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Final Friday – Futures Push Markets to Record-High Close for 2017

Image result for happy new year 2018What an appropriate way to end the year.

The Futures are being jammed higher to provide cover for sellers at the open and reel in more suckers to hold the bag.  The Dow Futures (/YM) are back to 24,850, where we shorted them yesterday and make a quick $250 per contract.  So that's every day this week we've been able to short the moringing run-up and, this morning, we might be able to catch 24,900 – or just under it and the S&P Futures (/ES) are an easy short at 2,698, with tight stops over 2,700 and that would be risking $100 per contract losses vs gaining $500 per contract is they calm back down to 2,688  – once again, we go for the positive risk/reward profile.

We also put our foot down and went long on the Dollar (/DX) at 92.00, that half-point drop this morning is the only thing boosting the indexes and commodities.  Gasoline (/RB) is also a fun short at $1.795 but that one is over the weekend into next week and might be painful if wrong ($420 per penny, per contract) but our logic is that the record cold snap doesn't encourage people to drive a lot and, after this weekend – what is the catalyst for gasoline over the usually slow winter?

Closing the markets at record highs gives the Banksters a great narrative to sell you overpriced equities next quarter.  After all – you don't want to miss out, do you?  Having the Dollar drop 3% since early November has made it more expensive to buy many things – including equities, which are exchanged for Dollars.    

Manipulating the Dollar lower is a great way to manipulate the market higher and the Banksters do this all the time when they want to paint a pretty picture for their year-end charts.  There's really nothing going on globally to justify a broad sell-off in the Dollar so we're going to start accumulating down here as a bounce back to 93.50 is good for $1,500 per contract and the margin requirement for Dollar Futures (/DX) is $1,980 per contract, so it's a pretty efficient way to make a bet.  

The Dollar ETF (UUP) is down to $24 and, if you are futures-challenged, you can pick up the Jan $24 calls for 0.10 and that gives you 21 days until expiration.  You'll be paying an 0.10 premium, of course but we're targeting a return above $24.20, at least, and that would be a double on the contracts. 

So let's say, for example, you were willing to risk $500, that would be 50 contracts at 0.10 but beware broker fees when dealing with such tiny contracts!  Anyway, we can compare the returns to the returns on /DX and see who comes out better on the deal.

Meanwhile, if the market is going to continue higher and/or the Dollar lower, we're going to be needing some inflation hedges for 2018.  I haven't done new inflation hedges yet but, in last year's "Secret Santa's Inflation Hedges for 2017" we gave our Members the gift that keeps on giving – profits!  Our 4 trade ideas were:

  • Sell 10 Barrick Gold (ABX) 2019 (Jan) $13 puts for $2.63 ($2,640) 
  • Buy 20 ABX Jan (2018) 12 calls for $4.10 ($8,200)
  • Sell 20 ABX Jan $18 calls for $1.95 ($3,900)

That spread was net $1,660 and it's fortunate that we had conservative targets as ABX has sold off recently (so we like it again for next year!).  Nonetheless, since we are BEING the HOUSE and NOT the Gambler – we come out nicely ahead as the Jan $12/17 bull call spread s now $2.42 ($4,840) while the short 2019 $13 puts are 0.95 ($950) for net $3,890, which is up $2,230 (134%) for the year, despite the fact that gold itself is only up 8.5%.  If that's how we do on a "loser" – I can't wait to see how the winners did!

Meanwhile, the disparity between gold's price (up $100) and ABX's price (down $1) makes it once again a fantastic hedge for next year and we'll be looking at 2018 inflation hedges next week as we begin to build our new portfolios.  

