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Friday Market Workshop – Portfolio Repair Part 4 – Adjusting Our Goals to Reflect Reality
Time to get real.
We've had 3 Workshops so far on fixing our portfolios this week:
- Portfolio Repair Part 1 – Damage Assessment
- Portfolio Repair Part 2 – Resetting Your Positions
- Portfolio Repair Part 3 – Adjusting our Hedges
Now we move onto a very important topic that combines what we have learned and that is Adjusting our Goals. I talked about this on Tuesday (Part 2) in the Boeing example for someone who bought Boeing at $350 and now it's $150 (today it's $123!) and we do not sit there and HOPE (not a valid investing strategy) that BA will go back to $350 because it's no longer realistic!
As much as you may love a stock – you have to be realistic when there is damage done to it's financial position or outlook and you have to adjust your expectations accordingly – perhaps even considering abandoning the stock altoghether – especially in times like these when there are other fantastic stocks on sale and, even as I say this, I'm thinking that BA is not really a fantastic stock anymore – they simply have too many troubles to be excited about them – even at $123.
So today we'll take a look at our Earnings Portfolio, which started out with $100,000 on October 21st and was originally supposed to be just quick earnings plays but, the way things went, we ended up getting "stuck" in some good bargains (or we thought as the time) and we rolled them into longer-term bets. So now it's a bit of a hybrid but that makes it interesting. At the moment, we're at $132,078 so up 32% for the year but, as you'll see – NOT because our picks were any good – but because our HEDGES saved us!
Notice we have more cash than the portfolio has value – that's because we follow our core Philosphy, which is: "Be the House – NOT the Gambler", which means we always try to be sellers of premium, not buyers and that gives us a huge advantage in our trades while also dropping a lot of cash into…
Wheee, that was fun!
Still, we don't want to be greedy so we'll set a stop at $22.50 once 
Wimps!
Why do we listen to these people? When have they ever been right? The same thing happened in 2008 when the people who had the money (the Top 1%) got their bailouts (TARP) and then went about telling the Bottom 99% that the World was going to end and they should dump all their stocks – the same stocks the Top…
What is your plan?
The virus rages on.
85,996!
$4.5 TRILLION!
We still need the House to confirm the bill but let's keep in mind this is only our FIRST bailout package. If things drag on, there will cerainly be others and the way our Government is responding, things are certainly going to drag on. If you wonder what FEMA is doing during this emergency, New York, Hawaii and North Carolina have issued an urgent request to FEMA for emergency mortuary assistance as deaths mount across the states.
$6,000,000,000,000!
What a crazy fist quarter it has been!
MORE FREE MONEY!!!
There's a great article in Bloomberg
I want free money NOW!!!
Hi ho silver!
Trillions of Dollars are being committed to "fix" the economy.
Bloomberg reporters are reporting from their homes – how's that for inspiring confidence!? As I noted this morning in an Alert to our Members:
How low can we go?
After finishing down 2,000 (10%) points on the Dow and 260 (9.55%) on the S&P, this morning the Futures are limit up.
Pouring more money on the fire is not going to make…
What will it take?
Yet the markets are not doing better at all. Despite yesterday's impressive "rally", we remained firmly on the sidelines as we never even came close to our "Weak Bounce" line at 2,960 and that's not even a recovery until we cross back over the "Strong Bounce" line at 3,070 and hold that for 2 consecutive days.
China's President Xi went to Wuhan this morning.
President Trump stayed safe on the golf course yesterday but made it back in the evening to announce he will seek further tax cuts (duh!) and "very substantial relief" for 
Well, you can't say we didn't see this coming.
Wheeee, this is fun!
Notice we're not playing the Futures this week.
What the Hell were people expecting?
Keep in mind the lunacy that is going on here – we are having emergency G7 meetings led by Steve Mnuchin (a Goldman Sachs Bankster) who is telling the Global Finance Leaders that they must lower rates to prop up the markets BECAUSE THEY ARE 8% below their all-time record highs. Propping up the markets is very expensive and it adds to government debt and it only helps the Top 1%, who own 90% of the stocks – what is the real agenda here?
Warsh agrees with my take that the Fed doesn’t have a lot of ammunition to help markets and the economy, but he thinks that means it needs to act quickly in a coordinated fashion with other Central Banksters like the European Central Bank, the Bank of England, the People’s Bank of China and the Bank of Japan…
Down we go again.
Wheeee – that was fun!
We can go bearish below our lines with the same rules we went bullish with – that's what's fun about the Futures – our stops had us risking very little to make what is already (8:07 am) over $600 per contract – not bad for 97 minutes work!
