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Thursday, June 8, 2023



Wednesday Wheeee – No More QE For You!

SPY 5 MINUTEI hate to say I told you so but…

Oh, who are we kidding?  I could not be happier saying I told you so and neither could our Members as our "Sell in March and Go Away" strategy seems to have hit the nail on the head – and it's only April 4th!  

Back then (2/24), we were still bullish but the plan was to let the rally run its course and cash out ahead of earnings and our plays from that Wednesday (2/22) which I posted right in the morning post for all to see, have performed very well, of course.  

We had April SQQQ and DXD hedges that failed, of course, but those were paid for by the short sale of AAPL 2014 $300 puts for $15, which are already $10.75, so up 28% already on those pays for a lot of protection.  

Another offset we had looked at was the short sale of FDX April $80 puts at $1.10, which expired worthless (up 100%).  We also looked at longer-term put sales on SKX, with the Oct $12 puts fetching $1.55 per contract, now $1.25 (up 19%), and the T 2014 $25 puts at $2.15, now $1.75 (up 18%). 

Along the same vein, the XOM 2014 $65 puts at $5, now $4.05 (up 19%) were sold to pay for the SU 2014 $25/37 bull call spread for $6 for net $1 on the spread.  The bull call spread is still $6 but that's net $1.95 now – up 95% on the combo.  Our other bullish play on oil was the USO June $40/46 bull call spread at $2, selling he SCO Oct $26 puts for $3 for a net $1 credit.  The USO spread has fallen to $1.40 but the short SCO puts dropped to $1.65 a net gain of .75 – up a quick 75% on a fairly neutral oil play, which was BRILLIANT as it covered many, many of our aggressive oil shorts over the month that went VERY well

Our other trade ideas from the morning post (and the logic and strategies are detailed in the post):  

  • AA 2014 $10 puts sold for $2, still $2 – even
  • X at $28.49, selling Jan $25 calls for $8.50 and 2014 $20 puts for $2.95 for net $17.04/18.52  (see "How to Buy A Stock for a 15-20% Discount" for details on this strategy), now net $18.98 – up 11.4%
  • PEG Sept $30 buy/write at net $27.07/$28.53, now $28.54 – up 5.4% (plus .355 dividend) 
  • HOV 2014 $2 puts sold for .90, now .80 – up 11%
  • BAC 2014 $3/7 bull call spread at $2.75, selling 2014 $10 puts for $3.30 for net .55 credit, now .75 – up 36% 
  • HCBK Jan $7 buy/write at net $5.14/6.07, now net $5.80 – up 12% 
  • FTR 2014 $5 buy write at $2.43/3.71, now $2.24 – down 8% (plus .10 dividend) 

TLT WEEKLYOf course we got much better exits than yesterday's prices as we took the money and ran in last week's cash out but these 10 trades will be good to cycle back into (not HOV or BAC as we're concerned with both now) when we find a bottom to this dip.  There's no shame in going back to the well – especially when the well is filled with gold!

In yesterday's aptly titled "Double Toppy Tuesday" post, we discussed our "sell the rips" strategy as well as buying the QQQ May $67 puts for $1.08 and they actually opened at .96 on the morning rip and finished the day at $1.07 (up 11%), which made them pretty good protection for the against the day's 0.5% drop.  

I made a quick comment in Member Chat as the Nasdaq opened up 0.33% on yet another AAPL run, saying to our Members at 9:41:  

The S&P is not playing and the NYSE is down 0.25 and the SOX are down 0.42 and the Transports are flat so I'm still thinking toppy here – so be careful – this could be just a blow-off top this morning. 

We used the same 836 line on the Russell Futures (/TF) that we used for shorting last week and, as of this morning, we're down to 821, which is a very nice $1,500 gain per contract.  Oil (/CL) of course, we shorted from $105 to our usual $103.50 line, then again below $103.50 (now $102.75) and those contracts are $10 per penny per contract so another $1,500 per contract gain just to $103.50.  

