Entries by Phil

TGIF – Quad Witching Madness

I love CASH!!! 

We cashed in most of our Member Portfolios so I'm not at all worried about what will happen today.  It's the end of the quarter for options and Futures (2 kinds of each) so "quad witching" and these days can have some violent swings – though we're not expecting anything dire.  We still thought it was a good idea to take advantage of this triple market top – JUST in case Q 4 Earnings don't go well or the Trade Talks don't go well or Brexit doesn't go well, etc.

Just because we moved to CASH!!! doesn't mean we can't still find fun things to trade.  We've been watching McDermott (MDR) collapse for the last few days and yesterday morning, I sent a Top Trade Alert out to our Members saying:

MDR – Fortunately, we got out of ours a long time ago as we never wanted them, we just liked CBI, who they merged with.  Needless to say, the merger has not gone well (which is why we didn't want to ride it out) and now they are calling in restructuring experts.  MDR says it "is taking positive and proactive measures, as we have done in the past, intended to improve its capital structure and the long-term health of its balance sheet."   You can take them at their word (as no one is) or you can imagine this is a sort of cover-up for their emergency measures to stave off some sort of disaster that's looming.

I do watch them (because they took away my CBI) and last year they took a $2.7Bn hit on write-offs and such and this year they lost about $190M in the first two Qs and it's doubtful they turn that around by the end of the year but they have $455M in cash and I bet they end up down less than $100M for the year with a profit in Q4.  

Assuming that's true – then


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Federally Funded 3,000 Thursday

Here we are again! 

As we expected, the Fed cut rates another 0.25% yesterday after changing just 15 words from their last statement, essentially indicating that Business Spending has slowed down to justify the completely unneccessary cut.  “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks,” Powell told reporters. So, apparently, we've gone from a "data-dependent" Fed to one that now uses psychic powers to react to trouble before it even happens?  

Powell said “Weakness in global growth and trade policy have weighed on the economy” but does that mean he will RAISE rates if Trump makes a deal with China?  Powell can't win so he shouldn't try to please Trump, who immediately tweeted about the Fed Chairman:  “No ‘guts,’ no sense, no vision!” for not giving the President the negative rates he demanded just last week.

Powell left the door open to “a more extensive sequences of cuts” if needed, but stressed this was not what officials expect. Instead, he described the situation as one “which can be addressed and should be addressed with moderate adjustments to the federal funds rate.”  Updated quarterly forecasts showed officials split over the need for rate cuts this year. Five didn’t want to move. Five saw a quarter-point reduction warranted, while seven saw 50 basis points of easing needed by year-end — half of which was delivered on Wednesday.

As you can see from the Fed's projections, we're wrapping up Trump's Presidency (hopefully!) with barely 2% GDP growth and an uptick in unemployment while the fiction of low inflation is being maintained and keep in mind that if inflation is 2% and the economy is growing 2% – then the economy isn't growing at all – things are just getting more expensive while we produce the same amount of stuff.  To some extent, that's to be expected in a mature economy but we do have 1% population growth so really 3% growth with 2% inflation should be the minimum we shoot for.

I discussed the Fed and the overall economy with Kim Parlee on Money Talk last night, so here's that segment:

Given all those concerns, as we noted in…
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Which Way Wednesday – Fed Edition

CASH!!!

That is our response to market uncertainty and we are officially cashing out our Money Talk Portfolio after a very successful 2-year run where we've taken it from a $50,000 start to $124,043, which is up a whopping 148%.  I'll be on BNN's Money Talk Show later this evening to discuss the matter but, in short – it's simply too hard to protect those gains against all the market uncertainty regarding the Fed, Trade, Brexit, the Middle East, Election Interference, Impeachment, Overpriced Stocks & Indexes and, of course, a slowing Global Economy.  While the market is, so far, content to "soar and ignore" – I don't think we have more than 10% left in the best of circumstances while the risk is a 20% drop – so I'd rather sit this quarter out.

