Trendless Tuesday – A Pause in the News Cycle

Not much is going on.

If I were lazy, I'd stop right there and that would be the morning report.  Even Trump hasn't done anything new to piss me off this morning.  He even confirmed yesterday's rant on Kushner's Saudi agenda by saying about the arrested Saudi Princes that "Some of those they are harshly treating have been 'milking' their country for years." 

I have great confidence in King Salman and the Crown Prince of Saudi Arabia, they know exactly what they are doing….

One of those princes, keep in mind, is Rupert Murdoch's partner, Alwaleed Talal, who went against Trump during the election, tweeting:


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Monday Market Turmoil – Trouble in Saudi Arabia and More Russian Ties to Team Trump

Wow, what a weekend.

There was a tragic shooting in a Texas Church but, unlike last week's response to the NY violence by GOP Congressmen to take immediate action, the GOP now says we shouldn't let one incident panic us into "politicizing" gun violence and regulating them or something.  When 300M people have the legal right to own weapons that can kill 25 people in 60 seconds – well, you do the math…  Trump, ironically, blames mental health issues (while cutting mental health programs as well).  

“This isn’t a guns situation,” Trump added. He said based on preliminary reports, the shooter was a “very deranged individual.  Fortunately there was a person shooting in the opposite direction,." 

The NRA encourages parents to expose children as young as five to the AR-15.AR-15's were used in all of the following mass shootings: Aurora, Orlando, Las Vegas, Sandy Hook, UMPQUA CC, San Bernardino, Sutherland Springs.  It is not a mental health problem, it's a gun problem!  And let's not forget, the GOP just passed a bill that puts guns in the hands of the mentally ill and no, I AM NOT JOKING!  

Just a few weeks ago, psychiatrists and psychologists were warning that GOP health care reform efforts, most recently in the form of the Graham-Cassidy bill, would have devastated the quality and availability of mental health care in this country. It offered states the opportunity to allow insurance companies to drop mental health care coverage and reduced spending on Medicaid by billions of dollars. It effectively ended the Obamacare Medicaid expansion and reduced federal health insurance subsidies. 

While Trump was making light of the violence in Texas, he was celebrating the violent swing Abe's Right-Wing Government in Japan is taking.  While one President may have taken the opportunity to remind Japan that their constitution has outlawed war and limited it's military since 1947 – leading to 70 years of peace and prosperity, this President wants to be their arms dealer, pushing for Japan to buy "massive" amounts of military equipment.


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FU Friday – Team Trump Gives Themselves Billions in Tax Cuts, Gives You $1,182

Related imageF**k the poor.  

F**k the middle class.  After failing to take away your health care, Team Trump has unveiled its latest scheme to destroy the bottom 90% of Americans by rolling out a tax plan that is so ridiculously unfair that they are trying to get it voted on before it can be scored – like they did with their health care bill – because this monstrosity would never stand up to scrutiny over time

Corporate tax rates are dropping from 35% to 20% but, on top of that companies can now deduct ALL the costs of purchasing new equipment and money made overseas is now taxed at just 12%.  By the way, PSW is officially moving to the Bahamas, which have no Corporate Taxes and we'll be bringing the money back to the US at the 12% rate so screw you 20% – that's too much for us!  Gosh that was hard to avoid, wasn't it.  Because we're moving to the Bahamas, I will need a private jet to fly back and forth – good thing that's fully deductible too – guess I won't start paying that 8% until the Government is done paying for my plane and, by "the Government" – I mean you suckers who think Trump is trying to help you – GOD you people are dumb!  

Image result for trump cabinet billionairesTrump's cabinet includes Billionaires Betsy DeVos and, of course, Jared Kushner, who is currently curing cancer on his way to broker a peace treaty in the Middle East and Wilbur Ross and Gary Cohn are also Billionaires while Cordish, Mnuchin, Tillerson and Liddle are all in the $100-300M range.  Even Keelyane Conway, for some reason, has $45M and James Mattis has $10.5M, Jeff Sessions $10M…  General John Kelly is the poorest guy in the room with only half a million to his name – no wonder he is so angry!

