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Thursday, March 30, 2023


Thrilling Thursday – Nasdaq 7,000 Is Our Next Summit

Can we really go higher?

Bullish Sentiment is literally off the charts and only 7,826 (11.4%) out of 68,119 investors polled by Earnings Whispers are currently bearish about the markets.  Usually you might thing that's the sign of a turn but if my daughter's softball team were going up against the Yankees, you might see similar sentiment results in favor of the Yankees and that does NOT mean betting against the Yankees is a smart move – just because it's the contrarian play. 

Sometimes, the crowd gets things right though not this time – this time the crowd is full of idiots who are chasing a trend off a cliff but other times, you shouldn't just be a knee-jerk contrarian.  Meanwhile, as I've been saying since Nov 29th's "Record High Wednesday – We Will All Be Billionaires," if they are going to keep giving money away in the markets – who are we to turn it down?  The Money Talk Portfolio we looked at that morning was "only" up 70.7% for the year and, this morning, those untouched positions are now up 80.9% less than two months later.

We cashed our other portfolios in and started new ones on Jan 2nd and our $500,000 Long-Term Portfolio is already up $25,000 (5%) in 3 weeks – a pace that will make us $1Bn in 14 years (at 75% annualized) and of course that's ridiculous and unsustainable but that's what you are paying for when you buy into a market that is basically up 5% for the month as well.  While earnings are "pretty good" so far, they are (as I mentioned in yesterday's Report) bolstered by a weak Dollar as well as the stimulus of a $1.5Tn Tax Cut, which consumers have already borrowed against to spend last Christmas.

Looking forward, we are now counting on the repatriation of Trillions of overseas Dollars to boost the markets into 2018 but, just like the rising income inequality in America, the benefits of the repatriation are concentrated to the Top 1% Corporations and, in fact, just 16 companies account for half of all overseas funds:

  • Apple holds $269 billion in cash and investments.
  • Microsoft holds $143 billion.
  • Alphabet holds $107 billion.
  • Cisco holds $76 billion.
  • Oracle holds $71 billion.
  • Coca-Cola holds $50 billion.
  • Amgen holds $41 billion.
  • Qualcomm holds $38 billion (spoken for in NXP merger, if Broadcom doesn’t win).
  • Facebook holds $38 billion.
  • Gilead Sciences holds $41 billion.
  • Intel holds $27 billion.
  • IBM holds $25 billion.
  • Pfizer holds $24 billion.
  • Merck holds $23 billion.
  • Procter & Gamble holds $21 billion.
  • Pepsico holds $20 billion

While  this is, indeed great news for these companies and their shareholders, what about their competition?  What about the 4,500 public companies that haven't got a penny overseas and aren't being rewarded for years of tax evasion?  FaceBook (FB) has $38Bn to crush SnapChat (SNAP) with.  Coke (KO) and Pepsi (PEP) have $70Bn to play with and they can go to war with each other or simply drive Dr Pepper (DPS), whose entire market cap is just $17Bn, completely out of business.  Do you think Trump's regulators will care if it's "unfair competition"?

Image result for trump monopolyWhat we have here is the Oligopolists consolidating their power and sure, we can bet on those companies to do very well down the road but beware if you hold stock in their competition – this is not unlike the game Monopoly, when your competitors start the game with 10 times more money than you – you are not likely to win and will likely go bankrupt as you try your best to move around the board without landing on one of their hotels.

So, believe it or not, 2018 is going to become a stock picker's market and there will be losers as well as winners and the problem with that is currently the indexes are not pricing in any losers at all – so the valuations are stretched across the board.  Yesterday, in our Live Trading Webinar, we discussed Cisco (CSCO) and, while they are one of my favorite stocks and will be bringing back $76Bn from overseas, they are not cheap at $42.30 as that's a market cap of $208Bn and they "only" make $10Bn a year, so 20 times earnings.  The repatriate cash is not "new money" – it's already on their books and has already been earned – it's just being moved around.

Instead we prefer in that space Finisar (FNSR), who are a $2Bn company at $19 and made $250M last year for a p/e of 8 and they are growing revenues and profits at a 15% annual pace.  THAT is the kind of company we like to put in our portfolios and we did add FNSR to our Options Opportunity Portfolio as well as our Long-Term Portfolio already.  Again, it's not that we don't like, even LOVE CSCO – it's just that they are not on sale – so why buy them?

Also in yesterday's Live Trading Webinar, we played with the Futures and our trade of the day was a long on the Russell Futures (/TF) as they dipped in the afternoon and we made a very quick $280 in our trading demonstration and the Russell went on to hit 1,610, good for gains of another $700 per contract for those who stuck with it so congratulations to all who attended yesterday.  

