Philstockworld June Portfolio Review (Members Only)

Image result for one million dollars animated gif$817,961!  

Now we're up $217,961 (36%) in our paired Long-Term and Short-Term Portfolios and that's up $44,185 from our last review, when I said I'd rather cash out than continue to risk our, at the time, 28.9% gains.  Since we didn't cash out, we pressed our hedges AND since the market kept going up, we added more longs and, so far – it's all working out.  As I said last month, as long as the indexes are holding their 50-day moving averages, we're not in immediate danger and this market seems to shake off everything that's thrown at it – so far.

On the whole, we haven't made too many adjustments to any of our portfolios this month as they are on a very good track and fairly well-balanced.  Do keep in mind that we are failing (so far) at the lower high of 2,800 on the S&P (/ES), but once we're over that line – we have to seriously consider a whole new leg of the rally may be forming.

We still have $369,258 in cash and about $1M in margin remainin in our Long-Term Portfolio, so we're very flexible and that portfolio is our MOST invested.  I'm still very risk-adverse in this market and yes, we could be making more if we were more aggressive but then again, we could blow it too – and that is what we're trying to avoid.  

Long-Term Portfolio Review (LTP) Part 1:  $643,761 is up an embarrassing $45,252 (9%) since our 5/17 review where I said I'd rather cash out ahead of the summer and come back in the fall.  Luckily, you guys didn't let me take a nice vacation and we still have all these positions, which we hedged more heavily in the STP (see earlier review).  Overall, we're up 28.8% for the year but that's 2% lower than yesterday – so it's a very volatile number and shouldn't be taken too seriously.  

Since we decided to stay in and since we had a lot of hedges, we picked up a bunch of new trades in the past month (always try to balance longs and shorts while selling premium). …
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TGIF – Dollar Blasts Higher on Easy ECB and Renewed Trade War Fears


That's a MASSIVE one-day move for the Dollar and it's putting pressure on the indexes and commodities but it's also a Quad Witching Expiration Day, when options and Futures roll over for the quarter, so we're not anxious to bet the indexes but I did put out a Morning Alert to our Members saying:

  • I'm liking Gasoline (/RBU8) long at $2.07 into the weekend with tight stops below.  I would think we can get at least a penny out of this one ($420/contract).
  • Coffee (/KCU8) holding up well against strong Dollar but often down into Monday.  Still, I'll take 2 and happy to DD now if they go lower.
  • Gold (/YG) still very laggy to /SI and I still like it long down here ($1,303) and it's a $300 loss at $1,300 but that's the stop if you want to play.  If /SI breaks over $17.30, we're golden!

As you know, we had a very successful Nasdaq short, making over $4,000 off Wednesday's Live Trading Webinar trade and yesterday we also cashed in Wednesday's Gasoline (/RB) short for another $4,000 gain so that's over $8,000 gained in two days from Wednesday's Live Trading Webinar (replay here).  We do these things every week folks for our PSW Members as well as the subscribers to the Options Opportunity Portfolio over at Seeking Alpha.  

Keep in mind that we only trade the Futures while we wait for our much more conservative spreads and hedges to pay off.  If we do those right, it's like watching paint dry waiting to get paid but the returns can be very, very exciting. 

For instance, our bullish play on the Carlyle Group in the Options Opportunity Portfolio expires today and it's in the money so we'll collect the full $2,500 for our 10 June $20/22.50 bull call spread we added on Feb 6th for net $1,450 – so that's up a nice 72% in
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Thursday Thoughts – ECB Ends QE, Fed Tightens – Now What?

It doesn't seem to matter.

Sure we had a small sell-off yesterday after the Fed (and we made over $4,000 just on our Nasdaq (/NQ) shorts during our Live Trading Webinar!), as we expected but this morning the markets are back to their usual pre-market pumping with /NQ right back to 7,250, which is right where we began shorting the Nasdaq in yesterday morning's Report.

Along with riding the Nasdaq to 7,210 for an $800 per contract gain, the S&P (/ES) Futures fell from our 2,790 shorting line back to 2,775 and that was good for $750 per contract gains while the Russell (/TF) fell from 1,685 back to 1,677 and that was good for gains of $400 per contract so, all in all – it was a fun day trading the futures and contratulations to all our Webinar participants.  

We can't short this morning, even tough we're back to the same(ish) levels as we don't have that downside catalyst from the Fed though I am very surprised the market is just shaking off the FACT of a rising rate environment. What will it take to get this market to correct?  Robert Mueller filed a request yesterday for 150 subpeonas – I know we're supposed to pretend politics have nothing to do with investing but don't you think that might be a little disruptive?

