Tumultuous Tuesday – Venezuela Crisis Boosts Oil Prices

A coup! 

When's the last time we had a good, old-fashioned coup?  There's one going on right now in Venezuela, where Trump-backed opposition leader Juan Guaido has a small, or large (depending who you ask) group of army guys taking on the elected Socialist (Boo!  Hiss!!) leader, Nicolas Maduro, who was elected to a 2nd 6-year term a year ago.  

“The imperialist U.S. government is directing an operation to impose through a coup a puppet government for its interests,” Mr. Maduro said in a speech from a balcony of the presidential palace. “No one here is surrendering. We’re going to combat until victory.”

Guaido and his troops have apparently taken over part of a highway adjacent to an air base near Caracas, possibly in preparation for landing US or other troops though, of course, it would be completely outrageous for Trump to openly support the overthrow of a democratically elected leader – even if he is a Socialist but, of course – who are we kidding?  Do you really think he wouldn't?

US crude imports by country. Source | EIA 2013There's a lot at stake here as the US imports 10% of its oil from Venezeula yet it is thought that the country could produce 1-2 Million more barrels per day if the right investments are made but to make the right investments, we need a Capitalist-friendly Government that will allow US-based oil companies (ie. Trump donors) to take over Venezuela's valuable oil assets so – Viva la Revolution!  

Of course, Maduro is no prize and, though he won with 67.8% of the vote, it was only 6.2M out of 32M people voting so very low turnout and very possibly it was a sham election but none of that was proven and it was Henri Falcon who got the 2nd most votes (2M), Guaido wasn't even a candidate!  

In a REALLY crazy move – even for Republicans, Senator Marco Rubio tweeted out, not just support, but a call to action to overthrow a foreign Government, urging the Venezeulan Military to "fulfill their constitutional oath and defend the legitimate interim President Guaido."  I mean – WOW –
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Monday Market Movement – Big Earnings Week Ahead

Now we'll see.

30% of the S&P 500 report this week and we'll have more than 2/3 reporting by the end of the week so, hopefully, we'll have a good handle on what's going on by then.   We also have a Fed Meeting on Wednesday and Non-Farm Payrolls on Friday AND the month ends on Tuesday yet I'm VERY concerned because there are SIX (6) Fed speeches scheduled for Friday – that's a lot and it seems like they must be thinking they'll have something to spin with that schedule.

Apple (AAPL) announces their earnings tomorrow, after the bell and this evening we hear from Google (GOOGL) followed by several heavy-hitters lined up tomorrow morning.  It will be nice to get a fuller picture of how the S&P stocks are performing but, generally, it's so far, so good on earnings reports – with not too many areas of serious concern.

Unfortunately, our first data point of the week is not that good.  Personal Income only went up 0.1%, indicating wage growth is not keeping pace with even the low inflation we supposedly have while Personal Spending blasted up 9% and that means consumers are plunging deeper and deeper into debt, trying to keep up with the inflation the Fed pretends not to see while the economy continues to run on borrowed money.

The December bump in personal income reflects all the bonus money paid out on Wall Street, not raises on Main Street and, since the turn of the year, Income Growth has died and automation will continue to kill it as companies spend more and more on machines and less and less on people.  Notice in the above chart that Real Disposable Income has gone negative as rising gas prices along with inflation in other essentials is leaving consumers with less and less to spend (except on Avengers Endgame tickets, of course).

To me, this is not a recipe for a record-high stock market.  If the US consumer breaks (and they are certainly stretched to the breaking point), then there's no one left in…
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Faltering Friday – Earnings Season Hits a Rough Patch

I love earnings season!

So far, it's loving us as well as we have generally been on the right side over each report but the seas are turning ugly as we get into the meat of earnings season, with about 40% of the S&P 500 scheduled to report next week AND there will be a Fed Rate Decision AND there will be Non-Farm Payrolls next Friday which have flipped between 312,000 in Jan to 33,000 in Feb to 196,000 in March – so be ready for anything there as well...

This morning, we're going to see the advanced estimate of Q1 GDP and it's still a low bar of 2.1% expected and we should be able to clear that hurdle, despite the Government Shutdown that caused so much damage to Q4 and Q1.  

While we are waiting, we had big misses from Exxon (XOM) and Archer-Daniels (ADM) but XOM's miss was due to more CapEx spending, which we expected and we're wating on Chevron (CVX) who are in a bidding war with OXY now for APC, so I wouldn't touch them for fear they end up drastically overpaying in order to "win".

