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Just Another Manic Monday – Tax Free Edition

The tax bill passed!  

That's right, the GOP Senate passed the Trump Tax Plan when all the GOP Senators voted for it – what a surprise.  In other news, water is wet.  Still, the markets are acting like it's a surprise with the Dow up 227 points in pre-market trading and that's up about 500 points from Friday's lows – in that brief moment we though Trump might be arrested before they pass the tax bill.  Now it looks like he won't be arrested until after the bill is signed – so all is well, I suppose.

Dow 24,500 is up is up 4,500 (22.5%) from the start of the year and up 6,500 (36%) since the election.  That's nothing compared to BitCoin (see this weekend's notes on that subject) which is up 11,000%.  Still, 36% is a lot and the Global Markets have driven higher as well, as one might expect but, as we were discussing in our series of market value discussions last week – the reaction is now far exceeding the reality.  

world market capFor example, in November of 2016, the total market capitalization of Global Markets was $65Tn.  That's about the same as our Global GDP ($80Tn), so not unreasonable.  Unfortunately, now it's not reasonable at all as we're about to cross (or may cross this morning) $100Tn.  That's up $35Tn (53.8%) in 12 months.  

Global GDP grew 3.4% in 2017 so let's say that's a gain of $3Tn .  The question then is – where did the other $35Tn of market growth come from?  The answer is, of course – Fantasyland – this is completely ridiculous.  You may think "tax cuts" are a good explanation but US Corporations paid just $411Bn in taxes in 2016 even is you took 100% of those taxes and drove them back into profits and mulitplied it by the S&P's insane 27x earnings multiple – that would only account for $11Tn and we'd still be $21Tn short, or about 20% of the total market cap.  

Image result for buffet tax sellingSo that, folks, is the correction we are expecting when, at some point, investors come to their senses.  Warren Buffett and I think that this late-year surge is being caused, not by rising values, but by a lack of sellers – as no one wants to take a profit in 2017 and pay 2017 tax rates when they can save a fortune by waiting to cash in under the new tax plan

That lack of sellers, plus a frenzy of late buyers chasing the market, is most likely what's causing this late-year rally.  While it's possible we may continue to head higher, a monkey with a dart-board can make money in this runaway market so, if it's going to continue, we're not going to miss much by cashing in ahead of the holidays – while suckers are still lining up to buy our shares at record highs.  Who knows if they'll still be there in January?

Goldman Sachs international analyst Christian Mueller-Glissmann also agrees with me, saying: "The bull market in everything" is about to come to an end. "the average valuation percentile across equities, bonds and credit is the highest since 1900," and it will produce two likely medium-term scenarios: "Slow pain" or "fast pain" as a correction creates a bear market.

"The current valuation percentile is most comparable to the late 20s, which ended in the ‘Great Depression’"

Image result for stock market sellSo, if I had an IRA/401K/529 with no tax issues in selling, I'd sell now.   For our taxable gains in our 4 Member Portfolios, we're already we'll-hedged but let's consider getting super-duper hedged (it's a technical term) over the next two weeks as well as cashing out those short puts on stock we don't really, Really, REALLY want to own if the market drops 20%.

That goes for our Top Trades as well – that's how worried I am about this market as we hit the $100Tn mark with a 54% Global Gain in 12 months.  Keep in mind, the US is getting tax breaks but we're "only" up 36% so the rest of the World is outperforming us by a mile – and they are payinig their taxes!  

Gee, maybe not paying taxes is costing us a substantial amount of growth?  

Meanwhile, if you are looking to hold on to your bullish positions until the last possible moment, I refer you to Mark Kolakowsi's excellent summary of "12 Forces that May Kill Stocks Despite Tax Reform Uphoria" : 

1. Vicious Feedback Loops

Computerized quant funds created a panic in 2007, when funds pursuing similar strategies sold heavily, sending prices spiraling swiftly downward, and prompting yet more waves of selling in a vicious feedback loop. Accelerated by high-frequency trading (HFT), these deadly downdrafts can crush the markets in minutes. (For more, see also: Could Algo Trading Cause a Bigger Crash Than 1987?)

2. Cyber Insecurity

As the financial markets are increasingly computerized and exposed to the internet, the odds of a catastrophic event stemming from hackers or systemic failures multiply. The parade of data breaches at major corporations and governments are evidence of the growing dangers. (For more, see also: Cyber Wars: How The U.S. Stock Market Could Get Hacked.)

