Archive for September, 2007

3 Steps to Successful Investing

OptionSage submits:

In the words of Warren Buffett’s mentor Benjamin Graham:

“Investing does not require genius.  What it needs is, first, reasonably good intelligence; second, sound principles of operation, third, and most important, firmness of character”

Since the first item on Graham’s list – “intelligence” – simply means the ability to read, add and subtract, we can skip quickly to “sound principles of operation”.  This is where most investors come to a grinding halt and with good reason.  Survey the financial landscape and you will be bombarded with a plethora of investment vehicles including stocks, bonds, options, futures, forex, treasuries, municipals and so forth.  Not only is it a challenge to figure out where to begin but, within each choice, the challenge is to figure out what system to apply!  So how do you choose?

Follow those that have successfully traversed the rugged terrain already!  Even the man considered to be the greatest investor of all time, Warren Buffett, had a mentor!  At PSW, we love to educate as well as enrich.  In numerous comments and articles, Phil expounds “sound principles of operation”, meaning a system of trading that has consistently worked for him.  The reason the system has been successful is it evolves with the market!  Although this is a simple concept most fail to trade this way.  Most investors simply sell losing positions and suffer from emotional trading.  In contrast, the approach Phil and I take is to modify our positions as necessary to account for changing trends or unexpected surprises.  We had a great conversation recently about how so many will simply “give up” on a position when in reality there is just no need.  With a little patience, positions can often be turned around and virtual portfolios made profitable.

While the goal of the short-term virtual portfolio is often to make attractive gains over the short-term, Phil’s contingency should a position move against him is to offset an unexpected trend with appropriate options in order to salvage a trade.  Irrespective of what happens then, he knows that his year will be a good one if he knows…
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Monthly Mop-Up

And you may ask yourself – What is that beautiful house?
And you may ask yourself – Where does that highway go?
And you may ask yourself – Am I right? …am I wrong?
And you may tell yourself – My god!…what have I done?
– Talking Heads

Letting the days go by / let the water hold me down
Letting the days go by / water flowing underground
Into the blue again / in the silent water
Under the rocks and stones / there is water underground.

Once in a lifetime/water flowing underground.

Same as it ever was…same as it ever was…same as it ever was…

Is the market truly operating under a new paradigm or is today’s situation simply "the same as it ever was"?

I love doing the wrap-ups as they are a great exercise in perspective and when I went back to the August wrap-up I was struck by the similarities.  We had just come off our August 16th lows and the Dow had risen from a low of 12,500 (spike down) all the way back to 13,400 in just 6 sessions, a Hang Seng-like effort.  At the time I didn’t want to get too excited as we had just barely made it back to the month’s open, which were also pretty much the July lows.

Here we are 30 day’s later and we’re just about back at the July highs, where I first posted this cartoon:

While we KNEW there was no good reason for the July run to 14,000 at least we can point to our latest 7-day, 600-point rally and say: "Oh, well that was because the Fed lowered rates."  Of course the fact that they lowered rates to avert a potential melt-down in the finance sector as Trillions of dollars of poorly constructed loans began to backfire is generally what history would consider closing the barn door after the horses get out but, since we’re all living in the moment, we’ll continue to pretend that it was some brilliant


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New Subscription Fees and How Not to Pay Them

This is the weekend we raise rates.

The new rate structure (as of Monday) will be:

  • $149/month
  • $399/quarter
  • $1,299/year

Members can lock in the old rates today, which will last until they expire, so if you wish to switch to an annual subscription a just $799, you can do that at: http://www.philstockworld.com/amember/member.php .  If you need any help, just drop Jared a line at admin@philstockworld.com but my understanding is that if you cancel your current subscription, then add an annual one, that should lock you in at the current rates and your annual subscription won’t start until your current quarterly or monthly one expires.

On a go forward basis, nobody who is currently a member will ever pay those rates anyway.  I am a big believer in rewarding loyalty and I've come up with a system I think is very fair for all.

