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Just Another Manic Monday – Abenomic Edition

Go Japan!  

As you can see from the chart, the Nikkei is up 600 points (2.8%) since Thursday's close as Prime Minister Shinzo Abe's party retained its 2/3 majority in the Diet (Parliament) – though it doesn't REALLY matter as Japan, like the US, is actually controlled by large Corporations.  “Corporate Japan is determined to play a role in rebuilding our economy and is cooperating with the Abe administration’s strategy,” Sadayuki Sakakibara, chairman of Japan’s main business lobby Keidanren, said in a statement.. 

Either way, the end result is a continuation of Japan's ultra-easy money policies that have led the nation to over 1.2 QUADRILLION Yen of Debt, which is $12.5Tn(ish) and 250% of their annual GDP.  

Related imageThe reason no one is worried about the US being $20Tn in debt is because it's "only" 110% of our GDP and that means we can borrow another $20Tn and STILL look better than Japan but Japan is a ticking time bomb, where 24.3% of Government revenues went to debt service alone last year – and that's at these ultra-low interest rates.  Japan, by the way, like the US, gets 41% of their tax revenues from the Social Security contributions of an aging population and only gives back 17.9% but the people don't seem to mind – they just voted for much more of the same.  

Japan is able, so far, to sustain their massive debts because their current borrowing rate is essentially negative.  The Japanese people and even the Corporations consider it their duty to support the Government by buying bonds, and they do so at any price – even when the rates are costing them money to save.  Things will be fine for Japan as long as the rates stay below 0.5%, where they have been for the last 5 years but, over that, and the share of debt service goes up 12.5% with each half point of intererst – Japan is one credit downgrade away from a real catastrophe.

In theory, the negative rates are supposed to spur consumer borrowing and spending but, like in the US, low wages for the Bottom 90% have kept spending and prices stagnant and, like in the US, the Top 10% just can't quite seem to figure out what is wrong with those lazy poor people – why won't they go shopping?  The buying power of the Yen has dropped 12% in the last 12 months which, coincidentally, is about the same as the decline of the Dollar's buying power since Trump was elected.  In both cases, that's a 12% confiscation of your life's savings by the Government but, because it's abstract, no one seems to complain.

Fortunately for us, there are no strong currencies (other than BitCoin) as we're pretty much in a Global race to the bottom as all the Central Banks are running the printing presses 24/7 to cover up what is still a struggling global economy.  As I noted last week, a lot of this FREE MONEY finds its way into the hands of our Corporate Masters who, lacking any better ideas to improve their bottom line, use the money to buy back their own stock and thus make is LOOK like earnings are improving when, actually, it's just the number of shares they dividen the earnings by that's making things look much better than they really are.  

IBM (IBM), for example, just jumped over 10% on earnings that put them on pace to earn $13Bn this year and the stock is up 20% from it's 2006/7 highs of $130/share but, in reality, revenues are way down, earnings are way down and even earnings divided by the lower share base are down – yet the PRICE just keeps going higher.  

Now, we're long on IBM, so I'm not here to dis them (we think they are a long-term grower and, artificial or not, NOW they have less shares to divide the earnings by) but this is what's happening across the board in the markets as investors are overpaying for stocks like they have never overpaid before (with the exception of the Dot Com bubble, of course).  This time is different – now they are overpaying for every sector – not just tech!  

We did our Member Portfolio Reviews last week and we TRIED to find things to cash out of but, the way this market is holding up, we just have to hold our noses, cross our fingers and hope our hedges hold up when we finally do get a correction.  Our Long-Term Portfolio is 70% CASH!!! (have I mentioned how much I like CASH!!! lately?) and is well on-track for our 40% annual goal.  We're using very little margin and looking for bargains into earnings and most of our adjustments have been bullish ones.

Unfortunately, at this point, people are giving up and looking for RELATIVE bargains, which is something we discourage.  There are still plenty of companies out there that generage a good cash-flow in relation to the amount of money you spend on a share and those are the companies we like to keep in our LTP whereas, in our Options Opportunities Portfolio, we tend to be a bit more – opportunistic…

Last weeks Sketchers (SKX) trade was a good example of an opportunistic trade, as we grabbed them ahead of earnings.  SKX is a stock we often buy into and $24 was too cheap to ignore on Thursday.  As noted in our PSW Report, the trade idea for SKX was:

  • Sell 10 SKX 2020 $20 puts for $3.20 ($3,200) 
  • Buy 10 SKX 2020 $25 calls for $6.25 ($6,250) 
  • Sell 10 SKX 2020 $35 calls for $3.25 ($3,250)

It's a long-term trade where we planned for SKX to be over $35 (up 50%) in just over 2 years but we got an early gift as the stock gained 41% on Friday as it was even more undervalued than we thought it was.  The spread was a net credit of $200 and the short puts obligated us to buy 1,000 shares of SKX for $20, but that's not going to happen and already the short puts have fallen $1.80 ($1,800) but, for that price – I'd sell more rather than buy them back!  The $25/35 spread is still just $5 so net $3.20 ($3,200) on the spread is up $3,400 (1,700%) in a day and that's only "on track" to our full $5,200 expected pay-off.  

