Philstockworld March Portfolio Review (Members Only)

Image result for one million dollars animated gifAnd the madness continues.  

We just finished the best Q1 in 10 years and, keep in mind, we're at the top of a 300% rally from the 2009 bottom so we're accelerating, not decelerating.  The Fed is keeping their foot on the gas and the economy isn't showing the usual signs of overheating (inflation, rising wages, rapid housing increases, commodity shortages) so they don't have a compelling reason not to boost the economy further – despite the stock market inflation that's causing the largest wealth gap this country has ever seen since the start of the Great Depression.  

It's very simple really, the Fed and the Government have boosted the market 300%, which has greatly increased the wealth of the investing class but none of that wealth has trickled down so demand for goods, services, housing and even labor remains restrained.  In other words, the rich get much, much richer and the poor barely hold their ground.  

While my liberal heart bleeds for them, we are running portfolios for the Top 1% and our two paired portfolios (LTP and STP) are now just under the $2M mark at $1,990,381 – or they were back on the 15th, when we did these reviews.  That's up $1.4M (233%) since our 1/2/18 inception at $600,000 so it's been a very good year for long-term investing, although the STP has actually outperformed the LTP by a wide margin in this crazy market.  It's an odd kind of rally indeed when your hedges outperform your longs – but that's the way it's been for the past year or so.  

With the market topping out again, we haven't found too many bargains recently but that doesn't stop our portfolios from making money as we make quite a lot of money by the very reliable method of time (theta) decay from the options we sell – the system we call "Being the House – NOT the Gambler".  

Options Opportunity Portfolio Review (OOP):  $283,465 is actually DOWN $3,622 from our 2/14 Review but was closer to $300,000 a couple of days ago – so luck of the draw as to when I do a review.  ALK took a big hit, BHC was better, CHK went our way, GNC got hit,…
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TGIF – Best Q1 in 10 Years – Is This as Good as it Gets?

Image may contain: 4 people, people smiling, people standing, child and outdoorI am 56 today.

Hard to get that off my mind as 56 seems like a lot and, of course, Birthday's mark the end of a year, not the beginning, so this is year 57 on the planet for me and thinking about how different it is now from when I was born makes me wonder what kind of World, if any, we are building for our chilren – mine are 17 and 19.  

March 29th, 1963 was a Friday as well and a Boeing 707 with Warren Beatty on it was struck by lightning over London and had to dump it's fuel before landing and the Castro Regime apologized that day for firiing on one of our jets with their Russian MIGs.  The first trans-Atlantic phone call was made the next day between NY and London (probably Beatty) and the New York City newspaper strike ended after 114 days on Sunday, with the price of papers doubling to 10 cents to meet union demands for raises.  Guatemala had a military coup that day with the US-backed army taking over the Government, which was close to electing Communist leaders (we couldn't have that!).  

 

IN PROGRESS

 

 

Fool Us Thursday – China Deal Once Again Used to Boost the Markets

Image result for fooling some of the people all of the timeReally?

How many times can we possibly fall for the same thing?  Every time the market takes a dip we suddenly make trade progress with China – according to US Officials, anyway.  Of course we need something good to happen with China to offset today's depressing GDP Report, which will highlight the damage Trump's Government Shutdown has done to the US (and Global) Economy.  

Still, it looks like you can certainly fool some of the people all of the time and the Futures are, as usual, coming off their lows on "news" that China is making concessions in the trade talks.  Reuters reported previously that the two sides were working on written agreements in six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.  Still, progress is not a deal and we are still miles away from a deal which means Trump's Tariff Tax on the American People will continue while China runs out the clock on his Presidency.  

It's been almost a month since the last meeting and the next meeting will be in May and then it's summertime and who knows if anything gets done over the summer yet, today, the Dow came 100 points off the low on rumors that progress is being made – it doesn't take much to get that index excited, does it?

