Philstockworld Top Trade Review

Image result for top trade ideasTop Trades has become one of Philstockworld's most popular Memberships and that's a shame because I actually hate trading services that just give out trade ideas.  Unfortunately, that's what the market demands and, though Top Trade Members miss out on the trading education and deep discussions we have in our Live Member Chat Room, they usually do get a lot of great trades.

We began Top trades in August of 2015 and year one saw 96 out of 119 Trade Ideas (80.6%) made money immediately (by the first review) and half of the intial losers turned around over time as well.  We started year two's first quarter, covering Sept-Dec with 22 of 30 trade ideas (73%) in the green but, for example, one of our 8 "losers" at the time of the review (2/20) was RH – a trade that was in our Long-Term Portfolio:

As of the last review, we only had the short puts, which were down $1,400 (23%) so a "loser:" and, at the time (2/20), I said:

As you can see, they hit our target floor at $25 but we were in Vegas and forgot to add the bull call spread at the time – though I still like the plan.  The puts, by themselves, are now $7.40 ($7,400) so down $1,400 (23%) and I still like that sale along with 10 2019 $25 calls $9.75 ($9,750), selling 10 of the $35 calls for $6.20 ($6,200) for $3,550 so we still


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PhilStockWorld September Portfolio Review

$2,093,910!  

That is a LOVELY $133,849 gain on paried LTP/STP Portfolios since our Aug 20th review.  I said at the time that it is ridiculous to make this kind of money in a month (6.8%) but I also said we'd be fools not to take advantage of the gift the market is handing to us.  The STP, where we keep our hedges, lost $6,813 as of our review date (these reviews are from last week) but that was lucky and now we're down to $460,302 but, on the other hand, the LTP is clocking in at $1,654,569 so $2,114,871 is up another $20,961 since last week – that's crazy!  

As I have been emphasizing all week, we are putting 25-33% of our long profits into our short hedges – in order to lock in those long gains.  When you are netting 6.8% even after the hedging that insures you will keep that 6.8% (or most of it) when the market turns sour, then you can certainly afford to be cautious.  At the end of the year, we'll be up 60-70% whether the market is up or down while, if you let it all hang out and went for 85% – maybe you'll have it at the end of the year and maybe you won't – I'd much rather be sure. 

Anyway, read my notes from the last report – no changes – we're cautious for the same reason but pay particular attention to the kinds of adjustments we made and how they worked out.  That's another HUGE benefit of keeping our portfolio well-balanced – the stability gives us lots of time to tinker with and perfect our positions as it's very easy to make a few minor adjustments, when you don't have to worry about having to make a major one…

Short-Term Portfolio Review (STP):  $487,027 is down $6,813 from our 8/15 review but no apologies there as it's fantastic that that's all we lost while the LTP made 6 figures.  That's because we made sensible adjustments back on the 15th but, otherwise, we didn't touch our STP, which has $481,657 in CASH!!! – just in case we ever need some money if things do go on sale.  

Despite the mountain of CASH!!! (we started with just $100,000 on 11/26/13), we are…
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TGIF – Markets End the Quarter at All-Time Highs

Well, we did it!  

All of our indexes, exept the Nasdaq are at their highs and this party looks like it's never going to stop as long as people are willing to believe that Trump's tax plan will help the Middle Class or the Economy or that the Fed withdrawing stimulus will have no effect (even though adding stimulus had a HUGE effect) or that as long as you don't hear about North Korea for a week because people are worried about who's kneeling at a football game – that all is well in America.  

And how can things not be great?  If the facts don't fit the narrative, they change the facts.  Treasury Secretary Steve Mnuchin told the press in Las Vegas that workers benefit the most from Corporate Tax Cuts and, if you think that sounds preposterous, you could have fact-checked it with a 2012 report from the Treasury's Office of Tax Analysis that showed workers pay 18% of Corporate taxes and owners pay 82% so what Mnuchin claimed is only about 450% untrue.   When challenged on this — the Treasury department REMOVED the report from the public records.  

“Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered. And the process is continuing day by day and minute by minute. History has stopped. Nothing exists except an endless present in which the Party is always right.” – Orwell, 1984

Image result for trump tweets cartoon1984 was not meant to be an instruction manual!  It's not legal to alter or remove Government records – even if they do contradict with the bullshit you are currently spouting.  When Trump deletes his embarrassing tweets supporting politicians who get trounced in elections – he's committing a Federal offense in violation of the Presidential Records Act of 1978, which was introduced in the wake of the Watergate Scandal to prevent exactly the sort of thing this administration is doing.  

Meanwhile, in another nod to Nixon, the Administration is compiliing an enemies list and
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Free Money Thursday – Trump Tax Cuts Promise a Chicken in Every Pot

No more death tax!  

Very nice if you are rich enough to have it affect you (estates over $10M with poor tax planning) and it's very important to the GOP's Top 1% donors, who plan on living on through their clones and need to leave all their money to themselves.  Think how annoying it would be if, every 60 years, when you are having you mind transferred to a new clone, you had to pay a tax to transfer your money.  Of course the "death tax" needs to be elimintated but of course you can't tell your bible-thumping base the real reason or they might decide you are a Godless heritic.

We are supposedly 5 years away from Avatar B, where your brain can be transferred from your body and the goal is put you into a machine or a clone over the next few decades.  Well, not you, unless you are one of the ones with millions of Dollars to spend on such nonsense but at least we know that the people who can afford it WILL be able to take it with them and build up such unimaginable wealth over multiple lifetimes that the efforts of you and generations of your mortal family will be like dust in the wind under their immortal gaze.

Speaking of Godless heritics, Oil (/CL) is spiking higher again today as Baghdad cranks up pressure on the Kurds following a controversial independence referendum, with a flight ban and a warning on oil exports, a vital source of income for Iraqi Kurdistan.  Oil already spiked over $50 on news that Turkey was upset with the Kurds but now Iraq is another excuse to jam things up – $52.75 this morning and yes, we're still shorting!  

If you don't trade Futures, you can play the home game with the Ultra-Short ETF (SCO), which is down about $32.50 and we can assume things calm down in a month and go with a November spread like:

  • Buy 10 SCO Nov $32 calls for $2.50 ($2,500)
  • Sell 10 SCO Nov $37 calls for $1.50 ($1,500)

That's just $1,000 on the $5,000 spread and makes $4,000 (400%)
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Which Way Wednesday – How Durable Is the Economy?

Image result for economic uncertaintyWell, this is what we've been waiting for.

8:30 brings us the Durable Goods report and we keep shorting the Russell (/TF) Futures, unsuccessfully so far, in anticipation of a sell-off.  Now we're favoring the S&P (/ES) shorts, as they are right on the 2,500 line – so it's easy to just set a stop above and short below to limit your losses.  We're still using the $52 line to shore Oil (/CL) but taking quick profits when the dips reverse and, of course, tight stops above with a re-short at $52.50.  That's what you have to do to play bearish in this market – quick in and out plays.

Why play bearish at all?   Well, we're playing short-term bearish because the bulk of our portfolio allocations are in long-term bullish positions.  That's the case in both our Options Opportunity Portfolio and our Long-Term Portfolio, which has gained another $51,816 (3.2%) since our 9/15 Review.  That portfolio is 100% bullish and is now at $1,658,699 from our $500,000 start on 11/26/13 (up 231.7%) and we strive to lock in those gains by spending roughly 1/3 of the gains on short positions – like our Russell and Nasdaq hedges.  

Of course, then we hedge the Short-Term Portfolio with additional longs and we tend not to lose the whole 1/3 we allocate to our shorts – it's just that we're willing to because we'd rather lock in 66% of our gains than go for broke – and end up that way when the market corrects (if it ever does).  You might think we are not maximizing our gains but, of course, with a 58% average return, we're able to be far more aggressively bullish in our LTP than we would ever consider being if we didn't have our buffer hedges in the STP.

Unfortunately, we end up talking about our short-term shorts a lot more often than our long-term longs – that's just the nature of having daily reports.  Our Long-Term positions rarely change but we're constantly tinkering with the shorts.  It tends to give outsiders the impression we're market bears when, in fact, the Short-Term Portfolio only has 8 total positions while the Long-Term Portfolio has…
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Testy Tuesday – Is S&P 2,500 the Market’s Waterloo?

