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Secret Santa’s Inflation Hedges for 2016

Merry Christmas!

I hope you get everything you want this holiday season and, most importantly, I hope you have time to spend with your family.  I love waiting for my kids to wake up on Christmas morning to come out of their rooms so I can videotape (gosh I’m old, there’s no tape anymore) them in those first moments of Christmas morning – how can I not be of good cheer anticipating that?

I have something I can give you for the holidays as well.  Not peace on Earth but perhaps peace of mind heading into the New Year – a way to help insure some future prosperity with a few inflation-fighting stock picks that can brighten up your portfolio, which also can be used to help balance your home's budget against unexpected cost increases.  

This isn’t an options seminar or one about risk or leverage – these are just a few practical ideas you can use to hedge against inflation as it may affect your everyday life using basic industry ETFs and some simple hedging strategies to give you an opportunity to stay ahead of the markets if they keep going higher. 

We haven't felt the need for inflation hedges since 2011 as the Fed has kept us in a somewhat DEflationary cycle but our 2011 hedges were good for 300-600% returns and we're simply going to repeat the same, simple concepts here to set up good, rational hedges against inflation to insure a financially healthy and happy 2016:

Idea #1 – Hedging for Home Price Inflation

Let’s say you have $40,000 put aside for a deposit on a home but you’re not sure it’s the right time to buy.  On the other hand, let’s say you are worried that home prices will take off again (I doubt this but you never know).  XHB is the homebuilder’s ETF, currently at $34.49 and they bottomed out at $31.62 in August and still well off the highs for the year of $39 right before the flash crash.  

You can sell 20 contracts of the XHB 2018 $28 puts for $2.25 each ($4,500) and that obligates you to buy 2,000 shares of XHB at $28 (16% off the current price) and you can use that money to buy 20 2017 $28/33 bull call spreads for $3.50 ($7,000) and that's net $2,500 out of pocket and you have 20 $5 contracts that pay back $10,000 if XHB simply stays flat through 2016.  These bull call spreads, however, do not pay off early – the ETF needs to be above $33 at Jan 2017 options expiration day (the 20th).  

So you are putting up $2,500 in cash and the margin requirement on the sale will be roughly $5,600 in an ordinary margin account.  What have we accomplished?  Well, if XHB goes up, your $2,500 becomes $10,000, adding $7,500 (300% gain on cash) to your $40,000 deposit, that should keep you up with up to a 20% jump in home prices but, if they go up that fast, getting a deposit will be the least of your problems!  

On the risk side.  We certainly don’t expect XHB to go to zero but let’s say it falls to $20 (1/3).  Well, you are obligated to own 2,000 shares at $28 ($56,000) and you would have lost $8 per share, so $16,000 is your risk there but I would put it to you that, if we have a crash of that magnitude again, you are better off losing that $16,000 than if you had bought a home for $400,000 and had it drop 20% on you ($80,000) or even 10% ($40,000) and again, that’s a very extreme example and you are not locked into the trade, you can get out when the loss is $5,000, for example, keeping 87.5% of your deposit and feeling good about your decision to wait out an uncertain housing market.  

That’s what hedging is, it gives you a cushion that can prevent things from getting away from you.  For example, you can hedge this hedge by buying 20 2017 $28 puts for $1.20 ($2,400) and you cap your downside at $12 (the $16,000 loss) but you raise your outlay to $4,900 and lower your reward potential to a still respectable $5,100 (104%) – just an example of a way to control the downside and you can trigger a cover like that only if XHB fails to hold, for example $25.  You can actually work these swings to your advantage by adjusting the trade as the stock moves through a channel but, for the sake of simplicity – we’re just discussing passive risk management examples.  The idea is to reduce your risk of waiting – that lets you sit back and make an intelligent, well-timed decision without worrying that the market is getting away from you.  Unlike CDs or Bonds, there is no penalty for an early withdrawal from a hedge, other than the bid/ask spread you may pay if you do it very quickly.  

Idea #2 – Hedging for Fuel Inflation

Gasoline prices have dropped drastically this year and, if you are the average family, you buy about 1,000 gallons of gas per year ($2,000) and spend another $1,500 heating your home.  That’s $3,500 a year spent on energy and it’s already down over $1,000 from last year – we might want to lock that in!   

XLE is the ETF for the energy market and it’s currently trading at $61.57.  If you want to guard against a $1,500 increase in the price of fuel next year, you can, very simply buy 3 Jan 2017 $60/65 bull call spreads for $2.35 ($705) and offset that cost with the sale of 2 2018 $40 puts for $2.50 ($500) for a total cash outlay of $205.  If XLE simply hits $65 (up 5%) into Jan of next year,  you make $1,295 (631% on the cash).

We can assume any increase in fuel prices over the year will push them higher and XLE has pretty much held $60 since 2010, the last time oil was below $50 that August, so this is a very nice mechanism for hedging 20% of your fuel cost.  What’s nice about this is oil can fall and you’ll save money on your fuel and, as long as XLE doesn’t fall more than 35% by 2018 – the trade only costs your $220 cash outlay and you should save far more than that on lower energy prices (assuming that relationship is maintained, of course).  Below 35%, you get assigned 200 shares of XLE at $40 in 2018 and that’s a price that’s held up very well since 2005, when oil was under $40.  So a risk of owning $8,000 worth of the Energy Spider, which puts you bullish on oil at $40 – which will always make a another nice long-term general hedge against inflation. 