If indicting half the Government doesn't bother you, how about China missing the mark on both Industrial Output and Retail Sales?  Fixed Asset Investment Growth was also lite at 6.1% vs 7% expected.  Chinese Auto Sales posted the first negative change since March of 2015 and their market corrected 20% into 2016 after that.  Maybe this time is different – I sure hope it isn't the same.

The Hang Seng was down 1% this morning, as was the Nikkei but our markets don't seem to care – that's stuff that's happening in other countries we either hate or won't let into our country, so who cares?  LMC Automotive forecasts that, in addition to falling demand for cars in China, Japan and Europe, Trump's tariffs are also likely to knock out 10% of
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Wednesday Fed Watch – Do Interest Rates Matter?

Image result for fed rate hikes 2018It's Fed day! 

The Federal Reserve is expect to raise rates by 0.25% this afternoon but what matters more is what Chairman Powell has to say at 2:30.  In the last statement, the Fed eliminated a line from the March statement that said “the committee is monitoring inflation developments closely.”  That seems to indicate they feel inflation is now at their 2% goal and clearly unemployment is below their goal so now the Fed must move to head off inflation pressure before it begins.

In fact, this morning's Producer Price Index is up 0.5%, miles above the 0.2% expected by leading economorons, who obviously do not shop where we shop or eat where we eat.  This should bring the markets down from their perch and we can short the S&P (/ES) below the 2,790 line (with tight stops above) and, of course, the Nasdaq (/NQ) at 7,250 and the Russell (/TF) at 1,685 – all Sept contracts now (thanks Jeff!).  Yes, we keep trying to short and it keeps failing but – ONE DAY!  

There are already many signs of wage inflation.  The recent Beige Book indicated all regions were having a lot of hiring pressures and once employers have to start competing for employees by raising wages and benefits – that's a genie that's very hard to put back in the bottle.  Wage inflation is bad for Corporate Profits and wages are about 30% of a Corporation's Operating Costs so a 10% increase in wages knocks 3% off earnings unless they raise prices – which adds to inflation and makes more workers demand higher wages….

Image result for wages profitsI remember working in the late 70s and early 80s when it was downright insulting if you didn't get a 5% annual raise just for doing your job 10% was fairly normal for doing a good job and when you took a job that started at $25,000, you fully expected to be making $50,000 in less than 5 years.  That seems like a fantasy these days as it's been decades since the workers have been given a fair share of the profits.  

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Terrific Tuesday – Trump and Kim Make a Deal

Related imageThis is good news. 

We actaully have a deal with North Korea to bring some stability to the region.  The document signed by Trump and Kim early this morning contained four key points:

  • Establishing new US-DPRK relations
  • Building a lasting and stable peace regime on the Korean Peninsula
  • Reaffirming commitments to work toward complete denuclearization
  • Recovering POW/MIA remains.  

It's a long way between this agreement and actually making the lasting peace but this is a great start though it's nothing for the markets to get excited about as I had mentioned last Wednesday that North Korea's entire economy is just $17.4Bn, which is less than Jeff Bezos gained in wealth last month.  Jeff Bezos has rockets and top-notch scientists and doesn't like Donald Trump – make peace with him and THEN I'll be impressed…

Image result for harley quinn crazyMeanwhile, the Amazon (AMZN) and Apple (AAPL) driven Nasdaq is up 30 points (0.42%) since last Wedneday and we're back at our shorting line at 7,200 on the /NQ Futures but tight stops above because there's no end to the crazy in this market.  Things seem to be on hold at the moment, ahead of tomorrow's Fed Meeting but I'm not sure what more good news is going to propel the market even higher.  

The Dow and the S&P were higher in January but the Russell is also making new highs at 1,680 and 1,700 would be up 10% since May 1st (1,550) and again – that's crazy!  What did the markets do in the past 30 days to gain 10% in value?  10% a month is a 120% a year pace and we'll all soon be Billionaires at that rate of return so you can bet it's going to continue – but it's very unlikely to…

Image result for 1999 market bubble chartOf course the market did gain about 140% between April of 1999 and March of 2000 so it's not like it can't possibly happen.  Then it lost 80% over the next 8 months but let's not dwell on the negatives, right?  Like now,
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Monday Market Mayhem – Now it’s the G6

Image result for trump g7 high chairThank goodness!

