Virtual Portfolio Insurance

This is an article I was saving for the private site but news has forced my hand so I'm going to start picking up some of these next week. Insurance companies are always good in times of trouble and should hold up better than the Dow in a plunge (but will not be immune to it so we sell calls against or get out in a downturn). Currently the IYF insurance ETF is 10% behind the Dow's rally but usually outperform the Dow (move the time-line further out, resting neatly at the 10% rule. I'd like to give a shout out to my man Warren Buffett who took the time over the weekend to pump my beloved BRK.A, saying "you ain't seen nothin' yet" (I may be paraphrasing) while at the same time jumping on our bandwagon and taking a stab at Exxon for sqandering Billions on buybacks and dividends. Berkshire Hathaway was my stock of the year selection for 2006 and, although it was outperformed by some, there were none that made us feel safer through thick and thin! This puts a lot of pressure on my 2007 pick... I think that Warren Buffet taking the time out of his busy day to tell you his company is still a good 30% undervalued at $107,000 a share should tell you something about the markets, especially the insurance sector. AIG comes to mind as a possible play, with 2007 earnings projected at $6.26, up a mere 8% from 2006. "Yawn"you may say, but then you would be sleeping through the story! AIG only earned $3.33 a share in 2005, which was it's best year ever, but still fell from 2004 highs of $77 a share down to $49 during "the scandal." That was then, this is now, AIG is so similar to Berkshire that they co-insured deals and poor Mr. Buffet was even slightly tainted by that nonsense back in '04 but he's moved on and so should we with the AIG Jan '09 $70s for the "I'm Not Kidding Price" of $10.40. You can produce an income against them by selling the Jan $70s for $1.70 AND covering yourself with the Feb $75s for .40 but I would just do half as long as the stock holds $70 because you don't want to miss a nice pop. Now here's a freebie for my hedge fund buddies (as you need a lot of equity and patience to play this one). Buy the Jan '08 $70s for $6.70, sell the Jan '09 $80s for $5.60 AND the Jan $70s for $1.70 AND cover yourself with the Jan $75s for .20. That gives you .60 in cash on a $0 investment. The strategy is very complex but generally, you hope it stays flattish but you are playing to sell for the premium each month but with some protection. If it goes up, you can roll it, if it goes down you don't care once you get past the first month. As a reference, the Jan '08 $80s are just $2.40 so your goal is to make another $1.80 (you made .60 taking the position) to cover your eventual buyout of the '09's but everything else is pure gravy. This allows you to play the insurance game while laughing at natural disasters! If Mr. B's comments boost Berkshire, then there are several other nice companies we can take a look at: Insurance is a game of inches and the whole sector has been very out of favor in the latest rally as sexier stocks have gotten all the attention. Just like an old boyfriend, investors will come running back to these old reliables as soon as they have a fight with their new squeeze. AFL is certainly famous enough and trades right in line with the industry in p/e (14.72) but is growing about 10% faster than most. May $45 are $2.05. If they ever stop spending money on advertising, their cash flow should skyrocket! I meant to write this last week and there's a post-it on my screen with PGR (car insurance) written on it. They got a Bernstein upgrade last week (c'est la vie) and stopped at the 5% rule at $24. These guys are NOT doing a good job of growing but they have been unduly punished for it and have fallen way behind the sector. Jan '08 $25s are $2.05 and I'm not selling against them until they test $25. PRU got away from us last week but CB has made such a mess of their year that they are getting no respect, despite trading at a 20% discount (p/e 10) and, at $20Bn, being a more attractive takeover target. They are buying back 5% of their stock so the Jan '08 $52.50s for $4.50 seem safe(ish) but I won't rest easy until they break the 50 dma at $52.75. I am dumbfounded that GNW is still at $32! They added 13% to the bottom line this year and project another 10% next year on about 8% more sales. They missed last Q and I sometimes wonder if my love of this old GE division clouds my judgment but I have to take the Mar $35s for $.75. They should have a tough time at the 200 dma with a death cross 50 dma at $33.75 but there are 9M shorts who will be in a 5 day "House of Pain" if they break it. According to Yahoo, this stock is 101% held by institutions. Good luck to the retail shorts getting out of those positions if it takes off... I'm in no hurry on this one as I will happily get other $35s once it breaks out! TWGP just came down to where I want it with the Jan $35s at .85 that were $2 just 2 months ago before a 48% increase in earnings caused the stock to drop 20% as the company lowered guidance by a penny (I know, people are idiots!). I'm very sorry I missed it then! ALL is being probed in CT for pulling new policies in CT, NJ and DE as they are looking to get out of the storm business. Don't they have the right not to insure? Well the way they are doing it is sneaky - they are requiring Connecticut homeowners to install hurricane shutters to maintain coverage. That way they get to say you left them, they didn't kick you out! As an insured I say Boo! to the evil corporation but, as a shareholder, I say "why insure people we might have to pay?" If they come down closer to $63 I want the July $65s, hopefully for $1.50.
 
 
 

Phil's Favorites

Influence, Temptation, And Persuasion

 

Influence, Temptation, And Persuasion

Courtesy of 

Robert Cialdini’s Influence: The Psychology of Persuasion, has removed any lingering doubt I had that we are reasonable creatures. Cialdini shares so many examples of experiments that at times I literally stood up in disbelief. Here’s a good one:

More compelling evidence for the importance of similarity in determining whether we will imitate another’s behavior comes from scientific research. An especially apt illustration can be found in a study done several years ago by Columbia University psychologists. The researchers placed wallets on the ground in various locations around midtown Manha...



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Zero Hedge

Free Trade Versus "Free Trade"

Courtesy of ZeroHedge. View original post here.