Now our Members at Phil’s Stock World know they can roll those puts or convert those put assignments into buy/writes or do a dozen other things to mitigate the losses – as I said, these are really basic examples of how anyone can hedge their real-life budgets to help them make long-range plans to fight inflation.  

Idea #3 – Hedging for Food Inflation

If you think you spend a lot on fuel, maybe you haven’t been to the grocery store lately.  I knew food inflation was getting out of hand when the A&P’s fruit and vegetable prices started catching up with Whole Foods.  I used to get a few cool items at Whole Foods and stop at A&P for the staples but there’s barely a difference in fruits and vegetables anymore when it used to be extreme.  Good for Whole Foods and local growers but not so good for the average consumer who is being bled dry by commodity speculators and agriculture cartels

And the middle-men are getting crushed too.  A&P (GAP) went bankrupt and DF has flatlined with WFM down for the year, even after a spectacular pop in December.  Perhaps the CEO's of Dean Foods and Whole Foods can benefit from this hedging exercise as well.  

DBA is the way to go here.  It's been a while since we've liked them when they shot up early in 2014 from $24 to $29 and, since then, it's been straight downhill back to $20.48, where we love them on the long side again.   

If you spend $10,000 a year on groceries you can risk being assigned 400 shares for $8,000 and sell 4 of the 2018 $20 puts for $1.25 each ($500).  That money can be used to buy 8 of the 2017 $20/23 bull call spreads for $1.15 ($920) and that’s net $420 out of pocket (2 week’s shopping) and the upside, if DBA simply hits $23 (up 7%) is $2,400 less the $420 laid out is $1,980, so a 20% hedge against food inflation and your risk is owning 400 shares of DBA at $20 ($8,000) as a long-term hedge – only if food prices continue to go lower.  

The 2018 put sale, if DBA should go to $16 (down 20%), would cost you $1,600 – less than you will probably save on food.  Remember, these are not magic beans that pay off no matter what the market does – these are hedges against inflation and, if there is no inflation, then you will save LESS than you otherwise would have but, again – there are dozens of ways to make owning DBA long-term a successful part of your portfolio.  Instead of randomly investing your retirement savings – trade ideas like these are ways to put some of the money to work for you – in ways that can help you manage your bills NOW – as part of your daily life.  

Inflation Hedge #4 – Hedging Against Rises in PSW Member Fees

We run a unique service.  I am on-line most trading days chatting live with members about trades like this.  Optrader, Trend Trader, Sabrient and several of our other writers are on-line as well but there is a limit to how many people we can effectively get back to in a day so we limit our Membership and, when it gets too crowded, we raise our prices (we just did last year, in fact).  We hadn’t raised them in a while but that summer we had to as we were going over 300 comments a day in my chat, which is around my limit.  Unfortunately, that made the service a little expensive for some people who wanted to join up.

So, for 2016, let’s make things interesting with my favorite hedge.  If you sign up for a full-year membership between now (12/25/2015) and Jan 2nd, 2016 and the following trade idea does NOT net 100% on the cash outlay by expiration day on Jan 2017 then I will give you a free Membership for 2017!  That’s a 50% discount on two years and your hedge can be going for let’s say $2,500 (1/2 the Basic Membership) on the spread and you either make $2,500 which is 1/2 of the 2015 Membership or you get 2016 for free, which, assuming you lose all $2,500, is 50% off 2015.  No matter what, you get one year of a PSW Membership for 1/2 price.  Not bad right?  You do not have to buy the spread to play – just the Membership, which is non-refundable so don’t get cute!  

(Probably good time to put in some kind of contest disclaimer that this is just for fun and we guarantee nothing at all and that we can change the rules at any time and that we accept no responsibility for anything under any circumstances whatsoever and that billions may play and nobody might win – how’s that?  You just have to trust us, we’re not in the contest/guarantee business – I just want you to know how good I feel about this trade idea.  Always consult a professional investment advisor (I’m not one) before doing anything!)

Anyway, what’s the trade?  VERY simple on NATURAL GAS!  I just wrote a post on why I love UNG down here (was $7 at the time, already $7.69) and UNG Jan 2017 $5/9 bull call spreads for $2 can be offset with the sale of Jan 2018 $7 puts for $1.60. That will be net .40 on the $4 spread (we are not counting the margin amount, which is about $1 per short contract, just the 0.40 cash outlay) and the payout if ABX reaches expiration at $9 (now $7.69) is $4 - or 900% more than the 0.40 outlay.  

To make 100% on the cash (0.40), the net price of that spread has to be .80 or greater – that’s the "bet."  Obviously, if the spread is even a penny over $7, the $7 puts would expire worthless and will not be an issue and, at $7, the spread returns $2,000 for each $400 invested (10 contracts).  Remember, if it fails to return at least 100% and you have signed up for an Annual Membership in the next 7 days - you will get a free year in 2017.

Now, if you are thinking, after going over these ideas and seeing how a few of our old trades worked out: "Well, that’s too easy, there’s a very good chance of making 100% on that trade."  Well, that’s kind of my point!  Don’t you think you should learn how to trade like that?  This is the whole point to using options and hedging in a balanced virtual portfolio and that is what we teach over at Phil’s Stock World every day.    

I very much hope all these trades work out well, ESPECIALLY the last one!  

Have a very happy holidays and we hope to see you inside in the new year. 

All the best, 

Phil 


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    Click here to see some testimonials from our members!


  1. Craigs from yesterday – "It's lonely being Jewish on Christmas Eve "  I can relate, sometimes during the holidays I feel left out like this.  And here we go…

    If you don't have a sense of humor, you might want to stop right here. These are professional's on a closed test track, do not attempt at home. Proceed with caution, you have been advised, no offense intended.

