by phil - March 11th, 2012 6:32 am
Now that I've slept on it, I want to raise cash.
As I mentioned in yesterday's update, we are very bullish, perhaps too bullish in our Income Portfolio and we are also 100% ahead of schedule and more like 250% counting the gains from our buy/writes, some of which are well in the money. Since we aren't thrilled with the overall economic picture and, since we're supposed to be learning new techniques and, since I think it's time to start a fresh Income Portfolio anyway, let's go through our positions and learn how to sell in May and go away with style.
We're not purposely cashing it all out but we won't be upset to be cashed out on some – and I'm sure you'll see why. I'm going to comment on every position with red highlights for action items, we'll start with our short puts:
- 20 HCBK July $9 puts sold for $1.45 (-$2,900), now $2.10 – down $1,300
- 1,000 HCBK at net $6.83, now $6.79 – .08 dividend expected 5/8 ($80)
- HCBK is now $6.79 and we essentially own them for $9. They pay a .32 dividend and we already have 1,000 shares uncovered so let's sell 20 July $7 calls for .30 ($600). If we're over $7, then we lose our current 1,000 shares (but get paid $7) and we'll have 10 short calls to roll into July, where anything between $7 and $9 is an improvement to our current short puts.
- 10 GE Jan $17.50 puts sold for $2.10 (-$2,100), now $1.38 – up $720
- I don't see GE popping $20 very easily but let's cash these puts in and sell 15 April $19 puts and calls for .99 to raise $1,485 that will expire in April. As we're willing to own GE long-term, either being forced to roll the puts or forced to buy stock to cover (with $2,195 already in our pocket) is
by phil - March 10th, 2012 4:46 am
Who says we're not bullish?
It's interesting how many people think we're bearish just because we talk about the problems in the economy and just because we don't buy into the market hype. Yes, short-term, we expect a correction and so far – so wrong on that one but, long-term, I don't think we have ANY bearish plays and our largest portfolio, our virtual income portfolio, is 100% bullish (with hedges) and has been since day one.
As of Friday, our $25,000 Portfolio was down $7,500 for the year. That's not good but that portfolio is supposed to be the aggressive carve-out of a more conservative $250,000-$500,000 portfolio like our income portfolio, which is long-term bullish and doing extremely well. How well? Up $73,792 in our first 9 months is an average of $8,199 per month generated off a conservatively invested $500,000 and double our goal of pulling a $4,000 monthly income without digging into our principal.
This is the kind of set-up that my Mom and many of her friends need to do to supplement their not very generous Social Security checks but it's also using the same principle that applies to any long-term wealth-building strategy, utilizing our best long-term growth strategies combined with a concentration on generating an income collecting dividends and selling short-term options to create our own "dividend" stream on ordinary stocks. Please see previous posts in our Virtual Portfolio section for our main strategy discussions – this is just an update.
Prior to making our moves, we had $87,042 of realized gains (positions we had cashed in) against $13,250 of unrealized losses for a $73,792 net gain in our 9th month so averaging a bit better than $8,000 a month and, as I said above, well ahead of schedule. The following positions were closed since then:
- 20 DIA Feb $120 puts sold for $1.60, expired worthless – up $3,200
- 20 SDS Feb $18 calls sold for .98, expired worthless – up $1,960
- 2,000 shares of AGNC paid a $1.25 dividend on 3/5 – up $2,500
- 3,000 shares of FTR paid a .10 dividend on 3/7 – up $300
- 1,000 shares of HCBK paid a .08 dividend on 3/8 – up $80
- 5,000 shares of SVU paid a .088 dividend on 2/28 – up $440
- 500 shares of MT paid a .188 dividend on 2/16 –
by phil - March 9th, 2012 7:53 am
The Greek debt crisis is over!
Again. Well, for now. Despite the "voluntary" participation of 85% of the debt-holders, collective action clauses (CAC) will be triggered to force other bondholders and a similar action in Argentina led to 10 years of lawsuits – so we have that to look forward to. "The rule of law has been treated with contempt," said Marc Ostwald from Monument Securities. "This will lead to litigation for the next ten years. It has become a massive impediment for long-term investors, and people will now be very wary about Spain and Portugal."
“Even if we band aid this Greek situation right now, they’re going to default down the road or write down 100 percent of the debt,” said Scott Wren, senior equity strategist at Wells Fargo Advisors.
