5 Reasons to Consider Buying SPY Puts Tuesday

The way the stock market laughed off bad news last spring and summer is over. The market action since January 19^th shows that the momentum from excessive liquidity is ebbing before the recovery can bloom. Now, the market is searching for corroboration to justify current levels. Markets have become impatient. Without these signs, the market is vulnerable to negative news. Any of the following five situations could cause the market to tumble:

1. Wednesday is a pointed economic release day. MBA Mortgage Applications, Industrial Production, Housing Starts, and the Treasury Budget can offer a surprise.

2. Although, most Americans knew February 14th as St. Valentine’s Day; in China, it was the Middle Kingdom’s Lunar New Year. President Obama is meeting with the Dalai Lama over the objection of Beijing. Sino-US tensions will only rise.

3. Greece is the word. The countdown starts to see what type of austerity program the government will embrace and will it be enough for Angela Merkel and Berlin.

4. On Thursday, Wal-Mart (WMT) reports earnings. If their earnings disappoint it could pull the market down.

5. Minneapolis Fed President Narayana Kocherlakota and St. Louis Fed President speak this week. Inflation hawk Thomas Hoenig, of the Kansas City Fed, speaks about “Avoiding a Government Debt Crisis”. One worrisome word from any speech could spook the market.

The odds of at least one surprise occurring is a certainty. Expiration Friday, notwithstanding, the repercussions could be immediate. Until the correction is over, protecting your portfolio may be in order.

COBRA's the Grinch that Will Steal This Christmas

Well, Black Friday’s sales figures are in and they are rather dark. Although, the usual spin doctors were out in full force implying people in between jobs are out shopping for things they don’t really need, this shorten holiday shopping season will most certainly be a dud.

According to the NY Times:

Some 195 million consumers visited stores and Web sites over the weekend, up from 172 million last year, according to the National Retail Federation, the trade group that reported sales results on Sunday afternoon. Average spending over the weekend, however, fell to $343.31 a person, from $372.57 a year ago. Total spending was $41.2 billion — about the same as last year.

We all know about unemployment at 10.2% and rising. And, we also are aware that the true unemployment rate (U-6) is 17.5%. Wages were flat again this year. Everyone knows of, or heard about, unused credit card accounts closed and existing lines of credit being reduced by prickly issuers.

The NY Times uncovered the breadth and depth of the Great Recession on Main Street with their food stamp usage in the US, article. Thirty-Six million Americans, or 1 in 8, and nearly 1 in 4 children, use food stamps. Twenty thousand people a day are signing up for assistance.

From the Times:

In sheer numbers, growth has come about equally from places where food stamp use was common and places where it was rare. Since 2007, the 600 counties with the highest percentage of people on the rolls added 1.3 million new recipients. So did the 600 counties where use was lowest.

Furthermore, that early in the year surge of people filing unemployment claims, 700,000 weekly, as companies pared-down expenses, received a 9-month subsidy from the stimulus package to pay 2/3 of their COBRA health insurance premium. Those first beneficiaries are starting to pay this month an extra $500, $1,000, or more for their family’s healthcare until a new job is found or until COBRA runs out. Suppose 200,000 workers from each week in the first quarter are now employed, that leaves (500,000 workers x 12 weeks) 6,000,000 shoppers who will think twice before spending.

Either way, Wal-Mart (WMT) and Amazon (AMZN) both have a brutal competitor in the likes of United Health Group (UNH) with little elasticity in its product.

If unemployed consumers are sitting at home deciding whether to go shopping, as their COBRA healthcare premium rise as much or more as their monthly unemployment benefit, chances are they‘ll likely stay home this holiday season and entertain Mr. Grinch.