by phil - August 27th, 2016 8:31 am
The hits just keep on coming.
When we left off in June, our Top Trades had 70 winners out of 91 trade ideas but 5 of those trade ideas were for Lumber Liquidators (yes, I liked them that much) and they are all winners now so our winning percentage has jumped to 75 of 91 (82%) – not bad! Of course, a few of the other losers have turned around too but LL was one I simply pounded the table on (which is why I picked them 5 times) so I will move those to the win column. For the rest – wherever we are when we do our review (usually 2 or 3 months later) is where we mark it.
Our June review took us to the end of April, for example, where we had 16 winners and only two losers but one of those losers was a Chevron (CVX) short, who subsequently took a nice dive and the other was SuperValue, which was a 2018 $3/5 bull call spread with short $5 puts and we bought 20 for $880 on March 3rd and, as of our June 5th review, they were $670, down $210 for our other loss of the period.
Now SVU is back at $5.36 and the spread is $1.25 and the short puts are $1 so net $25 x 20 contracts is $500 – still a loser (worse, actually) but what a great trade as all SVU has to do is hold $5 through Jan 2018 and the trade returns $4,000 – that would be a $3,500 gain from here (700%), so still great as a new trade!
That's why it pays to read our Portfolio Review section over at Philstockworld – many hidden gems there – especially in our "losing" trades – rare though they may be! That's because we're FUNDAMENTAL investors and, while the charts may go against us for some period of time, if we get the fundamentals right we know that, at some point, the market usually catches on to what we're seeing.
by ilene - August 26th, 2016 10:28 pm
Wow. If you're planning to beat the market by being an exceptional stock picker, this article is depressing.
Courtesy of Michael Batnick, The Irrelevant Investor
- Uncertainty remains, but Florida is in the cross hairs.
- What to expect today after tornado outbreak.
- Why we’re watching Gaston closely now.
These headlines were pulled from a few articles today at weather.com. You could seamlessly replace Florida, tornado, and Gaston with a stock because like the weather, markets are highly complex with countless variables that can’t fully be modeled.
In his highly entertaining book, But What If We’re Wrong, Chuck Klosterman talks about how much money has been spent trying to predict the weather:
Somebody once told me a joke about meteorology. The premise is that we’ve been trying to predict the weather since 3000 BC. The yearly budget for the National Weather Service is $1 billion…Even a conservative estimate places the annual amount of money spent on meteorology at somewhere around $5 billion. And as a result of this investment, our weather can be correctly predicted around 66 percent of the time. As a society, we can go two out of three. Yet if some random dude simply says, “I think the weather tomorrow will be the same as the weather today,” he will be right 33 percent of the time. He can go one for three. So we’ve invested hundreds of billions of dollars and countless hours into meteorological research, with the net effect of becoming twice as accurate as some bozo who looks out the window and points at the sky.
The Wall Street Journal just reported that U.S. mutual funds spend more than $300 million every year to send investors written reports. This is an astonishingly large number, but it’s peanuts compared to how much they spend trying to beat their benchmark. And while the net effect of becoming twice as accurate as some bozo might be true with the weather, it’s the opposite with investing.
The chart below from Dimensional Funds shows that all a bozo has to do to beat the majority of professionals is buy an index fund.
by phil - August 26th, 2016 9:05 am
11 Fed officials met with "Fed Up" protesters yesterday who told them: "You will be leaving us behind,” if the Fed rushes to raise rates, accusing the Fed of “pulling the ladder right up after you have climbed it. Our communities are still in a great recession” and “Let our wages grow”.
The protest, misguided though it is, exemplifies how uneven the US economy has become as 8 years of easy Fed policies have done nothing for the Bottom 80% – things have actually gotten worse just below the top of the economic ladder. Sadly, the Fed doesn't work for the Bottom 80% and the Fed is not the Government, the Fed is a Banking Cartel and the kind of inflation they seek to contain is WAGE inflation – exactly what the Fed Up crowd wants them to "fix".