Sony (SNE) had very good numbers this morning but then ruined it by lowering guidance as the PS4 has run its course and they have nothing new planned for Christmas.  The company was a real bargain though at $46.50 ($58.5Bn) yesterday and, even this morning, you can sell the 2021 $45 puts for $5.50 to net in for $39.50 – I'm happy to add 10 of those to the Long-Term Portfolio to collect $5,500 while we watch them.

8:30 Update:  GDP was an even bigger beat than we thought, coming in at 3.2% so about 50% higher than the expectations of leading economorons but they'll ask the same idiots what they think next Q will be as well and no one is ever held accountable for these TERRIBLE predictions on CRITICAL data – amazing!

Government spending was up 2.4% and the export of LNG as well as 3Mb/d of oil we now export did a lot to support our balance of trade and accounted for much of the upside  What I don't like about the GDP number is a huge
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Thursday Failure – MMM Drops The Dow

Well our site was down this morning.

It seemed to have gone down last night, perhaps on all that Canadian traffic as I appeared on BNN (Canadian Bloomberg)'s Money Talk with Kim Parlee and we went over our Money Talk Portfolio (see yesterday's Report for details), which is now up 155% since it's inception in Sept of 2017 – so it's not surprising that a lot of people want to check it out…

As I noted on the show, we can justify the current market levels given the strong earnings we're seeing (not you MMM!) while taking into account what I'm calling an Automation Super-Cycle that, while being disruptive and destructive at times, is going to be an overall long-term positive for corporate profits as we lurch ever-forward into the 21st Century.

We added trade ideas for Bank of Nova Scotia (BNS) as well as the Natural Gas ETF (UNG) on yesterday's show but it was L Brands (LB), which we noted was a laggard yesterday morning, that popped over 3% on the day but is still very, very playable for very nice profits ahead.

This morning, 3M (MMM) is dinging the Dow but, on the whole, the Futures are holding up well and the Dow Futures (/YM) are bouncing off the 26,400 line as we wait for the Durable Good Report at 8:30 and the Kansas City Fed Report at 11 along with a $32Bn, 7-year note auction at 1pm – so it's a good day for the Dow to turn down to chase some money into bonds anyway.

8:30 Update:  Durable Goods came in at a very nice 2.7% headline,  up from -1.6% last month and ex-transports it was in-line at 0.4% so the economy is still chugging along and tomorrow GDP should beat 2.1% expected and then we'll see how Michigan Sentiment looks (97.1 expected) and then it's time for the weekend again.

Once again, sorry the site was down this morning – some issue with Amazon Web Services that I do not understand at all!  

Earlier comments were over at Seeking Alpha and, whenever PSW is down (hopefully not often!), just check our Twitter feed to see where we're chatting.

 

Money Talk Portfolio Update

I'll be on BNN's (Bloomberg Canada) Money Talk tonight at 7pm.

As usual, we will be reviewing our Money Talk Portfolio, which we initiated back on Sept 6th, 2017 to track the trade ideas we would introduce, live on the show, about once each quarter.  The idea of the portfolio was to select highly leveraged, high-probability trades that did not have to be adjusted very often (or at all) and, so far, it's been a tremendous success with our initial $50,000 turning into a lovely $127,663 (up 155.3%) at yesterday's close, about 18 months after we got started.

We recently reviewed the MTP back on Feb 15th and, at the time, the portfolio was at $88,922 with, of course, the exact same positions – as I hadn't been on the show since Jan.  We did send out an alert (our first ever) to dump GE shortly after that – those alerts go out free of charge on Twitter, Facebook, Seeking Alpha, etc to make sure they were available to all so make sure you follow those feeds.    Note that, for each position, we clearly define our expectations and, overall, we expected our positions to make another $76,638 at the time but we've already made another $38,741 (43%) – which is way too fast – so we have to be careful that some of our positions are overbought already.  

That's right as FUNDAMENTAL VALUE INVESTORS we believe that stocks – even the ones we like – can be too expensive, as well as too cheap.  When they are too cheap, we buy them – when they are too expensive, we sell them.  It sounds logical but how many traders actually do it when the time comes?  

Now, let's take a fresh look at what we have:

  • Alaska Airlines (ALK) – Just a short put that nets us in for $51.80.  We're not worried about it.  Expect to gain the full $4,100 so $2,650 left to gain.
  • Nasdaq Ultra-Short ETF (SQQQ) - A hedge we expect to lose on and so far, so good as we're down about $4,000 with just $450 in value left.  Still, we do need hedges so


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Tempting Tuesday – The Beats Keep Coming (so far)

Image result for beats by dre logoEarnings are going very well.