Of course "sitting out" doesn't mean we won't still find things to trade – I just want to get a clean start in 2020 and I don't want to risk what we've made in the last quarter of 2019.  We also reviewed our Hemp Boca Portfolio yesterday morning in our Live Member Chat Room and, though it's only 4 months old and only up 8.2% so far, we reduced our risk on that one as well.  One difference is I'm on the Hemp Boca show at least once a month to make adjustments but only on Money Talk once a quarter and, between now and January – I really can't condone the risk of holding positions without the ability to make changes!  

Our Butterfly Portfolio is market neutral and self-hedging so we simply removed some of the riskier plays but the Options Opportunity Portfolio, which is now up almost 300% in less than two years is going to be completely closed down, as will the Long-Term Portfolio and the Short-Term Portfolio that protects it.  As with our Hemp Boca Portfolio, I will be highlighting those trades I think are worthy of keeping but, for the purposes of our educational porfolios – I think there's more to be gained next year starting with a clean slate so we can emphasize portfolio building strategies and stock picking.

Here's our Hemp Boca Review from yesterday's Live Member Chat Room:

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The PhilStockWorld.com Money Talk Portfolio Review – Sept 18, 2019

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

The last time I was on the show was back in on April 24th and we only make changes to the Money Talk Portfolio live on the show so we decided to lock into a neutral position over the summer and that's just where we ended up, dropping to $124,043 from April's $127,663 so down $3,620 for the summer is about as neutral as we can get it and we're still up $74,043 (148%) from our $50,000 start just about 2 years ago on the button.  

Since there's a lot of uncertainty going into Q4 and it has been just about 2 years – I think this is a good time to cash out this portfolio and we will begin a new portfolio with a new $50,000 around Thanksgiving – beginning with our still-undecided Stock of the Year.  

Our 2019 Stock of the Year is IBM (IBM) and our IBM position is already 100% in the money at net $2,707 out of a potential $7,500 so, if I were going to keep one trade active – that would be the one as all IBM has to do between now and January of 2021 is hold $135 and that spread will make another $4,793 (177%) so we could, for example, put $27,070 of our $124,043 in cash back to work on just the IBM trade and, if all goes well, it will turn into $75,000 – making almost 100% of our original total in just over a year – so why be more complicated than that?

There's still a lot of potential in all these positions, as noted in the April review, the portfolio has the potential to hit over $200,000 by Jan 2020 but, as I noted, if we cash out now at $124,043 and make another $50,000 on the IBM trade – that's $174,000(ish) anyway but we'd have $100,000 in our pockets NOT at risk through the holidays – that is certainly a much wiser way to go – especially in a portfolio we are unable to adjust between shows.  

So the decision is final, we're cashing out and endorsing our Stock of…
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Testy Tuesday – Trouble at S&P 3,000 – Again

Here we are again.

We re-tested our highs to close last week but they didn't last and we've already failed the 3,000 line – gapping below it with no support.  That is, as they say in the chart schools – not good.  Still, anyhing over the strong bounce line at 2,920 is still long-term bullish and that's still 77 points away or EXACTLY a 2.5% correction from here.  That's at least what we'll see if the Fed disappoints tomorrow.  

Meanwhile, what is the Fed supposed to do since they have no idea what's going on with China Trade, which goes from getting worse to "all fixed" overnight?  Brexit is still up in the air and now we have this additional trouble in the Middle East – these are not things the Fed has control of but they are all things that have serious impacts on the economy.

Wages are rising in the US, Prices are going up – these are reasons the Fed should be raising rates, not lowering them.  The Fed Fund Rate stands at 2-2.25% and dropping it to 1.75-2% isn't going to change people's spending habits or economic decisions.  It won't even do much for Trump, who wants to save money on the interest he pays on $22.5 TRILLION in debt he's run us up to but, even at 2% that's $450 BILLION a year in debt payments and the 1/4-point rate cut saves him $50Bn in interest but it's not savings if Trump turns right around and spends it on something else.