The President and his cabinet have $17Bn, which is more money than the bottom 100M Americans have, combined.  They earn roughly $1.3Bn a year, mostly through corporate entities and partnerships and these tax cuts will save them over $200M a year but the real bonus is eliminating the Estate Tax, which will save them about $7Bn and,
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Thursday Thoughts – Powell to Head Fed, Tesla Crashes and Burns $1.4Bn

$1,400,000,000. 

That's a lot of money to burn through in a single quarter – especially in a quarter where not only were just 260 Model 3s actually delivered by Tesal (TSLA) but they have now pushed back full-scale production targets through March, so 2 more lost quarters ahead, with Q4 losses now estimated at an even $1Bn. 

This can only mean one thing – Morgan Stanley will be ugrading TSLA any moment!  That's what usually happens when one of their leading underwriters has to defend the company's poor ACTUAL earnings.  Just a month ago, Nomura gave them a $500 price target – these analysts truly have no shame (or common sense!).  Our take on Tesla has been somewhat more negative (see February's "Tesla’s Emperor Musk Has No Clothes!" or May's "Tesla’s Earnings Miss – Emperor Musk has no Clothes!" or "Tuesday Turmoil – Tesla Valuation Reaches Peak Insanity") and, though we were often early, our Tesla shorts have all wound up being successful, so far.

On Tuesday, right here in the Morning Report (which you'd be foolish not to subscribe to HERE), our Trade Idea for this earnings period was:

  • Sell 6 TSLA April $350 calls for $23 ($13,800)
  • Buy 6 TSLA April $370 puts for $65 ($39,000)
  • Sell 6 TSLA April $320 puts for $34 ($20,400) 

That nets you into the $30,000 short position for $4,800 with a $25,200 (525%) upside potential if TSLA is below the current price of $320 in April.  It's a lot of margin ($15,465 ordinary margin) and a lot of risk – if TSLA gets back to $380, you will have to pay the short caller $18,000 but we'd roll them along to higher, longer months.  Of course, if TSLA does well then maybe our oil play does well (more electric cars) and that one we can make $2Bn on!  

With TSLA tumbling to test the $300 line this morning, we'll probably be good for 200% gains ($10,000) in just 48 hours – not bad for a free pick, right?  In yesterday's morning Report, we called…
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Wednesday Run-Up, Will This Rally Never End?

Image result for superman stock marketUp, up and away!  

It’s Super Market!  Strange index from another reality, who ignores bad news and achieves p/e multiples far beyond those of rational markets. Super Market, who can break resistance on low volume, move higher without consolidation and who – disguised as a genuine Price Discovery Mechanism, an actual indicator of the true-value of listed companies – Instead fights a never-ending battle with rational thinking and negative data because, in America, the market is only allowed to go one way!  

Ths morning, global markets are following the Nikkei higher as Abe was re-elected and the Nikkei popped 1.6% – as if it were some kind of surprise – even though Abe's party just clinched a 2/3 majority in Parliament 2 weeks ago so who didn't know he'd be re-elected too?  Apparently 1.6% of the Nikkei's worth of people is the correct answer.  Any excuse, of course, is a good excuse to rally the markets these days.  There was a terrorist attack in NYC yesterday with 8 people killed and 16 wounded and the markets still rallied into the close – just before Wall Street traders had to step over the bodies on the way home from work.  

Silver and gold blasted higher, allowing us to close out our long Silver (/SI) Trade Idea from last week's Live Trading Webinar with a lovely $6,490 gain and it's a good thing we weren't greedy as my call this morning (6:26) in our Live Member Chat Room was:

Good pop on /SI, $17.03 – taking profits there as it partly makes up for /RB losses.

Silver has since dropped back a bit, to $16.96 but Gasoline (/RB) is persistantly annoying at $1.755 and we're in at an average of $1.729 on our shorts so a loss of $1,092 per contract at the momnent ($420 per penny).  We'll have to see how the EIA report goes at 10:30 but the API Report last night showed a huge 7.69Mb draw in Gasoline, which is ridiculous as it would indicate a 15% jump in gasoline demand in a week –…
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Terminal Tuesday – Markets End October at Halloween Highs

Happy Halloween!

