Entries by Phil

Monday Market Movement – Up and Up and UP!

Another day another 1.5% gain.

This is why we can't cash out our long portfolios, as much as we'd like to.  The problem is we are going to have a very hard time protecting our ill-gotten gains from the correction – if and when it ever does come but, so far, the flow of money from the Fed and the endless stimulus by the Government is the rising tide that is floating all boats – no matter how rough the waters.  

Investors are "exhberant" but is it really irrational when so much money is being thrown at the stock market?  This is historically unprecedented.  Here we are at the start of Q3 and we already heard on Friday that Q2 was a disaster for the Auto Industry and Earnings Reports kick off next week with PEP, C, JPM, WFC, UAL, BK, GS, PNC, PGR, USB and UNH reporting by Wednesday.  This week we have just a few but nothing terribly exciting so we'll have to wait until next week to see if the markets can skip over Q2's almost certain disaster:

The top earnings releases scheduled for the week are Paychex, Aspen Group, Simply Good Foods, Walgreens Boots Alliance, Bed Bath & Beyond, and Levi Strauss.

The Atlanta Fed has increased their GDP Now Forecast to -35% from -54% for Q2 so I guess that's great news.  I'm not sure if -35% deserves new record highs in the stock market but it is certainly better than -54% thanks to that very clever re-opening thing we've been doing for the past month under the guidance of Supreme Leader Donald Trump.

According to our President, a few people "caught the sniffles" this weekend – a record amount, in fact – but it's nothing to worry about and no reason to chicken out and go back to our cowardly lockdowns that were damaging his economy.  I know I'm inspired.

"Experts say the president appears to have seized only on a death rate estimate of 1 percent or less that does not capture the entire impact of the disease, and excludes


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50,000 New Infection Thursday – Happy Holiday!

50,000 new infections!

That's right, that's the 5th time in the past 7 days the US has hit new all-time single-day highs in infections.  Over in Japan, six weeks after Tokyo lifted it's State of Emergency, they are back to their May highs in daily infections.  At this point, I don't think there is much to do about it.  Clearly humanity has no taste for the obvious way to control the disease and very clearly Americans don't.  Maybe the "herd immunity" crowd was right – cows don't go into lockdown when a disease strikes – some die, some don't and the rest of the herd moves on

I don't suppose a cow puts much thought into it's vulnerability or what will become of it's children and loved ones or how it's business will survive or how it's carelessness might affect his fellow cows - AND NEITHER DO AMERICANS APPARENTLY!  Maybe we just eat to many cows and we are starting to think (or not think) like them?  Texas eats a lot of meat and they had 8,000 new infections yesterday but Arizona, which has 1/4 of Texa's population, had 4,700 new cases – more than half, so about 5 times the infection rate of Texas.

Arizona Gov. Won't Require Masks Despite Coronavirus Surge | TimeFrom Japan and other countries that have had re-infections, it's very clear that bars are a major cause of the spread of the infection yet the bars are open in most states for what is usually a big drinking weekend as we bow to pressure from the Liquor Lobby to keep things flowing while completely ignoring the Rational For God's Sake Will Humanity at Least Try to Save Itself Lobby – as usual.  As noted by David Leonhardt:

Government policy and economic forces have combined to make corporations and the wealthy more powerful, and most workers and their families less powerful. These workers receive a smaller share of society’s resources than they once did and often have less control over their lives. Those lives are generally shorter and more likely to


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What Next Wednesday – Fauci Fears 100,000 New Cases a Day, Market Soars

Fauci Says U.S. Risks 100,000 Daily Cases in Dire Virus WarningThe US "is not in total control".  

That's quite the understatement from Dr. Anthony Fauci, who warned the Senate yesterday that daily new virus cases in the US were trending towards 100,000 per day.  That would knock out the entire population of Wyoming in 15 days!  The country is now reporting nearly 40,000 new coronavirus cases every day - almost double from about 22,800 in mid-May - driven largely by outbreaks in a number of states across the South and West.  “I can’t make an accurate prediction but it’s going to be very disturbing,” Fauci told the Senators.

“Well I think the numbers speak for themselves.  I’m very concerned and I’m not satisfied with what’s going on because we’re going in the wrong direction if you look at the curves of the new cases, so we really have got to do something about that and we need to do it quickly.”

Outbreaks in states like Florida and Texas also threaten to disrupt the progress states like New York and New Jersey have so far made in driving down the outbreak in the Northeast, Fauci said. New York, New Jersey and Connecticut last week announced they would mandate 14-day quarantines for any travelers coming from a states with rapidly expanding outbreaks. Nonetheless, Fauci said increased infection anywhere in the country threatens to spread everywhere.

Keep in mind that 100,000 people a day is 3M people per month which means 1% of our population will be infected each month and that means that in two months, 1 in 50 people will have the virus and how likely is it that we can stop the spread at that point?  1-2 months later,  1 in 25 and 1-2 months after that 1 in 12.  Hey I know – let's keep doing almost nothing, right?  

The S&P 500 has pretty much done nothing since the end of April.  Well, it's gone up and down but, on the whole, not much higher than that peak which is still much lower than the pre-virus peak…
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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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