Entries by Phil

Non-Farm Friday – Is America Working?

Jobs Report today (8:30).  

So far, under Trump, we've added 250,000 less jobs than under Obama in his last 9 months and today should make it worse as only about 195,000 jobs are expected to have been created in November, Trump's 10th month in office.  September was the real disaster for Trump, with just 20,000 jobs created but last month was a bit of a comeback, with 261,000 jobs but that may get revised lower – so watch out for that.  It wouldn't matter if we had an ordinary President, but Trump is big on keeping scores and he promised the moon and the stars on jobs and has, so far, woefully failed to deliver

Much worse than not delivering enough jobs is the horrific erosion of wages for all jobs since Trump took office.  Due to reversals in labor policies under the Trump Administration, hourly earnings growth has slowed 0.4% since the election and, while that may not seem like a big deal, when you multiply it by all 168M employed people it's the same as losing another 672,000 jobs worth of salary.  

Creating jobs at slave wages was never the goal of the Obama Administration while Trump actually ran on a promise to put people back to work in coal mines which, LITERALLY, has songs written about how it's the worst job on the planet.  Obama's job plan was to create a new, renewable energy economy and put $90Bn into funding companies like Solyndra, which lost $535M and was the GOP excuse for killing the program but it was too late to kill the jobs that were created and today, 10 years later, clean energy jobs outnumber coal, oil and natural gas combined.  And those are, generally, high-paying jobs with great growth prospects that are bringing manufacturing back to America.

Image result for cost renewable energy chartIf I were Vladimir Putin, with half my fortune in oil, I'd be very concerned about that trend and, indeed, Trump is working hard to reverse the trend by putting tariffs on solar photovoltaic imports of 35% – exactly at the point where solar energy has pushed past fossile fuels as the least expensive
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$15,000 Thursday – BitCoin Blasts to New Highs

S&P 500 Priced in BitCoin from www.PhilStockWorld.comThank goodness we still have our BitCoins!

We may have cashed out of the market but you'll have to pry our BitCoins out of our cold, dead fingers.  No, only kidding, this is silly too – we can't wait to sell – we're using tight stops now.  PSW Investments bought their BitCoins for $600 each two years ago, so it's a nice gain and we should lock it in – the cash will make a nice Christmas gift for our partners.  We still have our GreenCoins (GRE) though and we're accumulating more of those because each BitCoin's worth of those we bought is now worth $24,525 at 0.00327, so GreenCoins are doing 50% better for us than BitCoin – and they are far earlier in the run-up cycle.  

Of course, in order to buy a GreenCoin you need a BitCoin and then you have to go to the CoinExchange (where it's ranked 93rd) and trade the BitCoins for Greencoins.  That's one of the reasons BitCoins are exploding in value – you can't buy any other CryptoCurrency without first buying a BitCoin so millions of speculators are holding BitCoins in their wallets (like us, frankly), simply because they were using them to buy other coins and ended up with some change. 

That "change" is now worth a fortune – as BitCoin passes $250Bn in valuation.  That's 
















Weakening Wednesday – How Nice to Watch from the Sidelines

So far so good. 

We have no regrets on Monday's call to get to CASH!!!  Now, it is possible that it's a self-fulfilling prophesy as I went on TV, live at the Nasdaq on Monday Morning and told their viewers why I thought the market was drastically overbought – using very simple math that simply demonstrates that it's not likely that, after taking 200 years to get to $65Tn, the global markets were going to be able to justify a $35TN (53.8%) gain in 12 months.  

What's most amusing to me is the number of people on Social Media who feel that they need to defend the bubble and come up with dozens of reasons why I am wrong and why "this time is different" because of Trump's Tax Plan, the Global Recovery, Emerging Markets, Easy Money Policies, the Sharing Economy, Robot Automation…  All good reasons we should be having a rally – but not this INSANE, RIDICULOUS, UNSUSTAINABLE rally and, frankly, the whole time they are talking I just keep thinking "Wow, people just don't understand the basic concept of math, do they?"  

