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24,000 Thursday – Dow Continues Its Insane March Higher

24,000!  

It was only September when we broke back over 22,000 so about 10% gained in 3 months added to the 10% gained the previous 8 months puts us up 20% for the year.  On the Dow Jones Industrial Average, that means our 30 Dow stocks have gained $1.2 TRILLION in market cap to what is now just shy of $7.5 TRILLION for just 30 of the S&P 500 companies.  Keep in mind that the entire $18.5Tn United States GDP gained just 3.3% last year and that's only $610Bn so, even if the 30 Dow companies had gotten 100% of the entire country's growth – they'd still be shy $600Bn.

But, as I mentioned yesterday, it's not just the Dow 30 that are growing insanely – the entire S&P 500 is up 25% since Trump's election and you can credit the President if you want but, as I said, 3.3% GDP growth is $610Bn and our Top 500 companies (including the Dow 30) are now worth $24 TRILLION – up $5Tn in 12 months so we are, in effect, paying 8 times the actual economic growth for the stocks and that's assuming ALL of the growth goes to those 500 companies (and none for you, your family, local businesses, etc). 

Of course this is not logical but, so what?  It's a bubble – we all know it's a bubble and bubbles pop – eventually.  The problem is you don't know when they will pop but, when they do – they can be devastating.   Remember BitCoin?  It was a big fad earlier this week – running up to $11,200 yesterday afternoon and this morning it's back at $9,300 – down 17% overnight.  

You think that can't happen to your equities but they are up for the same no rational reason that BitCoin was and, even worse than BitCoin, the markets are up on very low volumes, which means there is very little support once the selling begins.  For example, in the past 5 days, less than 300M shares of the S&P ETF (SPY) were traded while in the down week of Aug 17th to the 23rd, 443M shares were traded and even that is nothing compared to last December 12-16, when 624M shares were traded.  What do you think happens when the number of sellers completely overwhelms the number of buyers?  Those of you who were around in 2008 don't need to be reminded.  

If you remember, in yesterday's PSW Report, we discussed how ridiculous it was that our Long-Term Portfolio had jumped $51,171 in less than two weeks to $1,749,543 – a 3% gain.  It's still less than two weeks but just 24 hours later and our bullish Long-Term positions finished the day yesterday at $1,796,342, up a RIDICULOUS $46,799 (2.6%) for the DAY!  The title of yesterday's Report was "Record High Wednedsay – We Will All Be Billionaires" – it looks like that may happen a lot soone than we thought at this rate!  

Keep in mind that we did not touch the positions – that's just how much they gained for the day.  When we reviewed them in our Live Trading Webinar in the afternoon, they were "only" up about $30,000 – the late-day push put the cherry on top of the gains while we watched.  This is WRONG people – you are not supposed to make money this easily because, when you do – money loses it's meaning (and value).  I know it seems odd to complain about making great profits but I'm essentially a Socialist (yes, Socialists are allowed to make money trading stocks!) and I'm VERY WORRIED about the damage this is doing to our long-term economy.  

Image result for wages over timeWhen people pay 8 times the actual economic growth for stocks (and it's more like 20x if you spread the growth out evenly) and putting a notional $5Tn into just the S&P 500 – it's not coming from the $600Bn in growth, is it?  It means other things are being valued less while the market is being valued more and that is NOT good for the actual economy or the humans that work in it.  Labor is one of those things that is poorly valued, with wages on a huge downswing over the past decade.

Fortunately for those of us in the Top 1%, wages make up little or none of our incomes.  We make money by investing in the market and that is essentially a license to print money – the money we're NOT paying to the bottom 99% in wages.  

Well, to say we're NOT paying the bottom 99% is sugar-coating things – we are in fact TAKING the money from the bottom 99%, who have lost an average of 3% of their incomes in the past decade as well as their benefits, government supports, retirement programs, health care assistance, etc.  In other words, whatever we can do to claw back the money we were forced to give you by bleeding-heart liberals and labor negotiaters (ie communists and mobsters), we are now taking back and shifting the wealth back to where we like it to be.  

We're even going to take away your free Internet access, raise your healthcare expenses, cut your Social Security and Medicare Benefits as well as dozens of other Government programes in order to give ourselves a big, fat tax cut next year.  Oh, and by the way, you're going to borrow $1.5 TRILLION to pay for it – thanks!  We deserve it, of course.  After all, I did sit here and talk about what stocks looked good and you had to go to your computer and move some of your money around to buy the stock and then we made $46,799 in a day.  I know I'm exhaused – how about you?  

Society cannot function like this – you know that it can't.  This is a path that will lead to disaster yet why should we change it when it's making us so rich?  We should change it because we are building these gains on a house of cards that, like the TV show "House of Cards", can suddenly end if just one thing goes wrong.  Or like BitCoin, which is down another $200 (2%) while I write this.  It's dragging our GreenCoins down with it (see yesterday's notes), now 0.000182 (-16%) and that makes it an even better bargain if you use them at our guaranteed 0.00044 exchange rate for Annual PSW Memberships (no other discounts apply!) in December – which is TOMORROW!  The future is now

We will be concentrating this morning on improving our hedges.  A good rule of thumb is to put 25-33% of your gains into hedges (that pays 3:1) to lock in the gains we make on the way up.  Sometimes we get lucky and get paid on the dip and then the market recovers and we don't need the cash from the hedges to fix our longs.  That's actually what's been happening for years, which is why our Short-Term Portfolio, which is used to protect our Long-Term Portfolio, has actually outgained it over the past 4 years.  Yes, we've made money on the dips – but we've never needed the money as the market always recovers.  So far.

