Will We Hold It Wednesday – Dow 27,000 Again?

MORE FREE MONEY!!!

We'd better give some to Disney (DIS), who lost $5Bn in Q2 and has given up on releasing Mulan (live version) in theaters and will go straight to video in September.  The Covid-19 pandemic has closed Disney’s theme parks, virtually eliminated movie distribution and curtailed live sports, a key programming source for Disney TV networks. However, the world’s shut-in nature has helped the  company’s Disney DIS 0.81% + streaming service secure more than 60 million users in nearly nine months, a mark that Netflix took about eight years to achieve.  

In other playground stocks, WYNN also lost $5Bn this morning in their Q2 report and the company has $3.8Bn in cash left and already has $12.8Bn in debt.  The company is trading at about 50% of it's all-time high despite revenues being off 94.8% for the quarter and despite the fact that WYNN has only made about $2Bn in the past 5 years so a $5Bn loss is wiping out 10 years+ of profits.   

Of course the nice thing about WYNN going forward is it will be 10 years until they have to pay taxes again but it could be 100 years if they lose another 5Bn in Q3 and go bust – all this optimism assumes things will be back to normal next year but, between now and then, how much debt damage will be done.

Unfortunately, we simply don't have enough information to take a stab at WYNN for $8Bn when they are losing $5Bn a quarter.  What rational investor would pay $8 to lose $5 per quarter?  These losses are real, they have to either borrow more money next Q (you already owe $13 as a proud shareholder) or find more investors, which will dilute your position.  As fun as it would be to own the stock going forward, even if they make $500M/year, there's this debt to pay and $8Bn is still 16x FUTURE earnings – that's not a good deal by any stretch.  

Most stocks are like that at the moment and so is the entire market.  We're irrationally ignoring the the potential downside to a second wave of viral infections and we're still in the middle…
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Toppy Tuesday – Waiting for the Shoes to Drop

We're still at 11,000 on the Nasdaq.

We punched over it a bit yesterday and we're into our second round of shorts on the Nasdaq (/NQ) Futures now and you can still catch them crossing the 11,000 line with tight stops above, which is a more conservative way to play.  We scaled back in overnight, taking advantage of the spike up to end up with 3 short at 11,048 average so 11,000 is now our stop line to lock in the net $1,000 per contract gains (there were some losses that are offset).  

The Russell (/RTY) is below 1,500 so, as long as that stays below, it's still good to short /NQ and the Dow (/YM) failed 26,600 and the S&P (/ES) failed 3,300 again and we're probably on the way back to 3,150, which is the Must Hold Line on our Big Chart and also now the 50 dma(ish).  Our tracking chart for the S&P is more conservative as we don't think this bull run will last so the Must Hold line on the SPX is still 2,850 and thats' a solid 15% drop from where we are now:

Our hedges in the Short-Term Portfolio are holding up well and the portfolio itself is up 373% for the year as the STP loves volatility – and we've had plenty of that.  Although it's early in the month, not much is happening today so it's a good time to go over our hedges and see if there's anything we should adjust (there wasn't last time).  We haven't touched the positions since July 14th (3 weeks) other than adding the short INTC puts but, since then, the Long-Term Portfolio (LTP) has gained $75,000 AND the Short-Term Portfolio (STP) is up $70,000 too – not bad for leaving things alone!

  • CANE – I thought sugar consumption may go up during a pandemic and so far, so good and we're well over our very conservative target.  Keep in mind that we sold the Oct $5 puts for 0.75 so our net entry is $4.25 and we make 0.75 (17.6% against risk) if CANE is


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Monday Market Movement – Nasdaq 11,000 and Bust, Again?

Apple $425, Nasdaq 11,000 – Yipee!!!

As you can see on the chart, AAPL is up almost 40% for the year and AAPL is 15% of the Nasdaq so it's responsible for 6% of the Nasdaq's rise from 9,000 to 11,000 (22%) for the year so 27% of the Nasdaq's rise is due to one stock and then you have to consider the suppliers Apple boosts along with their own stock.  

Apple is having a break-out moment as $425 per share is a $1.8Tn market cap so we're just 10% away from $2Tn in valuation at $470 – get your party hats ready.  $2Tn is the GDP of Italy (#9 in the World) or Brazil (#8) with France, India and the UK, with population of 65M in France, 1.4Bn in India and 67M in the UK doing a piss-poor job comared to Apple's 137,000 employees.  Is the average Apple employee 10,000 times more productive than the average Indian?  If so, it's hard to explain the valuation of Infosys (INFY). 

