weekend outrage--be warned nothing to do with markets

     I need some help in dispute resolution. My brother and i had a half hour argument regarding the comments on contraception, made by some guy who is a major contributor to the santorum campaign. To my knowledge,this is what he said, and i paraphrase. "In my day contraception was an aspirin...women held it between their legs..." Before we continue i should make a quick confession . I ,like liberals, love to find things to be outraged and indignant about. I think its out of boredom, but it sure feels good to have a cause. Anyway, this creepy old guy, clearly over stepped normal boundaries by making an inappropriate joke about womens body parts. If we as a society want to ramp up punishments on stupid, unfunny jokes, i for one, will not oppose. That being said, its obvious that the guy was trying to say that an effective form of birth control is abstinence. Do the liberals disagree with that thesis? is abstinence ineffective or inappropriate for avoiding unwanted pregnancies. I did not major in biology, but it seems that i would agree with the general point of the creepy guy. At this point of the discussion my brother made the point that its outrageous for the republicans to place the blame of unwanted pregnancies solely on the women.  I couldn't agree more and i dont think thats what he was saying. You could easily make the point that he was saying that women are strong and have choices, one of these choices would be abstinence. At this point of the discussion i was still trying to figure out what i was supposed to be angry about. The last and most important part of the argument is that this is a person who is not, himself, running for any office so who cares what he says. I would have to think that many campaign contributors have radical viewpoints and that's what draws them into the political discussion. I think i should note here that i am not particularly religious and i have never voted for major offices based on any platform other than economic policy. If you have time i would like to know if you side with me in this discussion or my brother. You can indicate via twitter by saying "im with you" or "im with that sniveling little liberal puke paul"

greece follow @jimiuorio

   My partner just asked me, are we supposed to go home short the euro in case something breaks over the weekend? I think the short answer is yes ,i suppose we should,but its not quite the layup it once was. If you are wondering if greece is going to default all you have to do is look at the greek 1 yr and 2 yr and you should realize that the time for that speculation is pretty much over and all thats left is narrowing down the time frame. That being said the euro is slightly higher, equities are slightly higher which leads me to believe that the market is fully prepared and no longer sweats it. That seems crazy to me and i believe there should be a bit more concern regarding the unintended consequences of the default and for that reason i will remain short the euro. On a another note, my guess is that the ecb is not gonna give a penny more to greece. If they were going to, would they have really made an argument about 300 million in additional cuts? thats a rounding error of a rounding error. My gut tells me that time is being bought until the ecb can be satisfied that all the proper ring fences are put in place. That, of course, is different than actually having them in place....thoughts???

thoughts for wed follow on twitter@jimiuorio

   I  think its important to take a big step back in order to get perspective on the situation in europe. The ecb continues to go to extraordinary lengths to avoid a greek default. Greece is a tiny country with an tiny economy and based on that should be insignificant

in the global economy. The fact that it isnt insignificant, is strong evidence of the pervading weakness thats spread throughout the eurozone. So much weakness that the ecb doesnt think it could withstand a default from an economy smaller than at least 20 states in
the u.s. For these reasons i see no point to being anything but short the euro. I try to increase my shorts on big euro up days, but i suspect those days will become less prevalent going forward. That being said, i am not necessarily bearish u.s. equities but i have become very cautious and will scrutinize every down move to determine
if it is the much needed correction. I continue to increase long exposure to vxx. I usually do that by selling the etf and buying a disproportionately higher number of out of the money calls. I do this to try to combat the decay element of the etf thats due to the roll up
in the underlying futures contracts (if anyone wants a further explanation please ask).Natgas is beginning to look attractive and although i would rather cut off my thumbs than be long that pig ung i do think there are decent ways to play it in the exploration and
distribution space. I am long rgp(regency energy). Mcd bounced of a trend line and 50 day ma today and i find that encouraging so i will stay with longs there as well. For tomorrow,as i said before i am on high alert for the correction. If the sp futures stay above 1329 i
will stay reasonably confident and continue to look for good bets in individual names. But if that level gives i may get out of everything and get short.  have a great night jim

thoughts on greece

  The most alarming thing to me about the situation in europe is how the ecb,it seems, is willing to go to almost any extent to prevent a greek default. This is a tiny country who's economy is equally tiny so why does it matter so much?? The only conclusion i come to is that the ecb is absoluttely terrified of contagion risk and if the ecb is terryfied, perhaps we should be a little more terryfied as well. I still think the way to trade it is to use big up days in the euro to increase longer dated out of the money puts longs.
   The broder markets appear to be tiring as it has had a nice run. If the s+p futures trades below 1341 i will begin to get nervous and that will progress to a mild panic if the market trades below 1329. As it stands now i stay long but not adding. As iv said before i like mcd, particularly after it bounced off trend line support on friday and feels bouyant today...

