Market in the Rear View: Looking Forward

Using the qqqq as a proxy for the stock market, here is a two-year weekly chart showing the nasty fall the market took at the beginning of last year; dropping about 1/8th of its value in the first three months of the year and then using the Spring and the Fall to recover.

$40 has been the key level during this period for the q's, providing resistance to the upside, and will also provide support, when the stock starts to break lower.

This last end-of-the-year rally has been low on volume, and looks to be running out of steam. The return to the $40 level for a test will not be far off.

Short rates have risen and may continue to do so as the Fed attempts to fight the very real threat of rising prices, i.e. "domestic dollar devaluation"; a problem which was created, of course, by the Fed itself.

The yield curve has inverted, increasing the odds of a recession next year. An inverted yield curve simply means that it no longer pays banks and other financial institutions to do what they do: borrow short term money to lend it long term. It's selling something for less than you buy it for, over and over again.

When lending is unprofitable, the boss hits you over the head and tells you to knock it off. So all sorts of productive activity doesn't get financed and that means it doesn't happen. Business slows. Bubbles burst. people feel poorer.

What could prevent a recession from happening next year?

The always easiest answer is that the Fed could return to her old ways and start pumping it out again like the drunken prom queen she is. Stop kidding us honey, you know you love it!

Another very real possibility is that some kind of tax reduction legislation gets pushed through sparking another growth cycle with an unexpectedly big market upside.

The establishment fears deflation like a liberal fears virginity; odds are, they'll do whatever it takes...

Greenspan: The Trailer...

Stefan M.I. Karlsson, like Murray Rothbard before him, isn't pulling any punches when it comes to Alan Greenspan and his legacy.

"...apart from inflation and economic imbalances, the defining characteristic of the Greenspan Fed has been its dishonesty. We have already seen how Greenspan claimed to have mimicked gold standard conditions. Moreover, instead of admitting how he was responsible for the tech stock bubble through the creation of moral hazard and suppression of interest rates, he blamed the bubble on "irrational exuberance." And instead of admitting his role in creating the housing bubble, he denied that there was such a bubble. Later, when he admitted that the housing bubble was real, he spoke out against it as if he had nothing to do with having created it in the first place."

A Low Inflation Kind of Year?

The Labor Department tells us that we actually experienced Deflation in November--consumer prices dropped by 0.6%.

Bill Fleckenstein is approriately skeptical about the accuracy of the official "inflation" numbers put out by our public servants in Washington, D.C.

Fed Abandons M3: what's up with that?

John Williams, at prudentbear.com, has some suspicions about the central bank's ending its publication of the broad monetary aggregate M3. What are they trying to hide?

Sean Corrigan over at the Mises.org blog takes an even bigger swing at it, foreseeing dire straits for the dollar and consequently much higher rates for the long bond.

On a separate note, here's a monthly 5 year chart of the anti-dollar, i.e., gold:

Review: St. Jude Medical

STJ gave us a freebie, so we might as well take it and run.

We sold the Jan 45-50 put spread at $2.75 when the stock was trading at $47.75; now that the stock has gapped up quickly over the $50 mark up to $51.75 The put spread is $.70 bid, at $.85.

We'll buy it back for $.80 and we are out of the trade with a $1.95 profit ($195 per put spread).

We'll wait for the stock to come in again before taking on a new position. Volume is still way positive and the uptrend should continue. Watch for support at the 200 day MA.

Stock: China Medical Tech

CMED looks like it is resting before a strong move in one direction or the other. In the month of December the stock has quieted down and has found support above its 50 day moving average. But when it does move, will it be to the upside or downside?

The big reversal day in late November showed active sellers overwhelming the momentum buyers and bringing the stock price down to a more moderate rate of increase. But the uptrend is unbroken and a pullback was due. Now that the expectations for easy money have been diluted, the volume patterns show the stock is still being accumulated.

CMED is also listed in IBD's "New Buys of Top Performing Stock Funds" for November, meaning that some smart institutional money is buying it.

Furthermore, at least through the end of the year, we are in a very positive period for the stock market and so we ought not to bet against the upside.

I know what you're thinking: "let's get long the Jan 35-40 call spread for about $1.50 and see what happens".

Okay, good call. You're getting better at this.

Stock Watch: INGR

This is another strong stock with high Investors Business Daily ratings. It's uptrend continues with its current consolidation. Institutions would rather not buy a stock too far away from its fifty day MA so they often refrain from their planned accumulation when the stocks price gets too far away.