Aside from GDP at 8:30, we get Jobless Claims and Corporate Profits followed by Pending Home Sales at 10 and the KC Fed Manufacturing Report at 11 followed by four (4) Fed speakers – Bostick at 11:30, Williams at 1:15 (on both sides of a 1pm 7-year note auction), Willimas again at 2:30 and Bullard this evening at 6:30 followed by Williams again at 9:25 tomorrow morning.  Williams is the Fed's Uber-Dove, so you can see which way the Fed is looking to steer things into the quarter's end.

It may not feel like it but this has been a great quarter for stocks, with the Dow up about 2,500 points (11%) and the S&P up 300 points (12%) since the year began.  It's just that we've been here since mid-February,
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Which Way Wednesday – Weak Bounce Edition

Image result for wile e coyote animated gifSo close but yet so far.

The Futures are down yet again as we revisit yesterday's lows ahead of the open (7:30).  The bond market is still causing trouble around the World as investors are getting jittery and Draghi came out with some comments this morning about the danger of negative rates – even as German 10-year notes fell further into negative territiory.  Draghi also said he's ready to get even more doveish but he's not too worried about the economy, saying:

"During the four euro area business cycle expansions since 1970, there have been 50 soft patches – defined as a two-quarter growth slowdown – and only four recessions. In fact, the euro area faced an analogous situation in 2016, when the economy also went through a soft patch triggered by a contraction in world trade. At that time, the strength of the domestic economy was able to shield the recovery from external uncertainties."

Somehow, this makes me worry more because 2019-1970 = 49 years and Draghi is saying we've had FIFTY (50) 2-quarter slowdowns in less than 50 years – and he thinks that's OK?  Sounds like a good case to get out of the EU to me!  Speaking of which – the first rat to attempt to leave the sinking EU ship is, of course, the UK and the chart on the left gives us an idea of where they stand. 

The original deadline for the decision was Friday but now it's the end of June but Parliament is voting today and notice that most paths lead towards a General Election, tossing out Theresa May and throwing the UK into turmoil yet again but all is not lost as Conservatives seem to be coming over to May's side in favor of the deal they just rejected – mostly because they just want to get this thing over with so they can go back to worrying about the names of new tugboats ("Boaty McBoatFace" won last time) without all that nasty interference from the EU (who submitted the name "Tugboat 12").  

Still, it's all the same nonsense that
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Turnaround Tuesday – Markets Pop Back Just Because

Related imageNo, nothing happened.  

Still, we're up 0.6% pre-market across the board and we're just waiting to see if the Russell can get back over it's Strong Bounce Line at 1,532 to confirm the bullish action of the rest of the indexes.  As I mentioned in yesterday morning's PSW Report, we were playing for the bounces off "Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500" and in our Live Member Chat Room, at 9:51, I put up the following note to our Members:

Good morning!

Big Chart not bad, only the RUT failed the 200 dma (and the 50) so we need to see 1,523 come back and the rest is just normal bouncing which would be:

Dow 26,000 to 25,400 is 600 points so 120-point bounces to 25,520 (weak) and 25,640 (strong)

  • S&P 2,860 to 2,790 is 70 points so 14-point bounces to 2,804 and 2,818

  • Nas 7,525 to 7,300 is 225 so 45-point bounces to 7,345 and 7,370 


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Monday Market Movement – Back at S&P 2,800 Yet Again

Image result for us drops global statusWell, Friday was a disaster, wasn't it?

Turns out it wasn't about Trump, he is still at large after Mueller did not find enough evidence to convict (still plenty of evidence to suspect but Trump's AG Barr has squashed further investigation) so it looks like Trump's policies will be with us for another two years.  As you can see from the chart, that will give us two more years to work on really pissing off the rest of the World, whose approval of the US is already at or near the record lows set by Bush II.

