by phil - January 15th, 2014 8:43 am
Ignition and BLAST OFF!
Sure it's low volume (see Dave Fry's SPY chart), but who cares? TSLA jumps 16% in a day, gaining $3Bn in market cap in 5 hours and they tack on another $1Bn overnight – just for good measure. Yes they delivered 20% more cars than expected but that was for one quarter, not the whole year and Musk himself says the long-awaited cheaper Tesla is "about 3 years away" the same 3 years away it was 3 years ago!
I'm not going to use the word "scam" because we shorted TSLA yesterday (Feb $140 puts for $5) and that wouldn't be fair. I also won't say "pump and dump" or anything else derisive other than paying $20Bn for a company that has no earnings and projects, at best, $200M next year (for a p/e of 100) in a sector where the average p/e is in the teens – may be a little overpriced.
We've played this game before with TSLA and we know not to stand in the way of a runaway train. We'll stop out of our Feb puts with a small loss if we have to and then re-short for April and again for July if they keep going higher because that strategy, of followed last year, eventually hit the jackpot as they dove from $195 all the way back to $120 between Oct 1st and Thanksgiving.
Just like a Futures trade (and see Tuesday's Webcast for a good example), the key to success is having tight stops when you are wrong so you have another chance to reload at the next stop. We expect some resistance at $165 and a pullback to $150 but, if not, then we'll see how $180 goes ($24Bn!). While TSLA was crowing about ramping up production to 600 cars a week, TM, who produce 600 cars AN HOUR announced their HYDROGEN fuel cell Prius should be ready next year.
by phil - January 14th, 2014 8:30 am
Wheeeee – that was fun!
It was fun because we were short-term bearish and we finally got a bit of a sell-off. During yesterday's live Webcast, in fact, we had just shorted the Russell Futures at 1,060 in PSW Member Chat and, as I was demonstrating the Futures trade on /TF, we were already down to 1,052 and up $800 per contract. We never got a strong bounce and the next leg took us down to 1,138, stopping out at 1,140 for a $2,000 per contract gain on the day – wheeeee! indeed.
Our very bearish, very aggressive, Short-Term Portfolio positions popped from +18,000 on Friday to +$42,000 but we closed that one and we're going to stick to more conservative trading this year, rather than endure daily $24,000 swings, even when they are in our favor! We already have a more conservatie virtual Short-Term Portfolio in our seminar series and, as planned, that STP popped 2.3% as it was the bearish offset to our Long-Term bullish portfolio, that fell back 0.3% to +0.2%.
We'll be doing a full review in today's Webcast at 1pm, which you can sign up for here.
Meanwhile, the question is, how worried should we be by this little sell-off. Looking at this Dow chart from Zero Hedge that compares the current Dow to the Dow movement just ahead of the great crash of 1929 - it does kind of look like we should be concerned, from a pattern-recognition standpoint at least. Even a bounce today is expected, according to the historical chart, giving us false hopes before the big drop in a week or so.
Last Tuesday we predicted how far the indexes would fall using our famous 5% Rule™, and they were the 1.25% and 2.5% drop lines at:
by phil - January 13th, 2014 8:11 am
Mergers are great market boosters.
They make investors think everything is undervalued in a sector when one company gets bought for high cash premiums and BEAM (Jim Beam) is one of those companies many of us know and love but not, apparently, as much as the Japanese who will be taking over this 110 year-old American Icon. BEAM did not rise 30% last year, making it "cheap" vs other S&P choices and, of couse, the only thing in the World more plentiful than Free Dollars is Free Yen – so why not gobble up some assets while the gobbling's good?
The company’s combined portfolio of brands will include Beam’s Jim Beam, Maker’s Mark and Knob Creek bourbons; Courvoisier cognac and Sauza tequila; plus Suntory’s Japanese whiskies Yamazaki, Hakushu, Hibiki and Kakubin; Bowmore Scotch whisky; and Midori liqueur and, if you went from "yeah, I know those" to "who?" while reading that list, then you can see why Suntory values Beam's distribution network and brand recognition as much as they do the product.
