by phil - December 3rd, 2014 8:20 am
Higher and higher we go!
The rest of the World seems a bit tired but the S&P, Dow and Nasdaq are like the energizer bunnies of the Global Indexes as they keep going and going and going…
Earnings don't matter, Fed policy doesn't matter, news doesn't matter – IT just doesn't matter! – and that's something I haven't had to say since the bad old days before the last crash. Still, here we are again, just 6 years after a catastrophic market collapse – ignoring wave after wave of negatives as if they JUST DON'T MATTER.
Well, it's true in a way, nothing really matters – until it does. For example, did you know, on Friday, that our nation's debt passed the $18Tn mark? Even I was surprised by that one as our debt just topped $17Tn last November so adding another Trillion in a year seems kind of quick, don't you think? Don't worry though – there's 150M workers so all we have to do is each come up with $113,333 each and we're all sqare.
If we DON'T all come up with a quick $113,333, then we may have a problem as the interest on $18,000,000,000,000.00 at even just 2% is $360Bn per year, which by itself is $2,400 for each working American. The reason the top 1% tell us not to worry about the debt is because $2,400 isn't very much to people who earn $2M+ per year but, for those of you earning the average $48,000 a year – it's 5% of your salary.
Notice the projection for the next 6 years takes us to $23Tn and let's say interest rates head up to 4% – then, suddenly, the annual interest is about $1Tn per year and that's now $7,500 per working American – just to pay the interest! We could default, but there goes your Social Security as we've already robbed that lock box of close to $3Tn to fund our (so far) $18Tn debt.
by phil - December 2nd, 2014 8:29 am
Lots of interesting chart levels today:
As you can see from our Big Chart, the damage has been done over the past week as the Russell has once again failed at the Must Hold line, as has the NYSE and now we're watching 17,600 very closely on both the Dow and the Nikkei (which we're shorting this morning at 17,800 on /NKD Futures) and the Nasdaq has been rejected at the 20% line (ridiculous anyway) and the S&P will test its 10% line at 2,035.
While I'm not a big proponent of TA, we still pay attention to it as the majority of traders are using it and that makes it a self-fulfilling prophesy as so many people trade off the same lines that the lines appear to have some meaning.
In truth, those lines are no more a barrier to stock movement than the lines on the highway are to stop you from changing lanes. You might generally stay within the lines but, every once in a while, you simply cross them.
The fact that you USUALLY don't doesn't lead you to conclude that they are a wall, does it? Why then, when looking at a chart, would you conclude that arbitrary lines are a floor or a ceiling to movement? Surely the stock doesn't know where those lines are.
AAPL sure didn't know where it's line was yesterday as that stock had a mini "flash-crash" and plunged to $111.50 (6.3%) in the first 21 minutes of trading yesterday and then spent the rest of the day recovering half of its losses.
There were stories about weak IPad sales but nothing particular worthy of a panic sell-off and, in fact, BCS upped their target on AAPL to $140 before the market opened - certainly nothing worthy of AAPL losing $40Bn in market cap in less than 30 minutes!
AAPL's drop took the Nasdaq with it, of course, as well as other high-flyers like BABA – as traders simply start dumping first and then try to find out why they are doing it. Fortunately, at PSW, aside…
by phil - December 1st, 2014 7:57 am
Putin played the Game of Thrones this year in Ukraine and, like many in the TV show, he's lost it all in his grab for power. As you can see from the RSX chart on the right, the Russian market (which Vlad had about $50Bn tied up in) is down 10% in two days and heading off another cliff today in what we, at PSW, refer to as a Homer Simpson Sell-Off.
Russia is, of course, an oil-based economy and Mr. Putin's holdings are very much tied up in the oil and gas sector with a 4.5% stake in Gazprom, 37% of Sturgutneftegas and 75% of oil trading firm, Gunvor, which is facing massive losses as oil has collapsed from the FAKE top at $107 we called for you on June 20th all the way down to $63.72 this morning. Following our suggestion to short them there (in our Live Member Chat Room that morning) would have put you up $43,000 per contract at this point – not bad for 6 month's "work"!