It's the same math I used in 2010, when I wrote: "The Worst-Case Scenario: Getting Real With Global GDP!" when I used the same MATH to show that the markets should be much higher than they were.  7 years later, the math hasn't changed, the markets have.  I'm not your enemy just because I'm trying to tell you the markets are overbought any more than your doctor is when he tells you your cholesterol is too high.  I've been warning you for a long time and I've prescribed hedges to make sure our portfolios didn't suffer any major damage but now, unfortunately, the untreated condition has gotten worse and we need to operate/liquidate – IMMEDIATELY – to prevent serious damage to your finances.

Image result for global gdp growth 2017Like a doctor, we don't know for sure that staying in the market will kill you, we have to rely on our observations and the risk/reward of cashing in vs. staying bullish into 2018.  Is the global market more likely to add $5Tn (5%) in the next month or two or is it more likely…
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Tempting Tuesday – Stop Buying that Dip and GET OUT!!!

Related imageGET OUT!!! 

In this year's horror hit, "Get Out" the main character gets his warning just one time, early in the film.  I don't know if it's early or late in the Stock Market Film but I did, very clearly, tell people to GET OUT!!! in yesterday morning's PSW Report and I repeated that warning live at the Nasdaq at 10:30, causing the index to drop 50 points (sorry).  There may have been other factors in play – but I'll take the credit/blame for this one.

You can see a quick video review on my logic for why the market is 20% overbought here:


#TradeTalks: Commodities Review and Preview w/ @philstockworld & @JillMalandrino https://t.co/ecs4wXWlts — Nasdaq (@Nasdaq) December 4, 2017






Market Cap Billiions
2016  Pre-Tax Income

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Just Another Manic Monday – Tax Free Edition

The tax bill passed!  

That's right, the GOP Senate passed the Trump Tax Plan when all the GOP Senators voted for it – what a surprise.  In other news, water is wet.  Still, the markets are acting like it's a surprise with the Dow up 227 points in pre-market trading and that's up about 500 points from Friday's lows – in that brief moment we though Trump might be arrested before they pass the tax bill.  Now it looks like he won't be arrested until after the bill is signed – so all is well, I suppose.

Dow 24,500 is up is up 4,500 (22.5%) from the start of the year and up 6,500 (36%) since the election.  That's nothing compared to BitCoin (see this weekend's notes on that subject) which is up 11,000%.  Still, 36% is a lot and the Global Markets have driven higher as well, as one might expect but, as we were discussing in our series of market value discussions last week – the reaction is now far exceeding the reality.  

world market capFor example, in November of 2016, the total market capitalization of Global Markets was $65Tn.  That's about the same as our Global GDP ($80Tn), so not unreasonable.  Unfortunately, now it's not reasonable at all as we're about to cross (or may cross this morning) $100Tn.  That's up $35Tn (53.8%) in 12 months.  

Global GDP grew 3.4% in 2017 so let's say that's a gain of $3Tn .  The question then is – where did the other $35Tn of market growth come from?  The answer is, of course – Fantasyland – this is completely ridiculous.  You may think "tax cuts" are a good explanation but US Corporations paid just $411Bn in taxes in 2016 even is you took 100% of those taxes and drove them back into profits and mulitplied it by the S&P's insane 27x earnings multiple – that would only account for $11Tn and we'd still be $21Tn short, or about 20% of the total market cap.  

Image result for buffet tax sellingSo that, folks, is the correction we are expecting when, at some point, investors come to their senses.  Warren Buffett and I think that
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Grand Theft Friday – GOP Desperately Deals to Steal Your Future

Before I get into taxes, I want to apologize to Roy Moore.  

