Faltering Thursday (Again)

The market can't seem to get the hang of Thursdays.  

Fortunately though, at Philstockworld, we had a pretty good handle on things yesterday as I noted my concerns in the Morning Report (and all week) and yesterday morning, in our Live Member Chat Room, I called for shorting the Dow (/YM) Futures at 26,650 as well as the S&P (/ES) Futures at 2,950 and, as you can see, we had a nice gain of $1,500 per contract on the Dow and I even called the perfect exit at 4:35 (Futures trade until 6pm), saying to our Members:

300 points is plenty on /YM – don't be greedy!  

The S&P (/ES) bottomed out at 2,915 but the S&P pays $50 per point so 35 points was good for $1,750 per contract – even beter than the Dow gains.  It's been a while since we've played the Index Futures but this is a nice way to get back into the swing as we get back to the kind of toppy inflection points we like to play.  

Speaking of toppy, my crystal ball was on fire yesterday morning as in the same morning note to our Members where we shorted the Futures, I also said:

API showed a 6Mb build in oil and down 1M in Gasoline and up 2M in Distillates so we'll see what EIA says but a build like that can send us back to $62.50 but now it won't take much to "beat" terrible expectations so I'd have to say it's too tricky to play at the moment.  

How cool is that?  Oil contracts pay $10 per penny so a $1 drop is worth $1,000 per contract – nice work if you can get it!  More importantly, when our crystal ball is working we're able to make MONEY in the Futures and that's always fun so we're going to be looking for more opportunities but probably more next week, though you can play Oil (/CL) to bounce off $62.50 and, since it's down $2 from $64.50 a weak bounce is
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Wednesday: An AAPL a Day Keeps the Bears at Bay

$11.5 Billion Dollars.

Or, what's known as a slow quarter for Apple (AAPL), who beat lowered expectations (they guided down $9Bn for the year back in January) on $58Bn in sales, which were down $3Bn from last year.  So we have $3Bn less Sales and $2.3Bn less Net Income and the stock is up 33% from last April.  

Apple is a bit different from most stocks as it was stupidly cheap last April and we have a substantial long on them in our Long-Term Portfolio and our Options Opportunity Portfolio and we even have short AAPL puts in the Short-Term Portfolio, where we sold the 2021 $170 puts for $22 back on November 20th, which was like getting $22,000 NOT to buy AAPL for $170 at this point, with Apple expected to open over $210 this morning.

We just reviewed the Options Opportunity Portfolio in the April 18th Morning Report and our AAPL trade at the time was net $38,525, up from a $12,500 entry back on Jan 3rd but we wanted to be a bit more conservative so we called for the following adjustment:

  • AAPL – There's no sense having $120 calls that are so deep in the money so we're going to cash those in for $85 ($85,000) and add 20 of the June 2021 $180 ($42)/220 ($23) bull call spreads at $19 ($38,000) and we'll roll our 10 short 2021 $185 calls at $36.50 ($36,500) to 10 short July $200 calls at $11 ($11,000) so we're taking net $21,500 off the table and we still have an $80,000 potential spread 1/2 covered by short calls. 

Now, had we left it alone, as of yesterday, the options spread looked like this:

AAPL Short Put


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Philstockworld April Portfolio Review (Members Only)

Image result for one million dollars animated gif

Your love (your love keeps lifting me)

Keep on lifting (love keeps lifting me)

Higher (lifting me)

Higher and higher (higher) – Jackie Wilson

Up and up the markets go, where they stop — well, they don't seem to be stopping, do they?

Last month we couldn't believe we were already close to $2M in our primary paired portfolios.  The Long-Term and Short-Term Portfolios stood at $1,990,381 as of about the 15th of March and, although we played cautiously and added more hedges, the LTP has marched on to $1,429,270 by itself (as of the 4/18 review) while the STP took a $36,413 hit but that still left it at $704,785 for a combined total of $2,134,055 – up $1,534,055 (255%) from our original $600,000 start on Jan 2nd, 2018 and up $143,674 for the month, which is 24% of $600,000 but "just" 7.2% higher than where we were in March.

I hate to be in this position as we're clearly benefitting from RIDICULOUS market conditions and I know from experience that, no matter how many times I say it, people won't believe how quickly we can give back a big chunk of these profits.  Just this morning, GOOGL went down 8%, INTC is down 13% in the past week…  If that can happen to big blue chip stocks – what can happen to the other crap?  