That means that, even if you aren't a Member and didn't get this trade idea hot off the wires on Thrusday, you can STILL get in today for $3,200 and it's hard to imagine not making $1,800 (56%).  28% a year is still better than almost any hedge fund so, if you are too cheap to subscribe to our service, you can still make a pretty good return playing with our scraps – enjoy!  

This week, we hear from 150 of the S&P 500 companies and THEN we will have a better idea of whether or not we should be putting more money to work – or taking more off the table.  As I mentioned last week, I transferred ALL of my kids' 529 College Plans to CASH!!! as it's hard to hedge them and I didn't see it being worth the risk.  Our own portfolios are, of course, well-hedged and we'll want to see those guidance projections turning around before we're motivated to risk our children's futures over the Holidays.  

Meanwhile, there's lots of fun ways to make money while we wait.  Silver (/SI) is back to $16.90 and that's down 0.40 from Thursday's close but back to where we went long on Wednesday so why wouldn't we play it again (with tight stops below) as it was a $1,500/contract winner last time?  $16.75 should be the low-low, so that's where I'd look to try again if $16.90 fails and we'll follow up on this one into Wednesday's Live Trading Webinar.  

We also discussed Coffee (/KCH8) last week at $1.28 and it's still only $1.29 so don't say I didn't tell you so over and over and over again on that one!  Natural Gas (/NGV8) has already popped to $3.027 so you're welcome for that $370 per contract winner (since Thursday!) but it's a long-term hold for us – or at least until we're up at least $1,000 per contract so again, enjoy our Member's leftorvers!  

Economically, it's a pretty slow week, with PMI Tuesday, Durable Goods Wednesday, Consumer Comfort Thursday and GDP Friday and not much Fed speak either – Yawn!  

Things will heat up again as we roll into November but, unless earnings take a nose-dive, I think Buffett is correct and the markets will hold up into next year – as Team Trump is promising us rich folks MUCH lower taxes on our gains next year – so why should we take profits this year?  Unless we think the market is going to correct more than 10% – there's no logic in taking our gains off the table ahead of "the biggest tax cut in history."  Oh, and in case you're in the middle class – enjoy the $800 per family they are promising you.   Yes, very fair and balanced indeed! 

The key to our tax savings is the 25% "pass-through" rate vs the 39.6% individual rate we pay now (on incomes over $418,400).  You see, it SOUNDS like it's helping small business people but 1.7% of those businesses pay 40% of all the taxes and that is where the bulk of the Trump Tax cuts will be ailmed – so "ordinary" people like you and me and Donald Trump, who have accountants that put most of our money throught Trusts, Partnerships and S-Corps, will now pay the same tax rate as people who make $37,950 a year – without ANY deductions at all (no more silly charity donations needed) - God Bless America!!!  

Isn't it GREAT… again?  And what will happen to the $350Bn we used to contribute to the Government to fund those programs the poor people seem to be so fond of?  We don't care!  That will be the next administrations' problem (and if they are Democrats – it will be all their fault anyway) but we're warning them now:  If they try to raise taxes on us – we're just going to leave, because that's how Government works; the rich threaten the Government and the Government rolls over and does whatever we want – just as the founders intended!  

Image result for founding fathers big business


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  1. Wow, bull market forever – Fisher talking his own book I guess:

    In all 143 years, any level of P/E, however high or low, successfully predicted simply nothing one year into the future. A complex but routine statistical tool called “R-squared” tests if one recurring phenomena possibly causes another. For P/Es, R-squared shows zero possibility. Zero possibility over one, three and five years. The valuation myth continues because it feels right, not because it is right. Feelings are always dangerous in markets. 

    Buy, buy, buy….

  2. Good Morning.

  3. TSLA announced a factory in China so stock is up even though it went up when they announced they were about to have a factory in China months ago.  Only what they didn't say last time is that they will have a 25% tariff and have to buy their batteries from China so it amazes me that people are still taking the stock higher.  Also timed coincidentally for their earnings on Wednesday.  They also had to increase their credit line from 600mm to 1.1b which is alarming for their lease program.  That's what happens when you give yourself a ridiculous residual value and supposedly they are about to raise 1.1b in additional capital soon.  Not touching stock till earnings but would be surprised if they stay up today.

  4. Phil/FCEL,

    Does the FCEL chart (in your multiple charts) signify buy? I did not get the significance of that chart among others…


  5. It should be called the 'Laughter Curve'…..

  6. What's so funny about these tax cuts is that they can't show any proof that they ever benefited the middle-class starting with the Reagan tax cuts. Wages have been stagnant since then but top 1% income have been growing exponentially. And yet, they can still convince people year after year! 

