Phil's Newsletter

Tuesday Turmoil – Brexit Uncertainty Trumps Trump Uncertainty

Short autos!  

Today's edict came out at 6am with President Trump tweetcreeing that autos shall henceforth be manufactured in these United States.  Once upon a time, we did manufacture cars in the United States and all those companies went broke or got massive Government bailouts at some point.  In fact, the Federal Government took over GM and Chrysler in 2009, firing CEO Rick Wagoner and forcing a merger with Fiat after putting in $80.7Bn to sweeten the pot.  The government ended up getting back all but $9.2Bn and managed to save Millions of jobs – ironically over the total objection of the GOP.  

Ford got a $9Bn line of credit and a $5.9Bn loan in exchange for pledging to spend $14Bn developing battery-powered and hybrid cars and more millions of jobs were saved without telling them where or how they had to make those cars.  Donald Trump met with Elon Musk yesterday, who does build his cars in the US but Tesla (TSLA) has LOST over $3Bn since 2010 and has no prospects of making a profit this year or next. 

Image result for us manufacturing historySo, is Trump trying to finish the job and finally destroy the US auto industry or did Musk simply convince Trump to help him destroy his competition?  The way to make America great again is not to forcibly prop up dying industries but to spur investment in the growing industries of the future – the way we did under Clinton when Silicon Valley and the chip industry became a thing. 

And Musk is the worst possible example of American manufacturing because his cars are primarily built by ROBOTS, not humans – something Tesla is very proud of in their promotional footage – does Trump not know this?  Tesla only has 13,000 employees who made 50,000 cars last year, if this is the Future of the Auto Industry then it's a very bleak one for American workers.  Perhaps instead of forcing manufacturers to move back to the US, we should invest in companies that make the robots?  Oops, that's already a fail as TSLA just bough a German automation company – now those guys are on the ball!  

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Monday Market Movement – Nervous Trading in a New World

Image result for there's supposed to be an earth shattering kaboomNo kaboom.  

Trump has been President all weekend and the World is still here so I suppose we're going to have to formulate a trading strategy going forward.  We reviewed our 4 Member Porfolios over the weekend and we are 75-90% in CASH!!! and, if the World continues not to end this week – we will be looking for more opportunities to deploy some of it.

Of course we're already dealing with the first crisis of the Trump Administration – How big was the crowd at the inauguration?  You might think, "who cares" if you are a rational person but crowd size experts told the New York Times they estimated Trump's audience at fewer than 200,000 people, and widely distributed side-by-side photographs showed the stark contrast between the comparatively sparse crowd for Trump's inauguration and the record-setting crowd for Obama's first.

The President of the United States of America said the press was lying and under-reporting the crowd and White House Press Secretary Sean Spicer gathered the press to deliver a five-minute statement Saturday in which he issued multiple falsehoods, declaring erroneously the number of people who used the D.C. metro on Friday, that there was a change in security measures this year and that "this was the largest audience to ever witness an inauguration, period, both in person and around the globe."  "These attempts to lessen the enthusiasm of the inauguration are shameful and wrong," Spicer said Saturday.

Then things get really freaky as Trump's counselor, Kellyanne Conway, went on Meet the press to confront the liberal media head on and ended up fighting with Chuck Todd and threatening NBC, saying "I think we're going to have to rethink our relationship here."   You have to see it to believe it:

Nope, I still don't believe it!  As noted by Todd, when the President's Press Secretary blatantly lies in his first Press Conference it undermines the credibility of the entire administration.  Even more frightening is Conway's statement that: "You're saying it's a falsehood and Sean Spicer, our press secretary, gave alternative facts to
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Philstockworld January Portfolio Review

Image result for new year 2017 stock marketWe're off to a great start!  

Only 20 days into the new year and, since our last review, all 4 of our Member Portfolios have added substantial gains as our bets on a flatlining market are paying off:

  • Our Options Opportunity Portfolio (OOP) is up $9,352 (9.3%), at $246,577, which is up 148.6% since its 8/8/15 inception – our newest portfolio.
  • Our Butterfly Portfolio is up $7,816 (7.8%) at $331,408, which is up 231.4% since its 7/29/13 inception.  
  • Our Short-Terrm Portfolio (STP) is up $9,222 (9%) at $484,298 which is up 375.1% since its 11/26/13 inception.
  • Our Long-Term Portfolio (LTP) has jumped 29,649 (6%) to $1,209,372, which is up 141.9% since its 11/26/13 inception.  

