by Phil Davis - August 1st, 2014 7:07 am
What fun this is! Well, it's fun for us because we were playing for this drop and not only did our bearish Short-Term Portfolio pop 10% yesterday but our bullish Long-Term Portfolio crossed over the 20% line for the first time this year. How is that possible? Because we are using our "Be the House – Not the Gambler™" strategy to SELL premium to suckers who think they know what the market is going to do!
This allows us to make money in any market direction while remaining well-hedged for the downturns. It also allows us to put up these spectacular gains while using less than 50% of our cash – keeping it on the sidelines and ready to deploy when we catch a good bargain on one of our Buy Lists to add to our virtual portfolios. We had not one but two special Live Trading Webinars yesterday for our Members, where we cashed out the XOM puts I mentioned FOR FREE last Friday for a 300% gain.
If you want to get our morning posts delivered to you each day, in progress, at 8:30 each day with access to the full posts pre-market – just sign up right here.
Last Friday I also suggested our SCO (ultra-short oil) longs and that $1,200 position in our Short-Term Portfolio closed yesterday at $3,400 – up a very nice 183% and the SQQQ trade I aslo put up in last Friday's morning post for a net $400 credit (also featured on TV on this Wednesday's Money Show) finished yesterday's session at $1,060 – up $1,400 (350%) in less than a week!
Another hedge we discussed were the TZA Aug $14 calls which were $1.67 on Wednesday (more FREE picks in the morning post), which was already up 153% from 0.66 when I first mentioned them (outside of our Live Member Chat Room) in our July 8th post. As of yesterday's close, they were $2.51 – up 50% from Wednesday and up 280% overall.
by ilene - July 31st, 2014 3:10 pm
Watch Phil's TV spot yesterday. Phil discusses the stock market, his expectations for the near future, and how he protects his portfolio from selloffs. Phil also outlines some option trade ideas. Click here to watch this excellent interview on Money Talk with host Kim Parlee of Business News Network.
Here are some photographic highlights of the show.
by Phil Davis - July 31st, 2014 8:05 am
I warned you about Argentina!
We discussed them way back in December as they faked their own GDP data, that it was nothing more than window-dressing to keep them from LOOKING like they were in default – even though they were clearly heading that way.
So it should come as no surprise that, as the deadline finally comes, there is no surprising rescue for the World's 26th largest economy ($477Bn vs $499Bn for Norway, $394Bn for Austria, $385Bn for Thailand and $248Bn for Greece). Since it's not a surprise, we took the opportunity this morning to go long in the Futures, as the 1% dip around 4am seemed overdone. I sent out a special Alert to all of our Members, saying:
Still, I like /TF for a bullish over the 1,130 line (testing now) and /YM at 16,700 and /ES 1,950 for bounces but VERY TIGHT STOPS if any of them fail.
Fortunately, they did not fail and already (8am) we have /TF 1,135 (up $500 per contract), /YM 16,732 (up $160 per contract) and /ES 1,955 (up $250 per contract) and our Egg McMuffins are paid for and those trades are now off the table (tight stops at least), as we expect more selling at the open!
It's nice to play the Futures to offset bearish bets, like the SQQQ (ultra-short Nasdaq) trade we discussed in yesterday's morning post and the QQQ weekly $96 puts we added for .22 in yesterday's live Member Chat ahead of the Fed – as we expected the statement would disappoint. Those should come out well this morning and going long on the Futures locks in those potential gains for us.
Now, getting back to Argentina, ARGT is UP 32% this year and that is just silly so ARGT makes a nice short at $23.20 and you can, in fact, buy the Oct $23 puts for $1.45 and, if they give back that 32%, they'll be back to $19 and you'll have $4+ for a $2.55 gain (175%) – that's a fun way to play it.
by ilene - July 31st, 2014 3:06 am
Courtesy of Tim Richards at the PsyFi Blog
A common reaction to pointing out to investors (or indeed, anyone) that they're as biased as a Fox reporter at a convention of transgender liberal pacifists is for them to respond, not unreasonably, by asking what they should do about it (that's the investors, not the reporters). It turns out that it's a lot easier to say what's wrong than to actually do anything about it.
The A to Z of Behavioral Bias is an attempt to address that issue, but it does rather show that there's no such thing as a common source of biases; bad behavior comes from many sources and requires many solutions. Or does it?