While there are plenty of misses in companies you probably don't care about (ABCB, ASTE, BANC, EDU, FCF, FBC, IRDM, MLI, PII, SHW and WAT missed just this morning), there are plenty of beats from large-cap companies you probably do care about like DGX, HOG, HAS (by a mile), JBLU, KO, LMT, NTRS, PG, PHM, STT, TRU, TWTR (by a mile) UTX and VZ – all from this morning.

Of course large caps are benefitting from tax breaks and buybacks but, as a shareholder, money (per share) is still money so up and up we go.   This is why we still have our longs – FOMO continues to be a thing and it doesn't matter that a stock is already high in anticipation of earnings – good earnings take them up anyway.  We're still adding hedges on the way up but it's silly to close down too many positions if the market is determined to break out to new all-time highs.

One thing that is too high is Oil (/CL) Futures at $66 – that's a good spot to put our foot down and play for the short but be very careful around inventories tomorrow (10:30, EST) – as they can move us pretty violently but $66 is a good stopping out line, so a good place to short with tight stops above.

Generally, with our /CL trades, as soon as we make $500 we try to lock in $350 and then $500 at $700, etc – a $1,000 gain ($1 in price) on a single move is not something you often catch though, as you can see – it happened TWICE on Friday night with an over $2 move from $64 to $66.

For bigger companies and commodities, weak Dollars are a benefit and the Dollar was generally weaker in Q1 than it was in Q4 and that's giving everything a boost but we may be heading back to the top of that range (98) as the UK is back in turmoil mode – with Theresa May very, very close to being forced to step down – perhaps as soon as next week.  That would be Pound/Euro negative and Dollar-positive.  

 

 

 

IN PROGRESS

 

 

$300,000 Thursday – Our Options Opportunity Portfolio Goes up 200%

There's not much news and it's a silly pre-holiday trading day so I'm going to reveiw the OOP instead.  

The Options Opportunity Portfolio was initiated last year in Seeking Alpha's Marketplace and, since the Summer, it's been on quite a tear and we just crossed $300,000 – up 200.7% from our $100,000 initial set-up back on Jan 3rd of 2018.  You can follow our progress and changes under the Virtual Porfolio Tab on Philstockworld's main page and, unlike our Long-Term/Short-Term paird portfolios, the Options Opportunity Portfolio is self-hedged – so it's just the one, balanced portfolio.

Our goal in the OOP is to take advantage of OPPORTUNITIES in the maket – usually we jump on stocks that have been unfairly sold off on news we don't consider as bad as the traders who are running out of the stock.  That's why you see a lot of stocks in here with erratic charts – usually they've had some kind of mishap which drew our attention to them.

In our March Review, on the 7th, we were at $283,465 and now $300,689 is up $17,224 for the month and that's 17.2% of our original $100,000 – so pretty good for a month – too good really and we're going to look carefully for places we can take some money off the table, as we don't REALLY trust this rally.

  • FTR – This has been a bad trade for us this year and we're just waiting to see what happens on 4/30 earnings.
  • HMNY – I think we own most of the company at this point – not that it's worth anything…
  • HOV – This one we're expecting to recover nicely over time.
  • TZA – One of our hedges, no adjustments.  TZA is a 3x Ultra-Short so a 20% drop in the Russell should give us a 60% bounce to about $14.50, which would make the 50 calls worth $6.50 so $32,500 less the current value of $10,275 means we have $22,225 worth of protection here.  

  • LB – An aggressive put but we like LB.
  • PLAY – Not worried about these. 
  • SIG – Retail


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Will We Hold It Wednesday – Nasdaq 8,000 Edition

nasdaq composite history chart8,000 on the Nasdaq Composite!

5,150 was the top in 2,000 before the great crash took it back to 1,200, a 76% drop which took many years to recover from.  In fact, we only got back to 5,000 in 2016 but here we are, less than 3 years later, up another 3,000 (60%) and no, I don't think this time is like 1999 when people were throwing money at terrible stocks but there are still plenty of stocks people are throwing unrealistic amounts of money at and there WILL be a reckoning – one day.

We did consolidate for about a year at the 5,000 line, which means roughly half the people trading thought stocks should be higher and half thought they should be lower but then Trump got elected and promises were made (not kept, just made) and we've been off to the races ever since. 

If we want to determine whether 8,000 is too much for the Composite, we should look at the top 10 holdings, which make up a whopping 40% of the indexes weight while the other 2,629 components fight for the other 60%.  The simple question we can ask here is are these companies worth 60% more than they were in 2016 and, to do that, we can simply look at earnings and revenues because we should expect some real changes, right?

