24,000 Thursday – Dow Continues It’s Insane March Higher

24,000!  

It was only September when we broke back over 22,000 so about 10% gained in 3 months added to the 10% gained the previous 8 months puts us up 20% for the year.  On the Dow Jones Industrial Average, that means our 30 Dow stocks have gained $1.2 TRILLION in market cap to what is now just shy of $7.5 TRILLION for just 30 of the S&P 500 companies.  Keep in mind that the entire $18.5Tn United States GDP gained just 3.3% last year and that's only $610Bn so, even if the 30 Dow companies had gotten 100% of the entire country's growth – they'd still be shy $600Bn.

But, as I mentioned yesterday, it's not just the Dow 30 that are growing insanely – the entire S&P 500 is up 25% since Trump's election and you can credit the President if you want but, as I said, 3.3% GDP growth is $610Bn and our Top 500 companies (including the Dow 30) are now worth $24 TRILLION – up $5Tn in 12 months so we are, in effect, paying 8 times the actual economic growth for the stocks and that's assuming ALL of the growth goes to those 500 companies (and none for you, your family, local businesses, etc). 

 

IN PROGRESS

 

 

Record High Wednedsay – We Will All Be Billionaires

America is great again.

There's no denying it – from a stock market perspective, it doesn't get any greater than this.  Forgive me for not believing but how can you deny how easy it is to make Millions in this market.  It's the largest cash giveaway of all time – and all you have to do is play along.  Out Long-Term Portfolio, for example, is just under 250% at $1.75M and we're being CONSERVATIVE – with 77% of our portfolio in CASH!!! (have I mentioned how much I like CASH!!! lately?) yet still, the EXACT SAME POSITIONS we just reviewed on Nov 17th at $1,698,372, are up another $51,171 (3%) in just 12 days.  

At that rate of return (6%/month), we'll have $3.5M by the end of next year and why not – certainly we're working hard for it, right?  Well, that's sort of the problem – we're not working for it at all and neither are the companies represented by these stocks – they are not growing profits or revenues to cover these gains – they are simply getting more and more expensive.  Now, clearly a lot of the exhuberance in the market is about the forthcoming tax cuts but – even if we assume they are going through – how much of an impact will they really have when US Corporations only paid $444Bn in taxes last year?

That's on $3.5 TRILLION in profits so, on the whole, an effective tax rate of about 13% so how much will lowering the Corporate Tax Rate to 20% really accomplish?  All it's going to do is lowe the rates for the companies that aren't already cheating by hiding their earnings overseas or funneling profits through partnerships so they can show losses to offset the gains.  Will they effectively pay 10%?  9%?  Even at 9%, they are only saving $130Bn yet the market is up TRILLIONS in anticipation of these cuts.   

The ENTIRE market cap of the S&P 500 at the 2009 lows was $6Tn and today we are testing $24Tn with just 5 stocks; - FB, AAPL, AMZN, NFLX and GOOGL (FAANG), making up $1Tn.  I'm old enough to remember when a Trillion Dollars was considered a lot of money, but not these…
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Trade of the Year Tuesday – Our Top Pick for 2018 is:

Our Trade of the Year is here!  

Each year, we put together an options spread that has the best chance of returning 300-500% on CASH!!! over the next 24 months.  The chart on the right is from my appearance on Money Talk, where I often announce our Trade of the Year but I wasn't on until Dec 14th and we made our pick around Thanksgiving so that 2015 Trade of the Year was:

  • Buy 20 AAPL 2017 $90 calls at $26.50 ($53,000) 
  • Sell 20 AAPL 2017 $120 calls at $13 ($26,000)
  • Sell 20 AAPL 2018 $85 puts for $9.50 ($19,000) 

The net cash outlay of that trade was $8,000 plus the margin for promising to buy 2,000 shares of Apple (AAPL) at $85, which would be $170,000.  Of course, AAPL was well above the target and the trade returned $60,000 for a $52,000 (650%) return on cash – not bad for two year's work!  

While Apple is still a staple of our portfolios, it didn't make the cut in 2016 when we went with the Natural Gas ETF (UNG) and our trade idea for them was:

  • Buy 100 UNG Jan $5 calls for $2.65 ($26,500)
  • Sell 100 UNG Jan $10 calls for 0.65 ($6,500) 
  • Sell 50 UNG 2018 $8 puts for $2.10 ($10,500)

That works out to a net cost of $9,500 and pays $50,000 if UNG is above $10 in January and stays


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Monday’s Mandarin Meltdown – Chinese Markets Make New Lows

China's markets fell 2-3% this morning.