In Hedge #2, we were worried about the price of gasoline going up and it is up about 15% since last Christmas, costing us 0.25 per gallon more and, in our example, we assumed your family would use 1,500 gallons and we wanted to offset any increase in fuel costs.  At 0.25, we have to beat $750 on our spread, which was:

  • Buy 1,000 shares of Sunoco (SUN) for $26.98 ($26,980) 
  • Sell 10 June 25 calls for $3.30 ($3,300) 
  • Sell 10 June $22.50 puts for $1.60 ($1,600)

SUN closed June at $29.92 (and it's back there now) and that was miles over our tartget so the net $22,080 spread was closed at $25,000 (called away at $25) with a $2,920 profit plus the $826 dividend in February and again in May broght the total gain to $4,572 (20.7%) in just 6 months so we ented up more than covering the families ENTIRE fuel costs for the year with this simple hedge.  Of course we'll do another one next year – who doesn't like free gas?

Hedge #3 was against food inflation and food went the other way in 2017, with groceries dropping nearly 20% on average.  Our trade idea was for a spread on the Agriculture ETF (DBA) as follows:

  • Sell 4 DBA 2019 $20 puts for $1.45 ($580) 
  • Buy 8 Jan $18 calls for $2.65 ($2,120) 
  • Sell 8 Jan $21 calls for $1.80 ($1,440) 

We were looking good into the summer but then things fell apart (so good for next year) and the Jan $18/21 bull call spread is 0.75 ($600) and the 2019 $20 puts are now $1.90 ($760) so this spread would cost $160 to close out from our original $100 net cost means we're down $260 on our food hedge but, even if food costs are only down 10% – if you spend $200 a week on groceries that's $10,000 a year and $1,000 saved in the stores.  That's how hedges should work – not too much damage on the way down and a real windfall when your own costs rise.  

Meanwhile, there's no need to pay the $760 for the 2019 puts, we can let them ride and hopefully recoup that money and turn this into a profit next year.

Finally, our last hedge was to help pay for your PSW Membership (like we just did with GreenCoins) and, at the time I said:

So, for 2017, let’s make things interesting with another metals hedge.  If you sign up for a full-year membership between now (12/25/2016) and Jan 2nd, 2017 and the following trade idea does NOT net 100% on the cash outlay by expiration day on Jan 2017 then I will give you a free Membership for 2018! 

The trade idea was our 2017 Trade of the Year on Silver Wheaton (SLW) who are now called Wheaton Precious Metals (WPM) but the stock and options remained the same through the name change.  Our trade idea was:

  • Sell 10 WPM 2019 $15 puts for $2.80 ($2,800) 
  • Buy 15 Jan (2018) $15 calls for $4.75 ($7,125)
  • Sell 15 Jan $20 calls for $2.65 ($3,975)

As you can see, we're well over our $20 target and the Jan $15/20 bull call spread is $7.15/2.20, so $4.95 out of a possible $5 x 15 contracts is $7,425 and the short 2019 $15 puts are already down to 0.35 ($350) so the net on the spread is $7,075, which is up $6,725 (1,921%) from the $350 cash outlay so I'm sorry to those of you who were hoping we'd give you a free Membership but $6,725 more than pays for any of our non-Premium Memberships so, you're welcome!  

I encourage you to go back and read the original post as we laid out our logic and the mechanics for each position and we will do so again next week with our fresh hedges for 2018 (Members only).  As we hit 3 out of 4 on this set and made $13,267 for the year – you might want to consider putting aside a little cash to hedge against inflation in 2018 as well.

Meanwhile, that's about all for 2017 and it's been such an exciting year we cashed out our 4 Member Portfolios and that makes 2018 exciting already as we start the new year off with endless opportunities to re-deploy our CASH!!!   For now, however – let's party!  

I'm already in Vegas and I hope you have great plans to celebrate with your friends and family.

May your new year be happy, healthy and wealthy!  

- Phil



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  1. Some interesting ideas for blue states to get around the SALT issue:

    But perhaps the most promising option, teased by a large group of tax law experts and vocally championed by prominent liberal economist Dean Baker, is for states to repeal their income taxes and replace them with employer-side payroll taxes. This might appear like a minor technical change. But it would not only totally offset the new limit on deducting state taxes — it would amount to a sizable tax cut for many middle-class families and would vastly simplify tax preparation by freeing people up from filing their own state taxes.

