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Troubling Tuesday – Broken Market is Good for You but GREAT for Me!

Is everything really awesome?

Or is the stock market broken?  Can the stock market be broken?  Something is clearly wrong at this point as market prices have nothing to do with earnings, which have dropped dramatically this year, running 15% lower than they were at the start of 2017 yet the market is acting as if those projections were being exceeded by 15%.

As a fundamental value investor, it's very hard for me to get behind a rally that has taken the Russell (IWM) up 18% in 9 months and all of that has come since the Russell went back to 0% in mid-August – so we're talking 18% in 45 days.  Yes, there is a little sour grapes here as the Russell is one of our hedges but that's BECAUSE the run is so ridiculous – that's what makes it a good hedge (in theory).   

What makes it a bad hedge is it's been up 23 of the past 28 days – an incredible run that is very close to mirroring the previous record, which was set in 1998, right before the small caps collapsed 38%, leading the rest of the market lower in a correction that was sparked by concerns over Russia's economic collapse as well as data that showed the US economy slowing.  

Our biggest fear duing this rally has not been Russia but China and Japan, as both countries are 250% in debt and can't afford a misstep but, so far, they haven't had one and their economies have both shown signs of improvement this summer.  Despite the turmoil in Spain and Brexit, the EU seems intact and the broad story of a Global recovery seems to be holding water – so many good reasons for the broad-market rally to continue – but that doesn't mean the Russell can't be getting ahead of itself.

Of course the big catalyst is Trump's proposed tax cut – that's what sparked an 18% gain in 90 days but is the tax cut REALLY going to happen or is yet another Republican fantasy being sold to us by an Administration that is 0/1,000 in passing legislation so far?  

As I have been repeating a lot lately (see almost every September Report) it's not that we're bearish.  In fact, 43 of our 47 Trade Ideas for our Members in September were bullish Trade Ideas.  However, I do preach taking 25-33% of our profits an putting them into bearish hedges and, because those are short-term positions that are frequently adjusted – we end up talking about them a lot more than our "boring" long-term longs, which make the other 67-75%.

It was just 30 days ago that North Korea's Kim Jong Un detonated a hydrogen bomb over Labor Day Weekend.  The Russell was at 1,415 that day, now up 100 points (7%).  2 Major hurricanes hit us and a third hit Puerto Rico on the 20th – yet up we continued.  Is our lesson then to buy whenever something bad happens or, because the market is broken, just BUYBUYBUY all the time?  

Who does a broken stock market benefit?  Well certainly the Top 10%, who own 80% of all US assets.  That's why "no one" is complaining about the market rally – how many people do you even know in the bottom 90% and how many of them understand that the 10% gain in their IRA might be $20,000 while it's more like $200,000 for people in the Top 10% (on avg – some get much, much more and some less) – which only serves to widen the wealth gap even further.  

Related imageHow does my wealth hurt the average citizen?  Well, for example, I have a nice house ($800,000) and I want to build a pool but I can't build a big enough one on my yard so I buy my neighbor's house ($500,000) and knock it down and build a pool and a tennis court for another $300,000.  Is my new house with double the property and a pool and a tennis court now worth $1.6M?  Maybe not but it's probably worth $1.2M and, if the house appreciates 5% a year, that's another $60,000 a year and my "loss" is erased in 7 years so, if I'm planning to stay around that long – why not?  After all, I just made $200,000 in the market so covering the additional mortgage is no big deal.

Did my wealth hurt anyone?  Of course it did!  If everyone in the Top 10% doubled their property, there would be 10% less property available in the town but I already own twice as much property as most of my neighbors and way more property than the bottom 50% of my town so really the Top 10% already have 25% of the property and doubling our lands would use up 50% of the towns land, leaving just 50% for the bottom 90%.  Effecitively, our actions have taken 1/3 of the bottom 90%'s land away.

That makes land much more expensive for the rest of you (as I've made it scarce) and, even worse, I've effectively decreased the population of the town (no more neighbor) which increases the net per-capita tax burden you must pay to keep things running.  It also decreases the customer base of local merchants, which forces them to charge more to meet their increasing rents and taxes and the marginal players begin to close down and good riddance to those discount stores with low margins – because I never shop there anyway.  

Image result for gentrificationThose vacant stores get replaced by higher-priced stores that can afford the rents and I'm thrilled because I don't mind paying 30% more for organic groceries and gourmet coffee because my grocery bill is roughly the same as yours + 30% but my income is nothing like yours at all – so you may spend $10,000 a year on food and $3,000 more is 15% of your stock gains while I spend the same $13,000 for my family and $3,000 a year is only 1.5% of my stock bonus.  What else can we buy?  

The same thing happens to restaurants and clothing stores and everything else you might want to buy.  Slowly but surely our upper-class gentrification drives up the prices and now there's suddenly a "nice" mall in town that used to be a regular mall and you can't afford it anymore so you have to go to the "other" mall but prices there have gone up too as there's less available retail space due to all the designer shops moving in.  You know the designer shops – things in there cost thousands and there's often just one saleperson who sits there all day and makes one sale that has more profit than the store in your mall with 5 people who sell low-priced tchotchkes all day.  

Image result for gentrification and unemploymentOops, and there's more damage I cause – unemployment.  When rents go up jobs get cut and those luxury stores tend to employ less people because most of you wouldn't even dare walk in to one of those places, right?  You know that feeling – you walk in and they size you up in a second and the salesperson doesn't even look up from their magazine – other than to make sure you aren't stealing anything.  You may think the salespeople are "snooty" but when WE come in, they couldn't be more charming.  Did you even know they have a cappuccino machine for the customers?  Those "snooty" salespeople turn downright friendly when they smell money walking through their door!  