    It's that time of year when dreidels, various religious prophets and Santa make the rounds. Throughout this missive, the ascending order in which religious faiths are presented is based upon global market share. No offense intended to Bahá'í, Confucianism, Jainism, Shintoism, Taoism, Zoroastrianism and others. Much like the BCS committee said to TCU last year regarding the CFP, sorry if your team got left out, which could be like Christmastime in Hell.

    To be divine?… Nobody really knows the exact day when the prophet for Christianity, Jesus Christ was born. But, its a pretty good bet he was born at the end of September. I believe there were many prophets, whose ideas have transcended cultures across the ages. Were these religious prophets of divine origin, possessed of divinely imparted wisdom or just full of… common sense? IMHO, the latter.

    For Judaism (0.2%), there is Yhwh (haShem), Abraham, Moses and the Torah/Tanakh. Hannukah runs 8 days starting the 25th day of Kislev according to the Hebrew calendar, falling In 2014, Dec 16th – 24th.

    Fear not? Is there an afterlife of exaltation or torture? This is "the fear of god" which many, including Constantine (who with the Edict of Milan, legitimized the cult of Christianity while marrying Church and State) realized could be used by the state, to control the masses. I have yet to be contacted by any of the deceased. So to date I have no evidence either way. IMHO, when your gone, it's called the "Big Sleep" for a reason. Something else, might be a pleasant surprise. TBD. We will come back to "the fear" later.

    For Buddhists (5.9%), there is Siddhartha Gautama (Buddha), Bodhi day is December 8th.

    Do unto other? IMO, the only "fear" you should have is Zamfir, master of the pan flute, and you should not need "fear" to live by the "golden rule".  Aside from Leviticus (19:18) and Hillel (Shabbat 31a), in ancient Egypt the golden rule was evident in the concept of Maat. Dated first to the Middle Kingdom (2040-1650 BC), it states with simplicity "Now this is the command: Do to the doer to cause that he do thus to you."

    For Hinduism (13.4%), there is Brahman, no central prophet and the Vedas. Pancha Ganapati is a modern five day Hindu festival celebrated from December 21 through 25.

    A higher power or Vishnu wit you? To have a globe shaped petri dish where life could flourish took perfect sizing, positioning and timing for the Sun, Moon, Earth and Van Allen belts, not to mention other serendipitous events. What are the odds? Coincidence? A guiding hand? Ancient astronaut theorists would say, Yes! or just another Festivusmiracle? No one knows for sure.

    For the Irreligious or Unaffiliated 16.3% (the most rapidly growing sector) there is Agnosticism, Atheism, Paganism and Festivus which is celebrated December 23rd.

    The Voice of Silence? There's usually trouble afoot when someone thinks the voices in their head are a supreme being's voice commanding them. Especially when "god needs money" or to "justify" heinous acts against others. I put these claims on par with those from a 2000 year old demonically possessed dog named Harvey. Why can't these inner voices be like the voice of silence?

    For Islam (19.6%), there is Allah, Muhammed and the Qur'an. Mawlid is fixed as the 12th day of the month of Rabi I in the Islamic calendar, falling Jan 3rd, 2015.

    Freedom of Religion? Freedom from religious persecution is one of the tenets in the founding of the USA where irreligious people make up 20% of the population.55% of Americans believe that Christianity was written into the Constitution and that the founding fathers wanted One Nation Under Jesus. This includes 75% of Republicans and Evangelicals. [source]

    I don't attend a "conforming" house of worship, but believe everybody should be able to worship their own totem poll, if they so desire or NOT. There are all kinds of religious persuasions, but it's the persecution of the irreligious that disturbs me the most. I believe the body is the temple of the spirit and living everyday life to its fullest, constitutes a valid house of worship. Does this make me a bad Catholic, heretic, hedonist, nihilist or Atheist? Although some might wish me this kind or this kind of Christmas, I think not.

    For Christianity (33%), there is El or Yaweh, Jesus of Nazareth and the Bible. Christmas was first celebrated on Dec 25th around the 4th century, with the twelve days running through January 6th. Orthodox Christmas is on January 7th.

    But how do you really feel? Sometimes during the holidays I feel left out like this. Sometimes I think people have too much heaven on their minds. Timing is everything and sometimes I wonder, Israel in 4 BC had no mass communication? Don't you get me wrong, I do know this, I am what I am and I will be what I will be.

    We wish you all a Happy Healthy Holiday Season and Prosperous New Year.  Out.


  2. Tishman Speyer Properties, one of New York City’s most active real estate developers, had bought two parcels of land on the Far West Side of Manhattan to clear the way for a 2.8 million-square-foot office tower planned for Hudson Yards.

    Standing in the way, though, were the occupants of two …


  3. 6 factors that will shape the global economy in 2016

    Flickr / zhouxuan12345678Earth.Anders Borg, Sweden’s former Finance Minister, gives his perspective on what to look out for in the economic year ahead, from reforms in China to the threat of Brexit.

    2016 will be a challenging and difficult year for the global economy.

    Global growth is picking up …


  4. In a new book, economists George Akerlof and Robert Shiller offer five dangerous scenarios free market consumers regularly encounter.

    Adam’s Smith’s “invisible hand” of the marketplace is perhaps the single most captivating metaphor in all of economics. The idea that all of society can be made …


  5. After the deadly landslide of a man made mountain of dirt that buried 33 buildings in Shenzhen, companies involved and workers at the site say that flagrant violations of safety regulations made the landfill a ticking time bomb.