The record-high Dow has pushed the Dow's Ultra-Short ETF (DXD) down to $9.31 and it should open even lower this morning as the Dow has a 125-point pre-market gain.  Why?  Why not?  In any case, if we want to lock in this month's $100,000 gain through the holidays, we can buy the following spread:

  • Buy 200 DXD April $8 calls for $1.30 ($26,000) 
  • Sell 200 DXD April $11 calls for 0.30 ($6,000) 
  • Sell 10 AAPL 2020 $140 puts for $10 ($10,000)

That's a net of $10,000 on the $60,000 spread so there's $50,000 upside potential (500% on cash) if DXD hits $11, which would take about a 10% drop in the Dow since it's a 2x short ETF. Since DXD is currently at $9.30, the trade is $26,000 in the money to start so, even if the Dow simply doesn't go lower – it's a great profit.  You can use any stock you REALLY want to own for the bullish offset – we certainly don't mind buying 1,000 shares of AAPL at a 20% discount but any stock you'd like to own cheaply can be used – including our Trade of the Year Ideas (see Tuesday's Report).  

Hedging can help you sleep a lot better at night and we're risking very little cash for a lot of protection.

Please, be careful out there.

 


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  1. Dooming the country like they did Kansas and using the same recipes:

    https://slate.com/business/2017/11/republicans-are-about-to-repeat-kansas-tax-cut-disaster.html

    Worst of all, just like in Kansas, these needless tax breaks for the rich could lead to excruciating budget cuts. Under Congress’s Paygo rules, the tax bill’s deficits will result in large automatic spending cuts to programs including Medicare or Social Services Block Grants, unless the Senate can get 60 votes to prevent them. Meanwhile, Republicans are now talking about adding an automatic trigger that will cut spending even further if their tax plans don’t generate heroic amounts of economic growth and revenues falls. We could very well be looking at tax cuts for the Trump family paid for by spending cuts on your grandmother’s health care.

    Of course, many Republicans would see spending cuts as a feature, not a bug, of their plan. And if slashing taxes on construction companies and midsized manufacturers doesn’t lead to booming economic growth, it may not matter, either. Republicans have repeatedly admitted that they need to pass this tax plan in order to appease their donors. And pass-through owners are especially powerful interest group whose demands can’t be ignored. After all, rich car dealers give a lot of money to political campaigns. Those guys want their tax cut, too. And so the whole country is doomed to repeat Kansas’ mistake.



  2. Phil,

    Do you like /SI down here? Are you long?


  3. Good Morning.


  4. Batman – FWIW.  We know that on December 14th, FTR's price will be set .60 lower than the close on the 13th.  You could sell the December $8 call for .60-.65.     It expires on the 15th.


  5. Now .75-.80.


  6. Just sold some at .80.


  7. Morning all!

    The webinar replay is now up!

    https://youtu.be/E9OCWMfM4b0


  8. Good morning!  

    Doom/StJ – That's why Norquist couldn't look more pleased on TV lately.  It's all part of their agenda to completely dismantle the Government by saddling it with crushing debt that forces them to cut programs down to nothing.  He's been running the GOP behind the scenes on behalf of the Top 0.1%  since Bush was elected.  

    Image result for norquist drown

    Related image

    /SI/Japar – I'm waiting for it to stop falling first.  Got burned a couple of times already so I think I'd rather wait for a cross back over $16.50 and play that long with tight stops below.

    Speaking of crosses below.  It's sell on the news day for oil and I'll like that short if they cross below $57.50 (with tight stops above).  All the good news is baked in by now and OPEC even raised their demand forecast this morning – all the guns have been fired at this point:

    FTR/Albo – Good job getting your price!  

    Dollar weak this morning – that's propping things up.

    Nasdaq 6,425 to 6,300 fall is 125 so 25-point bounce lines at 6,325 (weak) and 6,350 (strong) are what matters this morning.  Failing 6,325 is a good sign to short the other indexs (find the laggard).  


  9. Go M!!! Please no tease!!!


  10. LB had good earnings – I hope HBI does as well (IBM was our runner-up last year and did very well too):

    LOL on the instantly regrettable headline:

    Victoria's Secret parent L Brands shares slide 2% premarket after Nov. same-store sales fall 1%

    Here's the actual report:

    COLUMBUS, Ohio, Nov. 30, 2017 (GLOBE NEWSWIRE) — L Brands, Inc. (LB) reported net sales of $1.267 billion for the four weeks ended Nov. 25, 2017, an increase of 2 percent, compared to net sales of $1.246 billion for the four weeks ended Nov. 26, 2016.  Comparable sales decreased 1 percent for the four weeks ended Nov. 25, 2017.  For November, the exit of the swim and apparel categories had a negative impact of about 1 percentage point for both total company and Victoria’s Secret comparable sales. 

