Follow-Through Thursday – Dow 25,000 and Bust?

How long, can this keep going on?  

"Well, your friends with their fancy persuasion

Don't admit that it's part of a scheme

But I can't help but have my suspicion

'Cause I ain't quite as dumb as I seem



And you said you was never intending

To break up our scene in this way

But there ain't any use in pretending

It could happen to us any day" – Ace

So far, 2018 is looking like 2017, with the indexes climbing up and up and, as I noted to our Members this morning, there's some good economic notes backing up the positivity including 18 states that raised the minimum wage on January 1st, which puts a bit more disposable income into the hands of 4.5M affected workers while putting upward wage pressure on 50M more.  Those effects take time to roll in but rising wages is a trend we should be able to rely on.  

Clearly the markets are loving it as we made fresh record highs and this morning the Futures are making even fresher, higher records but, as noted above, how long can this keep going on?  What has actually changed to justify today's record high?  

You can't just keep rewarding the market for doing the same thing it always does otherwise, as I warned back on November 29th, we will all be Billionaires.  While I'm sure you want to be a Billionaire, what's the point of it if everyone is a Billionaire?  If that happens, you're going to be nothing if you aren't a Trillionaire – that's what happened in Zimbabwe, where they were printing $100,000,000,000 bank notes in 2009, right before their currency completely…
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Wednesday Watch List Update – Stocks We Like for 2018

Related imageIt's very important to have a Watch List.

I like to have about 24 stocks I keep a close eye on so that, when something happens and they go on sale, I'm ready, willing and able to pull the trigger in an instant.  We did that in November, when Macy's (M) announced their earnings and we thought they were just what we wanted yet the market sold them off after the opening pop.  That gave us a window to act and, because we follow M closely – we KNEW it was time to act and I issued a Top Trade Alert, identifying it as our top contender for Stock of the Year for 2018 (replacing LB, another retailer who has already flown higher).  

We issued our 2017 Watch List back in March and in May we picked 13 out of 24 for action, including M as well as BMY, ESRX (still cheap), FCX, GE (cheaper), GILD, LB, PSA (still cheap), QCOM, TGT, GCI, FMCC and SEE (still cheap).  So, out of 13 picks we had been watching and pulled the trigger on, 10 are winners, 2 are flat and one (GE) is down.

This is the key to understanding our system.  GE was our only non-winner out of 13 picks (the flat ones make money too using our "Be the House – NOT the Gambler" system) and is still very manageable but, since they cut the dividend, we're not jumping back in yet – other than short puts.  

Image result for real investingIn order to become a real investor, you have to break out of your "winning" and "losing" mind-set and that's very difficult because your broker – who wants you to TRADE, not INVEST, gives you a daily scorecard with minute-by-minute updates to encourage you to thing of your portfolio as something that should constantly be fiddled with to improve your "score".  They even highlight your losers in red – so they bother you and further encourage you to dump slumping stocks by raising the margin requirements on them – making them even harder to hold onto.  

Imagine if you ran a baseball team that way – constantly cutting players who were having a bad month and hiring
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2018 Tuesday – How we will be Building our New $100,000 Portfolios

Image result for new year stock market 2018Happy new year!

I hope everyone had a nice holiday.  Over at PSW, we've been in CASH!!! since early December so we'll be starting fresh this year and setting up 4 new virtual portfolios so we can get a bit more educational and teach our Members both basic and advanced techniques for wealth building.  Our 4 Portfolios for 2018 will be:

