by phil - November 28th, 2014 8:14 am
Oil is failing $70!
$66 is a 40% (strong) retracement from the $110 top we saw just over a year ago but this time may be different as OPEC ended their meeting with no agreement to reign in the massive over-supply of crude that's spilling out onto the markets, even in the face of continuing declines in consumption.
This is good news for consumers on two fronts - especially in the US, which has been miles behind the rest of the World in fuel economy. What we're seeing in play now is the lasting effect of the Obama Administration's Aug 2012 mandate that has required automakers to double the average fuel economy of new cars and trucks by 2025 to 54.5 miles per gallon and, already, by 2016, we are on track to hit 35.5 mpg on the average.
As the biggest guzzlers of gasoline in the World, the US was consuming 10.5Mb of gasoline per day when Obama took office in 2009 and already we are down 14% to 9Mb/d, which is a 14% decrease in oil consumption. 1.5Mb/d is 1.7% of the entire World's 88Mb/d oil habit but that number too is shrinking as it doesn't pay for auto manufacturers to make high-mileage cars just for the US, so the entire global fleet has been using less and less for 4 years now.
Getting to our goal of 54.5 mpg over the next 10 years will cut another 53% off our current consumption. If that feat is replicated Globally, we're taking about knocking back another 15Mb/d – at least!
And it's a double-win for consumers as their cars not only consume 14% less gas but that gas itself is now less expensive. During the Bush era, for example, gas was $4.00 per gallon and cars were getting 22mpg so the average citizen driving 15,000 miles a year was using 682 gallons of gas for $2,728 in fuel costs. Now, even at the early stages of the Obama Fuel Act, at 33 mpg it's only 454 gallons of gas and, at $2.85 per gallon, it costs just $1,294 to drive for the year – a $1,434 annual savings PER CAR!
by phil - November 26th, 2014 6:14 am
Let's not worry.
We're in the midst of a fantastic bull run so why ruin it with rational thinking? Barry Ritholtz used to be a rational guy but now he shills for Bloomberg (#8 on the Forbes 400 with $35Bn) and posts things like "Current Dow rally below average in both duration and magnitude" in order to encourage the beautiful sheeple to keep BUYBUYBUYing what his boss is SELLSELLSELLing.
I've warned before about how the smart money is leaving in droves while the dumb money piles in. Back on Sept 8th (S&P 2,010), for example, I wrote "Clear Proof of Massive Market Manipulation", saying:
It's pretty similar to what happened every day last week, with a high-volume (relatively) sell-off followed by a recovery on almost no volume into the close, giving us the impression that the markets are flat.
It is unbelievable, as in – something that should not be believed by intelligent people. When you see a magician on stage sawing a woman in half or levitating – you might be amazed at what a good trick it is but you don't start believing in magic, do you? What if that magician asks you to bet your retirement on the fact that he is really levitating people or that his assistant can medically be cut into pieces and reassembled?
You wouldn't risk your money on such obvious fakery, would you? You wouldn't give your hard-earned money to a person whose job it was to deceive you, would you? THEN WHY ARE YOU PUTTING YOUR MONEY INTO THIS FARCE OF A MARKET?
by phil - November 25th, 2014 8:08 am
Another day, another new high.
Yawn. We'd be a lot more impressed if all the gains for the day didn't come pre-market – in the even thinner-traded futures, followed by a day of choppy trading on anemic volume.
Still, it is what it is and what it is is another new high and another record monthly gain and we don't know why but we made $10,000 yesterday in our Short-Term Portfolio as our bullish positions (because we thought we were too bearish last week) came through for us in spades.
$10,000 is, of course, a ridiculous amount of money to make in a single day in a $100,000 porfolio. In part, it's a reflection of the extreme volatility in the options chains, as those prices fluctuate wildly. Since we sell a lot of premium when the VIX is high, we benefit when it gets low again. Also, we're getting closer to January and we have a lot of January plays where time is on our side – it's not really an accident, this is how we set up our trades – they are simply working out better than we expected them to.