  7. Big Chart – It's starting to look like something the Coyote draws up for a plan.  

    Related image

    Just remember not to feel around for a bottom – it might not be there!  

    Image result for wile e coyote cliff animated gif

    Although, more like this at the moment as we keep buying – just because things never go down:

    Image result for wile e coyote cliff animated gif

    Remember – it's all relative!  

    Fisher/StJ – Hey, these rallies can't fuel themselves.  

    Trump says no change to 401K.

    TSLA/Rustle – Well any excuse is a good one, right?  I'm still rooting for $380 so I can short them again.

    Laffer/1020 – What a joke that this idiotic device, invented solely to sell Reaganomics, is now treated like some sort of economic fundamental.  It's been disproven EVERY SINGLE TIME yet Laffer (who was about 36 working for Reagan at the time) made a career out of it…  

    FCEL/Pat – Well the chart looks interesting but not sure how that will pan out for them.  They lost $50M on $100M in revenue last year and $45M on $45M in revenue this year and they only have $40M left in the bank so they either need to not sell $40M more stuff or figure out how to make a profit in the next 6 months or it will be time to dilute you.  I think I'd wait until after they dilute to jump in (and still speculative, not a value play by any stretch).  

    Wheee on /TF!  

    /NQ falling too so /YM at 23,300 is the laggard to play (tight stops above).

  8. Pat/FCEL,

    As Phil said, nice chart and it is being bought; I sold the 2018 $2 puts last week.

  9. Retail names catching some bids today.

  10. FU TEVA!!!!

  11. Poor Kid….. 

  12. Millions return to poverty in Brazil, eroding ‘boom’ decade

  13. Tesla Plant in China May Be a First

  14. ~~ AAPL – From briefing trader :

    Apple: Early US survey results encouraging regarding iPhone demand and mix – UBS 

    UBS's early findings include (1) next 90-day iPhone buying intentions are at the highest level since the iPhone 6; (2) 43% of iPhone buyers plan to purchase the X; (3) the iPhone retention rate is at an all-time high; (4) the iPhone 8 was a lower percentage of units than previous new Sep offerings; and (5) the iPhone 8 Plus is outselling the 8, reflecting continued interest in larger screens. The weakness in the iPhone 8 probably is more due to strong demand for the X than a disappointing cycle though further data is needed, especially regarding a potential rebound in China; Buy.

  15. Donald Trump’s Permanent $1 Trillion Deficit

  16. How To Transfer Appreciating Assets to Heirs

  17. Was just reading how the GAAP Q3 earnings are coming in about 2% higher than Q3 2014 while the market is up 30%.  Got to love free money.

  18. uPhil/TSLA/AMZN

    Good morning!

    Hope you had a good weekend…we are in a relative heat wave in Southern California with the ‘Santa ana’ Winds from the desert.

    a TSLA: if you are reading a double top, then don’t you expect it to go down from here.? That means short it right here, no? Or is there such a thing as a triple top?

    AMZN: it’s down $30+ fromits highs above $1000…that’s only 3% but if we expect additional declines (and their earnings stink, and analysts have revised this Q LOWER), should we not short them here?

  19. TEVA/Jabob – Motley Fool negative on them today:

    Can Teva Pharmaceutical's Dividend Even Survive?

    IPhone/Albo – Numbers are all over the place, depending on who you read.  

    Free money/Rustle – Do you have a link with good numbers?  I'm finding good studies hard to come by. 

    TSLA/Maya – Yes, I expect it to go down but I'd feel a lot better about going in short (on a very dangerous stock to short) if it would re-test that high.   We did short AMZN in the STP, another dangerous stock.  We had too many major losses from trades like that in the portfolios so I'm not too keen on playing them unless we're really stretched on irrational enthusiasm so, I'm being PATIENT.  

  20. Phil, what's your thoughts on \RB?  Wasn't expecting that relentless rise last week and was thinking it would start coming down today, but not much movement so far. 

  21. SVU/Palotay – I agree.  That's why I wanted to get more aggressive last week, despite the scary chart.

    • SVU – I was worried we wouldn't get a chance to buy more of these but they keep getting cheaper!  Let's roll our 7 2019 $13 calls at $4.70 ($3,290) to 15 of the $10 calls at $6.40 ($9,600) and we'll buy back the short $25 calls ($1.20) just to clear the space and we will roll our 7 short $27 puts at $12.70 ($8,890) to 15 short $18 puts at $5.50 ($8,250) so we're effectively doubling down and uncovering for net $6,110 – effectively buying 8 2019 $10 calls for $7.63 – not too bad with the added bonus of improving our other 7 calls by $3 ($2,100 value) and uncovering them – so now we're set up for new call sales. 

    /RB/Ult – Give it more than 3 hours!  