In addition to our 4 virtual tracking portfolios, we also have our Top Trade Ideas, which do not go into a portfolio but I will do a review of those next week.  For the first time ever, our last two Top Trade Ideas were hedges – that should tell you something about my mindset for the market going forward.  

Image result for cash jokerAll of our Member portfolios are 75-90% CASH!!! at the moment and using 1/4-1/2 margin – leaving us plenty of room to adjust if the market does turn sour – something I feel is very likely to happen in the next two months and yes, I know I've said this before but, really, how much over our 2,100 top call on the S&P are we?  It's at 2,262, so we're 162 points over what I called a value top and that's 7.7% but, in fairness, the Dollar is down 3% and that explains most of it.

The rest of the pop comes from runaway expections from the Trump Presidency and yes, he will lower the Corporate Tax Rate but Corporations only pay 12% on avergage now – how low can they really go?  More pop came from the Banking Sector, where deregulation expections have added 20% to that index but we saw what deregulated Banks did to themselves under Bush – why is that a good thing?  And, of course, rising oil prices have boosted the Energy
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The Trump Error Begins!

Image result for trumpocalypseDid the Romans know it was over?  

In 476 AD, the Germanic leader Odoacer, deposed Emperor Romulus Augustulus and that was the true and official end of the Roman Empire but Rome was first sacked in 410 by Visigoth King Alaric and had limped into it's final decades.  But you have to go further back than that as the Goths killed Emporer Valens in 378 but he was only the "eastern Emperor" of Rome as the country had already split along party lines due to political in-fighting which caused Emporer Diocletian to divide the Empire into 2 halves.  Those two halves could never agree on Government priorities and the Empire essentially dissolved into chaos

Unlike today, January 20th, 2017, there was no particular day to point to and say: "Yes, that's when the Romans elected a guy who said he will change everything and he did – and then the Empire was destroyed."  We will have the luxury of knowing exactly when we made the decision that pushed America over the edge – or maybe on to greatness (again) – who's to say?

On the bright side, as noted by Samantha Bee, Trump doesn't actually do what he says.  Or, then again, maybe he does because, as he said in Michigan: "When you cast that ballot, just picture a Wall Street boardroom filled with the special interests who are bleeding your country and your city and everyplace else…"  He is certainly delivering that already, with what the Washington Post calls "the worst Cabinet in American History" – a complete and utter sell-out to Wall Street and Special Interests.  

As just one colorful example, let’s look at this report in today’s New York Times about Rick Perry, who will be Secretary of Energy. The change from the leadership under Barack Obama is already striking: the current secretary, Ernest Moniz, is a respected nuclear physicist who also came to the job with significant experience managing scientific institutions, and he’ll be succeeded by someone who advocated eliminating the department, although in his defense Perry couldn’t quite remember that it was the one he wanted to get rid

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Thursday Thoughts: Waiting on Yellen and Trump

Has the Dollar bottomed?

After a 2.5% pullback to start 2017 the Dollar has popped 1% in the past two days after Janet Yellen made a 3pm speech saying U.S. economy is “close” to the Central Bank’s objectives of full employment and stable prices and she’s confident it will continue to improve.

It is fair to say the economy is near maximum employment and inflation is moving toward our goal,” Yellen told the Commonwealth Club in San Francisco Wednesday. While “it makes sense to gradually reduce the level of monetary policy support,” the timing of the next interest-rate increase “will depend on how the economy actually evolves over coming months,” she said.

So the better the economy does, the faster the Fed will raise rates (duh!) and Yellen indicated a target for a 3% Fed funds rate by 2019, which would be 9 raises from here – a faster pace of increases than most economorons were expecting.  Inflation is, of course, exactly what we're expecting in 2017 and 2018 and I discussed that strategy on Money Talk last night.

The last time unemployment was this low was back in 2006 and 2007 and that marked the end, not the beginning of the market rally.  Full employment leads to higher wages and higher wages lead to inflation and that is so obvious I feel silly for saying it but, apparently, it's a surprise to "leading economists" who are consistently shocked by things they should have learned in Econ 101.

That's why I'm growing a beard – I've decided to become a leading economist so I need to start looking the part!  As you can see from this chart, 4.9% unemployment is low but we've been down to 4% so we can go lower and our new President promises to create those jobs (1.6M jobs = 1%), which is no different than promising to create inflation and so, we have our "Secret Santa’s Inflation Hedges for 2017," including the Trade of the Year we discussed on TV last night.