Now the stocks historical volatility has come in from 28 down to 18 but the implied vol in the options market is still up around 26.

Since we think the stock is going up and vol is high, we need to get long by selling premium. The preferred method is selling put spreads, rather than naked puts which leave us open to big losses.

The INGR Jan 45-50 put vertical is fair at 1.90--selling the Jan 50 put @ 2.40 and buyin the Jan 45 put for .50.

Let's sell the spread there and watch.

Example: Selling an STJ Put Spread

St. Jude Medical is a company with strong fundamentals in a solid group, and it has every reason to be in an uptrend. It formed an eight week base starting in August and broke above the buy point of 47 1/2 mid Oct. and up to 52, where it sold off and has returned to the 200 day moving average holding at 47 1/2. So how should you bet it?

Since the stock is still in an intermediate uptrend we look for a time and place to get long. The safest place is at the support of its long term averages when the stochastics are low and turn up, in this case when the williams% drops below -80, then heads back above it.

One way to make a bet that this stock will go higher from here is to SELL a put spread.

When the stock goes higher, the put spread will get cheaper. You can then buy it back at the lower price; or even better if the stock has moved high enough, let the price of the put spread go to zero at expiration and just pocket the money from the original sale.

The best thing about vertical spreads is that your losses are limited.

If you use strikes that are 5 points wide, like the STJ 45-50 put spread, its value will always be between $0 and $5. If you bought it for $1, the most you could lose would be $1; if you sold it for $1, the most you could lose is $4.

So let's look at the STJ Jan 45-50 put spread. With the stock at about $47.75, this put spread is trading for 2.75, or $275 apiece. Selling it there would put $275 into your acount now and if STJ went over $50 and stayed above it at the Jan expiration of those options, you would simply keep the money.

If STJ went below $45 and stayed there at the Jan expiration, you would lose the $275 plus another $225 of you own cash because the price of the put spread that you sold for 2.75, would go to 5. But you can buy it back at any time before expiration to get out of the trade, either to capture a profit or to keep from losing more.

Now with STJ in an uptrend and the stochastics about to turn up, let's paper trade the put spread, selling one at 2.75.

We'll watch it and update in the near future.

Recent New High in the Q's

Here is the weekly chart of the Q's. A new high, yes, but where is the volume? over the last dozen weeks the volume was on the downside and now in the new rally the up weeks are tainted with modest trading activity.

Buying activity did pick up underneath the 50 day moving average, giving support there, but so far aggressive buying has been absent. If this is the start of the rally season, shouldn't there be more people in attendance? Hmm.

Okay, I'll keep a wait and see attitude. But the Fed rate hikes do continue, and this is the first year of the Presidency, classically the poorest performing of the four year Presidential cycle as the Fed tends to pull the punchbowl away after their election year manipulations have done their trick.

But rally time is rally time, and the market is showing better and broader leadership this time around.

The rotation has been out of the oil and housing stocks and into certain retail, financial, medical and transport stocks. More to come on the individual winners in the near future; stay tuned.

Real Estate Futures to Trade at the CME

Set to debut in April at the CME, this futures contract will be "based on the median home price in ten U.S. cities".

The exchanges are continuing to offer new products in an effort to compete with newcomers for order flow. Some have gone public already, and more will surely follow. Let's go to the charts to see how they're doing.


The ISE is an all electronic options exchange here in the U.S. in competition with the five others, four of which are floor-based. It has run up about 30% in the last month, and is at risk of a little correction as those holding paper profits might be quick to take some off the table. But the volume shows big accumulation and the stock is a great bet for the long haul. A good buy around $27 1/2 if it comes in.


The Arca exchange has already started to come in after a quick runup from $40 on strong volume. As long as it continues to act well, it would be a great buy at $45, at the 50 day moving average.

The small group of publicly traded exchanges, which includes BOT, NDAQ and of course the CME, will continue to innovate and grow as public firms. They should be considered for the trading vehicles that they are, and also as good investments.

Big Cap Stocks of the Week

Here are the charts of the highest rated big caps according to Investors Business Daily, based on their proprietary composite ratings.



Motorola looks great with strong volume on the up days, a convincing break above its 200 day moving average, and a methodical base building process as it approaches the break out point at $24. It would be best if it had one more shake out to form a handle, before the big volume break out to new highs.



St. Jude Medical is also in an orderly uptrend, with the big volume days on the upside. It is one of the leading stocks in the strong medical sector and is showing good action after its break out at $47 1/2. A break above $50 with the continued support of its 50 day average could leave this stock a longer-term winner.