And, while we don't have the exact figures, I know when I go on a trip, the airfare is generally less than 1/3 of what I spend overall so we can assume another $1Tn of capitalization damage to the travel, entertainment and restaurant sectors so now we're chopping 1.5% off the Global Markets. 
Everything is fine.
Virus, what virus?
The Nasdaq (
Germany looks like they are heading into a Recession and now Japan is at the brink with 
Happy Valentine's Day!
Unfortunately, that's also how viruses work and I'm not going to bore you with any doom and gloom stuff other than to point out that we are heading into a 3-day weekend in the US (President's Day on Monday) and, even if we are only adding 4,000 new cases per day, that means we'll be at about 80,000 on Tuesday and around 100,000 by next Friday so I'm still very concerned about next week – as people tend to freak out about 6-digit numbers.
60,329 infected, 1,369 dead.
45,204 infected, 1,116 dead, 5,085 recovered.
The non-hidden forms of debt have jumped up $50,000,000,000,000 in the past decade and that's another 5% of Global GDP added in debt each year as well so of course it FEELS like we're doing great – just like your children feel like you are doing great when you put a trip to Disneyland on the credit card – it's the time of their lives for them and you have to deal with the bills when you get home.
You know it's true because Tom Cotton has now CHALLENGED "The Chinese" to prove him wrong and, guess what? They haven't! That's certainly guilty enough for me and you, right?
Last week, the markets got a pop on word there was a "cure" (viruses are not cured) and a vaccine (vaccines take months to create and more months to manufacture) in China and both turned out to be BS but, as we have learned in the age of Trump, it doesn't matter if something is true or not – as long as it works. In fact, just this weekend, 
Yet our markets are marching along as if the virus is a one-time thing, even though it's the 4th big one of this century. There was SARS in 2003, H1N1 in 2009 and MERS in 2012. I think that merits at least considering the potential risks going forward, don't you? A 2.5% pullback is all this outbreak warranted on the S&P, not to mention the Impeachment of Donald Trump and the ongoing Boeing Debacle, that's certainly going to put a dent in the US economy, which is only expected to grow 1.5% in Q1, except by the Atlanta Fed, who somehow sees 2.5% suddenly.
Up and up the markets go (again).
Back in China, the PBOC pumped another 400 Billion Yuan ($57Bn) into the banking system through reverse repo operations in extreme emergency measures to keep the markets afloat or, what our own Federal Reserve calls: "Tuesday." Of course China's economy is half our size so it is a very large anount of money – more like a Friday for our Fed…
17,400 infected (
China is trying to stop the slide by stepping in economically, with the PBOC pushing in a massive stimulus measure as well as a cut in the reverse-repo rate to push liquidity back into the system. Apparently, oil demand in China (the World's 2nd largest consumer) was down 20% in January and that will get worse for February as more and more people are in the ever-expanding quarantine zone.
AMZN's stock price is still out of control at $2,085 this morning as their "terrific" earnings were actually just $6.47/share so $23.01 total for 2019 means they are still trading at close to 100x their actual earnings and, on the whole it's barely up from 2018's $19.80/share.
8,000 infections, 170 deaths.
6,000 infections.
4,500 infections.
Hong Kong has 8 virus cases and will be implementing a broad series of restrictions aimed at controlling the spread of the coronavirus by limiting the number of mainland Chinese travelers entering the territory. The restrictions, which included the suspension of high-speed and other train services between Hong Kong and the mainland, a 50 percent reduction in the number of flights, and a ban on tourism visas for many travelers, were announced by Carrie Lam, the city’s chief executive.
Again, I am…
We're in danger of having a down week.
Well, it had to happen some time.
We played yesterday bearish because there was now NEW news that justified the move up and, this morning, there's no NEW news justifying the move down so we'll cash out and wait for something interesting to happen. The most interesting thing happening at the moment is the Chinese coronavirus that has sent the Chinese markets down 5% already this week and our 5% Rule™ says a weak bounce is 1% and a…/arc-anglerfish-arc2-prod-sltrib.s3.amazonaws.com/public/2STTLO77QRAHBJBKY3AGSPDPRI.jpg)
Impeachment begins in earnest this week.
It's Martin Luther King day so the markets are closed.
Will this rally ever stop – or even pause?
Despite the slowing growth, trade issues and 6 months of protests in Hong Kong, the Shanghai Composite Index rose 22% last year because – why not? – everyone else is ignoring the macros, why shouldn't Chinese Traders too?
