White Christmas Portfolio Wrap-Up
by Phil - December 24th, 2011 8:31 am
Merry Christamas!
I know it’s tacky to give cash but, as we closed our original, virtual $25,000 Portfolio early on October 20th and we were miles ahead of our $100,000 goal, we decided to do this bonus portfolio starting with a fresh virtual $15,000 set aside out of our $130,000 – risking 1/2 of the excess profits in an attempt to make 60% more ($10,000) in two months.
We started that Monday, the 24th of October with our GNW spread (which I also discussed on TV that day) and that Friday we put up the official post where, I will remind you, our stated goal was to make a little bonus money for the holidays AND to share some of that money with a worthy cause. I want to thank everyone who chose to donate to the NYC Food Bank, we got some really spectacular donations from some of you and I really appreciate it and I hope you have all gotten into the holiday spirit and helped to support those in need this season – it’s much appreciated and I thank you.
Just as importantly, I very much hope you were able to learn something following this portfolio. We never put much capital at risk, we took quick profits off the table and we worked our way out of most of our losses through rolling and adjusting – letting the trading range do most of the hard work. Most importantly, we had BALANCE – we selected trades in both directions – enjoying the wild ride from the up and down markets.
That strategy, in fact, worked very well!
As of Friday and since our last update on the 16th, when we had $41,465 of realized gains, we closed the following positions:
- 5 SCO Dec $37 puts sold for net $1.90, expired worthless – up $1,900
- 5 FAS Dec $40 puts sold for $2.40, expired worthless – up $1,200
- 10 TNA Dec $41 calls at net $1.50, out at $1.50 – even
- 10 FAS Dec $61 calls sold at net $0 (spread), expired worthless – even
- 10 TLT 12/23 $121 calls sold for net .74 ($740), expired worthless – up $740
- 10 GNW Dec $6 puts sold for .85, expired worthless – up $850
- 10 QQQ 12/16 $56 puts at .57, out at $1.05 – up $480
- 10
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DiggTwas the Friday Before Christmas
by Phil - December 23rd, 2011 8:10 am
Really guys!
Don’t we all have something better to do than watch the markets today?
I’m embarrassed for all of us. Even the crooks at the NYMEX are going home at 1:30 this afternoon, sacrificing an entire hour of losing money to us to be with their strippers. That’s right we OWNED those people yesterday, hitting play after play after play on the oil Futures, all based on our very simple premise that – If the crooks at the NYMEX want to pretend they want to buy a barrel of oil for $100 – we are very happy to promise to sell it to them!
Over and over they pretend to want to buy oil at or near $100 and over and over, as soon as we (real people) actually start accepting their offers – they quickly dry up and retreat – over and over and over again.
This is how you beat the scam artists, call them at their game.
At 3am this morning, they jammed oil up to $100.23 and at 3:51, in Member Chat, we were able to jump in and short the oil Futures (/CL) at $100 and by 5:30 we were out at $99.60. That may not seem like a lot but, at $10 per penny per contract – it buys a lot of Egg McMuffins!
As I’m writing this (7:35) we just caught another run up to $100 and already it’s back to $99.66 on fake, Fake, FAKE trading. Yes, ALL THE TIME they are faking it. ALL THE TIME. It’s a SCAM – Oil trading is a scam, a lie, a con – and it’s played on the American people every single day and no one does a thing to stop them (except us).
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GDPhursday – Death by a Thousand Cuts?
by Phil - December 22nd, 2011 8:36 am
"Death by a Thousand Cuts!"
That’s the word this morning from Societe Generale, who titled their Global Earnings Estimates Analysis: "Death by a thousand cuts; double digit downgrades for Eurozone and Japan" and included this spiffy graph to make the point that we are now about to cross back into the negative earnings zone that has, in the past, been a great indicator that we were about to have a HORRIFIC market correction.
Per Barry Ritholtz, the "highlights" of the report were:
• Recent earnings forecasts cut by 4.9% and 6.9% for 2011 and 2012, respectively.• Severe downgrading of both 2011 and 2012 consensus forecasts, with Japan and the Eurozone seeing double-digit percentage cuts to next year’s earnings;• US stands out with only minor cuts to 2012 forecasts.
Of course, the EU has just given us a fabulous road map for the next round of QE and they have flooded the World with enough freshly printed Euros that it would hardly make a ripple now if the Fed drops a Trillion here or there in 2012. Not to be outdone, the Swiss have been considering PAYING Banksters to borrow money and the Government actually voted yesterday (defeated so far) on creating a legal framework for negative interest rates.
