Testy Tuesday – Are we Hedged Well Enough?

June 29: Tracking COVID-19 Cases, Hospitalizations, and Fatalities ...Nice move up yesterday, this is a good time to take a look at the Short-Term Portfolio (STP).

As you know, I'm a bit skeptical of the rally because over 10.4M people (yes, up 400,000 since Sunday) on the planet now have or had Covid-19 and less than 1/2 of them are "recovered" or "dead" so at a rate of 200,000 infections per day, we'll be at 20M by the end of August and most of those people will be newly infected so going from 5M actively infected to 10M (at least) actively infected means there will be twice as many people spreading the virus in 50 days or less so twice as contagious and growing twice as fast (400,000 per day) and we're already over-running hopsitals in several US states.  

Coronavirus: A visual guide to the economic impact - BBC NewsThe economy is still very much shut-down and yesterday the markets were excited about some production growth in Asia but, when you were down 30%, growing 2% back is not really a reason to put on party hats – certainly not a 500-point rally.  But that brings us to the TREMENDOUS amounts of stimulus in the economy. 

I think the Government/Fed spent the right amount ($6.7Tn) to get us through 6 months but this isn't going to be 6 months and those unemployment bonuses run out at the end of July so either they put another $3Tn to work or Q3 will be a bigger disaster than Q2 and I'm sure we have diminishing returns (and mounting debt) – that pretty much sums up my "concerns" for the Economy at the moment.

Chart: The Coronavirus is Almost Everywhere | StatistaSo, the question is, are we hedged enough or CAN WE BE HEDGED ENOUGH to protect our long positions?  Our Long-Term Portfolio is up 70% at the monet at about $850,000 and our Short-Term Portfolio is up 445% at $545,000 so combined $1.395M is more than a double off our $600,000 combined start so all is well but that's because we got lucky and were bearish into the crash (because we feared the virus early on) and
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Manic Monday – S&P 3,000 Holds as We Pass 10M Infections, 500,000 Deaths

I guess people ignore stuff all the time.

There were 165,534 NEW cases of Covid-19 YESTERDAY – that's double China's TOTAL number of cases yet President Trump still calls it the China virus while China calls it the President's total failure to contain the virus like they did more than 2 months ago.

ALL Donald Trump had to do was do what the Chinese did and what most of Asia did to contain the virus and this never would have happened.  Instead the President ignored the experts, denied the virus was a thread, did not react fast enough or appropriately when he finally did act and TO THIS DAY, he still isn't doing what needs to be done to contain this Global threat and 38,845 people were infected in the US alone yesterday -  HALF of China's TOTAL infections from the "Kung Flu" as the President likes to call it.

Florida, where I live, had a 6.4% rise in infections on SUNDAY – that's pretty much a doubling rate of 10 days!  We are back to a state of emergency a month after opening but everyone knows it's too late – there's really no going back now.  On Thursday, Trump’s administration asked the Supreme Court to throw out the Affordable Care Act, including its protections for people with pre-existing health conditions, in its entirety — despite the president’s frequent insistence that he will always protect such patients. He has never offered a plan to replace the law known as Obamacare.

On Saturday, Trump said on Twitter that he’d win re-election, once again proclaiming that a “silent majority” supports him. He boasted about high television ratings for his recent campaign events and said “these are the real polls, the Silent Majority, not FAKE POLLS!”  Trump has repeatedly said, falsely, that the U.S. has more cases of Covid-19 because it’s conducting more testing for the disease. He’s also expressed skepticism that some of the reported cases are real.  “You’re going to have a kid with the sniffles, and they’ll say it’s coronavirus,” he said Thursday.

DURING a White House coronavirus task force briefing Friday — its first in two months, held at Health and Human Services headquarters and without Trump — the president tweeted a wanted poster for 15 people who allegedly
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Friday Failure – 33 States (out of 50) Are Spiking With Infections

Holy cow!  