    The company reported net sales of $9.077 billion for the 43 weeks ended Nov. 25, 2017, a decrease of 3 percent compared to net sales of $9.331 billion for the 43 weeks ended Nov. 26, 2016.  Comparable sales decreased 6 percent for the 43 weeks ended Nov. 25, 2017.  For the 43 weeks ended Nov. 25, 2017, the exit of the swim and apparel categories had a negative impact of about 4 percentage points and 6 percentage points to total company and Victoria’s Secret comparable sales, respectively.

    See, that's what I love about my value stocks – they only have to not suck to make people realize what a bargain they are!  


  11. GNC   lots of activity in the 2020 $5 puts and calls on top of the 4700 puts in open interest


  12. ABX    17,000 Jan20 $15 calls look to bought for $2.45

    NEM     5100 Jan19 $40 calls bought for $3.80


  13. ~~CVS is said to be moving closer to a deal to buy Aetna for more than $66b in cash and stock, DJ says, citing people familiar.

    * Deal for Aetna likely valued at $200-$205/share; may be announced Monday


  14. A true capitalist – Jack Bogle of Vanguard:

    https://www.bloomberg.com/news/articles/2017-11-28/bogle-says-tax-bill-favoring-business-is-a-moral-abomination

    The tax proposals in Washington are a “moral abomination” because they favor corporations at the expense of workers, Vanguard Group founder John Bogle said.

    “Just think about this: Corporate profits after taxes last year were the highest they’ve ever been in the history of GDP going back to 1929,” said Bogle at an event Tuesday sponsored by the Council on Foreign Relations in New York. “And we are thinking of giving relief to the corporations at the highest levels ever. Individual wages are at the lowest level in about 15 years as a percent of GDP,” he said.

    “So we are helping people who are doing very well and doing nothing for the people doing very badly,” said Bogle. “One of the flaws is that corporations are putting their shareholders ahead of the people that built the corporation, the people who put their heart and soul” in the company.

    “It’s just the unfairness,” he said.

    And Josh's comments:

    http://thereformedbroker.com/2017/11/29/a-moral-abomination-saint-jack-weighs-in-on-tax-proposal/


  15. seer--I wish CVS would buy TEVA instead!


  16. Any odds on the passage of this tax bill?  Looking like it actually might happen now.


  17. Phil - Insane,  paying 8 times the actual economic growth, RIDICULOUS, It's a bubble, no rationale reason, a house of cards, this is WRONG people – you are not supposed to make money this easily,  I'm VERY WORRIED,  I know I'm exhaused – how about you? 

    …it's dragging our GreenCoins down and that makes it an even better bargain if you use them at our guaranteed 0.00044 exchange rate for Annual PSW Memberships (no other discounts apply!) in December – which is TOMORROW!  The future is now…

    I'm not exhaused but today, perhaps exhumed. Your worried, but WAIT, the future is NOW and don't forget your guaranteed exchange rate….  I might be a riddle, wrapped in a mystery, inside an enigma, but sometimes your a dichotomy wrapped in a conundrum, inside a cattywampus. 

    But deep down Brother Phil, you know I really do love you man. Keep bangin that drum and thank you for the ROFLMAO, it's the best birthday gift one can give.  All I could think of apropos was this… 

    Today, got the check, got my car fixed, it's my birthday, fixed my bumper, early IV, adult cigarette, the MRS, birthday suit, can't help it I'm this…  Enjoy and Out.


  18. Watching Carl Ichan on CNBC  He is talking about SD (Sandridge Energy)

    Any thoughts about the company?  


  19. CVS/Seer – That's a strange deal but they had to do something to fight off WBA.  It's never a good idea when a $70Bn company buys a $60Bn company for $72Bn.

    Bogle/StJ – At least I'm not the only one screaming in the wilderness.  

    Tax Bill/Rustle – I think Pence will tiebreak it.

    Happy Birthday Naybob!  Don't take any wooden nickles.  Really, I mean that, it's not currency anymore.  Beads are out too – lots of changes since you were young.   Have you seen the wheel?  cheeky

    SD/Willson – E&P play with good growth.  Theoretically they have about $9Bn worth of oil reserves so the trick is what does it cost them to push a barrel out.  Icahn's in a big fight for control with owners and there are poison pills and other nasty stuff that make this speculative.  


  20. Carl Ichan discusses SandRidge (SD) activism and cautious view on broader market on CNBC…  (53.53 -0.04)

    11/30/2017, 12:20:25 PM ET

    Sandrige (SD):

    Poison pill is most egregious thing he has seen — new low in corporate governance

    SD will be diluted by 40% if Bonanza (BCEI) deal goes through at 75% above where it was a few months ago. He want so replace the Board.

    CNBC says SD mgmt had no comment. 

    On the broader market…

    Surprised by the market's 'euphoria' despite being encouraged by President Trump's direction and the fact that earnings are going to be very good. Cites Greenspan's famous line of 'irrational exuberance', then takes it back, a 'little too much' exuberance — there are a lot of strong underpinnings but have to be cautious because of potential for a correction.

    He has been relatively inactive this year because he has had a hard time finding "no brainers" given the valuations. Not an easy market.

    He doesn't understand Bitcoin.


  21. Naybob – Happy birthday !

    You're obviously wise beyond your years. 8-)


  22. My wife's birthday is today too.  Good company all around.  Wish I was with her; she and daughter are in NC wrapping up moving and I'm with son in Phoenix.


  23. This is F'ing unreal – I've never seen anything like it:

    That's another $21,000 in 3 hours.  This is just silly at this point.  