    On December 20, a massive landslide occurred at an industrial park in …


  6. The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy.

    This year the …


  7. It has been an ugly year for the hedge fund industry.

    As a group, hedge funds have posted dismal returns. The average hedge fund is down 3.72% this year, according to Hedge Fund Research.

    The S&P 500, a commonly used benchmark to compare hedge fund performance, is down 2.59% this year.

    There have been …


  8. — The venture capital sector is heading back to Earth. The big question for the new year is how bumpy its landing might be.

    A new set of data indicate that key segments in venture capital — the business of funding start-up companies — will be down sharply for 2015, a sign that the dramatic run-up in …


  9. Submitted by Doug Casey via InternationalMan.com,A meme is now circulating that gold is the investment equivalent of a pet rock, and that the smart …


  10. Referendum on radical proposal to give central banks sole money creation power will be held after petition gains 110,000 signatures

    Switzerland will hold a referendum to decide whether to ban commercial banks from creating money.

    The Swiss federal government confirmed on Thursday that it would hold …


  11. NASA has been developing the technology to 3D-print an entire rocket engine, and it recently tested a collection of the parts it has already made. The successful rocket firing is a fiery proof of the future of this technology.

    When you think of 3D printing, you may think of the kind of small, …


  12. 13 Asian Startups To Watch In 2016

    One97 Communications (India)

    A mobile Internet company in India backed by Alibaba Group, One97 is probably best-known for launching mobile payments platform Paytm, which is spun off into a separate company this year and is reportedly valued at more than $1 billion.

    Paytm’s platform, which gives users …


  13. Black Friday is done! Malls are empty! Brick-and-mortar is on the way out!

    And the sky is falling, Chicken Little.

    The holiday season has a way of bringing out the hyperbole in retail pundits and reporters alike.

    Forbes turned to Bill Martin, founder of ShopperTrak, which measures store traffic in …


  14. Even with good weather for shopping

    In the final weekend before Christmas, a growing number of Americans went online rather than to stores to wrap up their shopping.

    According to RetailNext data cited by the Wall Street Journal, sales at physical stores fell 6.7% over the most recent weekend, while …


  15. We looked for companies that were growing and undervalued.

    It wasn’t a great year to be invested in the stock market. And, to make matters worse, stocks still look expensive. The average stock in the S&P 500 has a price-to-earnings ratio of 16, based on next year’s profits. That’s one of the highest …


  16. I entered you recommended UNG trade on yesterday,  In reading your recommended trade this morning  It is not really ABX but UNG in the paragraph. Merry Christmas to you and your family.


  17. Merry Christmas to all!

    I'd be happy if ABX gets to $9 as well…


  18. Merry Xmas to all!  Hoping that /NG hits 3 in 2016!  

    I'm also going to be long /SI below 14 and always long /RB on a wed morning waiting for that weekend pump.  

    I wish someone could run a report on how many weeks /RB was lower on Wed than it was on Fri.  It would be a interesting statistic!


  19. I'm doing my best to use NG. It was -26C (-15 for you fahrenheiters) here this morning. Merry Christmas.

    Stu.


  20. It's lonely being Jewish on Christmas Eve so I was catching up on my reading and came across a website called Robinhood where you can trade stocks and options at no cost. I can't find a catch, so I ask you all if anyone has heard about this and knows why we shouldn't all be using these guys as our brokers. $0 commission $0 trading cost. Check it out and let me know what is wrong with this picture? Seems too good to be true, which tells me it probably is.


  21. One more from my Christmas reading, Realtyshares.com which is a way to invest in real estate using crowdfunding type methods. They have paid returns of 8 to 29 % according to the article I read. Seems like it may be one of those things that is good for early investors and then has trouble as popularity and demand grows. Does anyone have any insight or experience with this? Being able to diversify with real estate for as little as $5000 seems like a great idea.


  22. Phil yesterday you wrote about UNG 2018 $7/12 BCS's and today you are talking about 2017 $5/9 spreads. Is this just because the price of UNG went up $0.70 or is this just for a different investor profile and can you just compare them side by side for us when you have a minute to illustrate the risk reward of each showing us 


  23. Good morning!

    I hope everyone had a lovely Christmas. 

    Ours was a little hectic but we got to Disney around 5, had a great Christmas dinner at the California Grill (on top of the Contemporary Hotel) where we got to stand on the roof and watch the Christmas fireworks, so not a bad way to end a travel day.  Disney is packed – hotel (Grand Floridian) is totally full and the restaurant was hopping – all good for DIS, one would think.

    Today we're off to the boat.   Very strange that it's no warmer here than it is at home, though.

    Religion/Naybob – In letting our children decide for themselves what religion they'd like to follow, Maddie (15) has turned out to be an atheist (after checking them all out and spending 3 years as a Buddhist) and Jackie (13) "likes" Jesus and prefers to believe in something because believing in nothing is depressing, so she's a non-practicing Christian who celebrates the Jewish holidays with me.

     /RB/Burr – It's not always Weds but usually there's a dip early in the week and then a pop, usually on Thurs or Fri.  Sometimes it fades out before the weekend.  Also, shorting Friday's close is also a good play (but very scary and dangerous at $420 per penny). 

    Cold weather/Greno – What's that?

    Christmas Jews/Craigs – I used to go on epic ski trips every Christmas.  The resorts are mostly empty that weekend so the skiing is great.  Since having kids, we usually spend Christmas at home but I really miss going against the grain on the holidays.