Of course, we have been in and out of oil shorts over and over and over again in the interim but always with a bearish bias until we hit our $80 prediction and, since then, we've gotten more cautious and even made some LONG-term bullish bets but the bottom seems to be lower than even I predicted back in June ($70) though it may just be an over-reaction to the OPEC meeting – we'll have to see.
Meanwhile, there's no good news on the demand front as China's PMI kicked off the Global slump this morning with a 50.3 reading, down from 50.8 in October and the lowest since March while the private HSBC reading put them at 50 – not expanding at all. That was followed by Moody's downgrading Japan's (we're short) Credit Rating and that is a REALLY BIG DEAL for a country that is 260% of their GDP in debt.
When you are 260% of your GDP in debt, a 1% rise in your borrowing costs means you need 2.6% MORE of your GDP just to
by phil - November 28th, 2014 8:14 am
Oil is failing $70!
$66 is a 40% (strong) retracement from the $110 top we saw just over a year ago but this time may be different as OPEC ended their meeting with no agreement to reign in the massive over-supply of crude that's spilling out onto the markets, even in the face of continuing declines in consumption.
This is good news for consumers on two fronts - especially in the US, which has been miles behind the rest of the World in fuel economy. What we're seeing in play now is the lasting effect of the Obama Administration's Aug 2012 mandate that has required automakers to double the average fuel economy of new cars and trucks by 2025 to 54.5 miles per gallon and, already, by 2016, we are on track to hit 35.5 mpg on the average.
As the biggest guzzlers of gasoline in the World, the US was consuming 10.5Mb of gasoline per day when Obama took office in 2009 and already we are down 14% to 9Mb/d, which is a 14% decrease in oil consumption. 1.5Mb/d is 1.7% of the entire World's 88Mb/d oil habit but that number too is shrinking as it doesn't pay for auto manufacturers to make high-mileage cars just for the US, so the entire global fleet has been using less and less for 4 years now.
Getting to our goal of 54.5 mpg over the next 10 years will cut another 53% off our current consumption. If that feat is replicated Globally, we're taking about knocking back another 15Mb/d – at least!
And it's a double-win for consumers as their cars not only consume 14% less gas but that gas itself is now less expensive. During the Bush era, for example, gas was $4.00 per gallon and cars were getting 22mpg so the average citizen driving 15,000 miles a year was using 682 gallons of gas for $2,728 in fuel costs. Now, even at the early stages of the Obama Fuel Act, at 33 mpg it's only 454 gallons of gas and, at $2.85 per gallon, it costs just $1,294 to drive for the year – a $1,434 annual savings PER CAR!
by phil - November 26th, 2014 6:14 am
Let's not worry.
We're in the midst of a fantastic bull run so why ruin it with rational thinking? Barry Ritholtz used to be a rational guy but now he shills for Bloomberg (#8 on the Forbes 400 with $35Bn) and posts things like "Current Dow rally below average in both duration and magnitude" in order to encourage the beautiful sheeple to keep BUYBUYBUYing what his boss is SELLSELLSELLing.
I've warned before about how the smart money is leaving in droves while the dumb money piles in. Back on Sept 8th (S&P 2,010), for example, I wrote "Clear Proof of Massive Market Manipulation", saying:
It's pretty similar to what happened every day last week, with a high-volume (relatively) sell-off followed by a recovery on almost no volume into the close, giving us the impression that the markets are flat.
It is unbelievable, as in – something that should not be believed by intelligent people. When you see a magician on stage sawing a woman in half or levitating – you might be amazed at what a good trick it is but you don't start believing in magic, do you? What if that magician asks you to bet your retirement on the fact that he is really levitating people or that his assistant can medically be cut into pieces and reassembled?