Now the European Commission has sent a team of experts to Spain to check its budget deficit data, according to Spanish website Expansion, and they will be greeted by a National Strike, scheduled for March 29th, to protest the austerity measures the EU is trying to enforce. Greek bonds are already passing the 20% mark again so this "fix" has lasted all of a few hours and already we're seeing rates creep up in Italy, Spain and Portugal (Ireland can't even borrow money – at any price) and part of the reason is they just blatantly screwed over the last batch of bondholders and Credit Default Swaps have now been revealed as completely useless tools to protect bond investments – and part of the reason is Uncle Sam needs to borrow a record $227Bn to pay the bills for February alone:
While the above chart may look like a catastrophe to a casual observer, especially considering February is the shortest month of the year – others may be cheered by the thought that the US will never actually have to pay this money back, as Greece has now shown us all that the path to default is celebrated by global markets climbing to record highs. So, if Greece's $450Bn default can get us to Dow 13,000 – imagine what the US's $16Tn default will do – I can't wait!
We are waiting for the jobs report this morning but according to the Gallup poll, there aren't any. Gallup sees 9.1% unemployment in February, up…
by phil - March 8th, 2012 8:12 am
The Dollar is down 1%.
That makes the markets go up 1%. Mostly, the Dollar is down based on a FABRICATION in Uncle Rupert's Wall Street Journal – the most widely read financial publication in the World (next to Philstockworld, of course!). Although Jon Hilsenrath, the WSJ chief economist who started this nonsense made it VERY CLEAR that the story was predicated on IF they decide to do more "capital I, capital F," Jon says – THEN this is the kind of bond buying that might happen.
That's all it took yesterday to send the S&P up 1% but, if there were a volume measure, you'd see that, on the Dow, 25M shares were traded before 11, and just 35M shares between 11 and 3:30 and then 50M shares were traded between 3:30 and 4pm, almost 100% down volume. The only people that are fooled by these word games are the beautiful sheeple who are so well-trained to buy the F'ing dips that even a misstatement like this sends them into a buying frenzy.
Ah, fresh meat – we love it! Oil (/CL) was back at $107 this morning and we already caught a nice dip off our favorite sell spot in Member Chat and gold is giving us a good short entry at $1,700 (/YG) as well. All we have to do is watch the Dollar and see if it can hold 79.40 once real trading begins. The Euro is up at $1.324, off the $1.31 line yesterday so up 1% and the Pound is up from $1.57 yesterday to $1.58 this morning and the Yen is loving it at 81.71 (weaker) as they've been solidly backing the Euro over at the BOJ this month and the Nikkei futures (/NKD) shot up from 9,500 yesterday to 9,835 this morning (3.5%) on a 1% drop in their currency so this would be a great spot (below 9.850) to short the Nikkei.
For the Futures impaired, the EWJ April $10 puts at .20 should be a fun way to play the Nikkei reversing, assuming reality sets in at some point. It's 8:25 now and oil just hit $106.50 and that's our take the money and run spot in the futures as we pick up $500 per contract off my 4:56 comment in Member Chat this morning:
by phil - March 7th, 2012 7:52 am
Was that it?
On February 24th I wrote "TGIF – Sell in March and Go Away?" and I laid out my case for why I thought we were going to fall off the table in March and we have, indeed, fallen right off the table right on schedule since then. I said that Friday, that the post was intended as a bookend to my September 30th bottom call as I felt that we had captured all of the upside we were likely to see off the "good news" that Greece was "fixed" and the economy was "improving."
I'm not going to say anything bad about the economy here, I'll let Michael Snyder do that with his "15 Potentially MASSIVE Threats to the US Economy over the next 12 Months" – I think he pretty much covers it! 8 trading days ago (2/24), we had two short trade ideas in our Morning Alert to Members, they were:
- SQQQ April $13/17 bull call spread at .70, still .70 (even)
- DXD April $13/15 bull call spread at net .55, now .70 – up 27%
In Member Chat that day, Exec asked if I was getting bearish and my response was:
Bearish/Exec – Are you kidding, this is me painting a sunny picture! Give me a few drinks and I'll tell you how off the rails the Global Economy is right now… Do you know how much Kool Aid I have to consume not to scream short on every single stock I see. CAT $116, CMG $386, DIA $130, GMCR we already did at $70, IBM $200, KO $70, MA $415, MCD $100, MMM $88, MO $30, MON $80, MOS $59, OIH $45, PCLN $593 (did them too), QQQ $64, SPY $137, TM $85, USO $41.50 (got 'em), UTX $84, V $117, WYNN $119, XOM $87, XRT $59 (got 'em) – and that's just off my watch list of stock I like to buy when they're cheap! We are not just priced for perfection, we are priced for perfection plus a return to full employment a forgiveness of all debts without write-downs and inflation without rising interest – we are priced for Nirvana!
by phil - March 6th, 2012 7:35 am
Romney, Newt or Santorum?