    This would be interesting because it would shift the burden to employers but they are getting a tax cut and would put more money in the pockets of employees. Employers could of course lower salaries to make up the difference but that might not be very popular. And politically dangerous because it would highlight the issue from the tax bill to many people! Federal revenues would then be lowered and once again we see possible unintended consequences of a bill crafted in the dead of the nights by idiots!

  2. Give these poor people a tax cut:

    The richest people on earth became $1 trillion richer in 2017, more than four times last year’s gain, as stock markets shrugged off economic, social and political divisions to reach record highs.

    The 23 percent increase on the Bloomberg Billionaires Index, a daily ranking of the world’s 500 richest people, compares with an almost 20 percent increase for both the MSCI World Index and Standard & Poor’s 500 Index.

  3. And really, WTF – if you read that NYT interview of Trump yesterday you have to conclude that the guy is completely delusional. He can't be thinking what he is saying, it's just not possible. Although when you see the Dear Leader meetings in the White House, it offers some confirmation of the disease…

  4. Phil  What's up with the DAX? If it fails 12,900 it looks like it might fall off a cliff. Is this index the canary in the coal mine?

  5. Good Morning.

  6. A Happy and Healthy 2018 to Everyone!  :)

  7. Legal pot will actually benefit large businesses it seems:

    But here’s a word of warning for those looking to dive head-first into these brand-new legal weed markets: The data behind the first four years of legal pot sales, with drops in retail prices and an increase in well-funded cannabis growing operations, shows a market that increasingly favors big businesses with deep pockets. As legal weed keeps expanding, pot prices are likely to continue to decline, making the odds of running a profitable small pot farm even longer.

  8. Happy New Year to Phil and PSW members.  Still the number one place to spend my mornings..and afternoons…and evenings.  Ok, I’ve got a problem!

  9. As with the excellent micro breweries and small coffee roasters, there will always be a HIGH demand for quality cannabis…. It's always the greedy that get burned…. :)

  10. GM Everyone.  Happy New Year if I forget; I'm in and out a lot.  Yeah, sitting here is addictive, but someone has to keep that homegrown burning, run errands, lay tile, etc.

  11. Good morning and happy new year!  

    Here's a great example of history repeating:

    Image may contain: 1 person, text

    Nice wheee on our Futures shorts already – nice way to end the year.

    Don't be greedy, it's a silly, thin-traded day so good to take 1/2 off on a nice move down and strong bounce stops on the rest so you lock in weak bounce gains for average.

    Big Chart – NYSE still keeping us from being bearish.

    SALT/StJ – Funny, now the states are going to be engineering Federal tax evasion for their residents?  Not sure how they plan to run the Federal Government with no money though, I suppose, that's been the GOP goal all along – take the Government down completely, make it non-functional any way they can.  

    DAX/Den – I'd say 12,800 is more the line you want to watch.  

    Pot/StJ – No surprise there at all.  I still like MO for a pot play over the long run.  They can go from selling $10 packs of cigarettes to $100 packs of joints in a heartbeat.

    Problem/DC – I don't know about that, I love it here myself.  Nothing more interesting to do with my days than play this great market game with good company.

    Good point 1020.  We will call you 420 from now on…  cheeky

  12. ?420 – The PSW site only allows a minimum of 4 digits….. ;)

  13. There's an idea…..

  14. ?420 won't work either….. :)   Have a great day everyone!

  15. from twitter this morning

    Citron Research‏ @CitronResearch 44m44 minutes ago



    $WATT Co has a history of deception and the recent FCC info is no different. Tech is not ready for primetime and the loss of Apple for Dialog, death to the rumor. Roth upgrade was as ridic as their defense of Unipixel until BK. Powercast at CES will expose why $WATT to $15

    14 replies 35 retweets 72 likes


  16. Scottmi – I tried to implement the FTR/FTRPR trade.  Schwab didn't have any FTR shares to lend.


  17. Happy New Year 420!  

    Guys, I'm out of here at noonish – going to have a proper vacation today and tomorrow. 