THAT’s how crazy things are getting and THAT’s what happens when Banksters run a country – a fate the United States is itself in the early stages of. When the primary purpose of the Government (and that’s YOUR elected officials spending YOUR money) becomes finding bigger and better ways to give money (that they don’t have) to Banks – THE SYSTEM IS BROKEN! Really, what does it take to wake you people up???
"If
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Will We Hold It Wednesday – For 500 BILLION Euros – We’d Better!
by Phil - December 21st, 2011 7:44 am
500 Billion Euros – Muhahaha!
This is, as they say in the Euro-zone, a good start. Money was offered and 523 banks requested a total of 489Bn Euros ($641Bn) in funding from the ECB at the delicious rate of 1% for three years.
We already discussed the merits of this program in Member chat this morning and Pharmboy and I will be debating the issue on National television very soon if this keeps up as it’s a shame to waste such a good debate.
Despite my bullish take on $641Bn being handed out to people who can lever it 10:1, this morning we shorted the run in the Dow Futures (/YM) to 12,100 and got a little dip to 12,070 but the big winner was, as usual, oil – which got all full of itself and ran up to $98.50, where we caught multiple rides down with the last hitting $97.50 so, as is often the case, the Egg McMuffins are paid for.
After the announcement of the "Longer-Term Refinancing Operation" (LTRO) – it did finally occur to some people that dropping that kind of money bomb on the EU might, somehow, devalue the Euros that are currently in circulation. Some theory about "supply and demand" which you may have hear of… Well, it seems the people who took Econ 101 were of the opinion that $1.32 was a bit much for the Euro under the circumstances (5am) and by 6am it was back down to $1.305 – a pretty crazy drop for a currency in an hour in any of the other 100 years of currency trading but, in 2011, we call just another it Wednesday morning.
So we’re done with our event-driven bearish bet on the futures and now we can go back to being bullish until and unless our levels fail to hold on our Big Chart.
Unlike those voodoo moving averages, our Big Chart lines are fixed according to our 5% rule and these are the same lines we used to predict the market since early 2009 and the only reason we move the lines is to adjust for major changes in Dollar valuation, which the market is priced in.
Other than that, we are rock-solid on target to finish at our 1,250 goal for the S&P, which is (after taking into account the net 4% drop in the Dollar) almost exactly…
Tuesday – Unthinking the Euro Crisis
by Phil - December 20th, 2011 8:23 am
“It’s still absurd and unthinkable in many senses of the word for people who really understand what it means to have a monetary union, it’s really unmanageable and unthinkable.
“Some people that seem to think about it or have the idea of preparing for it, they don’t know what they’re talking about. In my view, it’s still not going to happen.” – ECB Vice President, Vitor Constancio
Finally someone official is saying what I’ve been saying for months! The palpable fear that surrounds the Euro-zone is itself the problem – not the EU itself. I pointed out to Members last year, when the Greek crisis first hit, that dumping Greece from the EU would be as silly as the US dumping Florida or California because they missed their budget goals.
Constâncio said the ECB was determined to stick with its current policy of introducing new three-year funds to try to counter the freeze in interbank lending, and support greater fiscal integration in the euro zone. “What we decided is very recent and it’s enough, but we never pre-commit, so we will see,” he said. “So far, we think the decisions we made are very significant and should be enough for the objectives that we are responsible to attain.”
And what is it the EU has done recently? Up to one TRILLION Euros has been pledged in 3-year funding at the (variable) ECB rate, which is currently 1%. That is enough money to fund ALL the financing needed by ALL of the EU nations for the next two OR THREE years, according to GS analyst Jernej Omahen. Keep in mind that all you have to do is borrow $1Tn at 1% and lend it at 4% and PRESTO! – you make $30Bn. Do that 3 times and lever up the money you borrowed 10 times and suddenly you’re making a Trillion – nice work if you can get it!