Losses for Chinese companies came after the yield on the nation's 10-year Treasury note ended unchanged at 3.98%, trading within a striking distance from its three-year high.  "Whether the selloff is a slight correction after a strong surge in 2017, or steeper declines on the way, remains to be seen," Hussein Sayed, chief market strategist at FXTM, wrote in a note. "However, rising bond yields, particularly junk bonds, should keep investors worried."  “The Chinese stock market drop is reminiscent of the selloff that we saw in the summer of 2015, and that is causing some investors to become cautious going into the thin year-end markets,” said ING currency strategist Viraj Patel, in London.

South Korea's market also took a tumble, finishing the day down 2.4% and led down by Samsung's 5.1% drop but that was nothing compared to Qudian's (QD) 20% pullback (see chart above), now down more than 60% since their IPO last month and a great example of what I was talking about last week, when I said we need to be concerned with how much of our own US Markets are now indexed against Chinese companies of EXTREMELY QUESTIONABLE valuations.  

Image result for china debt 200% gdpNow that we've established that I do know how to connect a few dots, I will once again point out that China is only the second-most indebted nation on a debt to GDP basis (maybe higher by some counts) and the massive debt taken on by their Corporations is the Global Catastrophe in the on-deck circle.  Japan is still the king at about 265% while the Trump Tax Plan will do a great job of catching us up, by putting us on a path to 200% debt to GDP in just 10 years.  

At a 4% interest rate, servicing $20Tn in debt that we now have would take $800Bn.  At $40Tn, we'd need $1.6Tn a year just to make our interest payments – that would be 1/2 of all the taxes our Government currently collects and far more than half after Team Trump performs their massive tax givaway to the Top 1%, leaving the Bottom 99% holding the bag for all the new Debt and subsequent interest – keeping…
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Fully Stuffed Friday – Markets Feast on New Highs

Another day, another record high.

We''ve had 54 record closes in 220 market days so barely a week has gone by this year without a fresh record high but don't call it a bubble – because this is how the market will just go from now on and we'll all be Billionaires when we retire and the Fed is worried that inflation will be TOO LOW.

The key to what went wrong for the forecasters this year was the lack of inflation, something Federal Reserve Chairwoman Janet Yellen has described as a “mystery.” As the year went on, investors became increasingly convinced that inflation would stay dormant, bringing down long-term bond yields and the dollar even as decent economic growth boosted profits and stock prices.

Sure, something in this narrative doesn't add up but that's why Greenspan called it "irrational exuberance" last time something like this happened but he called it way too early and the market went on to add another 100% after that.  Perhaps that's why forecasters are now very gun-shy about calling a market top here – they could be 100% wrong by the end of next year, when we're at S&P 5,000.

As noted earlier in the week, we got a bit more bullish in November as there doesn't seem to be any way this market is going down at the moment.  We still have our hedges and we still have plenty of CASH!!! (have I mentioned how much I like CASH!!! lately?) but we are quick to pick up bargains when they present themselves – just in case this party never stops and we need some fresh horses to run with.

This morning, in our Live Member Chat Room, we took a long poke on the Dolar (/DX) at 93 and we'll see how that goes.  We're hearing chatter about strong Black Friday Retail Sales numbers and, if true, that would indicate more demand for Dollars than is being priced in.  The Dollar is often artificially pushed down in order to boost things that are priced in Dollars like oil and stocks and it's much easier to manipulate the currency on slow holidays – when most of the honest traders are off-duty.  We're hoping for a nice little bonus next week if things reverse back to "normal."  

  

  IN PROGRESS

 

 

 

 

 

 

Wonderful Wednesday – And We’re Up 300 Points Since Friday Because?

Image result for stock market rally 1929What a rally!  

I just finished our November Portfolio Reviews and our Long-Term and Short-Term paired portfolios are just shy of their 40% goal for the year but our more aggressive Options Opportunity Portfolio, which we trade over at Seeking Alpha, has gained another 100% in 2017, now up 233.8% in just over two years (we begain on 8/8/15 with $100,000).  If the market keeps going the way it is, we have no doubt we can add another $100,000 over the next 12 months.  This is how, thanks to Trump, the rich are getting much, much richer.

