by phil - November 24th, 2015 8:12 am
You can't draw any conclusions from these low-volume trading days but, in general, stocks have been in retreat and this morning the news of Turkey shooting down a Russian jet fighter did not help the mood one bit as European markets dove 1.5% and our Futures followed down half a point (so far).
I already sent out a News Alert to our Members and, if you follow us on Twitter, you already saw it – so I won't go over all the details and possible repercussions again. Needless to say World War III would be kind of a bummer so let's hope things don't escalate. Fortunately, Vladimir Putin is well known for his diplomatic restraint.
The US State Department has already issued a Global Travel Alert that's likely to put a damper on holiday cheer this year. Paris is already seeing a slump as airline bookings into the city are down 13% – enough to put a serious dent in the travel industry's bottom line. I was in NYC this weekend and my children got to see heavily armed police hanging out in Times Square and it was way too easy to get stand-by show tickets on Sunday (but we knew it would be, that's why we decided to go). Buffett's admonition to "be greedy when others are fearful" applies to more than just stocks…
Brussells has become a complete ghost town as the Government there is hunting for terrorists in the capital – not even the subways are running as the ECB must be protected at all costs, of course. It is in this environment, amazingly, that I have gotten tons of messages and comments in the past week telling me I'm too bearish and the markets will fly on the biggest Santa Claus Rally of all time. It really does scare me that so many investors believe in Santa Claus, not to mention the Fed.
I'm tired of explaining why I'm more comfortable being in CASH!!! into the end of 2015 but David Stockman isn't, so you can hear his interview where he makes the case that the Fed is very…
by phil - November 23rd, 2015 8:25 am
We have, essentially, a 3-day week this week and don't expect people to stick around on Wednesday either and Friday being a half-day is a joke as it's dead as a doornail on Thanksgiving Fridays. Overall trading with be thin, which means all market action should be taken with a grain of salt and, unfortunately, we get revised GDP tomorrow morning – which is very important.
Our initial estimate of Q3 GDP was 1.5% and most Economorons think it will be revised up to 2% and why not – if GDP is so inexact that it can move up or down 33% in less than a month – what's the difference what number they paint into a holiday weekend? It's Personal Income and Outlays that really matter on Wednesday – as that's a precursor to Christmas Shopping Season. Durable Goods (also Weds) were a disaster in September (-1.2%) so hard to be worse in October but run away if they are.
In faraway lands we'll also get Eurozone PMI Reports, which are looking up so far but enjoy it while you can as tomorrow we get Germany's GDP, which may make ours look good. The rest of the Eurozone reports their GDP Thursday and Friday – so that will be worth at least checking in for on Friday morning – especially if you are a Futures player looking for some fun!
Meanwhile, oil Futures look like this, so you'd have to be a maniac to play. We played on Friday, of course and our long plays on oil (/CL) and gasoline (/RB) each made over $1,000 per contract for our morning readers (you're welcome). For those who could not play the Futures, we also had a long play on UGA options that popped 44% on the day (and will be cheap again this morning) so again, it's not like we have to be heavily invested to make money every day – we can make a fortune with these quick in and out plays – over and over again.
Getting back to cash allows us to enjoy our Thanksgiving trips without worrying about what the market is doing while we're on a plane. As noted in our October…
by phil - November 23rd, 2015 6:13 am
One Million Dollars!
That's up 66% on our main, paired portflios as we approach our 2-year anniversary. 66% is our 3-year goal for the Long-Term and Short-Term Portfolio strategy so of course we decided to lock in our gains after having a rough ride in September, when the LTP balance fell as low as +26% on September's dip to S&P 1,870. That led us, in our last review, to add another $50,000 worth of downside protection in the STP and it worked perfectly, as the October dip barely touched us.
Well, not PERFECTLY, our net balance on the Long and Short-Term portfolios has dropped from $1,020,881.30 to $1,002,144.60 – down $18,736.70 (1.8%) for the month. As I noted in our Chat Room, we did add ABX, ARO, BHI, BRCM, COH, IRBT, RIG, UNG and YHOO trades since our last review so we're hardly sitting on our hands – just playing the market cautiously in the final quarter since we're so far ahead in the game.