As you can see from the chart, over 20% of the people who are tested in Arizona do, in fact, have the Covid Virus.  Not much better in Florida and anywhere were 1 out of 10 people have the virus it's pretty much game over for containing it.  We did have it contained – but Trump was so eager to call that a victory that he opend up the cages and now we are all Christians that have been thrown to the viral lions by our modern-day Commodus.  Maybe in the future, we'll call the toilet a Trump, instead of a commode in his "honor"… 

That's right, Commodus was the son of the popular Marcus Aurelius but, as Gladiator fans surely know, his reign was one of rot and corruption as he surrounded himself with incompetent toadies and managed to intiate the complete anhilation of the Roman Empire after 12 years of incompetent rule (he was assassinated):

During his solo reign, intrigues and conspiracies abounded, leading Commodus to an increasingly dictatorial style of leadership that culminated in a god-like personality cult. His assassination in 192 marked the end of the Nerva–Antonine dynasty.

Commodus had upset the peaceful balance that Rome had enjoyed for almost eighty years. Currency was devalued and the economy collapsed, leading the country into a civil war that lasted four years. His rule was the beginning of the end for that most famous empire..

Yikes, sounds a lot like the movie we are all currently starring in, doesn't it?  I think we're just about in the middle of act two:

 In context, the Latin panem et circenses (bread and circuses) identifies the only remaining interest of a Roman populace which no longer cares for its historical birthright of political involvement. Here Juvenal displays his contempt for the declining heroism of contemporary Romans, using a range of different themes including lust for power and desire for old age to illustrate his argument.[6] Roman politicians passed laws in 140 BC to keep the votes of poorer citizens, by introducing a grain dole: giving out cheap food and entertainment, "bread and circuses", became the most effective way to rise to power.


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3,000 Thursday – Holding the Line on the S&P 500 While Infections Rise and Rise

This is getting interesting.

We shorted the S&P 500, as noted in yesterday's Live Trading Webinar, right at our 3,135 line on the last cross and this morning we got stopped out after almost testing the 3,000 line and we've been over and under our line since and the next time we test it, we're going to short it again.

Our hedges are doing their job as the Long-Term Portfolio fell from $883,615 on Friday to $836,750 yesterday (down $46,865) while the Short-Term Portfolio rose from $521,687 to $540,485 (up $19,098).  That's exactly what your hedges should be doing – MITIGATING half your damage on the way down.  If your hedges are completely reversing the damage – you are probably over-hedged.

Why is that?  Because if you have $100,000 and you put $85,000 in longs and $15,000 in hedges (our standard ratio), then if the market drops 20% your longs drop $17,000 but the hedges, which we play with 3x ETF and options, gain about $7,000 ideally.  Because we also hedge our hedges, you don't see the full effect right away but mitigating 50% of the damage is close enough.

So now the market has dropped 20% and what do you have?  You have $92,000 – that's only down 8%.  That in itself isn't very exciting but that's where Part 2 of our strategy comes in because, since we are not very damaged by a 20% drop, we are in a great position to go bargain hunting for stocks that over-reacted to the downside (and that is what our Watch List is for) and now we can buy our stocks for a 20% or greater discount and, using our other options strategies and taking advantage of the higher VIX – we can buy stocks closer to a 40% discount with our $92,000 in buying power.

See how simple that plan is?

 

 

 

Wobbly Wednesday – Virus Surge Worries Markets

Donald Trump's Helicopter Walk After Rally Becomes Meme | PEOPLE.com2,347,102 infected Americans.

Will we even make it to November so we can choose 4 more years of this nightmare?  121,225 Americans are dead out of 477,807 worldwide – only Brazil is close to us with 52,645 dead in their country – clearly not as "great" as ours has been made.  Trump has been calling the virus "Kung Flu", which both attaches it to China (in a racist fashion) and diminishes the toll it is taking on the people of this country who are suffering and dying under his watch.  Well played sir! 

While the Chinese (84,653 infections, 4,640 deaths) are able to travel to Europe and the US, Americans may soon not be able to travel to China or to Europe as both Governments are considering banning US travelers from entering their countries and will at least require 2-week quarantines for those that do wish to escape our disease-ridden nation.  That's as of July 1st folks, so you'd better take that summer vacation quickly.

Trump Puppet Putin | Envisioning The American DreamIn 3.5 years, America has become isolated and unloved, with soaring debts and monstrous unemployment.  We have far less trade, riots in the streets and our life expectancy is crashing as fast as the stock market is rising.  Putin could not possibly be prouder, could he?  