Speaking of companies that are worth $1.5 Trillion (yes, there's more than one now), Microsoft (MSFT) is trying to buy TikTok's North American operations so they can have something cool in their portfolio (now that's they've given up on Bing).  President Trump has been helping Microsoft by threatening to ban TikTok in the US, devaluing their platform and scaring the company enough for MSFT to swoop in and make an offer – good old-fashioned strong arm tactics from your favorite Oiligopolists:

“Microsoft appreciates the U.S. Government’s and President Trump’s personal involvement as it continues to develop strong security protections for the country,” the company said in its statement.

Big Brother Isn't Watching You — You're Watching Him! – LobeLogThe deal would land Microsoft the breakout social-media player of this decade. It would give Washington a win over Beijing by bringing a Chinese technology crown jewel under U.S. ownership. For TikTok parent ByteDance it would resolve the national-security concerns that threatened to thwart its U.S. operations.  The proposed transaction gained the blessing of senior Trump officials, including Treasury Secretary Steven Mnuchin, who saw value in an American company getting access to sophisticated TikTok algorithms that decide what videos users are
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Thank Tech it’s Friday – Apple and Company Boost the Markets

$60 Billion!  

Apple (AAPL) had $59.69Bn in revenues last quarter and that's up 10.9% while the rest of the economy was down 33% and the market logic is that one company making money trumps an entire economy losing money.  Of course it's ridiculous but what can you do?  

The chart on the right illustrates just how bad our Q2 GDP was compared to… well, history!  This one-quarter drop in GDP was worse than ENTIRE RECESSIONS COMBINED yet the market is trading like we are going to just dust ourselves off and get right back into the race.  Of course Apple did well – they sell exactly the kind of crap that people forced to sit on their couch for 3 months are going to buy.  Amazon and other tech companies did well too because they cater to the shut-in crowds – you can't judge the economy or the market by what was bound to be the strongest sector.

Apple was our Stock of the Year 3 times this decade and, just two weeks ago, on July 17th, we did our Portfolio Reviews and we made aggressive adjustments to our AAPL position in the Butterfly Portfolio:

AAPL – We got more conservative but AAPL did not.  The Aug $330s are $60 and they can be rolled to the Oct $350s at $50 so we're paying $10,000 for $20,000 more strike.  Since our $200/260 spread is now net $144,000 out of a potential $180,000, it has $36,000 more to gain to cover the short calls.  Still, we can do much better than that in two years so we'll cash that spread ($144,000) and move to 40 of the June 2022 $300 ($117)/400 ($65) bull call spreads at $52 ($208,000) so we're spending $64,000 to move from a spred with $36,000 potential to one with $192,000 potential – easily covering the short calls but also well-covered by them. 

AAPL Short Call 2020 18-SEP 350.00 CALL [AAPL @ $384.76 


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GDPhursday – Fed Boost Doesn’t Last 24 Hours

Wheeee, that was easy money!  

In yesterday's Live Trading Webinar, we were watching the Fed report live and we didn't see what people were being so bullish about so I made a call to short the Russell (/RTY) and the S&P 500 (/ES) Futures, which I reiterated in our Live Member Chat Room:

"In the Webinar we decided to short /ES at 3,250 and /RTY at 1,500.  GDP tomorrow is likely to be ugly."

As you can see, we've already gained over $1,000 per contract and we haven't even had the GDP Report yet (8:30) and that is expected to show a horrific 30+% drop in US economic activity for the 2nd Quarter.  It's POSSIBLE we have an upside surprise – thanks to $5Tn of stimulus spending during Q2 but, either way, we're in the middle of an economic disaster with not end in near sight.  

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Germany's GDP was down 10.1% this morning and that is twice as bad as it was in 2009, the second-worst on record (only records since 1970) but Germany, unlike the US, had a plan to fight the virus and has things more or less under control with 208,892 – about as many cases total as the US has deaths (150,716 so far).  Germany has just 9,137 deaths to date, both about 5% of the US's totals although they have 25% as many people (84M).  

Trump's bashing of Angela Merkel might help her keep a grip on ...Merkel's Germany did everything the Trump Administration did not and the differences are astounding.  Rather than spend Trillions of Dollars propping up the economy, they actually protected their people from getting the virus in the first place and are already on the road to recovery while the US virus count and death count are spinning out of control.