Unfortunately, like all prevent defenses, you end up giving back a little ground in the interest of preserving the greater victory. Of course, that doesn't stop us from having plenty of other trade ideas – they just weren't added to our tracking portflios yet.
AAPL, for instance was featured as it dropped back below $115 and IBM was officially announced as our trade of the year as it plunged to $130 and it's already begun to recover. At our Butterfly Portfolio Seminar in Washington last week, we went over 20 stocks we'll be watching in 2016 but mostly AFTER we get through the holidays intact!
It can be hard to sit on the sidelines in cash – especially when we've had such fun increasing our cash piles all year long. However, as I mentioned above, we had a $115,000 swing in the LTP in Sept and, despite making some offsetting gains in the STP to compensate – that was a little more variation than I was comfortable with. We did, in fact, go on a buying spree at the Aug dip…
by phil - November 20th, 2015 8:55 am
I know – where's Mali? Who cares? Apparently, not too many of you do because the Futures have gained 0.5% since this happened early this morning, so let's just keep going and invest as if nothing bad is ever going to happen.
Today's market cheerleader was former Goldman Sachs Director, Mario Draghi, who said the ECB is prepared to deploy its full range of stimulus measures to fight low inflation, indicating that the Central Bank will apply additional easy money policies at its next meeting in December.
That sent the Euro down half a point and, so far, the Dollar is up 0.5% to match, which is pushing oil back down to $40 (the Dec contract, on it's last day) and giving us a nice buying opportunity into the weekend on both /CLF6 (the Jan contract, now $41.50) and /RBF6 (Jan Gasoline, now $1.275) into next week's holiday. For the Futures impaired – the Gasoline ETF (UGA) should be at $28.75 and that should put the Dec $29 calls under $1 – a fun way to pay for a tank of gas for next week's visit to Grandma's.
Keep in mind that Draghi is a guy who thinks Bankers should run the World, the quote in this picture comes from his actual interview in Der Spiegel in 2012 and, since then, he's simply moving his agenda forward, in a subtle(ish), diplomatic fashion:
"It is not that we want to replace the national supervisory authorities; on the contrary, we want to work closely with them. However, they need to be independent of their governments in their assessment of the problems. In the past, problems in the banking sector have been hushed up time and again.
"I am not going to mention any names. However, I am certain that we will be able to act more independently and quickly if Frankfurt is at the heart of the decision-making."
On our side of the pond, the NY Fed's Bill Dudley (former Goldman Chief Economist) was heard saying, in his opening remarks at a regulation conference: "If we begin to raise interest rates, that’s a good thing. That’s…
by phil - November 19th, 2015 8:44 am
Gobbledygook, I say! What other word could describe the 4 paragraphs of economic nonsense that led off yesterday's Fed minutes (highlighted text here) which said (and I sadly quote): "A number of participants indicated that they expected short-run r* to rise as the economic expansion continued, but probably only gradually. Moreover, it was noted that the longer-run downward trend in real interest rates suggested that short-run r* would likely remain below levels that were normal during previous business cycle expansions, and that the longer-run normal level to which the nominal federal funds rate might be expected to converge in the absence of further shocks to the economy…" It just goes on and on like that.
"r*" is, of course, the "neutral" or "natural" real interest rate. Well, I say "of course" because the Fed made it up and now that's what it is and soon you'll hear all sorts of blowhards on TV pontificating on what r* is at the moment – it's our new distracting talking point! The Nattering Naybob summed it up quite nicely in our Live Member Chat Room, saying:
As for their inept discussion of R, as in rates: The pace of economic activity has slowed due to inappropriate monetary policy. A lack of thin-air or ex nihilo credit growth in the NB's and CB's is a symptom, not a cause. Ceteris Paribus, the cost or price of money is represented by various price indices. Interest is NOT the cost of money, it is the cost of loan funds. Supply and demand for loan funds determines interest rates and bond prices. Demand at zero bound is present, it is SUPPLY due to NIM compression and former lending institution disintermediation that is NOT forthcoming. The 300 Phd's on staff at the Fed, who spoon feed the appointed idiots from Goldman Sachs banksters that are running it, and who have never predicted a recession in advance, don't know money from mud, much less their ass from a hole in the ground.
by phil - November 18th, 2015 8:37 am
Woah, we're half way there – Woah, living on a prayer.