That's another way the rich mess with your life.  When I go to the local restaurant, the waiter knows I'm a big tipper, so I get more attention – who do you think ends up geting less?  I don't need to make reservations either.  I'm going to get the best plumber, the best lawn guy, the best electician, the best handyman, doctor, dentist… and you will have to wait for them to be free or find someone else and my kids will go to the best schools and then I'll vote no to funding your school – because my kids don't go to that crummy place anyway.  

And don't even think about what my wealth does to the cost of your kid's college (if they can get there with that crummy education).  Who on Earth can afford $50,000 a year for tuition and another $20,000 for living expenses?  We can – that's only 1/3 of my stock gains this year but it's 350% of yours!  There's a good example, in fact, of how my wealth makes you poor.  My kid's college causes me to save "just" $130,000 of my $200,000 gain this year while your kid's college costs you 3.5 years worth of GREAT market gains every year for 4 years – that's 14 years of your stock market gains wiped out sending one kid to school.  

How's that $20,000 looking now?  

Image result for gentrification and unemploymentHow do you level the playing field so the Bottom 90% have even a chance of not being broke when they retire?  Well taxes are a good way to redistribute the wealth but, OOPS, the GOP tax plan will only add 1.2% to your $60,000 salary ($720) while it adds 8.5% to my $200,000 salary ($17,500).  See – it works just like the stock market – good for you but so much better for me that I will destroy you and your family with my wealth.  

Well, at least when I pass away the money will – OOPS AGAIN – no more death tax means my kids and my grandkids will start their lives with HUNDREDS of times more money than yours will.  

Love and kisses from the land of opportunity (sucker)!  

- Phil


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  1. I guess markets would go up 5% after a nuclear attack from N. Korea on the premise that we'll have increased construction spending! We'll add more lines tonight.

  2. Taking a stab. Long /NGX7 $2.896 

  3. go TEVA!!!

    please no tease!!!

  4. Your sentiments echoed by Hussman this week: 

    "We are observing an episode that will make future investors wince. Just like the two closest analogs, the 1929 high and the tech bubble, I expect that future investors will shake their heads in wonder at the stark raving madness of it all, and ask what Wall Street could possibly have been thinking. In any event, I've shared what I see as my truth, and I experience no need to change anyone's mind. I remain content to abide our value-conscious, historically-informed, full-cycle discipline, and to follow our path. Others are free to continue along their own."

    …. end of quote

    ?But what are we meant to do as the average investor? Take a deep breath and expect the market to come back to us, or continue to play the fool's game and keep adding long exposure. I skewed short some time ago, but am continually forced to layer on BCS to capture some of the upside to provide fuel for rolling my short (with hindsight possibly too short) positions. But Sod's Law dictates that rolling too heavily could be a waste of firepower if the market does experience a sell off. And of course those BCS will start to lose value if the Cassandra's of the market are correct (which are sure hope so!).


  5. Good Morning.

  6. TZA – Phil, I think your TZA looks interesting here.  Bought some.

  7. Good morning!  

    Katy Perry puts on quite a show.  Was like a Vegas spectacular with sets and costume changes and such.  Garden was packed – you can't intimidate New Yorkers but I noticed extra security and a lot of very serious guys – the kind whose eyes never stop sweeping the room.  Still, the kids were oblivious and had a blast.

    They have good sushi at the Garden now, $15 is a good price too.  Gourmet burgers by one of those famous chefs and gourmet chicken and all kinds of good food – nice upgrades.  Pretty much in-line with what I'm talking about in the post though – I fee bad for regular people, you have to look pretty hard to find a good old hot dog or a pretzel.  Not that they can afford a seat anyway…

    I think $50+ for a concert tee was my biggest sticker shock.  We used to pay $5 – I have a closet full of old concert tee-shirts…

    Big Chart – Now that's just silly!  I agree StJ – let's go over the lines today so we can go through the process of working them out. 

    Speaking of silly, /NQ 6,000 is a good shorting line!  

    /NGX7/Joseph – I agree, it's a good spot. 

    Hussman/Winston – I kind of agree.  I have to fight with myself constantly to resist the urge to just go 100% cash and go on vacation until the correction.  Hussman doesn't hedge so it's an on or off game for him, for me it's more about balance and I hate to keep pushing money into losing hedges but I can't possibly, in good conscience, call longs without making sure people are very well-hedged first.  You can recover from making a bit less money a lot more easily than you can recover from getting wiped out!  

    TZA/Albo – We're into the broken clock theory at this point…  

  8. TZA – Just picking a spot.  Risking about .30.  Don't want to be in the position long because of degradation inherent in leveraged ETFs.

  9. Winston- I have taken so many deep breaths I am almost hyperventilating. Have been holding and adding hedges for some time now expecting some form of return to sanity/fundamentals. Valuations don't matter in this environment; bullish sentiment among money mgrs. I know remains strong. Low interest rates and low inflation form the basis of their outlook. Credible cases for more upside and at least a drawdown. I read all of both sides which I find. So, I add some longs , taking on a bit more risk but remain cautious adding a bit more  to my down side hedge. As the man used to say, up or down from here. 

  10. Speaking of the Garden, I was thinking that the original Garden (which was square) was build in 1879 and the new one was built in 1968 (they actually tore down Penn Station to build it and rebuilt Penn Station under the Garden but we lost a great landmark), when there were 14M people in NY Metro and now there's 20.5M and those extra 6.5M are a lot richer than the 14M used to be so of course ticket prices are through the roof – there aren't enough venues to support the population. 

    Up or down/Pstas – Very true, we can't afford to be too bullish or too bearish, which is why I'm so pleased when our portfolios are balancing out (and loath to touch them for fear of upsetting the balance).  