    Oil should come back to $50 too.

    Honey badger pausing at $3.

  22. HAS down over 9% trust toys are not in demand today. Looked for a play the other day but held back to see what earnings bring.

  23. Is it just me or is the site going crazy?

  24. Jel/Site;  Has been fine for me all morning.  Must be something at your end.Sorry

  25. HAS/Yodi – Well with Toys R Us going BK, they have to be having all sorts of distribution issues.  Also demographics not being kind to the toy biz.  

    Site/Jet – Just you I hope!  

  26. Phil HAS funny enough I played them since Dec 14 and in my conservative way, squeezed 22K out of them.

    But as you mentioned this morning stocks are reaching their peak and HAS at no different.

  27. Phil – $500K for 2 framed degrees?? – Consider it the cost of higher level socialization. At that price, it better be a place where they can build a really good network for the future.  BTW, you can get an IVY league education at a fraction of the cost. Just thinking outside of the box…

    By going ONLINE and eliminating the overhead and multiple headaches, rather than spending $120K in current dollars per year for two, you could bank around 110K per year going straight into the OOP?? 

    Let's say the OOP did 20%, over the next five years, because four is doubtful in most cases, these things do happen.  Rather than spending 500K, you would have 1.1M in hand for the girls.  If the OOP did 40%, you would have 2.25M at the moment of graduation.  But it gets better…  

    Now if you let that lay in trust until they turn 35, assuming 10% return over the following 12 years you have $7.4M to HAND THEM for not having that "experience" with a degree which will qualify them to flip burgers in this economy, and worse in what day dreams or nightmares may come.  With love and Out.

    All costs below are per student 120 hr 4 yr Bachelor, Online NON-resident tuition and fees.

    UMass Amherst – a Minutewoman costs $54K

    Utah State – an Aggie costs $39K

    University of Wisconsin – a Badgerette costs $35K

    University of Wyoming – to be a Cowgirl costs $16K

    University of Florida – to be a Gatorette $66K, however… I mention FLA for a Thanksgiving reason.

    That Gator cost can be cut to $16K with a simple phone call. Hi Mom, can you receive the girls mail? And we need to draw up a "rental" agreement says the kids are renting from you. Then ship them off to a FLA DMV to get DL's. Done.

    The Gainesville online program started in 2013, already Top 5 online MBA program, #4 in Forbes “Best Value Colleges” (2017) and in the top ten of Kiplinger’s "Best Values in Public Colleges" (2017),  #11 online Bachelor Program (US News & World Report, 2016)

    And those few programs I mentioned are just the tip of the iceberg… click here and here, it all depends on what program and the Bach degree they are looking for.  Hell, tuition at Wyoming for a resident, just buy a cheap ass condo in Laramie, is a whopping $2500 per year.  Healthy living out there, and you get a spy at Jackson Hole!!!

    Ask Maddie if she would go online to receive an additional 3.75M when she's 35 and see what she says. Now there's your moment of Zen and Out again.

  28. Phil,  How do you think GM's earnings will be?

  29. Phil,

    Please look at BSMX, big Mexican bank reports on Thursday.  Paying almost 8% with 10% withholding.  Being bought on the way down.  Retracing to around 9 just below 200 mda, a 50% correction from 2016- 2017 double bottom at 7. Liquid with options.

  30. Speaking of Messico, here's the latest on the Hacienda Hedge… and Out.

  31. Hi all, I've  been getting very interested in the whole blockchain/crypto thing recently and have a bit of play money in BTC, ETH, DASH, NEO and GRE. Here is a Canadian company for a stock investment (play money only, I know nothing more about these guys but their team seems credible), BLKCF:

  32. Phil,

    Are you available to chat briefly about the PSII  Hedge Fund after today's close? 


  33. Phil, when a short put position goes positive early in a trade, is there a recommended play to increase the position? Add a BCS, add a higher-strike put or just hang on to the original position and hope it goes down again?  I have finally come to the place of being disappointed when a new position goes up too fast!

  34. HAS/Yodi – Well, it is a nice pullback but over $100 (20x earnings) was a bit much in the first place.   This is just, finally, getting realistic at $90 but still not a bargain. 

    Speaking of bargains – the fresh horse paid off.  25 Dow points so far.

    So at 10:10, I got paid on /TF and, having seen it bounce back 100 times, I took that and ran and flipped to the /YM call because they were lagging to the downside.  That means they probably have further to fall if the others keep going down (so I miss nothing taking profits on /TF) and, hopefully, less likely to move higher – especially as the 30 components are unlikely to move much on intra-day news so we can assume the early bump is all they get out of pre-market releases.  

    Now, at 25 points down, we get out if they bounce over 5 points (weak).  Also out if /ES goes back over 5,670 – that would be a little bullish too.   Then we look for the next fresh h-h-h-h-horse.