3. Bubbles in China

Chinese banks may be sitting on a mountain of bad loans, perhaps 20% of their total portfolios. Debt has ballooned to about 215% of GDP, the real estate market shows signs of speculative excess, and an increasing number of zombie companies are being kept afloat. When these bubbles burst, the impact will be felt worldwide.

4. Stock Exchange Crunch Time

U.S. stocks have 12 official public trading venues, which provide backup for each other. However, during the final 15 minutes of the day stocks trade only on their home-listing exchanges. Here closing prices are determined, vital for valuing a host of positions, accounts and portfolios. Current backup procedures in case of technical failure or cyberattack may not be robust enough, especially if order flow is particularly heavy.

5. Crowded Indexes

The rush to invest in index funds and ETFs? have created a very crowded set of investments, with valuations of their components being pumped up ahead of fundamentals. When investors sell en masse during a market decline, a crash of epic proportions may ensue.

6. Crypto Crash

Cryptocurrencies? such as bitcoin have a relatively small combined value right now, and their pricing on unregulated exchanges limits their appeal to cautious mainstream investors. However, they are likely to enter the mainstream if derivative products based on them are approved, such as options, futures and ETFs. This would magnify the dangers of a crash in their already volatile values. If digital currencies ever get accepted as loan collateral, a replay of the subprime meltdown may be on the horizon. (For more, see also: Nasdaq Will Add Bitcoin Futures in 2018.)

7. Overdue Recession

The current economic cycle inevitably will turn from expansion to recession. The only question is when. Meanwhile, quantitative easing by central banks has sent investors headlong into riskier assets in desperate search for ever-diminishing yields. When the recession finally comes, perhaps the result of excessive tightening by the Federal Reserve, a bear market should follow, and these risky investments will be hit especially hard. (For more, see also: Get Ready For The Coming Bear Market and Recession.)

8. Financial Domino Effects

The financial crisis of 2008 was a lesson in how a supposedly limited problem, such as mortgage defaults in the U.S., could trigger a worldwide financial and economic near-collapse. Lehman Brothers offered a corollary lesson about the domino effect from counterparty risk. The next eurozone debt crisis may be a catalyst for a global crisis, sped along by the post-Brexit? cracks in EU solidarity.

9. Japanese Debt Bomb

Japan leads all industrialized nations with debt at 240% of GDP. The aging population will send medical and nursing costs up rapidly, increasing the debt load, eventually sparking inflation, and thus likely to send Japan into financial crisis.

10. New Oil Glut

If an oil glut sends prices below $30 per barrel, oil consumers would cheer. However, marginal U.S. producers with low credit ratings would be unable to pay their bills, perhaps setting off a wider crisis.

11. Repo Choke Point

By mid-2018, only Bank of New York Mellon Corp. (BK

 

) will provide clearing and settlement services for the $2 trillion U.S. market for repurchase agreements (repos). JPMorgan Chase & Co. (JPM), the only other player, is exiting due to regulatory capital requirements that it finds too onerous. A breakdown at BNY Mellon could cripple the $14.3 trillion market for U.S. Treasury securities, and reduce liquidity for traders in stocks, corporate bonds, and currencies.

 

12. Crisis of Confidence

Once a crisis of investor confidence sets in, frothy asset prices will plummet, and leveraged trades will unwind rapidly. Such a crisis can be sparked by political, as well as economic, events. In the bear market of 1973 – 74, the S&P 500 dropped 45%, exacerbated, if not caused, by a perfect storm of events, as noted by longtime Wall Street Journal columnist Jason Zweig: war in the Middle East, a quadrupling of oil prices engineered by OPEC, the Watergate scandal that led to the resignation of President Nixon, and a spike in inflation, itself partly due to OPEC.

Bloomberg also has a list of 10 things to watch.  That's 22 things that could tank the market in a year when we've made fantastic returns and are heading into the holidays – why on Earth wouldn't I want to just cash out and take the rest of December off?

Please, whatever you decide – Be careful out there!  

 


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  1. Good Morning—what did I miss :-)



  2. These guys were in such a rush to pass anything that they didn't look at all the possible consequences:

    http://www.motherjones.com/kevin-drum/2017/12/rd-tax-credit-falls-victim-to-republican-vote-payoff-orama/

    Robert Murray, the company’s chief executive officer, said the Senate tax plan would raise his tax bill by $60 million. “What the Senate did, in their befuddled mess, is drove me out of business and then bragged about the fact that they got some tax reform passed,” Mr. Murray said Sunday. “This is not job creation. This is not stimulating income. This is driving a whole sector of our community into nonexistence.”