volatility trade

  The vxx volatility etf appears to be a flawed instrument. The problem, as i see it, is that the etf has to constantly roll futures contracts to maintain the proper exposure to volatility, and in doing so is forced to sell cheaper, near term futures contracts to buy more expensive further out contracts. This phenomenon is consistent as long as the vix futures are in contango. Although,there is no way to avoid the resulting decay element of the etf i think there are ways to control losses and still have protection against a vol explosion. A typical trade that i would execute would be to sell 100 contracts of the vxx(currently about 27)/ buy 2 april 30 calls(for 2.60 each)/sell 1 april 23 put(collecting 1.33). Make no mistake about it, this trade is paying for insurance and is not designed to make money. the trade cost a total of $380, but if vol explodes you will end up being long 100 contracts. If the more likely scenario unfolds and we have a continued decline in vol due to the fed policies than the vxx declines and it becomes a scratch below 23.

wed trade notes

   The market is going through a temporary bout of insanity, wherein it believes that the latest round of greek bailout money has taken care of the problems. This will surprise no one, but, i do not agree. However, i do respect the markets decision and i believe that the euro has more room to run on the upside, my current target is around 136.00. That being said, i am not going long the euro, as a matter of fact, i am going to keep some small shorts on as it provides a little protection against my long equity positions. If i am correct and the euro continues higher, i plan on using big up moves as opportunities to put on long dated, out of the money, put packages that are cheap, but will explode in value in the event of a dramatic euro decline.
    I remain a bear of long end treasuries and i have been increasing my long position in tbt, incrementally, as the ten year takes out support levels. The next objective and  support level i have in ten year futures is around 130.00. The fundamental argument for higher rates is that there appears to be better uses for money than what bonds are offering plus i would not be surprised if we start to see some hints of inflation. The prices paid component of one of the ism release i found to be mildly troubling and, although, i am still not "all in" on my ten year shorts, i am comfortable with the position.
   Now on to gold. Whats not to like?? that concludes my take on gold.
   Tomorrow i will probably increase my long vol positions as it is just too cheap and ,although i remain an equity bull, the rally is getting a little long in the tooth. As i have said on twitter many times, i like mcd and yum as my 2 favorite current picks. As always, nothing above is a recommendation and is only meant for discussion purposes..have a great night...oh one more thing..on twitter yesterday someone called me an "asshat". It was a proud moment for me and i felt like i had arrived in some way...Any attention is good attention...
 

thoughts for fridays trade

   Calpers(california  public pension fund) returned just over 1% on their money in 2011. The problem with that is that they had built in an assumption of around 7.5% in their models. Im sure this is being viewed as an unmitigated disaster, and if it is repeated in 2012, heads will roll. Now repeat this same scenario another 1000 times across the country because , just about, every other pension fund is in a similar predicament.This is significant in that i expect money to start crawling further out on the risk spectrum in a desperate attempt to post returns. I suppose this is exactly what the geniuses at the fed want, to push people into riskier assets. So, from a long term perspective , i am still positive u.s. equities and other traditional risk assets. That being said, there is always potential for a correction when you've had the kind of run up that we have had.. I like being long the s+p for now, but if the futures trade below 1307-08(1311ish in the spx) tomorrow i will rethink my near term strategy. The bottom line is that i am enjoying the rally, and i'm on board, but evry day i'm getting more leery and may be quick to reverse if things start to falter. The vix at 18% provides an excellent opportunity to hedge equity risk with options, or to replace long exposures with calls or call packages.
          Both the charts in gld and slv look fine, and i plan to stay long. Tomorrow i may add to long positions in slv as that chart looks like it could have more momentum than gld(will look at a 35-37 call spread). When i pitch a trade i normally like to give a technical argument and then a fundamental, back up, argument. With gold and silver that seems painfully redundant as we are reminded everyday of a global disrespect for ones own currencies. The same argument that supports pm's doesn't translate perfectly to the oil market and todays selloff in crude seems to have other triggers. I wish i could put a finger on what those triggers are but, so far, i have nothing. Probably, the crude market is taking away some of the headline risk premium. As a rule, i dont like to be short crude because of the tendency of explosive moves to the upside so, even though the chart looks bad, i will sit it out. Yesterday i added to longs in msft and i still think that is my favorite play right now as it represents a small step out the risk spectrum and i think that level will  be of particular interest. I also am long yum brands even though i know my italian grandma would roll over in her grave if she knew i had stock in something called pizza hut. Its painful but its just business grandma.
       The last thing i want to discuss are a couple of recent failures; SO was a bad call and it seems like there are some longs that still need to be shaken out,but soon it will flash buy again..And, i have been wrong again on those damn bonds and i am close to a stop out level  if the long end rallies tomorrow.. This will be particularly painful because i already owe a beer to jeff kilburg who bet me that i'd be wrong if i shorted the long end..hav a great night...jim