    2 degrees of separation (from my money)/Naybob – Logical and, when they were young, I planned on sitting them down and putting a briefcase with $250,000 on the table and saying "you can have this cash to start a business with or you can go to college".  That was before I noted the positive affects of social influences on my kids and I have bailed on that plan and have not even given them the choice not to go or to go on-line.  

    College was a very important part of who I grew up to be and very little of that had to do with the education.  Is it worth spending a quarter of a million Dollars to send them to 4-year summer camp?  As a guy who books suites on cruise ships – who am I to judge?  Thank God I can afford it and it's not really an "or" choice for the kids.  If they said they would rather travel the World – I wouldn't stand in their way – but I think the very act of encouraging it changes the nature of the experiment so, like Schrodinger – I need to keep a lid on the briefcase and await their own life decision.  

    Image result for schrodinger's kid

    Image result for schrodinger's kid

    Image result for schrodinger's kid

    Image result for schrodinger's child

    GM/Baron – I certainly hope they did well.  Hurricanes boosted sales tremendously after the fact and guidance should be good as well but I'd think it's baked into the price at $45+.  We actually went bear in the LTP into earnings but that's because we had a huge call (2019 $28s) to take off the table and we're "risking" a move higher but hoping they calm down a bit so we can buy back the short calls (now $45) for less than $5.

    • GM – So far over target we have to do the math.  $35,000 is the max payoff and currently we're at $28,555 so 25% more to gain is kind of dull and I think GM is toppy so let's cash in our 2019 $28 calls for $18 ($90,000), which is $11 more than the spread pays.  So, with the extra $11 ($55,000), we can roll the short $35 calls ($11.20 = $56,000) up to the $45 calls at $5.05 ($25,250), where they are 100% premium.  We can then buy back the 20 short $32 puts for $1 ($2,000) and sell 20 of the $40 puts for $2.90 ($5,800) so even if the stock doesn't fall, we still have an extra $28,050 against the short $45 calls AND the $35,000 we expected to win on the spread.  If these short calls end up expiring worthless, we will have made a bonus $28,050 (80%) and, if they don't, we will cover with a 2020 spread and start the cycle all over again.  

    BSMX/Baron – If I can't pronounce it, I don't play it!  I don't follow them but they seem solid but someone doesn't think so as they are down about 50% since 2013.  Revenues are up 50%, earnings are flat though on an adjusted per share basis (buybacks).  I worry about the NAFTA risk on Mexico's overall economy but I would watch them and hope for a dip back to $7.50 and then go bargain-shopping.   Unfortunately, the options have wide, $2.50 spreads and only go to April – so hard to construct a good trade on them.

    $46/Naybob – Wise move.  

    BLKCF/Jet – It's the wild west but trending and all these startups are pushing money into BitCoin and others so a rising tide does a lot of lifting – for now.  

    Fund/8800 – Sure but right after as I have a CC at 6.

    Puts/Jet – Not really because that's all chasing.  My attitude with LTP-type short puts is usually I hear negative news on a stock I think is still pretty good but I DON'T like it enough to make a big commitment so I pick a price where I WOULD buy a bull call spread and then sell puts against that.  More than anything else, the short puts serve as a reminder to check in on their progress.  If the thing that drove them down turns out to be short-lived – I just keep the money and move on.  Flat I may consider a further play and down I strongly consider (if the Fundies are still there) but up I never chase.  A small win is a win and, when you have lots of them, they add up just fine.  

  35. lookie…TSLA can go down too!

  36. Halliburton warns of slower growth as U.S. rig count drops

  37. Fiscal conservatism, RIP

  38. Saudi Aramco’s IPO is a mess

  39. Phil, thanks for the reminder on GM.

    I had a $25/$35 2019 BCS that was 90% in the money… I have taken my profits and will wait for a pullback. No point in waiting for 14 months for the remaining 10% here.   

  40. Anything major driving QCOM up today? I see only that MB partnership but that can't be it!

  41. SKX/phil,

    i had 2019 $23/$27 and $25/$35 bull call spreads.  I'd like to take some of the profits off the table--what's the best way?  the $23 and $25 are trading for $15 and $13.70, respectively.  TIA

  42. GM/ BSMX

    Thanks Phil. Made adjustment on GM.

  43. Hi Phil.  25 aapl 100 calls became long term last week with a $31 gain.  Thinking of rolling them to 25 150/180 BCS.  2019 and 2020 spreads about the same.  Which one?  Or is there something else you recommend?  Thanx.

  44. Taihuichi – Nice ! ! !

  45. Phil – Still want to be short on RB for the current month? with reports coming tomorrow and Wednesday?

  46. Phil/DIN

    DIN looks toppy and is at 45, where we sold calls.  If I wante4d to get shorter, would I roll the calls up and add, or just sell some portion of my  longs?  Thanks.

  47. Phil/AMZN short

    Patience is good.