Now we're up 70% for the year again and we have to consider whether or not we should take the money and run or just let them ride. To some extent, we're protecting the much larger gains in our $500,000 Long-Term Portfolio, which is up 26% for the year ($130,000), which puts our $70,000 gain in the STP into the proper perspective.
If we cash the STP, then the LTP is unprotected (as it's all bullish) and that's not acceptable but we COULD decide to cash out our longs and that would leave us VERY BEARISH in the STP, probably over-protecting the LTP but that might be a good thing into January.
So, let's consider our STP longs and what we should do with them:
20 USO Jan $29 calls at $1.05, now $1.30 – up 23.8%
by Sabrient - November 24th, 2014 2:16 pm
Courtesy of Sabrient Systems and Gradient Analytics
With warmer weather arriving to melt the early snowfall across much of the country, investors seem to be catching a severe case of holiday fever and positioning themselves for the seasonally bullish time of the year. And to give an added boost, both Europe and Asia provided more fuel for the bull’s fire last week with stimulus announcements, particularly China’s interest rate cut. Yes, all systems are go for U.S. equities as there really is no other game in town. But nothing goes up in a straight line, not even during the holidays, so a near-term market pullback would be a healthy way to prevent a steeper correction in January.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the top-ranked sectors.
Last Friday brought a very nice opening pop to U.S. markets when China decided to cut its lending rate, making U.S. assets more attractive to global investors. Moreover, the ECB indicated its willingness to implement greater stimulus measures, including government bond purchases. Japan has slipped into recession with GDP decreasing by -1.6% in Q3 versus expectations of +2.2%. And Germany only expanded by a paltry +0.1%. The euro fell to near 2-year lows versus the U.S. dollar, while the yen fell to new 7-year lows against the dollar.
The combination of economic weakness in these major global economies and increasing U.S. oil production continues to push down the price of oil, and the resulting wealth effect of rising equity prices and low gasoline prices is expected to create a boon for retailers this holiday season. Adding to the seasonal strength for stocks is that corporations tend to do much of their buybacks this time of the year. Also, elevated short interest can provide yet another short-term catalyst.
M&A activity is another catalyst, and last week Allergan (AGN) and Actavis plc (ACT) both rose when ACT agreed to pay about $66 billion for AGN. Also, Halliburton (HAL) announced its acquisition of Baker Hughes (BHI). All four of these companies have been Sabrient favorites and…
by phil - November 24th, 2014 7:53 am
It's a short week.
That means we won't expect much volume and that's good because the volume we had on Friday was all downhill from the open. Friday's volume was almost double the other days of the week and you can see how the TradeBots took full advantage of the gapped up open – courtesy of China and Draghi's 1-2 combo stimulus.
This morning, we're drifting up again – resetting the pins for another knockdown but probably not into the end of the month (Friday), as "THEY" want to post what will end up being one of the strongest months in the market OF ALL TIME!
That's right, we're getting all-time great returns (as evidenced by our Top Trade Alerts) and the hits just keep on coming as more and more stimulus is poured on the fire. That's giving us the third highest p/e in the S&P's history, higher than the crash of 1901, higher than the crashes of 1966 or 2007 but still not quite as overpriced as 1929 and, of course, a far, far cry from the dot com crash of just 14 years ago, when YHOO was $300 a share:
Of course, if we were to throw out the ridiculous 1,000x valuations of the internet darlings of 2000 and we look at the AVERAGE 15.7x for the S&P, then we're simply 80% overvalued to the norm. That's not so terrible, is it? Oh wait, I'm sorry, that's actually pretty much the definition of terrible…
If you are paying a company 27 times what they earn, then it will take you 27 years to get your money back. That's a 4% return on your investment. With rates artificially low (now negative in some countries), 4% returns on capital seem pretty good, so money flows into the markets but, as we discussed in Member Chat this weekend, we're getting more and more divorced from the Global realities that USUALLY matter to the markets. Dangerous waters.
by SWW - November 23rd, 2014 1:52 am
Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.
Here's the Happy Thanksgiving Edition of Stock World Weekly!
Picture via Pixabay.