Waiting on Wednesday – Too Many Things Happening Tomorrow to Trade Today

This is a good day to take off.  

I can't take off because I'm doing a Live Trading Webinar at 1pm, EST (all are welcome), where we will be showing people NewsWare – the best way to get the FACTS in real time.  Other than that, though, we don't expect much action today at tomorrow we have Jame's Comey's testimony, the UK election and the ECB rate decision.  The Euro didn't wait and dropped half a point this morning as the UK is in electoral turmoil while Draghi has given every indication that "easy" is his only setting.  

That's punched the Dollar up (we're long), giving us a nice start to the morning.   The ECB is very focused on inflation and Draghi has repeatedly said that inflation must look like it's on a sustained path to 2% before he will remove monetary stimulus and inflation fell to 1.4% in May with core inflation way down at 0.9% – so there's really no drama tomorrow and that's what made our Dollar longs such an easy call.

It's a good thing the ECB doesn't have a jobs goal because PricewaterhouseCoopers (PwC) projects that 38% of jobs could be at risk of replacement by automation within the next 15 or so years.  That's odd since Treasury Secretary Steven Mnuchin thinks that we're so far away from seeing artificial intelligence take American jobs that "it's not even on my radar screen."  38% of the US workforce is 62M jobs – about 4M per year over 15 years and our Treasury Secretary doesn't think it's worth thinking about?  

In the shorter-term, the World Economic Forum projects a loss of 7.1M jobs in the World's top 15 countries by 2020 and, last I looked, we're halfway through 2017 so 2.5 years of carnage before the main event begins to devastate the workforce.  Just last night, Elon Musk was talking about rolling out electric, self-driving trucks that would eliminate the need for 3.5M truckers working in the US – Jimmy Hoffa must be spinning in his unmarked grave!  

Image result for death lack of health insuranceFortunately, Congress is on the case with the House having passed a bill to
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Tumbling Tuesday – Trump Troubles Mount While US Macros Hit 2016 Lows


Is there really any point to discussing the falling-off-a-cliff Macro Index which USUALLY leads the S&P up and down when we are in a market that reality forgot?  Last time the Macro Index was this low, the S&P was at 1,850 – down 24% from where we are now and we're 10% over the 200-day moving average and yet we're still scared to short the market because every dip gets bought – pretty much immediately.  

While we are timid about shorting individual stocks, we are happy to do some hit and run work on the Futures and the trade ideas we had for you in yesterday's PSW Report ($3/day to have them delivered to you, pre-market) made a quick $1,000 already on two short S&P (/ES) Futures shorts and the Russell (/TF) is down to 1,385 for another quick $1,000 per contract gain so 2 short /TF and 2 short /ES has been a $3,000 return on your $3 investment since yesterday morning – a very wise investing decision on your part!  

Oil (/CL) and Gasoline (/RB) were losers so far but we still have faith with /CL over the $47.25 line (tight stops below) and /RB over the $1.53 line.  Hopefully tight stops kept yesterday's losses in the hundreds and, of course, our Coffee (/KCU7) long more than made up for it with a huge $3 move per contract (to $131) at $375 per $1 is $1,125 per contract and you are very welcome!  

Making $4,000 is always a good way to start the week so no need to be greedy and we take the money and run on the winners and wait to see if your two losers pay off.  There's always new opportunities and we identified two long plays for our Members into yesterday's close as Craigs620 pointed out that Barrick Gold (ABX) hasn't been participating in the gold rally so we upped our Long-Term Portfolio position on that stock (one of our favorites) as they tested the $16 line.  Earlier this morning, Advill identified another LTP opportunity we'll be jumping on by selling $4,300 worth of…
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Monday Market Movement – Countdown to June Swoon

Will this market ever go lower?

If not, it's very easy to make money in a never-ending bull market.  For instance, the S&P ETF (SPY) is currently at $244 with the S&P at 2,439, so they run pretty much neck and neck and, if we think the S&P isn't going lower, then the SPY Jan $236 ($14)/245 ($8.05) bull call spread is $5.95 and we can sell Jan $212 puts for $3 to net $2.95 on the $9 spread which will make $6.05 (205%) by January if SPY is over $245.  That's how easy it is to triple your money in a bullish market and, if you want to check out a dozen other examples of that technique working over the past 6 months, check out our Top Trade Review, with our first 14 trades (2 months) of 2017 netting $19,185 so far.  

