This is, of course, expiration week for August options. Often well-jammed, particularly early in the week. So I took some profits on LRCX and SNDK with the hope of putting them back on from higher. I also closed out my TLT calls and a long bond position, just feeling that I wasn’t going to bet against the inflation data this week. I did add some puts on RIMM and HPQ.

I haven’t been posting much because there is little to say. Markets continue to be locked in place. Watching the Nasdaq 100, 1480 is the magic number. For the last couple of months, whenever 1480 is touched the programs kick in and jam the market higher. Just look at the chart. No portfolio changes.

Nouriel Roubini warns of the potential for a 1987-style accident. Bill Fleckenstein has mentioned the same thing.

John Chambers, Cisco’s CEO, gave his usual the-future’s-so-bright-I-gotta-wear-shades conference call last night and Cisco stock was up 15%. Even though all they did was their usual beat-by-a-penny. The programs took over and jammed the market up further on the back of the celebration and then it just sagged. Not a great performance, the Nasdaq was essentially unchanged after being up over 2%. However, the semiconductor shorts/puts were not helped by this whole process. I can wait.

Energy prices are high, what with the Middle East and the Alaska pipeline shutdown and I couldn’t resist lightening up a bit, so I sold my PWE. Also I bought some BKX puts this morning, allocated to Real Estate, because the bursting housing bubble is going to damage the banking sector.

The New York Times has an article today, Public Pension Plans Face Billions In Shortages: “Barclays Global Investments has calculated that if America’s state pension plans were required to use the same methods as corporations, the total value of the benefits they have promised would grow 22 percent, to $2.5 trillion. Only $1.7 trillion has been set aside to pay those benefits.”

And that doubtless understates the real liability and says nothing of municipalities, which have been even more irresponsible with benefits. Typical deal these days for municipal employees is retirement at age 50 on full salary with free medical. A friend mentioned his friend, a recently retired engineer working for the city - essentially a glorified draftsman designing sewers and things - retired at age 52 on $115K with full, free medical coverage. But the truly evil deal is the DROP, or deferred-retirement option plan. In this case, the 50-year old employee continues to work and receives his normal salary. His pension is paid into an account which accrues a guaranteed, high rate of return. This fund is paid to him on top of his regular pension when he actually retires. An example from Houston shows that “Under one scenario, a lifelong city employee retiring with a salary of $92,000 could get $420,000 a year in pension benefits.” As far as I am concerned, this is yet another case of plain theft. However, the taxpayer is on the hook and it will be very hard to get rid of this new privileged class.