    This should put some pressure down on /CL:

    Trump administration rescinds fracking rules for government lands

    • The Trump administration is rescinding proposed rules for hydraulic fracturing and other drilling practices on government lands, drawing praise from industry groups and condemnation for environmentalists.
    • The rules developed under Pres. Obama would have required oil and gas drillers to disclose the chemicals used in fracturing, which the companies say would have duplicated state rules and added unnecessary and expensive burdens.
    • The Interior Department also proposes to eliminate some safety regulations for offshore oil and gas drilling that the Obama administration put in place after BP’s Gulf of Mexico oil spill in 2010.
    • One of the safety provisions planned for removal by Interior's Bureau of Safety and Environmental Enforcement is a requirement for operators to get a third party to certify that safety devices work under extreme conditions.

    Citron agrees with BDC that WATT is kind of scammy:

    itron Research tweets Energous' "history of deception"; shares drop 6.4%

    • Energous (NASDAQ:WATT) shares drop 6.4% after short-seller Citron Research calls out the company’s “history of deception” on Twitter.
    • Full Citron tweet: “Co has a history of deception and the recent FCC info is no different. Tech is not ready for primetime and the loss of Apple for Dialog, death to the rumor. Roth upgrade was as ridic as their defense of Unipixel until BK. Powercast at CES will expose why WATT to $15.” 
    • Background: Energous and Powercast both received FCC certification for wire-free charging technology this week. The companies will each present at CES in January.
    • Apple is reported designing its own power-management chips for future iPhones, which cut Dialog Semiconductor out of the supply chain, and went with the competing Qi standard for wireless charging. Citron suggests these movements end rumors that Energous could become an Apple supplier. 
    • Citron also advises not to listen to Roth’s defense of Energous as the firm defended Uni-Pixel ahead of its bankruptcy earlier this year.        
    • Previously: Energous +63% on FCC certification (Dec. 26)
    • Previously: Roth Capital raises its Energous price target; FCC chair tweets confirmation(Dec. 28)
    • Previously: Energous competitor receives FCC approval (Dec. 28)


    Goldman Sachs says tax law to cut Q4 earnings by ~$5B

    • Goldman Sachs (NYSE:GS) says it expects the new U.S. tax law will reduce Q4 and full-year earnings by ~$5B, although the impact may differ due to changes in interpretations and assumptions or guidance that may be issued.
    • GS says two-thirds of the reduction is due to the repatriation tax, with the remainder including the implementation of the territorial tax system and the re-measurement of U.S. deferred tax assets at lower corporate tax rates.

    Bernstein sees 15% upside on Target

    • Bernstein fires off a price target boost on Target (TGT +0.9%) to $75 from $65 after factoring in tax reform benefits and store labor investments.
    • The firm's PT is out in front of the Street average of $62 and reps 15% upside potential. Shares of Target currently yield 3.83% vs. 2.05% for Walmart and 1.07% for Costco.

    Trump slams Amazon while calling for higher Post Office pricing

    • President Trump mentions Amazon (NASDAQ:AMZNon Twitter while calling for the U.S. Postal Service to raise shipment prices to cover costs.
    • Trump’s tweet: “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!” 
    • The Post Office reported FY17 results last month with revenue of $69.6B, down $1.8B on the year, and operating expenses of $72.2B. The drop was due to declines in First-Class and Marketing Mail, which were partially offset by growth in package volume. 
    • Package volume grew by 589M pieces or 11.4% on the year compared to the 5B piece or 3.6% decline in mail volume. Shipping and Packages revenue rose 11.8% to $2.1B.  
    • Amazon founder and CEO Jeff Bezos also owns the Washington Post newspaper, which Trump has slammed numerous times on Twitter.   
    • Amazon shares are down 0.6%.  

    Apple's apology letter to consumers includes $29 batteries

    Image result for i'm sorry animated gif pee wee

  18. $20 trillion secret… it's not the debt, interesting read… this is what the msm should be reporting on.

  19. As Carlin would say, nobody seems to notice, nobody seems to care.

  20. On a lighter note, wishing all my friends here a happy and healthy new year!

  21. Have a Happy New Year everyone!   

  22. Interesting that we are starting to see stories from companies, particularly banks about how the tax reform may not be all that it was made out to be for their bottom lines, yet analysts like the one above on TGT thinks he knows how tax  reform will affect TGT's bottom line.