Isreal still likes us and you can see the GOP working double-overtime recently pandering to them and Nigeria likes us for some reason along with Poland and India.  Of course, Trump and his followers probably don't care if foriegners don't like us because these 320M people don't need the other 7,800M people on this planet and we don't need to trade with them or get along with them or even enter into defense agreements with them because – WE'RE NUMBER 1!  USA! USA! USA!!! 

Image result for global economy cartoonSee, if you say it loud enough and often enough, you may actually start to believe that.  Who needs reasons when we have chants?  Well, I guess the answer is people with globes, people who understand that it's a global economy and not a local one any more but those people are called "Globalists" and they are vilified by the right as if reality is some anti-American agenda.  

We have the same problem in the stock market as US traders think that things that affect the rest of the World don't matter to US markets, despite the FACT that the S&P 500 gets half it's revenues from overseas.  Fortunately, at PSW, we do watch the overseas markets and there was nothing surprising about last week's correction and this morning, we can play long off the support lines as we expect to bounce off Dow (/YM) 25,300, S&P (/ES) 2,800, Nasdaq (/NQ) 7,300 and Russell (/RTY) 1,500 and, of course, we go long the laggards with very tight stops if any of them fail to hold…
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Flailing Friday – Crazy Market Action Continues

And now we are down again.  

The Dow started the week at 25,900 and we hit 26,130 on Tuesday but now back to 25,830 this morning so, on the whole, we'll be lucky to finish the week out flat.  It's a clearly manipulated, low-volume market and JP Morgan points out that, despite the S&P 500 surging 20% from its December low – almost every catagegory of investors tracked by JPM, from individuals to hedge funds and computer-driven trading, has shown little inclination to chase the rally. 

Dwindling liquidity is often dragged into discussions of market meltdowns. In December, for instance, when the S&P 500 plunged toward the brink of a bear market, both President Donald Trump and strategists from Goldman Sachs flagged it as potentially escalating the sell-off.  While very dangerous if the market turns negative, JPM says these low-volume conditions could also keep the rally going:

“Given liquidity, it is plausible that just short covering, buybacks, dealers’ gamma hedging, and some limited re-leveraging drove the entire recovery.  This, in turn, opens the possibility that the current rally can continue during the spring.”

JPM cites the dramatic reversal in Central Bank policies as putting another floor under the market.  While I agree with their premise, I believe it, like most bullish premises, is ignoring the risks of the overall Global slowdown driven by the Trade Wars, Rising Oil Prices and Brexit as well as the dramatic slowdown in Corporate Profits we'll see now that they don't have additional tax breaks and, of course, rising wages will eat into profits as well.  

 

 

IN PROGRESS

 

 

Throwback Thursday – Testing our Tops from Above

"How long, how long will I slide?
Separate my side, I don't
I don't believe it's bad
Slit my throat it's all I ever
"Turn me on, take me for a hard ride
Burn me out, leave me on the other side
I yell and tell it that it's not my friend
I tear it down, I tear it down

And then it's born again" – RHCP

Well, you can see why we remain skeptical with these low-volume rallies as we've now given up 50 S&P points since Tuesday's hign along with a whopping 500 Dow points and now we are testing 2,800 from above on /ES Futures and 25,600 from above on the /YM Futures.  During yesterday's Live Trading Webinar, we called for shorting the Russell (/RTY) at 1,560 and that's down 20 points, to 1,540 and that's good for gains of $1,000 per contract but we took a quick $750 and ran into yesterday's close.  

We also shorted Gasoline Futures (/RB) at $1.915 and, of course, we always go long on July Coffee Contracts (/KCN19) at $97 and Natural Gas (/NG) is getting to be playable again as a long at $2.80 (with tight stops below) but, since it's close to expiration on April Contracts (6 days), I'd go with /NGK19, which are the May contracts at $2.815 though even a stop at $2.80 would cost $1,500 per contract – so be very careful with those!  