Making money in a bull market is easy, the trick is not losing it when the market turns sour!  We only had 3 losing Top Trade Ideas (out of 14) in the first two months of 2017 and one of them was a Russell (TZA) hedge, which was SUPPOSED to lose money if the market went up.   By funneling a percentage of our profits into well-constructed hedges, we are able to lock in a substantial portion of our gains against a downturn.  We had that tested a few weeks ago when the market dipped and our portfolios passed with flying colors.  

In fact, we actually make more money on the way down than we do on the way up because we're tilting bearish with some highly-levered positions but we did have to adjust a few last week to reflect the possibility that this market is going to keep going higher and higher and never ever stop – because that's kind of how it feels at the moment.  

As I've noted before and as you can see on Doug Short's Equities/GDP chart (the Buffett Indicator), this market is getting a very 1999 vibe and only in 1999 has the market gone this insane with valuations.  Never before have so many people paid so much money for such little earnings!  

When the DotCom bubble burst in…
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Philstockworld Top Trade Review

Image result for top trade ideasTop Trades has become one of Philstockworld's most popular Memberships and that's a shame because I actually hate trading services that just give out trade ideas.  Unfortunately, that's what the market demands and, though Top Trade Members miss out on the trading education and deep discussions we have in our Live Member Chat Room, they usually do get a lot of great trades.

We began Top trades in August of 2015 and year one saw 96 out of 119 Trade Ideas (80.6%) made money immediately (by the first review) and half of the intial losers turned around over time as well.  As of our prior review, covering Sept-Dec, we had 22 of 30 trade ideas (73%) in the green already but, for example, one of our "losers" was RH – a trade that was in our Long-Term Portfolio:

As of the last review, we only had the short puts, which were down $1,400 (23%) so a "loser:" and, at the time (2/20), I said:

As you can see, they hit our target floor at $25 but we were in Vegas and forgot to add the bull call spread at the time – though I still like the plan.  The puts, by themselves, are now $7.40 ($7,400) so down $1,400 (23%) and I still like that sale along with 10 2019 $25 calls $9.75 ($9,750), selling 10 of the $35 calls for $6.20 ($6,200) for $3,550 so we still have a net $2,450 credit (or a $3,850 credit if starting from scratch) and our worst case is owning RH at net $22.55 – 16% below the current price.  That's an official add for our LTP!  

Obviously, the situation has much improved, despite the recent pullback.  The short 2019 $25 puts are down to $4.10 ($4,100) and the 2019 $25/35 bull call spread is in the money at $7 ($7,000) for net $2,900, up $5,350 (218%) from our original net $2,450 credit and well on the way to making the full $10,000 (still a good trade if you can settle for a double).  

The secret to
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Non-Farm Friday – Is America Working?

Unemployment is LOW! 

As noted in the Fed's Beige Book (which we discussed in Wednesday's Live Trading Webinar), low unemployment is restraining growth due to a lack of qualified applicants.  Low immigration isn't helping either – to the point of crops rotting in the fields due to lack of laborers.  The Fed is becoming very concerned about rising wage pressure, which can quickly eat into Corporate Profit Margins – especially when they are still having trouble pushing price increases through to the consumers.  

The ever-weakening Dollar means the workers have less buying power with the Dollar falling 6% since Trump took office (making America eh again) – effectively cutting the buying power of 160M workers by 6%, which is like losing 9.6M jobs yet today Trump will celebrate and take credit for 1M new jobs created under his regime – at the same 200,000/month pace we've been on for 5 years (thanks Obama).  

What we really have is a net loss of 8.6M jobs worth of buying power and it's been great for Corporate Profits as companies get paid in weak Dollars (very good for S&P companies, who get half their revenues overseas) and pay their workers in weak Dollars, which greatly inflates their Net Income – for now.  Restaurants are one of the first industries feeling the pinch of diminishing buying power as traffic is down 2% overall, most notably on 433M less lunches taken.

Restaurants are doing what every industry will have to do in a tight labor market, they are raising prices and HOPING not to lose too many customers as a trade-off.  Unfortunately for restaurants, food at home is getting cheaper at the same time – making the trade-up to a meal out a more and more expensive decision for consumers. 

The pain is spreading to suppliers. Meat giant Tyson Foods Inc. recently said a 29% drop in quarterly earnings was due partly to the decline in restaurant traffic.  “Consumers are buying fresh foods, from supermarkets, and eating them at home as a replacement for eating out,” Tyson Chief Executive Tom Hayes said.

