Forward-Looking Friday – Are We Hedged Enough?


That's a gain of $95,674 since our February Review for our paired Long & Short-Term Portfolios.  Our LTP is predominantly bullish and the STP is where we keep our hedges – as they tend to need adjusting more often – as you are about to see.  Interestingly, despite the rally, the Short-Term Portfolio gained $40,000 – mostly due to our very well-timed short play on Tesla (TSLA), which we just cashed in last week.  One of the reasons we cashed it in is we now have $97,098 in cash to deploy so it's a great time to add to our hedges:

  • TZA – They reverse-split on us and this is our new position.  They should be $64 short calls (because they were $8s) but TZA only goes to $60.  It's a 3x ETF so if the Russell drops 20%, TZA should gain about 60% to $48 – so that's our actual target and, since $60 would be almost a 40% drop and we don't expect that, it means we can afford to sell more short calls if it comes up.  June $45s are $3 and that means we can double down on the $32 calls at $5.15 ($12,875) and sell 25 of the $45s for $3 ($7,500) and we have spent just net $5,375 to add $32,500 in additional protection.

  • TQQQ – Despite the dip, our Jan $100 put is showing a loss so far. Those are now $29.65 so the first thing we do is look to see if we can improve them and the Jan $120 puts are $43 and we won't pay $13 for $20 and the $110 puts are $36 so $6 for $10 is not much better.   We also won't pay $14.53 to buy back the short $70 puts, that are $20 out of the money so the best way to improve this position is to SELL 7 (1/3) of the April $80 puts for $5 to lower our basis by $3,500 and those can't go in the money unless our spread is $40,000 in the money and it's net $20,000 now – so hard to lose and we're BEING THE HOUSE! 

  • CMG – The

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13,000 Thursday – Nasdaq in Critical Territory


That's the 50-day moving average on the Nasdaq that we need to cross back over by tomorrow or it's likely the Nasdaq continues to correct back to the 200-day moving average at 11,721, which would be 10% down from where it is now.  Since we know the Nasdaq is ridiculously over-valued, the 10% down scenario is a lot more likely than the resume the rally scenario.

Sure we just got $1.9Tn to play with but we knew we were getting that since November, when the Nasdaq was at 11,000.  $1.9Tn is 10% of our GDP and 11,000 + 10% is 12,100, not 13,146, which is 10% too high.

Everything is Awesome again – just like it was in 2007 and do you know what else is just like 2007?  Refinancing!  That's right, American Homeowners cashed out $152.7Bn of home equity last year, up 42% from 2019 and the highest level of withdrawals since 2007, although 2005, 6 and 7 were actually $262Bn, $320Bn and $240Bn respectively – so we're not there yet.  Still, as we now know in retrospect – people using their home equity as a piggy bank does not tend to end well, does it?

We're still on a stimulus high, of course and the Dow is at an all-time high at 32,300 but it's more like 32,400 in the Futures along with S&P 3,925 and Russell 2,305 and we'll be betting against them into the weekend so don't miss tomorrow's Short-Term Portfolio Review.  Considering the all-time highs, the STP is holdiing up remarkably well (see yesterday's Live Trading Webinar for my notes) but that's because our key shorts were TSLA and QQQ, which worked out very well for us and we even cashed out our Tesla shorts this week – another reason we need to adjust the STP.  





Which Way Wednesday – Bond Worries Continue as US Borrows $2.8Tn in 2021

Federal Debt: Total Public Debt (GFDEBTN) | FRED | St. Louis FedIs there such a thing as too much?  

Our Government, so far, is looking to sell $2.8Tn worth of Treasury debt to unsuspecting victims in 2021 and that's up 64% from $1.7Tn in last year's record-breaker, which was almost double 2019s record $990Bn of debt issuance.  America – F*ck Yeah!  Too much is America's brand, so why should borrowing $2.8Tn bother us?  Well, math – for one thing.  $2.8Tn is bigger than the GDP of India or the United Kingdom, who are tied for 5th in the World at $2.6Tn.  Germany is $3.7Tn, Japan is $4.9Tn, China $14.8Tn and we are sitting at $20Tn and running a 15% annual debt.