The Fed was very doveish, as expected but what spooked investors in the end was their overall downgrade of the economic picture as Trump's Tax Cuts simply are not boosting the economy and his Trade Wars are hurting it.  The Fed keeps dropping subtle hints that such things are our of their hands to fix and their $4Tn balance sheet makes it very difficult for them to add any new programs to boost the economy – the best we can hope…
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Which Way Wednesday – Fed and FedEx Move the Markets

FedEx (FDX) is tumbling and you should care.  

Though smaller in volume than UPS, FedEx ships over 13M packages per day, which means they have their finger right on the pulse of business and, this morning, they missed earnings by 2.5% – but that was after they drastically lowered guidance last quarter (sending the stock 32% lower) and now they are lowering guidance yet again, sending the stock down 7% pre-market.

Weakness in International Shipping is the major problem but FDX says the Government shut-down also contributed to giving them a very poor Q1 – though that's not the excuse for taking down Q2 as well.  Nonetheless, we think this news was already baked in in December and, in fact, on Dec 14th, we sold FDX 2021 Jan $180 puts for $22.22 to net in for $157.78 in our Long-Term Portfolio and it's likely you can do better than that this morning – if you are brave enough. 

Why Did FedEx Cut Its Fiscal 2019 Earnings Outlook?Just because the economy is weak doesn't mean FDX is suddenly a bad company – so it's a great play for long-term investors on a $47Bn company ($45Bn this morning!) that dropped $4.5Bn to the bottom line last year but, even adjusting for one-time tax breaks – they should still be netting about $3Bn in profits in 2019 so $45Bn ($170) is very fair.

FDX is also still working through their $4.8Bn acquisition of TNT Express in Europe – and it was pretty bad timing as the economy began turning down last year as the Brexit fears grew.  

Still, it's not FDX we're worried about but what it says about the broader market, which has mostly ignored the troubles in Europe and the damage that was caused by the Government Shutdown, as well as all the nonsense in Europe and, let's not forget, the continuing trade battle between the US and China.  FDX is down $90 (33%) since Sept and about 40% as of this morning – it's the companies that haven't corrected yet that I'm worried about.  

That brings us to the Fed, who are very likely not to raise rates today (2pm) and we'll be discussing it in today's Live Trading Webinar, which…
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Terrific Tuesday (as usual) – Markets Up, Up and Up!

Wow, what a rally!  

Up 40 points in 3 days on the S&P (/ES) is 1.42% so Everything is Awesome - just like it was before the last crash because it's very dangerous to pin the Awesome Indicator and then something bad comes along and everyone is SHOCKED that things may not be as awesome as they were led to believe.

Today we are waiting on the ever-wise Federal Reserve to come up with yet another excuse not to raise rates (the last Jobs Report comes to mind) or unwind their still $4,000,000,000,000 Balance Sheet.  Keep in mind that these Fed Fund Rates and this Balance Sheet are at emergency crisis levels and keeping the rates this low and the balance sheet this high means the Fed still thinks we are in an emergency of some sort – no matter what market traders may believe.  

All the Fed has done so far is unwind $500Bn (11%) out of $4.5Tn that's on their books – and the market freaked out about that…  

We're not "wrong" in our positioning, just a bit too cautious at the moment, considering the rally.   We reviewed our Money Talk Portfolio, which we trade live on BNN's Money Talk, two weeks ago (3/7) as it stood at $125,790 (up 151.6%) and we couldn't change it because we weren't on the show this month but, even left alone, that well-balanced portfolio is now $130,260 (up 160.5%) gaining almost 10% off our $50,000 basis in 12 days while the S&P went from 2,765 to 2,850, which is up 85 points (3%) so we're certainly keeping up with the gains – it's just that we COULD do much better if we were willing to be more aggressive.  

The Money Talk Portfolio is hedged and our SQQQ hedge lost $800 and our TZA hedge lost $780 as the rest of the portfolio gained $6,050 but that's exactly how hedges are supposed to work – you give up a little of your upside in order to protect yourself if there's ever a downside – though that doesn't seem possible the way this market has been going

The "big" news moving the markets this…
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