Clearly no one is spooked about the markets as we're drifting along at the highs into the monht's end – as well as into tomorrow's Fed meeting and maybe the traders are right and there are no economic monsters under the bed or even in the closet and maybe the President isn't an uncontrollable monster but a nice orange man who is here to grant all of our wishes – like a giant Oompa Loompa...

As I mentioned last week, Keebler Elf-man Warren Buffett gave us a great reason the markets will hold up through the holidays – the promise of lower taxes but that will require the GOP to hold things together while the indictments are flying around Washington.  If the investing public gets w a whiff of fear – it could start a stampede out of equities.  Money is already flying out of oil longs as the Oil ETF (USO) recorded it's 3rd consecutive week of outflows – even as the price of oil has risen 5%, from $49 to $54.  Gasoline (UGA) has risen 10%, from $1.55 to $1.70 – oupacing oil by 100%, even as we enter the slowest time of year for demand.  

Not only does that not make sense (OPEC has been talking up oil so speculation is driving the price, not Fundamentals) but the quantity of fake, Fake, FAKE!!! open orders at the NYMEX has never been higer, with 1.3 BILLION FAKE!!! orders in the front 4 months alone.  Consider how ridiculous this is when the US only imports 7Mb/d of oil so these orders, over 120 days, would deliver 10.8Mb/d to Cushing, OK alone – a terminal that can handle, at most, 50M barrels in a month.

Click for
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Current Session Prior Day Opt's


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Just Another Mueller Monday – Let the Indictments Begin!

The new Watergate?

Image result for guilty guilty guilty doonesbury

After almost a year of interviews and investigations, the first indictments are coming for Team Trump and the markets, so far, are very complacent about it.  Of course we don't know who is being indicted or where it will lead but, having gone through Watergate when I was young, this is following a very familar path.  So much so that our President is putting out angry 5-part (a new record!) tweets seeking to shift the focus to his usual punching bag – Hillary…

I find it interesting that very few people forwarded or commented on his middle tweet but interest picked back up on tweets 4 & 5.  It seems very odd to me that 33% of the people who didn't retweet part 3 would then retweet part 4.  Maybe it's the use of all caps that gets people excited about a tweet?  We report, you decide whether or not Trump's account is tweeted by Russian Robots.  

Actually, that's one of the things Robert Mueller will be deciding on that.  Apparently, the anwser isn't no involvement as members of Trump's team are going to be ARRESTED (tweet that) and that's a bit awkward because, as Trump himself has said, regarding Hillary's FBI investigation, "We must not let her take her criminal scheme into the Oval Office" while PRAISING the FBI and DOJ for having "the courage" to pursue the truth.  He also said:

The special counsel has taken up several strands of inquiry, including into the business affairs of Trump's former campaign chairman Paul Manafort, claims that members of the President's campaign team, like former national security adviser Michael Flynn, transgressed in their alleged contacts with Russian officials and whether the President's dismissal of FBI Director James Comey amounted to obstruction of justice.  The President's political vulnerability is becoming more acute as well — an NBC/Wall Street Journal poll Sunday put his approval rating at 38% -- the lowest point of his presidency. 

 

IN PROGRESS

 

 

Philstockworld October Portfolio Review

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-Term Portfolio Update (STP) – Submitted on 2017/10/19 at 3:20 pm:  $430,680 is down $56,347 on our hedges in the past month and that neatly negates about 2/3 of the LTP's gains so we're a bit more bearish than we were last time (in our paired portfolios) after making several bearish adjustments that were intended to move us to neutral.  

So, on the whole, we made about $25,000 despite ourselves, which is the strength of our model for selling premium.  The primary purpose of the STP is to protect the LTP – it's not supposed to make money in a bull market but it BETTER make a lot of money when we turn bearish.  Of course, it always has – that's why it's up 330% in 4 years despite usually being "wrong".

  • AMZN – They keep going for $1,000 and keep failing.  Our intention was to risk earnings but it's too scary so let's take the $13,208 profit in the hand and get out of the bush!  
  • FAS – Those financials are like a killer clown, they keep popping back up.  Still, the ultra ETF looks toppy and it's counterpart looks bottomy so we'll see what happens.  