Suntory is a 1 TRILLION Yen Company and a steady, 4% dividend payer in Japan. A move like this is another bullish signal for the markets as this is the proverbial money coming off the sidelines, when foreign companies begin buying up US companies and Japan is a prime candidate as the Nikkei was up 45% last year – making the S&P look pretty cheap to them.
If you want to find other companies that look cheap, I would suggest the S&P's 20 Most Concentrated Hedge Fund Holdings, where BEAM was number 7. These are the companies most favored by hedge funds and it's not the usual suspects:
The Free Money is still out there, as long as you can service a 10-year loan at 3%, any of these companies can be yours and refinancing a decade from now is the next CEOs job – especially if you are a CEO already over 55 and looking to put your stamp on your company with a big move. STZ, for example, is a $15Bn company at $80 a share (expect it to move higher on this news) and a…
by phil - January 10th, 2014 8:30 am
We're waiting on the Jobs Report.
I don't think it's going to matter, whether or not we employed more or less than the expected 200,000 new people in December doesn't matter as much as what we had to pay them. Hourly earnings are, so far, up 0.2% for the year and the average work-week for "employed" people is 34.5 hours and that's GOOD news for Corporation, who are spending 15% less per worker than they did in 2005.
Now, you may wonder how the workers feel about that but, if you do, then you are some kind of LIBERAL and you have to leave right now because this is a stock newsletter and we should care no more about the feeling of labor as we do about the feelings of a barrel of oil – the second biggest cost for our beloved Corporate Masters.
Of course, there are some Corporations that do own oil, and they do care about the price of each and every barrel they own, but there are no Corporations who own people (not legally, anyway) - so f*ck them, right?
Our current trickle down economic policy guarantees us a steady supply of cheap labor. Labor costs were, in fact, rising in 2007 but "accidentally" wrecking the economy wiped out over 9M jobs and, at an average of 100,000 jobs a month added since Obama took over in Jan, 2009, we've now added back 5M of them – leaving plenty of people still scrambling for work – so many, in fact, that Congress wisely decided that they are just lazy and cut off their unemployment benefits.
And, the best part is, we've replaced all those nasty high-paying jobs with cool low-paying jobs – leading to record corporate proifts – Yay Capitalism!!!
8:30 Update: And here's the number - just 74,000 jobs added, a 63% miss from what Economorons were estimating and the lowest positive figure since 1978. Will that tank the market? Hardly – because it means the Fed will have an excuse to give us MORE FREE MONEY!!! Again, we're buying stocks, we're capitalists, we don't give a crap if 126,000 people…
by phil - January 9th, 2014 8:21 am
That's it, I'm officially the last bear in America.
Well, according to the AAII Bull-Bear Sentiment Survey, anyway. In the entire 23-year history of this survey, there have never been more bulls or less bears and, as you can see from the ratio, it won't be long now before they track me down and shoot me – well, that's what it feels like to be bearish in this market.
I guess the people at Macy's are crazy too, they are closing 5 stores and laying off 2,500 people in the middle of the greatest bull market (sentiment-wise) in history. It won't hurt their stock, of course, which is up 30% from last year (along with the rest of the market) and, in fact, BMO Capital just gave them an upgrade because firing people is what American Corporations are all about these days.
We're still short in our Short-Term Portfolio, and painfully so at the moment but we ARE playing the technicals and we need to see the S&P confirm with a move over 1,840 and then 1,850 to match up with Dow 16,500, Nas 4,175, NYSE 10,400 and Russell 1,070 – as which point we are HAPPY to make more bullish plays.
Meanwhile, our last set of bullish plays is doing just fine. Aside from our 3 Trade Ideas for 2014, which were all bullish, we had our last 5 Bullish Trade Ideas on December 17th which followed up on November 25th's 5 MORE Trades That Can Make 500% in a Rising Market.
Needless to say (obvious from the chart), all of those trades are doing fabulously, even our ABXs have finally come on strong. The ten trade ideas from those two posts (and you can get trade ideas like this delivered to you daily with a PSW Subscription) were:
by phil - January 8th, 2014 8:24 am
1,825 or bust!
That's the deal today as we wait for the Fed minutes at 2pm. We already had the Fed statement back on December 17th, when the Fed announced a very light version of tapering along with a promise to keep rates near zero for at least another year.