So the World is sitting down for their Easter Dinner and America says to it's family – I know I make more money than you guys but this year I need another 15% to cover my expenses – so I'm passing the hat.  China has been bailing us out for years and they are busy hacking the WiFi, so we can't count on them.  Japan is already 250% of their GDP in debt and also borrowing about 20% a year – so they are not going to be much help.  Germany and the UK clearly have problems of their own in 2021 – especially Germany as mommy said she's leaving and the new mommy might be a fascist.

That leaves the UK, who is our ex.  We used to be part of them but we rebelled and slaughtered them and took all their land but they got over it and used to be proud of us but we incinerated that goodwill over the past 4 years and, even if we hadn't – can they really afford to lend us 107% of their own GDP?  That leave Uncle Fed, Jerome Powell and he's been a real darling these past few years and is still planning to lend us $960Bn in 2021 – but that's down from $2Tn he lent us last year so we still need $1.9Tn more from someone….

Supply may not be the primary factor driving yields higher. But it has been an accelerant, weighing on the market precisely because …
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$2,000,000,000,000 Tuesday – Now What?

Free Money Friday – Biden Pledges Another $1.9Tn for the Bonfire - Phil  Davis

"Out of college, money spent

See no future, pay no rent

All the money's gone, nowhere to go" – Beatles 

Well, we got our $1.9Tn – that should hold us over for a month or two, but then what?  

Hopefully most of us will have been vaccinated by the end of May and, according to the new CDC guidelines – it's party time!  The new CDC guidance says fully vaccinated people ( those who are two weeks past their second dose of the Moderna and Pfizer Covid-19 vaccines or two weeks past a single dose of the Johnson & Johnson vaccine) can:

  • Visit other vaccinated people indoors without masks or physical distancing
  • Visit indoors with unvaccinated people from a single household without masks or physical distancing, if the unvaccinated people are at low risk for severe disease.
  • Skip quarantine and testing if exposed to someone who has Covid-19 but are asymptomatic, but should monitor for symptoms for 14 days
  • Wear a mask and keep good physical distance around the unvaccinated who are at increased risk for

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Micro SOFT Security Monday – Chinese Hack Wrecks Tech

China Broadens Cyber Options - Asian Military ReviewWe're under attack.

At this very moment, a Chinese Government-backed hacking group has used Microsoft's EMail software to infect 60,000 Corporate Clients.  Yes, it sounds like the plot of a movie and that we should be sending a tape to Tom Cruise or something but this is really happening – NOW.    The European Banking Authority became one of the latest victims as it said Sunday that access to personal data through emails held on the Microsoft server may have been compromised. Others identified so far include banks and electricity providers,   

The rapidly escalating attack came months after the SolarWinds Corp. breaches by suspected Russian cyberattackers, and drew the concern of U.S. national security officials in part because the latest hackers were able to hit so many victims so quickly. Researchers say in the final phases of the attack, the perpetrators appeared to have automated the process, scooping up tens of thousands of new victims around the world in a matter of days.  The Chinese hacking group, which Microsoft calls Hafnium, appears to have been breaking into private and government computer networks through the company’s popular Exchange email software for a number of months,

The attacks were so successful — and so rapid — that the hackers appear to have found a way to automate the process. “If you are running an Exchange server, you most likely are a victim.

In other news this morning:

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Non-Farm Friday – Is America Working

Analysis: Breaking Down the Unemployment Crisis by Industry | U.S. Chamber  of Commerce10M jobs.  

That's how many jobs we need to make up just to get back to where we were, which still wasn't full employment.  Let's say those 10M people made an average of $50,000 per year so that's $500Bn in wages lost and wages are generally less than 1/3 of revenus so that's $1.5Tn (7.5%) of our $20Tn economy still lost in the pandemic, reflected JUST in those 10M wageless people.  Add that to the overall slowdown in the rest of the economy and you can see why "maximizing employment" is what the Fed is all about.  The economy is all about putting people to work and I know you are trained to think PRODUCTIVITY will save us but Q4 productivity was DOWN 4.2% – the worst drop in 39 years (1981).

Hours Worked for those who still have jobs were down 10.1% from Q4 2019 but Unit Labor Cost was UP 6%, meaning it was costing more money to get the same amount of productivity from the workers.  Why is that?  Working at home is slightly less efficient and the supply chain is a total disaster, which causes parts and material shortages so, if you show up at the factory to make a car but there are no tires….  well, you are not going to be as productive, are you?  