8:30 Update:  Officially we're down 33% DESPITE the $5,000,000,000,000 boost by the Fed and Congress (see yesterday's Report for breakdowns) so I'm very glad we put on those extra hedges as things could get pretty ugly although it's really right in-line…
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Which Way Wednesday – Fed Edition

Will the Fed save us (again?).

Looking at the chart on the right, clearly we are in need of saving.  Those numbers are pretty up-to-date and we're starting to re-close in certain places and several airlines and auto makers have announce massive job cuts that are not going to make things better.  At least this chart will LOOK better as people will no longer be getting the benefits, which run out soon – so they will no longer be counted on this chart – having moved over to the "homeless" chart or the "impoverished" chart.  

30M unemployed is 1/10 of our fellow Americans and you know how many more businesses are struggling in your neighborhood.  Is it another 1/10th?  Will 20% of our people be out of work soon?  What happens to the economy if 20% less people are getting paychecks?  Clearly the Government, even if the Liberals take charge, will need 20% more money to prop it up and we've already spent $6.7Tn in the past 4 months just to get to this mess!

Obviously the money was mainly misdirected and wasted but is that going to change when we give Jared another $500Bn of untraceable funds to play with?  What happened to the first $500Bn?  Oh yeah, untraceable…  Well there was another $500Bn that the Treasury had and that fund was traceable but, at last count, no one was getting that money either.  

Notice how the Federal Reserve Actions are not being counted as part of our debt and that's a good thing as we've added $2.5Tn in new debt already this year and Congress is voting on another $1-3Tn to get us through Q3 but even $6Tn is barely 1/3 of our GDP and we've certainly taken a 30% hit to the economy this year – we'll find out more in tomorrow's GDP report.

 

IN PROGRESS

 

 

Trillion Dollar Tuesday – New Stimulus Package Not Enough to Keep the Market Afloat

ONE TRILLION DOLLARS | Dr evil, Austin powers, Dumb criminals$1,000,000,000,000.  

That's enough money to give all 1,000 Billionaire in the World another Billion Dollars.  Oh wait, we did that already.  Well it's enough money to give one Million Millionaires another Million Dollars.  What?  We did that already too.  Well it's enough money to buy 3,000 masks for every man, woman and child in the country so we wouldn't need to spend Trillions of Dollar propping up the economy or it's enough money to continue giving $600 unemployment bonuses to 30M people for an entire year.

ROFL!!!  Who are we kidding, this is America, we're going to give it to the rich people again!  

Bob CratchitThe funny thing is the rich people are pissed that they are ONLY getting $1Tn this quarter (they got $6.7Tn last quarter) so the Futures are tanking and we're losing all of Meaningless Monday's gains.  The biggest stimulus issue will hit us on Friday, it's the end of the $600 weekly unemployment bonus and the Democrats in the House wanted to extend it through Christmas while the Scrooges in the Senate said not only do they want it dropped to $200 now but they want all unemployment capped at 70% of wages AFTER it's combined with any State Benefits people are receiving.

The Republicans also want to cut dependent checks down to $500 while the Democrats want to increase them to $1,200 for up to 3 children, so people with more than 7 children come out ahead on the Republican plan!   Democrats also want to spend $430Bn to make our schools safe enough to attend and providing $50Bn for child-care facilities to keep our toddlers safe while the Republicans think $70Bn is plenty and the kids can take their chances with the rest of us.

Drop Dead": How Trump Inspired the New York Daily News to Revive ...Democrats have also propose $1Tn in aid to local Governments while the GOP just says no to that and again, they want the cities and states to fight the virus with the same budgets they had when there was
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Monday Morning Markets – More Stimulus as We Wait for the Fed

Kentucky can't escape Louise Linton's Instagram clutches | Jeffrey ...More free money!!!

The Senate Republicans are expected to vote on the CARES Act 2 (it's a 5-act play) and this will be the beginning of two weeks of negotiations with the House, who already voted on a much more extensive measure to prop up the economy.  The $600 weekly unemployment benefit will expire on Friday and most economists predict a complete disaster if that's not extended to 30M unemployed Americans.   "We're not going to pay people more money to stay at home than work," US Treasury Secretary Steven Mnuchin said Thursday on CNBC using the poor grammer of a person who's never worked a day in his life and has sold his soul to Satan.

