Posts Tagged ‘BRK.A’

Tempting Tuesday – As Usual

If it's Tuesday we must be bouncing!

Clearly, from the recent sell-off, we have a whole lot of bouncing to do.  Yesterday we failed our Must Hold lines on the Nasdaq, the NYSE and the Russell (the Dow never got there) and the S&P was briefly below 1,360 and recovered to end the day at 1,366 – still below our weak bounce level of 1,372.

That leaves us in the same place as we were on the 11th, when I titled the morning post – "Weak Bounces and Beige Books."  As we expected at the time, we made it to our 1,384 level on the S&P and then failed to hold it and now we come in for our 2nd tests of our 3 significant levels – 1,360, 1,372 and 1,384 – that's our range until it breaks and THEN we can make some directional bets.  

In this market chop, our best strategy has been to bet both ways and our virtual $25,000 Portfolio is now up about $16,000 for the year but that's nothing compared to our completely neutral FAS Money Portfolio, which has turned a $2,000 spread into almost $8,000 in profits in the same 4 months – just using our very simple strategy of selling premium on a regular basis:  

Last year's FAS Money Portfolio was also a great performer and it's a great time to get started following as the current position is down $706 so you sure didn't miss anything but a loss by taking up the current position.  It's a great exercise to set up a virtual portfolio and follow these trades along as we are constantly managing these positions to maximize the amount of premium we sell so it's a great practice portfolio for rolling and adjusting short positions, teaching you the value of BEING THE HOUSE!  

Woodstock for Capitalists: A Film About Warren Buffett, Charlie Munger, and Berkshire Hathaway Shareholders RallySpeaking of investing value – don't miss our contest to win 2 passes to Berkshire Hathaway's Annual Shareholder Meeting!  Hopefully we'll get a nice report from whoever wins – it's always good to get a little insight into what the Oracle of Omaha is thinking.  

My thinking is that – while our Virtual Portfolios are all performing very well this year – I still can't shake my overall feeling that the markets are very weak internally.  Today we are hoping that AAPL will save us (earnings…
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S&P Downgrades US to AA+ – Tied With Belgium!

Uh-oh!

Officials at ratings firm, Standard & Poor’s, said U.S. Treasury debt no longer deserved to be considered among the safest investments in the World.  S&P removed for the first time the triple-A rating the U.S. has held for 70 years, saying the budget deal recently brokered in Washington didn’t do enough to address the gloomy long-term picture for America’s finances. It downgraded U.S. debt to AA+, a score that ranks below Liechtenstein

S&P said "the downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics." It also blamed the weakened "effectiveness, stability, and predictability" of U.S. policy making and political institutions at a time when challenges are mounting.

In other words, the ship is sinking and the captain and crew are doing nothing but rearranging the deck chairs.  S&P was supposed to release this report this afternoon (Friday) but the Treasury Department caused a delay by arguing the math the S&P was using (a $2Tn discrepancy).  At 8pm, the S&P decided the Treasury was wrong and went ahead and released the report, not only downgrading our Debt to AA+ but giving us a NEGATIVE OUTLOOK as well.  Now we have to contemplate what the effect of this change may be…

Let’s first keep in mind that this was expected.  In fact, it’s ridiculous how long it took for someone to downgrade us.  JPM estimates that $4Tn worth of treasuries are pledged as collateral by borrowers such as banks and derivative traders.  The change in status from one ratings agency is unlikely to trigger any immediate covenants (a primer on Sovereign Debt Ratings)  but it may take only one more before borrowers are required to come up with many, many Billions of Dollar of cash or securities to keep their creditors at bay – essentially – it’s a margin call on America!  

Well, I say this was expected but I mean by us.  We cashed out today (see morning post) but Little Timmy Geithner, who blew his chance this week to resign with America’s credit rating intact under his watch, was on Fox News in April SPECIFICALLY stating that there was "NO RISK" that the US could lose it’s AAA rating.  Read the article or watch the video –…
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Warren Buffett’s Secret to Making 100% a Year

I love the Berkshire Hathaway annual report!  

Especially Warren Buffett’s letter to shareholders.  The report gives us a great view of the overall economy from a man who has his finger in every pot and his letter to investors gives us a very good insight as to how things are going in the various sectors his operations cover.  Most importantly, what I have learned in my own 40 years or reading Mr. Buffett’s reports (my Grandfather was a shareholder) is what should shape any long-term investing strategy:  Patience and performance.  