    And to hear Susan Collins ramble the talking points about growth paying for the tax cuts when presented with analysis even from conservative think-tanks is disheartening. Didn't these people see what happened in Kansas? 


  3. And these evil idiots are passing tax cuts for corporations in the middle of a profit boom and when the average family is not seeing any benefits. And then when we are hit by a recession, they will cut spending because we live in a bizarro world where we do the opposite of what makes sense:

    http://www.motherjones.com/kevin-drum/2017/12/the-history-of-us-corporate-taxes-in-four-colorful-charts/

    So there you have it. Over the past four decades, corporate profits have doubled; tax rates have been cut in half; dividend payouts have gone up 400 percent; and the household income of the middle class has…

    Gone up a whopping 20 percent.

    But don’t worry. This time trickle-down economics will work. Believe me.


  4. And Teddy Roosevelt is spinning in his grave:

    https://www.nytimes.com/2017/12/04/us/trump-bears-ears.html

    The move is particularly significant because it is expected to trigger a legal battle that could alter the course of American land conservation, possibly opening millions of protected public acres to oil and gas extraction, mining, logging and other commercial activities.

    What are they going to do there – build Trump towers, dig for coal, frack for oil. Not happy to only rape the middle class, they also look to rape the environment!


  5. Phil / GNC – Thoughts?

    GNC Pulls Borrowing Plans, Hires Goldman Sachs To Evaluate Alternatives — MarketWatch

    The company is sticking with its full-year free cash flow target of $190 million to $210 million and has $40.1 million in cash and cash equivalents, as well as $246.1 million undrawn under a revolving credit facility


  6. Good Morning.


  7. Just wow:

    http://talkingpointsmemo.com/livewire/grassley-tax-bill-savers-over-spenders

    The House bill repeals the Estate Tax, while the Senate’s version doubles the exemption for the tax for individuals. Grassley argued in an interview with the Des Moines Register that repealing the tax is beneficial even if it only affects relatively few Americans.

    “I think not having the estate tax recognizes the people that are investing,” he told the Des Moines Register, “as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.”

    That means that 99% of the population are just drunkard womanizers!


  8. Good morning! 

    Have to run to the Nasdaq for interview around 10:30.  Back a bit after 11 as I have a hotel.  

    Think seriously about what I'm saying above – this is just getting stupid at this point and you don't NEED to participate.  In fact, remind me later to come up with a few upside hedges – so we won't feel like we're missing out if stocks do keep going higher while we cash out our toppy positions (not all, just the toppy ones).

    Again, if you are IRA/401K – it's an easy decision – GET OUT!!!  If, on the other hand, you have tax consequences – check with your accountant about how much difference it would make and decide how much that matters.  If it does, then lean more towards hedging for now.

    See you later! 


  9. GNC – Big time falling knife.


  10. M -Up big.  Covered some.


  11. albo--i think it is trying to catch up to FTR as worst FU stock of 2017?


  12. Jabob – Could well be.  But I gritted my teeth and sold a few more puts.


  13. Wow look at M/…. please no tease!


  14. FTR up 4% today…


  15. Anyone looking at the TICKS?


  16. I guess some are starting to actually read the tax bill… 


  17. FTR some selling put I bought some more Jan 8/10 put for cover!!!


  18. After 2.5 Billion Barrels, Eagle Ford Has More Oil Coming


  19. Facebook Debuts New Messenger App That’s Only For Kids



  20. In mortgage fraud frenzy, China’s banks face a hidden danger




  21. Phil/SVXY

    SVXY at $115!!!..I think you had a trade setup last week on this. I missed it.

    Regards


  22. Phil,

    Would you close the butterfly positions as well as others? I only have TGT (up 10K) and GIS (up 1K). 

    If you liquidate all positions would you still keep the hedges, or st least some , as bets on a correction?


  23. That was a fun interview.

    I was explaining why I think the market is unsustainably overvalued and I said "It's like that horror film called "Get Out" where just the one time, early in the movie a guy goes to the main character "Get Out!" – that was his only warning."  You guys have all been warned too.  I have a really bad feeling about this market now. 

    Savi you missed nothing, same old up and up nonsense so far. 

    /NQ back to 6,300 and back to testing the weak bounce at 6,325 from last week.  If it starts spending more time below it than above it….  Get Out!!!!  6,350 is strong bounce.