Original 2006 members will get a 20% discount on the new subscription prices and 2007 members will get a 10% discount.  As of Jan 1st, all members bump up 10% in discount category and will continue to do so annually through 35%.  This is a good way to reward people who've been with us from the beginning as anyone who is a current member and renews through '08 at $799 would get at least a 30% discount in 2009, which would make the current annual fee  (it will be more by then) just $910.

In addition to this I've come up with a structure to address the needs of those who would like to pay even less, since most of us have either time OR money, but rarely both, there are now 3 ways to get your subscription for free in exchange for some of your valuable time:

#1 - Refer people to the premium site.  Every active member you bring in that is referred by you will get you a 10% discount on your next renewal.  That means that anyone who is currently a member and refers just 8 people over the course of the next year will have a free membership in '09.  These discounts remain in force as long as the members you refer remain active.

#2 – Refer people to the paid newsletter.  As of Jan 1st, the majority of our content will no longer be available on…
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Friday Virtual Portfolio Moves

Posted September 28, 2007 at 9:34 am | Permalink (Edit)

Sold those extra FSLR Dec $110s for $17 – happy to get paid!

Posted September 28, 2007 at 9:42 am | Permalink (Edit)

Oil sector showing continued strength, probably not a good short for the day but I’ll be shorting some into the close.

FXI posting ATH, about time with China at 27K

Let’s watch that S&P 1,530 for the big breakdown as well as the Nas, which looks strong this morning but SOX are still right at 500 and will lead the Nas lower and 2,700 is critical. The dollar is getting crushed in Europe so our market gets cheaper and cheaper.

VLO taking off and the $70s make a nice mo play, when those stop out it will be time to consider oil puts so I like the $70s at $1.27 with a .25 trailing stop as a mo play. XXX

Posted September 28, 2007 at 9:58 am | Permalink (Edit)

FWLT went nuts, sold the $135 puts for $6.30 to cover my $125 puts, will roll my puts up to $130s for + $1 to cut my risk to $3.50 ($4.80 net basis less $6.30 collected on a $5 spread) if it falls back from $132.

Posted September 28, 2007 at 10:03 am | Permalink (Edit)

Giving up on VLO, got weak and I don’t like the market right now. Lots of silly stocks getting sillier it looks like..

Posted September 28, 2007 at 10:24 am | Permalink (Edit)

TSO very ugly!

FXI – rolled my Jan $180s to 2x Nov $178 puts at $10.67, offset with sale of 1/2 $174 puts at $5 XXX

TSO – holy cow that whole trade is down .30! Really you shouldn’t play these things if you are going to stress out like this. We wanted TSO to go down, and it went down – just a little faster than we thought it would… If you want to duck out now you can roll the Nov $50s to 2x the Jan $45s at $3.70 for + $2 and roll your caller…
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Friday Morning Markets

[Grain]I thought I got all my complaining off my chest in last night's article but now I wake up to more nonsense!

Sorry, I'm trying to stay positive but…  Well, come on:

"The days of cheap grain are gone," says Dan Basse, president of AgResource Co., a Chicago commodity forecasting concern.  This year the prices of Illinois corn and soybeans are up 40% and 75%, respectively, from a year ago. Kansas wheat is up 70% or more. And a growing number of economists and agribusiness executives think the run-ups could last as long as a decade, raising the cost of all kinds of food.

American families, which spend 9.9% of their disposable income on food, are facing the fastest-rising food prices in 17 years. The consumer's cost for everything from yogurt and popcorn to breakfast cereal and fast-food french fries is climbing. In U.S. cities last month, the average retail price of a pound loaf of whole-wheat bread was up 24% from a year ago, according to the Bureau of Labor Statistics. Whole milk hit $3.807 a gallon, up 26%

"We're in uncharted territory," says Christopher Fraleigh, chief executive of the food and beverage division of Sara Lee Corp., which earlier this month raised its bread prices 5%.  To cope, General Mills is shrinking the size of its breakfast-cereal packages, effectively raising the price per ounce. At a Dominick's supermarket in suburban Chicago, a 15.6-ounce box of Wheaties recently cost $5.16, more per ounce than the round steak London broil at the meat counter. Grain typically has accounted for a small part of the cost of packaged products like bread and ready-to-eat cereals.