Trunp has added over 10% to the entire National Debt of the United States in just 2 years (the 2016.5-2017.5 budget was still Obama's).  You can see the way the budget explodes higher as Trump's tax cuts take effect and he's boosted Government spending, almost all of it military, at the same time – pretty much everything the Republican's used to run against…  

You can like or not like his reasons but the math says that if Trump continues at this pace, we'll be $24.8Tn in debt by the time his 2020.5-2021.5 budget runs it's course and 4 more years of Trump's policies would take us to $30.2Tn – 150% of our GDP in debt.  Trying to force
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Monday Market Madness – Drone Attacks Threaten Global Oil Supplies

Image result for saudi drone

Phil – September 14th, 2019 at 3:17 pm

"Oil/Emike, Bert – Yeah but it's the same thing.  FUNDAMENTALLY we knew the Saudis would do something to support $60 on /BZ due to the Aramco deal.  Last summer they pulled the deal but now they are too far along so their only option is to do SOMETHING to boost the price.  

Oil (/CL) right at $55, Gasoline (/RB) coming off $1.55.  Brent (/BZ) $60.33 should hold $60 so /CL is not a bad long at this line over the weekend – maybe something will blow up? "

And THAT is how you make $5,000 PER CONTRACT trading oil into the weekend! 

In our Live Memeber Chat Room, we are not conspiracy theorists – it's simly that we have observed many, many times that, when the Saudis need to boost the price of oil (and they desperatately needed the price highers as the Aramco (state-owned oil company) IPO is looming), things tend to blow up.  Whether it's Nigerians attacking a pipeline or Iran or Houthis (who are taking credit for the current attack), we call them "Rent-A-Rebel" as they are perpetually on-call to jack up oil prices off key supports.  

Creating a sense of unease in the supply chain is a great way to jack up the Futures and jacking up the futures by 10% is a $100-200Bn payoff for the valuation of Saudi Aramco – that's enough money to make even Dr. Evil stand up and take notice.  Do you think the Saudis are above sacrificing a few men for that kind of money?  Jamal Khashoggi would certainly tell you otherwise.  

IN PROGRESS

 

 

 

 

 

 

 

 

 

 

Lucky Friday the 13th – Markets Retest their All-Time Highs

"Let me tell ya, your love (your love keeps lifting me)

Keep on lifting (love keeps lifting me)

Higher (lifting me)

Higher and higher (higher)

I said your love (your love keeps lifting me)

Keep on (love keeps lifting me)

Lifting me (lifting me)

Higher and higher (higher)" – Jackie Wilson

Here we go again!  

3,028 was our July high on the S&P 500 and we're so close this morning we might actually get there into the weekend – isn't that great!  This is the highest the S&P has been since it dropped 200 points (6.66%) in the last week of July/first week of August but we held that top for a good two weeks so it's not that likely we'll fall right back off the cliff on Monday – especially as the driving catalyst is "progress" on the China deal and we're not actually meeting until October – so we can have a whole month of enthusiasm before the next breakdown.

That's good news because we'll be adjusting our portfolios into next Friday's Options Expiration Day and it's Quad Witching as the quarter is ending as well so Futures contracts expire along with stock options and I'm going to be very hard-pressed for a reason not to take the money and run on a good deal of our positions, rather than risk an uncertain Q4 – keeping in mind that last year we rolled into September making a new all-time high at 2,950 (that's right, the S&P is only up 75 points (2.5%) since last year) but plunged 600 points (20%), below 2,350, into Christmas.  

I think a proper China Trade Deal could take us up to 3,300…
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Thrilling Thursday – Back Over S&P 3,000 as the ECB Eases

NEGATIVE 0.5%!