    It's 55 degrees in NYC – I had a great walk back from Times Square (20 blocks) but it's sick that it's this warm 3 weeks before Christmas.

    Big Chart – 6,337 is the 50 dma, right between the strong and weak bounce so quite the area of contention for the Nasdaq.

    Corporate Profits/StJ – I have a huge issue with how they measure Corporate Profits since it's net of losses from other companies, which includes a ton of BS.  If I were home today I would have done a spreadsheet analyzing the Dow's profts, taxes, etc.  – hopefully I'll be in the mood tomorrow.

    GNC/Batman – I don't know.  They have a new CEO and now he's decided to wait on new financing until Goldman can do a full review of their best plan moving forward – how is that a bad thing?   

    GNC also announced that it has retained Goldman Sachs and Co. LLC as its strategic advisor to help the Board evaluate alternatives to optimize GNC's capital structure and other alternatives to enhance shareholder value.  GNC noted that it maintains a strong liquidity position, including $40.1 million in cash and cash equivalents and $246.1 millionundrawn under its Revolving Credit Facility as of September 30, 2017.  In addition, the Company reiterated its full year free cash flow target of $190 million to $210 million and reconfirmed its plans to repay the remainder of its revolver in the fourth quarter.

    And you can buy the whole company for $366M – yes please!  

    LB still off to the races:


  24. Phil,

    I take your warnings very seriously, having stayed the course and regretted it when you said your gut feeling was to liquidate, even though you didn’t for instructional purposes. Are there any exceptions like LB? Do you have any intention to make a short list of keepers?? 


  25. Phil/ Hedges

    I am wondering what to take off?  Or put on?

    Thanks


  26. Sold 1/3 of KODK put on Friday – up 9%.


  27. I'm trying to take some profits so I can afford to roll the short calls getting away from me.  I cannot believe retail XRT is up 10% in two weeks without a pullback,except Friday which I took off.


  28. Hi Phil would like to see what you are shooting down with all the get out cry????


  29. I  mean really, BBBY and DIN up 8%.  How does that compute unless someone really believes that giving money to the rich is somehow going to cause them to buy a lot more towels and pancakes.  I don't know about the rest of the world, but I, at 57, am not buying more towels, I am using the millions I have accumulated over the years, and if I want pancakes, I make them at home rather than spend $50 for breakfast for my family of 4.


  30. Baron good point there


  31. Baron – yep, Phil has a number of posts going back year about how 1,000,000 with an extra $1,000 effects the economy versus 10 people with $100M extra.


  32. Albo – You are doing well picking from the dumpsters! 


  33. SVXY/Pat – It was:

    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.  

    Butterfly/Kevin – There's no real need to shut down Butteflies but I am considering doing all new portfolios from scratch so new people can go through the whole process.  People following the old trades should know what to do by now and, if not, they can certainly ask.

    What does everyone think – all new portfolios for 2018?

    If we do liquidate, I think I'd put on a couple of shorts and longs like short TSLA, long HBI – some things I'm pretty confident in regardless of market direction in Q1.

    Exeptions/Kevin – Sure, there will be some but, on the whole, I'd kind of like to start again with $100K in STP, OOP and Butterfly and $500K in LTP and get back to a teaching/building cycle.  So, while I might make a buy/keep list – I might not act on it until Jan 2nd, when we begin deciding from scratch how to turn $800,000 into $1.2M over the next 12 months using our 3 core strategies. 

    I think, at this point, I've proven my point that the LTP/STP strategy pays off dramatically over time….

    Hedges/Lala – Sadly, I am screen impaired today in NYC so I'm going to start doing the main work tomorrow and it's going to take the next couple of weeks to decide exactly what's going on but, like I said – I'd rather just cash it all in (ignoring tax issues) and start from scratch on Jan 2nd.  It doesn't mean you have to – I'll always be here to answer questions on whatever trades you do have. 

    Oh, except Mondays.  March 29th is my 55th birthday and the start of my retirement so Monday, March 26th, will be my last working Monday.  In 5 more years I will also retire from Fridays and, at 65, I will retire from Wednesdays. It doesn't mean I won't be around – I will be sometimes – it just means don't plan on it!  We are going to learn to trade 4 days a week and that may mean more weekend hedges but I don't think we'll miss 5 days and, if we can pull it off – you'll get 33% more weekend for the rest of your life!  

    In my case, it will give me more weekday time to spend on PSW Investments and our Hedge Fund (Capital Ideas) so you may not see it as retiring but I don't fish or golf or play bridge (poker yes) – so, for me, this is what I do for fun when I retire!  