That's the creeping "shadow inflation" we get at the early stages of an inflationary cycle.  The cereal box is smaller, the restaurant cuts back on bread, the Whopper shrinks, the car has less features, the movie has less special effects…  This is how an economy can collapse all around you and you don't actually realize it until it's too late to do anything about it. 

 

For instance, making fuel out of food is MONUMENTALLY STUPID and is causing more inflation…
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Thursday Thump – For the Dollar!

Did you hear that sound today?

It was the sound of our currency collapsing.

The dollar sank to an ALL-TIME LOW of 78.19 against it's indexed basket of currencies and, if the Yuan were included, we'd be down around 75 as we've lost 10% against that currency alone in just 2 years. 

Today we got TERRIBLE news, it seems home sales are now off 8.3% – SINCE LAST MONTH!  That is almost double the expected 4.6% decline but, even worse, the median price of homes fell from $243,900 last year to $225,700, a 7.5% decline.  The rate of new home sales dropped 21% since last year.

Despite all the bad news, the market went up, a move we caught right at the beginning of the afternoon rally when I noted: "Strong demand for treasuries – 4.25% for $13Bn, huge buying interest probably based on fears the Fed will continue to lower rates but the demand is a surprising and good sign that foreigners (including China) are willing to support the Fed move. That should goose the markets a bit, now we’ll see if refiners can recover.. "  What is going on is that the dollar is now so low that people are starting to play it like it's some stock that's going to bounce.  This is based on a global premise that fundamentals are meaningless in trading.  Investors are rushing back into the carry trade, borrowing Yen at low interest rates and then using them to purchase dollar-denominated assets hoping to make money off both the interest they collect as well as a return of the dollar to "normal" levels.

Brazil's Real is at the highest level it's been against the dollar in 7 years, the Columbian Peso is at an all-time high and that means, in addition to the record high corn, wheat an soybean prices we are paying, we can look forward to price hikes in textiles, bananas, sugar, coffee and cocoa (and cocaine).  It is very important to note that Columbia and other South American countries have been operating under capital controls that were implemented last year to curb the appreciation of the Peso to the dollar but IT DIDN'T WORK!  Our currency cannot be saved by the intervention of foreign governments.

"Currency controls are a risky, stopgap measure, but some gaps desperately
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Thursday Virtual Portfolio Moves

Posted September 27, 2007 at 9:19 am | Permalink (Edit)

Please note I’ve added several additional $10KP and $25KP plays from yesterday’s Dow post in case you’re following those virtual portfolios and that the Happy 100 HXL play is moving to the Jan $22.50s for +.25 XXX

Posted September 27, 2007 at 9:42 am | Permalink (Edit)

DIA $140 puts are a great deal at $2.20! XXX as a cover play to start scaling in no matter how the day ends.

Posted September 27, 2007 at 9:54 am | Permalink (Edit)

Rolling is simply trading positions. If you have an option-friendly broker, there should be a function in your account where you set up a simultaneous buy/sell for a specified spread. If not, you can call your broker and say “I’ld like to roll the HLX Dec $22.50s to the Jan $22.50s for .25, good until cancelled” and once they make a match, they charge you a quarter (and, hopefully a reasonable commission) and you have a new position without all that messy buying and selling.

Yes nu2- you roll for .25 debit, you don’t care what the price of either is when they match it.

Posted September 27, 2007 at 10:00 am | Permalink (Edit)

RIMM holding $100! That’s about where they were a year ago, before the 3:1 split! Must sell the $100s here for $7.25! XXX

Posted September 27, 2007 at 10:04 am | Permalink (Edit)

PFE – yep. I think they will have trouble at 25 in the very least.

Whole market about to have touble with new home sales down 8.3% AND median price down to $225K from $239K – that’s in a month!!!!!!!!!!!!!!!

Be careful not to start thinking here though as logic may go that this is a good thing because surely the Fed will have to lower rates further.

ICE $150 puts at $5.80 as a mo play with a $5.50 stop. XXXX

Posted September 27, 2007 at 10:15 am | Permalink (Edit)

HXL – It doesn’t matter if you never…
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Thursday Morning

Yesterday was another pretty good day!