    TLSA in danger of a big breakdown:

  11. How TSLA isn't down 15 points or more right now is amazing.  They said they were going to produce 1500 model 3's in Sept alone with 200+ in Aug and produced 220 overall.  And then Musk said, some problems but we will produce more than expected later.  How anyone can take him at face value anymore is incredible.  He is the boy who cried wolf times 10.

  12. I saw Imagine Dragons last week in Phoenix; first rock concert in decades.  Seat cost close to $100 with fees (still not bad compared to stuff like opera and ballet in NYC).  Security was not what I saw; I saw a different experience than my last one,  Yes in NYC.  Today, nowhere near as edgy or dark.  Sat next to teenage girls, little kids with cotton candy, like it was a B-day party.

  13. Interesting Winston.  Thanks for sharing, I am holding my breath and have yet to make a hedge.  Well, unless playing Futures counts.  I think Phil/PSW considers that a hedge.  Also, using Futures to fund the build-out of my portfolio. While I am NEW to investing (close to my 1000 mark), I am loving every minute of it – Thanks to PSW!!!  I am sure in a year or so… I'll be shocked at some of the Future trades that I am making today.  

    But, this Futures stuff reminds me of playing long Texas Hold'em sessions and I must confess… many of those skill sets are alike.  Patience, riding out the storm, bankroll mgt, cashing the small wins, etc.   My favorite is taking a small percentage of the wins and swinging for the fences, every now and then.  I call it the free roll, and If I lose it, I reload the tin can and play it again.  

    /NGX7 – Cashed out 2.918  — Still Long /NGH8  $3.165

    Good Night All

  14. Oh… I am learning…. To Be the House.   That is just taking a bit longer than I expected, especially for those that are math challenged.  

  15. Phil/Room

    How about a play on utilities.  Maybe SO or D.  Anything that's not overbought.

  16. Maybe PPL

  17. Phil,

    What are your thoughts on SYNT ? It appears they are paying more in dividends than they are bringing in. Do you think it is a good buy at this level ?



  18. To distract from real news, Musk puts out pic of his electric truck that won't be out till 2020 and that's a big if.  Kind of knew he would offset bad news with a tweet, that's why I stayed away before numbers and stayed on sideline.  Should've bought some cheap calls on open.

  19. Phil,

    What's your target on /CL? I'm short at 51 and using the gains to help ease the pain of my /TF shorts. Just wanted to see what you thought I could get on /CL. Thanks 

  20. and TSLA is going up again!

  21. TSLA wtf?

  22. TSLA/Rustle – I talked about that a while ago.  Too many true believers holding the stock and it's really not a very big float.  My kids didn't sell their DIS stock just because ESPN was consistently losing subscribers and overpaying for football, TSLA shareholders don't care about whether or not they actually make any cars – or profits.  After all, certainly this market is teaching a whole generation of investors that none of that stuff matters, right?   People get mad when I call Musk a con man but, more and more, the evidence points that way.

    Kids/Baron – Try a Katy Perry show.  The "mosh pit" was filled with kids.  I felt bad because I didn't get my kids those "seats" because I was worried it would be dangerous.  At one point, Katy Perry got off stage and strolled through the audience – no one bothered her.  That's so different than my childhood though Peter Gabriel did dive off stage into the audience and we all passed him around while he sang "Lay Your Hands on Me" – that was very cool!   I wish they recorded those shows – such good memories.

    Shocked/Joseph – All part of the learning process!   I agree on poker, a lot of similar concepts because poker too is all about money and risk management and it's a game of skill with an element of luck.  

    Utilities/Baron – I haven't been buying utilities because they have major pollution issues with coal and other emissions or waste if it's nuclear and then they have the problem that they are losing customers faster than they are adding new ones.  Solar has a very fast payback curve for homeowners now and now they are starting to build new homes with panels and Musk and many others are planning MASSIVE marketing campaigns aimed at stealing customers from utility companies.  What plans do utility companies have to grow their business?  

    Image result for electricity solar costs

    SO is only "cheap" on a chart.  They made $2Bn in 2014 and $2.5Bn now so 10% annual growth but you have to pay $48Bn to own them so p/e in the 20s 

    Where Southern Company Stock Might Go from Here

    Also, they are southeastern so we have no idea how much those storms cost them – I'd wait until after earnings and hope they take another good hit if you really want to own them.  About 30% of their stations still use coal or nat gas and they are already up 20% at $48 on the premise that we won't be following the rest of the world in regulating greenhouse gases but that's not going to happen – the world will pressure us.  

    Same for D or PPL.  If they drop 20%, they get attractive but not a major bargain here.  PPL probably the best of the bunch but their chart looks very dangerous and earnings are first week of November so I'd wait but you can sell the 2020 $33 puts for $2.80 and that's $30.20 so, if you think you are going to miss something, that's the way I'd start an entry. 

    SYNT/Pat – They are very interesting.  They made so much money that they paid out a special dividend of $15/share when they were at $45 but, after that, they dropped like a rock as people took it and ran.  Those people were smart because then they got whacked with a $250M tax bill for the dividend payout and that caused them to show -$57M last year and spooked out whoever was left.  

    Quarterly, however, they are back to making about $40M/qtr and that's a p/e of just over 10 on a $1.6Bn valuation at $19.50.  They don't actually pay dividends – just that one time.  They did just put in a new CEO and it's possible he may kitchen sink this quarter to start with a clean slate but, otherwise – I like them down here.  

    Sadly, they don't have great options to sell but you can sell the May $17.50 puts for $1.25 and that nets you in for $16.25 so no harm in that while we wait for earnings and hopefully we can pick up the May $17.50 ($3.50)/$22.50 ($1.10) bull call spread, now $2.40, for $2 or less and then you'd be net 0.75 on the $50 spread.