    Oil hit $57 so we're making it both ways today.  

    Watch out for the VIX though – coming back from the dead:


  24. F'n'A.  This market is 


  25. market through the roof…

    FU FU STOCKS!!!!


  26. Naybob    Happy Birthday!

    You're obviously years beyond your wise.   :)


  27. Phil – I'd appreciate any new hedge ideas you have.   Thanks.


  28. Look at coffee


  29. Never got filled on my short and forgot about it.


  30. Phil – "Happy Birthday Naybob!  Don't take any wooden nickles.  Really, I mean that, it's not currency anymore.  Beads are out too – lots of changes since you were young.   Have you seen the wheel?  cheeky"


  31. I make my football predictions against the spread, and so far this year I am beating all so called "experts",  using a double headed wooden nickel that my good friend Cochise gave me.


  32. Albo – Naybob – Happy birthday !  You're obviously wise beyond your years. 8-)

    Stocky -  Naybob    Happy Birthday!  You're obviously years beyond your wise.   :)

    Thank you Phil and all. When I was young, just before Pilate washed his hands… as for living in the here and now,  in that respect I can offer this…

    Growing to half a century in the making, 
    are you one of the few, cognizant of the taking? 
    In the pabulum for the masses
    the media narrative of another new "paradigm" forever passes. 
    Of what worth are these paradigms? 
    Not the sum of rubbing together a new "pair of dimes".
    Yet ringing out through the generations goes the mantra of indifference, 
    "but this time, it is different." 
    Those who do not learn from history 
    are doomed to repeat its mistakes, no mystery.
    Thus, the more things change, 
    the more they stay the same. – TNN

    As for being alive and healthy, this…

    If I wake up and can take a deep breath and my elbows don't hit wood it's all good in the hood, as for one more day we can short death.Yesterday is past, tomorrow we know not, and today is the present or gift we got. – TNN

    Take a deep breath, kiss an old person, hug an animal and rather than take it for granted, appreciate what you are so fortunate to have. Feelin no pain and Out.


  33. Phil – Pretty much like this...


  34. Interesting point.  We are very oversold.  Wondering if I should uncover some of my TZA.

    https://twitter.com/ukarlewitz/status/936277321530535936


  35. Overbought rather


  36. Hedges/Albo – I'm about to get to those through adjustments to OOP and STP.  And there's the DXD above. 

    /KC/Baron – It alwasy does that, that's why we're quick to take profits.  

    More like this Naybob:

    Image result for 2001 obelisk animated gif

    Over/Palotay – We've over something – 330 gained on the Dow to top things off.


  37. Naybob – Many Happy Returns – keep those missives coming!


  38. Naybob – Happy birthday to he who never ceases to crack me up!


  39. Hedging Adjustments:

    In the STP we have:

    • 60 short SQQQ June $30s at $2, now $1.50 
    • 100 SQQQ March $21 calls at $3.20, now $2.55  

    Not too much damage on these since our 11/14 adjustment and now we can spend 0.95 to roll our 100 March $21 calls to 100 June $21 calls at $3.50 and that will cost us $9,500 and we can pay for that by selling 40 of the June $28 calls for $2.10 ($8,400).  We're capping the return on the spread to $82,000 but, since the market never goes down, I want to spend as little as possible on the hedges.  

    We also have:

    • 200 TZA April $11 calls at $2.65, now $1.90 
    • 100 short TZA April $16 calls at $1.10, now 0.66 
    • 40 short TZA Jan $20 puts at $4.05, now $8

    TZA is way down at $12 now and we can cash our April $11s and roll them to 200 July $10 ($2.80)/18 ($1) bull call spreads at $1.80 so a small credit and we'll put a stop on 50% of the short April $16s at 0.80 and the rest at $1.  The net of the spread was $25,800 and we're putting $1,000 back in pocket on the roll (it's not an emergency, get a good price!) And we can set stops on 50 of the short April $16s at 0.80 ($4,000) and $1 ($5,000) so the most we'd put in extra is $9,000 but we're getting 3 more months of time and $1 better in strike ($20,000 into the money) and we've widened the spread from $5 to $8 ($60,000 more but it would have to be a hell of a crash!).  And, of course, we'd only be putting the extra $9,000 in if things started going our way for a change.  

    In the OOP, we have:

    60 SQQQ June $20 ($4)/$28 ($2.10) bear put spreads at $1.90 ($11,400), now $3.80/1.90 so even and SQQQ is at $22, so this one is fine for now.  

    • 20 SVXY March $105 ($20)/$80 (10) bear put spreads at $10 ($20,000), now $12.25/5.25 ($7 = $14,000)
    • 15 short SVXY Dec $80 puts at $12.90 ($19,350), now 0.42 ($630) 

    So down $6,000 and up $18,720 is net up $12,720 – we finally figured out how to profit from the VIX!   We'll want to keep this going so we may as well roll the 20 March $105 puts ($12.25) to 20 June $115 ($22.50)/90 ($12.75) bear put spreads at $9.75 so we're pocketing $2.50 ($5,000) but we should also roll the 20 short March $80 puts at $5.25 ($10,100) to 15 short Feb $90 puts at $5.60 ($8,400) so we'll spend a little bit of our winnings to stay safe while we're set up to collect another $8,400 if the VIX stays low and, if not, we have $50,000 coming to us before we have to worry about the short puts.  