We didh't quite make my Nasdaq (missed by 1) or S&P (missed by 5) levels but we're just 122 points from 14,000, where we will either break on through to the other side or crash and burn – this is so exciting!

Deus Ex Buffett was used to lift the financials, which had been struggling (other than GS, of course) all day.  There is nothing sexier in the markets than when Mr. Buffet smiles upon a sector and, whether the rumor is true or not (I think not) it sure does get people to take a serious look at the many undevalued financials.

We've been in the BSC calls since they hit my $100 target that I set way back on August 6th when I said: "GS – I think BSC is a better value right now. Hopefully they sell off to some extreme as I feel strongly that $100-$110 is a fair bottom for them. I’d be looking to begin setting up a nice ‘09 or maybe ‘10 play, perhaps the $110s with a 3/4 sell of current $10 out of the moneys."

Our BSC Jan '10 $120s are in very good shape and we'll be repositioning them if the stock keeps heading higher but Buffett or no Buffet, I expect them to meet some strong overhead resistance at $140 before moving on to test new highs, still miles away at $172.  In the end, we went with GS too and the Jan  $220s are in great shape, already up 30% with the $220s sold against them at $3.60.  We're far enough ahead to let GS test $220 before we roll our caller but, if the Buffett rumor is true, we need to pull them on momentum and resell whatever level we run out of gas at.

Japan jumped 396 points as financial mania swept Asia and the Hang Seng added (yawn) another 634 points, breaking the 27,000 mark just 2 days after breaking the 26,000 mark after gapping right through 25,000 on the 19th (over a week ago!).  That puts the Hang Seng up 35% for the year and almost exactly 10,000 points higher than last September, when we thought the 1-year run from 14,000 to 17,000 was bound to end "soon."

If you
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Wednesday Virtual Portfolio Moves

Posted September 26, 2007 at 9:39 am | Permalink (Edit)

GM sold the $35 calls for $3.30, we’ll see how it goes.

I’m sorry I sold those XOMs but I have tons of XLE $74 calls so I’ll manage. Tempting to sell the 9/30 $75s for .77, I think at $1.25 I’ll sell them to cover, depends on inventory of course. They were $1.50 on Friday but they expire in 3 days now…

Posted September 26, 2007 at 9:46 am | Permalink (Edit)

RMBS leaped up, putting a stop on the naked ones at $2.70. XXX

CDS – I ring the register early and often on Chinese gains.

OOPS!!! I forgot HXL Dec $22.50s for the Happy 100!!! 20 for $2.60 XXX

Posted September 26, 2007 at 10:23 am | Permalink (Edit)

FNF – no I do not stop out on a 90-day out call 24 hours after I enter it! K1 – please drop some links on scaling into positions when you get a chance…

CHK – You’re covered and you have 3 montht, relax.
AMGN – I bought my guy out and luckilly didn’t replace him yet but the $57.50 is my target.

Posted September 26, 2007 at 10:44 am | Permalink (Edit)

CY/Any naked calls – if we hold 13,800/2,700/1,530 then there’s no reason to sell anything against our runaway postions in a hurry.

Damn those XLE Sept $75 calls are still in fanasy land at .40! SLB flying down.

Market looking shaky all of a sudden and the energy sector did not take that big of a hit…

Posted September 26, 2007 at 10:49 am | Permalink (Edit)

You are very welcome Bob!

Oh if you missed the radio, there was a surprising build in oil but it was caused by low refinery utilization so not that meaningful but it still takes the wind out of the sails of the energy sector. Don’t know if I can blame that sector for the S&P fall off but the OIH group is taking a hit and XOM is in a power dive. We took the COP $85 puts…
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Wild Wednesday Morning

Whee!  Here we go again!

All aboard the market train as the GM strike ends, oil prices rebound (XOM, another Dow component) so we're in for a retest of 14,000.  I'm going to dispense with the news today as it doesn't seem to affect the market anyway and let's take a look at our 30 Dow components – perhaps we can find some bargains as the tide of index buyers lift all ships (plus they are nice and liquid so we can get our when it all hits the fan!).