    Musk/Rustle – Well we could tell he was getting desperate with that BS 30 minutes to Europe thing.  It's like he reads a bunch of science-fiction books and then has an "idea" and starts playing it as if it will work.  Then there's the "Boring" company, which is really a revamp of Hyperloop, which is bat-shit crazy (yet 3 companies are currently raising funds for it).   

    /CL/Japar – Back below $50 for sure but dangerous play as the Saudis have hundreds of Billions riding on Brent staying over $55.  

    TSLA/Jabob – As I said, nothing matters to fanboys. They said they would deliver 5,000 model 3s and it turned out to be 220 – so what? 

  23. OPTT,CPST – interesting both of these tiny niche alt-energy stocks have moved up in last couple days. who's buying? and why? Couple be a single fund/buyer as total of both (yesterday) was around 4 million shares, with avg cost between the two of about $1 (yesterday)

  24. My comment broke chat.  That's why we can't let everyone post pictures.

  25. Phil,

    Thanks for your read on utilities. Don't have much  myself but figured if we get some risk off they'll go up.

  26. Phil,

    Also, I still need to double down on /TF shorts to have even a chance to get out even. How do o determine the best spot to double down? I want to know what to look for. I know we don't want to throw good money after bad right now but just trying to learn what to look for

  27. Phil – "Love and kisses from the land of opportunity (sucker)!"


  28. 1020 – "It is in the best interest of Las Vegas that this incident be of a domestic nature….even trump knows that…."

    Regardless of how far fetched, a possibility and example of counter intuitive or contrarian thinking. Blue-skying requires thinking outside of the box, because sometimes there are blue roses, thorns and all. C I LU2.

  29. BDC - "I'll count "20's comment above" in that group. Sheesh the garbage I have to read on this board."

    See our comment above. Over attenuation to the frequency can squelch otherwise viable signals or ideas. As opposed to the ignore button, which is used by ignoramuses exclusively, one must keep the filters off and channels open.  Glad you are and as old 49er Sourdough used to say… sometimes we must sift through a whole lotta shit to find a nugget and Out.

  30. One more utility (discussed last week) is SCG which is dropped hard on news that state (SC) might not let it pass the costs for a half-finished nuclear plant on to its customers.  But no long term options. 

  31. Balance is a difficult concept to get to grips with – and I certainly don't believe a delta neutral portfolio is something that can be maintained for the long run. Some time ago I asked how we would position for a 20% drop – stupid of me – it should have been how we exploit a 20% up move. The leading indicator since 2009 has been price, and it is price momentum that has led this market. That is why hedging has been so 'sisyphean' since forever. I am not denigrating hedging – my hedge of choice has been short covers on bull call spreads and that has been a challenging strategy for many months. The choice is often using cash to roll short calls up and out or to use that cash to layer on BCS – for me the jury is still out on what is more appropriate. But if there is one thing I am sure of, and that is to sell puts in this market to finance a call rolling strategy could be the quickest way to the poorhouse.

  32. joseph – futures. I had the privilege of seeing Phil in action at the poker table earlier this year at the PSW conference. My ability to trade futures is on a par with my poker playing skills. Suffice to say Phil cleaned me out. It reinforced my view that futures trading is better suited to poker players. Or maybe that should be poker playing is better suited to futures traders?

  33. OK, it's time to update the Big Chart!  

    First, we need the big big picture.  Here we see the S&P 500 has a firm bottom at 800, hit good resistance at 1,600 (up 100%) and then 2,000, which is another 50% up or 25% of the 1,600.

    To test whether that's valid, the run from 1,600 to 2,000 is 400 so a retrace would be 80 and so would an overshoot so, if we zoom in, we should see 1,920 and 2,080 as significant points in the consolidation ahead of the move higher:

    Well, I'd say 2 years of consolidation proves our point, right?  That's where 1,850 came in on the Big Chart – it's where we expected the S&P to be at the end of 2014 (in 2011) and, because earnings have been flat – we haven't adjusted it since.  However, market multiples have massively expanded and the Dollar is weak so those need to be taken into account.  The Dollar is 7% below our target so that's 130 points right there (1,980) and we need to accept a higher multiple adds another 10% to the S&P (240) and that takes us to 2,220.  

    Meanwhile, back to the bigger picture, we're not going to walk away from 800, 1,600, 2,400, 3,200 so I would call 2,400 the top of the expected range (10% up) and that makes the must hold 2,160 but there's enough evidence to round off to 2,200 and call that our new Must Hold for the S&P.  

    That makes the others easy as we can say "what lines up with S&P 2,200" and then we see if there's evidence to support consolidation there.  

    Dow looks like 20,000 would be a fair call but 17,600 is our current must hold and we're 35% above that and 12.5% over 20,000 already..  The Dow is tricky as it switches components, notably AAPL but BA has also blasted it higher recently and neither of those is likely to fail (outside of a broad pullback) so we figure the boost is here to stay.  

    In the bigger picture, the Dow bottomed at 7,000 and 14,000 was a double-top from 1999 and 2007 and we blasted from there to 21,000 with only a tiny pause.  A 7,000-point run (and 17,500 was the halfway mark, where we did consolidate) would have a 1,400 point retrace but we'll use 17,500 and call that 1,400 strong while 750 would be weak.  That makes 22,400 a strong overshoot if we're going to call 21,000 the top of the range and 10% below is back to 19,000 for a Must Hold but let's factor in AAPL and BA 

    AAPL is up 50 points since the election and that's 400 Dow points and BA is up 100 points, which added 800 points to the Dow so they have added 1,200 of the 4,600 points since the election – about 25%.  That's why we have such a tremendous overshoot on the Dow but, as I said, it's not likely to reverse as long as those stocks are in the index so we'll fudge the Dow to 21,000 on the Must Hold line and I can live with that as it makes the -10% line back below 19,000 – where I REALLY think the Must Hold line should be.  