In the movie "Sophie's Choice," Meryl Streep was forced to make a terrible decision over which of her children would be sent to the gas chamber and which to the labor camps. Even after choosing, she was unable to live with the decision and she and her husband killed themselves, which manages to further screw the boy who was sent off to the labor camps, now an orphan too. That pretty much sums up this Primary season for the Republicans as they have to choose between 3 TERRIBLE candidates – any one of which is a pretty clear path towards National suicide.
A recent Gallup poll indicated 55% of Republican voters say they wish someone else was running but, that leaves 45% happy with their choices (I guess if they were Sophie, they would have just flipped a coin and been done with it) and perhaps today we'll get a better indication of who the front-runner is as 410 delegates go up for grabs today, which is much less than last election, when John McCain alone scored 511 delegates on Feb 5th, 2008. Interesting Republican trivia: On that day in 2008, Mitt Romney came in 2nd with 176, Mike Huckabee had 147 and Dr. Ron Paul scored 10. So Romney was only 1/3 as popular as McCain 4 years ago and I'm pretty sure McCain got his ass kicked in the General elections, didn't he?
Something has to change in this country as 93% of all income gains in 2010 (most recent figures) went to the top 1%. 93%. How does this work? In 2010, average real income per family grew by 2.3%, but the gains were very uneven. Top 1% incomes grew by 11.6% while bottom 99% incomes grew only by 0.2%. Looking ahead to last year, National Accounts statistics show that corporate profits and dividends distributed have grown strongly in 2011 while wage and salary accruals have only grown only modestly. Unemployment and non-employment have remained high in 2011.
While it is very, VERY good to be in the top 1%, being in the bottom 99% – not so much. What I try to get the top 1% to see though, is that getting 45% of the growth, like we did under Clinton, is pretty good – especially when it means that EVERYONE is participating in economic improvements and the overall growth is…
by phil - March 5th, 2012 8:14 am
99.7% – in Chechnya!
That's right, the very place where Putin brutally put down civil unrest and the same place where they still launch terrorist attacks on Russian targets apparently LOVES Putin. All of Russia "loves" Putin as the former KGB Boss turned Russian Boss sailed to another Presidential victory. Nationally, Putin scored about 63% of the vote with his worst showing in Moscow, where just 48.7% voted for him but, unlike the US, Russians choose between 5 parties so 48.7% is pretty good while 99.7% is INcredible (as in NOT credible)!
So it's "meet the new boss, same as the old boss" in Russia this morning and before you think "that can't happen here" – perhaps you should consider how our own propaganda networks covered this election. Here's a video of Fox (of course) showing video of a "violent rally against Putin" complete with fire bombs, riot police, etc.
Only it isn't Russia – it's Greece. Fox knows their viewers are so gullible, they don't even bother to edit out the Greek letters on the bank in the background because, as any Fox viewer knows – Russian, Greek – all the same nasty unAmerican languages.
CNN is no better, showing a soccer rally and narrating it as violent protests against Putin (end of same video). The fact that these deceptions aren't considered major news in THIS country let's you know how dangerously close we are to seeing one of our own candidates getting 99.7% of the vote one day as one group of thugs or another consolidates their hold on our Government and our Media.
So happy Monday to you! It was a pretty boring weekend so not much to report other than the Eurozone PMI fell 2% in February to 49.3 (contracting) while China's Feb Service PMI dropped 9%, into negative territory at 48.4 (contracting). China also lowered their GDP target by 6%, from 8% to 7.5% as Wen Jiabao says "the nation needs to shift to a more sustainable and efficient economic model."
Hmm, China's Premier says their growth is unsustainable – don't worry folks, move along – nothing to see here…. Unwilling to ignore the situation is Credit Suisse's Dong Tao, who says The commodity super-cycle underpinned by China has drawn to a close as Chinese commodity needs have peaked as the nation transitions to domestic…
by phil - March 2nd, 2012 8:18 am
Oil shot up to $110.55 yesterday.
The news was that a pipeline in Saudi Arabia had been attacked and oil had been running up all day into this "news," which, funnily enough, turned out to be fake. We caught the news at 3:05 in Member Chat (thanks Kustomz) and we had been waiting for oil to stop going up so we could short it. The turn came at the $110.50 in the Futures (/CL) and we caught a nice run down to $109 and I reiterated, at 3:36, with oil still at $109.88 my love for the USO April $40 puts, which were $1.08 at the time and finished the day at $1.15.