That sent the Dow flying from 15,750 back to 16,500 (4.5%) and a 750-point run gives us the expectation of a 150 point retrace (20% – weak) to 16,350 or a 300-point retrace (40% – strong) back to 16,200 and, so far, 16,350 has held and that's a bullish sign for the Dow.
BUT, it's held on ridiculously low volume (see Dave Fry's chart) so it don't mean a thing until we see a proper test and it's hard to imagine what the Fed can say that would be worth adding to the 5% pop that's already been baked into these minutes – so I made the call to short the Dow Futures at 16,450 (/YM) this morning in our Member Chat Room.
During yesterday's Member Chat, we caught a nice move on the Russell. Aside from our usual Futures short (/TF) we looked at the option combo of buying the Jan $17 calls for .52 and selling the Jan $17 puts for .47 for a net entry of 0.05. That was at 11am and, by the time we were doing our weekly Webinar, at 2pm, that combo was at 0.25, up 400% in two hours. This is why we don't mind being mainly in CASH – you can make a Hell of a lot of money in this market by just deploying small amounts of your sidelined capital.
Also, keep in mind that CASH has gained 1.5% since we went to it over the holidays – that's something investors often lose sight of – cash is also an asset class that, sometimes, we want to get into when it's cheap. We had a situation where stocks were expensive-looking and cash was cheap, so we traded our stocks for cash – a very simple plan.
by phil - January 7th, 2014 8:16 am
It's only a little pullback – so far.
As you can see from Doug Short's S&P chart, we're having a modest pullback on increasing volume as things return to "normal" following the holidays. You can see why we elected to sit out the past two weeks – already the gains have reversed and we're right back to where we were just before Christmas, where we took the opportunity to get to CASH!!!
We've deployed that cash in a very profitable fashion with some great short-term plays, including last Thursday's short on oil. In yesterday's morning Alert to Members, which I also tweeted out at 7:30 am, my trade idea to short oil at $94.50 yeilded a nice $1,250 gain on the day as oil bottomed out at $93.20 with a stop out at $93.25. Those Alerts are usually sent out to our Voyeur and higher subscription levels. Though, for all of our Trade Alerts, you need a Premium Membership, of course.
Once the markets opened, my first idea for a Futures trade in Member Chat was shorting the Russell (/TF) at 1,160 and the Dow (/YM) at 16,450. The Russell fell to 1,142 for a $1,800 per contract gain and the Dow hit 16,340, up $550 per contract. When you can make quick moves like that off a cash position, what's the rush to get "back into" the market?
We haven't re-opened our USO short or SCO long positions as we're hoping for a run back to $95 on oil inventories (tomorrow, 10:30) where we can make a contrary play BUT, if oil hits $94.50 and fails again, we will take that short with tight stops. Meanwhile, the absense of short-term shorts leaves us long-term long with our Dec 2019 contract hedges - so let's hear it for the manipulators today!
Dave Fry's Transport chart shows us a little break-down in that sector, despite FDX's $2Bn share buy-back announcement. Dow theorists watch the Transports carefully, so we should too but part of this may be attributable to the storm conditions in the Northeast – so we're not going to read too much into it until/unless next week continues the trend…
by phil - January 6th, 2014 8:14 am
That thing is that the economy is the number one issue facing our nation. Just like it was when Clinton said it in 1992, when he first used the phrase in campaign to unseat Bush the 1st, it has been in 2004, 2008, 2010 and 2013 – the economy matters more, followed closely by Unemployment as a bi-lateral concern.
Presumably, from the way the stock martet behaved in 2013 – going up about 30% in a single year (as opposed to the 5 years it usually takes to gain that much), the economy must be booming – so why all the concern? Well, the simple answer to that is that the economy isn't benefitting the bottom 90% very much – from their point of view, things have not gotten much better at all. Not only that, but now we've cut off the Unemployment Insurance to 1.3M already struggling Americans.