    Robinhood/Craigs – I didn't know they were doing options, might be worth looking at.  They are no joke, Google Ventures and Adreessen Horowitz are funding them.  They make money on the margin lending and, of course, overnight interest on your unused cash and then there are perks from the exchanges for order flow they can make some money on too.  There was something like this called Zecco, but they didn't last but RobinHood has deeper pockets – still, I wouldn't put too much money in them but, for expensive trades like a day-trading account where you churn a lot of fees – it's not a bad thing to try.  Not sure about the execution though – I pay more at TOS than I might at other brokers but their execution is better.  If you do try it, I'd be very curious to know how it works out.

    Realtyshares/Craigs – I like the fact that they pay you back monthly (on loans, not equity) but, if you invest in specific properties, you run the risk of a default wiping you out (just like any lender).  I think there are ways to spread it but I think this is the kind of thing that works great in a recovering market and will become the poster child for folly when the market turns sour.  You don't control the paperwork and you don't have loan officers or lawyers to enforce your rights, nor do you know what other kinds of debts your borrowers are incurring.  The company does some kind of due diligence but who knows what they actually do – I'd try getting a loan first to go through the process and see if you think they do a good job,

    By the way, they charge a 1% annul fee to "manage" your investments.  That's half of what a hedge fund charges so not awful – as long as the returns are there.  Also, as they do act like a hedge fund, you have to be an accredited investor to play.  

    UNG/Craigs – It's really the same trade on different time-frames.  On the shorter play, I don't think $12 is a reasonable target and I feel better about starting deep in the money (with very little premium), just betting on any kind of move up.  Longer-term, we can get more leverage playing for a bigger rise over 2 years.


  24. Offshore RMB/USD liquidity screaming overnight SHIBOR - 12/11 - 1.626 on 12/23 – 9.452, highest ever was Aug 24th at 10%


  25. Star Wars: The Force Awakens earned a whopping $27.59 million on Thursday. That’s a drop of just 27% from Wednesday. Christmas Eve is usually an off day at the box office, with ticket sales shooting back up on Christmas Day. That’s why studios tend to open movies on Christmas Day even when they …


  26. A year ago, Saudi Oil Minister Ali Naimi made it plain that he didn’t care what happened to Russia if oil-producing countries failed to cooperate with Saudi-dominated OPEC on keeping prices high by restricting production.

    “We want to tell the world that high efficiency producing countries are the …


  27. Warren Buffett has been auctioning off a “power lunch” since 2000 at his charity event for GLIDE Foundation, an organization dedicated to reducing poverty and marginalization.

    The highest bidder gets to bring up to seven people to dine with the steak-loving business magnate at Smith & Wollensky …


  28. Facebook has bought shopping search engine The Find.

    We first spotted the news in a tweet before the company announced the acquisition in a post on its website.

    TheFind bills itself as “the only way to search the entire shoppable web.” Its proprietary search engine lets you type in something you’re …


  29. Home buying in 2016 will remain challenging for many borrowers. But the market should look closer to normal, as more homeowners who had been stuck underwater reach the surface and more first-time buyers find their financial footing.

    Here are some predictions.

    HOME PRICE APPRECIATION WILL SLOW.


  30. BEIJING — The head of a Chinese firm that is building the world’s biggest animal cloning factory has vowed not to use the technology on people — for now, at least.

    Biotech company Boyalife Group’s $30 million facility in the coastal city of Tianjin will produce embryos of cattle as well as …


  31. LAS VEGAS (AP) — Christmas brought snow to Reno and flurries to Las Vegas as wintery weather swept east from the Sierra Nevada.

    National Weather Service meteorologist Dawn Johnson said Friday that while a snowstorm was letting up in Reno, icy temperatures remained.

    Motorists found treacherous roads …


  32. The Asian Infrastructure Investment Bank (AIIB) has been formally established

    The China-backed Asian Infrastructure Investment Bank (AIIB), viewed by some as a rival to the World Bank and Asian Development Bank, was formally established on Friday, according to a statement issued by Beijing.

    The …


  33. Robert Peston travels to China to investigate how this mighty economic giant could actually be in serious trouble. China is now the second largest economy in the world and for the last 30 years China’s economy has been growing at an astonishing rate. While Britain has been in the grip of the worst …


  34. BERTHOUD, Colo. — The price of oil keeps dropping. But that didn’t stop a work crew from drilling a well recently on what was once a cornfield, carefully guiding the last sections of 13,000 feet of pipe spiraling into the hard Niobrara shale with a diamond-tipped bit.

    Their well, one of hundreds …


  35. The website of the Office of the U.S. Trade Representative proudly describes the Trans-Pacific Partnership as “Made in America.” It does so to position this treaty, made up of a motley crew of allies, as a bulwark of free competitive markets against China. It is only fair, then, to judge the TPP on …


  36. ANCHORAGE — Oil money no longer pays the bills here.

    The governor, facing a profound fiscal crisis, has proposed the imposition of a personal income tax for the first time in 35 years. State lawmakers, who recently moved into a palatial new office building here, where they work when not toiling in …


  37. There are many observations to be made about the dramatic shifts shown in the chart below which demonstrates the top 20 companies by market cap over …


  38. 10 Weekend Reads | The Big Picture

    Well, did you get what you wanted? (I know I did!) Brew up a rich foamy cup of cappuccino, and settle in for our longer form, weekend reads:

    • The 50 …


  39. If you jumped into real estate at the bottom of the market around 2008, or if you’ve been holding onto an asset even longer, you may be considering …


  40. Amazon wants to work with more startup product brands, and it is leveraging its giant customer base to get exclusive deals from the inventors making them.