    I will wait to short or start a small position to keep an eye on it. If it goes in my dir3ction, will keep adding more shorts. Otherwise, will just stop out if it goes the other way.

    I think TSLA is more dangerous to short than AMZN as proven by its trading history and total irrationality.

  48. Phil – "College was a very important part of who I grew up to be and very little of that had to do with the education…. the positive affects of social influences on my kids… If they said they would rather travel the World – I wouldn't stand in their way – but I think the very act of encouraging it changes the nature of the experiment so, like Schrodinger – I need to keep a lid on the briefCASE and await their own life decision."

    Fuck Schrodinger, his cat shit can't even explain how gravity works. It's like economics, they are clueless.  My two cents, yes my friend, a compelling CASE indeed. I worked full time while taking 12 units at night, summer semesters included.

    Got er done, a blue collar commuter school in effect. Would I trade it? Could have washed out throwin that screwball in the minors, or netting it in the MLS.  Did not have the luxury of choice, so I'll never know. It is what it is and its about choices, sometimes having them and sometimes not so much. You do what you gotta do.

    Education is a life long experience and college with always be there, regardless of whatever is or is not, in the CASE.  Think of the positive effects of travelling the world vs seat time, that's an education you can't buy at any price, in any school. 

    It is different now, these Ute's have computers and the communications network. We had analog phones, hand written letters, manual typewriters and no cell. Simpler times, read a book or actually get out and engage, talk to people, live a little and learn a lot.

    Word to the wise, don't wait, travel the world, while there still is one to see.  Do it while you are still able and can enjoy it, something to be said for Ute.  Choices are nice to have, choose wisely, and above all remember, oggi chi siamo, domani non sappiamo.  Nothing is guaranteed, shit happens, its called life.

    And something on SVU. Translate the Roman above as written, time for my IV my friend and Out.

  49. GM/Learner – Exactly, cash on the side is better than holding toppy stocks.

    QCOM/StJ – Probably some development in their lawsuit(s).  They also are trying to buy NXPI so news on that deal can move them.  

    SKX/Lunar – Well the $23/27 is over 80% of value so really you are just cashing them early, silly to talk about "rolling" them.  Better to concentrate on using that money to boost the $25/35 as the 2019 $25s are $11.40 and the $35s are all premium at $5.85.   I would use the $11.40 to buy 2x (the number of $25/35) 2020 $32 ($9.50)/$45 ($5) bull call spreads at $4.50 so that's $9 of the $11.40 and $2.40 per long goes in your pocket (probably what you paid for the spread) and I'd roll the short 2019 $35 calls ($5.85) to 2x the short April $36 calls @ $3, so better than even and you have 2x short April $36 calls covered by 2x the 2020 $32/45 bull call spreads and I'd keep a stop on 1/4 of the Aprils at $4 and 1/4 at $5 and then you can do another 2x roll on what's left if SKX is over $40 but, if SKX is over $40, your 2x free longs would be $8 in the money for a bonus $16.  If they have a sharp sell-off, you keep the short money and can sell puts ($25 puts are $3) for more cash.

    You're welcome Baron.

    AAPL/Taihu – I'd go for 2020.  It's nice, long-term money and if AAPL dips, you can sell puts and widen the spread and, of course, sell 1/3 short calls against if the stock looks toppy.  Think of it as buying a vehicle you can use to make money, more so than just a target price.  The 2020 $150/180 spread is about $11.50 and you can sell 1/3 Jan $165s for $3.70 so that's $1.20 (10%) per long back on one quarterly sale out of 8 so you're on track to get 80% of your money back selling covers while you wait to collect your $30.  

    /RB/Bulls – Lots of Saudi Aaramco crap holding up the market (as usual) but what does that have to do with the price of gasoline in America?  Post-hurricane "normalcy" should make this report a good one for /RB bears.

    DIN/Baron – This looks "toppy"?  

    You need to invest in daily charts, my friend!  I'd be very careful shorting here.  

    AMZN/Maya – They are both crazy stocks but that's why, sometimes, I can't resist selling silly premiums.  Even now, with earnings Thurs, AMZN Jan $1,050 calls can be sold for $17.30 so there would need to be a $100 gain (10%) for those to hurt you and, even then, the April $1,160 calls are $15 (no $150s) and the 2019 $1,400 calls are $17 so those are your rolls.  AMZN is at $463Bn now at $964 so betting they won't add $230Bn in market cap between now and next Jan would seem like a rational way to make $17.30 so, if you have the ability to ride out a very painful move against you, where you could show a $10,000 per contract loss if the stock pops 20%- and then wait comfortably for many months for it to come back down – THEN it's a good way to make money…  

    That's why, in the STP, even though it's part of a $2M account, we only sold 3 of the Jan $1,015 calls for $80 ($24,000) on 7/24, when AMZN was testing $500Bn at about $1,040.  It spiked up to $1,080 on earnings and we showed a massive loss for a while – but all good now though those short puts are STILL $27 each.  