  34. Phil,

    Rolling question – IMAX. I have some BCS 18/22 (net 2.05) and some short Mar 23 calls (1.45, now 2.52) covering an equal number of shares. Considering rolling the sht calls to the Mar 25s (1.70) or Mar 26s (1.32) for more head room. Your thoughts appreciated, as always.

  35. Phil,

    Above, IMAX bcs are in March.


  36. You're welcome Baron.

    /TF/Japar – As I said yesterday, I wanted to see how 1,500 holds up.  I added 2 short at 1,510 failed but back to 10 now as 1,505 held up and I'll just keep working on that when I can, not looking to go to 20 the way this thing keeps burning me. 

    SCG/Rexx – So it's a utility with 2 good reasons not to play it?

    Delta neutral/Winston – That's not what I mean by balance.  In our portfolios, we're about 66/33 bullish on the way up (we gain twice as much as we lose) but, on the way down, our hedges tend to pay us more than enough to stay even.  That's what I mean by balanced.  Also, of course, since our primary goal is to SELL PREMIUM – we don't care if our actual positions tread water – as long as time passes and the premium that we sold keeps decaying.  As you've noticed, put selling at this low VIX has not been that attractive, which is why the LTP now only has 15 naked short puts, down from 36 less than a year ago.  Stopping those out with a loss is something we can do with the cash we'll make from TZA and SQQQ – IF the market ever does actually correct but, if it doesn't – then all those short puts ($63,000 worth) will pay for the losses on our insurance hedges.  THAT IS BALANCE!!!  

    Even better, in that case, the gains are taken in our LTP retirement accounts – tax free or at least tax-reduced while the losses from the hedges come out of our short-term capital gains.  A huge tax advantage as well!   Between that and learning not to chase a straight – we'll improve your performance in no time!  

    IMAX/8800 – at $23.15 the short calls are at the money while your spread is good for $4 and a $3.60 profit.  The spread is now $6/3.20 for $2.80 so $1.20 more to gain there and I'd wait for June to come out rather than spend 0.40 for no reason.  You could always DD on the spread (+$2.80) and roll the short calls ($2.50) to 2x the $26s ($1.35) and, of course, you'd only be doing that if IMAX were breaking over $24 so why not make $1.20 on another $2.80 (42%) in less than 6 months while pushing the short calls 15% out of the money for free?  And all you have to do is wait patiently instead of panicking and paying the short caller $2.35 in premium just because you are nervous that your stock will do well…  cool

  37. Phil,

    Thanks for the iMAX guidance.

  38. CTL

    ~~(CenturyLink confirms the DOJ cleared its pending acquisition of Level 3 Communications),

    Added a spread to my already overweight position  :

    Bought the Jan 20 $22 call

    Sold the Jan 20 $30 call             for   $1.60

  39. The TEFLON market is blasting higher-just another day after another mass killing and assault on the American people. The answer for all the brain dead is TIGHTER security @ hotels!!! And silencers on handguns. It isn't just sick, its insane.

  40. CCJ – crashed this morning.

  41. You're welcome, 8800.

    CTL/Albo – Nice on them.

    Insane/Pirate – Paul Ryan just said "It's a mental health issue" even though the shooter had no history of mental health issues.  Meanwhile, the GOP is cutting Medicare, the largest payer of mental health treatment in the country.  F'ing idiots!  These bastards will do/say anything to get people away from talking about gun control.  

    That whole narrative that these were automatic weapons that were illegal was BS – the guy modified readily available semi-automatic weapons with readily available high-capacity cartridges that have tricks to increase the rate of fire.  

    I agree with Mental health reform is a critical ingredient. We need to vote these crazy bootlicking gun nuts out of office

    Every time there's a mass shooting, the Republicans pretend they care about mental health which then sparks a new debate which distracts people from the out of control gun issue.  

    And, by the way, does anyone remember this outrage from way back in February:

    President Donald Trump signed a bill into law on Tuesday that repeals a previous rule intended to prohibit the sale of firearms to the mentally ill. 

    The measure reversing the rule was passed by the GOP-controlled Senate in February by a 57-43 margin after consternation from Republicans — and the National Rifle Association — who argued that the rule infringed on Second Amendment rights, according to NPR.

    The original Obama-era rule, which was finalized in December 2016, required the Social Security Administration to share information about who was receiving benefits for certain mental disorders with the National Instant Criminal Background Check System. If an individual's information could potentially prohibit them from purchasing a firearm, they would be notified both orally and in writing.


    According to CNN, the Obama administration had estimated that roughly 75,000 people receiving disability benefits would have met the criteria to be reported to the national background check system annually.

    But the NRA and the American Civil Liberties Union both opposed the rule on the grounds that it was discriminatory. In a letter to Congress, the ACLU wrote that the rule reinforced "the harmful stereotype that people with mental disabilities, a vast and diverse group of citizens, are violent."

    During a February speech, Democratic Sen. Chris Murphy, who represents Newtown, beseeched Senate Republicans to abandon their efforts to reverse the measure.

    "We know that people with serious mental illness in this country can go buy a very powerful weapon and do great damage with it," he said. "If you can't manage your own financial affairs, how can we expect you are going to be a responsible steward of a dangerous, lethal firearm?"

    A gun must be placed in every last hand of every last living citizen!  

    CCJ/Scott – That's why we gave up on them.  Solar is cheaper, nukes aren't coming back.

  42. GOGO/Phil – any future for these guys (aka BTFD)?

  43. Gun control / Phil – And they have a new bill to make silencers more readily available. Imagine that the guy in Vegas had a silencer. How many more people would have died until they realized that someone was shooting? And how cops will be able to locate the shooter when he is using a silencer? The excuse is that silencers will prevent hearing losses among hunters. These guys in Congress are evil criminals. 