    Of course I love the markets too and, if something interesting is happening – even if I'm away, I will be able to check in and chat.  There's no better place to be during market hours than right here, in our chat room – so, even as a  semi-retired investor – this is where I'll be checking in!  

    Canada/BDC – It's an odd coincidence because a lot them have been using BitCoins to store their money and transfer funds to suppliers and, by accident, they got rich simply because they happened to be holding BitCoins when they went crazy.  Then they told 2 friends and so on….

    Shooting down/Yodi – As above, I'm for just getting all out for the simplicity of it.  The real question is what will I buy back in Jan? 

    Computing/Baron – Things are just nuts.  That's why I want to cash out.  What if people realize these prices make now sense – who are you going to be able to sell to then?


  34.  VZ/Phil, Yodi

    And good morning!

    Thank you for your thoughts on VZ…up again?

    Well, I will prob roll out the short calls. Don’t want to BUY calls to covert the shorts to a spread at this price as it’s too much, too fast, even if VZ earnings rise 50%.

    Crazy!

    And Phil, thanks for the heads up on the overall market….I am hedged with short calls and DOUBLE SHORTS on GOOGL, FB ( with stops, of course as one can still get singed with this market continuing up another 20% before awakening occurs)


  35. Phil, I'd be all for starting the portfolios over.


  36. Me, too!


  37. Yes to all new portfolios in 2018!!!!!


  38. new portfolios!! way to go!

    regards


  39. DF – previously opened a long combo (short march 10 puts, long march 12 calls) for net credit of .40. Now looking to cover half with Jan 12 calls for .45.


  40. Yes, from me also re: new portfolios…Please start over in January!!


  41. VZ/Maya – Just blasting off, isn't it?  Not much to do in this market but wait and see.  We're in a proper bubble and it's pushing all sorts of things higher than they should be.

    Cool, lots of votes for new portfolios – that will make my life easier as we'll just CASH ALL and be done with it.


  42. New portfolios again!?  I'm happy I've been here long enough to be able to say that! Looking forward to it.


  43. I have mixed feelings about the new portfolio idea.  I'd prefer a house cleaning but understand the logic.  Many of us hold the FU stocks so I think it would be important to include them in the new portfolio so we can hear your thoughts on those businesses on a regular basis.


  44. You mean dump everything?  Will kind of trash the prices won't it? Especially for shorted positions currently way under water but that will not be at expiration.


  45. Phil,

    I’m all for new portfolios. 


  46. options_alpha 

     

    Here!  Here !


  47. New portfolios for me


  48. FCX/Phil – in kid's accounts have some FCX which is at breakeven right now. Considering selling half (the LT higher cost shares) … but taxwise is not going to be significant so really wondering, do I bother? Want to keep the shares? Add? or Kill the whole thing? No dividend these days..  Do I recall you saying you like them again?


  49. Phil/ new portfolios

    I am in!

    However, to be fair and to follow the big time losers like FTR/M/TEVA and others, we should transfer these over to the new portfolios. I say this not to look at the returns on these stocks, but because some of us have them and it would be easier to discuss them going forward.

    Adjustments will need to be made and this will provide all an opportunity to learn as well as redeem the positiones over time with your help.

    If dump the FU stocks, how will we know what adjustments to make going forward. 

    The winners, of course…no problem.


  50. also, CBI should be transferred


  51. New Portfolios – You guys need to understand the logistics of this – we can't do some one way and some the other – it wouldn't be fair to anyone.  The main purpose of this site is to tech people how to pick and manage positions and build wealth using option strategies – the portfolios are just a tool we use to illustrate it.  

    As to the FU stocks, while it is very likely we'll get back in them in Jan, it would be silly not to treat them as new positions at the time.  Those losses will cancel out some of our gains from other positions this year but, going forward, they'll be new positions like any others we add.

    Meanwhile, if you personally (Jabob) have any FU positions or whatever that you can't seem to let go of – all you need to do is say (and I will have a heart attack if anyone actually uses my preferred format):  "Phil, I have this position in FTR:

    • Bought 6,000 shares at an average of $12.69, now $9.14
    • Sold 60 2020 $10 puts at $2.20, now $5.50
    • Sold 60 2020 $12 calls at $2.40, now $1.20

    What do you think a good adjustment would be?"

    See how easy that is?  I can look at ANY trade like that and tell you what I think of it and discuss possible adjustments based on your goals and dreams and hopes and fears.  A stock doesn't have to be in our portfolios to have those conversations.

