 2009 with its CEO Lloyd Blankfein proclaiming last year that Goldman Sachs does "God's Work". Meanwhile, tGS continues making more and more money off of the money that they made perpetuating fraudulent financial schemes, and then lending back to others at interest the very money that they stole from others, thereby making even more money and the vicious circle continues. Now GS wipes its hands clean and pays a minute fine for their financial crimes against all Americans. In furtherance, GS did not have to admit that they committed fraud.

I would not be surprised if the US Government and all Americans (except for GS) are now the laughing stock of the entire global community. This makes Bernie Maddoff look like a two bit criminal compared to what GS did and what they got away with.

America will never be the same country again because it sends the wrong message to all Americans and that is: If you play by the rules, you will get hurt financially, and if you do not play by the rules, then you not only get to hurt others, but you will get off scot free with the right amount of power and money.

Thursday, July 15, 2010 will represent one of the saddest days in American history - it is the day that will be forever remembered by Americans where they lost complete hope in their government to right the wrongs of others who brought America to the brink of financial collapse and let them get away with it and a consistent reminder of how the US stock markets are rigged against the every day man and woman.

The Two Most Despised Companies Cause a Reverse Rally In the Last 30 minutes

Overbought, overwrought, the S&P and Dow was heading back down expeditiously until BP announced that they have stopped the leak with their new top and a flashing news break came across that stated GS to settle with the SEC. On such news, Goldman, which low today was 137 rallied 4.4% to 145.22 and jumped additionally another 7 points to 153 plus after it was announced that Goldman Sachs would pay 550 million dollars or the equivalent of perhaps 3-4 weeks of trading revenue by the firm despite the billions of dollar. In another story, BP stated the leak has stopped and that drove BP shares up 7.6% to 38.92. With Producer Pricing Index first announced in the morning, the market dropped by about .5% almost instantly. Initial Jobless claims appeared to drop to its lowest since August 2008, however, not factored in was the seasonal factors and the reminder that more people are leaving the work force permanently. Volatility reigned once again as the Dow swung from a intraday low of 10241 to an intraday high of 10379 finishing barely negative down 7 points at 10,359. The S&P was up 1 point after swinging from an intraday low of 1080.53 to 1098.66. All of this while the 10 year Treasury note returned to a yield of 2.98%. Again, trading was anemic was 1.12 billion shares.

Fed Downgrade On The Economy Equal Flat Market?

The Fed today downgraded the economy today stating that they believe it will take five to six years or around 2015 to 2016 nearly at the end of President Obama’s second term (if re-elected) is complete. Interesting timing here. Despite the downgrade, and the initial move down in the market, in uncanny fashion, the market recovered to barely eek out a seven day UP streak for the Dow and Nasdaq.

The Dow closed up 4 points to 10367. The S&P was down less than a point at 1095. The Nasdaw gained a mere 7 points to 2249. The 10 year treasury note was up 20/32 to yield of 3.05% based on an auction of treasury 30 yr bonds that somehow brought stronger than predicted demand.

Intel should have led the technology rally today reporting earnings yesterday that was the best in their 42 yr history. Oddly, the follow through was not as great as any predicted. As expected, with people losing more jobs than ever, retail sales were down for the month of June. Volume remained anemic at 1.06 billion shares.

HERE IS THE INSIDE SCOOP FROM THE WALL STREET OUTSIDER:

Spoon: Consolidation of the market and collusion of keeping the market up during option expiration week.

Scoop: Expect a market decline coming next week of at least 400 points. The next two days expect a relatively flat market until market expiration.

Idea: Write Puts on your favorite stocks - gain a little premium