We've been purging things we think are overvalued and we keep hedging but, when you make 255% in less than 18 months you have to KNOW that there's something wrong with the markets and, eventually, things may normalize on you.  I've discussed FOMO (fear of missing out) a lot lately and sure, we'd hate to have missed another $143,674 in gains and now those gains are a buffer against future losses but $2M is A LOT of money to risk and we're getting to the point where I'd rather cash it and start again with a fresh $600,000 – locking $1.4M away in a safer place.


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Tumultuous Tuesday – Venezuela Crisis Boosts Oil Prices

A coup! 

When's the last time we had a good, old-fashioned coup?  There's one going on right now in Venezuela, where Trump-backed opposition leader Juan Guaido has a small, or large (depending who you ask) group of army guys taking on the elected Socialist (Boo!  Hiss!!) leader, Nicolas Maduro, who was elected to a 2nd 6-year term a year ago.  

“The imperialist U.S. government is directing an operation to impose through a coup a puppet government for its interests,” Mr. Maduro said in a speech from a balcony of the presidential palace. “No one here is surrendering. We’re going to combat until victory.”

Guaido and his troops have apparently taken over part of a highway adjacent to an air base near Caracas, possibly in preparation for landing US or other troops though, of course, it would be completely outrageous for Trump to openly support the overthrow of a democratically elected leader – even if he is a Socialist but, of course – who are we kidding?  Do you really think he wouldn't?

US crude imports by country. Source | EIA 2013There's a lot at stake here as the US imports 10% of its oil from Venezeula yet it is thought that the country could produce 1-2 Million more barrels per day if the right investments are made but to make the right investments, we need a Capitalist-friendly Government that will allow US-based oil companies (ie. Trump donors) to take over Venezuela's valuable oil assets so – Viva la Revolution!  

Of course, Maduro is no prize and, though he won with 67.8% of the vote, it was only 6.2M out of 32M people voting so very low turnout and very possibly it was a sham election but none of that was proven and it was Henri Falcon who got the 2nd most votes (2M), Guaido wasn't even a candidate!  

In a REALLY crazy move – even for Republicans, Senator Marco Rubio tweeted out, not just support, but a call to action to overthrow a foreign Government, urging the Venezeulan Military to "fulfill their constitutional oath and defend the legitimate interim President Guaido."  I mean – WOW –
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Monday Market Movement – Big Earnings Week Ahead

Now we'll see.

30% of the S&P 500 report this week and we'll have more than 2/3 reporting by the end of the week so, hopefully, we'll have a good handle on what's going on by then.   We also have a Fed Meeting on Wednesday and Non-Farm Payrolls on Friday AND the month ends on Tuesday yet I'm VERY concerned because there are SIX (6) Fed speeches scheduled for Friday – that's a lot and it seems like they must be thinking they'll have something to spin with that schedule.

Apple (AAPL) announces their earnings tomorrow, after the bell and this evening we hear from Google (GOOGL) followed by several heavy-hitters lined up tomorrow morning.  It will be nice to get a fuller picture of how the S&P stocks are performing but, generally, it's so far, so good on earnings reports – with not too many areas of serious concern.

Unfortunately, our first data point of the week is not that good.  Personal Income only went up 0.1%, indicating wage growth is not keeping pace with even the low inflation we supposedly have while Personal Spending blasted up 9% and that means consumers are plunging deeper and deeper into debt, trying to keep up with the inflation the Fed pretends not to see while the economy continues to run on borrowed money.

The December bump in personal income reflects all the bonus money paid out on Wall Street, not raises on Main Street and, since the turn of the year, Income Growth has died and automation will continue to kill it as companies spend more and more on machines and less and less on people.  Notice in the above chart that Real Disposable Income has gone negative as rising gas prices along with inflation in other essentials is leaving consumers with less and less to spend (except on Avengers Endgame tickets, of course).

To me, this is not a recipe for a record-high stock market.  If the US consumer breaks (and they are certainly stretched to the breaking point), then there's no one left in…
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Faltering Friday – Earnings Season Hits a Rough Patch

I love earnings season!

So far, it's loving us as well as we have generally been on the right side over each report but the seas are turning ugly as we get into the meat of earnings season, with about 40% of the S&P 500 scheduled to report next week AND there will be a Fed Rate Decision AND there will be Non-Farm Payrolls next Friday which have flipped between 312,000 in Jan to 33,000 in Feb to 196,000 in March – so be ready for anything there as well...