    You guys had me thinking about this two nights ago and while I don't recall all my permutations, it does seem as if you have to be able to sell short the shares, but my real conclusion was that FTR has to cut the dividend before the  conversion; does that make sense?

  23. Got on the /TF sled from 1553 to 1548…so made up for yesterday plus mcmuffins.  Now in /DX for 1 at 92 long

  24. Debt/Mkucs – That's the least of our worries with this President….

    Banks/Baron – They are a different animal.  That's why we had some heavy hedges on XLF (FAS) in the short-term portfolio – we thought the tax bill wouldn't be the benefit that was being priced in.  I can't believe how long it took people to do the math!   FAS is still at the top, I say $60 next Q.

    Good job with the quick in and outs Latch.  Make a few bucks and move on to the next one..

    /ES now way past our goal at 2,684, should be bouncy here.  24,783, 6,425 and 1,547.50 are lined up and now we see if they can bounce more than weak from these lines.

    Congrats to all who played along.

    Dollar (/DX) even cheaper at 91.94 and that's holding /CL just over $60 for now and /RB still a juicy short at $1.793 at the moment.

  25. Well, when a missing $20 trillion is the least of your worries, I'm glad I don't have your worries!

  26. Happy New Year to the entire PSW family! Let's hope for continued peace and a more normal 2018.

  27. happy NY PSW!!!

  28. My 2017 top pick was QUIK.  It's closing the year up 28%; not bad, but far short of the move I expected.  Going to pick it again for 2018.   We know they now have at least 6-7 design wins which will go into production in the next couple of quarters.  Expect the long delayed revenue ramp to begin in this next quarter. 

    Company is still losing money, but I believe they are at the forefront of new technological advances in the field of wearables, hearables, and always-on devices such as Alexa.

    Very speculative, for sure, but still looking for a multi-bagger.  We'll see.

  29. Wishing Phil and all PSW members a safe New Years Eve and a Happy, Healthy, Prosperous 2018! 

  30. Happy New Year to all at PSW. This is a great community of smart and cordial people looking to learn and profit from Phil's experience and knowledge. Thanks, Phil…you are the hardest-working guy I know and the most entertaining!

  31. $20Tn/Mkucs – Hey, we're $20Tn in debt now with another $60Tn in unfunded liabilities (SS, etc) and no one seems worried about that so what's another $20Tn – it only matters if the Big Orange keeps his finger off the nuke button for 3 more years. 

    Normal/StJ – Now where's the fun in that?

    QUICK/Albo – Good choice, worth watching.

    Thanks Jet and thanks to all for such a great 2017, looking forward to next year but, today, I'm looking forward to hitting the Grand Canyon (well, hopefully not literally as we're taking a helicopter!) so you guys have a  Happy, Healthy, Wealthy New Year – I will see you all on Tuesday morning, where we can start putting all this sideline CASH!!! to work.

    Have a great holiday weekend,

    - Phil

  32. Hi guys and girls, To all of you a happy and prosperous NEW YEAR

  33. Phil & all PSW – wish you all health, happiness and peace in the new year!

  34. Phil Thank you for the help this past year


    Happy Holiday’s to all and best of luck for the new year

  35. Peace, happiness and prosperity to one and all.

  36. Ditto QCMIKE!

    and my theme song for 2018…

  37. Latchdaddy


    My songs for 2017

    After Ever After – DISNEY Parody


  38. .Albo / FTR – Fidelity has shares (hard to borrow – as well) to lend at a 40% annual interest rate. At this rate, it reduces the economics of the trade, but doesn't eliminate it. Curiously, Fidelity hasn't borrowed any of the FTR share from my account – have a lending agreement that permits them to borrow shares for the going interest rate…. Suspect they don't want to borrow or lend shares for some reason.