I mean, seriously, TSLA is delivering about 100,000 cars in Q4 and about 350,000 cars for the year while Nissan delivers 350,000 cares PER QUARTER – and they are in 5th place in US Sales (where Tesla only sold 36,000 cars as the rest are global sales). This is part of the problem traders have as they don't differentiate numbers when they hear about Tesla's "amazing" market share. It's not amazing at all – it's only slightly better than Volvo in the US and, internationally, Volvo kicks their ass!
Today is the day!
What a boring weekend!
It will be a good test to see how rational traders are getting (if at all) in this ultra high-value market environment. Bank America (BAC) and Wells Fargo (WFC) are also expected to be making less money than they did last year and they too are at year highs – might be an interesting time for a little correction?
So much for shorting the Nasdaq.
The entire planet's GDP is about $90Tn and it grew at 3.5% so there's $3.15Tn, so I guess maybe the entire World put 2/3 of their 2019 growth into those 5 stocks but the rest of the markets did expand as well – up 24% Globally – and that means we're right about the $100Tn mark in global equities, having started 2018 at $77.5Tn.
That's kind of crazy, but crazy is pretty normal these days so we'll just have to go with the flow and see what happens, I suppose. In an unfortunate coincidence last night, 
All this peace breaking out has sent Oil (
Whee, what a ride!
Happy New Year!
The attack, the most forceful move yet by the U.S. to target Iran-backed militias, represents a fresh escalation of tensions between the U.S. and Iran and undermines relations between Washington and Baghdad. It drew condemnation from across the political spectrum including Iraq’s most influential Shiite cleric Ayatollah Ali al-Sistani, and revived calls for the departure of American forces, which returned to Iraq in 2014 to help fight Islamic State.
Greetings from Thailand!
Merry Christmas!
The momentum is still going.
'Twas the weekend before Christmas and all through the mall,
According to UBS, Online Sales are currently 16% of Retail Sales and will rise to 25% by 2026, which could, in turn, force up to 75,000 additional stores to close, including 20,000 clothing stores and 10,000 consumer electronic stores. Moody's lowered its outlook on Department Stores heading into the holiday season but it shouldn't affect things much as retailers like Macy's (M), Kohls (KSS), Gap (GPS) and L Brands (LB) are already in the bottom 20 of the S&P 500 in 2019 performance.
This is not the first time Trump has been accused of flashing the White Power symbol during a speech and it's a very interestering time to be stirring it up again, what with him being impeached on the same day and all but 
I say we give Trump a pass on using the OK sign because 
I don't think people understand math.
Will this one matter? It's hard to say. There are plenty of people who go outside in lightning storms and very few are actually struck by lightning. That doesn't mean it's safe to go out in a lightning storm and those who don't go outside are never struck by lightning while those who do are only rarely struck by lightning. The people who stay inside are not foolish and the people who go outside are not really foolish either – as statistics are very much on their side.
Go KC!
We have a Trade Deal – now what?
Dow 30,000 or 10,000?
As to the "Trade Deal", although not fully announced, it seems that China is agreeing to purchase $50Bn worth of US Agricultural Products (they used to buy $40Bn anyway) in exchange for $50Bn worth of tariff reductions so, essentially – we are GIVING China $50Bn worth of Agricultural Products and the differenct to the Treasury will, of course, be paid by the American people – as usual. What a deal!
"
The trade war has hit swing states particularly hard. In seven of the top swing states (Florida, Iowa, Michigan, Minnesota, Ohio, Pennsylvania and Wisconsin), Americans have paid a combined additional $7.66 billion in taxes because of these tariffs. In Michigan alone, businesses, farmers and consumers have paid an additional $1.8 billion in taxes. For the month of October, people in these seven states have paid an extra $687 million, including almost $138 million in Ohio alone.
500,000 Jobs!
There's a bit of noise in the report as 
Also note that 3.1% increases in labor costs are ahead of the sub 2% official inflation rate and that puts the squeeze on Corporate Margins and, as labor gets tighter, wages tend to go even higher. That's why Trump is trying to force 1M people off food stamps and back to work – his Top 1% buddies need to put supply back into…
Trump is at the NATO meeting – which means he's not meeting with China or his handlers in Russia – so a mixed blessing there but there's a looming Dec 15th deadline on trade and no progress is being made and that is spooking investors. Trump also has no friends at the NATO meeting – even Boris Johnson won't talk to him as he's facing an election and people already think he's "too Trumpy."
Getting ready for Thanksgiving?