    Dump/Tangled – It's not an emergency.  Ask for good prices, see what gets filled.

    FCX/Scott – What a boring stock for kids!  I do like them long-term.  They are at $14.55 at the moment and you say break-even so, taxwise, you can sell "now" effectively, but actually sell in your tax window by, for example, selling the May $12 calls for $3.15.  That effectively pays you $14.15 so 0.30 more than we're at now and FCX doesn't pay a dividend so not too likely to get called away and, even if you do – you're only selling the stock for $11, right?   If they do drop significantly, your new entry point is effectively $11ish.

    Losers/Maya – I will be taking many suggestions in Jan as to what to add – all 3 of those I would want.  Is M even a loser?

    CBi/QC – Another one I'd love to own going forward. 


  52. Phil – "in that brief moment we though Trump might be arrested before they pass the tax bill.  That's right, the GOP Senate passed the Trump Tax Plan when all the GOP Senators voted for it – what a surprise.  In other news, water is wet."

    In my best Tommy Lasorda – they couldn't hit water if they fell out of a fuckin boat.

    As for arresting things,  we weighed in today, our Flynn Trump timeline (much better than others) concludes tomorrow.


  53. Maya, VZ is aswell a stock which skyrocked. I closed some 60 positions today, finding still suckers buying.

    Simply looking at the chart of one year from TOS, if the stock is on top of the scale I am cutting it down.

    VZ aswell is in a bubble, if you really want to hang on to the stock I would roll not higher than April 50 call, this aswell can give you backing on a dip, Phil has promised. On the other hand I would sell the stock and eat the caller, hang on with your cash and wait for the explosion.


  54. My big question would be what to do with that WYNN butterfly?


  55. Meanwhile, nice pullback on the Dow.  

    OK, things are normalizing a bit so I'm going to beat the traffic and head back in 30 mins.  I'll touch base when I get home but the real work starts tomorrow. 

    Trump/Naybob – Most people are too young to remember the very long, tedious process of impeaching Nixon.  You don't rush to conclusions when it's the President and this process will take as long as it takes and, while that's happening, both sides will look for signs in their favor.  I stand by my prediction that Trump will end up resigning "for health reasons" before the end of his 2nd year.

    Good system Yodi (selling stocks at the top of their ranges). 

    WYNN/Tangled – We'll look at it tomorrow, when I have more screens. 

    Oil coming down nicely and /KC, as usual, fails $130.  Those were my weekend holds. 


  56. Definitely would like a new portfolio.

    Only request would be when you post trade ideas using call spreads and selling puts or calls that the ideas are likely to be executable.

    For example, the last HBI trade was great timing but could not be executed at the prices you posted. 

    If a put is 3.30--3.50 saying to sell them at 3.50 usually will not fill unless it goes against you at first.

    Sometimes (not always) there are trades posted that need to go up and down just to get filled at those prices.

    But I love your idea about starting the new portfolios and asking about adjusting FU stocks.


  57. The market is coming down, but none of the consumer discretionary is.  What does that say?


  58. Vz/yodi

    I totally agree with you.

    I rely on the tax beneficial dividend but that’s not a reason to hold on to the stock and see it go back down 10-15% to $45.

    So, I will let you know what I decide to do…have to look up when the next dividend payment is

    Thanks!


  59. FCX/Phil – thanks. I follow the idea (if not your math or pricing of the May $12 calls) for selling in the money calls now. 


  60. I chopped some of VZ down already. Even on a day like this where I am in a closing and cutting down mood, Some stock / call combinations are hard to close out. So I think it will be much harder to find suckers on the down hill!


  61. FCX/Phil – with a cost basis of 14.55.. and if I sell May $12 for 3.15… and if I get called, I will be 'selling' the stock for $12.. (with a net cost of about $11.40 with the call, so net win).. That's how I understand it.. Not sure what you man by in the tax window, unless you mean the possibility it is called away before end of year?


  62. Executions/Jabob – That's one of the things I want to work on with people.  When I pick a price, it's the price I will offer for a fill.  It includes my opinion that something may go up or down from where we are at the moment – not just the current bid/ask spread.  In HBI's case, as it was our Stock of the Year and widely announced, it took off fast but fills were still good until 2pm at $3.40, which was certainly close enough (within 5%) to take the fill – especially as it's the put leg – so less impactful on the trade.  

    Of course, had you bought the calls first and waited to sell short calls – you'd have a massive bonus win.  While I don't intend to discuss every trade to death, I do intend to spend more time discussing and demonstrating filling techniques.  