Last Wednesday, our Webinar play was a long on Coffee (/KC) Futures at $120 and this morning we're testing $125 but we took the money and ran at our usual $123.  Coffee contracts pay $375 for each $1 move so up $1,125 per contract was a nice gain for our Members and, if you are just a webinar watcher – I'd say it's a bit greedy not to take some off the table at $125 and keep tight stops on the rest as the main reason we like tradin coffee is because it keeps pulling back and giving us new entry opportunities though, long-term, we certainly expect it to move much higher than it is now.

For the Futures-challenged there's a Coffee ETF (JO) which is subject to a bit of decay but is still playable at $15.21 and the way we would lay out a trade would be:

  • Sell 5 JO 2020 $16 puts for $2.40 ($1,200)
  • Buy 10 JO 2020 $14 calls for $3.75 ($3,750) 
  • Sell 10 JO 2020 $20 calls for $1.95 ($1,950) 

That nets you into the $6,000 spread that's $1,210 in the money for $600 so your upside potential is $5,400, which would be a 900% return on cash and the margin for selling 5 short 2020 $16 puts is about $1,500 and your ultimate obligation is to own 500 shares of JO for $16 ($8,000) if it's assigned to you but then you can turn around and sell the $14 calls for $3.75 and your basis drops down to $12.25 so the risk of being long on JO at net $12.85 (the $600 cash presumed lost as well) is a risk that compares very favorably with the potential $5,400 reward so we'll add that one to our Options Opportunity Portfolio and see how it plays out.

Of course, going long just one Futures contract at $130 and running up the same 25% to $162 would pay $12,000 and the Coffee contracts only require $2,310 in margin and, even better, we go in and out and in and out and make money on all the little move in between so, if all goes well, we'll make much, much more than $12,000 per contract over the next couple of years in the Futures – which is why we teach our Members how to trade them in our Webinars! 

Sadly, it's January 25th and our month of free trade ideas for non-Members is drawing to a close but here's a bonus trade that seems very silly to me with the Dollar so low (see yesterday's notes) and gold so high:  Barrick Gold (ABX) is a quality miner with a very low cost of extracts (under $800) and, with gold hitting $1,360 this morning – it seems hard to imagine that Q4 earnings won't be better than last year's Q4, when gold averaged under $1,200 per ounce.  ABX spiked to $20 after Q4 earnings last year so $15 seems like a bargain at the moment.

A simple way to get bullish on earnings is to pick up the Feb $15 calls for 0.55, which is 0.50 in premium but that's all the risk you have and there is no margin requirement.  If ABX breaks up ahead of earnings and the calls hit $1, you can sell half and then carry no risk into the earnings and any move up from there is all bonus money.  We are carrying longer-term spreads on ABX in both the Long-Term Portfolio and the Options Opportunity Portfolio and we have high degrees of confidence in them.  

Another fun gamble on Gold is micro-miner Northern Dynasty (NAK), which we also hold in the OOP and that's just $1.60 but pure speculation as they don't mine at all but they are trying to get regulatory approvals and partners to begin mining up in Alaska.  What we like about NAK is that getting permits to strip mine the land and pollute the rivers is much, much easier under the current administration so yay Capitalism!  

Meanwhile, if this rally doesn't calm down – we're going to need a bigger chart (we are shorting Nasdaq Futures (/NQ) below the 7,000 line with tight stops above as well as S&P Futures (/ES) below the 2,850 line.



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Starting to bounce

The 35 most amazing lines from Donald Trump’s impromptu press conference

Phil, can I get your thought on the following trade from the STP in GOOGL:  

If you want to be more "conservative", you can back up the short March $1,080s at $42 with the 2020 $970 ($200)/1,040 ($164) bull call spread at $36 so if the short $1,080s expire worthless, your gain is the remaining value on the spread + $6 or, if GOOGL goes up, you have $76 of upside protection while you roll them along. 

That's a fun trade, let's do 3 in the STP.  I have the 2020 970/1050 BCS 3x that I paid $42.83.  I also have three of the MAR 1100 calls and I collected $37.33.  As the stock shot up I added 2x the 800 Puts for 19.25.  With GOOGL at 1182, I've pocketed $2,200 with the potential to collect $24000 in 2020.  The position is currently showing a $20k loss.  Would you do anything now.  Thanks in advance.

The bold text is a copy of your original comment in blue

$ – dollar – FWIW- my currency trader friend texted me last night saying the $ broke key support at 90 so long EUR/USD.

Spread on SGYP lurking there somewhere?  It is just so hard to decide in this market what the heck to do.  A third of my positions expired in January and I and 2/3rds in cash, and wanting to make plays like the ALK play above, but in the back of my head I'm waiting for the market to tumble enough to feel confident getting in these positions. 

JO spread – not sure what happened after you posted that trade idea, but TOS is now quoting mid $3.15, nat $4.30 on the spread. The bid/spread on the options of JO are so wide that it makes it a difficult trading vehicle. 