Things are very fixed, as far as the Fed is concerned. In fact, in the past 3 months, US banks made $43.6 BILLION in profits, beating the previous record of $43.01Bn in Q2 of 2015. So the Fed is doing exactly the job they are supposed to be doing. They don't want higher wages – they want "full employment" – in other words, they want a high supply of labor but that doesn't mean they have any interest in those employees making a living wage – that would be inflationary!
I know that when we look at globally the overall U.S. population, it seems like things are getting better. But when you really start breaking it down and you look at that core consumer that we serve on the lower economic scale that's out there, that demographic, things have not gotten any better for her, and arguably, they're worse. And they're worse, because rents are accelerating, healthcare is accelerating on her at a very, very rapid clip.
Making matters worse, he added that the company's core consumers
by ilene - August 25th, 2016 5:56 pm
Watch a replay of Phil's weekly trading webinar, recorded yesterday, below.
For LIVE access, join us at Phil's Stock World – click here!
00:03:03 TSLA's Planned Roadmap to Vehicles
00:04:54 More on Extrapolation
00:06:19 TSLA Chart
00:08:42 Auto Sales by Quarter
00:10:00 Annual Vehicle Sales
00:13:52 Ford Sales Performance
00:15:53 Possible Problems with the Auto Business
00:16:40 Chinese Auto Sales
00:18:30 Ford Trade Status
00:19:21 Long-Term Ford Portfolio
00:22:27 Ford Trade Ideas
00:29:12 Velocity of Money
00:44:47 Owning a House vs. Renting
00:50:21 Home Sales
00:51:20 XON Chart
00:52:04 XON relation to Zika
00:53:42 APPL Car Environments
00:55:17 Self-driving Cars
00:57:56 Interest Rates
00:59:27 Selling Bonds in the Market
01:02:07 Self-driving car infrastructure ideas
01:08:04 Fair Market Price
01:09:00 DIS Chart
01:10:05 DIS Earnings
01:12:15 XON expires on Oct.
01:14:06 LOW Trade Ideas
01:20:58 DAL Trade Ideas
01:22:00 More Trade Ideas
01:25:00 BBY Trade Ideas
01:27:49 Petroleum Status Report
01:35:00 JNJ Earnings
01:39:00 Long Term Portfolio
01:45:00 Checking the Markets
01:47:46 Short-Term Portfolio
01:48:37 5% Portfolio
01:49:07 Butterfly Portfolio
01:52:40 More Trade Ideas
Phil's Weekly Trading Webinars provide a great opportunity to learn what we do at PSW. You can subscribe to our YouTube channel and view past webinars, here. For LIVE access to PSW's Weekly Webinars – demonstrating trading strategies in real time – join us at PSW — click here!
by phil - August 25th, 2016 8:30 am
Aren't you glad we're back?
What a great week to start doing free picks again as we started off with Monday's Toll Brothers (TOL) trade idea, which has already gone from a $300 credit to $1,250 for a $1,550 gain (516%) in 3 days, so you're welcome for that one and it's only "on track" to our full 1,433% expectation so, if you want, you could still play it for $1,550 and look to get the full $4,300 in Jan 2018, which is up another $2,750 (177%) from here – but those are just our table scraps at this point!
Even if you don't subscribe to PhilStockWorld (PSW), where you get these articles EMailed to you pre-market every morning, you can follow us on Twitter or read us on Seeking Alpha, where they had Monday's post ready by 10am - not too bad of a delay for free picks, right? On Tuesday our 8:38 article was ready on SA at 9:55, just a little behind the Huffington Post (9:36), where we picked up a short play on GameStop (GME) and I called for shorting the indexes:
Still, with the Dollar (/DX) down at 94.30, it should be bouncy here and there's no particular reason for the markets to go higher so I like shorting the Futures, with VERY tight stops, at the following levels:
Dow (/YM) 18,550, S&P (/ES) 2,185, Nasdaq (/NQ) 4,825 and Russell (/TF) 1,242.50. We can't short the Nikkei (/NKD, now 16,550) because the Nikkei likes a strong Dollar, so it's too risky but a bounce in the Dollar back over 95 will drive Oil (/CL) and Gold (/YG) lower and knock down two big sectors of the S&P.
by ilene - August 24th, 2016 11:55 pm
Courtesy of ValueWalk.