    What does it say/Baron – Can't read into anything today – just a crazy move.  Retail though, was oversold – that's why we've had so many calls for them in the past month or so.

    Math/Scott – LOL, that's because I was originally looking at the sale of the $11s but then decided the $12s were a much better sell but my brain was stuck on $11 when I did the math.

    Suckers/Yodi – I agree 100%.  If you are not going to sell when people are buying – when are you going to sell?   I'd wish I were artistic – I'd draw a caricature of you astride your forest of holdings, taking an axe to the old growth to make room for new plantings!  cheeky

    FCX/Scott – But you'd also have a short-term gain on the short calls, which would effectively be cancelled at $0.  By Tax window I mean if you bought them less than a year ago, say March, then selling them now would be a short-term gain but selling the May $12s ensures you get past your 12-month window and turn it into a long-term gain (at a lower rate) next year (at presumably lower tax rates) with relative safety. 

    OK, hitting the road now.


  63. Baron - "I don't know about the rest of the world, but I, at 57, am not buying more towels."

    OMG you are older than dirt.  Of course I remember, soda pop machines that dispensed bottles; Coffee shops with tableside jukeboxes; Newsreels before the movie; intermission during the movie; Butch wax; Telephone numbers with a word prefix (Trump-6666); 78RPM records; and of course bucking my laundry in the old days. That was long after those apes were bangin around me in my high school photo.  Where is Towelie when you need him?  Out. 


  64. Stick – as I posted last week, I had four days in a row of profitable stick plays on /YM in the last hour of the market.  I'm not playing it today, the market is too frothy, but I'm thinking that if They can't stick it again today, it might say something about diminishing firepower in the buyers…


  65. MSFT – so anyone follow what is their deal today?


  66. PHIL,

    Do you see a long trade on /SI at this level? Seems to be holding 16.35


  67. Canada – Phil / BDC – TSX Venture exchange (with bitcoin fever) does well in an accelerating market.  Cannabis stocks have been exploding and valuations getting very rich.  It is a land grab with valuations placed on growth capacity in terms of how many kilos can you grow and they are getting as much money as they need.  Very much reminds me of fiber in the ground metrics for new telcos in 1999 when investment bankers funded too many new entrants and then 90% imploded.  Money is too easy to get.  Having said that I am going to hold some select positions.  EV battery penny stocks also jumping well.  American Manganese that you mentioned Friday up another 27% today and Elcora I mentioned up another 13% from Friday close.


  68. FTR – Buy stock and sell Dec 15 $8 call for $8.00 with stock at $9.20 and collect the December $.60 dividend seems like a good risk/reward play.


  69. maybe a broken stick today for a change?


  70. ThankBDC

    Do you know anything about sparklecoin? Supposedly it’s intended to be used more easily for day to day transactions? I don’t know anything about cryptos but have been hearing about this from a few people and wanted to get your thoughts. 

    Thanks! 


  71. BDC

    Whoops! Stupid iPhone typo at the top there. 


  72. Think we took one too many whacks with that happy stick, may need to look for a new one. 


  73. Hello everyone - I have been following the discussion and learning from all of you, but haven't been active on the board. Wanted to share an observation and a question on FTR.   Seems like the December calls are priced with little to no premium (e.g. the $8 Calls at $1.2, $9 Calls at $0.5 with the stock at $9.2), is that an indication the ex-dividend is priced in? 

    People who bought the Calls can theoretically exercise on 12/13 and grab the dividend, right?   So the idea to Buy-Write, keep the dividend, and have the stock called away may not work as expected?


  74. mitomeio / FTR  - The stock is ex dividend on 12/14 so stock must be owned unit end of day 12/13 to get the dividend.  I have been toying with the idea of selling the 8 or 9 dollar calls for both Dec and Jan – the Dec calls are on some shares i'm selling as a LT loss to offset other gains.  The ones in Jan are half of my remaining shares.  I expect that there are lots of people buying this for the .6 dividend and on 12/14 will dump it.  I'm not sure where it will settle but i expect it will be quick and probably more than the .6 dividend price.  If you look at the historical chart, the price dropped between .7 and 1.0 on the ex dividend date.  I'll wait till i think this has stopped going up ( but no later than Friday or Monday) to sell my short calls.