I thought I was losing my mind as the Futures were up this morning after Trump blew up the G7 meeting and refusted, for the first time ever, to join the rest of the Free World Leaders in signing the joint communique.  How can the markets be bullish when we are walking back the steps the nations agreed were necessary after WWII to prevent WWIII?  Trump can double down tomorrow if he also blows the negotiations with Kim Jung Un and ticks the Doomsday Clock up to 11:59:30.

German Chancellor Angela Merkel said Sunday that President Trump's refusal to endorse a communique from the Group of Seven (G7) leaders was "sobering and a bit depressing."  In the same interview, Merkel said the European Union was preparing to implement counter-measures against U.S. tariffs on imported steel and aluminum.  If they retaliate, they're making a mistake," Trump declared before departing the annual Group of Seven summit, which includes Britain, Italy, France, Germany and Japan. 

Speaking of Doomsday, the Fed is almost certain to raise rates 0.25% on Wednesday and that should kick the 10-year rates permanently over 3% for the duration.  So far, the markets have shrugged off every possible sign of rising rates, rising wages and rising inflation as stock prices have inflated to record levels but, for those of us who believe in Physics, Match, Economics…. Reality – a day of reckoning is coming – we just don't know when.

Crypto currencies are also having a doomsday as BitCoin falls below $7,000 as a South Korean Coin Excahange was hacked over the weekend.  See, this is why we have BANKS and Government-backed currencies – there's a massive system in place that insures against loss and theft of your US Dollars.  We put that in place after years of the exact kind of random losses, robberies and devaluations associated with old monetary systems.  Crypto currencies are sure making things great again – for bank robbers! 

And sure, eventually consumers will wise up and learn to "bank" their crypto-coins in more reputable exchanges with better securtiy and crypto may even develop it's own FDIC to insure deposits but all that stuff is hard…
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G7 Thursday – Trump Talks Trade with World Leaders

Image result for trump g7 cartoonThe G7 starts today.

The market indexes are at record highs as Americans have total confidence in our President's ability to win the trade war as he sits down for a 3-day meeting with other World Leaders.  Trump has signaled his intention to continue pursuing an aggressive trade agenda even if it comes at the expense of America’s standing in the world.  The “World trade system is a mess,” Mr. Trump’s top economic adviser, Lawrence Kudlow, told reporters on Wednesday. “Trump is trying to fix this broken system.”

Of course, the "broken system" is the sole opinion of Team Trump while the rest of the World thinks it's America that is "broken" and that difference of opinion could turn very ugly if our leaders can't come to some agreements over the weekend. 

Tariffs imposed last week by President Trump on the EU and Canada have increased significantly tensions before the meeting,” a senior EU official said, adding that a breakthrough to ease trade tensions was unlikely. “We have extremely low expectations.”

Image result for trump trade cartoonThe consequences of the U.S. driving away allies, even if it wins short-term trade concessions, could do lasting damage to the strength of America’s coalition (see "4 charts showing why putting tariffs on your friends is a bad idea"). “If the U.S. loses their support, then it’s a different ball game at the global leadership level,” said Fred Bergsten, the founding director of the Peterson Institute for International Economics.  At last week's meeting of Global Finance Ministers, all 6 other G7 Nations put out a joint statement rebuking Trump's tariffs on steel and aluminum.  

US companies are also almost unanimously opposed to the tariffs but, so far, Trump has turned a deaf ear to all of them.  The markets have also turned a deaf ear to the Trade Wars – as well as every other thing that's going on in the World.  Bad news is good news, no news is good news and good news is good news as the Dow, the Russell and the Nasdaq are each up about 10% in Q2 while the S&P has moved a more modest 178 points up from 2,600, so that's
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Record-High Wednesday – Here Come Those Tears Again


The market has been running like a rocket.  Like one of those reusable Space X rockets as it keeps going up every time it falls.  The Nasdaq is retesting 7,200 on the 100 Index (/NQ) and we shorted that line this morning only because the last time we tested it (mid-March) we plunged 10%, back to 6,322, which was the 200 dma back in April.  This time, the 200-day moving average is back at 6,500, so still a 10% gap down if we fail to punch over.  That means our RISK is stopping out at 7,205 with a $100 loss while the potential REWARD could be $14,000 on a 700-point drop – that's the kind of bet we like to make!  