We're waiting on the Fed minutes today (2pm) and, hopefully, more indications that bad news is good news and yesterday's -0.2% Industrial Production and falling Housing Index and weak CPI and poor Redbook Sales were actually good news because the Fed will or won't tighten or whatever the narrative is at the moment – who even cares anymore, it's almost Christmas!
So far, this "rally" of the last few days has erased 30 points of the 90-point drop from S&P 2,010 back to 2,020 and now 2,050 again. Those of you who follow our fabulous 5% Rule™ know that, when we have a 90-point dip we expect at least a weak 18-point bounce (2,038) and a strong 36-point bounce (2,056) before we even begin to consider making bullish bets again. PS – the bounce needs to hold for 2 closes so we are, indeed, not even halfway there.
But we are, in fact, living on a prayer in the hopes that St. Janet and the Immaculate Fed will… oops, what is it we want them to do now? Seriously, I have lost track of the narrative as now we are, for some reason, rallying into the tightening or is it that the recent data is so bad that the Fed would not dare tighten at their next meeting (12/16) – just 7 shopping days before Christmas?
Seriously, I pay more attention to this stuff than pretty much anyone on the planet and I can tell you with absolute certainty that I have no idea what it is traders are now looking for. There is nothing but confusion in the marketplace – which is why we moved to the sidelines.
And we're not alone, by the way. Since we went to mainly cash back in July (the S&Ps previous trip to 2,100), Institutional Investors have been flying out of the market and hedge funds have been lightening up as well. Of course, some of them are our Premium Members over at PSW but we can't be responsible for ALL of the cashing out in the market, can we? No, I…
by phil - November 17th, 2015 8:24 am
That's right, the G20 is fixing the entire Global Economy right… now! There, did you feel it? All better. I for one am so relieved I'm going to take all of my cash off the sidelines and buy overpriced stocks – how about you? This morning, our fabulous 20 World leaders took time off from solving ISIS and Climate Change to issue a communique declaring their intent to raise the GDP of our entire planet by 2% by 2018 "as announced in Brisbane last year."
As I noted in our Morning Alert to Members, this is the same goal they have miserably failed to accomplish for the last 7 years but hope springs eternal I suppose – I just wish I was still young and stupid enough to believe that our leaders were somehow wise enough to solve ONE of these issues – let alone all of them. Just check out item number 6 and tell me how much confidence you have in getting this accomplished:
6. We are committed to ensure that growth is inclusive, job-rich and benefits all segments of our societies. Rising inequalities in many countries may pose risks to social cohesion and the well- 2 being of our citizens and can also have negative economic impact and hinder our objective to lift growth. A comprehensive and balanced set of economic, financial, labour, education and social policies will contribute to reducing inequalities. We endorse the Declaration of our Labour and Employment Ministers and commit to implementing its priorities to make labour markets more inclusive as outlined by the G20 Policy Priorities on Labour Income Share and Inequalities. We ask our Finance, and Labour and Employment Ministers to review our growth strategies and employment plans to strengthen our action against inequality and in support of inclusive growth. Recognizing that social dialogue is essential to advance our goals, we welcome the B20 and L20 joint statement on jobs, growth and decent work.
Apparently, if the G20 is going to grow the global economy at a 4% pace, they'll have to do it without the United States, as the Congressional Budget Office forecasts just over 2% growth in the US in 2018 and forward and…
by phil - November 16th, 2015 8:31 am
Big tragedy over in Paris this weekend.
You would think the markets would be trading down with the World's largest tourist destination suffering the worst terror attack in their history right at the start of the holiday shopping season. Clearly, if it can happen in Paris – it can happen in any major city and you would think that would have investors acting cautiously. Well it did – for about 5 minutes – as the markets opened down about 1% in Europe and the US futures but 4 hours later (7am, EST) and we're back in the green – it's simply amazing what traders are willing to ignore these days.
I was eating at an outdoor cafe in Washington, DC this weekend and I'm glad I didn't see the above picture first or I wouldn't have been quite as relaxed. We all know it's not that hard to get a gun in the US and, so far, we've been lucky there have "only" been 325 mass shootings so far this year – and mostly by US citizens – so we don't worry about those, right?