    In the OOP, we have a straight 80 TZA April $11/16 bull call spread we paid net $1.65 for.  It's now net $1.24 but not worth adjusting yet.  Ideally, we'll roll out to the STP's July $10/18 spread at $1.80 but the OOP doesn't have the margin of the STP, so I'd rather wait for the short Aprils to be closer to expiration.  As long as the April $11 calls are over $1.50 (now $1.92) – it's certainly not urgent. 

    All these are, of course, good as new hedges in addition to our DXD idea from the morning Report. 


  40. Phil, thanks for the review.  For a new position (or positions) would you start with the April TZA?  


  41. Taxes: What Would Jesus Do?



  42. A Headache for OPEC


  43. Winston – Bai – Thank you very much, keep laughing, it's the best medicine and it's free.


  44. Phil – Will miracles never cease? How the HELL did you get hold of my high school graduation photo????  Heavy IV time and Lights Out.


  45. M, TEVA, FTR, GNC, GE, JO — what a tease today..Dangit!


  46. Sen. John McCain’s Support Bolsters GOP Tax Hopes as Senate Vote Nears






  47. The State’s War On Student Debtors Is Heating Up



  48. Ultra Low Vix Level Not A Mystery



  49. Phil,

    I don't have an SQQQ hedge at all. What would you recommend at this point?


  50. Well it looks like 'The Stick' from bygone days is a thing again. Looking back at the last three days, instead of watching the market all day if you just bought 10 YM futures an hour before the close and sold at close you'd make some great coin.



  51. New/Taihu – I like the DXD spread above – especially if you have a nice offset you're looking at.  You could go with a half-covered version of SVXY – that one is like our old DIA Mattress plays, which are a great way to keep shorting a bull market.  

    ROFL Naybob!  

    Image result for 2001 obelisk animated gif

    Tease/Jabob – It's going to be a bumpy ride into Jan.

    Well, another crazy day in the books.   That's the end of the Month – what happens tomorrow?


  52. Phil/SVXY – Can you take a look at yur SVXY adjustment above, and see if there are any corrections?  I'm having a hard time following it, and I think part of the reason is you are saying bull call spreads, when you mean bear put spreads.  


  53. Happy Birthday Naybob and don't stray too far from the IV in case you can't crawl back!


  54. Thanks Phil, a nice offset would great!


  55. BRK/B- new high for Berkshire today- $193 at the close. Historical price to book valuation has been 1.2 to 1.6 x BV, just shy of the range top at 1.555 X BV.

    Latest reported BV is $124 with putative floor (120% of BV) now at $149.

    A few more days like this and Berkshire will be overpriced along with the rest of the market. 


  56. BRK / pstas – Trading at the same multiple as GOOG with expectations for EPS growth 50% lower. One of these 2 is mispriced! Is that the Buffett factor?


  57. The analysis from the Congress Joint Committee on Taxation – not pretty:

    https://www.jct.gov/publications.html?func=startdown&id=5045

    Over ten years, the tax bill will increase the deficit by $1 trillion rather than $1.4 trillion.

    This means that the deficit hawks no longer have any excuse for pretending that the tax cut will supercharge the economy so much it will pay for itself. JCT applied the dynamic fairy dust, but it was nowhere near enough.

    As for growth, Republicans were going around saying that all they needed was 0.4 percent higher GDP each year and everything would be great. JCT projects instead that the bill will increase GDP by a little less than 0.1 percent.

    I doubt that this means the bill is in danger of not passing. It just means the deficit hawks have to come up with a different excuse for voting for it.


  58. Sarah Sanders lives in an alternate reality:

    http://talkingpointsmemo.com/livewire/sanders-trump-muslim-hate-videos-elevate-the-conversation

    White House press secretary Sarah Huckabee Sanders on Thursday defended President Donald Trump’s retweeting of anti-Muslim propaganda from a British ultranationalist hate group, saying that Trump reposted the videos to “elevate the conversation” about terrorism and “extreme violence.”

    They are covering for a sick person!


  59. STJ/BRK- if you are referring to P/E ratio's I don't think any comparison is applicable. Two entirely different entities. I don't follow GOOG but see their price to BV is around 4.5 so quite a difference. Same thing- different enterprises entirely. GOOG source of revenue is primarily advertising where BRK is much more varied, i.e., insurance float; dividends; various industrial companies, RR, etc. 

    BV is a metric most often used by Buffet (and others) when talking about value of the firm, which is not often. There are certainly assets on the books for a fraction of actual value (i.e., Geico). So, the 1.2 to 1.6 metric is simply a historical trading range over an extended period. I have no doubt a theoretical liquidation value would be substantially greater than 1.6.


  60. Thanks for the explanation Pstas. Although I am not sure that you can use P/B to compare companies in different sectors. Look at AAPL, MSFT and others. They all have P/B ratio much higher than BRK (or even GOOG for that matter).


  61. Why is TEVA up AH?


  62. Amazon in talks with TEVA? Anyone else hear that?


  63. Happy birthday Naybob, hope someday I can buy you a drink or three… my kindred spirit.

    You are wise between your ears :) where it counts.