  • While Apple (AAPL) gets a lot of attention as it nears $1Tn in valuation, Microsoft (MSFT) has quietely gotten there without the drama and is "worth" $927Bn at $120.  Revenues have gone from $92Bn to $118Bn (up 28%) while profits in 2016 were $20.5Bn and, last year, they were $16.5Bn but that was due to write-offs and they should do better than $34Bn in 2019 and that's up 70% so yes, MSFT is worth much more than in 2016 but I'm not sure I want to pay $1,000Bn for "just" $34Bn in earnings (p/e 29.5) so I would give this one a B- grade.  
  • AAPL, of course, is my favorite company on the planet and $200/share is $943Bn in market cap but AAPL earned $59.5Bn last year (tax advantaged) and should make $53Bn this year for a p/e of 17.8 –


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Terrific Tuesday – Futures Blast Higher Just Because

Incendie dans la cahtÃ?©drale Notre-Dame de Paris, le lundi 15 avril.Wheee, up 180! 

Why?  Literally, there is no reason that the Dow is up 0.666% this morning in the Futures.  The other indexes are up 0.4% and mostly we popped higher at the EU open (3am).  There are no reasons for this and we don't need any reasons – there were no reasons in 1999 or 2007 as the market plowed higher – even as some were warning of dire macro events that were clearly visible just around the corner.  The markets tend to march on until the changes are long past undeniable, kind of like our President

All eyes were on France yesterday as Notre Dame had a tragic fire, destroying a large part of one of the World's greatest architectural wonders.  Victor Hugo said Notre Dame is a work of art authored by humanity itself, with no individual artist. It surpasses anything an individual can do and therefore becomes the best of what all of us can do – it's loss is a great tragedy and already hundreds of Millions of Dollars have been pledged to rebuild it. 

When Hugo Wrote "The Hunchback of Notre Dame" the church had already been destroyed during the French revolution and his novel called enough attention to it that it underwent a great rebuilding program in the mid-1800s so, almost 200 years later – we're just repeating the cycle – hopefully with less wood this time!  In truth, there's not all that much left of the original, built in 1163. 

Image result for notre dame floodSo, while we may see it rebuilt and think "it's not the same" – our great, great, great grandchildren will probably see it as an achitechtural classic once again – providing we do something about Global Warming, which came within 3 feet of breaking over the embankments during the 2016 Paris Flood.  

As there is not much news today, it's a good time to kick off our Portfolio Reviews with a look at our public portfolio called the Money Talk Portfolio, which we only trade live on BNN's (Bloomberg Canada) Money Talk Show once per quarter.  I'll be on the show again next Wednesday at 7pm
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Monday Market Movement – Earnings Season Finally Begins!

Related imageIt's earnings season!  

Finally we get to see whether or not these record highs come with record earnings!  We got off to a bang on Friday with beats from FRC ($1.26 vs $1.22 expected), INFY ($9.36 vs $8.95), JPM ($2.65 vs $2.35), PNC ($2.61 vs $2.60) and WFC ($1.20 vs $1.10) so so far, so good it seems and, this morning, Citigroup (C) came in at $1.87 vs $1.79 expected and Goldman Sachs (GS) is $5.71 vs $5.02, M&T Bank (MTB) $3.35 vs $3.29 and we're waiting for Schwab (SCHW) and Washington Federal (WAFD) but things are looking good in banking

Goldman Sachs, of course, gained 2.5% on Friday so today's earnings is giving them no additional lift and that's another sign of a toppy market as the whole banking sector went up on just a few earnings reports so woe unto any of them who fail to deliver going forward.  We still have plenty of Banks to hear from but, more interesting, will be the companies who may have been affected by the Government Shut-Down in Q1 – that's where we're expecting to get some resistance.

Earnings Whispers has the above cool charts for earnings and I love the "implied move" into earnings as it can alert you to seriously mis-matches that we can potentially take advantage of like Micro-Vision, where options imply a 50% move but the average move is only 11.3%.  MVIS is essentially a penny stock, trading at $1.03 but it does have options abd a fun way to play them is to sell the August $1 calls for 0.40 and sell the August $1 puts for 0.30 so you are collecting 0.70 and anything less than an 0.70 move between now and Aug 16th (expiration day) is your profit.  

Sketchers (SKX) on the other hand, usually makes violent moves on earnings yet it's priced for a relatively calm 7.6% move so we can play them to be more violent than that but we can also use our heads and, though we love to be bullish on SKX when they are low (and we are aggressively long in our…
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