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Friday, March 31, 2023


Non-Farm Friday – Finally Good News Can Be Good News Again

Now that we have QInfinity, it's OK to have a good jobs report.  

Previously in the market, bad news has been good news as poor jobs growth has put the Fed "on the table" but now that the Fed has committed to QE, more QE and, failing that, MORE QE – it's finally OK to have a good jobs report

Last month we had terrible August Job numbers with just 103,000 jobs created in the US and it was very "disappointing," even though Aug 2011 was 96,000 jobs and Sept 2011 was even lower at 85,000 jobs.  So what we have this report is very low expectations of 115,000 jobs for this September and anything over 150,000 jobs will be an upside surprise and anything over 200,000 jobs, or unemployment going below 8%, will be big trouble for Mitt Romney, who's hitched his wagon to people believing Obama is not creating jobs. 

The reality is, we are currently creating jobs at a pace not seen since the first half of the last decade before the Bush/Romney tax policies kicked in and shifted capital investing away from production and into financial instruments and commodities.  

Perspective is very hard to come by in America and we have very short memories – especially when it comes to jobs because 30M Americans didn't lose their jobs overnight.  Even with the monthly job losses of over 400,000 a month during the crash – it still took YEARS of losing 100,000 here and 200,000 there coupled with anemic gains for us to get into the mess we're slowly working our way out of today

Since January, 2011, over 4M jobs have been added in 20 months but, unfortunately, we need 3M jobs just to keep up with normal population growth (1.5%/yr) over that time so the extra 1M jobs is just a drop in the bucket when it comes to reversing the damage that's already been done to America.  This is why it terrifies me that Romney wants to go back to "the good old days" – they weren't actually very good for middle-class Americans, were they?  

Barack Obama is about 300,000 jobs away from avoiding being the second President in 50 years to have a negative jobs number for a full term – considering the month he took office we lost 900,000 jobs that were charged to him, that's pretty good but, as I said, not good enough – we need Bill Clinton numbers (22.7M jobs in 8 years) just to get America working again.  

8:30 Update:  This is interesting, only 114,000 jobs were created yet unemployment has plunged to 7.8% as the number of unemployed people dropped by over 400,000.  The number of people who are employed rose by 879,000 but the U6 Unemployment rate is flat at 14M.  The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months. The overall trend in the employment-population ratio for this year has been flat. The civilian labor force rose by 418,000 to 155.1 million in September, while the labor force participation rate was little changed at 63.6 percent.

Obviously, some of the revisions to March unemployment (300,000+ improvement) are filtering through to this report so our overall civilian workforce is up nicely (155.1M/63.6% of adult population working) and, although it's not being counted as jobs created, the effect on unemployment is severe.  This is not, as far as I can tell, a BS number – this is a fairly significant improvement in our overall jobs picture.  The biggest flaw I can find is a disturbing 600,000 increase in people working part-time for economic reasons (they would rather have a real job) – now at 8.6M.  

As I write this (8:55), money is flying out of bonds and will likely plow into the market today – essentially we just found 873,000 more people who can afford an IPhone – and that's going to count for something in the Appleconomy.  We've been leaning bullish but maybe not bullish enough – we'll have to see if the Dow can clear 13,600 and hold it on this news – at the moment, the Futures are up 50 points.  Europe is loving the numbers and EU markets are up about 1% and trading at the day's highs into the US open and, even better, the BOJ has switched to buying Euros today and that's keeping the Dollar low despite the jobs gains (more demand for dollars to pay people with) and the Yen is at 78.77 with the Euro at $1.304 and the Pound at $1.621 and that leaves the Dollar in the dust at 79.30, down 1% for the week and helping to lift stocks and commodities, which are priced in Dollars. 

Although more jobs should be good for oil, we lost interest on yesterday's bullish oil plays (see morning post) as our USO calls tripled and, of course, the Futures trade (/CL) took us from $88.50 to $91.50 and $3,000 per contract is A LOT of money to make in an oil trade – especially as it's the second time this week as we caught it going the other way as well so not worth the risk into the weekend.  

Gasoline (/RB) is our normal weekend play and we bottomed out at $2.75 on Wednesday, got back over the $2.80 line yesterday morning and just tested $2.98 so that should be it for that play too at $420 per penny per contract because $3 is just too painful at the pump – even with a few extra people driving to work.  

Another trade idea from yesterday's morning post was BBY at $17.50, already at $18.50 this morning and those TNA weekly $61.50s should be about $2.50 this morning after dipping back to .84 yesterday morning.   AAPL was disappointing so we sold calls against it but we're going to buy them back this morning and give our long positions room to run in case money starts pouring into the market.  

Next week things get very serious indeed with earnings season kicking into high gear but today can give us some good momentum leading up to it. 

Have a great weekend, 

– Phil


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VEGAS UPDATE—-the dinner will be at Nobu, Hard Rock as the one at Caesars will not be open —also due to the larger attendance this year the dinner format will be a tad more formal—we will have a set menu (there are choices within this) and have to place a deposit of 50%.  I am still working with the events manager and will post asap–but it will be under Pharm's tab—Pharm or I will alert you when it is posted—-looking forward to a splendid time

Keep It Simple. The last couple of years have been extremely kind to my portfolio, and now seems like a good time to consider whether a change of tack is in order. I have been captivated by many of the ideas on this board, and have a plethora of positions with many, quite frankly, taking more time to manage than they are worth. I am now assessing the advantages of managing a portfolio of perhaps 3 to 5 positions, with a laser like focus. Objective is to make 10% a year.
First up for consideration is the following:
SPY Dec 14, 130/160 BCS @ $15.89 funded by the sale of SPY Dec 14 120 Put @ $10.13, so net $5.76 on the 30 point spread that is $16 in the money (SPY currently @ $146.14. 
Reduction in buying power for 10 contracts is $23,375 for the BCS and $10,728 for the sold put = $34,103 in total.
In order to bring the cost of the trade to zero, front month calls could be sold for the next 26 months. The Nov 13, 150 calls can be sold for $0.84 (reduction in buying power $20,375). Currently the Dec 14, 200 calls are selling for $0.78 so the opportunities for rolling are there.
I would welcome a critique of this trade, as well as other suggestions that would fit well in a reduced size portfolio. 