Of course, it doesn't have to be a whole tire that stops you from making a car, just missing a lug nut or that little thing where you put the air in can stop you from making the whole car.  Right now it's chips that are causing the biggest problems across many industries – you can't make most products without microchips these days.  So the whole World has to be healthy in order for our economy to be healthy – just putting America First doesn't get you into first place.

The Role of Supply Chain Management in Your Business Operation | Supply  chain management, Global supply chain, Supply chain logistics


Global Supply Chains Explained … in One Graphic | U.S. Chamber of Commerce

Looking at the Boeing plane, for example,
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Free Lunch Thursday – Powell Scheduled to Boost Confidence at Noon

MacroView: 2021 - A Disappointment Of Growth And Disinflation | Seeking  AlphaWhat inflation?

That's been the Fed's consistent message as they like to pretend they can print $9Tn in a single year – adding 25% to the money supply – and it will have no effect on inflation (so we should keep pretending that less than 1.5% for a 10-year note is a fair rate of return).  Any child who's played Monopoly knows that, as more money is put into the game by the banker – more money is spent on things like properties and hotels.  This is toddler economics.  

President Toddler owns a lot of hotels and he was well aware that if, we pumped $9Tn into the economy, some of it would trickle down into his organization.  President T's pals also did very well, with America's 660 Billionaires getting over 1,000 Billion Dollars (1Tn) richer during the pandemic.  A 38.6% gain in their fortunes since March of 2020.  In fact, before the pandemic there were only 614 Billionaries – 46 people became Billionaires in the past year!

The chasm between those at the very top of America's economic ladder and those in the middle and at the bottom was immense before the damage inflicted by the pandemic on the U.S. economy. That divide has widened. According to a study released Monday by economists Bruce Meyer from the University of Chicago and James Sullivan of the University of Notre Dame, America’s poverty rate increased by 2.4 percentage points over the final six months of 2020. That’s the largest increase since the 1960s and is nearly double the largest annual increase in poverty over the last 50 years.  We truly are Great Again for the 666 that are taking in all the wealth.  All hail the ruling class!  

An additional 8 million people nationwide are now considered poor – and that makes sense because you have to take $5,000 away from 8M people in order to give $1Bn to 40 people – that's just math, folks!  Black Americans (5.4% increase) representing a disproportionate share of those thrust into poverty. More than 70 million individuals (or roughly 40% of the labor force) have filed unemployment claims in the U.S. since the start of the pandemic.  10M more people are still unemployed…
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Which Way Wednesday? Vaccines by May and $1.9Tn – So What?

Ben Sargent Takes on the Texas 'Stay Home' ProtestersStill not enough? 

As I pointed out last week, these things don't happen in a vacuum and the vacuum at the center of the US economy really sucks.  The stimulus package is being passed, Biden has stepped up the pace of vaccination so that we all should have our shots by Memorial Day and, just this morning, the Governor of Texas announced the state will be "100% open as of March 10th" and sure, he's an idiot and not listening to Health Experts but neither is MIssissippi Governor, Tate Reeves, who will open up his state on the 9th.  

"Our hospitalizations and case numbers have plummeted, and the vaccine is being rapidly distributed. It is time!," Reeves tweeted Tuesday.  In the last year, Texans have "mastered the daily habits to avoid getting Covid," Abbott said. As of Monday, 6.57% of Texans have been fully vaccinated, according to Johns Hopkins University.  "Now is not the time to reverse the gains we've worked so hard to achieve," Harris County Judge Lina Hidago said in a written objection: "At best, today's decision is wishful thinking. At worst, it is a cynical attempt to distract Texans from the failures of state oversight of our power grid."

Even Jason Brewer, of the Retail Industry Leaders Association, thinks this is a bad idea – saying: 

"Relaxing common-sense safety protocols like wearing masks is a mistake.  Going backwards on safety measures will unfairly put retail employees back in the role of enforcing guidelines still recommended by the CDC and other public health advocates.  It could also jeopardize the safety of pharmacies and grocers that are gearing up as vaccination centers."
Trump's Screechy Swan Song: Lining Up Ugly Ducklings for Biden | Random  Lengths NewsHouston Mayor Sylvester Turner said Abbott's announcement "really undermines all of the sacrifices that have been made by medical professionals, doctors, nurses, EMS workers, firefighters, police officers, municipal workers, people in the community."  Austin Mayor Steve Adler told CNN's Anderson Cooper on Tuesday night

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Toppy Tuesday – Again?