You wouldn't risk your money on such obvious fakery, would you? You wouldn't give your hard-earned money to a person whose job it was to deceive you, would you? THEN WHY ARE YOU PUTTING YOUR MONEY INTO THIS FARCE OF A MARKET?
by phil - November 25th, 2014 8:08 am
Another day, another new high.
Yawn. We'd be a lot more impressed if all the gains for the day didn't come pre-market – in the even thinner-traded futures, followed by a day of choppy trading on anemic volume.
Still, it is what it is and what it is is another new high and another record monthly gain and we don't know why but we made $10,000 yesterday in our Short-Term Portfolio as our bullish positions (because we thought we were too bearish last week) came through for us in spades.
$10,000 is, of course, a ridiculous amount of money to make in a single day in a $100,000 porfolio. In part, it's a reflection of the extreme volatility in the options chains, as those prices fluctuate wildly. Since we sell a lot of premium when the VIX is high, we benefit when it gets low again. Also, we're getting closer to January and we have a lot of January plays where time is on our side – it's not really an accident, this is how we set up our trades – they are simply working out better than we expected them to.
Now we're up 70% for the year again and we have to consider whether or not we should take the money and run or just let them ride. To some extent, we're protecting the much larger gains in our $500,000 Long-Term Portfolio, which is up 26% for the year ($130,000), which puts our $70,000 gain in the STP into the proper perspective.
If we cash the STP, then the LTP is unprotected (as it's all bullish) and that's not acceptable but we COULD decide to cash out our longs and that would leave us VERY BEARISH in the STP, probably over-protecting the LTP but that might be a good thing into January.
So, let's consider our STP longs and what we should do with them:
20 USO Jan $29 calls at $1.05, now $1.30 – up 23.8%
by phil - November 24th, 2014 7:53 am
It's a short week.
That means we won't expect much volume and that's good because the volume we had on Friday was all downhill from the open. Friday's volume was almost double the other days of the week and you can see how the TradeBots took full advantage of the gapped up open – courtesy of China and Draghi's 1-2 combo stimulus.
This morning, we're drifting up again – resetting the pins for another knockdown but probably not into the end of the month (Friday), as "THEY" want to post what will end up being one of the strongest months in the market OF ALL TIME!
That's right, we're getting all-time great returns (as evidenced by our Top Trade Alerts) and the hits just keep on coming as more and more stimulus is poured on the fire. That's giving us the third highest p/e in the S&P's history, higher than the crash of 1901, higher than the crashes of 1966 or 2007 but still not quite as overpriced as 1929 and, of course, a far, far cry from the dot com crash of just 14 years ago, when YHOO was $300 a share:
Of course, if we were to throw out the ridiculous 1,000x valuations of the internet darlings of 2000 and we look at the AVERAGE 15.7x for the S&P, then we're simply 80% overvalued to the norm. That's not so terrible, is it? Oh wait, I'm sorry, that's actually pretty much the definition of terrible…
If you are paying a company 27 times what they earn, then it will take you 27 years to get your money back. That's a 4% return on your investment. With rates artificially low (now negative in some countries), 4% returns on capital seem pretty good, so money flows into the markets but, as we discussed in Member Chat this weekend, we're getting more and more divorced from the Global realities that USUALLY matter to the markets. Dangerous waters.
by phil - November 22nd, 2014 5:17 am
Happy Thanksgiving (almost)!