The average price of a restaurant lunch has risen 19.5% to $7.59 since the recession, as…
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Thursday Thoughts – Fed Blowing Housing Bubble 2.0?

Here we go again.

As you can see from Naked Capitalism's Case-Shiller Chart, those who forget the mistakes of the past are doomed to repeat them and we just passed the last "out of control" housing peak.  As the Fed's Neel Kashkari said about housing prices:

“It is really hard to spot bubbles with any confidence before they burst.  Everyone can recognize a bubble after it bursts, and then many people convince themselves that they saw it on the way up.”

As noted by Scofield, it's really not hard at all to see when you are in a bubble, the hard part is predicting when they will finally burst.  Housing prices jumped 7.7% from last year, far outpacing the growth in household incomes, thus making homes more and more unaffordable for the average buyer.  However, the people buying homes are above average – generally in the Top 10% of Income Earnings which, in Donald Trump's America, makes them better people than the other 90% of you and more deserving of a good home.

After all, what else matters in life but how much money you make, right?  Of course right – you voted for it!  

Some regions are more bubbly than others, mostly in Texas and out west (Seattle, Denver, San Francisco) with massive gains since the last bubble burst.   Yesterday's read on the Beige Book shows an economy that does not support this kind of housing recovery and just last night, San Francisco Fed President John Williams said the Fed is still on path for 2 more hikes in 2017 with a goal of 3% by 2019.

That's up 2.5% from where we are now and do you know what happens to mortgage payments when they go from the current 3.5% average to 6%?  Again, we only have to remember what happened in 2007/8 but, for example, a person buying a $250,000 house with a $200,000 mortgage pays $898/month at 3.5% but will pay $1,199/month at 6%.  That's $300/month more, which is 33% and people don't buy houses, they buy mortgages so it's going to be up to the homeowners to bring the price of the home down low enough…
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Which Way Wednesday – Beige Book Edition

Image result for the new phone books are hereThe new Beige Book is here! 

Today we get the "anecdotal" information on the current economic conditions from each of the twelve Federal Districts, we find these reports useful as they give us some insight into what the Fed is seeing on the ground level and we'll go over it live, during our Live Trading Webinar at 1pm, EST today.

As noted yesterday, our trade ideas from the last Live Trading Webinar were good for thousands of Dollars worth of quick gains into the weekend and this morning oil (/CL) was kind enough to dip back to our $48.50 buy lone and gasoline (/RB) is back below the $1.60 line at $1.59 and we love it long over the $1.60 line with tight stops below.  See last week's Reports for options trade ideas we had for the Oil (USO) and Gasoline (UGA) ETFs at these levels as well as UVXY, which is still playable.  And the Dollar (/DX) is back at the 97 line, where we like that long as well.

I was over at the Nasdaq yesterday and we discussed 3 different ways to hedge your bubblicious Nasdaq positions like Amazon (AMZN) $1,000 or Tesla (TSLA) $335 or Netflix (NFLX) $165 – all of which are a good 33% over even the most generous interpretations of a fair value and, in a downturn, could drop 20% as fast as Bitcoins – which also seemed like they would never go down.  

I set up a link you can follow right here from our Live Member Chat room which lays out our 3 hedging ideas.  

I was just the 8:30 guest on Benzinga's Pre-Market Prep (35 mins in) and we discussed our oil and gasoline longs as well as the overall economic situation so no need to go over it again here.  At risk of having yet another post censored for political content, I will mention that Trump just pulled the US out
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Trump Error, Day 130 – The President Returns from Disastrous World Tour

Down the memory hole: Establishing "1984" for today's Trump-filled worldHe's back!  

After a relatively calm couple of weeks while the President was in Europe, we're back to the National nightmare of dealing with an Administration in turmoil (Trump now has a "war room" dedicated to staving off negative reports about his ties to Russia – at your expense, of course) with Trump's son-in-law, Jared Kushner, now under direct investigation and there are rumors of a major staff shake-up as suspected leakers are being fired now that the boss is back in town.

There are as yet unsubstantiated claims that Trump is now under indictment for his ties to Russian mobsters (but a sitting President has immunity so the case is "on hold").  Last week, the Trump campaign released an email to supporters entitled "SABOTAGE," in which the campaign said, "There are people within our own unelected bureaucracy that want to sabotage President Trump and our entire America First movement."

The White House has yet to announce any terminations or staff realignment. Instead, overnight Trump took another swipe at reports that his Twitter privileges may be removed, saying that "the Fake News Media works hard at disparaging & demeaning my use of social media because they don't want America to hear the real story!"