If anyone was filled at $1.80 on the spread I will shut up, but………

Looks like too many professionals are involved in this site, or I need to change the brand of wacky backy I'm smoking.

winston—do you mean you couldn't buy the call at the bid and sell the call at the ask and sell the put at the ask?

Thanks Phil that was really helpful 

Winston, I got the Long calls and short puts at the prices Phil noted in the trade idea. The short calls though…no. That order will sit open for a bit I think. 

Jabo / I rarely buy spread trades by legging into them – been burnt too many times in the past on filling one side and not filling the other. So I normally offer the mid point that shows up on TOS. I did not even bother to try and fill the trade because the numbers were so 'off' from what Phil had posted. 

A we have noted in the post, many of Phil's trades get bid up on the day he posts them. Probably better to let the excitement and try another day. Interested in other people's experience.


Sometimes, because of the popularity of Phil's site, single investors jump without thinking.  On the ALK trade, in particular, I noticed someone executed trade(s) right at $12 instead of bidding lower, or at least the mid. It looked like the trade could have been made for much less.  Unfortunately, once the price was set ,nothing would execute for less than $12 (plus).  Unfortunately, it's probably not possible to train everyone who follows Phil's site to bid first rather than jumping on whatever Phil says.  Annoying!

Greg /or Phil –  ALERTS – this year for some reason I am not getting alerts texted to me.  I get the emails OK.

I"ve checked my profile, and my cell no. is correct and the.  Can you help on this?


Phil;/GOOGL Trade;  Thanks that was very helpful.   Those are the 2020 800 that I currently have.  With regard to your suggested changes I think I would want  to be more conservative and keep less cash.  Would you suggest a higher strike on the short May calls, lower strike on the short Puts or fewer Puts.  Thanks


How do you feel about Newell Brands (NWL), they got a major smack-down today on talks of business lines restructuring and 3 directors leaving.

Phil/DX – did you take some off the table?

dclark – there is no accounting for incompetence, but it still seems strange nonetheless. 

Currently the JO 2020 $16 puts are bid $1.50 / ask $2.40 (the price Phil had the put sale at).

It's no great drama, just move along to the next trade idea, or wait for the prices to come to you. But I would scratch the trade from the OOP.

Any idea whats moving Oil back down?

Oil, gold, & silver all down on the USD spike. 

So follow up question- any ideas on what's moving the USD?

Jabo / Phil – Dollar-  Ahh, yeah that would do it lol!  Thx

Phil /  DSW – I’ve been looking at this one for a bit.  It’s one of a few US retailers that has not bounced back from the AMAZON effect.  I'm thinking may be a good position.

On the plus side:

-Earnings should be moving forward at the mid to high single digits

-Has good cash flow of 2.5/ sh

-High insider ownership bout 19%

-GM at 31%, Op Mgn 9 ( both these were hurt by ebuys) expect this to improve

-Should see positive gains from tax

On the negative

-Purchase of Ebuys was a disaster they took markdowns on this.

-They are building up their IT and the site is OK but they have more room on this so they are spending money here – it will hurt margins.

With an at about 15x and earning at 1.6 for ’18 and 1.8 for ’19 this looks like a target price of 25 to 30 is very reasonable.  Am looking at the following:

’20 20 / 30 BCS at a net 3.7


’20 20 / 25 BCS at a net 2

while selling the 20  puts for 4.3.

Would like your thoughts on the company and any hairballs I missed as well as the position.


Phil/ NFLX – hi, i got myself in a costly short (crazy, i know!) on NFLX. I reckoned it had rallied ahead of earnings so much it was almost sure to sell off on the news. So so wrong. Anyway, i sold 6 naked March $190 calls for $35. As cover i bought 5 April $215/230 call spreads for $7. Didnt predict NFLX shooting $50 up to $270 so quick!! I want to receover the loss so am thinking of buying 6 Jan 2020 $240/300 bull call spreads for $35 (only $5 time premium) and gives me more upside cover. I would welcome your ideas on this? As always, thank you. 

Phil, F got shellacked today. Thoughts?

Trump has dinner with European corporate leaders – not one woman in the group.

denlundy—would you want to go to dinner with him if you were a woman???? 😉

NFLX – thanks Phil. I'll give that a try. 

Scratch JO – looking on TOS at the option time and sales (although I admit rarely look at the data and may be interpreting incorrectly) shows how thinly traded JO options are. Looks like Jeff and a couple of others traded 10 options on the 2020 series of 14 calls and 16 puts. A concern would be the lack of liquidity in the options – but it is a great combo if you can get filled. I'm long coffee and rooting for /KC to make an upward move, in that case filling the short calls at those prices will be easier.

Still, the extremely large width of the bid/ask spreads coupled with the low option volume (I guess the one is a consequence of the other) is certainly a watch out. A shame to get shafted on the way in as well as the way out!

your right jabobeast

I bought the iphone X bad news storyline yesterday and have a few AAPL jun 140 puts. It's a tough bet going against apple, but I dont have much short so I need to pick something!

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