I often preach to members the joys of letting gains compound and our $25,000-$100,000 Virtual Portfolio, which is currently at $27,531 (up 10%) after 4 weeks, is an exercise in how to quickly compound small gains over the course of a year.  Primarily, we try to follow Warren Buffett’s Number One Rule of Investing, which is: Don’t Lose Money.  Buffett’s Rule #2 is: See Rule #1 and like us, it’s not that nothing Warren Buffett ever buys loses money – it’s just that he doesn’t ever buy things he isn’t willing to stick with UNTIL they make money.  Sure we take a few losses along the road but, by being selective in our entries, we don’t discard stocks that we carefully selected just because the market temporarily disagrees with our valuations.  

In our $25,000 Virtual Portfolio, it’s only been a month so we’ve only closed our winners so far and they were SPWRA with a 100% gain (these are option trades), INTC with a 40% gain, NFLX with a 42% gain, EDZ with a 75% gain, XLF with a 15% gain, VIX with a 50% gain, USO with a 53% gain and XLE with a 5% gain.  In 19 trading day we have made 28 virtual portfolio moves (counting each leg) and, as I said, netted a 10% return to date.  Interestingly, we’ve been playing it very cautious as we still have over $18,000 of virtual cash on the sidelines, hoping for a sign to get a little more aggressive next week.  

How, you may wonder, are we going to get to $100,000 by December with just $27,531 in February?  THAT is the lesson Warren Buffett has to give us and that lesson is COMPOUNDING RETURNS!  Since 1965, Berkshire Hathaway has returned an overall gain of 490,409% to it’s shareholders.  $10,000 handed
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Smart Virtual Portfolio Management III – The $1,000,000 Virtual Portfolio (Members Only)

You can't lose what you don't have.

The reverse is true for people with Millions in a stock virtual portfolio.  Phil points out that the reson you don't run a large hedge fund trying to make 100% gains is that the people who invest in those funds are more interested in what we call "preservation of capital" rather than generating wealth.  Generally, the people who have $1M of investable cash to play the markets have already achieved a great deal of success, often by taking their own risks along the way.  For most of us, $1M is hard to come by and, while we want to put that money to work – we certainly don't want it wondering off and joining the circus.

As a high net-worth investor, you need to decide how to diversify your assets to suit your long-term goals.  We're not going to get into that here – let's just say that if you want to gamble and go for some of our "more exciting" plays, perhaps allocate a portion of the virtual portfolio to those.  Whether that's 5% or 10% or 30% is up to you but it is good to fence off your risk to a sensible, manageable amount that you really can afford to lose while keeping the bulk of your market allocation well diversified and well-hedged. 

I have my own 5% Rule.  Phil's famous 5% Rule deals with the predictable movement of stocks in their trading ranges but my 5% Rule, which Phil also agrees with is simply "Do not put more than 5% of your virtual portfolio in the stock of any one company! This is so much easier said than done for many reasons!!

[1] Transition to Large Numbers

Moving from a 5 or 6 figure account to a 7 figure account has a profound impact on many traders. In fact, our friend Dr. Brett refers to the effect “performance anxiety” can have on a virtual portfolio and notes that one of the causes is the responsibility felt by traders as larger dollar amounts are traded.  Phil advocates a system of "purging" Short-Term Virtual Portfolio gains when they gets too large and shifting money into safer investments in a Long-Term Virtual Portfolio – it is good to have a strategy for balancing out your holdings, not just target goals.

While it might be acceptable to put
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Monday Medical Miracle – Health Care Finally Passes

Paul Krugman summed it up nicely:

There is, as always, a tunnel at the end of the tunnel: We’ll spend years if not decades fixing this thing.

Love it or hate it, the US has just taken a big step towards nationalized health care so maybe now we can finally stop talking about it and move on with the investing!  I think medical devices (IHI) should do well with 32M new patients – that's a play we made quite a while ago though and, like pretty much everything else in this market – they look a little toppy. 

As I noted in the Weekend Wrap-Up, we came to the decision to get back to cash on Friday, removing all uncovered bullish bets and adding our disaster plays, no longer hedges (as there's not much to hedge) but as bets that the Global markets are due for a little correction at this point.  I'm already feeling good about the decision as the futures look awful this morning (8am) as the Hang Seng dropped 2% (437 points) and couldn't get back over 21,000 during the session and has now given up all of March's gains.  The Dow is still up about 400 points in March as well – hopefully our fall won't be as violent as what the Hang Seng saw this morning.  India held up well, only losing 1% after Friday's surprise rate increase. 