Steve Mnuchin | Our America 2Mnuchin (who's father was a general partner at Goldman Sachs and spit out the silver spoon he was born with - demanding a platinum spoon on his way to Yale and a job with, you guessed it, Goldman Sach after which he took part in the total destruction of Sears, where they looted the pension and cost millions of workers their jobs while getting rich of the real estate they sold out from under the investors' noses) says 70% of minimum wage should be the cap for those lazy bastards who aren't risking their lives to go back to their closed businesses.  

Really people, just tell Daddy you need another job and stop bothering the Government, who you've paid unemployment insurance to for your entire life, to actually pay you when you are unemployed!  What do you think this is – Europe?  At least we're all getting a second $1,200 stimulus check so the rents will probably be paid in August.  It remains to be seen if the moratorium on evictions is extended.  If not, expect total chaos in the housing markets and the courts since 1/3 of Americans have not paid their rents in the past few months.   

While the House plan included $1Tn in aid to state and local Governments, the Senate plan has none.   With so many areas shut down, tax revenues have gone down sharply and this funding was meant to help deal with that shortfall so expect this to
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TGIF – Stop the Week, We Want to Get Off!

Wheeeee, what fun!  

The Dow fell 353 points yesterday and that's not a big deal but it was a great deal for our PSW Report Members who were alerted, pre-market, to the idea of shorting the Dow Futures (/YM) at the 27,000 line.  The Dow ended up falling all the way to 26,450, a 550-point drop that paid $2,750 per contract but we took the money and ran at about $1,200 per contract early and as the Futures shorts are just extra protection while we wait for our primary hedges to kick in.

And what are our primary hedges?  Well those are the positions in our Short-Term Portfolio, which we reviewed last Tuesday at $405,464 and, as of yesterday's close, the STP stood at $460,074, up $54,610 on the dip and the portfolio itself is up 360% for the year – despite the generally bullish market.  That's because of clever (though sometimes painful) trades like our Tesla (TSLA) short, which is only just beginning to pay off.  

At the same time, our Long-Term Portfolio (LTP), which we reviewed last Wednesday at $901,428, is now at $966,958 so that's up $65,350 for the week so it does turn out we are correctly bearishly balanced – and now you can see why we didn't make any portfolio changes last week (other than mechanical changes on expiring positions).  We knew the "rally" was a house of cards so we were very happy to be neutral on the way up, knowing that we'd make a very nice gain on the way back down.

3,135 is the top of our range on the S&P 500 and we are still way over that but it's just a blip on the weekly calendar so don't get excited, especially when the unemployment bonuses and other stimulus measures are running out and Congress does not seem able to step up to the plate with additional funding.  

As we are all painfully aware, the virus is still raging out of control and the US is up there with other 3rd World countries in the number…
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4 Million Infection Thursday – Virus Rages on at Dow 27,000

This is a good shorting spot

27,000 is a good line on the Dow (/YM), which was around 18,000 from November 2014 through November 2016 so we can call that a good consolidation point.  So we're 50% above 18,000 and that means, via our fabulous 5% Rule™, that we can expect a 20% (weak) retrace of that 9,000-point run, back to 25,200 or a 40% (strong) retrace back to 23,400 and, guess what?  That happened already!  

In fact, we fell yet another 1,800 point to 21,600 just recently but it was an overshoot and we quickly took back the strong retrace and the weak retrace and now we're back at 27,000 but the real question is – where should we be?  

Let's consider that 18,000 was a realistic base.  The economy was going well under Obama, America was at full employment and a respected World leader and the deficit was getting under control – all good things that help a market stay strong.  The Dollar was strong too, it was at 102 in 2017 and Americans enjoyed great buying power and my kids loved going to the Dollar store to get knick knacks.  

Trump took office in January of 2017 and he cut taxes drastically for Corporations and people in the Top 1% and the Dollar dove all the way to 0.88 a year later, a 14% collapse that we've only recovered half of 2.5 years later.  Losing 7% of the buying power on every penny you've saved your entire life is a devastating shock to the average American, who was not able to offset the loss of buying power through their stock market gains.  

Still the weak Dollar is also good for our Corporate Citizens (thanks Citizens United!) as well as for the Top 1%, whose stock prices were jacked up by the weak dollar which, of course, makes our exports cheaper too.  This is how we make America Great, by devaluing our currency, running up the deficit and putting profits over people time and time again.  Surely that's worth a 20% boost in the Dow, isn't it?  

But now we should consider that 50% is MORE than 20% (math done as a courtesy for Fox viewers) so how exactly are we getting that extra 30%. …
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