This morning, we're going to see the advanced estimate of Q1 GDP and it's still a low bar of 2.1% expected and we should be able to clear that hurdle, despite the Government Shutdown that caused so much damage to Q4 and Q1.  

While we are waiting, we had big misses from Exxon (XOM) and Archer-Daniels (ADM) but XOM's miss was due to more CapEx spending, which we expected and we're wating on Chevron (CVX) who are in a bidding war with OXY now for APC, so I wouldn't touch them for fear they end up drastically overpaying in order to "win".

Sony (SNE) had very good numbers this morning but then ruined it by lowering guidance as the PS4 has run its course and they have nothing new planned for Christmas.  The company was a real bargain though at $46.50 ($58.5Bn) yesterday and, even this morning, you can sell the 2021 $45 puts for $5.50 to net in for $39.50 – I'm happy to add 10 of those to the Long-Term Portfolio to collect $5,500 while we watch them.

8:30 Update:  GDP was an even bigger beat than we thought, coming in at 3.2% so about 50% higher than the expectations of leading economorons but they'll ask the same idiots what they think next Q will be as well and no one is ever held accountable for these TERRIBLE predictions on CRITICAL data – amazing!

Government spending was up 2.4% and the export of LNG as well as 3Mb/d of oil we now export did a lot to support our balance of trade and accounted for much of the upside  What I don't like about the GDP number is a huge
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Thursday Failure – MMM Drops The Dow

Well our site was down this morning.

It seemed to have gone down last night, perhaps on all that Canadian traffic as I appeared on BNN (Canadian Bloomberg)'s Money Talk with Kim Parlee and we went over our Money Talk Portfolio (see yesterday's Report for details), which is now up 155% since it's inception in Sept of 2017 – so it's not surprising that a lot of people want to check it out…

As I noted on the show, we can justify the current market levels given the strong earnings we're seeing (not you MMM!) while taking into account what I'm calling an Automation Super-Cycle that, while being disruptive and destructive at times, is going to be an overall long-term positive for corporate profits as we lurch ever-forward into the 21st Century.

We added trade ideas for Bank of Nova Scotia (BNS) as well as the Natural Gas ETF (UNG) on yesterday's show but it was L Brands (LB), which we noted was a laggard yesterday morning, that popped over 3% on the day but is still very, very playable for very nice profits ahead.

This morning, 3M (MMM) is dinging the Dow but, on the whole, the Futures are holding up well and the Dow Futures (/YM) are bouncing off the 26,400 line as we wait for the Durable Good Report at 8:30 and the Kansas City Fed Report at 11 along with a $32Bn, 7-year note auction at 1pm – so it's a good day for the Dow to turn down to chase some money into bonds anyway.

8:30 Update:  Durable Goods came in at a very nice 2.7% headline,  up from -1.6% last month and ex-transports it was in-line at 0.4% so the economy is still chugging along and tomorrow GDP should beat 2.1% expected and then we'll see how Michigan Sentiment looks (97.1 expected) and then it's time for the weekend again.

Once again, sorry the site was down this morning – some issue with Amazon Web Services that I do not understand at all!  

Earlier comments were over at Seeking Alpha and, whenever PSW is down (hopefully not often!), just check our Twitter feed to see where we're chatting.

 

Money Talk Portfolio Update

I'll be on BNN's (Bloomberg Canada) Money Talk tonight at 7pm.

As usual, we will be reviewing our Money Talk Portfolio, which we initiated back on Sept 6th, 2017 to track the trade ideas we would introduce, live on the show, about once each quarter.  The idea of the portfolio was to select highly leveraged, high-probability trades that did not have to be adjusted very often (or at all) and, so far, it's been a tremendous success with our initial $50,000 turning into a lovely $127,663 (up 155.3%) at yesterday's close, about 18 months after we got started.

We recently reviewed the MTP back on Feb 15th and, at the time, the portfolio was at $88,922 with, of course, the exact same positions – as I hadn't been on the show since Jan.  We did send out an alert (our first ever) to dump GE shortly after that – those alerts go out free of charge on Twitter, Facebook, Seeking Alpha, etc to make sure they were available to all so make sure you follow those feeds.    Note that, for each position, we clearly define our expectations and, overall, we expected our positions to make another $76,638 at the time but we've already made another $38,741 (43%) – which is way too fast – so we have to be careful that some of our positions are overbought already.  