The Dollar was very strong after the Health Care vote and we're sitting below $1.50 to the Pound and we've bounced off $1.35 to the Euro twice this morning – a break below there could get very interesting!  The Yen is staying down at 90.5 to the Dollar, which is a relief for Japanese exporters but I'm not sure they'll hold 90 this week.  Copper broke below $3.40 on Friday – confirming our bearish turn and is at $3.32 this morning.  Gold once again is testing $1,100 and silver failed $17 at $16.82 with $16.50 being a bearish signal for metals.  Oil dropped all the way to $79.31 this morning and we'll see if they can get back over $80 but we are going to be thrilled with our short plays (see wrap-up) in that sector

Risk aversion has come up after developments in India and Greece,” said Henrik Gullberg, a fixed-income strategist at Deutsche Bank…
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Another Weak Weekly Wrap-Up

This is getting tedious!

We were bearish going into the week but not this bearish.  It is unusual though that we have a weekly wrap-up with nothing but negative plays as we did last week but there was nothing very positive in the outlook after the action of the week of the 16th through the 20th, pictured here on this chart.

As I said in the last Weekly Wrap-Up: "Of course nothing beats sector specific covers against your own mix of positions but we like using the DIA puts as general virtual portfolio coverage although, as I mentioned last week, both the DAX and the Qs may now have farther to fall."  The Qs ended up dropping 8.5% for the week while the DAX tumbled 6%, underperforming other global indexes as we had expected it would.  Our hedge play , the DIA June $77 puts, which we went with at $8.22 on Friday and half covered with March $75 puts at $3.85 ended up at $9.85 and $5.40, not much improvement but accomplishing it's goal of converting a net $6.29 entry into puts that are now 100% in the money to our net entry.  At this point, every point down on the Dow is a penny we realize in intrinsic value.  Per our original plan, the $75 puts can still be rolled to 2x the Apr $66 puts, now $2.32, allowing for our long puts to be $11 in the money against the puts we sold.  The reality is more complex than that as we day-traded the covers around and rolled up the longer puts but we went into this weekend with the same bearish half-cover, not wanting to take chances after Friday's poor performance.

On Monday morning, I was not at all enthusiastic about our prospects for the week as we had the Bernanke testimony Tuesday and Wednesday and Trichet started us off with a thud by stating: ""In recent weeks we have seen the first signs of falling credit flows.  An important part of this fall is demand-driven. However…there are indications that falling credit flows reflect also supply-side factors and tight financing conditions associated with a phenomenon of deleveraging.  If such a behavior became widespread across the banking system, it would undermine the raison d’etre of the system as a
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The Oracle Speaks – Words of Wisdom From Warren Buffett

Boy is this a tough market, even Berkshire Hathaway profits dropped 96%.

First of all, stop right now if you haven't read Warren Buffett's Chaiman's Letter in the Berkshire Hathaway Annual Report.  He can tell you a lot more about the state of the economy than I can.  Although I will go over some of the highlights of The Oracle of Omaha's 100-page report, you should read the whole thing – go ahead and read it, then come back – I'll wait… 

Berkshire Hathaway has produced a compounded annual gain in value of 362,319% since it's founding in 1964, about 10 times what you would have gotten investing in the S&P 500, roughly a 20% annual growth rate.  Included in that figure is a 9.6% decrease in book value last year, the first loss since 2001 and the second loss EVER.  The average S&P company dropped 37% of their book value in 2008 and this year is looking worse already.  "By the fourth quarter," says Mr. Buffett, "the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear."

Buffett does not provide a positive outlook, he expects a rough 2009 and "for that matter, probably well beyond" but that does not shake his outlook that, over time, investments made today will pay off in the future.  He has a quote that is almost identical to one of mine: "Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down."

Commentary on the housing market was: "The 1997-2000 fiasco should have served as a canary-in-the-coal-mine warning for the far-larger conventional housing market. But investors, government and rating agencies learned exactly nothing from the manufactured-home debacle. Instead, in an eerie rerun of that disaster, the same mistakes were repeated with conventional homes in the 2004-07 period: Lenders happily made loans that borrowers couldn’t repay out of their incomes, and borrowers just as happily signed up to meet those payments. Both parties counted on “house-price appreciation” to make this otherwise impossible arrangement work. It was Scarlett
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Phil's Favorites

Trump, Saudi Arabia and yet another arms deal

 

Trump, Saudi Arabia and yet another arms deal

Courtesy of Russell E. LucasMichigan State University

The Saudi king presents Trump with The Collar of Abdulaziz Al Saud medal on May 20, 2017. AP Photo/Evan Vucci

The first stop on Donald Trump’s first trip as U.S. president was to Saudi Arabia.