  44. Yes I remember when dumft did that, repealed something that was innately sensible and could possibly save many life's in pandering to the NRA. But that is what a narcissistic psycho does; only thinks of himself, first, last and always.

  45. Bought some ROKU at 21.12.  Recent new issue.  Playing for a bounce.  Risking $1.

  46. Then new S&P lines – does that match your expectations Phil. The support lines look OK to me:

  47. Pirate – Was talking to a friend last night who was part of the team that opened the Four Seasons in the Mandalay Bay.  She told me that the Four Seasons, for security reasons monitored all of the windows. If one was broken, then an alarm went so they could then take action.  It was more or less for guest security (no open windows in Vegas of course).  She was surprised the rest of the Mandalay Bay didn't have a similar capability.  I expect we'll see building floor numbers on outside of buildings and other things to speed up responsiveness in the future, but no gun control. 

  48. Trump – Puerto Rico, you throwing our budget out of whack…. Spending $20B to help you is money we can cut from our taxes for the top 1%. This guy is just so out of touch with reality – except reality TV I guess.

  49. Nat – Thank You.

  50. 1020 – Your welcome. 

    And just in case anyone forgot, there are 30 million reasons why Trump is beholden to the NRA.

  51. ~~(Reuters) – Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) bought a major stake in Pilot Flying J, the largest U.S. truck stop operator, and said it will become the majority owner in six years, deepening its commitment to the American economy.  

    The company is privately held.

    TA catching some peripheral action.

  52. Stuman-that's interesting about open windows. My other question was, does law enforcement have the capability to hit a gunman 22 story's high.? I noticed that the swat team went up to the floor where the shooter was in the hotel though they knew where his location was. My son is a detective in Ohio. guess I'll have to ask him. Bet they have the "firepower" and it would take a heck of a sniper to get the accuracy necessary. It does give one pause about any large concert venue in the open, or enclosed for that matter.

  53. Big Chart modifications, continued:

    So far we're using S&P 2,200 and Dow 21,000 as our new Must Hold Lines.  

    The Nasdaq should be easy as we know 5,000 is a big deal for the past 20 years and we did get good consolidation at 2,500 on the way back up and barely a pause at 5,000 before blasting up to 6,000.  

    Like the Dow, the Nasdaq is a revolving door of components and then the also rebalance it to further confuse things.  They also have a huge AAPL issue, with AAPL making up about 15% of the index and it's up 50% so 7.5% of the Nasdaq's 33% post-election run is from AAPL.  That's 340 points and, as with the Dow, we don't think they'll go away so it's a gimme so I think we'll bump the 5,000 line up to 5,500 but no, that's ridiculous as 6,000 is certainly too far so let's worth backwards and call 6,000 our 10% line and that makes 5,400 our Must Hold line.  Still seems too high to me but we'll try it and see how it behaves. 

    The Russel is easy but not really.  400, 600, 800, 1,000 and 1,200 were all significant on the way up so clearly we're moving in 200-point increments but we blasted through 1,400 and already 1,500, which indicates were on the way to 1,600 and a hell of a correction from there. 

    1,000 (Jan 2016) to 1,600 would have a pullback of 120 to 1,480 (weak) and 1,360 strong and yes, 1,360 was a point of contention for almost a year:

    That simply strengthens the bull case for 1,600 so, if that's our goal then 10% below it is the Must Hold – which would be 1,440 so that will be it for the Rut.

    Since the NYSE is a broad index and generally 10x the RUT, I'm inclined to go 14,400 but once again the NYSE would be trailing so let's drop it 10% to 12,800 and it's currently at 12,300 – so that works out just fine as it would be a bullish sign for all the indexes if the NYSE pops over 12,800.


    GOGO/Scott – We got out of ours but now, at $12, they are interesting again.  They miss on earnings because building their tech is expensive and, with satellite launch deadlines – they can't always delay spending to pretty up the quarters.  

    Meanwhile, ALK/Virgin just picked them on 8/22 and those guys wouldn't settle for less than the best and we already know we like them so let's add them to our portfolios again.  

    In the OOP: 

    • Sell 10 GOGO May $12 puts for $1.85 ($1,850) 
    • Buy 10 GOGO May $10 calls for $2.85 ($2,850)
    • Sell 10 GOGO May $14 calls for 0.95 ($950) 

    That's net $50 on the $4,000 spread with $3,950 (7,900%) upside potential if GOGO goes over $14 in May.  Shouldn't be too hard to adjust otherwise and our worst case is owning 1,000 share for $12.05 and, if we owned that now, we could sell the May $11 calls for $2.25 and the $12 puts for $1.85 and drop our basis to $7.95/9.975.  So the worst worse case is owning 2,000 shares at about 20% off the current price! 

    Silencers/StJ – What sick people they are!  

    ROKU/Albo – I hope they do well, it would be good for FUNN, which PSW Investments owns 2% of.  ROKU is coming out of the gate at over $300M – half of that would make us very happy!  

    S&P/StJ – Looks like we're already way behind but I can't bring myself to go higher than that.  

    4 Seasons/Stu – Love that hotel!  Whenever I want to really relax, that's the one I go to.

    Puerto Rico/StJ – There's no upside to helping them.  His constituents would like to have a wall that keeps them out as well and the states that consider PR friends are generally blue states anyway.  So why should Trump give up a penny to help them?  PR doesn't even get to vote for President, so they can't help his opponents.  

    Of course, not fixing PR could push some of their 3.4M people into Florida (can't stop them, they are technically citizens) and Trump only won Florida by a few hundred thousand.  That's what he's failing to see when he pisses off a whole island. 

  54. Phil – Interesting on FUNN. 

    Good luck with that.

  55. So weird that if you are Puerto Rican living in Puerto Rico you cannot vote in federal elections but if you live in a full state you can.