    Wow, bell already!?!?

  50. Phil/ DIN

    Short term toppy but what I really was interested in was it being over the short call price of $45 and how that impacts P&L, particularly if going higher in the longer term (and it did hold up well above the the $45 breakout on Friday).  Why not widen the spread even if not adding more short calls?

  51. Thanks Phil.

  52. Travel/Naybob – We all do plenty of that but, sadly, my girls don't have my lust for adventure – I worked 2 jobs during high school so I could take my summers overseas but, of course, I'm kind of glad they are not hitchhiking around Europe and sleeping in seedy hostels – even though it was the best time of my life!  Again, I try not to influence their life decisions but the World seems a bit more dangerous than it was 40 years ago.  It also gives me great angst to think I may have a double standard because they are girls.  It's so easy to limit your children's experiences in the name of "protecting" them.    

    When I was 13 and staying in England with my Grandparents, they had a shop downtown and my Grandpa Max and I used to walk there in the mornings (a few miles) and I'd hang out and do the books for him and then he'd give me a Fiver (5 pounds) and tell me to meet him back at the flat at 6.  THOSE were great days too, walking around London all day with 5 Pounds to spend by myself at 13.  You used to be able to jump on and off the double-decker busses while they were moving (well stopping) – they actually had an open platform in the back for it – what a way to see a city!  These days he'd be arrested for neglect!  

    Nice pop on /SI – better than a Fiver ($825)!   Made a quick $2K on /YM shorts too.  Good way to start the week.  /KCH8 back at $128 but not trading now.  

    DIN/VBaron – So it bothers you that, on this net $1,200 credit spread, that we will make $11,200???

    Short Call 2017 15-DEC 50.00 CALL [DIN @ $45.75 $-0.08] -10 7/21/2017 (53) $-1,200 $1.20 $-0.58 n/a     $0.63 $-0.06 $575 47.9% $-625
    Short Put 2018 16-MAR 40.00 PUT [DIN @ $45.75 $-0.08] -10 8/21/2017 (144) $-5,000 $5.00 $-3.28     $1.73 $0.08 $3,275 65.5% $-1,725
    Long Call 2018 16-MAR 35.00 CALL [DIN @ $45.75 $-0.08] 10 8/18/2017 (144) $7,090 $7.09 $3.96     $11.05 - $3,960 55.9% $11,050
    Short Call 2018 16-MAR 45.00 CALL [DIN @ $45.75 $-0.08] -10 8/18/2017 (144) $-1,970 $1.97 $1.43     $3.40 $-0.50 $-1,430 -72.6% $-3,400

    Our March short calls are $45 but our short-short Dec $50s are still out of the money comfortably and I do hope they stay that way.  Meanwhile, the spread is already net $5,300 out of $10K (not counting the credit in pocket) so it's going to double from here – why mess around?  If you did not sell the short calls, you could half-sell the Dec $45s ($2.40) to get more bearish or, even if you have the short $50s, you can cash those for 0.60 and do the 1/2 sale and collect back $1.20 per long so that's a way to get more bearish.

    You're welcome Taihu.

  53. Technical analysis – Is it just me or does it seem that more than ever the industry focus is on the technical charts to justify everything.  ."…Wow, the stock just broke through resistance at all time highs so it's a buy and should move up another x%!"  Feels like we are entering dangerous territory where fundamentals don't matter in the big picture.  Nothing new I know, but it seems worse than ever.  Refreshing to see some fundamental focus here like on SVU (as well as technicals, which I use too) and reference to that fundamentals based article on Seeking Alpha.  Looks like a good entry point here for 1 – 2 years out.  

  54. thanks   Phil.  always amazed at your turn around time on questions, even at end of day

  55. Phil / College – Foreign schools can provide a lot of benefit at a reasonable cost as an alternative as well.  An example is McGill in Montreal.  Great school in downtown Montreal with medical and dental coverage for about $15K US per year for an arts program and a different perspective on the world.  If  a student manages somehow to get residency you are looking at about $2K per year for tuition and fees.   Probably lots of good alternatives in Europe as well. 

  56. Phil/double decker buses

    You missed all the fun in India!

    We went to school at age11 in public buses in India. Sometimes, the buses were full and the driver did not stop at the bus stop if no one wanted to get off.

    Other times, one or two people got off, and the bus moved. If I got toes of one foot and a hand on the vertical handle bars, I knew if I hung on for dear life, I would eventually get ‘on the bus’. Of course there was a lot of jostling going on but the advantage of being 11 was that I could squeeze my way into the bus eventually.

    It was fun…once in a while, I was late for class but it kinda worked out.

    No way you could do it in the US…and I don’t know how they do it in India anymore.

    But I did spend some time in London as a teenager  double deckers were indeed a fun way to see the city. Nowadays, I just walk…..