As I noted in our Member Chat Room this morning:
As I said about that last week, screw those guys (from a top 1% perspective) because they only get about $1,200 a month so 1.3M of those lazy bastards losing their benefits is only $1.5Bn a month taken out of consumer spending – not a big effect – unless you happen to be one of those losers, then it's a life-changing effect but, hey, by the end of the year we save $18Bn, that's enough to paint an aircraft carrier – with the blood of those 1.3M of the families we're supposedly protecting…
Wall Street seems to have had a much better recovery than Main Street. Asset prices have responded vigorously while real wages have been squeezed. Inequality has been widening (see Free exchange). It is hardly surprising that voters have become discontented, with a surge in support for the populist right in Europe and plenty of partisan bickering in Washington. The combination of an angry electorate and nervous governments may lead to unpredictable policy measures--and an atmosphere that is hardly helpful to either business or investor confidence.
by phil - January 3rd, 2014 8:17 am
Wheeee, what a ride!
Those 10 Oil Futures (/CL) contracts I mentioned as a short in yesterday's morning post gained another $23,000 during the day as oil plunged back to $95.50 – not a bad pick for the first post of the year. We set our stops at $95.80 to lock in gains and we already took our USO puts off the table as they were up 100% and we hate to be too greedy, though we're happy to re-enter them if they get cheap again.
We still have our SCO (ultra-short oil) plays in place, to take advantage of a proper break-down. They had a longer time-frame so we chose to leave them active as we feel USO will be well below that $33 line ($92.50 oil) but, as Dave Fry notes in his chart, inventories are today and anything can happen.
The Nikkei is another Futures play (/NKD) I've been banging the table on, shorting them whenever they go over the 16,300 line and we got the big pay-off yesterday, as the index fell all the way down to 15,900 for a lovely $2,000 per contract gain. Don't worry if you missed that one, this index is like a yo-yo!
As I reminded you yesterday, when we added 2 more trades for 2014, our big trade idea for 2014 is AAPL and, this morning, Cantor's Brain White agrees with me and makes it his top pick for 2014 as well. White declares Apple's valuation (just 9x his calendar 2014 EPS estimate exc. cash) "remains depressed," and predicts "new product innovations" will help it return to growth after posting its first EPS declines in a decade. He also expects Apple, which opposes Carl Icahn's buyback proposal but says it's still weighing cash-return options, to return more cash to shareholders in 2014.
We were actually hoping AAPL would take more of a dip and give us a cheaper entry, but White may have screwed that up for us by re-ignighting excitement in the stock. Oh well, there's bound to be other fun things to buy. CLF, for example, went down a bit yesterday but ABX (also…
by phil - January 2nd, 2014 8:00 am
Happy New Year!
We ended 2013 with a bang. As you can see from Dave Fry's SPY chart, the last hour was all window-dressing but we couldn't quite get to 1,850 on the S&P, closing at 1,848.36 for the year, up 29.1% in 12 months, which was a big 7.5% behind the small-cap leadership of the Russell, which finished the year officially at 1,1656,64, up 36.6% or an average of 3.05% each and every month of the year!
If we take just $100,000 and compound it at a rate of 3.05% per month for 10 years, we get $3.64 MILLION Dollars. 10 years later, it's $132.7M and 10 years after that, we have $4.8Bn so, if you want to be a multi-Billionaire in 30 years, just put $100K into the Russell and go fishing, I suppose.
That's what the Pundits and Financial Advisers are telling you when they say last year was "normal" or that we have a "new paradigm" and it's OK to chase performance, despite the fact that history has shown us, over and over and over again – that it's usually not. My very simple investing premise for 2014 is to buy the worst performer of 2013, which is gold, which fell 28.2% for the year. It seems to me that if everyone who has $100,000 today and sticks it into an index fund has $4Bn in 30 years, they might choose to buy something shiny for their spouse down the road.
As we noted on Tuesday, there are 373M people in the World with more than $100,000 today and they average, if you include the top 29M (the top 0.4%) they average $491,689 each so, by bullish market logic, they should have an average of $23.8Bn each in 30 years and that's $8.87 QUADRILLION or 40 times more money, just for the top 5%, than there is TOTAL in the World today.
So, if the markets are going to continue to go up, I humply submit that there MAY be just a little more inflation on scarce things that rich people like to buy. Stocks are one of those things, of course and art and, of course, GOLD! Between now and the time our 3D printers…