Berkshire Hathaway’s Warren Buffett discusses Jeff Bezos’ extraordinary success with Amazon.
Warren Buffett: Jeff Bezos Has ‘Changed The World’ In A Big Way
Sign up for ValueWalk's free newsletter here.
by phil - August 24th, 2016 8:48 am
Not a very exciting market while we wait for Friday's Fed Speak but we have been amusing ourselves picking up some cheap positions – in case the free money train is going to keep on rolling. The nice thing about sideline cash is you get to deploy it, which is so much more fun that being full of positions you're stuck with and praying they don't drop. In addition to all those free trade ideas we gave you yesterday (and TOL is up over 10% since Monday's featured pick!), we added 3 more long trade ideas in yesterday's Live Member Chat Room, including IMAX, which spiked higher as we sent out our Top Trade Alert for that stock.
Our shorting lines remain the same as yesterday and you have to be nimble with those S&P (/ES) (SPY) contracts but the trading range allows for many opportunities to pick up $250-$500 pretty much every day though yesterday we firmed up on shorting the Russell (/TF) at 1,250, with tight stops above that line. On the Russell, it's $100 per point per contract – so a little more aggressive.
We're doing a Live Trading Webinar today at 1pm, EST and we'll do a little Futures Training. Oil should be in play today with inventories out at 10:30 but we already saw an API Report that indicates an unexpected (by economorons) 4Mb build and that should be good for those USO puts we told you about last week. Keep in mind the reason for the build is mainly the 500Kb/d Exxon (XOM) refinery is off-line and 7 x 500,000 = 3.5M barrels that weren't refined – duh!
Of more concern to the oil bulls is the ever-declining demand for gasoline, as evidenced by the EIA revising their gasoline consumption expectations from +4-5% in January to +1.5% in their July estimate and even that may be revised down as US consumption, according to our friends at CNBC, had missed 10Mb/d estimates by 200,000 (2%) all summer.
by ilene - August 23rd, 2016 2:59 pm
Courtesy of Joshua M Brown
Last fall, financial advisors Anthony and Dina Isola came into our firm to talk shop one afternoon. We were blown away by their passion for saving the retirement portfolios of their clients, many of whom are teachers and professors who are inundated almost daily with bad product pitches at their schools.
Within a few weeks, we were talking about hiring them. It’s one of the best decisions we’ve made so far – an absolute grand slam from a culture perspective.
Tony’s background as a trader-turned-educator-turned-Certified Financial Planner makes him a highly unique animal in our menagerie. He comes to work ready to crush it every day, and he’s armed to the teeth with knowledge about how the machine takes advantage of the investor class at every turn. Dina’s detail-oriented work assures a smooth client experience for all who come to them for help.
Tony’s also got a great blog, called A Teachable Moment. When we set it up for him, we had no idea how consistently good his stuff would be each week.
For example, this bit about the application of history lessons is so crucial:
How can investors act as applied historians and use this skill set to create wealth?
There are several minefields that could easily be avoided with some knowledge of the past:
- Most market corrections don’t turn into bear markets.
- Using leverage to boost investment returns often ends badly.
- The president has very little control over the global economy.
- Buying new financial products at market peaks is a poor idea.
- Bull markets last much longer than bear markets.
- Stocks are six times more likely to be up 20% than down the same amount. (Michael Batnick)
- Uncertainty is always present and it is not a wise choice to use it as an excuse not to invest.