  64. Helping the middle class …. to get poorer:

    https://www.bloomberg.com/view/articles/2017-11-30/there-s-an-increase-hiding-in-the-republican-tax-cuts

    What does this have to do with the proposed Republican tax plan? The new tax proposal would replace the current CPI, which is based on changes in prices for urban consumers, with a new version called the chained consumer price index. Various estimates conclude this new measure would lower reported inflation, which is already lower than it actually is, by as much as 0.30 percent a year.

    But this yardstick would do something else: It would allow Congress to come up with about half of the funds needed to cover the proposed GOP tax cuts by pushing more people into higher tax brackets and potentially creating a hidden tax on everyone who will ever get Social Security in the future. But for the purposes of today's discussion, let's focus mostly on the latter.[...]

    Adopting chained CPI would be the set-up to reduce future Social Security payments without having any sort of honest debate about it.

    When both the deception and motivations are this obvious, it is incumbent upon us to call out those who seek to mislead the public. The reality is, adopting chained CPI would entail both future tax increases and lower benefits for Social Security recipients down the road in order to pay for a tax cut today.


  65. Phil. USD. Are you surprised to see it back below 93? Will you go long. ?  Strange to see SI this low


  66. Why would government care what we think? They are making bank, and most don't seem to get it or care.


  67. Good luck to all of members of Capital Trading Ideas hedge fund.  Here's hoping it performs even half as well as Phil's portfolios. 

    http://www.visualcapitalist.com/what-is-a-hedge-fund/


  68. I joined you in shorting the Russel today, I think that rubber band is stretched about as far as it can go, tax bill or no… they sure have bought the rumor. Sell the fact? I haven't talked to anyone that really believes it will pass, but even if it does we are overdue. Or we get more rip your face off rally… still I believe the race will be on in January to take those profits regardless. Maybe sooner if they manage this like they did health care. 


  69. SVXY/Palotay – Yes, I meant a bear put spread, thanks for catching that. 

    BRK/Pstas, StJ – We sold 10 of the 2019 $125 puts fro $4.75 back in Feb.  Quite the rally since.  Can't love it here though I'd rather buy them than SPY.  What's not priced into BRK is Buffett's (87) eventual demise.  I'm sure it will clip 10-20% as people worry about their future but still a long-term hold either way.

    Tax Bill/StJ – I like that they have gotten everyone to say "increase the deficit by $1Tn" which is very misleading because the deficit is projected to get $1Tn/yr worse between now and 2026 and this ADDS $1Tn to that.  See the assumption is no one was going to fix the out of control deficit by sensibly raising taxes so, instead, they'll make it a bit worse.  

    Total deficits and surpluses

    In CBO’s baseline, deficits rise because growth in revenues over the next 10 years is outpaced by increases in spending—particularly for Social Security, Medicare, and interest payments on the federal debt. The deficit remains at roughly 2.8 percent of GDP through 2018 but climbs to 4.9 percent of GDP by 2026. The cumulative deficit projected for the 2017–2026 period is $9.3 trillion.

    • Once interest rates returned to more typical, higher levels, federal spending on interest payments would increase substantially.
    • Because federal borrowing reduces national saving over time, the nation’s capital stock ultimately would be smaller, and productivity and total wages would be lower, than would be the case with lower debt.
    • Lawmakers would have less flexibility to use tax and spending policies to respond to unexpected challenges.
    • The probability of a fiscal crisis in the United States would increase. Specifically, the risk would rise of investors’ becoming unwilling to finance government borrowing unless they were compensated with significantly higher interest rates. If that occurred, interest rates on federal debt would rise suddenly and sharply relative to rates of return on other assets.

    Beyond the 10-year period, if current laws remained in place, the pressures that contributed to rising deficits during the baseline period would build, and the consequences would be even more severe. Under those circumstances, debt held by the public three decades from now would constitute 155 percent of GDP, a far larger percentage than any recorded in the nation’s history.

    You would think the Democrats would be buying commercial time and just reading that to the public over and over again and that's why we're f'd – there's no one in this country really willing to fix anything (other than Bernie) or willing to tell people what needs to be done for fear of losing voters or donors – so we're going to lose the country instead…

    Top companies/StJ- So the most valuable company would be the least valuable company 50 years later and that means $1Tn will be the bottom in 50 years.  We can assume BRK would still be on the list, so at least a double for them and MSFT will still likely be near the top at what's probably going to be $5Tn which means any company you pick that will make the top 10 is likely to be a 5-10 bagger in 50 years.  

    Since we can make great money on any stock that simply doesn't go down – It's pretty good proof of concept for playing the LTP for 50 years.  If we had that attitude in 1967, we'd simply have IBM, T, I don't think I'd have kept Kodak, GM, XOM over Texaco and Gulf, SHLD, GE, not Polaroid either.  So, for the next 50 years, I like AAPL, GOOGL, MSFT, BRKB, JNJ and JPM which are now $3.4Tn and figure they average $2.5Tn in 50 years for $15Tn is up $12.5Tn (500%) averages 10% a year – that's all we need to base an LTP on.

    Then all we do is sell puts and calls each year and we can boost our returns to 20% and, if we start with $500,000, which is $1M in buying power and allocate 1/2 to those trades, we'll have $4.5Bn in 2067.  

    Plus dividends!  Who says investing is hard?  