Last weeks was: "Toppy Tuesday – What More Can Powell Say or Do at this Point?"

Today I can take the day off becuase here we are again, back at S&P 3,900 along with Dow 31,500, Nasdaq 13,250 and Russell 2,270 all trending lower than their previous two Tuesday's.  Why Tuesday?  Because Monday markets are very low-volume and easily manipulated with M&A Rumors and Analyst Upgrades along with Government Happy Talk and, of course, a healthy dose of 401K deposits rolling in from Friday's Payrolls.  

That allows "THEM" to take advantage on a weekly basis and overcharge long-term savers for their positions as they drip-feed their retirement accounts,  In fact, Randers pointed out last week that the weekend performance of the S&P 500 (when no one is trading) accounted for about 25% of all gains over the past 10 years.  

Even "better", overnight trading (when no one is looking) accounted for OVER 50% of the total market gains.  So nights and weekends are when all the real money is being made, apparently.

That's why shorting on Tuesdays has been good to us – by Tuesday people are trading and, when there is volume in the market, it usually turns lower because there aren't that many real buyers out there – certainly not at these elevated prices!  Guo Shuquing agrees with me and he's the Communist Party Boss at the People's Bank of China.  Guo (last name) said this morning: "We are really afraid the bubble for foreign financial assets will burst someday."  Guo is also the Chairman of China's Banking and Insurance Regulatory Commission – kind of a right wing Elizabeth Warren...

Investors, hedge fund managers and former central banking officials have all expressed concerns too, as Wall Street trades near record highs even as the United States continues to grapple with the effects of the coronavirus pandemic.  Guo echoed such fears, adding that the rallies in US and European markets don't reflect the underlying economic challenges facing both regions as they try to recover from the brutal pandemic recession.

Guo's remarks shook markets in the region. The Shanghai Composite (SHCOM) and Hong Kong's Hang Seng Index (HSI) were both trending upward before Guo's speech, building on Wall Street's rally Monday. But both indexes reversed course soon after. Shanghai's benchmark was down 1.2%, while the Hang Seng fell 1.3%.




Just Another Manic Monday

Up we go again!

In the end, the S&P 500 only made a weak retracement of the rally, back to the 3,800 line on the button, per our 5% Rule as we noted on Friday morning.  Since then we bounced back but it's a fall from 3,900 so those bounces then should be 20 points so 3,820 (weak) and 3,840 (strong) and we don't pay much attention to the Futures but a fail to hold a strong bounce today means we are still more likely to be consolidating for a move down to 3,700 this week.  

Bonds finally stopped falling (which indicates rates are rising) but they too are likely just bouncing after falling 5% from 140 to 133 so we're not very impressed with that move either until we see a strong bounce – which would be 2 points back to 135 – where you can see we paused on the way down.

Pausing here is certainly nothing to get excited about as the US just held a TERRIBLE 7-year note auction that got very little interest (the lowest demand in history) and the 10-year note yield is still about 1.5% – back to where it was pre-Covid and miles above the Feds 0.25% target rate – a gap that shows how far away from reality the Fed really is at the moment.  

Almost everything that mattered was red on Thursday. Treasuries sank, driving the yield on 10-year notes up as many as 23 basis points to 1.61%. Stock losses were most pronounced in Nasdaq-100 and small-cap shares that, with help from frenzied speculators and economic optimists alike, had led equities higher. Corporate bonds continued to rack up the biggest losses since the pandemic began as companies scramble to sell debt before yields go up even more. The dollar surged in a classic haven trade.

A return to pre-pandemic yield levels didn't calm anyone

So, what's gotten better over the weekend?  Nothing really.  “I was surprised to see the almost complacency from Fed officials, with naive comments about U.S. bond yields reflecting a stronger outlook,” said Thomas Costerg of Pictet Wealth Management in Geneva.  What sounds like reassurance to US investors sounds like idiocy to Global Traders – that's why no one is buying our bonds anymore – no faith in our Fed is a dangerous thing because faith is all we have holding this monetary system together at 200% debt levels.