While Oil may be 'falling,' gas is not in CA. 

Average pump prices in California hit a record $4.614/gallon yesterday vs. $4.145 a week earlier following refinery and pipeline outages, with one downtown LA station even selling regular grade at $5.49/gallon. Prices might now have peaked, as Exxon's Torrance refinery resumed normal ops on Friday after experiencing power problems.

While this is a CA problem….I can only imagine what it is doing to the nation if gas is near its highs, while oil remains range bound.

I have updated my High and Low from 2009 spreadsheet with the latest prices. I also added some fundamental information as requested by Phil. You can now see P/E, PEG, Prices/Sales, Forward P/E and also Yahoo 1-Yr Price Target (just for fun)


Here are the top 21 (AAPL fell one spot) stocks:

And the bottom 20:

Looks like 66 stocks are at their highs since 2009…

Calling all PSW travel consultants: Our family is going on a 1 week New England College visit tour starting next weekend. I am looking for ideas for a few dinners (Lobster rolls, Chowder, Pizza?) and afternoon excursions. We are spending 3 nights in the Boston area, 2 in Amherst and 1 each in Green Mtn.  VT & Portsmouth NH.  TIA

Randers – I live in Northampton near Smith College and not far from Amherst.  In Amherst, try Fresh Side downtown for Asian fusion, its great.  Make sure you try to tea roles. Northampton is loaded with good food- Paul and Elizabeth's for the Northampton all-vegetarian feel, India House is the best Indian food I've had, and Bistro La Gras is our favorite.  If it gets warm enough, rent bikes and hit the bike trails.

You havn't been to Boston witout Leagal Seafood, paper plates and no waiting on tables, all about the food and used to be excellent. I lived there in the 70's but the real deal was seafood in Marbelhead, north shore where all the kool people keep their boats or whatever you want to glamorize them to.

I know PSW doesn't trade currencies as a rule, but I'm guessing that the Yen may have reached a 5 year peak.  There is perhaps a derivative of that trade that someone here might recommend, instead of just shorting the Yen, but here's the five year performance.  The sudden disappearance of Chinese tourism may have turned the tide, which was already ebbing on the perception that the U.S. economy may have bottomed.  Just guessing, for the moment, but thought I'd mention it.
  1 Day                                 -0.31                    
  1 Week                              -1.14                    
  4 Weeks                            -0.84                    
  13 Weeks                           0.96                     
  1 Year                               -2.61                      
  3 Years                             12.45                   
  5 Years                             45.89

Sad news, Chavez got reelected…
Oil should be a short for a retest of $85

Unfortunately  Legal Sea Food  is white linen instead of paper plates now, but really excellent food nonetheless. Make sure you go to Boston's North End –best Italian food this side of Pisa–,make sure you walk, don't drive.

I wonder what sort of investment portfolio PSW would recommend for someone who cloned themselves through stem cells made from their own skin cells and became their own heir.  Don't laugh too hard — the ultimate exercise in amour propre is apparently no longer science fiction, but coming sooner than you think to your local [Chinese] fertility center.

Postscript:  My wife, who is no shrinking violet, upon being informed of this felicitous development in human reproductive evolution, smiled slyly and said [roughtly translated from her native language], "Well, if women can clone themselves with their own skin cells, then men will have some very serious negotiating to do going forward!!"

Oil on its way to $88 to retest its lows and then…

….it went back up!
weak bounce off $88.30
Reloading shorts

 "…..But the numbers aren't rigged."
Depends on your definition of,  "rigged".
A baker's dozen of the post modern world:
1) a 'reduction in the rate of increase is now considered a, "cut"', even in the WSJ,  , 2)  the word 'is' must be defined, 3) oral sex is not sex, 4) a tax cut must be "paid for", 5) creating new FRNs is called Q.E., 6) when a celebrity appears in her usual role only 99% of the time, she has "retired", 7) trillions in bonuses are paid— with those newly printed FRNs— to bankers (and politicians) who failed utterly, 8) in finance, politics, and law, failure is the now Success, 9) Rights are denied for victims, but sought for perpetrators, 10) "mistakes are made" in government and politics, but no one is {(because it must be defined) blamed and prosecuted for making them, 11) duty and responsibility are tertiary to amusement, entertainment, and distraction which are now considered vital, essential, and mandatory, 12) Santa Claus is not a fictional character, 13) Law has replaced Justice.

looks like that 3am trade is back on again for oil

Still talking about jobs on cnbc this morning

Better late than never…

Hi Phil
I would really appreciate some advice on my AAPL trades. I have been buying LEAP APPL BCS (700/725 Jan 13, 665/690 Apr 13) and I have invested around $5K so far buying an option, every time there was a dip in the past few weeks. But now it seems like AAPL has run into technical trouble and I really think it could go down to 620 or even 580. I am willing to rough it out as I believe the long term story is still intact.
However, to make some money off the weakness, I was thinking of selling naked calls – 680 next week calls are ~$2 and I really don't think AAPL tests 680 next week. I would like to hear your opinion. Are there any better trades that you can suggest.

Thanks Phil!

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