That is now the European Central Bank's Deposit Rate.  That's 2.6% lower than our Fed's current 2.1% rate and 0.75% lower than our all-time low of 0.25% (and you thought we couldn't go to zero!) back in the throes of the Recession.  As you can see from the bottom of the Fed's historical rate chart – this has never happened before in the history of the World so don't listen to people who tell you that they know what is going to happen in a negative-rate World – no one has any friggin' idea what is actually going to happen when we go below the zero line…

We've had Recessions, Depressions, Hyper-Inflation and even Deflation in Human Economic History but we have not had a situation in which rich people (Banksters) CHARGE YOU money for holding your money.  And they are not HOLDING it, you are lending it to them and they are using it to make more money (as Jimmy Stewart explains) – they don't even HAVE your money – IT's GONE!!!  

Negative rates sent the Euro plunging lower (if you have 100 Euros, and you put it them the bank for 10 years, you get back 95 Euros), which will not make Trump happy, as he wants a weak Dollar to inflate the value of his real estate assets so he will pressure the Fed to lower our rates further, so Trump can then borrow money at lower rates to buy more buildings and, of course, the US Taxpayers pay the bill for all these artificially low rates through gigantic deficits and Putin wins again – but there's no collusion – things just work out for him… all the time.  

In fact Russia has been hoarding gold and dumping US assets – almost as if they knew what Trump was going to do.  Russia has been the World's largest buyer of gold recently with the value of their reserves climbing 42% in the past year alone.  “Russia prefers to cushion its macroeconomic stability through politically neutral tools,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki. “There is a massive substitution of U.S. dollar assets by gold — a strategy which
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Which Way Wednesday – Why Not Both Ways?

Image result for scarecrow both ways ozWhat a crazy week already.

Yesterday the Dow topped out Monday at 26,900 and fell back to 26,700 yesterday, closed at 26,909 and is now up another 40 points in the Futures as President Trump is back on Twitter this morning saying:

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet….. 

….The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”

By the way, that's not my emphasis, that's his – I have no idea how he gets twitter to make giant text like that.  In this case, Trump is not wrong(ish) as his "plan" is to have the Fed lower rates to zero and then WE can borrow $22,000,000,000,000 to "refinance" our existing debt (by confiscating existing bonds?) and then sell even longer-term bonds at 0% or maybe even BELOW 0% so PEOPLE WILL PAY US to lend us money in which case the more in debt we go – the more money we'll make forever and ever and ever – what could possibly go wrong with that plan?

 

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Technical Tuesday – 3,000 or Bust on the S&P 500

Here we are again!  

2,978 on the S&P 500 is within spitting distance of 3,000 and today it will be all about Apple (AAPL) and the market's reaction to their event at 1pm today, where they are expected to announce yet another new IPhone and probably more watches and stuff about their TV Service and who knows what else…

Apple is 3.5% of the S&P – its largest component and it's 14% of the Nasdaq – by far the largest component and it's a Dow component where each $1 move in AAPL stock moves the Dow by 8.5 points.  So, to say there's a lot riding on AAPL today is a huge understatement.  

The Nasdaq, for it's part, is having a rough week – so they could use some good news from Apple, who are the only FAANG stock besides NFLX who are not involved in anti-trust investigations and NetFlix WISHES they were more of a monopoly because AAPL, DIS and a dozen other streaming companies are putting pressure on their bottom line and limiting their growth (our hedge fund is short NFLX). 

My early summer comments to our Members on NFLX were:

Submitted on 2019/06/01 at 7:43 am

CMG/Sun – NFLX would be my top short, I just don't think they can keep their growth up, there's no moat to their business and costs are skyrocketing because they are a movie studio selling subscriptions (HMNY) when push comes to shove, not a tech company.

Submitted on 2019/07/17 at 4:17 pm

As I said in the Webinar, it's not really possible for them to sustain that ridiculous valuation.  They are no different than TWX or CBS and those companies trade at 15-20x earnings.  The same people who were convinced to subscribe to HBO over the past 40 years


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