Just like the…
Monday Mourning – Good Night Dear Leader
by Phil - December 19th, 2011 7:36 am
Oh, hello Mr. Seoul,
I dropped by
to pick up a reasonStick around while the clown
who is sickdoes the trick of disaster
Asia was in turmoil last night as news of the death of Kim Jong Il hit the wires. South Korea’s Kospi Index fell 3.4%, both the Shanghai and Hang Seng fell more than 2% at their opens but, along with the Nikkei, they all finished strong and down about 1.25%. My comment on the matter to Members at 11:29 last night was:
Meanwhile, Dear Leader has died and that shot the Dollar back to 81 and knocked the futures down half a point. Asia is down more like 2% as no one is please with Jr. taking over in South Korea. I always find that amusing when leaders who are hated die and the markets react negatively – as if the next guy could be worse. Markets just hate uncertainty but China is in charge of N. Korea – I doubt Kim’s son is going to suddenly declare war or whatever it is people are worried about. He’s just 27 and probably not suicidal
If anything (but I’m going to bed), I’d take oil long off the $93 line (/CL), which is where we liked them Friday. Gold already zoomed back to $1,600 and has been rejected there and the Dollar doesn’t look that strong above 81 so far.
So far, my logic is holding up as things have already calmed down and oil topped out at $94.50 at 5:30, for a nice $1,500 per contract gain in less than 6 hours. I find it easier to trade futures off news like that than they are to play during the US Market hours as the moves internationally, still seem to make a little sense while the moves in the US market are often pure nonsense.
Speaking of nonsense, David Fry agrees with me on Treasury rates as we are now falling below what you can get in an FDIC-insured deposit, which I consider the non-panic limit for rates. Unfortunately, we do get plenty of panic at a drop of the hat these days and TLT shorts were our big loser last week but we stuck with them for January, hoping things calm down over the…
Phuket Friday – Carnival of Madness
by Phil - December 16th, 2011 8:25 am
It’s party time!
A lot of investors have been saying "Phuket" lately and they can only be referring to the annual Patong Carnival in Thailand, where the tourist bureau wants you to know the tuberculosis outbreak is "under control." Actually, it’s an amazingly beautiful place with great people – must be why so many people keep mentioning it when starting at the markets this week…
As I mentioned yesterday, we had to flip bullish because our bearish bets were no fun and we felt that A) the bottom was a little forced in order for Timmy to peddle his T-Bills and B) that Santa Clause is coming to town. Actually, we had plenty of bearish bets from when the market was high so we needed the bullish bets to get BALANCE!
Balance was the theme of our virtual White Christmas Portfolio and we added another $3,615 in gains over the past two weeks to bring us very close to a triple at $42,925 off our $15,000 start back on November 21st. This is a very aggressive virtual portfolio where we are practicing the art of hit and run trading. The positions we closed in the last 9 sessions were bullish bets with FAS, XLF, FAS, DIA, GLD, XLF, FAS and XLF and bearish bets with GLL, TZA, FAS (spread), USO, DIA, TZA, DIA, DIA, DIA, DXD. See – BALANCE!
We thought the market would go up and down (I know, such a stretch!) and the markets did, in fact go up AND down with an AVERAGE swing of 1.5% PER DAY but, in the end, we’re still consolidating around our Must Hold lines and right back where we were at the last options expiration day of November 18th – causing almost all puts and calls sold to sucker a month ago to expire worthless. Isn’t it a funny coincidence how all that seems to work out for the Banksters?
As I reminded our Members, our cynical motto at PSW is "We don’t care IF the game is fixed, as long as we can figure out HOW the game is fixed and place our bets accordingly."
I don’t know how many times I need to tell you oil is a scam before you’ll believe me but it was way back on June first, when I laid out our plan to break the…
Thursday Flip Flop – Bank of France says F UK!
by Phil - December 15th, 2011 8:20 am
"They should start by downgrading the U.K."
That’s the word from BOF Governor Noyer when asked about the rumored French rating cut. That follows a report of Sarkozy calling David Cameron an "obstinate kid" over his behavior at the summit. “A downgrade doesn’t strike me as justified based on economic fundamentals,” Noyer told Le Telegramme, a Brittany-based newspaper. “Or if it is, they should start by downgrading the U.K., which has a bigger deficit, as much debt, more inflation, weaker growth and where bank lending is collapsing.”
That’s a Big Central Banking no-no. One Central Banker doesn’t generally use the word COLLAPSING when discussing the another Central Bank’s economy – especially when the economies are as closely tied as France and the UK’s. To some extent, this is evidence of how tightly ratcheted up tensions are in Euroland as well as how bat-shit crazy everyone and everything is going these days.
Note in the chart above that Spain and Italy are not so much the UK’s problem as they are that of France and Germany and England does have Ireland to worry about in much larger proportions so it’s natural that this should shape policy on both sides of the Channel. Obviously people who issue Fiat currencies shouldn’t cast dispersions on ANYONE – as you REALLY do not want people questioning the soundness of the entire system where each country simply puts it’s ink on a piece of paper and calls it money and tricks people into trading their stuff for it.
