The market has been running like a rocket. Like one of those reusable Space X rockets as it keeps going up every time it falls. The Nasdaq is retesting 7,200 on the 100 Index (/NQ) and we shorted that line this morning only because the last time we tested it (mid-March) we plunged 10%, back to 6,322, which was the 200 dma back in April. This time, the 200-day moving average is back at 6,500, so still a 10% gap down if we fail to punch over. That means our RISK is stopping out at 7,205 with a $100 loss while the potential REWARD could be $14,000 on a 700-point drop – that's the kind of bet we like to make!
In our Options Opportunity Portfolio and our Short-Term Portfolio, we are using the Nasdaq Ultra-Short, SQQQ as a primary hedge because the index is full of overpriced stocks. It's not a bet though, it's a hedge as it's crazy to BET that the Apple-driven index will go lower while AAPL is still under $1Tn in market cap (now "just" $950Bn). $1Tn is more than the GDP of Turkey ($849Bn) so, if Apple were a country, it would rank 17th in the World. Above them is Indonesia and Mexico – both at about $1.1Tn, which would be about $225/share for AAPL.
I suppose if we're going to learn to accept valuations in the Trillions, we should start thinking about Corporations more like countries or maybe we should just start trading countries – it's a work in progress – anyone want to go long on North Korea at $17.4Bn? With 25M people, that's just $696 per person – seems like a bargain compared to South Korea, which is "valued" at $1.7Tn for just 50M people so $34,000 per person's share. Life is good below the 38th Parallel!
How does a country with just $17.4Bn develop nuclear missiles? That means Carl Icahn can develop nukes – he has $17Bn and Icahn is "only" ranked 73rd on the Forbes 500 list. Jeff Bezos can buy a dozen nukes with his $112Bn and he's already got rockets, as does Elon Musk with $20Bn and he already looks like a James…