Norfolk Southern is in the very strong transports sector, has broken above a short-term base at $41, and shows the signs of volume accumulation and support in the moving averages.

The big caps tend to be less volatile, have a lot of liquidity, and have very active options markets behind them, leaving many ways to gain from their movements.

Now go forth and prosper.

Broad Market Indexes

Here are the latest 6 month charts for a quick look at the state of the stock market.

Notice the recent run up in the Dow Transports and the flatline of the utilities during the Bull of the last few weeks. What does that tell you about the markets expectations for interest rates?

Utilities are one of the most rate sensitive sectors of the stock market. They don't do well when interest rates rise because their earnings are strongly affected by the cost of borrowing money; they are heavy debtors. When that cost is low, their earnings are high, when that cost is high their earnings are low.

Transports are strong when the economy is running strong or soon will be. Their earnings rise as they are booked to ship more goods to and from manufacturers and to their final destinations; the Dow transports are indicating an uptick in the economy which leads to a greater demand for credit, and higher rates as a result.

During the past year, businesses were getting squeezed between higher commodities prices which they pay to produce goods and services, and an inability to pass them on in the form of retail price increases.

Now however, the lid may be coming off the prices that they are able to charge, and they are anticipating larger profits in the near future as a result.

Given all this and the fact that the ten-year Treasury yield has gone from 4.0% to over 4.6% in short order, it looks like long rates will be rising with short rates, and the yield curve will continue to steepen.

But will it last if the Fed keeps raising rates?

At least for a little while, yes.

Bonds and Futures Links

A couple of more links, then I'll get back to business.

Here is a bond yield summary from BondsOnline.com; and a very concise futures page from Barchart.com.

Thanks to PrudentBear.com for both.

200 Most Active stocks by Options Volume

Here's a link to the list from ivolatility.com

Economics Texts Online

Here's a list courtesy of Tyler Cowen at Marginal Revolution.

Investors Business Daily Big Cap Twenty Stocks

Here are the graphs for Tuesday, October 25. IBD runs a computer generated ranking of leading large cap companies trading in the U.S. and I dropped them into a stockcharts.com page.

Fed's Fisher spooks the Market

He seems to be blaming a new bout of inflation on hurricane Katrina; so rates (fed funds) will continue to rise. The stock market cries 'Uncle'.

Hello seasonal bout of weakness.

The End of the Dollar Standard?

Rob Lee at Prudentbear.com gives us four reasons why the U.S. dollar standard system is breaking down.

'As Voltaire said in 1729 "paper money eventually goes down to its intrinsic value – zero."'

Dow Jones Industrial watch, CAT

CAT, another of the big Dow 30, is coiling like a snake, ready to break out over $60 on strong volume, just like she did at $55. Get ready to sell that put spread but don't jump the gun; this little triangle pattern could still fail. Wait for the closing new high.

Dow Jones Industrial Stock Watch

AIG you look like you are ready to break out on strong volume over $62 1/2; you know once you do the sellers will disappear for a while. The path of least resistance. The future is Kaleidic and yet we seek order. Your historical and implied vols are pretty close; as your stock rises your vol should stay low or drop further. How does shorting a put vertical sound? Excellent.

Now to find a call spread to sell on another of the Dow stocks. "Market neutral" means live long and prosper.

The Nobel to Israel Kirzner?

The announcement for the Nobel Prize in economic science is due out in October; Peter Boettke makes the case for Israel Kirzner.

Kirzner, along with Murray Rothbard, carried on the work of Ludwig von Mises and spearheaded the revival of interest in Austrian economics that began in the early 1970's and continues to grow today. While Rothbard was more prolific and wide-ranging, Kirzner focused on economics.

His Competition and Entrepreneurship is a critique of neoclassical price theory; the "perfect competition" model built upon an equilibrium foundation, with its unrealistic assumptions about time and knowledge, and its total neglect of the process by which an equilibrium state would come to be.

Without a market process to drive prices toward that equilibrium state, there is no need for the one whose actions make that happen, the entrepreneur.

This mystery-man is noticeably absent from the neoclassical story, but he is center stage in the Austrian one, and he is not alone. Because others are on the prowl for profit opportunities also; he must compete with them and win in order to gain.

To Kirzner, "competition" means "rivalry". Every businessman knows it, but not many economists do. To them, "competition" means the state of not having to compete.

If you've ever taken a microeconomics class, you've learned about that neoclassical fraud called the "perfect competition" model; you knew from the beginning that there was something wrong with it, and in Competition and Entrepreneurship Israel Kirzner shows you what.