We added a new feature last month called Top Trades™ (Members Only) so I thought it would be a good time to see how we're doing as well as give a few tricks and tips to our new subscribers. Top Trade Alerts are sent out once or twice a week via EMail and Text Message from our Basic and Premium Live Member's Chat Room. These trades are just a very small portion of what we discuss during chat each day, but hopefully a good representative sample. Let's see how they performed so far:
We already reviewed our first Top Trade Alert™ in Thursday's post and our first 7 ideas are already up a combined 3.7% for the month but, officially, GSK was the actual Top Trade that day, and it's already up 6.1% for the month – a great way to get started! Also on Thursday, we checked out out 2nd Top Trade Idea for CAT and, with Friday's 4.27% gain, the stock is already up 9% in a month but, of course, we don't just play boring old stocks at Philstockworld – our option trade Idea was:
As a new trade on CAT, I'd sell the 2017 $80 puts for $7.30 for a very nice $72.70 net entry. That's more than the $5.60 dividend you'd make owning the stock for 2 years and a 26% discount if put to you. That's great as a stand-alone play or it can be paired with the $100/115 bull call spread at $5.50 and you still have a net $1.80 credit (so net $78.20 entry – 20% off) but 100% of the upside over $100 for the next two years.
As of yesterday's close, the $80 puts were $5.70 (up 21.9%) and the bull call spread is now $7.35 for net $1.65 plus the original $1.80 credit is $3.45, up 191% in a month on the option play. Isn't that more fun than just making 9% on the stock?
by phil - November 21st, 2014 8:01 am
MORE FREE MONEY!!!
Europe is up 2% with no signs of slowing at lunch as Mario Draghi kicks it up a notch, saying the ECB is ready to "step up the pressure" and expand its asset-purchase programs if inflation fails to show signs of quickly returning to the ECB’s target. BAM!!!
“We will continue to meet our responsibility—we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us. If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases,”
That was enough to send the Euro plunging 1% ($1.24) as the Dollar jumped over the 88 line for the first time since 2010, when the Global Economy was collapsing and we looked like the only game in town. Well, China wasn't going to take that lying down so, of course, the PBOC, in the middle of the night on Friday in China, suddenly decided to cut their own rates by 0.4 to 5.6% and they lowered their deposit rate by 0.25, to 2.75% effective tomorrow.
“All the targeted easing measures or the mini stimulus measures to cut the cost of financing are in fact ineffective,” said Chang Jian, chief China economist at Barclays Plc in Hong Kong, who correctly forecast one interest rate cut in the fourth quarter of this year. “So the only way to really reduce the cost of financing is through cutting the benchmark rate.”
Today’s move suggests a shift toward pro-growth policies that may fuel even more debt. An unprecedented lending spree from 2009 to 2013 led to a surge in debt on a scale that’s triggered banking crises in other economies, according to the International Monetary Fund. China’s total…
by phil - November 20th, 2014 8:18 am
This low-volume rally is a joke.
As I pointed out to our Members in yesterday's Live Chat Room, volume on the up side of that v-shaped recovery has been 1/2 of what the volume to the downside was (comparing the last 3 weeks to the 3 before it), which means this "rally" is nothing but hot air – with very little support underneath.
And I know you get tired of hearing me say it and I get tired of saying it but, one thing I learned in 2008 is that you can't warn people often enough to be more cautious. Yes we lose subscribers when we go to cash (not much to trade) but, when the markets do pull back – my subscribers still have money!
And it's not like we can't make money with our cash. Just yesterday, we posted 7 bullish trade ideas for our Members, 3 of which we added to our virtual portfolios and one of which, a long on /SI at $16, made $2,500 per contract in 30 minutes and another $1,500 per contract this morning – that's not a bad way to sit on the sidelines, is it?
We don't ALWAYS have to be invested. We still have many long-term positions, it's just that we also have a lot of cash in case those long-term positions get cheaper and we decide to buy more. In fact, a few of yesterday's plays were just that – buying more of stocks that we've been liking all year as they go on sale.
This morning our Futures are at 17,600 on /YM, 2,040 on /ES, 4,200 on /NQ and 1,155 on /TF and we can go long on the laggard when (and IF) two of them are over and get out when 3 are below as a bullish play for the normal morning pump – that's how we make a quick $500 for you at Philstockworld!
Copper is bouncing off $3 again, that's also a good play, one that already made $1,250 per contract at $3.05 when I recommended it in Tuesday morning's post (which you can have delivered