As much as it wants to, the market simply cannot have it all.  If we are going to lower unemployment than we are going to drive labor costs higher (until we're all replaced by machines,…
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Wonderful Wednesday – Oil Sell-Off Gives us $1,500 Gains to Start the Week


That's the sound we make at PSW when we get a nice sell-off and it doesn't get much nicer than making $1,500 PER CONTRACT off our call to short Oil Futures (/CL) at $53.20 in yesterday morning's post as we rode down a $1.50 drop back to $51.70.  

That wasn't our only winner either – Gasoline contracts (/RB) were shorted at $1.65 and they fell quickly to $1.60 so we took that money ($2,100 per contract) and ran though they picked up yet another $840 in the overnights as gasoline continued to fall – all the way to $1.58 this morning where we flipped long (as well as long on oil at $52.50 on the new, /CLH7 March contracts) – looking for a small bounce but with little conviction – as we still think oil can go lower.  

As we have told you, we can make great calls like this because the energy markets are just a scam and we have a pretty good idea of how that scam works.

Now, there are some people (who shall remain nameless) who think that NYMEX traders trading 4 BILLION barrels worth of contracts (4M) back and forth during a month in order to ultimately accept delivery of less than 20M barrels (0.5%) is somehow legitimate speculation but the friction costs alone of trading 200 barrels for each barrel delivered ads $20 to each barrel purchased in the US – even if it were legitimate, the practice should be stopped!  

Yesterday, I printed a chart of the NYMEX open contracts and I said that the 197,589 open orders (at 1,000 barrels per contract) for February were FAKE!!! and that they would be cancelled and put into other months to FAKE!!! demand in future months so the cycle can repeat.  Our short bet was based on the pressure they had to sell or roll the Feb barrels over the next few days.  Already today we can see the difference:

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Tricky Tuesday – How Will the Markets Perform with Volume Trading?

Image result for slow trading dayAre we there yet?

The average volume trading on SPY, the S&P ETF is 100M shares per day yet this month, the average has been 70M so about 30% less trading than "usual", which was very slow to begin with (down 25% from last year).  A lot of times, if you are day-trading and you feel like you're the only one in a position – you are probably right!  

As you can see from the above chart, when you see these kind of toppy, sloppy patterns – it's best just not to trade and wise traders go to CASH!!! (have I mentioned how much I like CASH!!! lately?) and wait PATIENTLY for conditions to improve.  If that chart looks familiar to you – just check out what the S&P 500 Futures (/ES) have been doing for the past few weeks:

That is what they call a "textbook" example of a market that is not good to trade.  That's why we stopped making calls in our morning posts after a fantastic first week of the year:  A) We didn't want to ruin our perfect record and B) There were no longer any very obvious trades to call.  We did, however, call oil short at $54 on the 6th and it's been up and down but now $53.20, which is still up $800 per contract from where we called it and now we're calling that one short again (/CL) as well as Gasoline (/RB) at the $1.65 line.

Why are we short oil and gasoline?  Well oil, in particular, is nothing more than a gigantic fraud of a market that is based on the artificial manipulation of what has always been, historically, a plentiful supply.  As we all know, OPEC spent most of last year promising to cut production and, FINALLY, this January they actually did cut production, by 1.5% of Global supply and this morning they spiked oil from $52.20 to $53.20 by releasing a statement from the Secretary General predicting oil prices would stabilize in 2017 and hit $70 by the year's end.  

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Thank Trump It’s Friday – Markets Flatline Into Long Weekend

What a ride! 

On the whole, we've gone nowhere since Christmas.  The S&P Futures (/TF) were at 2,260 on 12/26 and they finished the day yesterday at 2,266 with dips and pops along the way but, ultimately, nothing happened.  Great news has already been priced in and the markets are now looking for justification to these all-time highs.  S&P earnings are expected to be up 15% in 2017 but most of that is because Trump is expected to cut taxes – not because things are getting so much better in Corporate America.

The Fed has been fairly consistent in letting people know they expect to hike rates 3 times in 2017 and 3 rate hikes are certainly not baked into this market.  We'll be getting earnings this morning from 6 Big Banks and the Financial sector is up 17% since Election Day – can they justify that kind of price action?  JPMorgan (JPM), Bank of America (BAC), Wells Fargo (WFC), PNC Financial (PNC), First Horizon (FHN) and First Republic (FRC) are scheduled to report, as well as BlackRock (BLK) and, so far, BLK, BAC and FHN missed on Revenues with FHN also missing on earnings with PNC beating and we're waiting for FRC and JPM.