  • Options Opportunity Portfolio (OOP) – This was orignally called the 5% Portfolio, as the goal was to use $100,000 to make $5,000 a month but, at Seeking Alpha, where we have a version of this portfolio, they felt is was confusing people to call it a 5% Portfolio, so we changed the name to what we do – look for opportunistic option plays.  Originally, we were more short-term but I realized not that many people have time to trade so actively so we went with more long-term trades, which still make plenty of money in the short-term.  While 5% a month may seem like a high goal, we were up over 100% in each of the two years we ran the portfolio.
  • Butterfly Portfolio – "Butterfly" refers to the type of spreads we use, though they are not typical butterflies as we use extended time spreads as well.  Since we began our first butterfly portfolio in 2006, it has been our most consistent player, easily averaging 40% annual returns with much lower volatility than the other portfolios.  Though the spreads are complicated, ofen with 4 or more legs, they are generally low-touch and their self-hedging nature means they have much lower volatility than our more directional bets we take in the other portfolios.  
  • Short-Term Portfolio (STP) – Our STP is part one of our larger, paired portfolio and the purpose of the STP is to protect the Long-Term Portfolio (LTP), which is generally 100% bullish.  So the STP tends to have shorter-term bearish bets and index hedges but we do take the occasional short-term plays if something interesting comes up.  We'll also use this portfolio for short-term speculation for trades which do not fit into our LTP.
  • Long-Term Portfolio (LTP) – Our LTP is our bread and butter portfolio and is much larger ($500,000) than the other 3.  The STP/LTP strategy


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Final Friday – Futures Push Markets to Record-High Close for 2017

Image result for happy new year 2018What an appropriate way to end the year.

The Futures are being jammed higher to provide cover for sellers at the open and reel in more suckers to hold the bag.  The Dow Futures (/YM) are back to 24,850, where we shorted them yesterday and make a quick $250 per contract.  So that's every day this week we've been able to short the moringing run-up and, this morning, we might be able to catch 24,900 – or just under it and the S&P Futures (/ES) are an easy short at 2,698, with tight stops over 2,700 and that would be risking $100 per contract losses vs gaining $500 per contract is they calm back down to 2,688  – once again, we go for the positive risk/reward profile.

We also put our foot down and went long on the Dollar (/DX) at 92.00, that half-point drop this morning is the only thing boosting the indexes and commodities.  Gasoline (/RB) is also a fun short at $1.795 but that one is over the weekend into next week and might be painful if wrong ($420 per penny, per contract) but our logic is that the record cold snap doesn't encourage people to drive a lot and, after this weekend – what is the catalyst for gasoline over the usually slow winter?

Closing the markets at record highs gives the Banksters a great narrative to sell you overpriced equities next quarter.  After all – you don't want to miss out, do you?  Having the Dollar drop 3% since early November has made it more expensive to buy many things – including equities, which are exchanged for Dollars.    

Manipulating the Dollar lower is a great way to manipulate the market higher and the Banksters do this all the time when they want to paint a pretty picture for their year-end charts.  There's really nothing going on globally to justify a broad sell-off in the Dollar so we're going to start accumulating down here as a bounce back to 93.50 is good for $1,500 per contract and the margin requirement for Dollar Futures (/DX) is $1,980 per contract, so it's a pretty efficient way to make…
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Final Thursday Thoughts of 2017

Wednesday Wind Down for 2017

Not much is happening.

That doesn't stop us from making money in the markets, of course, but we have to be a bit selective in picking and choosing our spots.  Yesterday morning, for example, a pipeline explosion in Libya sent oil rocketing up to test $60 and, as it was climbing, I put out the following note to our Members at 11:09 am:

Oil exploding higher, $59.55 and /RB $1.796 - even though there's no logic to that following oil higher because a pipeline explode in Libya so I like /RB short under the $1.80 line with tight stops above.

That's all good Fundamental Trading is:  Read the news, think about what it means and play for or against the market reaction.  In this case, it was an over-reaction so we went against the market.  When oil hit $60 (/CL) we shorted that too as $60 is a tough line to cross and we expected at least some rejection there and, this morning, we just cashed in at $59.50 for a $500 per contract gainj already.

As to Gasoline (/RB), that was good for a quick $1,411.20 on two contracts into the close – not bad for a day trade, right?  Even if you have a $500,000 portfolio that you parked in CASH!!! and it's sitting on the sidelines, making $1,000 per trading day is $200,000 a year – that's a 40% annual return with some simple Futures trades while you wait for some good opportunities to re-deploy your cash!