    Teva Pharmaceutical Gains New Confidence from Miuzho Amid Restructuring Turnover at Headquarters

    Taxes/StJ – The insidious thing about their plan is they are screwing the poor and middle class, but only really after 2020 so, if a Democrat gets elected, they'll be able to blame them for the tax increases.  If they are still in power – they will say they need more tax cuts and they couldn't cut as much as they wanted to last time because the Democrats objected and that's why their plan isn't working.  Either way, they can spin it to win.  

    Dollar/Latch – I'm surprised how fast we pulled back but I'm hoping we test 92.50 again, which is where we went long on Monday.  I wish I saw Silver hitting $16.35 but already back near $16.50, which I still like for a long entry.  

    Hedge Fund/Latch – We're going to be starting very cautiously in Dec.  Want to see if we get a good sell-off in Jan.

    Russell/Mkucs – We might not get a proper sell-off until Jan – or maybe never.  I'm in because I would just hate to miss a sell-off more than I'll hate to be wrong and lose money on the hedge.  I'm getting a vibe the tax plan will pass but we thought they were going to ram health care through and that failed big-time – so there's still hope.  


  70. 2 indisputable facts about the Senate tax bill




  71. Accusers face risks in breaking nondisclosure agreements



  72. Trump Pressed Top Republicans to End Senate Russia Inquiry






  73. GOP pressing plan to avert government shutdown on Dec. 8



  74. 2017 Holiday Movie Guide – WSJ.com



  75. Factbox: Saudi Arabia’s privatization plans


  76. Our cities need fewer cars, not cleaner cars




  77. The real reason Robert Mueller is suddenly letting Paul Manafort go free on bail


  78. Good morning!  

    Getting a bit of a pullback but nothing exciting so far.  

    Oil back near $58 will hopefully give us another short entry.   A lot of people are betting we break over $60 and rocket back to the good old days of $100 oil but, as long as we're below $60 – it's still a better short than long at each 0.50 line (with tight stops above).

    Europe is down 1%, so we have a ways to go to catch up.  

    Remember, failing 6,325 (weak bounce) on /NQ was bad – we said that yesterday.  

    Finally made a profit on this thing!  

    Sopped out on the bounce back over 1,535.

    So, who is the laggard (fresh horse)?  Dow 24,200 (/YM) is the best short at the moment and we tag that with 2,640 on /ES, 6,325 on /NQ and 1,535 on /TF and, if those 3 are below, then the Dow remains a good short and, if they go over (or the Dow does, of course) then it should be a quick stop out.

    How did we miss going long on /RB into the weekend yesterday?

    Honey badger done playing dead.

    What, us worry?

    I'm liking this up channel in /KC

    Next time we go over $130 could get exciting (/KCH8)

    Senate Bill Hits Obstacle Over Deficit Concern. ‘It doesn’t look like the trigger’s going to work,’ Sen. John Cornyn says.

    Senate tax bill hits roadblock, vote pushed back to Friday at the earliest

    • The Senate is delaying any votes its the Republican tax plan at least until Friday morning after running into significant hurdles just as the legislation seemed on the verge of passing.
    • The first impediment came after a critical report from the Joint Committee on Taxation said the Senate plan would fail to meet the goal of paying for itself through stronger economic growth.
    • Then the Senate parliamentarian ruled that a fiscal "trigger"' is not allowed under Senate rules; the trigger would increase taxes in future years if the deficit grows more than expected, which was a key to corralling the votes of at least three wavering GOP senators.
    • Some senators now are talking about paring back corporate tax cuts, starting the rate at 20% and rising in stair-step increments in later years; such a move could shrink the size of the tax cut by $350B over a decade, making it ~75% of its previous size.

     

    • What seemed like a sure thing yesterday isn't so this morning. Three GOP senators (and naturally the entire Democratic caucus) are gumming up passage of the tax bill.
    • At issue are exploding deficits, who actually benefits, and more likely than not, personal grudges against the president.
    • S&P 500 futures are down 0.45%, and Nasdaq 0.7%.
    • Premarket: Bank of America (NYSE:BAC-1.2%, Citigroup (NYSE:C-1.25%, JPMorgan (NYSE:JPM-1%, Wells Fargo (NYSE:WFC-1%, Goldman Sachs (NYSE:GS-1.1%, Morgan Stanley -0.9%XLF -0.6%
    • U.S. stock index futures are pulling back from the Wall Street highs seen in the previous session as the Senate tax bill ran into significant hurdles. Dow -0.3%; S&P 500 -0.4%; Nasdaq -0.7%.
    • With concerns over the deficit, it's now possible that deep tax cuts might have to be moderated, future tax increases might be built in and that some conservatives might seek to attach spending cuts.
    • A Senate vote has now been delayed, and it's not clear if it will even take place today.
    • Oil is up 0.9% at $57.90/bbl, gold is 0.1% higher at $1278/ounce and the 10-year Treasury yield is down 3 bps to 2.38%.
    • November was best month for eurozone factories in over 17 years.
    • IHS Markit's final manufacturing PMI for the bloc climbed to 60.1 last month from October’s 58.5.
    • Suggesting the expansion will continue through December, new orders soared, backlogs surged and headcount increased at the fastest rate since the survey began in 1997.
    • LYFT saw an explosion of sales growth in the first half of the year, according to The Information.
    • Revenue is estimated to have tripled from the year-ago period to $483M, while Lyft's net loss fell 27% to $206M.
    • The company's strong revenue gains come at a time when larger rival UBER struggles with a series of scandals and setbacks.
    • The German Federal Office for Economic Affairs and Export Controls removes Tesla (NASDAQ:TSLA) from the list of cars that qualify for subsidies due to the high cost of its models.
    • The agency says extra features on the Model S push it over the €60K limit.
    • German automakers BMW and Audi are looking to challenge Tesla with their EV programs at similar price points.
    • Shares of Tesla are down 1.09% to $305.49 in premarket action.
    • General Motors (GM -1.1%) releases slides ahead of its investor day event.
    • Front and center, GM makes it clear that it's committed to a "zero emissions" future in a major electrification push. The automaker plans to be selling two crossover EVs by 2020.
    • The company expects a commercial launch of autonomous vehicles at scale in urban environments in 2019 and long-term potential in the trillions from AVs. GM is a big believer that autonomous driving will save lives and money over time. There's a goal to see first mover escape velocity with its AV strategy.
    • GM also sets high goals for Maven as a leader in the ride sharing business.
    • GM Investor Day slides (81 pages)
    • Toyota (TM) says it plans to build a renewable fuel-cell plant and hydrogen fueling station to support operations at its Long Beach port.
    • The automotive giant says the facility will use bio-waste sourced from California agricultural waste to generate water, electricity and hydrogen. It will be the the first Toyota facility in North America to use 100% renewable power.
    • When the facility comes online in 2020, Toyota expects it to generate 2.35 megawatts of electricity and 1.2 tons of hydrogen a day.
    • "Going forward, Toyota remains committed to supporting the development of a consumer- facing hydrogen infrastructure to realize the potential of fuel cell vehicles."
    • Source: Toyota press release