  57. GAO: Climate change already costing US billions in losses

  58. Phil – "You used to be able to jump on and off the double-decker busses while they were moving (well stopping) – they actually had an open platform in the back for it – what a way to see a city! "

    Makes me wax nostalgic of Cable Cars in The City.  Hop on and off, turntables, those were the days.

  59. Good morning! 

    Oil was going down but popped 0.50 at about 5:30 on more Saudi jawboning so I'll be liking /CL short at $52.50 and /RB short, now $1.69 – especially if it hits $1.70.  

    "Saudi Determined to End Oil Glut, Sees Smooth Exit for OPEC Pact" by REUTERS via NYT


    RIYADH — The world's top oil exporter Saudi Arabia is determined to reduce inventories further through an OPEC-led deal to cut crude output and raised the prospect of prolonged restraint once the pact ends to prevent a build up in excess supplies.

    Saudi Energy Minister Khalid al-Falih, speaking during an investment conference in Riyadh, said on Tuesday the focus remained on reducing the level of oil stocks in OECD industrialised countries to their five-year average.

    The Organization of the Petroleum Exporting Countries, plus Russia and nine other producers, have cut oil output by about 1.8 million barrels per day (bpd) since January. The pact runs to March 2018, but they are considering extending it.

    "We are very flexible, we are keeping our options open. We are determined to do whatever it takes to bring global inventories down to the normal level which we say is the five-year average," Falih told Reuters.

    "We have reduced the inventories by over 180 million barrels and we still have about 160 million barrels according to numbers I have seen last," he told Reuters.

    "The intent is to keep our hands on the wheel between now and until we get to a balanced market and beyond, we are not going to do anything that is going to disrupt the path we are on," he added.

    The minister said there was consensus to continue the cuts until targets were reached to balance the market but said shocks to the market by reducing more than needed should be avoided.

    They say this over and over.  Have been for a year.  Oil peaked last year mid-Oct and then fell to $44 in mid-Nov but then raced up to $55 for New Years.

    Wow, if one more person from this Saudi Business Conference says "The Saudis are modernizing, they are even going to let women drive next June" – I'm going to throw up!  How about we bet now that the first accident involving a woman causes them to "review" their policy decision?

    TA/Stu – TA has been taking over for years.  Investors are less and less educated and those investors become analysts who also can't understand FA so everyone likes to point to the squiggly lines.  Another upside of being a TA analyst is it's never your fault because "the chart got it wrong" – that gives them longevity even the best FA's envy.  And, holy cow, what an easy job when your whole investing premise is identifying a chart pattern!  Most bots also are pattern traders, which is why the 5% Rule works so well – those things are taking over too.  

    Speaking of the 5% Rule, 2,450 x 1.05 = 2,572.5 so, if the S&P were obeying the 5% Rule, we'd expect to see a rejection there, followed by either a weak pullback, which would be 20% of the 122.5 run or 24.5 (weak) points, back to 2,548 but we round that to 2,550 and then 25 below would be the strong retrace at 2,525 so those would be our watch lines – if the 5% Rule was able to predict such things…

    On the Nasdaq, the Big Chart says 5,940 is the 10% line on the Nas and, if that's so, then the 12.5% line would be 6,088.50, which seems like a pretty random place to see resistance but that's what we'd look for under the 5% Rule:

    5,670 was the 5% line and 5,400 is the Must hold but we had a retrace and consolidation around 5,670 (and 5,805 is the 7.5% line) so we'd use 5,670 to 6,088.50 (418.50) and that gives us 83.7 retraces but we know the Nas loves the 25s so we'll call it 6,100 and retraces either 75 (6,025) or 100 (6,000) would be expected as weak and then 5,850 or 5,825.  When in doubt, go back and do the exact numbers and see what's closer so 6,088.50 – 83.7 is 6,004.8 (weak) and – 83.7 again is 5,921 so we're looking for 6,000 and 5,925 are weak and strong retraces.  See how simple!  cheeky

    Speaking of indexes – the Dow is now doing a moon shot on CAT earnings.  CAT is up $9 so about 80 Dow points.  MMM, GM and UTX all good too.  So no retraces today although the other 26 components must be dead as those 4 more than account for 130-point rally.  

    You're welcome Baron.

    McGill/Stu – That's one Maddie is still considering but, since I funded the 529s, it's a use it or lose it thing as they hit you with full taxes and a 10% penalty on only money not used for college.  So, even if she has $100K left after being frugal for 4 years, it's only $50K back or less and I certainly don't want her to make any decision she doesn't want to make just to save $50K over 4-6 years of school.  

    India/Maya – Yep, looks like fun!  

    Image result for india crowded bus

    By the way, it's technically not a double-decker bus just because people sit on the roof!  wink

    Cable cars/Naybob – Those things were great too.

  60. Phil, 529's can be transferable to grandchildren