President Trump, as well as his Russian and Brazilian counterparts have followed what critics call a comparable path in their pandemic response that leaves all three countries in a similarly bad spot: they were dismissive at the outset of the crisis, slow to respond to scientific advice and saw a boom of domestic cases as other parts of the world, notably in Europe and Asia, were slowly managing to get their outbreaks under control.

This morning, the stock market kind of cares about the virus and we're down a bit in the Futures 

 

 

 

IN PROGRESS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Testy Tuesday – S&P 3,135 Yet Again

"Baby here we stand again

Where we've been so many times before

Even though you looked so sure

As I was watching you walking out my door

But you always walk back in like you did today

Acting like you never even went away

Well I don't know if I can

Open up and let you in baby

Here come those tears


Here come those tears again"Jackson Browne 

That's right it's Tuesday so the S&P must be testing the 10% line and last Tuesday we failed but the Tuesday before that we popped over so it's a real coin flip this morning.

Things are looking good so far because those 30M unemployed people are still getting their $600 WEEKLY bonus checks ($18Bn/week, $72Bn/month) and those will last until July 31st and that has kept the economy from totally collapsing and has kept Consumer Spending at reasonable levels at the Bottom 25% of wage earners are now outspending the Top 25% relative to where they were before the crisis.  

Pumping an annualized $864Bn into bonus checks for the Unemployed is 5% of the GDP we're adding and that's making all those economic numbers look much better than they are, not to mention the base $15Bn a week of regular unemployment benerfits that are being handed out – that's another annualized $780Bn (4% of GDP).

Then we add in the $1,200 stimulus checks for 170M tax filers ($204Bn) and $500 for 50M dependents ($25Bn) and that's another $229Bn in Q2 is an annualized $916Bn (5% of GDP) so this economic bounce is here because we spent…
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Monday Market Movement – Futures Can’t Hold Gains

First you go low on high volume, then you go high on low volume.

That's one of the tricks "THEY" do when "THEY" want to reel in retail suckers to take stocks off their hands at high prices.  Keep the headliners like Apple (AAPL) rolling up the market while doing massive selling like we saw into Friday's close – a 100-point drop in the S&P 500 (3.2%) during the trading session but then a 60-point "recovery" when the markets closed and there was no volume – a time when it's MUCH easier to manipulate the markets, as well as the news.

Yes, we used to only have to worry about fake Financial News, the kind Jim Cramer boasts about routinely placing in this video.  As Cramer says, if you are running a hedge fund and you are not manipulating the markets – you're just not doing your job.  If you think that's not true today – just look at that action on the S&P and read the headlines of SOME papers and you tell me if we're still being manipulated or not.

ImageDoes what you hear about the markets and the economy make sense when you walk on empty streets and eat in empty restaurants?  Will it makes sense when we get those quarterly reports for Q2?  Does it make sense when you look at the Atlanta Fed's GDP Now forecast, that shows Q2 (the one we just finishing next week) GDP is projected to be DOWN 45.5%. 

I know not all of you are Economists but I'll save you 2 years of graduate school by saying down 45.5% is BAD!  What's also bad is that the average range of pundits is more like -35% so the public is in for a big disappointment if the Atlanta Fed is right and the random idiot on TV is wrong.

We get the final GDP Report for Q1 on Thursday (8:30) and that will be down 5% with Consumer Spending down 6.8% and that only reflects the last two weeks of March when we were locked up (hey, Trump did it, he locked us up like he promised!).  If we were down about 50% for two weeks and the other 10 weeks of the quarter we
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Philstockworld June Portfolio Review – Members Only

Image result for one million dollars animated gifYes, I am being lazy (some would say efficient), this is Friday morning's Report because not much is going on and these Reviews take forever to write so I'm getting a jump by doing them as we go along today.

$1,405,302!  

That is up $271,547 (24%) for our paired portfolios since our last review and we've made very few changes to the LTP in the past month – the market's move higher just worked well for our leveraged positions, which are still pretty bullish from that bottom action in March.  The S&P 500 was at 2,863 back on May 15th and now it's 3,135 – up 272 points is right about 10%.  That's why we keep spending money on those hedges in our Short-Term Portfolio – we want to lock in those ridiculous gains.