He's been accused of being a sexual predator just because, when he was in his mid-30s, he had sex with girls that were as young as 14 and maybe he was a little gropey and maybe, after forcing a 16 year-old girls' head into his lap, he shouldn't have said ""You're just a child, I'm the district attorney; if you tell anyone about this no one will ever believe you."[23][24]", but this is a very different culture (Alabama) than the one we're used to – so who are we to judge who the people of Alabama want representing them in Washington?  After all, when Donald Trump was 35, his wife was 11

Roy Moore, if he is elected, certainly won't be the most evil, loathsome figure in the Death Star that is the US Senate.  There are people there who, as we speak, are plotting the deaths of thousands children by starvation, heat, cold or a slow death from many childhood diseases.  Some of them don't even want to vaccinate our children – potenially unleashing new epidemics on our nation – the first of many plagues we are likely to endure under the Golden Pharoh.  

Image result for republican death star9 MILLION low-income children will lose their health care on December 31st.  This is not Obamacare, these are children we, as a country, decided did not deserve to suffer just because their parents committed the mortal sin of being poor.  Not that the GOP has forgotten about the parents.  In order to pay for $338Bn of the tax cuts they are giving to the Top 1%, they are repealing the Obamcare Mandate Provision that will cut 13M people off health care.  That's over 10 years so $33.8Bn a year means they have to take $2,600 away from each poor person they put at risk.  Keep that in mind – that's what your life is worth to a Republican.  Even less according to Brookings, who see 32M people losing health care under these provisions!    

Those are, of course, the FEDERAL savings and all they do…
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24,000 Thursday – Dow Continues It’s Insane March Higher


It was only September when we broke back over 22,000 so about 10% gained in 3 months added to the 10% gained the previous 8 months puts us up 20% for the year.  On the Dow Jones Industrial Average, that means our 30 Dow stocks have gained $1.2 TRILLION in market cap to what is now just shy of $7.5 TRILLION for just 30 of the S&P 500 companies.  Keep in mind that the entire $18.5Tn United States GDP gained just 3.3% last year and that's only $610Bn so, even if the 30 Dow companies had gotten 100% of the entire country's growth – they'd still be shy $600Bn.

But, as I mentioned yesterday, it's not just the Dow 30 that are growing insanely – the entire S&P 500 is up 25% since Trump's election and you can credit the President if you want but, as I said, 3.3% GDP growth is $610Bn and our Top 500 companies (including the Dow 30) are now worth $24 TRILLION – up $5Tn in 12 months so we are, in effect, paying 8 times the actual economic growth for the stocks and that's assuming ALL of the growth goes to those 500 companies (and none for you, your family, local businesses, etc). 





Record High Wednedsay – We Will All Be Billionaires

America is great again.

There's no denying it – from a stock market perspective, it doesn't get any greater than this.  Forgive me for not believing but how can you deny how easy it is to make Millions in this market.  It's the largest cash giveaway of all time – and all you have to do is play along.  Out Long-Term Portfolio, for example, is just under 250% at $1.75M and we're being CONSERVATIVE – with 77% of our portfolio in CASH!!! (have I mentioned how much I like CASH!!! lately?) yet still, the EXACT SAME POSITIONS we just reviewed on Nov 17th at $1,698,372, are up another $51,171 (3%) in just 12 days.  

At that rate of return (6%/month), we'll have $3.5M by the end of next year and why not – certainly we're working hard for it, right?  Well, that's sort of the problem – we're not working for it at all and neither are the companies represented by these stocks – they are not growing profits or revenues to cover these gains – they are simply getting more and more expensive.  Now, clearly a lot of the exhuberance in the market is about the forthcoming tax cuts but – even if we assume they are going through – how much of an impact will they really have when US Corporations only paid $444Bn in taxes last year?