Watching the Money Czar

Chad Hudson ask's over at The Prudent Bear, will the Fed Pause?

Prices keep rising even as the economy seems to be slowing. Wasn't their a name for that?

The Monetary Central Planning Group of America, the Fed, meets in two weeks to humbly decide behind closed doors, how quickly they will destroy the value of the dollars we save and earn here in the land of the free.

The Fed Funds market has the probability of a quarter point rate increase at about even money.

One order of flattened yield curve, comin' up; would you like a market crash with that?

Ludwig von Mises

Ralph Raico writes about The Great Economist of the twentieth century. Those who have never heard of him should read it. It starts with a trickle.

Why No longer Term Bets in the Oil Market?

Tyler Cowen wonders why futures markets, such as the NYMEX, don't sell longer term bets, and offers up a few possible reasons why.

My take is that these markets develop and grow out of the needs of the hedgers, who look to lay off the risk of future price changes, and focus their efforts on profiting from efficient development, marketing, and production, etc., where they can play a strong hand.

For a market in longer term contracts,like 10 years out, it may not be enough that speculators want them. Speculators can come and go as they please, and their activity alone would probably not provide enough consistent liquidity to sustain the operation.

But firms whose existence requires them to be consistent buyers or sellers of a commodity, like refining and exploration companies are with oil, may have business needs which only require them to lay off price risk a few years out and not beyond.

Without the hedgers participation in the longer term contracts, there is little hope of enough liquidity to justify the contracts existence.

But over-the-counter contracts can be created by the larger brokerage houses, who will take the other side of any bet you care to make--for the right price. If enough of the same kind of OTC bet keeps getting requested, then someone there will eventually get the idea to standardize and list it.

Inflation and Asset Prices

If someone were to ask you what the current rate of inflation is, what would you say? Well, if your answer has anything to do with the CPI (consumer price index) number, you should think again.

Thorstein Polleit writes on the problem with using this index as the benchmark.

Massaging the perceptions of their populations is the oldest game in politics. Are things really as good as they say they are?

The Austrian economists were critical of the use of all indexing, for a number of reasons, and they argued against the use of aggregates that has come to dominate the world of macroeconomics.

The misuse of the (government created) CPI is but one example of how the U.S. government tries to put off the consequences of its own monetary manipulation, at first denying the existence of inflation, and then when no one buys that line anymore, blaming someone else for causing it in the first place.

But being that the nature of all governments is some combination of force and fraud, one could expect no more from them.

The interesting part is how mainstream economists, who have some degree of independence and intelligence, will don their tu-tu's, go before the cameras, and say their lines on cue; denying domestic inflation and blaming price increases on the greedy oil companies or some other villain of the moment.

Misdirection is essential for the scheme to work.

It's how all pickpockets operate.

Planning For Failure

From cafe Hayek, an MIT professor finds the solution to high oil prices in a scheme to have the best and brightest take over the helm of the American energy market, and force it to conform to their more rational plan for production and consumption.

Dr. Heywood differs from Chinese communists--in that he is not Chinese, and he would most likely balk at the accuracy of the label "communist".

The functions and importance of the system of free prices is a pretty big thing to not know about. And it takes more than a pinch of hubris to be willing to go out in public and unflinchingly display that ignorance. But Dr. Heywood plows ahead, nonetheless.

On second thought, he's perfect for the job.

You Wanna Bet?

Alex Tabarrok from the Marginal Revolution gets a chuckle over environmental "scientists" who are long on talk, short on integrity in Not Putting Their Money Where Their Mouths Are.

Inflation: Deception at the Core

Peter Schiff on Getting to the "Core" of Inflation Propaganda at Kitco.com, argues against this sleight of hand used by establishment economists and media "intellectuals".

These economists say that the already misleading inflation numbers put out by the beneficiaries of said unacknowledged inflation, need to be modified even further, to exclude those price increases which they would like not to be taken account of by ordinary Americans, who know that they, themselves, are paying much higher prices this year, but could be fooled into thinking it's just the result of their own bad luck--and not of the abhorent abuses of the hogs at the trough in our nation's capital.

They might be fooled if morons in suits say these stupid things with straight faces, resonant voices, and the steady stare of their dark, beady eyes which mask the condemned souls of these fallen ones--servants of beelzebub.

At least the people might be fooled for a little while longer. And hey, it's just the next election cycle that really counts anyway, right?

Option Market Making by Allen Jan Baird

This book is written for those who would like to become a market-maker on one of the options exchange.