Futures trading is a very valuable tool to have in your trading toolbox but, like anything worthwhile, it takes a lot of practice and that's why we do a lot of Futures work in our weekly webinars.  There will not be a Live Trading Webinar this week, however, as I'm on semi-vacation in Las Vegas, where I'm applying our "Be the House – NOT the Gambler" method to the poker tables.

Image result for winning pokerAside from the bluffing and luck aspects of the game, winning consistently at poker is just like good portfolio-building, we try to take a consistent series of positive risk/reward positions and manage…
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Tinsel Tuesday – Market Decorations Expected to Last our the Week

Image result for santa on vacationWhy are you here?

I'm not here, I'm in Las Vegas!  It's 4am here – I have nothing else to do and the markets close at 1pm (PST) and I'll have a full day of fun in the sun after that – what's your excuse?  The US markets are open but not Europe, because they are not idiots – so expect very low volumes and take nothing seriously this week.

Nothing serious seems to have happened in the morning other than Apple (AAPL) getting some negative notes on IPhone X demand that's sending that stock and their suppliers about 2.5% lower in pre-market, which should put a drag on the Nasdaq (/NQ) and the Dow and S&P – all of which have AAPL as their largest component.  This could all be BS, where unscrupulous fund managers are taking advantage of the holiday – as well as Apple's refustal to comment on rumors – to knock the stock down.  

We can play along by shorting the Nasdaq Futures (/NQ) but they are already falling but the Russell (/TF) is lagging at 1,545 so I'd short them for a cross below, with tight stops above.  Speaking of Futures, congrats to those who played along with our long play on Natural Gas (/NGV8) from last Wednesday's Live Trading Webinar as we got a great pop this morning and an even nicer $1,200 gain – Merry Christmas to all of our Members!  

Now Coffee (/KC) has dipped back to $120, which is where we like to play them long with tight stops below that line.  We already put that note out to our Members earlier this morning, in our Live Chat Room.  The Nasdaq already hit our $1,000 per contract goal for gains from last week's short, where I said to our Members on Thursday morning:

Dow looks intent on giving us another chance to short at 24,850 (/YM) and that should be 2,690 (/ES), 6,500 (/NQ) and 1,550 (/TF) so all good shorting spots to watch (with tight


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Friday Market Follies – BitCoin Drops 30% from the Highs, What Bubble?

Bubble, what bubble?

We're not saying BitCoin (GBTC) is dead, just because it fell 30% this week.  That seems to happen to it every few months and it hasn't happend since September, so it was overdue for a correction.  We sold our BitCoins and BitCoinCashes(?) as $18,500 and $3,500 seemed kind of silly to me but we're still accepting GreenCoin until the end of the month as payment for our 2018 Annual Memberships and they are cheap today at 0.000285 while we're converting at 0.00044 so close to a 50% discount on the exchange!  

We bought our 4 BitCoins 2 years ago for $600 each and we traded two for 150M GreenCoins (GRE) and let the other two ride.  Last week, as BitCoin raced up towards $20,000, we managed to get out at $18,500 so a nice 2,983% return on our investment but, even at just 0.000285, our 150M GreenCoins are now $42,750 – so doing better than BitCoins for now!  There are lots of small, alt currencies out there – GreenCoin is simply the one we decided to play with but, keep in mind, we're in them for $1,200 (not even counting the BitCoin profits) – not really a make or break trade!  

The fact that we're trying to get more of them is a sign that we don't think crypto is going away but that doesn't mean we want to buy a BitCoin for $13,000 or $10,000 or $5,000 or $3,000.  Now $1,000 I'll buy 10 or 20 (still with the profits from our first 4) but what makes a BitCoin worth more than a GreenCoin other than BitCoin is more popular at the moment?  Well, I don't think BitCoin is likely to get more popular but the sky is the limit with GreenCoin and, even at a penny, we'll be Millionaires – so it's a much more fun gamble, isn't it?  