At 11 am we held fast to our bearish short-term portfolios at the market topped out and even added (or rolled to for people in other puts) the PCLN July $560 puts at $7 as PCLN ran up to $730 on a C upgrade.  If they are going to keep offering cheaper puts on PCLN ahead of earnings – we'll take 'em!  My comment on Fed expectations at 11:09 in Member Chat was a pretty good preview for the afternoon:  

Fed – 2pm.  Just the minutes of the last meeting, where they said no QE3 for now.  I don't understand the fuss – they gave us their formula and clearly we're not there so why do people think the Fed is going to lay out the conditions for more easing for the first time in their history and then break those conditions within a few months – even The Bernank is not that crazy.  

That cartoon is from last February – the more things change, the more they stay the same…  

Of course all of our bearish bets were in place, so there wasn't much to do but sit back and watch the carnage.  We did have a good conversation about Star Trek in the afternoon and how far people drive for groceries but things got serious again when I noted to Members it was "80 minutes to Bernanke."

Stock World WeeklyWe were thrilled to have the Fed minutes confirm our bearish outlook at 2pm (public version of my commentary on the Fed for Members is up on Seeking Alpha but, sadly, they don't have color capability, so a little harder to follow – I'm sure the full version will be up in Stock World Weekly this Sunday – and you can get a Free Trial now).   Speaking of Stock World Weekly, they featured my Long Put List this weekend – what fantastic timing!

As the market collapsed, TLT did a funny thing and dropped to $110.50 and my 3:31 response to Button, who asked in Chat why TLT and the 30-year were dropping on the Fed statement, was:  


TLT/Button – No more twist.  First reaction is dumping out of Treasuries on fear that the Fed (essentially the only buyer) may not cover the auctions.  Now we need a bit of panic into the Dollar and TBills to take us the other way.  

Let's DD on the TLT April $110/111 bull call spread at .57 in the $5KP (5 more).  

That TLT bull call spread pays .43 (up 75%) if TLT simply holds $111 through April expirations.  I imagine by this morning they should be good for 20% or better gains already as TLT comes back on the expected Global panic.  This is one of the reasons I drone endlessly on about market Fundamentals to our Members – if you UNDERSTAND why something is happening, then rather than panicking with the herd – you can calmly jump in and take advantage of opportunities when they present themselves.

    Now we will watch and wait and see how far this correction will take us.  Since we already have plenty of bearish bets, we'll be looking for bullish ones and our old top 10 list is going to be a fine start but who knows what stocks will go on sale as we head into earnings season.  Europe is already off 2% this morning and our Futures look to be opening down 1% (9am) despite a pretty good ADP report.  Since China was closed today and is missing all the fun (they were UP 1.3% on Tuesday), if we finish down 1% or lower, we can expect them to snap down harshly tomorrow morning and that won't be pretty for the EU open so lot's of fun in store.  



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    Despite the last 2 days, a lot of large stocks are still overbought:


    We keep on piling up the crude….


    What are we going to do with it?

    Xerox (referring to Phil): “Your "plutocrat attack" is tiresome. … You have always shown a reflex toward deprecating the speaker rather than addressing an argument.”  
    It seems to me, Xerox, that you exhibit a very high SI (Sanctimony Index).  I won’t say “always”.

    TrimTabs Investment Research estimates the U.S. economy added 187,000 jobs in March. In the past three months, TrimTabs says, employment growth has averaged 172,000. Meanwhile, the consensus view is that the U.S. Bureau of Labor Statistics (BLS) will report 200,000 new jobs on Friday for a three-month average of about 245,000.

    TrimTabs’ employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees.  They are historically more accurate than initial estimates from the BLS.

    “Real-time tax withholding data says employment growth is anemic and real-wage growth is barely positive,” says Madeline Schnapp, Director of Macroeconomic Research at TrimTabs.  “The real-time data supports our view that the U.S. economy is stuck in slow-growth mode. This view runs counter to the results from the Bureau of Economic Analysis (BEA) and the BLS, whose survey-based data point to faster wage and salary growth and employment growth.”

    Was this not a problem a few years ago, and has now resurfaced?

    VIVUS Inc. (VVUS):
    New diet drug Qnexa awaits FDA approval amid safety questions – USATODAY.com

    Diamond – we will be taking a short position tomorrow….FWIW.

    Pharmboy –  OK … what month and what strike?

    Oh, and they pumped VVUS into the close on a GSK offer.  Why would GSK do that?  They have an ED drug already (VVUS has one), and why would they go after them for the distribution rights, when all anyone has to do is take the two drugs, show that the PK is the same (it is called bioequivalence) and then market it. 