    The company said on Wednesday that it had launched a new online storefront called Amazon Exclusives featuring a small selection of new products, …


  41. CORRECTION:  that was HIBOR, not SHIBOR, sorry about that, so that you can check here is the link.

    Those 5 year sector gains must consider, everything got cut 50% in 2008-9.


  42. Photo Credit: BKEarly on, new traders will want to give up. Particularly when they figure out that the first few years are more about studying and …


  43. In May, at a San Francisco talk to mark the 50th anniversary of Moore’s Law, Intel co-founder Gordon Moore said he was surprised chipmakers have kept …


  44. Thick layers of toxic smog often blanket the skies in Hanoi, limiting visibility to less than a mile away. When the pollution gets really bad in Beijing, children are kept home from school or restricted to classrooms during recess. In Shanghai, a mother says she struggles to get her child to wear a …


  45. Chinese stocks continue to plunge. Despite a Tuesday rate cut from the People’s Bank of China, the $5 trillion rout rolls on. Authorities in China …


  46. The world's sovereign-wealth funds together have assets of $7.2 trillion, according to the Sovereign Wealth Fund Institute, which studies them. That is twice their size in 2007, and more than is managed by all the world's hedge funds and private-equity funds combined, according to J.P. Morgan Asset Management.

    We comment on the market effect of their pullback due to under $50 oil here.


  47. As of today, the cost for UNSECURED intrabank lending or Overnight LIBOR = 0.367

    The cost for SECURED intrabank lending or the TED Spread = 3 mo Libor @ 0.60 minus 3 mo UST bill @ 0.15 = 0.45 TED Spread

    Meaning the cost for SECURED borrowing exceeds UNSECURED by 0.09 or 9bps.  Upside down and what will banks NOT be doing? Meaning further contraction in intrabank lending, greater demand for the collateral to do so, both resulting in lower liquidity.

    We comment on this subtlety and other potential market effects of the Fed raise here, here and here.


  48.  That's interesting on the sovereign wealth funds,  interesting concept when you can print money and then use that money to buy stocks. I want to how much market growth is being supported by freshly printed money? 


  49. Goldman Sachs’ annual compendium of its 100 best charts from the year is a treasure trove of information on pretty much everything.

    One chart that jumped out at me while I was browsing was the one below that shows the top 15 websites in 11 big countries from around the world. Google is the clear …


  50. 2016 will be all about inflation.

    When the Federal Reserve raised interest rates on December 16 it did so with inflation running below it 2% target.

    The latest “core” personal consumption expenditures reading, which excludes the more volatile costs of food and and gas and is the Fed’s preferred …


  51. London (CNN) — Congrats! Your prospects of getting a raise in 2016 look good.

    A large survey by the management consultancy Korn Ferry Hay Group found that companies in major developed nations around the world are planning to give their employees a healthy pay bump.

    And since inflation is forecast to …


  52. Why Apple Finished 2015 on a Sour Note

    The bear message is the one that stuck.

    This is the last day of Apple’s first fiscal quarter of 2016. By all the measures that should matter to Wall Street—rate of growth, free cash flow, price to earnings, share of profit, etc.—Apple had a very good year.

    Yet its stock is trading lower than it was …


  53. Phil,

    Not just during the holiday season… for those who suffer from an "overly connected" world, this little invention is quite worthy as the video clearly demonstrates


  54. I've been a member of a group on facebook called TripleScreen.  It's a interesting method to find value based stocks.  Anyway here is a post from today that I thought was interesting.  It could be of value at PSW, as it's based on finding quality stocks at their bottoms.  There is a image attached to the post, which you could see in the group.

    Here is the link.  https://www.facebook.com/groups/798860836866216/

    —-

     I want to demonstrate the power of the 2-period RSI used as buy and sell triggers. For the life of me, I cannot see any reason to use any other indicators. As I've said, this metric is a proven oversold/overbought indicator, one that's been validated over millions of trades. Let me show how it can be used.

    My population for this study consists of 29 TSM stocks (those holding membership in at least 1 of 49 fundamentals driven screens) that in Jan had a Zacks ranking improvement from a 3 the week before to a 1 in the current week. The table documents how these 29 could then be traded from Jan through March using the 2-period RSI. I trade this list of stocks for 3 months after they make my list. And I add members to the list every evening.

    There are four strategies being evaluated:

    1. When one of these 29 became oversold enough to lower its RSI(2) below 25, the stock was bought at the next day's open. That position was then held until either that stock became overbought to the extent its RSI(2) exceeded 70, in which case it was sold at the next day's open, or it was sold at the open of the eighth day regardless of what the RSI(2) is. This strategy produced a 141/31 win/loss record (81.98% win rate) and $116.81 points; buying 500 shares of each position would have produced $58,405.

    2. This strategy required two closes below a 25 RSI(2) before the position was entered at the next day's open. It exited each trade under the same conditions as strategy 1 and produced a 69/16 win/loss record (81.18% wins) with $70.04 points for a total of $35,020 — lower than strategy one buy with many fewer trades.

    3. and 4. were similar to 1 and 2 but used a higher exit RSI(2). It had a significantly lower win rate but produced more cash.