That's right as FUNDAMENTAL VALUE INVESTORS we believe that stocks – even the ones we like – can be too expensive, as well as too cheap.  When they are too cheap, we buy them – when they are too expensive, we sell them.  It sounds logical but how many traders actually do it when the time comes?  

Now, let's take a fresh look at what we have:

  • Alaska Airlines (ALK) – Just a short put that nets us in for $51.80.  We're not worried about it.  Expect to gain the full $4,100 so $2,650 left to gain.
  • Nasdaq Ultra-Short ETF (SQQQ) - A hedge we expect to lose on and so far, so good as we're down about $4,000 with just $450 in value left.  Still, we do need hedges so


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Tempting Tuesday – The Beats Keep Coming (so far)

Image result for beats by dre logoEarnings are going very well.

While there are plenty of misses in companies you probably don't care about (ABCB, ASTE, BANC, EDU, FCF, FBC, IRDM, MLI, PII, SHW and WAT missed just this morning), there are plenty of beats from large-cap companies you probably do care about like DGX, HOG, HAS (by a mile), JBLU, KO, LMT, NTRS, PG, PHM, STT, TRU, TWTR (by a mile) UTX and VZ – all from this morning.

Of course large caps are benefitting from tax breaks and buybacks but, as a shareholder, money (per share) is still money so up and up we go.   This is why we still have our longs – FOMO continues to be a thing and it doesn't matter that a stock is already high in anticipation of earnings – good earnings take them up anyway.  We're still adding hedges on the way up but it's silly to close down too many positions if the market is determined to break out to new all-time highs.

One thing that is too high is Oil (/CL) Futures at $66 – that's a good spot to put our foot down and play for the short but be very careful around inventories tomorrow (10:30, EST) – as they can move us pretty violently but $66 is a good stopping out line, so a good place to short with tight stops above.

Generally, with our /CL trades, as soon as we make $500 we try to lock in $350 and then $500 at $700, etc – a $1,000 gain ($1 in price) on a single move is not something you often catch though, as you can see – it happened TWICE on Friday night with an over $2 move from $64 to $66.

For bigger companies and commodities, weak Dollars are a benefit and the Dollar was generally weaker in Q1 than it was in Q4 and that's giving everything a boost but we may be heading back to the top of that range (98) as the UK is back in turmoil mode – with Theresa May very, very close to being forced to step down – perhaps as soon as next week.  That would be Pound/Euro negative and Dollar-positive.  

 

 

 

IN PROGRESS

 

 

$300,000 Thursday – Our Options Opportunity Portfolio Goes up 200%

There's not much news and it's a silly pre-holiday trading day so I'm going to reveiw the OOP instead.  

The Options Opportunity Portfolio was initiated last year in Seeking Alpha's Marketplace and, since the Summer, it's been on quite a tear and we just crossed $300,000 – up 200.7% from our $100,000 initial set-up back on Jan 3rd of 2018.  You can follow our progress and changes under the Virtual Porfolio Tab on Philstockworld's main page and, unlike our Long-Term/Short-Term paird portfolios, the Options Opportunity Portfolio is self-hedged – so it's just the one, balanced portfolio.

Our goal in the OOP is to take advantage of OPPORTUNITIES in the maket – usually we jump on stocks that have been unfairly sold off on news we don't consider as bad as the traders who are running out of the stock.  That's why you see a lot of stocks in here with erratic charts – usually they've had some kind of mishap which drew our attention to them.

In our March Review, on the 7th, we were at $283,465 and now $300,689 is up $17,224 for the month and that's 17.2% of our original $100,000 – so pretty good for a month – too good really and we're going to look carefully for places we can take some money off the table, as we don't REALLY trust this rally.

  • FTR – This has been a bad trade for us this year and we're just waiting to see what happens on 4/30 earnings.
  • HMNY – I think we own most of the company at this point – not that it's worth anything…
  • HOV – This one we're expecting to recover nicely over time.
  • TZA – One of our hedges, no adjustments.  TZA is a 3x Ultra-Short so a 20% drop in the Russell should give us a 60% bounce to about $14.50, which would make the 50 calls worth $6.50 so $32,500 less the current value of $10,275 means we have $22,225 worth of protection here.  

  • LB – An aggressive put but we like LB.
  • PLAY – Not worried about these. 
  • SIG – Retail


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