- Stocks will do the best job of protecting future purchasing power over long periods of time.
- Investing in the fastest growing world economies will not guarantee higher investment returns.
by phil - August 23rd, 2016 8:38 am
Well, we're making SOME progress.
As you can see from JackDamn's SPY Chart, since gapping up in the 2nd week of August we've stayed tightly in this range between 2,170 and 2,190 on the S&P (and divide by 10 for SPY) which is up around 10% since the Brexit Panic, brief though that was at the time.
Before then we were hovering around 2,010 so 2,020 is only up 5% and really, it shouldn't be THAT hard to manage, should it. I hear again and again from the MSM and my fellow pundits how great everything is but, to me, "great" should have a much easier time of gaining 5% in a quarter – this is "good" at best…
Of course, it's not quite so "good" when we consider that SPY, like the S&P, is priced in Dollars and those Dollars have become 2.5% weaker in the past 3 weeks and more than 5% weaker than they were at the start of the year, when the S&P was at 2,050, which is 6% lower than it is now. So, in reality (I know, where is that), in constant Dollar terms, the market is only 1% higher since the start of the year since those Dollars you cash in your shares for have 5% less buying power than they did back then.
If only we had all bought gold in January – or Natural Gas (which was our Trade of the Year), that trade is up 900%! Speaking of trades, we were dead wrong on Best Buy (BBY) yesterday and they had a fantastic quarter and popped 15% to $38 pre-market this morning. The way to adjust a short call is simply to roll it to a longer-term, higher strike and generally we roll the loss, not the whole amount. I'll touch base in Member Chat in case anyone played them short.
Inside of BBY's numbers were poor game revenues and that might bode ill for GameStop (GME), whose earning are Thursday, so another potential shorting candidate at $31.50 and the Jan $35 calls can be sold for $1.40 while the $37 ($7.25)/32 ($3.75) bear…
by ilene - August 22nd, 2016 3:39 pm
Courtesy of Wade of Investing Caffeine
Like Goldilocks searching for the “just right” porridge, chair size, and bed, so too are investors searching for the Goldilocks stock market that is not too hot or too cold. Many are aptly calling this the “most hated” bull market in recent history as Goldilock investors have decided to stay home rather than look for an investment prize. What many investors don’t quite realize is that waiting too long for an elusive, perfect Goldilocks scenario will only lead to your portfolio getting eaten by unhappy bears.
Waiting on the sidelines for a perfect buy signal is a hopeless endeavor (see also Getting Off the Market Timing Treadmill). The evidence for extreme risk aversion is extensive. From a corporate standpoint, it’s clear executives and board members have been scarred by the 2008-2009 financial crisis. Management teams have been quick to cut expenses and slow to invest and hire. And speaking of hiring, the post-crisis expansion has led to the slowest job recovery since World War II.
In the face of all the investor pessimism, the economy has been adding a few million jobs per year on average, resulting in a unemployment level below 5%; corporate profits at/near record levels; and trillions of dollars of cash piling up on corporate balance sheets. Rather than accelerate investments, companies have by and large chosen to spend that mountain of cash into trillions of rising dividends and share buybacks.
Risk aversion is evident at the individual level as well. Part of the explanation of why corporations have increased dividends to record levels is due to 76 million Baby Boomers approaching or entering retirement. Boomers need more income just as interest rates are rapidly approaching 0%, and in many cases negative interest rates, which effectively means they are earning $0 on their bank savings and losing to inflation.
Collecting fatter dividend checks from stocks actually sounds pretty attractive when individual investors are scared silly about geopolitics, terrorism, elections, Zika virus, and other horror story headlines of the day. Fortunately, it’s profits, interest rates, valuations, and contrarian sentiment indicators that control the stock market (see Follow the Stool), and not Fox, CNN, ABC, NBC, and internet bloggers (myself included).