Submitted by Peter Klein via The Mises Institute,

NPR featured an unintentionally funny piece this week on Donald Trump's views toward the EU and free trade. The guest, former US ambassador to the EU Anthony Gardner, rightfully criticized the president's view that "protection will lead to great prosperity and strength," and called for continued global engagement by US companies and consumers. But he revealed, perhaps inadvertently, what politi...



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ValueWalk

Undervalued RMR - Strong Competitive Moat And Loads Of Free Cash

By The Acquirer's Multiple. Originally published at ValueWalk.

One of the cheapest stocks in our All Investable – Deep Value Stock Screen is RMR Group Inc (NASDAQ:RMR).

RMR Group Inc (RMR) provides management services to four publicly traded real estate investment trusts, or REITs, and three real estate operating companies. As of September 30, 2016, RMR had $26.9 billion of assets under management in the companies it manages.

RMR is a wonderfully lean business with strong recurring revenues, high operating margins around 40%, and 30% ROE. The company has a competitive moat through its long term lock-in contracts, a strong balance sheet, and loads of free cash flow. In terms of its valuation, RMR is currently trading on a P/E of 16, 4.79 times opera...



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Kimble Charting Solutions

Doc Copper; Time for it to out perform the S&P 500?

Courtesy of Chris Kimble.

Some feel the price action of Copper is important to watch, because it could send important macro messages, about world wide growth or lack of.  Since 2011 Ole “Doc Copper” has been very weak, no question about it. During this weakness, the S&P 500 has continued to move higher. So is the price action of Doc Copper not useful or relevant anymore?

Below looks at ratio of Copper to the S&P 500-

CLICK ON CHART TO ENLARGE

Doc Copper has clearly been ...



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Market News

Breaking News And Best Of The Web

Courtesy of John Rubino.

US stocks up, gold and silver near multi-week high. President Trump begins with flurry of changes to Obamacare and NAFTA. Earnings season starting well for banks and miners. Global debt continues to soar, especially in China. Fake news debate rages. Trump and Merkel trade insults.  

Best Of The Web

These are the countries with the biggest debt slaves – Wolf Street

Everything is awesome! – Mish
...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.



Date Found: Thursday, 30 June 2016, 11:51:18 PM

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Comment: Bullion Banks Are Starting to Lose Control of Silver youtu.be/lxZBYK1eN00



Date Found: Friday, 01 July 2016, 03:30:33 PM

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Comment: Cashin - Market Beats Fed



Date Found: Friday, 01 July 2016, 11:06:14 PM

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Promotions

Phil's Stock World's Las Vegas Conference!

 

18 people have signed up, but it's not too late to join in!

Learn option strategies and how to be the house and not the gambler. That's especially apropos since we'll be in Vegas....

Join us for the Phil's Stock World's Conference in Las Vegas!

Date:  Sunday, Feb 12, 2017 and Monday Feb 13, 2017            

Beginning Time:  9:30 to 10:00 am Sunday morning

Location: Caesars Palace in Las Vegas

Notes

Caesars has tentatively offered us rooms for $189 on Saturday night and $129 for Sunday night. However, we have to sign the contract ASAP. We n...



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Digital Currencies

As China Slaps Fees On Bitcoin Trades, Japan Monthly Volumes Soar by 8,900%

Courtesy of Zero Hedge

There is one reason why bitcoin quickly became the darling of HFT and various high speed algo traders operating out of China and the rest of the world: domestic transactions were "frictionless", as there were no fees on buys or sells. Until last night, that is, because as China's three largest bitcoin exchanges, BTCC, Huobi and OkCoin, all said in separate statements on their websites late on Sunday, starting Tuesday they will charge traders a flat fee of 0.2% per transaction. This is only the latest fallout from the recent crackdown on Chinese bitcoin exchanges whose activities have drawn increased scrutiny from the centra...



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OpTrader

Swing trading portfolio - week of January 23rd, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Members' Corner

Secular Stagnation and Pension Crisis?

Courtesy of Nattering Naybob.

From Jeffrey Sniders The Denominator Prevails...

PSS57 - "There is absolutely no data supporting a premise of demographics. "

Bingo, the vile filth known as "Secular Stagnation" emanated from Larry Summers, and was given an unqualified Fed benediction.  Voila, no real data, no proof, an MSM narrative and repeated URBAN MYTH.  The Flatworld Society has a more promising premise than this intellectual claptrap.

Its another "boogey man" same as the "pension crisis", which will be utilized to take away all forms of private and public pension, and have everybody forced into fee laden 401K/IRA. They will also force Social Security into the same fee laden hole using...

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Mapping The Market

If we try it enough, it will work.

Via Jean-Luc

Brownback wants Trump to emulate what he did in Kansas because it worked so well:

Sam Brownback Calls on Donald Trump to Mimic His Kansas Tax Plan

By RICHARD RUBIN and  WILL CONNORS

Sam Brownback, the Kansas governor whose tax cuts brought him political turmoil, recurring budget holes and sparse evidence of economic success, has a message for President-elect Donald Trump: Do what I did.

In 2013, Mr. Brownback set out to create a lean, business-friendly government in his state that other Republicans could replicate. He now faces a $350 million deficit when the Kansas legislature convenes in January and projections of a larger one in 2018. The state’s economy is flat and his party is fractured...

...

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Biotech

The Medicines Company: Insider Buying

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

I'm seeing huge insider buying in the biotech company The Medicines Company (MDCO). The price has already moved up around 7%, but these buys are significant, in the millions of dollars range. ~ Ilene

 

 

 

Insider transaction table and buying vs. selling graphic above from insidercow.com.

Chart below from Yahoo.com

...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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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...

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