That's on $3.5 TRILLION in profits so, on the whole, an effective tax rate of about 13% so how much will lowering the Corporate Tax Rate to 20% really accomplish?  All it's going to do is lowe the rates for the companies that aren't already cheating by hiding their earnings overseas or funneling profits through partnerships so they can show losses to offset the gains.  Will they effectively pay 10%?  9%?  Even at 9%, they are only saving $130Bn yet the market is up TRILLIONS in anticipation of these cuts.   

The ENTIRE market cap of the S&P 500 at the 2009 lows was $6Tn and today we are testing $24Tn with just 5 stocks; - FB, AAPL, AMZN, NFLX and GOOGL (FAANG), making up $1Tn.  I'm old enough to remember when a Trillion Dollars was considered a lot of money, but not these…
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Trade of the Year Tuesday – Our Top Pick for 2018 is:

Our Trade of the Year is here!  

Each year, we put together an options spread that has the best chance of returning 300-500% on CASH!!! over the next 24 months.  The chart on the right is from my appearance on Money Talk, where I often announce our Trade of the Year but I wasn't on until Dec 14th and we made our pick around Thanksgiving so that 2015 Trade of the Year was:

  • Buy 20 AAPL 2017 $90 calls at $26.50 ($53,000) 
  • Sell 20 AAPL 2017 $120 calls at $13 ($26,000)
  • Sell 20 AAPL 2018 $85 puts for $9.50 ($19,000) 

The net cash outlay of that trade was $8,000 plus the margin for promising to buy 2,000 shares of Apple (AAPL) at $85, which would be $170,000.  Of course, AAPL was well above the target and the trade returned $60,000 for a $52,000 (650%) return on cash – not bad for two year's work!  

While Apple is still a staple of our portfolios, it didn't make the cut in 2016 when we went with the Natural Gas ETF (UNG) and our trade idea for them was:

  • Buy 100 UNG Jan $5 calls for $2.65 ($26,500)
  • Sell 100 UNG Jan $10 calls for 0.65 ($6,500) 
  • Sell 50 UNG 2018 $8 puts for $2.10 ($10,500)

That works out to a net cost of $9,500 and pays $50,000 if UNG is above $10 in January and stays

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Monday’s Mandarin Meltdown – Chinese Markets Make New Lows

China's markets fell 2-3% this morning.

Losses for Chinese companies came after the yield on the nation's 10-year Treasury note ended unchanged at 3.98%, trading within a striking distance from its three-year high.  "Whether the selloff is a slight correction after a strong surge in 2017, or steeper declines on the way, remains to be seen," Hussein Sayed, chief market strategist at FXTM, wrote in a note. "However, rising bond yields, particularly junk bonds, should keep investors worried."  “The Chinese stock market drop is reminiscent of the selloff that we saw in the summer of 2015, and that is causing some investors to become cautious going into the thin year-end markets,” said ING currency strategist Viraj Patel, in London.

South Korea's market also took a tumble, finishing the day down 2.4% and led down by Samsung's 5.1% drop but that was nothing compared to Qudian's (QD) 20% pullback (see chart above), now down more than 60% since their IPO last month and a great example of what I was talking about last week, when I said we need to be concerned with how much of our own US Markets are now indexed against Chinese companies of EXTREMELY QUESTIONABLE valuations.  

Image result for china debt 200% gdpNow that we've established that I do know how to connect a few dots, I will once again point out that China is only the second-most indebted nation on a debt to GDP basis (maybe higher by some counts) and the massive debt taken on by their Corporations is the Global Catastrophe in the on-deck circle.  Japan is still the king at about 265% while the Trump Tax Plan will do a great job of catching us up, by putting us on a path to 200% debt to GDP in just 10 years.  

At a 4% interest rate, servicing $20Tn in debt that we now have would take $800Bn.  At $40Tn, we'd need $1.6Tn a year just to make our interest payments – that would be 1/2 of all the taxes our Government currently collects and far more than half after Team Trump performs their massive tax givaway to the Top 1%, leaving the Bottom 99% holding the bag for all the new Debt and subsequent interest – keeping…
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