Even more ridiculous is are the gains on our Money Talk Portfolio, which was initiated to track the calls we made live on that show, including our Trade of the Year on Wheaton Prescious Metals (WPM) which started the year as WPM but that didn't stop our net $2,000 entry on the spread from gaining $8,425 and that's only "on track" to our expected $23,000 gain by next January (2019), so it's still good for a new trade from here, with $14,575 left to gain over the next 12 months – that's still 173% up from the current $8,425.

Of course, a mere 173% return is not enough to make it our 2018 Trade of the Year, where we aim to get 300-500% returns on the net cash of our spreads (there are also margin requirements) – and we have NEVER yet missed one of those.  At the moment, contenders for our 2018 Trade of the Year include Macy's (M), Chesapeak Energy (CHK), Cleveland-Cliffs (CLF), Chipotle (CMG) and Hanesbrands (HBI) – all of which we are already in from our recent Portfolio Review but can still make fantastic new trades.  We were going to go with Limited Brands (LB), but they already popped and got away from us (well not us, but before we got a chance to announce the trade though it is, of course, on our OOP, LTP and Money Talk Portfolios). 

The best thing about the Money Talk Portfolio though, is that we haven't touched those trades at all since announcing them on the air – 3 of them on Sept 6th, in fact.  Those 3 trades…
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Philstockworld November Portfolio Review

Image result for one million dollars animated gif$2,121,342! 

Not bad for the 4th anniversary of our primary portfolios.  We began this lesson on November 26th of 2013 and allocated $500,000 to our Long-Term Portfolio and $100,000 to our Short-Term Portfolio with the intention of demonstrating our balanced, paired portfolio tactics over time.  Now, 4 years later, we're up $1,521,342 (253%), which is right at the top of our 40% annual compounded gains we can expect from this strategy when it goes very well.  

You can't double up in a year playing a hedged strategy like this because we're constantly betting against ourselves but by "Being the House – NOT the Gambler", we are able to CONSISTENTLY make 20-40% returns and, in this non-stop bull market – it's been more like 40%.  Well, a bit under 40% as $600,000 at 40% compounded for 3 years would be $2.3M but that's my fault, not the system's – as we got so close to goal back in October that I put the brakes on and shifted to a more neutral stance and, in our last review, we "only" made $14,565 for the month and, since last month, we've "only" made another $12,867 – it's like it's hardly worth getting up in the morning, right?  

 

 

 

 

 

 

 

Short-Term Portfolio Review (STP) - Submitted on 2017/11/14 at 12:46 pm:  $422,970 is up 323% but that's down 7.7% since our last review on 10/19.  That's mostly because I had forgotten an SCO trade we put in the OOP AND the STP and that's a big loser as oil moved badly against it and it was a November call.  Even with oil dropping another $1.25 this morning – not enough to save it.

Otherwise, the rest of the positions are doing their job but I do want to adjust our hedges.  Keep in mind, most of these adjustments are not urgent, make sure you get a good price above all else.  

FAS – Expensive leftovers from an old spread


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Temperature Tantrum Tuesday – Planet Earth Attacks Trump’s Properties

Image result for trump climate change20-50 years.  

Not hundreds of years, not even 100 years but "20-50 years" is how long we have before the oceans are 3 feet higher than they are today.  New studies of Pine Island Bay in Antartica have cause climate scientists (the 97% that say Global Warming is real and actually happening) to drastically revise their estimate of how quickly this planet is headint towards catastrophe.  

The glaciers of Pine Island Bay are two of the largest and fastest-melting in Antarctica. Together, they act as a plug holding back enough ice to pour 11 feet of sea-level rise into the world’s oceans — an amount that would submerge every coastal city on the planet.  Minute-by-minute, huge skyscraper-sized shards of ice cliffs crumble into the sea, as tall as the Statue of Liberty and as deep underwater as the height of the Empire State Building.  

“Ice is only so strong, so it will collapse if these cliffs reach a certain height,” explains Kristin Poinar, a glaciologist at NASA’s Goddard Space Flight Center. “We need to know how fast it’s going to happen.”