We didn't do a lot of buying this month, we added FL, HMY, IMAX, KO and TIF, who were all still bargains from our Watch List but, for the most part, things have gotten too expensive to be of much interest so we are wating PATIENTLY (right guys?) for earnings – when it's certain to be bargin-hunting time again.  

Meanwhile, as our Members are certainly aware, I think being up $800,000 from our $600,000 start to the year is a bit too much money to be making so I am VERY inclined to take it all off the table and start from scratch (keeping the $800,000 in our pockets so we can't possibly have a losing year).  We could be super-aggressive in the new portfolios and it would be fun but people hate it when I do that (even though it's sensible) so I'm simply going to say that if the combined Long and Short-Term Portfolio values drop below $1.2M (up 100%), we will be shutting them down (along with the rest as their health is a good indicator for all of us).

It's boring when our portfolios are too well-balance, there's not much to do during the day…

Short-Term Portfolio (STP) Review:  The last time we checked in on the STP was way back on June 4th, when the S&P was at 3,122 in the morning, as I wrote our report.  At the time it was…
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Thrilling Thursday – Bolton Claims Trump Asked China to Help Him Get Re-Elected

Bolton Book Offers Scathing Rebuke of Trump as DOJ Escalates Efforts to Block PublicationBolton's book is out.

According to the exerpt from the Wall Street Journal (hardly part of the "Liberal Media"): "The president pleaded with Chinese leader Xi Jinping for domestic political help, subordinated national-security issues to his own re-election prospects and ignored Beijing’s human-rights abuses."  I'm sorry about the "politics" but some of this stuff you just have to read:

In Buenos Aires on Dec. 1, at dinner, Xi began by telling Trump how wonderful he was, laying it on thick. Xi read steadily through note cards, doubtless all of it hashed out arduously in advance. Trump ad-libbed, with no one on the U.S. side knowing what he would say from one minute to the next.

One highlight came when Xi said he wanted to work with Trump for six more years, and Trump replied that people were saying that the two-term constitutional limit on presidents should be repealed for him. Xi said the U.S. had too many elections, because he didn’t want to switch away from Trump, who nodded approvingly.

Trump closed by saying Lighthizer would be in charge of the deal-making, and Jared Kushner would also be involved, at which point all the Chinese perked up and smiled.

Trump spoke with Xi by phone on June 18, just over a week ahead of the year’s G-20 summit in Osaka, Japan, where they would next meet. Trump began by telling Xi he missed him and then said that the most popular thing he had ever been involved with was making a


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Which Way Wednesday – Testing the 10% Line on the S&P 500

Here we are again.

We blasted back to the 10% line at 3,135 yesterday but failed to hold it and we'll try again this morning in a very forgiving Futures market as the Fed's Powell made enough good noises yesterday about the Fed's Infinite Balance sheet that the bulls don't think there's much to worry about.

As I've mentioned, I live in Florida and over 2,700 people came down with the virus yesterday in one of the most open states in the Nation and 7.5% of the people are now testing positive for the virus but, keep in mind, that's a bit skewed towards people who think they have the virus anyway.

Just to the south of us, 34,918 people caught the virus yesterday in Brazil, about 1/4 of the 139,479 people who caught the virus around the World – one of the worst days on record.  In the New York Times this morning, Thomas Friedman, who has 3 Pulitzer Prizes, asks: "Is Trump Trying to Spread Covid-19?" and he makes a good point.  The President literally would seem to need a panel of experts who are advising him to do the WORST possible thing to contain the virus every day.  Literally NOTHING would be better than what this Administration is doing to the American people.

We are miles past Vietnam (70,000) in American lives lost to Trump's incompetence and we're heading towards World War II's 405,000 American deaths and, after that, only the Civil War (620,000 casualties) would be able to top the disaster we are facing now in this country.  We'll see what the President has to say about this on Saturday, when he holds an indoor rally for 20,000 people in Tulsa, OK – an event some are predicting will become a "Super-Spreader" as people are coming from all over the country to gather and infect each other so they can take it back to their home towns.  BRILLIANT! 

Tulsa County already had 89 new cases on Monday, the most ever, with active cases climbing from 188 to 532 in the past week as the county re-opens in preparation for the rally.  Keep in mind, those are just the cases they know about – there could be thousands of locals at the rally
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