In anticipation of disappointment in the Financials, we put up a nice hedging play using the Ultra-Short ETF (SKF) offset by a bank we thought would recover (WFC) in Monday's post.  We'll see how that plays out later today.  Our target is $33 to make $6,150 but, so far, no shockers.  Of course, I'm not sure you need a shocker to knock financials back from a 17% run, which knocked SKF back 25% over the same period.

Ah, there's JPM and they earnings are up 2% from last year but how does that justify the 2016 50% bull run from $57 to $86?  It's the same with BLK, who made $4.75 last year in Q4, when shares were $300 but now shares are $378 (26% more) with earnings hitting $5.14 (8.2% more).  That's pretty much the story for the 2016/2017 market – paying 3x for incremental earnings!  

Related imageMeanwhile, back in the catastrophe that is retail,
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Thrilling Thursday – Rally Resumes on Dollar Weakness

Down and down the Dollar goes. 

While Americans may have been thrilled with whatever it was that Trump and his lawyer said in yesterday's press conference (pundits are still trying to figure it out), the rest of the World lost faith in the Dollar and sent it to it's worst 24-hour drop since 2001 from just under $103 to $100.75 (and still falling) is more than a 2% drop in the value of the Dollar and the US indexes, which are priced in Dollars, gained half a point and everyone thinks it's a rally – idiots!  

Oil, also priced in Dollars, jumped up from $51 to $53 (and still climbing) and that's up 4% and boy did we call that one wrong yesterday for our first Futures loss of the year.   Gold was up 2%, etc. etc. – in other words, the Dollar went down and all the things priced in Dollars went up but, notably, not so much the equity markets.  In fact, if you look at the S&P and divided it by the price of oil over the past few months, you get a very disturbing trend:

In fact, since the election, we've lost 17.3% of our buying power and, for the year, 1/3 of our buying power has disappeared while the stocks have "rallied" to record highs.  This is what happens in inflationary times – your portfolio may go up in value but, when you try to convert it to Dollars and then try to buy something useful with those Dollars – you find that you've fallen very short. 

Why the sharp loss of faith in our currency yesterday?  Well, after waiting for two months for Trump to give his first press conference, he said nothing of substance.  No infrastructure program, no jobs program, no agenda at all other than repealing Obamacare and that comes with no particular plan to replace it – which could be a disaster for 20M people who will lose their health care.  

Then there are the economic issues in the US that the market has been ignoring:  Wells Fargo (WFC)'s take on the ICR Retail Conference sums it up nicely as they call the entire Retail
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Weakening Wednesday – Oil Leads Markets Lower

We're short oil at $51 (/CL).

The API report last night showed a 1.5Mb build in Oil, a 1.7Mb build in Gasoline and a 5.5Mb build in Distillates and, if that's matched on the EIA report at 10:30 this morning – you can say goodbye to $50, which would be a $1,000 per contract gain in the Futures.  

It's all starting to fall apart and that includes Trump's plan to be President.  I'm not going to get into it but it's best to read the UK's Guardian's article for an outsider's perspective on this mess (and this follow up timeline) and, if you dare, to read the actual intelligence briefing on Trump's ties to the Kremlin, with it's horrifying details.  As noted by Trump spokeswoman Kellyanne Conway last night, these are "unverified" claims and that's true because, if they were verified, a lot of people would be going to jail for espionage!  

Now we know why Hillary said she is going to the inauguration next week – she still might end up being the one who's sworn in!  While it's doubtful that still-President Obama will declare martial law and delay the transition until a full investigation is completed – it's not impossible at this point and markets really don't like political uncertainty – especially in a leading World power. 

That's all I'll say about it for fear of being censored for political commentary and then you would miss out on our oil call and other hedging ideas as well as a repeat of our main idea to make sure you have plenty of CASH!!! to ride out what could be a major black swan crisis.  

We're back to shorting the Russell Futures (/TF) below the 1,370 line (tight stops above) and we expect a rising Dollar (already 102.50) to put downward pressure on the indexes as well as commodities but it's going to be wild and we probably won't be playing those.  If you want an option play to hedge with the Russell, I suggest the following using the Ultra-Short ETF (TZA):

  • Buy 20 TZA March $18 calls for $2.25 ($4,500) 
  • Sell 20 TZA March $22

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Whoever Gets Appointed To The Fed, Expect Negative Rates And QE In The Next Crisis

By Mauldin Economics. Originally published at ValueWalk.

Janet Yellen’s current turn at the chair expires in February.

Who will be running the Fed next year, and will it matter? How will new leadership change anything?