Macy's has been entertaining the idea of SPENDING about $1.5Bn to build 1.2M feet on top of the existing structure and use that space to generate about $1Bn a year in rental income. They already have to maintain the building so, aside from the building costs – they wouldn't be taking on a lot of running expenses – so it's a very good idea and, when you consider that Macy's "only" drops about $1Bn a year to the bottom line (on $25Bn in sales) – it's a GREAT idea.
We might have another trade deal!
The Futures are up again – yawn!
Democratic candidates on Hong Kong ran on a central theme of "Five Key Demands" from the protests, which boil down to this:
The madness continues!
Water freezes at 32 degrees.
For example, trade could be up 3% from last year but, if the Dollar is 5% weaker, then our Import Spending would rise 8% while our Export Revenues would fall 0.2%, leading one to conclude that the trade gap had widened by 10%. Of course, it's much more complicated than that because each trading partner has their own currency exchange and some goods are price flexible and some are not and some, like Oil, are priced in Dollars anyway. All in all it's enough to make your head spin if you think about it – so most people don't.
What are they so afraid of?
In fact, the headline in the South China Morning Post is: "
Curiouser and curiouser.
Uh oh! The last time I started making Alice in Wonderland references about the stock market being ridiculous was 
And now there's no trade deal – again.
As you can see, the NYSE has indeed been drifting along under the 13,500 line for two years after breaching it early in 2018. The NYSE is the…
Speaking of which, I guess I will have a better publicist as we move some of our Member Portfolios over to TheStreet.com starting with our 
Here we go!
James McCord: One of the Watergate burglers who used to be in the CIA and the FBI. Security officer for the Committe to RE-Elect the President (CREEP). McCord wrote a letter to Judge Sirica claiming the defendents had pled guilty under pressrue and committed purjury. In January 1973, WH Security Liaison Caulfield had told McCord the White House would grant him clemency, money and a job if he accepted his prison sentence and didn’t testify against members of the administration. When McCord relayed he had been offered clemency “from the highest levels of the White House” before the Senate Watergate committee on May 18, 1973, Nixon’s ties to the efforts of the White House to break into Democratic National Committee Headquarters finally surfaced.
Wow.
Perhaps if Trump hadn't already had Barr make a fool of himself attempting to exhonerate the President in the Meuller Report, Trump would still have some political capital to spend but the sheer volume of scandals surrounding the President makes it hard for Barr to be the point man defending every crime – lest he himself become an impeachable obstructor.
I feel like we're playing Peek-a-Boo!
Another day near 3,100 on the S&P.
Meanwhile, 
Also according to Bloomberg
The Dow is up another 125 points (0.5%) this morning.
Our market rally has clearly been led by the Information Technology sector, which is up 36% and companies like Apple (AAPL), Chipotle (CMG) and Target (TGT) are up over 60% for the year, boosting the large-cap sector. The S&P 500 is now trading at 20 times the earnings of it's components - another all-time high and significantly higher than other countries are trading.
How "great" are things?
Undercounts in the census lead to under-representation in Congress and Trump has already kicked over 300,000 people out of the country, leading to an environment of fear that will cause census responses to go even lower as people are suspicious that it's a trick to get them to reveal relatives who are potentially illegal. Imagine if you were a Jew in Germany in the 30s…
Now China is saying they doubt there will be a Trade Deal.
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Things are going up, up, up – so why worry?
Dividends are very nice.
We're slipping again.
Tesla (TSLA) made money!
Tesla sold 97,000 cars in Q3 and are now guidling 360,000 for the year, at the lowest end of their 360,000-400,000 range they have been promising all year. Also, the mix of cars has shifted to a vast majority of Model 3s, accounting for…
Earnings are now a mixed bag.
It's one long Sunday for me as I just flew in from California.
Here we are again.
In other words, Trump's erratic behavior is now threatening the Dollar's role as the World's reserve currency – Putin couldn't have done more damage to our country if he had bombed us than Trump has done – and this mess can't be cleaned up easily. Losing our status as the World's reserve currency could put us just a step or two away from bankruptcy – just like companies with too much debt that get downgraded are thrown into chaos.
Doesn't this seem to happen a lot?
Why are we in cash?
Happy Indigenous People's Day!
Meanwhile, with a pause in the Trade War in the works, President Xi has turned his attention back to Hong Kong and warned over the weekend that "
Of course China wants to make a deal.
More Trade War!
Mostly, we're waiting.