Baird's focus is on the "...basic risks, strategies, and tactics of options market-making as a profitable business. It's goal is to be both a theoretical and a practical reference for options traders, dealers, and market-makers in financial and commodity options markets..."

Right off the bat you know that this is not a book for beginners or small-time retail options traders. Nor is it a book for the speculator of any size for that matter, though they too would profit from reading it.

His focus is on those people who have to take the other side of whatever order may come into the options trading pit, and how they might capture their profit while still minimizing their risks.

He starts out with a brief discussion of fair value, pricing models, and volatility. Then he quickly moves on to the standard risks of individual options such as delta, gamma, vega, etc., giving good explanations of each.

Next, he talks about those subjects which don't often appear in thin books on options trading: synthetics, conversions and reversals, the importance of interest rates and boxes, time and calendar risks, and finally core strategies and market-making tactics.

Baird does a great job of avoiding the temptation to impress his readers with a lot of formulas and mathematics and instead relies on simple examples and diagrams to get his concepts across.

As I said, this is a thin volume, coming in at under two hundred pages, but it gets right to the heart of the matter. It doesn't take the encyclopedic approach that some fall back on, but gives simple and direct instructions on how to hedge individual trades and what kinds of overall positions you should be shooting for as a market maker.

This is an excellent addition to any library on options trading, as a reference for the speculator, or an instructional guide for the future market maker.

Options Market Making gets the Full Moon rating; excellent.

QQQQs in the short term; bad moon rising.

The Nasdaq, here represented by the qqqq's, looks ready to make a run up to test the yearly high near $41.

But coming at this time of year, in this interest rate environment, and during the first year after a Presidential election, The odds are...that it will fail.

The recent correction during August has been accompanied by the increase in implied volatility that one expects to see when a stock heads south (yellow line). If the Q's do rally from here, implied volatility will again decline offering up a great opportunity to the straddle or put buyer to buy cheap vol going into the traditionaly stormier seas of September.


Front month implied vol on the Q's is currently running about 14 which is not a bad buy in itself, historically, but should it get down to around 10 again within the next few weeks, it would be a screaming buy.

If one wanted to trade this scenario immediately, one could SELL the Put spread Oct 38-39 for about a $.40 credit. Then when the market tests the new highs in the next few weeks buy back the short options (the Oct 39 puts) with the lower implied vol--for about $.30, leaving you long the Oct 38 puts for a net CREDIT of $.10.

Though there aren't any sure things in trading options, getting long vega and gamma that cheaply in this market environment is a solid bet, leaving one open to the small probability of a big payoff.

Citigroup and the Business Cycle

Citigroup earnings disappoint due, in part, to a flattening yield curve; it's fixed-income markets revenue dropped by 28% from the prior year. The stock is currently down about 2.5% on the day and has been the catalyst for a weak banking sector.



When short-term rates are high relative to long-term rates, bank margins get squeezed. Since they are in the business of borrowing "short" and lending "long", when their cost of funds rises (short rates), while the price they charge others to borrow them remains the same (long rates), their profits dissappear.

The yield curve itself is a product of both the market, and government intervention. The Fed has been hiking up short rates in order to keep inflation at bay, and to keep speculative markets like real estate, from getting out of hand. But longer-term rates like the ten year T-bond yield, are set by the market, and have remained stubbornly low.

If short rates continue to rise and surpass long rates, the yield curve will then be negative, and that does not bode well for the economy or the stock market. Financing begins to dry up as lending money becomes unprofitable, and business activity slows down as a result.

And even a well diversified banking powerhouse like Citigroup will feel the pain of an unacknowledged business cycle.

Single-digit Implied Volatility

Implied volatility (yellow line) on the OEX is now down below 10. It generally goes lower as the market moves up, and higher when prices move down.

But at this low level the daily drip of decay is more bearable to option-buyers as they wait for the next big move.

The Treasury Bond real interest rate

An interesting look at the current bond market interest rate conundrum throught the lens of Austrian Economic theory, via Mises.com.

The problem is that the current real interest rate is roughly zero, the exact number being dependent upon how you arrive at the true rate of inflation, and therefore, what you think it is; government supplied numbers are never quite what they seem.

If the current nominal market rates are the result of an artificial stimulation by the central bank, then the coordination between the time-preferences of savers, and the time-preferences of borrowers will be all screwed up, leading to further boom/bust cycles in the economy and a genuine loss of wealth.