  56. I bet if the island was loaded with tax paying, retired wasps, PR would become a 51st state…. 

  57. Incidentally, Pilot Flying J is privately owned by the Haslam family,  Bill is the current governor of Tennessee and Jimmy is the owner of the Cleveland Browns.

  58. Roku is only used if you don't have a smart TV and no access to cable, satellite etc. It might help for cord cutters who want things cheaper and for islands, rural area's etc. It has all the Nflx ,Sling, movies. In the backwoods it is popular for the "off the grid people"  who want to stay hidden for whatever reason. Eventually it may become obsolete like so many of our electronic gadgets.

  59. Las Vegas – I am amazed and thankful, that the more we learn about the shooters armament, plans and prep, that more lives were not taken…. 

  60. I'm afraid we'll see senior citizen profiling and retirement home surveillance before any new gun laws were enacted…. :(

  61. Pulling stop order on ROKU in case we get a sharply down open.

  62. Thanks Albo. 

    PR/Tangled – And they keep voting that they want to be a state.  Maybe the next vote they vote to get away. 

    ROKU/Pirate – So many of these things now, it's hard to differentiate.  Someone (AAPL?) needs to come out with a single service that has everything.  Now, if we want to watch a show, I have to ask the kids if it's on NFLX or HULU or AMZN or one of the networks or HBO or CBS On Demand (Star Trek) – how many services do we need to have to watch TV?  Fortunately, TIVO handles all but CBS so far.  AMZN is "free" with our Prime Membership but we pay for NFLX and HULU and cable – adds up to a lot.

    Lives/1020 – I'd say 500 injured was pretty efficient.  Thankfully, the police quickly identified where the shots were coming from and the hotel was smart enough to tell the 5 cops who zoomed over to breach that the smoke detectors went off in that guys room on 32 so they were able to get up there pretty quickly and he apparently killed himself when he saw 5 cops at the door. 

    Profiling/1020 – I think they'll push for more stop and frisk.  They love that one as they get to fill up the for-profit jails with all sorts of minor offenses.  

    Meanwhile, be afraid, be very afraid:

  63. OMG, RUT zooming back to 1,515!  What BS!  

  64. Adding 4 more /TF short to bring avg to 1,492 but very tight stops on the new 4 over 1,515 and very quick profits if I get 5 points down – just to get a little back hopefully.

  65. Buffett saying he's not selling into the end of the year because there's a good chance he'll pay significantly less tax on gains next year.  That makes sense but maybe then we get a big sell-off in January as either the tax cuts are passed by the end of 2018 or, if they're not, then the market would probably tank BECAUSE they cuts failed so, either way, it makes sense to lighten up in Q1 vs Q4.

    Keep in mind, if Corporate Tax Rates are being cut from 35 to 20% and Berkshire would be looking at gains of $5Bn, then not selling now will save them $1.5Bn so there's a lot of room for a pullback before that becomes a bad decision. 

  66. TSLA up $8 – LOL! 

  67. Nomura gave TSLA $500 PT

  68. Boot – Added Even the Losers to the post:

  69. Imagine if they came in on target, they'd have a $750 PT

  70. Inside North Korea: What We Saw in Pyongyang

  71. Ilene – suggest adding Refugee from Live Aid in '85. Nice live performance.

  72. LIVE: US auto sales

  73.  Anyone see the API numbers ?

  74. deano – thank you! I'll add that now. 

    Here’s the post:


    Anyone else have a song request for PSW’s official tribute to Tom Petty?

  75. The Saudi king heads to Russia to discuss oil, investment, and Syria

  76. Tom Petty == AMERICAN GIRL 

  77. Latch,

    Got that one. smiley

  78. TEVA dropping AH

    MYL up

    Copaxone news I bet… dangit!

  79. Nice! yes u do. how about Yer sooo bad. ?

  80. Latch, check back in a minute and it will be there. 

  81. dangit!

    Oct 3, 2017

    Mylan Announces U.S. FDA Approval of First Generic for Copaxone® 40 mg/mL 3-Times-a-Week and May Be Eligible for 180-Day Exclusivity

    Mylan N.V. (NASDAQ, TASE: MYL) today announced that the U.S. Food and Drug Administration (FDA) has approved Mylan's Abbreviated New Drug Applications (ANDAs) for Glatiramer Acetate Injection 40.

  82. Thanks ilene :)


  83. From Bill Fleckenstein's Mr. Skin…

    Q: So far, the equity market continues to act like a traditional bull market. "Internals" remain strong, though not as strong as they were when this thing lifted off late last year. The "left out crowd", like David Stockman, for example, or John Hussman, continue to proclaim a huge downside is inevitable. That same argument has been around for a couple of years and refusal to recognize the abrupt change in market behavior in November of 2016, has locked in that prognosis. However, regardless of all the "reasons" why the stock market "should" be going down, or why all the idiocy from the CBs hasn't been reflected in precious metals going to the moon, collective actions on the part of investors now seem to favor "generic" equities as opposed to precious metals. When gold ran from 260 to 1900, THAT move possibly "discounted" CB behavior years ahead of time, using the precious metal complex as proxy. Now, after getting ahead of itself, precious metals have relaxed and "the new guy in town" has become equities – especially since CB buying (Swiss, Japanese, probably ECB, and even likely Fed via Citadel's derivative desk) has manifested itself. When Trump's pro business posture is combined with subtle improvement in certain economic metrics, and added to the fact that the equity "benchmarks" are up YTD, and the "FOMO" syndrome is alive, then we have a powerful "brew" stimulating the "paid-to-play" crowd into a frantic race to year end. So called "Valuation" considerations remain irrelevant for decision making. If "valuation" really mattered, then the market would be heading south, or at least showing severe internal damage. Just the opposite remains in place – namely no sign of "wanting" to go down. Trends are up until they aren't, so trend followers continue to be rewarded. Seems like the year end ramp job is becoming more likely, regardless of intellectual or philosophical arguments to the contrary. It is ALWAYS easiest to confuse wishful thinking with reality, which in turn, results from seeking the "why" instead of accepting the "what".