Is it easier for China to forces their citizens to buy 175% more US merchandise, whether it's good or not or should China make more of an effort to make up the 10% of their merchandise sales to the US by making their easier-to-get-along-with trading partners happy? While it would be nice to "fix" the trade issues with the US – it certainly isn't the desperate situation for China that Trump paints it to be when talking to the very uncritical suckers who still support him.
More free money!
MADNESS!
The ISM Report was, I would say, NOT good.
We have Auto Sales today, coming in all day long but, so far, they have sucked in Europe and Asia, with double-digit declines for many companies – that hasn't been helping and the Futures are off another half a point this morning. Over in Japan Toyota, Honda and Nissan all reported double-digit declines for the US Market in September but the month began and ended on a Sunday and Labor Day was early so it's not really as bad as it seems – just tough comps to last year. Still, the money won't be there for the end of Q3 – that's what matters.
Is Impeachment an Elitist move that shifts power away from the voters?
This is week 17 and 
And we're back (again).
It's not all bad…
I threw that last one in there to remind us that the planet is dying and we're wasting time worrying about whether or not Trump might be lying about…
Wheeeee – it's so much fun to watch this from the sidelines!
So it's going to be chaos for the next few weeks but don't worry, we have TEN (10) Fed speaches to guide us through the rest of the week, starting with Chicago's Charlie Evans, 
Let's see what kind of trouble the World got into over the weekend:
Here we are again!
Powell left the door open to “a more extensive sequences of cuts” if needed, but stressed this was not what officials expect. Instead, he described the situation as one “which can be addressed and should be addressed with moderate adjustments to the federal funds rate.” Updated quarterly forecasts showed officials split over the need for rate cuts this year. Five didn’t want to move. Five saw a quarter-point reduction warranted, while seven saw 50 basis points of easing needed by year-end — half of which was delivered on Wednesday.
Here we are again.
Trunp has added over 10% to the entire National Debt of the United States in just 2 years (the 2016.5-2017.5 budget was still Obama's). You can see the way the budget explodes higher as Trump's tax cuts take effect and he's boosted Government spending, almost all of it military, at the same time – pretty much everything the Republican's used to run against…
And THAT is how you make $5,000 PER CONTRACT trading oil into the weekend!
NEGATIVE 0.5%!
What a crazy week already.
Here we are again!
It's quiet time.
We'll see how the trend is going today.
What a night it's been!
Hong Kong protests are getting worse, not better and we're now 60 days away from a "NO DEAL" Brexit that will throw the EU into chaos and UK Prime Minister, Boris Johnson has said he will call for new elections (they can do that) if Parliament tries to block…
To trade or not to trade?
There's a huge move up in the Futures this morning simply because 
We're down a lot for the month.
And up we go again!
It's all about Jackson Hole on Friday though all we're really going to get there is more Fed spin and, as I noted in yesterday's Live Trading Webinar, I'm getting more and more inclined to cash out our portfolios while we can as we're finding less and less things to buy and, as value investors – that's a pretty good sign the market is putting in a top – 
Of course, as usual, the markets are reading it wrong and, as usual, traders have absolutely no grasp of history as, historically, the Fed raises rates in a GOOD market and LOWERS rates in a bad market – ESPECIALLY at the top of a bad market as they attempt to forestall a looming disaster so the cut of July 31st was a warning – not a bullish signal!
Well, here we are.
Trump says we're "
More free money!
The delayed tariff date will also boost orders into the holidays and give us a better Q4 than we probably would have had as people rush to beat the tariffs with their orders. That's something that will blow back on us next year, but Trump won't have to run on next year's GDP as it won't be over by the election so this year is his "report card" and, like his school career – the President is willing to cheat to get a C.
A bit of a roller-coaster, right?
As you know, the bond market is already pricing in a Recession with the inverted Yield Curve, Germany and South Korea are both very close to recessions already, with almost no growth in the first half and Global Industrial Production and Manufacturing is also very near the contraction line below 50. Trade Growth is, of course, negative and not looking like it's going…
China is boiling over.
Hong Kong Airport is one of the World's busiest, with hundreds of flights each day, it's closure disrupts a lot of business in Asia and, long-term, if people begin to feel they can't rely on it, there could be major economic repercussions.
We're making some progress.
Don't be fooled.
In addition to the currency move, Beijing said that Chinese companies had suspended purchases of U.S. agricultural products, and that the government has not ruled out putting tariffs on U.S. farm goods purchased after Aug. 3rd. China’s Central Bank said Monday’s depreciation was “due to the effects of unilateralist and trade-protectionist measures and the expectations for tariffs against China.” People’s Bank of China Governor, Yi Gang, said that China…