That was no accident.

His decision was surely based on the fact that the alliance between Saudi Arabia and the United States is one of the foundations of American foreign policy in the Middle East.

While Trump was there, Saudi King Salman awarded him the kingdom’s highest civilian honor. Trump came bearing gifts of his own i...



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Zero Hedge

Shaping The Future: Moscow And Beijing's Multipolar World Order

Courtesy of ZeroHedge. View original post here.

Authored by Federico Pieraccini via The Stratgic Culture Foundation,

Once in a while, think tanks such as the Brookings Institute are able to deal with highly strategic and current issues. Often, the conferences held by such organizations are based on false pretences and copious banality, the sole intention being to undermine and downplay the efforts of strategic opponents of the US. Recently, the Brookings Institute's International Strategy and Strateg...



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ValueWalk

North Korea Puts Strain On U.S.-South Korea Ties

By insidesources. Originally published at ValueWalk.

SEOUL — Hope for South Korea’s liberal President Moon Jae-in “engaging” the North in dialogue is in danger of running afoul of North Korean leader Kim Jong-un’s refusal to stop developing missiles capable of carrying a nuclear warhead to the United States. With a mere 41 percent of the votes in this month’s presidential election, Moon has no mandate to jettison the pro-American policies of Korean presidents since the founding of the Republic of Korea under Syngman Rhee in 1948.

Public_Domain_Photography / Pixabay

Kim Jong-un, overseeing two missile tests since Moon’s...



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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Producers Set to Extend Cuts as Rally Stalls: OPEC Reality Check (Bloomberg)

Reeling from the worst oil-market rout in a generation, producers controlling about 60 percent of the world’s supply came together last year determined to put an end to the global glut. 

OPEC's Worst Cheater Will Get Harder to Ignore as Curbs ...



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OpTrader

Swing trading portfolio - week of May 22nd, 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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Chart School

Relief Rally Approaches Resistance

Courtesy of Declan.

Wednesday's gap created a significant reversal, stalling the mini-rallies kicked off in April. Thursday and Friday generated some come back against last week's loss, bringing many of the markets back to the highs of the gap down.

The S&P is in a position where shorts may look to attack the gap. Friday's spike high put itself inside the gap, recovering the 50-day MA in the process. This gain was supported by a 'buy' trigger in On-Balance-Volume. While shorts might have the better risk:reward option, a move above 2,389 opens up for a retest of 2,405.

...

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Digital Currencies

Bitcoin Soars Above $2000 For First Time Ever

Courtesy of Zero Hedge

Bitcoin is now up over 100% in 2017, amid global political uncertainty and increased interest in Asia, suddenly spiking above $2000 this afternoon for the first time ever...

That is a year-over-year gain of more than 350%. The move comes, as CoinDesk notes, amid a broader boost in the cryptocurrency market, which broke the $60bn barrier today. The increase has taken place amid strong surges from Ripple's XRP, which seeks to lower costs in enterprise cross-border payments, and ethereum's ether token, a cryptographic asse...



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Biotech

Beyond just promise, CRISPR is delivering in the lab today

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

Beyond just promise, CRISPR is delivering in the lab today

Courtesy of Ian HaydonUniversity of Washington

Precision editing DNA allows for some amazing applications. Ian Haydon, CC BY-ND

There’s a revolution happening in biology, and its name is CRISPR.

CRISPR (pronounced “crisper”) is a powerful technique for editing DNA. It has received an enormous amount of attention in the scientific and popular press, largely based on the promise of what this powerful gene e...



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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



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Mapping The Market

Bombing - Right or Wrong?

Courtesy of Jean-Luc

I am telling you Angel – makes no sense… BTW:

Republicans Love Bombing, But Only When a Republican Does It

By Kevin Drum, Mother Jones

A few days ago I noted that Republican views of the economy changed dramatically when Donald Trump was elected, but Democratic views stayed pretty stable. Apparently Republicans view the economy through a partisan lens but Democrats don't.

Are there other examples of this? Yes indeed. Jeff Stein points to polling data about air strikes against Syria:

Democr...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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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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FeedTheBull - Top Stock market and Finance Sites



About Phil:

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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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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