    There are always calls for "…this time is different…" and those calls have traditionally meant that either a long term bull market or bear market is near its end. However, the current version is more closely related to a new reality – simply, direct global CB manipulation of both bond and stock markets. Period. Pull out that simple yet profound influence and we would be seeing "downside". We just aren't "there" yet and from the look of things, right now, we won't be "there" for several months. Meanwhile, the bulls can enjoy the ride, hoping as usual, that they can exit the game when necessary. A rarely accomplished feat!

    ?[In summary] ?The persistent "overbought" internal condition, despite all the chatter about "reasons" why the thing should go down, is clear evidence of market strength. The calendar is now the most important "consideration" for all the so-called "professionals". Nothing else matters, and with virtually no signs of any selling pressure, anything that might have mattered in pre-Bernanke markets, simply will not matter, until the market wants it to. Then, whatever actually "matters" will likely be some sort of wild card that none of the robots recognized.

    Fleck: As Mr. Skin has been saying, looks highly likely that we get a year-end ramp job. Great summation of where we are, thanks to him.

  84. Phil — maybe we need to give up on RUT? Whatever happens I am out of futures after this.

  85. Roku – I believe this device and those like it are as 8 tracks were to albums, cassette tapes, to CDs, etc..  Perhaps, it will be decades before it fades away, as I am an early adopter to techy things.  

    That being said, if you want a device for streaming ANYTHING FREE, MBOX is a nice way to go.  Bought a device similar at my local flea market from a techy guy (you know the one — with the pencil pack protector and taped glasses). Anyway, been using for 4 years and continue to watch any type of programming from anywhere in the world for free, including most NEW movie releases (some are poor recordings, but within a couple weeks, I am watching it from the comfort of my home), including day after Pay Per View Live Events, NetFlix Series, about anything you can google, you can watch, without the subscription, or service plan.  However, it looks like someone has figured out a way to monetize it for $9.00 a month, I doubt they allow for the New Movie Releases to be accessed.   

    Got a smart TV? You ain't seen nothin’ yet! Kodi puts your smart TV to shame.

  86. Poker/Options/Futures - hope to meet the PSW gang at a conference in a year.  As for poker, always looking for a good game and hear Phil is better than most.  Maybe, I'll figure out a couple tells and clean him out.  ????

    Just landed in Asia for a year to study Options/Futures, with PSW leading the charge.  Ah, good to be somewhere other than America.  

  87. Hi every one. I must say the market seems not stop climbing. I think, looking at the different comments, we really do not know what reality is any more.

    Tree planting plays are not too many to look at, as most candidates are too high for my liking to start a new position. Mostly I am holding my old positions, with rolling and adjustments.

    However I have some more armchair plays to renew or are falling angles and good for a new set up.

    Here are some of them.

    MBT buy stock @ 10.30 and sell the Mar 18 strangle 10/10 for 1.85 combined monthly return 3.28%

    NYCB buy stock @ 12.90 and sell the April 18 13/13 strangle at 1.50 combined monthly return

     2.19 %

    QCOM buy stock @ 52.00 and sell the Jun 18 Strangle 55/52.5 at 7.75 combined monthly return 2.12 %

    SBRA buy stock @ 21.80 and sell the Apr. 18 strangle 22.5/20 at 2.15 combined monthly return 2.01 %

  88. Good morning!  

    Petty/Ilene – Well don't forget Breakdown – that's what made the man famous!  

    Remember the days when you could go to a concert and hear a version of the song that was better than the album?  Great singers playing with talented musicians – it's not complicated.  My kids would say "what's an album" and "what's a real drummer" and "what's an instrumental".  

    That was a strange thing at Katy Perry, she had a real band but did not acknowledge them at all – they were just props and every song was essentially a note for note replication of the official releases – no room for musical creativity and nothing special about them other than the live staging – which I guess you have to do for kids who are used to flashy videos accompanying everything.  

    TEVA/Jabob – Down 15%!  

    Mylan surges as its generic of Teva's Copaxone gets FDA nod

    We knew that was going to happen, silly reaction.  

    RUT/Latch – At this point, I don't think I can quit because I'd be so pissed not to be in it when it does drop.  Made a little improvement adding 4 short last night but only a 3-point dip so far and I'll stop out of the extra 4 very quickly if the indexes perk up.  

    MBox/Joseph – My daughter wanted one of those and I just don't like the idea of owning pirate devices.  For myself, if my Tivo can't record it, I'm never going to watch it.  I'm old and I'm a TV guy, I don't watch shows on my IPad or phone (unless I'm on the plane but not even in a hotel) and, if there's nothing on TV, I always have a pile of books and magazines to read (though I usually do both at once – if I wasn't doing something else while watching TV, I would never watch it).  

    Tells/Joseph – I don't have any tells because I generally play a statistical game and apply money management techniques to optimize betting.  It makes me very good in early rounds but I still have trouble closing the deal at final tables.  My brother is the opposite, he's a killer at the final table but has trouble getting there.  When I was down in Florida recently, we both played in a tournament and we ended up at the same table and I had a huge pile of chips and he was middling so I went all in on a bad hand and gave him my pile.  Good strategy – he won the tournament while I made my money back at the cash game.

    Good trade ideas, Yodi, thanks!  

    Time to go to work! 

  89. Ilene – Please – Won't Back Down

    <iframe width="560" height="315" src=";showinfo=0&quot; frameborder="0" allowfullscreen></iframe>

    RIP Tom

  90. I'll add Breakdown, I think I have Won't Back Down, but I'll check it out. Thanks!