QQQQ and the Moody Blue

The big picture on the Nasdaq composite eqivalent, QQQQ's.

Resistance can be found at the high of $40 from the end of last year, where the 200 month moving average is also coming to rest. Notice the distribution volume during the first half of this year.

Now tell yourself it will all be O.K.

Money Supply heading South of the border

This graph from an article over at The Daily Reckoning gets to the heart of the matter. The stock market is in for a heap of trouble this fall given this kind of monetary environment. MZM has gone negative and the yield curve is flattening, and may go negative as well.

This adds up to a recession for the economy and a downtrend for the stock market, with the possibility of a good old fashioned whacking before the end of the year. The August-September time period is the most likely candidate for the lows of the year, according to The Stock Trader's Almanac put out by Yale Hirsch, and the year after a Presidential election tends to be the worst.

If this is true what should you do? If you've already made some money this year on a good pick or two, think seriously about banking it, or at least hedging. If you want to make some money on the possible down turn, buy some puts.

Implied vols, which means options prices, are low at this point, i.e., calls and puts are cheap. This varies from stock to stock of course but as an example, let's take a look at the QQQQ options:

As you can see, the implied volatility (yellow line) of the Q options is at a low. Notice how it spiked up in August of last year, which is another way of saying that the calls and puts suddenly became a lot more expensive, or that those who had the foresight to buy them just prior, made a lot of money. Will this August be the same?

Of course no one can predict the future, but those who consistently make money at anything know to place their bets when the odds are in their favor, and reduce their risk when the odds are against them.

Credit Spreads

SFO has a good article on one of my favorite options strategies. The best thing about it, is the fact that with credit spreads, time is on your side.

But the downside is that right now in the equities options markets, implied vols are low. People have already been selling those at-the-moneys for all they're worth, and you may just be the last in line. Your wages (pay per hour) would be very low at this point, so why bother?

Then again, if the skew was in your favor, you could probably find a good backspread or two and just wait it out. Sometimes even negative surprises can be a good thing.

Charting the Volatility Index

Successive hundred point drops in the DOW due to higher oil prices, caused a rise in the VIX from it's low of around 11; straddle buyers should be happy.

When she bottoms, she bottoms quickly. People get nervous before earnings season and in this environment of higher short rates and higher commodity prices, they may not want to risk a nasty surprise. So some will sell early and come back to buy after the dust settles.



Maybe the Summer will be interesting after all. The down days came on heavier volume in the DOW and left a lower high behind, hinting at an intermediate term downtrend in the stock market.

But in order to make that official, the DOW would have to drop below the 10,000 mark, making a lower low; not an easy thing to do without a small dose of panic.

And that's something the straddle buyer would love.

Black Robes and Goose Steps

The long march continues, as the Leftists on the "Supreme" Court lead us further down that glorious road to serfdom.

"Taking" is a tradition here in the land of the free; the very foundation of progress. Without it, how could we plan for our glorious future? Should chaos rule, instead?

Your house is your's--unless we want it. Then it's ours... so it can then become his. Let the will of " the people" be done.

And let this blather about your rights, be done, too. You stand in the way of progress, waving some old parchment that's of no interest to us. You will be crushed, and your parchment will be buried, and we will drown your cries with the sounds of our boots, clapping the ground as we march on past.

Your quaint attachment to this notion of rights, is outdated in this era of public-spiritedness and planning. Our rulers are benevolent, and much smarter than you. And only by their will, can some progress appear. Let their will be done.

On what basis do you challenge them? You are a selfish peasant who seeks to deprive the community of what it needs. When instead you should be rejoicing for the opportunity to serve. No more evidence of your individual corruption is necessary. By your challenge, you display your guilt.

The people march forward in stone-faced columns, with empty hands and hollow eyes. Following the goose-stepping imposters in their shining, black robes.

With nothing in particular on their minds.

volatility crush

Summer's here for the options markets; volatility is nearly nonexistent as the VIX sinks to 11. This means both calls and puts are being sold by the professionals, who don't expect much activity in the stock market--at least not for the next 30 days.

Are they right? Probably yes, for now. But at some point nearer to the end of Summer, in this post-election year, shopping for puts will be the prudent thing to do. Especially if options prices remain this low. Short term money is getting tighter now, by the Fed's design. They pumped enough into the system prior to the election to keep the incumbents happy, and now it's time to soak it back up. Same old story.

With commodity prices continuing to move up putting the squeeze on margins, the third quarter results could have an excellent chance of coming up short. And surprises are very good for options buyers.

Uva uvam vivendo varia fit.