Yesterday, the Long Island Iced Tea Corp (LTEA) said they were changing their name to the Long Blockchain Corp or some such nonsense and the stock jumped 346%.  For those of you who remember the pet food seller, Pets.com, this is the kind of nonsense you see at the height of a speculative bubble – people just trying to associate themselves with the…
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GDPhursday – No Way We Make 3% This Year

The final Q3 GDP Report is out this morning.

While the quarterly figure is supposed to come in at 3.3%, the first Q was only 1.2% and Q2 was 3.1% and that averages 2.53%, far, far below Trump's claim of 3% and, in order to hit 3% for the year, Q4 would have to jump to 4.5% – and that's not very likely at all.  2.5% GDP growth is better than last year's 1.5% average growth rate but far, far shy of 2015's 2.92% because, in reality, it's hard to grow an $18,570,000,000,000 economy 3%, which would be adding $557Bn.  

$557Bn is the entire GDP of Argentina, the 21st ranked country by GDP.  Saudi Arabia is 20th at $646Bn, which is 3.4% of our economy.  Isreal's GDP is $318Bn, just 1.7% of our own so, essentially, the US builds an entire Israel and absorbs it into our economy every 6 months.  Singapore is $296Bn, Ireland is $293Bn,  Portugal $204Bn… you get the idea – $557Bn is a lot of money – and that's why people who tell you we're going to punch up to that level and beyond are full of crap and assume you have no idea how to do the math, so you'll swallow their crap and repeat it to other people as if it's a fact.  

According to the Tax Policy Center's report on the Trump Tax Plan that just passed the House and Senate, we are growing something by 5% of our GDP but, unfortunately, it's the level of Debt to our GDP, which already stands at 108% with just over $20Tn in debt.  Even at just 1.5%, our Government is spending $300Bn a year in interest on that debt but the Fed is raising rates at least 1% next year so that will add another $200Bn in interest payments, taking up 40% of our anticipated GDP growth. 

That can quickly get much, MUCH worse if inflation kicks up and people demand more for bonds to keep up or if the Dollar devalues if, for example, someone were to pass irresponsible tax legislation that gave huge tax breaks to the rich while doing nothing to improve the lives of 90% of the people who live in the country, which would leave little possibility for GDP growth unless,…
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Which Way Wednesday? S&P 3,000 in 2018?

1,500.

That's where the S&P 500 topped out in both 1999 and in 2007 – in both cases right before crashing and giving up 50% of that level.  That didn't stop analysts from calling for higher highs or assuring us that the markets were still a buy – even as they were collapsing.  That's because the analysts and the TV stations don't work for you – they work for their sponsors and their sponsors are the investment banks and brokers that make their money off your transactions – they will never tell you to go to CASH!!! – they want you to BUYBUYBUY all the time.

Only one of 12 "equity strategists" polled by Marketwatch can imagine the market goes lower in 2018 and, frankly, I'm not one of them either as I think we do end up around 3,000 by the end of the year.  I'm simply expecting a correction first.  IF the market keeps going into August, it will become the longest bull rally in history at 9 years – 8 of them under Obama and 1 of them under the guy who claims all the credit for it.  Bush Jr took credit for the Clinton rally too – that didn't turn out well for him or America.

We went to CASH!!! two weeks ago because we think the market is currently being held up simply because no one wants to sell and take a profit in 2017, when the taxes paid on those gains will be substantially higher than they will be next year.  In fact, you can see from Morgan Stanley's chart that tracks Intra-Year Declines in the market, that this year has been a real outlier and there may be a lot of pent-up demand for selling that will be unleashed in 2018.

Or maybe not.  That's why we're in CASH!!! – the market is too scary to stay in but also way too scary to bet against – so we're sitting it out and waiting for the dust to settle.  There are still plenty of things to buy.  We reviewed our Top Trades yesterday and found several stocks we'd love to add to our new portfolios in 2018 already.  Still, it's slim
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