    5. The last strategy required a lower entry RSI(2) and the higher exit RSI(2).

    I would combine strategies 1 and 2. When a TSM (3-1) stock closes the day with a RSI(2) below 25, I would buy the position ($25k) at the next day's open. If that day the stock closed with another RSI(2) below 25, I add another $25k to the position. I would then close the entire position at the next day's open following a RSI(2) 70 close or on the 8th day's opening following the last entry.

    I will begin providing this list on the TSM page in January.


  55. Here is a good post Ric did on writing puts for income.

    http://www.triplescreenmethod.com/Special_Report/140920_SpecialReport_WritingPuts.asp


  56. Good morning!

    Connected/Naybob – That's why I like these cruises, I get to spend a more or less device-free week with the kids.  I'm the only one in the family "cheating", in fact.  And it's not just us, the boat makes a whole community of people who are not using their phones so we actually have conversations and play games and eat without being distracted – even my kids appreciate it…

    We're out on the open sea today, just a tiny spec in a vast blue ocean though this morning, when I was the only person awake on the ship and walking the decks – I had more of that "King of the World" feeling.  Then the Sun came up and I thought about the article the other day about how we only have a few Billion years left before this whole solar system is gone and that got me to thinking of what's the point of it all?

    Are we only dust in the wind or are we stardust and golden and billion year old carbon on our way back to the garden?   I prefer the latter but that means we need to heed Confucius, who said "If you are planning for 1 year, plant rice; if you are planning for 10 years, plant trees and if you are planning for 100 years, teach your children what to plant."

    As boring as it is, I think we should focus a bit more on our long-term portfolio planning in 2016. If we don't learn to manage our wealth and our income in such a way that we can depend on it enough that we have time to enjoy our lives – what's the point?  If we build castles made of sand that wash away when we're gone and leave no trace of our passing, what's the point?


  57. That strategy sounds great, Burr – keep us posted.  


  58. Chang Xiaobing, who was recently named CEO of state-owned telecoms giant China Telecom, is the latest Chinese executive to go “missing” amid a nationwide crackdown on corruption led by the government.

    Beijing-based independent magazine Caijing reports on Sunday that Xiaobing is “lost” and …


  59. Seven years after ZIRP (then NIRP) was launched and central banks grew their balance sheets by $13 trillion, in the process inflating the biggest …


  60. “This morning I saw the countryside from my window a long time before sunrise, with nothing but the morning star, which looked very big,” Vincent van Gogh wrote in a letter to his brother.

    He was sitting in the Saint-Paul asylum in Saint-Rémy, France, at the time, where he had checked in to not long …


  61. Mondo is a London fintech startup that’s looking at banking in a different way. It doesn’t have branches, and its current account is controlled from a smartphone app that analyses spending and can be used to contact the company at any time.

    You can’t actually use a Mondo card yet, as it’s still …


  62. The World Economic Forum’s recently-released Global Competitiveness Survey offers a bundle of indicators to show the health of a country’s institutions.

    One of those is the perceived safeness of banks.

    WEF used its executive opinion survey to ask “in general, how do you perceive the soundness of …


  63. WASHINGTON — China’s economy lost some luster and its leaders their aura of invincibility. A commodities boom went bust, spreading pain from Texas oil fields to Indonesian coal mines.

    Seven years of near-zero interest rates ended in the United States, while easy money kept flowing elsewhere. …


  64. Roger Ekrich noticed many old books, including Chaucer’s “The Canterbury Tales”, referenced two periods of sleep being the norm in their era.

    Via Dreamland: Adventures in the Strange Science of Sleep:

    …Ekirch somehow rediscovered a fact of life that was once as common as eating breakfast. Every …


  65. With 29% of young Americans having lost faith in ‘The American Dream’ (for good reason as we detailed here), it is hardly surprising that a new poll …


  66. Would Germany be a better place if each citizen received a no-strings-attached government check for $1,100 a month?

    Would people still get out of bed each day and go to work or do something else productive even with that unconditional basic income of 1,000 euros, less than half the average German …


  67. When the Dow Jones Industrial Average was created in 1896, it had about a dozen industrial stocks.

    Apple’s addition to the current list of 30 American conglomerates back in March 2015 shows just how far the index has come.

    Apple took the place of AT&T, which was popularly known as American Telephone …


  68. Burr - thanks for sharing. The education website on options was very informative and a good reference tool. BTW, I thought that Alexander Elder was the originator of the Triple Screen Trading concept?


  69. Dust to Dust: Phil, I'm all for boring. The investing theme for 2016 may be just CASH (not CASHY and CAUTIOUS). Sitting on the sidelines watching everybody being busy arranging their own small set of deckchairs.


  70. I WAS LEANING against a craggy rock on one of Mallorca’s more out-of-the-way beaches when I noticed a man perched atop a low cliff above the crystalline sea, slowly moving his outstretched hands horizontally from left to right.

    “Ooh, that’s so cool,” I said, pointing him out to my girlfriend. “He …


  71. 10 Sunday Reads | The Big Picture

    My easy like Sunday morning reads:

    • Stocks Rise 3%, Leaving S&P 500 Flat on Year (Barron’s)
    • How Esurance Lost Its Mascot to the Internet …


  72. “He said basically, ‘We’ve got the Bible. That’s our proof.’ He’s right.”The post How The American Religious Right Is Making The Middle East Peace …


  73. In a Sierra Leone plagued by Ebola, Bureh Beach Surf Club members find resilience in a passion.


  74. A roller-coaster ride in financial markets, deal frenzy among Chinese Web operators spurred on by Alibaba and Tencent, the rise of Asian unicorns and …


  75. In May 1984, Warren Buffett laid out everything you need to know about his investing philosophy.

    In a speech at Columbia Business School, later adapted into an essay, Buffett introduced what he called, “The Superinvestors of Graham-and-Doddsville.”