In the past few years, scientists have identified marine ice-cliff instability as a feedback loop that could kickstart the disintegration of the entire West Antarctic ice sheet this century — much more quickly than previously thought.

  • Three feet of sea-level rise would be bad, leading to more frequent flooding of U.S. cities such as New Orleans, Houston, New York, and Miami. Pacific Island nations, like the Marshall Islands, would lose most of their territory. Unfortunately, it now seems like three feet is possible only under the rosiest of scenarios.
  • At six feet, though, around 12 million people in the United States would be displaced, and the world’s most vulnerable megacities, like Shanghai, Mumbai, and Ho Chi Minh City, could be wiped off the map.
  • At 11 feet, land currently inhabited by hundreds of millions of people worldwide would wind up underwater. South Florida would be largely uninhabitable; floods on the scale of Hurricane Sandy would strike twice a month in New York and New Jersey, as the tug of the moon alone would be enough to send tidewaters into homes


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Monday Market Movement – Dead Week Ahead

Why are you here? 

I told you it was going to be a pointless, slow week.  You need to take advantage of these things and take vacations.  Surely you didn't become a trader so you could be chained to a desk all day, right?  Get out there and have some fun, the market will still be here when you come back.  

We took a quick $338 per contract profit off the table already on our oil shorts and that's a nice $3,380 on 10 contracts to fly us down to Florida and have a big old turkey dinner with the family and THAT is why I like being a trader – just a little bit of work for a lot of reward (after putting in years and years of hard work and practice, though).  Still, the point is you have to learn to enjoy yourself, that's why our tag-line is: "High Finance for Real People – Fun and Profits."  If you're not having any fun – what good are the profits? 

Related imageAs I noted in our Portfolio Reviews last week, we're trying to emphasize the LONG-term investing strategies.  Futures trades like the one above are fun but they are a lot more fun when you KNOW you have a good collection of stocks working for you 24/7 to keep new money pouring in.  In the case of our Long-Term Portfolio (LTP), we're collecting $50,000 a year in dividends alone and we just added another dozen big dividend-paying stocks to our Watch List.  

Our Portfolios have been pretty much locked in neutral since October, with only our Buttefly Portfolio putting up big returns because it's already self-hedging and doesn't really care whether the market goes up, down or sideways.  If I had to trade just one strategy the rest of my life – that would be the one I'd pick (though I'd be SO bored!).  Boredom is why we play the Futures.  Good trading is BORING – it's supposed to be boring as you grind out steady, consistent gains.  If your tading is exciting, you are probably doing it wrong…

One of our Memberships at PSW is our Top Trade Alert and we've sent out 6 Alerts in the
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Fearless Friday – Markets Head into the Holidays at All-Time Highs

Image result for winter vacation cartoonNext week is nonsense

In the US, Thanksgiving is Thursday and the markets are closed and many people take the whole week off and almost everyone is in vacation mode by Wednesday and Friday (a half-day on Wall Street) is a total joke for those who show up – often the lowest volume day of the year.  So we don't expect much action next week and certainly not a move higher and then, after Thanksgiving it's Christmas time and then New Years so let's just meet back here on Jan 2nd and see where things are, OK? 

We've been reviewing our porfolios in our Live Member Chat Room and we're well-locked in neutral already with very little gained in the past month but that's OK, as the market has made very little gains in the past months.  In fact, our last Portfolio Review was October 28th and the S&P closed that Friday at 2,581 and, this morning, we're at 2,585 so – happy holidays – see you in Januray!  

If you do insist on hanging around, you can expect more of the same in December – unless the Trump Tax Plan fails to pass the Senate, then we are likely to break below the range.  At the moment, as we've discussed before, most people are holding their equities (including us) into next year, so we can take our profits when the taxes are lower.  If no one is willing to sell (and take high-tax profits), then the new buyers are forced to offer higher prices and the market does drift higher but the low volumes indicate it may be very hard to find buyers once people do want to cash in their gains. 

There are good strategies for locking in gains and I'll tell you a few.  Apple, for example, is at $171 and let's say you bought 1,000 shares for $120 ($120,000) and you have a $51,000 gain.  If you take that gain now, you will be taxed, for example, 38.5% ($19,635) but if you wait and next year you pay just 25% ($12,750) you are saving almost $7,000.  So your 1,000 shares of AAPL would have to fall more than $7 (4%) for it to be…
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