  39. Albo – I did end up giving it a go in an account I decided did not need to 'increase" FTR exposure so much. Sold shares I was long and replacing with FTRPR to cover and round up the post split number of shares. let me take a loss, and transfer some cost basis to dividend payout . In this way, will have shares again come june so no loss to the stake/upside potential,

  40. Best Wishes for a Happy New Year to all!

  41. Scott – Yeah, that does look like it'll work.  If I still had shares, I'd do it too.  Already swapped my remaining shares for CTL shares.

  42. FTRPR/Baron – FTRPR did not reduce the dividend at any time.. it has paid 2.78125 out per quarter, per share, following the first (higher) div since the offering. Latest one just hit my accounts today. Now just two payments left, then conversion. But yes, this is a risk, though the ranking places it senior to all common stock and no other issuances (other than debt) have been made that would be senior. and if they cut back on dividends, then: "If, prior to the mandatory conversion date, we have not declared and paid all or any portion of the accumulated dividends on the Mandatory Convertible Preferred Stock, the conversion rate will be adjusted so that holders receive an additional number of shares of our common stock equal to the amount of such accumulated dividends.."

  43. FTR/Eric -thanks, and yeah, at 40% annualized loan rate that takes a serious bite., you are still a good way ahead, didn't put that cost in before. Plugging that rate into my spreadsheet takes me down to a 54% return in 6 months (1.11% annualized). So.. There is room for it, but does pull if paying that loan rate. Replacing existing shares looks better!

  44. oops. 111% annualized.

  45. Phil and All- Happy New Year to you and your family!

  46. Another stock market year in the books.

    Hope everyone has a happy, healthy, and prosperous New Year !

    Thanks to Phil and all for the many good ideas.

  47. Muck – "$20 trillion secret… it's not the debt, interesting read… this is what the msm should be reporting on."

    So Dr. Mark Skidmore and his MSU team (GO SPARTY!!!) found $20 Trillion missing…. and now your New Year's Eve moment of Zen…..  Can you guess what, or should I say who, will be missing next? 

    My "picks" for this season can be found here. Been taking no names or prisoners, just kicking the books ass ragged.

    Wishing all a very happy, healthy, sane and prosperous New Year.  IV Time and Out.

  48. Happy New Year everyone!

  49. Happy New Year everyone!  Question (if anyone can answer):  How does the new tax law handle those with 2nd homes?  Is the mortgage and taxes deductible up to 10K or ??  How about rental property?  Rental property expenses (taxes), the way I understand it will be fully deductible, but those 2nd houses are a big question.

  50. Pharm  

    Interest deduction is limited to the first $750k of debt taken out after 12/15/17 on primary and second homes. Similar to above, if the primary home loan proceeds are used for investment properties, the entire interest expense may be tax deductible against rental income and escape the new limitation. Mortgage interest, however, for investment properties continues to be tax deductible without the $750k limitation.

    This is from Bigger Pockets website — pretty good info


    All the best to you Everyone on this page – I'm signing off for 2018 and going to TrendWatcher subscription. But I will be looking forward to the PSW Hedge Fund to do the heavy-lifting from here on out.

    Best Regards


  51. I am guessing that if you are in the top 0.1%, that second home is listed as assets to a company so everything is deductible!

  52. 2017 was good for everything except telecoms and energy (stocks and resources)

    Not listed here – crytos!

  53. Prosperous new year to everyone!  Thanks to Phil for being a patient teacher and everyone for sharing your thoughts (and humor).

  54.  Hi guys, happy new year!

    I’m back from Vegas I’m back from Vegas and the bad news Is I have the flu. Hopefully I will feel better in the morning but I’m not going to stress myself out by making sure I get up on time so, if the post is late, that will be why. I want to hit the ground running with the new portfolios. But I’m completely nonfunctional at the moment.  

  55. Hope you feel better soon Phil!!!

  56. Good morning!  

    I lived through the night and am pretty functional this morning (much to my surprise).  

    Still, not as prepared as I wanted to be for this morning.

    Our indexes are up a bit but Europe down nearly a point so someone is wrong.  Dollar still very weak around 92: