Sign up here for a 30-day FREE trial of our PSW Report! (NO Credit Card required.) Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

View Single Comment

  1. phil

    Here's my notes for Money Talk later:

    Show notes: 

    Segment one, economic overview. 

    This is our Big Chart, where we use our 5% Rule to determine the likely trading range for our indexes. 

    We set our Must Hold lines based on what we consider the fair value for our indexes for the year with a 10% up and down range we expect. 

    On August 13th, we wrote an analysis of the S&P 500 and, at the time (with S&P at 2,095) we decided to short back to our levels saying:

     

    So, upon further examination, there is no change to our stance of being short the markets at these levels which, on the Futures this morning, are 17,400 on the Dow (/YM), 2,095 on the S&P (/ES), 4,550 on the Nasdaq (/NQ) and 1,212.50 on the Russell (/TF) and, as usual, we look to short the laggard of the set with tight stops above.  We also took on a more aggressive SDS (ultra-short S&P) position yesterday afternoon – as we felt the run-up was nonsense anyway – this post just confirms our gut reaction.

    http://www.philstockworld.com/2015/08/13/thoughtful-thursday-contemplating-the-sp-500/

    That was, of course, followed by the August flash crash – right back to our lines, where we played long back to the top.

    On Jan 14th of this year, we wrote an analysis of the Dow, where we called a valuation bottom at 16,000 (where we are again today), saying:
     

    So, overall, our 30 Dow components look like they are only good for about 700 Dow points, which is only twice as much as they lost yesterday.  The good news is we can call a bottom here (16,000) but the bad news is we're not likely to go anywhere from here and what goes for the Dow likely goes for the other indexes as well. 

    http://www.philstockworld.com/2016/01/14/fearful-thursday-are-the-markets-doomed/

    Currently the macro environment is choppy but mostly it's a huge rotation out of energy and materials (sorry Canada) and into consumer staples and blue chips, which is fairly normal.  Oil exporters, like Canada, are being stung by the shifting dynamics but the good news is jobs are coming back and wages are rising in other sectors:

    Segment 2:  Why oil is not coming back.  Currently, according to the IEA, there is currently 1.75mb/d more oil being produced than is being demanded and OPEC supplies 1/3 of the World's oil so, if they have to cut by themselves, they would have to cut over 5% of their production to balance supply with demand.  Even if their members agreed, they would then have to not cheat for many months before it had a real effect on the markets and they'd also have to hope that the other 2/3 producers didn't begin pumping more oil to fill the gap and steal their market share. 

    The real problem for oil producers is on the demand side but demand is not very price-elastic, so low prices aren't increasing demand. 

    We have to think about the rigid and limited mind-set of the average analyst, who think that low oil prices mean a bad economy because, clearly, demand must be off.  That was a very solid assumption since the birth of the internal combustion engine but now that we have electric cars and solar and wind power – it's no longer such a direct correlation.  While we do have an oversupply of oil, to be sure – it's wrong to blame it on a slow economy.  

    One solid example of this is auto demand.  You are probably aware of the fact that auto sales hit records in 2015, with 50M cares delivered globally.  While this is somewhat a bump in demand, it's mainly about replacement cars and what kind of cars are we replacing?  The average age of the US fleet is 11.5 years and we can safely assume that most cars being replaced fall on the longer end of the scale.  Well, the average car in 2005 got just 22 miles per gallon and we're replacing them with cars that get 35 miles per gallon (new car fleet average) thanks to Obama's CAFE standard rules.  And it's not just the US – the whole World is getting more efficient:

    A car being driven 15,000 miles a year (average) that used to use 750 gallons at 20 miles per gallon is replaced by a car driven the same 15,000 miles a year that now gets 35 miles per gallon and used 428 gallons.  That's 42% LESS fuel than the previous car!  An oil barrel is 42 gallons and it's not all refined to gasoline but let's just say that each new car sold requires 10 less barrels per year than it's predecessor.  At 50M cars a year that's 500M less barrels per year required for our auto fleet – a 1.5Mb/day demand cut that becomes 3Mb/day in year 2 and 4.5Mb/day in year 3 and THAT is where our demand is going and it's NOT coming back!  

    In fact, we also are getting more efficient trucks and more efficient planes and more efficient machines in our factories and a lot of equipment is using wave, wind and solar energy for power and not using any oil at all to run.  So our economy could be off to the races and oil consumption would still be going downhill and, ironically, the better our economy does the faster the old gas-guzzling machines get replaced and the faster the demand for oil declines but that's a GOOD THING, not a reason to panic.