It's been very exciting.

Back on the 13th, I titled the morning Report: "Which Way Wednesday – S&P 2,500 or Bust!" and we've been teasing the line in the subsequent two weeks but now failing again as oil prices rise ($52 this morning, which is our new shorting line!) and Global tensions mount.  Meanwhille, on the home front, the Republican agenda is failing in a most spectacular fashion as repealing Obamacare simply isn't going to happen (thank God!) and now they are far over-reaching on Tax Cuts, with a plan that will add Trillions of Dollars to the National Debt with no offsetting spending cuts – all just to benefit the Top 1% – it's not going to fly either.

The markets are still wildly underpricing the overhanging threat of war in North Korea.  We are, in fact, still at war with North Korea – having never signed a peace treaty since that war started in 1950.  Meanwhile, back in the middle east, Turkey's President and Trump Thunder Buddy, Erdogan has threatened to invade the Kurdish region of Iraq as he is enraged by their vote for independence (Turkey also has a larget Kurdish region so he considers it a bad example).  

Key to this conflict is a major oil pipleline that runs from Kurdish Iraq through Turkey which Edrogan threatens to cut off (hence the jump in oil) as well as warning: "“Our military is not (at the border) for nothing.  We could arrive suddenly one night."  We need to take Edrogan seriously – this is the guy who had his security detail beat the crap out of protesters in Washington DC and again in New York – even after he was told what they did in DC was not acceptable.  

Janet Yellen will speak this afternoon at 12:45 and MIGHT seek to clarify Fed policy moving forward but is more likely to remain enigmatic – since that seems to be working.  As I noted yesterday, we have a dozen Fed speakers this week and, last night Neel Kashkari came out on the dove side, saying he thought it was far too soon to raise rates.  Nonetheless, the markets have flattened out in pre-market trading so far…
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Monday Market Mania – Suicide Missions

Image result for trump kim jong un cartoon"You're on a suicide mission."

"No, you're on a suicide mission."  "Rocket Man" "Dotard".  That pretty much sums up the weekend tweet wars between fearless leaders Donald Trump and Kim Jong Un, who both finally found someone to play with that understands them.  Nort Korea's foreign minister told the UN on Saturday that North Korea "will strike premptively if needed" and the US countered by sending bombers right to the edge of North Korean airspace in a massive escalation of events not seen since the Cuban Missile Crisis – yet the markets are just shrugging it all off this morning.  

“None other than Trump himself is on a suicide mission,” Ambassador Ri said through the UN’s simultaneous translation. “In case innocent lives of the U.S. are lost because of this suicide attack, Trump will be held totally responsible.”

“The very reason the DPRK had to possess nuclear weapons is because of the U.S."

Image result for trump kim jong un cartoonEver the diplomat, Trump followed that up Saturday night on Twitter, posting: “Just heard Foreign Minister of North Korea speak at U.N. If he echoes thoughts of Little Rocket Man, they won’t be around much longer!”  Trump's bombers, of course, flew out of Guam – effectively making North Korea's poiint that the base is a direct threat to them.  

North Korea’s state media issued a statement Saturday from the National Peace Committee of Korea describing Trump as “wicked” and “a rabid dog.”  U.S. analysts now estimate that North Korea may have as many as 60 nuclear weapons, according to a Washington Post report.  

Of course, Trump is just following the grand tradition of name-calling practiced by all our greatest leaders, remember when Kennedy called Kruschev "Little Nicky"?  No, of course, not, becasue President Kennedy wasn't a moron!  

I know, it's almost hard to remember what a real President sounds like these days, right?  So, it's easy…
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Friday Failure – OPEC Does Not Agree to Extend Production Cuts

This will be interesting.

After saying they would for the last 10 days, driving oil from $47.50 on 9/11 to $51 (7.4%) on Wednesday (now $50.45), OPEC has now decided they will "wait and see" what happens between now and their March meeting.  As U.S. shale oil continues to thrive and seasonal demand wanes, the surplus that has weighed on markets for three years could return. If OPEC doesn’t extend the supply curbs, the market will return to oversupply again, forecasts from the International Energy Agency indicate.  