    Buffett writes:

    “The common intellectual theme of the


  76. All anyone can talk about is “Star Wars: The Force Awakens” and the more than half-billion-dollar haul that the Walt Disney Company pulled in over the weekend.

    The press has been breathless and Wall Street analysts are mostly giddy about Disney’s prospects.

    But on Friday, just as the entertainment …


  77. craigs and Phil—are we finally going to get some colder weather that could move oil and nat gas a little higher????


  78. Beats me who started it. I’m going to trade the csgs idea tomorrow and see how it goes unless we are starting at red in the morn


  79. Jabo- after January 1 we will finally have seasonal temperatures for at least a week. I have not had a chance to look at my weather information beyond that so  I can't really comment any further yet. I will try to take a look at this tonight  And let you know if it looks like there will be another warming trend.


  80. thanks craigs--nat gas futures up.  hope it continues tomorrow (with oil too please).


  81. “Star Wars: The Force Awakens” surged past $1 billion in worldwide sales in 12 days, becoming the first picture to reach that mark so quickly.


  82. In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well.


  83. Chinese shares led emerging-market stocks lower amid declining industrial profits. U.S. equity-index futures were little changed after the biggest weekly surge in oil prices since August helped the Standard & Poor’s 500 Index erase its losses for the year.


  84. Demand at U.S. Treasury auctions fell this year to the lowest since 2009 as Wall Street dealers and central banks pulled back.


  85. Oil in New York slid from the highest in three weeks and snapped the longest run of gains since April as Iran repeated its goal of boosting exports after sanctions on the country are lifted.


  86. Japan’s industrial output fell for the first time in three months in November, as exports fell more than expected and households spent less.


  87. Investors in the pound have waited more than six years for the Bank of England to raise interest rates and bolster the U.K. currency. With money markets signaling no move next year, it looks like they may have longer to wait.


  88. The Japanese government formally protested the entry of an armed Chinese government ship and two other vessels into waters that Japan claims as its own on Saturday, according to an official in the Japanese Ministry of Foreign Affairs. This is the first time that an armed Chinese vessel has intruded into the areas that Japan’s claims as its territory, the official said.


  89. In 2014, Democrats, the majority party in the Senate, had to defend most of the seats up for election, more than a few in unfriendly territory. That year, Republicans took back control of the chamber, picking up nine seats.


  90. Over the last 15 years, Americans have become accustomed to distinguishing domestic mass shootings from Islamic terrorism — the difference between Columbine and the Sept. 11 attacks, if you will. In 2015, that conceptual division broke down with the massacre in San Bernardino, California. It wasn’t the first domestic act of terrorism inspired by Islam — Army Major Nidal Hasan’s attack on Fort Hood and the Boston Marathon bombing both featured American Muslim terrorists. But San Bernardino was the first time the two paradigms were literally indistinguishable. It’s as if the terrorists finally said, “Who needs airplanes when assault weapons are readily available?”


  91. Beijing suspended gas supplies to some industrial users after liquefied natural gas imports by PetroChina Co. were disrupted.


  92. Chinese stocks headed for their steepest losses in two weeks in Hong Kong after industrial companies’ profits declined and the nation’s anti-graft authority announced an investigation into the chairman of China Telecom Corp.


  93. Investors can’t seem to get away from non-energy commodities fast enough.


  94. The idea behind asset allocation is simple: when one market struggles, it’s OK because an investor can jump into another that is thriving. Not so in 2015.


  95. Saudi Arabia, seeking to cope with the lowest oil prices in more than a decade, may announce cuts in capital spending and other economic measures for next year as it unveils the first annual budget under King Salman.


  96. European stocks fell as low trading persisted in the shortened holiday week.


  97. Hong Kong’s exports fell 3.5 percent year on year, the government said Monday. This beat economists’ median estimate of -2.8 percent year on year.


  98. Japanese Prime Minister Shinzo Abe made a landmark apology to South Korean “comfort women” coerced into Japanese military brothels before and during World War II, with his government agreeing to provide 1 billion yen ($8.3 million) to a fund for compensating victims.


  99. Greg Richmond ordered two wool caps from on Dec. 22 to give to his wife for Christmas, and asked for overnight delivery to ensure a pre-holiday arrival. On Friday, at home in Chicago, he was still waiting for FedEx to show up.


  100. Goldman Sachs Group Inc. and JPMorgan Chase & Co. will probably benefit most from the coming wave of financial technology disruption, rather than being supplanted by startups driving the change, according to an Autonomous Research survey.


  101. Stocks and currencies in developing nations halted a two-week rally as lingering concern about the health of China’s economy weighs on the global growth outlook for 2016.


  102. Iron ore stockpiles at ports in China are heading into 2016 at the highest level in more than seven months as expanding low-cost supplies and sputtering demand in the biggest buyer spur concern that a glut will persist, hurting prices.


  103. Good morning!

    Not much excitement over the weekend, which is good as it turns out I've got a snorkeling thing this morning.  I should be back in the afternoon unless eaten by a shark or something. 

    Jackie didn't come in until 2am, I'm looking forward to waking her up in two hours!  ????


  104. So cool, I can see the space station!  Easy to spot because it's moving up and down with the waves relative to the stars around it.  Really fun using my Star Walk app out here.