    • A federal judge today seemed skeptical of Exxon Mobil’s (NYSE:XOM) claim that an investigation by New York Attorney General Schneiderman is flawed because its focus shifted from a suspected climate change cover-up to whether investors were misled.
    • An XOM lawyer argued that "shifting theory of liability" was evidence the investigation is a politically motivated effort to punish the company for not adopting the climate change "alarmism" shared by Schneiderman and other Democrats, to which the judge replied, “Investigations shift all the time… If that gives rise to federal court proceedings, then the world of federal investigations will come to a halt.”
    • The judge ended the hearing without ruling but suggested the strength of Schneiderman’s findings about XOM would determine the success or failure of the investigation, rather than a courtroom battle before it is complete: "If they’re wrong, they don’t have a case. If they’re right, you should be held to account."
    • Scientists say a volcano in Bali has the potential to seriously affect natural gas prices if it blows, as research shows tropical eruptions typically bring on mild winters in the U.S.
    • An eruption of Mount Agung, which has been rumbling since September and on Monday sent ash soaring 4.7 miles above sea level, could cool the earth for years, which traders say could usher in freezing temperatures across the U.S. and higher gas prices.
    • But research shows Northern Hemisphere winters tend to be warmer than usual following large tropical eruptions; an eruption also could trigger a Pacific Ocean El Nino by cooling tropical Africa, which could set the stage for milder conditions across much of the U.S.
    • “If Agung does put a large enough mass of sulfur dioxide into the stratosphere, the global average temperature would be reduced for several years,” says Michael Mills of the National Center for Atmospheric Research, but "the regional and seasonal climate impacts would be more complex."
    • The October Prices Index for agricultural production, down 5.2% from the Sept. 2017 index but up 8.3% from Oct. 2016.
    • The crop production index -8.1% M/M to 82.2 and livestock index -0.7% to 94.1.
    • Food grains +1.9% M/M and +17.0% Y/Y.
    • Feed grains -1.4% M/M and -0.7% Y/Y.
    • Oilseeds -2.1% M/M and -0.9% Y/Y.
    • Fruits and nuts -2.8% M/M and -2.2% Y/Y.
    • Other crop -1.9% M/M and +4.9% Y/Y.

     

     

     

     

    • Copyright infringement? Disney (NYSE:DIS) has filed a lawsuit against Redbox in an attempt to stop the DVD rental company from selling digital copies of its movies.
    • Redbox is offering $7.99 to $14.99 per title because it doesn't have a distribution arrangement with the studio and buys retail copies of its discs to rent to customers that come with download codes.
    • News broke yesterday that Apple (NASDAQ:AAPL) filed suit against Qualcomm (NASDAQ:QCOM) for patent infringement involving the Snapdragon chips. Qualcomm filed a suit of its own the same day.
    • Qualcomm accuses Apple of violating 16 of its patents including power-saving tech and camera autofocus in devices from the iPhone 7 to the new premium iPhone X. 
    • Qualcomm also filed its complaint with the U.S International Trade Commission and wants to ban import and sales of certain iPhones – namely, those with Intel chips.
    • Read Qualcomm’s California court filing at RPX Insight.  
    • In better news for Apple, Piper Jaffray analyst Michael Olson says the iPhone X will lead to a longer “super cycle” and the company “may be increasingly well positioned to experience a strong multi-year iPhone trajectory.” 
    • Olson expects Apple to release three OLED iPhones next year and calls the devices the iPhone X’s “offspring.” 
    • Olson reiterates his Overweight rating on Apple and $200 price target. 
    • Apple shares are up 1.4%
    • Qualcomm shares are up 0.3%.  
    • Previously: Apple countersues Qualcomm for patent infringement (Nov. 29)