Check out Florida on this map – it looks like it's going to sink under the weight of the mass shootings! Even the gangs in LA are warning their members to stay away from Florida… That's why, in the US, we have the occasional terrorist attack and we just move on – terrorists would have to step up their game considerably to kill more Americans than Americans do! In France, on the other hand, there's only 1 homicide per 1M people per year, vs 32 in the US. That's why they are still shocked when someone kills their citizens.
Keep in mind that's 32 people PER YEAR out of 1M so, over the course of your 75-year life, you have a 2,400 out of 1M chance of being murdered in the US – better than 1 in 50. Not you, of course, you are reading a stock market newsletter, which means you are probably in the top 10% and you are not likely to live in "those" neighborhoods – and pray you never do!
by phil - November 13th, 2015 8:20 am
Will the G20 "fix" this?
Now we're getting terrible GDP reports from all 19 Eurozone nations, coming in at an overall 0.3% in Q3, down from a not exciting 0.4% in Q2 and please keep in mind this is DESPITE TRILLIONS of DOLLARS in stimulus. Draghi has already said he plans to do more of the same and we can expect all of the G20 nations to pledge to do SOMETHING to prevent a Global Recession – but can they? Should they?
What we need the G20 to do is to put shovels in the ground and fund some infrastructure projects that put real money into the economy and, more importantly, begin to burn of the massive surplus of raw materials that China's slowdown has left us with. Pumping another $58.6Tn into the Top 1% (see Tuesday's post) isn't going to "fix" anything but the balance sheets of people rich enough to have balance sheets.
If you can't get Capitalists to pay their laborers more then the Government (the one that is supposed to be "of the people, by the people and FOR the people") then it is the JOB of the Government to compete with those Capitalists for cheap labor and cheap materials. The Capitalists are not making efficient use of our workforce or our materials – that is an OPPORTUNITY for the Government to get a few home improvement projects done while they can be done cheaply.
The same logic should apply to any industry that is being mismanaged. If private enterprise is unable to efficiently deliver low-cost health care to all of the citizens, then why can't our Government compete to offer a service at a lower cost? That's not socialism – that's real Capitalism.
The thing we are doing now is nothing like Capitalism, it is Corporate Welfare on a massive scale and the worst thing about it is that, ultimately, the burden of all these debts we're incurring falls back on the same people we are making no effort to help – it makes no sense – unless you are the one getting the Corporate Welfare, of course.
by phil - November 12th, 2015 8:29 am
Who says cash can't be fun?
Yesterday, in the morning post, I noted the weak volume rally was a good shorting opportunity in the Futures – specifically the Russell (/TF) at 1,190 (pictured here, now 1,170 for a $2,000 gain!) and the Nikkei (/NKD) at 19,800 (now 19,635). The Russell was good for a very quick $1,000 per contract gain and has hit $2,000 as of this morning (where we're done for now, expecting a bounce here) while the Nikkei took longer to grind out it's $1,000 win at 19,600 before bouncing back.
A lot of traders have an irrational fear of trading the Futures (and options, for that matter) and it's one of the things we work on in our Weekly Webinars (replay available here). The cost of initiating a Russell Futures Contract is $5,940 in margin (may vary by broker) and you simply bet long if you think the Russell will go higher or short if you think it will go lower and then you make (or lose) $100 for each point the Russell moves.
The very great thing about the Futures is that you can play them in off hours, like yesterday morning – when we saw the Futures market rising for bad reasons ahead of what we thought would be a weak open based on the data that was coming in. My comment at the time was:
The volume on yesterday's move up was a joke and this morning we're being pushed even higher in the Futures, back to 1,190 on the Russell (/TF) and 19.800 on the Nikkei (/NKD) along with 2,085 on the S&P (/ES), 17,800 on the Dow (/YM) and 4,660 on the Nasdaq (/NQ). I listed the Russell and Nikkei first as they are going to be our key shorts – providing the others stay below their lines.
That's the real key to playing the Futures (and it's not very different with stocks or options) – pick a strong support or resistance line where several factors line up that lead you to take a stand and then, once you make your bet – get out quickly if things don't go the way you…