Our average on the Oil (/CL) Futures shorts is $50.48 on 10 contracts and we're waiting fo the great unwind, which probably won't happen today as the weekend is here but these contracts run until 10/20 and there are 1.267Bn FAKE!!! orders over at the NYMEX in the front four months – so we're pretty confident there will be a catastrophic sell-off at some point.

Click for
Chart
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Nov'17 50.73 50.78 50.32 50.39


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Thursday – F*cked by the Fed (there’s no other way to put it)!

Well, that's that!  

The great unwind has begun and I was off by $100Bn (20%) yesterday, when I predicted the Fed would aim for $500Bn a year in balance sheet reductions (they are going for $600Bn) although, to be fair, they are gradually stepping up to $600Bn so the net effect will be the same $500Bn a year, which is what we calculated would be the most even a recovering economy could withstand.

Keep in mind that treasuries are only half of the assets the Fed holds, they also have a lot of stock they need to dump and a whole lot of real estate and mortgages they need to find buyers for as well and you KNOW what happens when a seller HAS to sell to raise cash by a certain time – they are simply not going to get great prices for the assets they are dumping.  

It's a lot easier to write a check to buy things than it is to sell them – ask anyone who's thrown a garage or estate sale.  Whatever the Fed ends up writing off will be losses that transfer to Treasury and ultimately add to our deficit.  None of this is accounted for in Trump's already pure-fantasy budget and, in fact, the Fed ADDED $97.7Bn in profits to the Treasury last year, reducing our defict.  If instead they lose $100Bn a year – that's a $200Bn swing in our deficit.  That's 5% of Government spending – no small item!

The market seems oddly calm about all this but, as we discussed in yesterday's Live Trading Webinar (where we shorted Oil (/CL) at $51 and the Russell (/TF) at 1,445), the process for large funds and banksters involves several meetings and perhaps board votes before they begin to unwind their own assets – so the real reaction is likely to be delayed into next week.  

The quick reaction was a 1% drop in the indexes, a half-point drop in bonds (higher rates) and goaaaaallllll!!! on our Dollar trade, as it blasted up to our 92.50 target from the Morning Report and that was good for same day gains of over
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Fed Day Follies – Dollar Crashes in Anticipation of MORE FREE MONEY!!!

Is America great yet?

It is if you get paid in something other than Dollars, or if your assets are not Dollar-backed.  Otherwise, it's 3.4% less great than it was in November – as measured by Global confidence in our currency.  Cutting taxes, running up Government spending, threatening war (s) and easy money policies are no way to strengthen a currency.

US Household Wealth is roughly $100Tn so a 3.4% cut in the value of those Dollars means $3.4Tn was essentially taken from us – pretty much confiscated by our Government.   That's a lot worse than any tax because it's 3.4% of EVERYTHING we have.  Fortunately for those of us in the Top 1%, a lot of that $3.4Tn went right back into the market, where we have the bulk of our wealth anyway and, of course, we have enough money that we diversify our assets into other currencies and, of course, Gold, which has flown up from $1,125 to $1,325 (17%) since the election.

So thank you, Bottom 99%, for your contributions to our portfolios.  We couldn't have done it without devaluing everything you own!  In yesterday's morning Report, we discussed the massive debt bomb we are facing and looked at the Fed's projections and concluded the market may be wrong and the Fed may tighten at this meeting.  If they do, the Dollar will shoot higher and shorts will cover so I like Dollar Futures (/DX) long over the 91.50 line – with tight stops below.  

If the Fed surprises us and brings rates up 0.25%, expect the /DX to move up to at least 92.5 for $1,000 gains per contract.  Don't forget, Japan, Europe and China do not want a weak Dollar – this is the point they are likely to step in and prop it up anyway – so I feel pretty good about that play.  If you are Futures-impaired, you can use the Dollar ETF (UUP) as a proxy.  It's at 23.80 and the October $23.50 calls are just 0.45 so 0.15 in premium isn't bad for a month's worth of leverage, right? 

We'll look at that trade this afternoon at
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