In our Options Opportunity Portfolio and our Short-Term Portfolio, we are using the Nasdaq Ultra-Short, SQQQ as a primary hedge because the index is full of overpriced stocks.  It's not a bet though, it's a hedge as it's crazy to BET that the Apple-driven index will go lower while AAPL is still under $1Tn in market cap (now "just" $950Bn).  $1Tn is more than the GDP of Turkey ($849Bn) so, if Apple were a country, it would rank 17th in the World.  Above them is Indonesia and Mexico – both at about $1.1Tn, which would be about $225/share for AAPL.  

Image result for 38th parallelI suppose if we're going to learn to accept valuations in the Trillions, we should start thinking about Corporations more like countries or maybe we should just start trading countries – it's a work in progress – anyone want to go long on North Korea at $17.4Bn?  With 25M people, that's just $696 per person – seems like a bargain compared to South Korea, which is "valued" at $1.7Tn for just 50M people so $34,000 per person's share.  Life is good below the 38th Parallel!  

How does a country with just $17.4Bn develop nuclear missiles?  That means Carl Icahn can develop nukes – he has $17Bn and Icahn is "only" ranked 73rd on the Forbes 500 list.  Jeff Bezos can buy a dozen nukes with his $112Bn and he's already got rockets, as does Elon Musk with $20Bn and he already looks like a James
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Trouble-Free Tuesday – Markets “Soar and Ignore” but How Long Can it Last?

Image result for big brother trumpGood morning HomeSec!  

That's right, it seems our President has ordered our Big Brothers at Homeland Security to "Compile a comprehensive list of hundreds of thousands of “journalists, editors, correspondents, social media influencers, bloggers etc.”, and collect any “information that could be relevant” about them."  Not only that but they have put the contract out for bid to a private company – what could possibly go wrong?

As part of its “media monitoring,” the DHS seeks to track more than 290,000 global news sources as well as social media in over 100 languages, including Arabic, Chinese and Russian, for instant translation into English. The successful contracting company will have “24/7 access to a password protected, media influencer database, including journalists, editors, correspondents, social media influencers, bloggers etc.” in order to “identify any and all media coverage related to the Department of Homeland Security or a particular event.”

“Any and all media coverage,” as you might imagine, is quite broad and includes “online, print, broadcast, cable, radio, trade and industry publications, local sources, national/international outlets, traditional news sources, and social media.”

Related imageAnd we're already being Trumped for questioning this massive attack on freedom of the press as the DHS has already made the following statement:

If you find yourself skeptical of this proposal of mass state monitoring of the press, consider yourself a bonafide member of the “tinfoil hat wearing, black helicopter conspiracy theorists,” DHS representative Tyler Houlton 

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Monday Market Movement – Dollar Down, Markets Up – What Else is New?

The Dollar is down 0.5% this morning.

Dow Futures (/YM) are up 0.5% to match but the Russell (/RTY), Nasdaq (/NQ) and S&P (/ES) are up less than 0.25% as of 8am and that's not at all impressive.  /NQ is right on the 7,100 line, so an easy short below the mark but Apple (AAPL) is holding their developer's convference this afternoon and may say something bullish – so it's a very dangerous short.  Apple popped over $190 last week, now just $65Bn shy of a $1Tn valuation and 7% more ($13.30) will do the trick and we'll have the World's first Trillion Dollar Company.

If AAPL is doing well, the Nasdaq does well and so does the Dow, where every AAPL point is 8.5 Dow points and so does the S&P, where Apple makes up 4% of the 500 Indexe's total weighting.  

If it were not for Apple's great effect on the market, I'd be enthusiastically shorting the indexes but, as it is, we keep getting stopped out of our short positions as they keep making new highs.  This morning we're taking a whack at shorting the S&P Futures at 2,745 and the Dow Futures at 24,750 but tight stops over those lines as we near the pont of maximum crazy but the Dollar (/DX) should be councy at 93.70 and that will hopefully cause a pullback into the open – but only a small one as we expect it to have trouble getting back over 94.

Trade Wars are bad for the Dollar because the Dollar is an instrument of trade and China, Canada, Mexico and Europe have all threatened to retaliate if Trump doesn't reverse his position by this Thursday-Saturday G7 meeting so you bulls out there are betting on Trump being a great deal-maker, which is his repution but not at all his actual results.

Nonetheless, we've punched back over that 2,728 line on the S&P, which generally puts us back in bullish territory until it fails but I called for CASH!!! in early May, as we briefly popped over the line – as I didn't think it would last and I don't have enough faith in Trump's negotiating skills to think this rally will last either but, if we do manage to stay over the
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