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Zero Hedge

USA Is Now Twice As Likely To 'Default' Than Germany

Courtesy of ZeroHedge. View original post here.

While the market turmoil (stocks down a few percentage points from all-time record highs) is being pinned on various factors (from North Korea, Trump, & Cohn to terrible retailer earnings and J-Hole anxiety), we suspect the real cause of market uncertainty is starting to peak through - the looming debt ceiling crisis that has now become too big and too imminent to ignore.

Of course, uncertainty in The White House is starting to make investors realize the chance of successfully navigating the debt ceiling crisis without a government shutdown are dwindling...


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Phil's Favorites

Fearful Investors Losing Faith in Trump?

Courtesy of Mish.

Mainstream media likes to assign a reason for every squiggle in the stock market, bond market, or commodities.

Today provides an amusing example.

Reuters says Washington’s Mounting Woes Push S&P to Biggest Loss in Three Months.

U.S. stocks sold off on Thursday, with the S&P 500 recording its biggest daily percentage drop in three months as escalating worries about the Trump administration’s ability to push through its economic agenda rattled investors.

Investors appeared to be losing faith in the Trump administration’s ability to move forward with tax cuts and the rest of its domestic economic agenda, some strategists said. Th...

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Chart School

Volatility on the Rise

Courtesy of Declan.

Today's losses look big on current charts but in a historic context, they weren't too severe. However, big red bars are not to be ignored and 'market leading' Small Caps have felt the full brunt of the selling from July which is bad news for the broader market.  Today's losses in the Russell 2000 undercut the 200-day MA leaving 1,345 as next support (of which I would not be too confident of it holding).

If the Russell 2000 gives up 1,350s then a drop to 1,150s could be on the cards. Things could get ugly if this scenario pl...

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Insider Scoop

10 Stocks To Watch For August 17, 2017

Courtesy of Benzinga.

Related SMRT Earnings Scheduled For August 16, 2017 The Factors That Could Be Moving Short- And Long-Term Buyers ... more from Insider

Digital Currencies

Ukrainian Lawmakers Disclose $45 Million In Bitcoin Holdings

Courtesy of ZeroHedge. View original post here.

As Ukraine's crackdown on corruption continues, three lawmakers from Ukraine’s ruling party revealed this week that they own a combined $45 million in bitcoin, according to a report by RIA Novosti, a Russian foreign news service.

Their holdings came to light during mandatory financial disclosures by members of the Ukrainian parliament, part of an IMF-approved strategy to tamp down corruption in Ukraine. The country's democratic institutions, which were never very robust to begin with, have been further destabilized by...

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Swing trading portfolio - week of August 14th, 2017

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


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

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

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

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

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Editing human embryos with CRISPR is moving ahead - now's the time to work out the ethics

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

Editing human embryos with CRISPR is moving ahead – now's the time to work out the ethics

Courtesy of Jessica BergCase Western Reserve University

There’s still a way to go from editing single-cell embryos to a full-term ‘designer baby.’ ZEISS Microscopy, CC BY-SA

The announcement by researchers in Portland, Oregon that they’ve successfully modified the genetic m...

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Members' Corner

Why we need to act on climate change now


Why we need to act on climate change now

Interview with Jan Dash PhD, by Ilene Carrie, Editor at Phil’s Stock World

Jan Dash PhD is a physicist, an expert at quantitative finance and risk management, and a consultant at Bloomberg LP. In his thought-provoking book, Quantitative Finance and Risk Management, A Physicist's Approach, Jan devotes a chapter to climate change and its long-term systemic risk. In this article, Ilene interviews Jan regarding his thoughts on climate change and the way it can affect our futu...

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Mapping The Market

The App Economy Will Be Worth $6 Trillion in Five Years

Courtesy of Jean-Luc

This would be excellent news for AAPL and GOOG to a lesser extent although not inconsequential:

The App Economy Will Be Worth $6 Trillion in Five Years 

In five years, the app economy will be worth $6.3 trillion, up from $1.3 trillion last year, according to a report released today by app measurement company App Annie. What explains the growth? More people are spending more time and -- crucially -- more money in apps. While on average people aren't downloading many more apps, App Annie expects global app usership to nearly double to 6.3 billion people in the next five years while the time spent in apps will more than double. And, it expects the...

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NewsWare: Watch Today's Webinar!


We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.


EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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All About Trends

Mid-Day Update

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

Click here for the full report.

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

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FeedTheBull - Top Stock market and Finance Sites

About Phil:

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

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About Ilene:

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

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