Toxic Arms Races
To generalize, perhaps beyond the point of reason, there are two sorts of bad behavior amongst investors. The first kind occurs because the modern investing industry is designed to be toxic for creatures like ourselves who evolved methods to deal with risk and uncertainty and duplicity in a completely different world. The same argument can be made more generally about the world outside investing, of course.
In addition, the creation of our consumerist society has led to a psychological arms race, as corporations vie with themselves to create redundancy in their products by magicking up a demand that isn't predicated on a genuine shortage of supply. In investing, as in other areas where services or goods have to be sold, techniques have been evolved, by trial and error, that persuade us into parting with our money by exploiting our biases.
To Choose or Not To Choose
For many of us our problem is not the one that's afflicted humanity for most of its history: it's not that we have too little choice, but that we have too much. Choice overload, as it's known (see Jam Today, Tyranny Tomorrow), has been exploited by the securities industry, amongst others, to keep prices high and reduce competition. History suggests this hasn't been a deliberate attempt to manipulate us, but has developed by trial and error as corporations seek to maximize profits.
by Phil Davis - July 30th, 2014 8:02 am
Yesterday went as expected.
As I told you in the morning post, the "rally" was nothing more than a prop job to allow a full day of selling right into the close. Now that the markets are closed, the S&P is being propped back up – 0.3% as of 7:30 am. May the farce be with you!
Of course, this morning, there may actually be something to get excited about as the 2nd Quarter GDP Report will come out at 8:30 and economorons are expecting a full reversal of Q1s 2.9% dive with a 2.9% gain forecast for Q2.
I don't know what numbers they are looking at (assuming they even bother – from their usual performance, they would be better off using darts) but I'm not seeing a big resurgance in Consumer Spending, which is 70% of the US economy. I don't see how our Trade numbers improved, although we did import less oil (to create artificial shortages and drive up prices for the consumers).
Business Investment seems to be up a bit and Inventories are a real wild card where a build will be a huge plus – even though, to me, it sort of indicates they are not selling anything and it's piling up on the shelf.
This is the fantasy chart for the GDP that is making the rounds this morning. Notice it's from the Commerce Department (aka MiniTru) and, like our Chinese Masters – they are able to make those numbers dance when they want to and, believe me, they REALLY WANT TO this Q as two down quarters in a row = the "R" word.
So we'll see if the GDP can get the rally back on track and, if not, it will be up to the Fed this afternoon (2pm) to pump up the jam and get the party going again with their statement. It's very possible the Fed timed their announcement on the afternoon of the GDP release BECAUSE they know they'll have to make a save in the afternoon. Also, it's no coincidence that Treasury is pushing $44Bn of 2-year and 7-year notes between GDP and the Fed – just in time to…
by Phil Davis - July 29th, 2014 8:28 am
Some of the people all of the time.
That's the basis for this rally – or what's left of it – as we see this pattern almost daily: A big(comparatively) volume sell-off followed by a "rally" on 1/3 to 1/4 of the volume that sold and then, once we hit a pre-programmed peak (about where we got to in the no-volume Futures), we have a bit of volume selling into the close.
This is how you can see those charts that show all the "smart money" running out of the market, even as the market goes higher. Why would they leave? Why would anyone leave this exciting market? The answer is, because those fund managers are well aware that, at some point, the music will stop and there will be no buyers to save them then. Best to get out now and avoid the rush.
That time was also "different," wasn't it? We had invented the Internet (well, Al Gore did) and easy monetary policy led to bank mergers and NAFTA ushered in an era of free trade that send tens of millions of jobs overseas, causing profits for US Corporations to soar and those good times were never going to end – until they did.
It's very hard to say when a rally like this will finally run out of gas but, when we stop making new highs and we have these BS daily, manipulative run-ups to cover the selling – that's probably a good time to get more cautious.
As noted on Dave Fry's S&P chart, it's ALL about the Fed and how much FREE MONEY the Fed will pump in and how long they will keep pumping it in, etc. You would think we'd be tired of the same old song and dance but why should we, when we GET PAID to join in?
Yesterday, for example, in our Live Member Chat Room, I called for a bottom on the Russell Futures (/TF), saying:
/TF below 1,130! One would hope that's it. Playable for a bounce over that line