    Yes, there will be disruptions as we move into a post-oil economy – especially for economies that depend on oil.  Saudi Arabia alone has enough oil in the ground to supply the World for 40 years and, sadly, it's not likely they'll even use half of it before oil is a fuel of the past and THAT is why no one wants to cut production – despite this persistent glut that is without end – because they know they are playing a game of musical chairs with oil barrels and they are all going to be stuck with a worthless fuel of the past with a rapidly declining inventory value. 

    This is also bad news for companies like Exxon (XOM), Chevron (CVX) which are, unfortunately, Dow Components.  It's bad news for the energy sector and the banks that lent them money so there WILL be disruption – but it's the good and healthy kind as our society moves on from using oil and it's NOT a sign of a slowing global economy – that's why we flipped long this morning! 

    Segment 3:  Trade Ideas

    While there is likely to be more pain in the energy sector, we do like natural gas, which can be played with the UNG ETF, now at $7.42 with natural gas at $2.02.  Beginning next quarter, the US will begin exporting natural gas to other countries.  While Canada mainly will be exporting their natural gas to Asia, the US will mostly be exporting to Europe. 


    Natural gas is $5 in Europe and $8 in Asia.  Adding the North American surplus supply to the mix will lower prices globally but will raise prices at home in the US and Canada.  While the numbers may look small, these first 9 terminals add up to almost 1/3 of the current US natural gas output scheduled for export.  The assumption is that, over the next two year, more supply will come on-line to balance it out but, until then, expect some pretty big price swings. 

    That makes the natural gas ETF, UNG, our Trade of the Year and the way we are playing it is:
     

    • Buy 100 UNG Jan $5 calls for $2.65 ($26,500)
    • Sell 100 UNG Jan $10 calls for 0.65 ($6,500) 
    • Sell 50 UNG 2018 $8 puts for $2.10 ($10,500)

    That works out to a net cost of $9,500 and pays $50,000 if UNG is above $10 in January and stays above $8 into Jan 2018.  Worst case is you end up owning 5,000 shares of UNG at net $8.95 ($44,750), which is about $2.40 on /NG contracts.  Best case is you make a $40,500 profit on a $9,500 cash bet, which is 426% back on your cash!

    Another trade we really like down here is Ford (F), who have fallen back to $11.40, well below our $15 target.  The US fleet has an average age of over 11 years so we're only mid-way through the replacement cycle and our play on F would be:
     

    • Buy 100 F 2018 $9.75 calls for $2.45 ($24,500)
    • Sell 100 F 2018 $12 calls for $1.35 ($13,500)
    • Sell 50 F 2018 $9.75 puts for $1.50 ($7,500)

    The net cash outlay is $3,500 and there is an obligation to buy 5,000 shares of F at net $10.10 ($50,500) if it slips below $9.75, which is down 14% from where we are now.  If all goes well and F gets back over $12 then the short puts expire worthless and the trade returns $22,500 for a $19,000 profit, which is 542% on cash in less than 2 years. 

    For people who like to own stock, it's also possible to play F the following way:
     

    • Buy 5,000 F shares at $11.40 ($57,000)
    • Sell 50 2018 $9.75 calls for $2.50 ($12,500)
    • Sell 50 2018 $9.75 puts for $1.50 ($7,500)

    Here we're laying out $37,000 but the advantage is that we will collect a 0.60 dividend ($3,000) in each of the two years of this trade for a bonus $6,000.  Our net entry is just $7.40 per share and, if we are called away at $9.75, we profit another $2.35/share ($11,750) for a total profit of $17,750 over the trade (48%) which is very nice for people who prefer to own stocks and not gamble on options.  The nice thing about this trade, of course, is F can drop 14% and you still make your full 48% as it's a very conservative target. 

    It's also worth noting that in both of these cases, simply making a short put sale puts money in your pocket and gives you a tremendous discounted entry on the stock (or you keep the cash) – that's worth discussing as part of our "Be the House – NOT the Gambler" strategy. 

    Thanks,

    - Phil





Sign up here for a 30-day FREE trial of our PSW Report! (NO Credit Card required.)


See our disclaimer here.

 
 
 

Zero Hedge

Children Of The American Police State: Just Another Brick In The Wall

Courtesy of ZeroHedge. View original post here.

Submitted by John Whitehead via The Rurtherford Institute,

We don’t need no education

We don’t need no thought control
No dark sarcasm in the classroom
Teachers leave them kids alone…
All in all it’s just another brick in the wall
All in all you’re just another brick in the wall.
—Pink Floyd, “Another Brick in the Wall”

...

more from Tyler

ValueWalk

A 1977 Warren Buffett Interview From the WSJ Archives

By John Huber. Originally published at ValueWalk.

Someone I’m connected with on Linkedin sent me this old article from 1977 in the Wall Street Journal on Warren Buffett. I thought I’d share it here, along with a few highlights. It’s an article I haven’t seen previously. There isn’t much new here, but I thought it was quick read with a couple passages worth commenting on.

]]> Get The Full Warren Buffett Series in PDF

Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

...

more from ValueWalk

Phil's Favorites

Now Children, Please Play Nice

Courtesy of Mish.

German Chancellor Angela is telling Turks in Germany to develop a high level of loyalty. The admonishment sounds like a kindergarten teacher preaching to her kids to play nice.

In related news, Jean-Claude Juncker repeated Merkel’s ill-fated message from a year ago, welcoming all refugees. He is seriously out of touch with voter reality given events of the past year.

Please consider Merkel Tells Turks in Germany to ‘Develop a High Level of Loyalty’.

Chancellor Angela Merkel has warned Germany’s Turkish population to “develop a high level of loyalty” to their new homeland, in the latest sign of political concern about divided allegiances in th...



more from Ilene

Chart School

S&P 500 Snapshot: A Modest Gain on Weak Investor Participation

Courtesy of Doug Short's Advisor Perspectives.

The S&P 500 rallied at the open and hit its 0.49% intraday high about 30 minutes into the session. It then slowly sold off to a narrow trading range after the lunch hour and then sold off to its 0.20% closing gain in the close vicinity of its intraday low. The mixed spurt of economic news at 10 AM, strong New Home Sales and weak Richmond Fed Manufacturing didn't seem to be much of a factor in today's trade. The general view among the pundits is that the market mavens (who aren't on vacation) are awaiting the Friday flavor of Fed Chair Yellen's spee...

more from Chart School

Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Olympics a Losing Streak for Host Currency as Real Falls: Chart (Bloomberg)

Brazil’s real, the best-performing currency this year with a 24 percent gain, lost its shine during the Olympics in Rio de Janeiro.

This country went from boom to economic nightmare in 5 years (CNN Money)

In 2011, Mongolia's economy grew by 17% and attracted billions of dollars in foreign investment. Now, the country is facing a debt crisis and possible default.

...



more from Paul

Kimble Charting Solutions

Testing- Crude Oil and Natural Gas testing breakout levels

Courtesy of Chris Kimble.

Crude and Natural Gas have stunk it up for the past few years, been a great place to avoid. Could both be creating multi-year trend reversal patterns? CLICK ON CHART TO ENLARGE Crude and Natty are both correlating the past few years and both are near tests of resistance that could send a message that […]Requires Premium Membership - log in or see subscription options

To become a member of Kimble Charting Solutions, click here.

...

more from Kimble C.S.

Biotech

Epizyme - A Waiting Game

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...



more from Biotech

OpTrader

Swing trading portfolio - week of August 22nd, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Digital Currencies

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust

 

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust 

By  at Bloomberg

Excerpt:

Stefan Thomas, who introduced millions of people to bitcoin, has had a change of heart.

Blockchain, the ledger software that makes the digital currency possible...



more from Bitcoin

Mapping The Market

Illusion of Choice

From Jean-Luc:

Looks like we are down to about 10 companies for our consumer goods:

http://www.visualcapitalist.com/illusion-of-choice-consumer-brands/

Just like banks, airlines and cable companies! 

The Illusion of Choice in Consumer Brands

Explore the full-size version of the above graphic in all its glory.

If today’s infographic looks familiar, that’s because it originates from a well-circulated report that Oxfam International puts together to show consolidation i...



more from M.T.M.

All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David

Promotions

PSW is more than just stock talk!

 

We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

PhilStockWorld.com features the most important and most interesting news items from around the web, all day, every day!

News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

If you are looking for non-mainstream, provocatively-narrated news and opinion pieces which promise to make you think -- we feature Zero Hedge, ...



more from Promotions

Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>