    VVUS – I am looking at the April $20/15 BPS for 1.50 or so.  Just a few.

    Bioequivalence – upon approval of course.  And when someone has a heart attack, accident from the memory issues….watch that thing fall so fast that they will not know what hit them.  I call BS, let's see what the FDA thinks! 

     "By the way, I totally love how calm this board is during a sharp market decline – makes me feel like I'm doing a good job!  8-)"
    Your comments from earlier today. You are doing a fantastic job. I think most of us our very well balanced and consequently have learned how to manage through these ever so short declines in the market without panic. Now, if you could improve our ability to prognosticate the forthcoming reaction from the FED!

    @Cwan, what is your cost basis?  In the IRA there no difference between selling puts and selling the corresponding covered call.  Except, collecting the dividend.  That is why I own the shares.  My Philosophy with managing this portfolio is that I always leave room to double down should my stock suddenly drop.  You need to have the ability to lower your cost basis enough that you can sell calls with some juice in them.  I would never be fully invested unless we get another opportunity like we did last AUG-OCT when the VIX was up around 50.

    Phil: Now that was a blowoff top of Sturm und Drang to end a good week.   Always a pleasure  pitting my sanctimonious ubermensch against your brotherhood-of-man working class sentiment.   I am unshakeable in thinking that the creation of a legal entitlement to not work and be paid would be an experiment in social engineering that you may think worked out perfectly well in Athens, but then no ones buying Greek bonds with any enthusiasm these days, so I maintain that the matter is not free from doubt.  Karl Marx commented on the same issue, but came out somewhat differently in his conclusions.
    So let me roll into my next question — this "intelligence" you refer to. Intelligence, as a quantity to be measured or a quality to be described in the human beings.  I've always thought that a healthy population would contain is a broad range of "intelligences" that apply themselves usefully to a variety of situations and studies.  I've never known any two identically talented people. It isn't all wheat or rice.  It's wonderfully nuanced, and gets back to the hippie-ish notion of everyone "realizing their potential." 
     Or not, in a certain number of cases.  And therein lies the politics of the thing.  Any political system, and the legal system that proceeds from it, contain a range of incentives and proscriptions that guide societies, and these would have to be reconsidered in the context of a substantial percentage of the population having the right to share the "production" of those who work. [a universal problem in all human societies[.  What are the rights of working people?  And of those that don't work?  What rights do these groups have over each other?  How is wealth distributed and re-distributed?  
    I'm all for a hippie-ish solution.   But this notion of national subgroups having the right/option not to work — and be paid a certain income standard — is a challenging one from a political standpoint.  I agree with Crosby, Stills & Nash's notion that "We've got to get back to the garden" but the human lifespan is relatively short and man has traditionally survived and evolved in response to competitive pressures.  This would involve be changing some very old rules of the survival game.

    Futures pushing through the channel.  This could be an interesting day.  Do or die for the BTFDers.
    What is your view….fall or bounce?

    Goldman has been privately predicting S&P 1,250 while publicly telling the sheeple what a great time it was to buy…
    This is no doubt true, but since Goldman Sachs is a huge multinational organization with tens of thousands of employees and different divisions, isn't it likely that there are differences of opinion within the organization and that some parts of the company have no idea what other parts of the company are up to? And then take into account that individual employees may not agree with official company policy. Even communist parties are not completely monolithic.

    Paying people not to work
    Difficult to implement in effect, because people will take the shilling and then work on the side for extra income. Could work to some extent by giving people more interest free loans or grants to go to college full time, or enabling them to retire earlier to free up jobs, or paying mothers with young children to stay home and take care of them. The tax code could probably be tweaked to facilitate the latter.


    Yes, you are right, but the issue of illegal immigration and people coming to the UK on fake political asylum grounds, etc. is a massive political hot potato.

    The UK did explode into flames a few months ago, and many of the participants in the rioting were unemployed youth living in subsidized government housing.
    However, in the US all politics is tribal and no matter what anybody claims the biggest issue on the right hand side of the political spectrum is that a significant number of white Americans don't want descendants of slaves to benefit from government largesse. This is always hidden under the rubric of "state's rights", "small government", etc., but it is there all the same.

    Good Morning every one Somebody knows when the market will close today?

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