  • ABX – A bullish offset, not worried. 
  • GOGO – Not too worried.
  • SBUX – Who wouldn't love a 20% discount on SBUX?
  • LABU – A real no-brainer when they get cheap!  Blasted past our target but earnings are dicey so let's cash our 10 extra long March $50 calls so we end up with a proper spread.  

  • SQQQ – 40 uncovered $23 longs is pretty aggressive.  Let's keep it that way.  At $30 (7% Nas drop), we


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Fabulous Friday – Nasdaq’s Big 4 Come Through

Wow! 

What a big day for tech as Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Intel (INTC) all beat earnings estimates and all raised guidance – pretty much justifying the crazy Nasdaq run – 6,666 it is (see yesterday's Report)!  I hate to say it but it's not a bubble when earnings are blasting higher and all 4 of the big tech names are benefitting from the explosive growth of Cloud Computing and the Internet of Things.

I will be on Benzinga's Pre-Market Prep this morning – just in time to look over the GDP report and I'm sure we'll be discussing the Nasdaq and where we could go from here.  Last time I was on the show was September 29th and we discussed our Limited Brands (LP) spread, which has already moved up from $1,600 to $4,200, so up $2,600 (162%) in short order but only "on track" for our 800% projected gain.  

We also talked about using the Russell Ultra-Short ETF (TZA) as a hedge with 50 Nov $12 calls at $1.95 ($9,750), selling 50 $14 calls for 0.70 ($3,500) for a $1.25 ($6,250) net cost, which we offset by selling 5 Apple (AAPL) 2020 $130 puts for $11.20 ($5,600) to drop the net of the spread to $650.  Despite the rally, TZA is at $13.45 so the spread is $1.45 ($7,250) while the AAPL puts have fallen to $10 ($5,000) so net $2,250 is up $1,600 (246%), despite not even needing our hedge during this rally.  

Why does that work?  Because we are Being the House – NOT the Gambler and selling premium when we establish our spreads.  The only sure thing in the markets is that premiumd DOES expire – and that gives us an edge in every trade we make.  

This morning we discussed a variation of yesterday's long trade idea on Celgene (CELG):

  • Sell 5 CELG 2020 $80 puts for $9 ($4,500) 
  • Buy 10 CELG 2020 $80 calls for $30 ($30,000)
  • Sell 10 CELG 2020 $110 calls for $16 ($16,000) 

That trade nets you in for $9,500 and returns up top $30,000 for a $20,500 profit (215%) if CELG can get back over…
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Thrilling Thursday – Will Big Tech Justify Nasdaq 6,666?

Image result for nasdaq rally fangAmazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Intel (INTC).

All four will report tonight and they make up 20% of the Nasdaq by weight (and AAPL, who are the rest of the Nasdaq that counts, reports on 11/2) so it's do or die for the index that's up 25% since the election but that's still only HALF of the move the FAANG stocks have made (Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and GOOGL), who are up 50% as a group since last November.

It's truly a market gong wild and we made some lovely profits on our shorts yesterday, nailing the move oil, as we had said to you in the morning Report:

Meanwhile, in our quest to join the Top 1%, we shorted Oil (/CL) Futures again at $52.50 and the EIA Inventory Report is at 10:30, so that will be fun.  We have Gasoline (/RB) shorts to at about $1.72 avg but they spiked to $1.738 overnight – so a rough ride.

Oil fell to $52 and that was good for gains of $500 per contract while Gasoline hit the $1.70 mark, which was good for gains of $840 per contract and then it bounced right back to $1.735 – so we shorted it again in our Live Trading Webinar but this time, we went with next month's /RBZ7 contract at $1.686 for our Webinar Trade (and you can see our volume spike on the chart!).  This morning, in our Live Member Chat Room, we used our 5% Rule to set goals for a pullback at $1.63, which would be a better than $2,000 per contract gain.  

While we usually don't share trade ideas with cheapskate readers during earnings week, the following trade is such a gift I simply have to tell you about it.  Barrick Gold (ABX) is our favorite gold company and we have them in all of our portfolios but, as an earnings play, I sent out a Top Trade Alert to our Members yesterday afternoon with a trade we discussed in our Live Trading Webinar:

ABX – In the Webinar we decided 50 2020 $15 ($3.45)/$22 ($1.35) bull call spread at net $2.10 ($10,500)


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