This kind of stuff is not really good for investor confidence.  Not only is Trump's domestic agenda in turmoil but he has single-handedly taken the mantle of World Leadership away from the US for the first time since World War II with Germany's Angela Merkel warning the G6 (who were all aligned with science against Trump on climate change this weekend) that reliable relations with her country’s closest post-World War II ally may be a thing of the past.

“The last few days have also shown me that the times when we could completely rely on others are to some extent over,” Merkel said in a speech at a climate conference in Berlin on Monday, echoing her language of the day before. “We are and remain close partners,” she said of the U.S. and Germany, “but we also know that we Europeans really must take our destiny into our own

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TGIF – Gold Flies Higher as Kushner Goes “Under Scrutiny” in Russia Probe

Image result for trump russia tiesThis is gettting interesting, isn't it?  

Jared Kushner, Trump's son-in-law, is now a "person of interest" in the FBI investigation into the Trump Administration's Russia ties.  That doesn't mean he's guilty but it does mean the investigation has moved closer to the President – to the guy married to his daughter, in fact.   The records of records of both Manafort and Flynn have been demanded by grand jury subpoenas, NBC News has reported.  

Kushner has already admited to meeting with Sergey Gorkov, who is the Chairman of VneshEconomBank, a Russian government-owned institution that has been under U.S. sanctions since July 2014.  Gorkov studied at the training school for the FSB, one of Russia's intelligence services.  To be fair to Kushner, you can't be part of Trump's Team and NOT have met with Russians – they are EVERYWHERE!  

Meanwhile, why are you here?  It's the Friday before a 3-day weekend, we didn't become investors so we could work every day, did we?  Go have some fun – I'm already on vacation, writing from my hotel room like a sensible fellow.  

Yesterday's big story was the collapse of oil after the OPEC meeting.  Despite extending the existing production cuts for 9 more month, the cartel failed to increase them and, since the current cuts have barely been effective and since the US production is already filling the gap and putting us back in a glut – a lot of oil longs finally gave up hope and bailed out, leading to a whopping 5% Rule™ correction on the day.

We're long here ($48.50) on the Oil Futures (/CL) as well as the Oil ETF (USO) at $10 as we are only just starting summer driving season and the July 4th holiday gives us another opportunity to see some gains in the coming month.  We may fall another $1 first, to $47.50 because Brent Crude (/BZ) is still at $51 and $50 is better support for them and $47.50 is better support for us but I would hate to miss the rally, so I'd rather get started now.  Gasoline (/RB) is also a good buy at $1.60.


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Federally Fueled Thursday – WTF?

The Futures went flying this morning.

Apparently, after having a strong day in the US yesterday and despite the Fed minutes that indicated imminent tightening, China decided to stick it in Moody's eye by strengthening the Yuan to boost their own markets.  The move drove the Shanghai Composite 1.4% higher for the day while the Hang Seng gained 0.77% and the subsequent plunge in the Dollar, to 96.80, goosed our own stock Futures to even higher highs

We're long on the Dollar (/DX) down here and we also have Dollar ETF (UUP) June $25 calls, now 0.24 with UUP at $25.08 as we think there are still strong odds the Fed tightens at their June 14th meeting.  We went over the minutes of the last meeting in yesterday's Live Trading Webinar and noted that the Fed was waiting for evidence that an "economic slowdown is transitory" since May 2nd and, since then, we've had generally bullish data that indicates the Fed will go ahead with the next phase of tightening sooner rather than later. 

Federal funds rate history and recessions.png

Goldman Sachs (GS) agrees with us and pegs the likelihood of a June hike at 80% with another rate hike in September, followed by the announcement of balance sheet normalization at the December meeting and possibly another hike there though I think they'll be more likely to hike on Nov 1st if the markets take the Sept hike well.  Citibank agrees with me there, saying:  "The fact that operational details are closer to being specified shows that the FOMC could be ready to announce tapering of its balance sheet earlier than previously expected. This increases the risk of a September announcement relative to our current view for an announcement in December."

The chart above is not complicated, Fed tightening ALWAYS leads to recession (grey lines) and recessions are rarely more than 10 years apart.  The markets are very likely enjoying their last harrah at the top but my advice is to SELL IN MAY (get back to CASH!!!) and go away until we have a proper correction.  Our Member Portfolios are roughly 80% CASH!!! (have I mentioned how much I like CASH!!! lately?) and we are very,…
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