Just for fun I'm going to make a Dow page, as it should be a fun group to watch if the global market catches fire.  We can allocate $3K per position in a $100K virtual portfolio and see how it goes.  These are plays for a Dow rally, with the assumption we are going to break and hold 14,000, otherwise we take the money and run:

AA – I don't understand why the dumped China's Chalco for $2Bn, perhaps they were guessing the top of the market…  Earnings were 7/9 and the company jumped from $42 to $48.   My pal Icahn owns 3.5M shares and the stock has taken a beating in Q3 and their forward p/e of under 11 is a good 30% below historical averages.  Did not buying AL put them at a huge disadvantage?  I say they're still worth $40+ but let's give them time and go long with the Jan '09 $35s for $7.40, selling the current $37.50s for $1.30.

AIG – Hmm, no hurricanes and they are still going down?  I suppose the concern was that they tie up a lot of their reserves in mortgage-backed securities but as long as everyone seems to have forgotten about that, we should too.  I like the May $70s here at $4.10, if they can't break $73 by the month's end we can consider selling calls against.

AXP – People keep confusing these guys with a credit card company but the majority of AXP's revenues is purely transaction based.  I simply don't remember these guys having a bad Q3 (last year was a 3% beat) and I think estimates are low here.  The Apr $60s are $4.70 but we'll be out by January and we can sell the current $60s if they hit $2+ (now $1.20) as $62…
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Phil's Favorites

The dysfunctional debt ceiling and why we should kill it: 5 questions answered

 

The dysfunctional debt ceiling and why we should kill it: 5 questions answered

Treasury Secretary Mnuchin is taking ‘extraordinary measures’ to avoid busting the debt ceiling. AP Photo/Jose Luis Magana

Courtesy of Steven Pressman, Colorado State University

Editor’s note: The U.S. government maxed out its national credit card in March and has been moving money around ever since to avoid running out of cash. Very soon the Treasury Department ...



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Zero Hedge

This Is Where The Next Recession Will Start: An Epidemiological Study

By Nicholas Colas of DataTrek

(Published at ZeroHedge)

US recessions are like epidemics: they all begin somewhere, and the “tell” is state-level unemployment data. For example, the end of the 2000 dot com bubble hit Connecticut and Massachusetts first – two hubs for the financials services industry with lots of affluent investors to boot. The end of the 2000s housing boom predictably impacted Florida and Nevada before the rest of the country. This time around, the data shows the manufacturing-heavy states of Michigan, Ohio and Indiana are most at risk. No wonder “Dr. Fed” wants to inoculate the region with lower interest rates.

When medical professionals study epidemics, they look for the source of the ou...



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Digital Currencies

Cryptos Suddenly Panic-Bid, Bitcoin Back Above $10k

Courtesy of ZeroHedge. View original post here.

Following further selling pressure overnight, someone (or more than one) has decided to buy-the-dip in cryptos this morning, sending Bitcoin (and most of the altcoins) soaring...

A sea of green...

Source: Coin360

Bitcoin surged back above $10,000...

Ethereum bounced off suppo...



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Kimble Charting Solutions

Silver ETF (SLV) Testing Dual Breakout Resistance

Courtesy of Chris Kimble.

Silver (NYSEARCA: SLV) has been in a bit of a slumber when compared to the price action for Gold (NYSEARCA: GLD).

Precious metals bulls hope that this about to change, as bullish action from Silver is necessary to confirm any bull market / move in metals.

Today’s chart takes a closer look at the Silver ETF (SLV) on a weekly basis. As you can see, Silver is up 5 percent this week alone.

This is good news for metals bulls. But this rally isn’t confirming a breakout just yet.

As you can see in the chart below, SLV has been trading between support (1) ...



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Insider Scoop

Analysts Weigh In On Netflix's Rocky Quarter

Courtesy of Benzinga.

Netflix, Inc. (NASDAQ: NFLX) reported second-quarter results highlighted by an uncharacteristic decline in U.S. subscribers while international subscriber adds missed expectations. Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

Mor...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 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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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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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...

Learn more About Phil >>


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About Ilene:

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.

Market Shadows >>