My 11 year-old daughter thinks the whole system makes no sense (her school hasn’t completely extinguished her ability to question authority – yet) and asked me on what basis the Dollar goes up and down and why she gets the same allowance each week regardless of changes in its buying power. Even a child realizes she is being ripped off by this system and the worst thing Central Banks can do is to wake up the population to the fact that the "legal tender" ain’t what it used to be. I pointed out to Madeline that she was on the right track and and told her to listen Jackson Brown’s "The Pretender" – she caught it the first time around – we’re still waiting for the rest of the happy idiots to wake up…
Pretense is what Fiat Currencies are all about! There’s no gold…
Wednesday Weakness – Can We Survive Without QE3?
by Phil - December 14th, 2011 8:01 am
WTF?
Do Ben Bernanke and I live on different planets? "For a lot of people," he said during a speech at Fort Bliss, "I know it doesn’t feel like the recession ever ended." For what people exactly, Dr. Bernanke, does it seem like it did end? Study after study after study show that, if you are not lucky enough to be in the top 10% of our society (and certainly not a shade of Johnson’s "Great Society" anymore) then you are pretty much f*cked – and, no, there’s not a nicer way to put it.
Bernanke seems to love the Great Depression so much he is Hell-bent on replicating it here so he can study it in greater detail. I suppose he has some sort of academic detachment regarding the untold suffering he is causing the American people but, who can blame him? He just got a great rate when he refinanced his $850,000 home.
Fortunately, we had complete confidence in Bernanke’s incompetence (see yesterday’s "To QE3 or not to QE3 – That Sets Direction") and, of course, we took advantage of yet another chance to short oil futures (/CL) off the $101 and then the $100 lines on the way down. We were HOPING (not a valid investing strategy) that we’d get some QE3 but, as I warned Members in the morning: "If not – well, Hell hath no fury like a market disappointed."
Clearly, as you can see from David Fry’s SPY chart – I was not overselling the point. Bernanke and the Fed are of the opinion that 10% unemployment is within their mandate of "promoting full employment" and don’t see the need to take action? Let’s have a little review of how good the Fed Chairman has been as a prognosticator for our economy as he enters his 7th year at the Fed:
Drivin’ that train, high on cocaine
Casey Jones you better watch your speed
Trouble ahead, trouble behind
and you know that notion just crossed my mind
Trouble with you is the trouble with me…
Tuesday – To QE3 or Not to QE3 – That Sets Direction
by Phil - December 13th, 2011 8:27 am
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Waiting for the Fed.
We did our Hamlet post for the ECB last Thursday and, like the Prince of Denmark, the dithering by the former Deutsche Mark crowd on whether or not to support the union of Mother Merkel and Uncle Nick, who killed the Fatherland in order to take their place at a new EU table – goes back and forth endlessly, swinging from pledges of bold action, right back to more inner monologs – where much is pondered by nothing is actually fixed.
In Hamlet, the action is moved forward by haphazard events, with Germany’s decision-making driven by fear of the hyper-inflationary ghost of the past while a castle full of knaves and fools twist and turn along the path which fate will, inescapably, lead them all to.
Sadly, in Hamlet, pretty much everyone ends up dead (spoiler alert!), dropping off like flies, one by one as their little union falls apart and things spin out of control. In the end, Norway has to come and take over the ruined kingdom – presumably because they have all that oil money and a balanced budget….
It was Polonius (Ophelia’s Dad), who first said, "neither a borrower nor a lender be" (shame on your English teacher if you thought Ben Franklin didn’t steal it) and the continuation of that couplet is "for loan oft loses both itself and friend."
The European Governments certainly aren’t making any friends with their drastic austerity measures and the program they came up with (see "The Rube Goldberg Solution") simply guarantees a recession while doing virtually nothing to solve the debt – just another game of kicking the can down the road.
But what is the point of kicking the can down the road if you are doing nothing to improve your situation along the way? Does the EU really not understand the game? Businessmen punt all the time – when bill pile up and sales are down and times are tough – we restructure, we refinance – whatever it take to buy some time and improve our cash flow but THERE’S USUALLY A PLAN! You don’t just begin haphazardly shutting down operations while hoping your revenues randomly improve.
Austerity NEVER works! The UN’s Economic Think Tank, UNCTAD, in their September report, entitled "Post-Crisis Policy Challenges in the World Economy," savaged U.S. and European economic policies and called for…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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