  75. Phil/New Portfolios

    I understand the push to renew. Why not just keep a small FU portfolio?  After all, how many FU holdings are there?  Sure would be nice to see them through to fruition.  REAL FU's:  FTR, GNC, TEVA (I hold only 2)

    Either way is fine with me.  I like what I own, and most are my own trades, or versions of yours anyways.  Seven years does that to you!  Thanks Phil!


  76. Thanks batman – I guess FTR is also bottoming too as some people also recognize the value and margin of safety at the price where it is.   If it did drop more than the dividend previously, it doesn't seem to make sense for those just trying to capture the dividend (they will be worse off…)? Maybe opportunity for us then


  77. What does everyone think – all new portfolios for 2018?      YEAH… 

    I am about 1000 hours into learning about investing.  While, I have tried other websites along the way, they don't teach or focus on selling premiums and certainly don't have your mindset.  Anyway, I have a lot to learn and look forward to the new portfolios.   

    So, thank ALL of you for being patient and teaching others how to "Be the House and not the Gambler"!


  78. FTR and in the money short calls,

    Having experienced it a couple of times with other dividend stock, don't be surprised if the stock is called away after hours between the 13th and 14th.  Seems that the morning prior to market opening on the ex-dividend day is particular popular.  If this happens you will loose the dividend as you can't buy the stack back prior to ex-dividend day.


  79. FTR/TOS question.

    When I look on TOS, I see two chains for FTR 18 Jan 2019, one has some Yellow text "6/100 (US $9.45)".  Based on what I have in my portfolio, this is the option chain for before the split, but what does the yellow text mean?     TIA… 


  80. Good morning!

    Took a detour last night and ended up getting home late – passed right out after a long day but now it's too much sleep so I'm wide awake at 2am…

    Towelie/Naybob, Baron – I have, on the other hand, always followed Doug Adams' advice on that subject and always have a really good towel.  They are, actually, incredibly useful and versatile from pillows to swaddling babies to make-shift sacks to traction devices for cars that get stuck in the mud or snow, so:

    Image result for don't forget to bring a towel animated gif

    MSFT/Scott – Just caught up in the tech sell-off.  Went from $60 to $85 this year and $55 at the election is 54.5% – kind of due for a pullback, right?

    /SI/Japar – I sure do like /SI but hard to call a bottom here, though I'd have conviction at $16.  I blame BitCoin (as noted at the Nasdaq yesterday) for sucking up $200Bn from the same kind of people who would usually buy silver or gold as an alternate store of wealth.  

    See, only $42Bn of physical gold is actually traded in a year! 

    So I think, when and if the BitCoin fad dies out, or at least calms down, then money will move into silver and gold again because certainly this irresponsible budget by our Government is not good for the Dollar and, even if it does manage to boost the economy – that would likely lead to the inflation the Fed is pushing for and inflation is generally good for gold and silver.

    Fiber/Stu – Good comparison.

    Welcome Mitomeio!  Yes, the FTR ex-dividend is likely to drop the stock a quick 0.60 and yes, if your premium is less than 0.60, it makes sense for the caller to grab your stock and get the dividend.  I would buy the stock for $9.20 and sell the Feb $9 calls for $1 so you are netting in for $8.20 and don't care if you get called away with an 0.80 profit and, if not, you get your dividend.  

    FU Portfolio/DC – Because the idea is to start from scratch and teach people how to build portfolios over time.  By it's nature, the LTP will always end of with "FU Stocks" because we cash in our winners and tend to work our losers so, given those conditions, after 4 years, what will be left in a portfolio?  In the LTP, which started with $500,000, we now have $1.35M in CASH!!! and we have some positions that have a loss and some that have a gain for another net $460,000 positive Dollars.  If I HAD to keep a position I'd sure as Hell keep the 50 AAPL 2019 $150/180 bull call spreads with 15 short $120 puts and 20 short Jan $155 calls at net $41,907 because that's going to return $150,000 so why, if I'm only going to keep 3 positions, would I choose FTR or GNC or TEVA over that?  Those positions are 3 of 61 open stocks in the LTP and our strategy is all about BALANCE, which means we're always going to have some beaten-down value stocks to balance out the momentum stocks we're playing.  I'm sure we'll be adding all of those names back, along with AAPL and other more sensible positions.  I just picked FTR again on the simple covered call above!  

    Thanks GrassHopper!   Yellow on TOS indicates a 6/100 split and $9.45 in cash against old positions.  They standardize everything to 100 units so 1/15th 6.66 shares and they can't give you 6.66 shares so you get 6 shares and the cash value of 0.66 shares (at the time of the split).  






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