As Malsg pointed out in Member Chat: "The pictures of the fire are taken in daylight … but Saudi sunset was several hours ago … the oil market only stared going nuts after the close." A very good observation that gave us the resolve to stay short on oil – which is working out fantastically this morning as well.
We also grabbed an aggressive short spread on BNO, as it seemed the whole day's run had been BS, with traders in the know stocking up ahead of the fake news so they could unload barrels into the retail suckers who bought into the spike. Don't worry though – no one who bought oil up from $105 on Thursday to $109 ahead of the news will be arrested or even questioned – we'll just keep pretending the total farce of oil trading is a legitimate pricing mechanism, even though it costs people around the world hundreds of Billions of Dollars each year in excess charges (see "Goldman's Global Oil Scam Passes the 50 Madoff Mark").
Now, this is the part where I would usually point out how the economy is weaker than we think etc. but I'm not going to do that this morning because the S&P still over 1,360 and, if a stronger Dollar isn't going to stop this rally – nothing will. Even yesterday, I joked to Members that I wasn't going to highlight negative news items in red anymore as there was no such thing as bad news in this market.
As you can see from David Fry's SPY chart, we''re back testing the bottom of that channel today and, if we don't break down here, then we can…
by phil - March 1st, 2012 8:23 am
“Capitalism threatens our existence.”
That's the message today from legendary investor Jeremy Grantham, who's GMO Capital manages $97Bn and, like Buffett, writes an annual letter to his investors. Part one of the letter has some great general investing advice but part two gets very interesting as Grantham titles it "Your Grandchildren Have No Value (And Other Deficiencies of Capitalism)" exposing what he considers the "two or three main flaws" of Capitalism that are "potentially fatal and have gone largely unaddressed."
A sustainable economic system, for instance, can’t be based on ever-increasing debt, corporations can’t be allowed to run governments and loot treasuries, and “growth at any cost” is a recipe for planetary suicide.
Grantham points out that a company is now free to spend money to influence political outcomes and need tell no one, least of all its own shareholders, the technical owners. So, rich industries can exert so much political influence that they now have a dangerous degree of influence over Congress. And the issues they most influence are precisely the ones that matter most, the ones that are most important to society’s long-term wellbeing, indeed its very existence.
Thus, taking huge benefits from Nature and damaging it in return is completely free and all attempts at government control are fought with costly lobbying and advertising. And one of the first victims in this campaign has been the truth. If scientific evidence suggests costs and limits be imposed on industry to protect the long-term environment, then science will be opposed by clever disinformation. It’s now getting to be an old and obvious story, but because their propaganda is good and despite the solidness of the data, half of the people believe the problem is a government run wild, mad to control everything.
- Capitalism too heavily discounts the future value of cash flows as it seeks to raise debts: “Your grandchildren have no value.”
- "For example, let us say that a firm’s current actions are going to cost society at large a billion dollars’ worth of harm in 50 years. Further, let us agree that all of the costs will definitely be imposed on the company. The company would feel that pain today as equivalent to only a mere $1 million hit to earnings. Why should they care?"
- Companies foolishly reward executives for taking on debt: “Total remuneration … for
by phil - February 29th, 2012 8:12 am
That's how much the ECB dished out to 800 lenders this morning – close to $1Bn per bank of cheap, 3-year loans in the hopes that they, in turn, will turn around and lend them out to people and businesses throughout the EU at less-than-cheap rates so the EU banks can make a nice profit and back-fill the gaping holes in their balance sheets that have been devastated by defaults and currently are being ignored by the mutually assured distraction that allows everyone's assets to be marked to fantasy.
As we saw yesterday, US foreclosures in Q4 were jumping at a rate of 100,000 per month – and that was before the settlement. There is a backlog of 4M homes in foreclosure in the US and Case-Shiller's Home Price Index have hit record lows on the 20-city Composite Index. So it's not just the $400Bn worth of losses on homes in foreclosure (4% of all homes) that have not been taken by the banks but the impuned damage of another $10Tn of asset devaluation on the other 96M homes that is being ignored by US banks.
Europe has more people and more homes and more unemployment than the US. While there is no convenient Case-Shiller report in the EU, we can reasonably expect that EU banks are at least as screwed as US banks and we're not even discussing their Trillions of questionably-valued bond holdings
So, when you watch the markets today and wonder how it's possible that a $712Bn injection of capital widely distributed throughout the European Banking System (exact details a guarded secret, of course) doesn't do anything to boost the markets – that's why.
I read the news today oh boy
Four thousand holes in Blackburn, Lancashire
And though the holes were rather small
They had to count them all
Now they know how many holes it takes to fill the Albert Hall.