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Terrific Tuesday – Markets Blast Higher Just Because

Image result for no news is good newsNo news is good news.

That's true for the markets as the lack of negatives puts us back into default mode (up), despite there being any real positives to point to either.  We're well over our bearish levels now and in full-on recovery mode and, usually, I would make a comment about yesterday's comically low volume but that never seems to matter either – so we're just going to go with the flow and enjoy the ride until it stops.

This morning we had a calmer CPI number at 0.2% as energy prices came down and the Core CPI (ex food and energy) remains at 1.8%, which briefly blasted the markets higher but then Trump fired Rex Tillerson and we gave back half the gains but now Trump appointed the CIA Director (Pompeo) to be Secretary of State because, I guess, Director of the CIA isn't an important enough job.  Of course, Pompeo is a very loyal Tea Party Republican, appointed by Trump last year (he had previously been a Congressman).  

Image result for Gina HaspelThe good news is Pompeo is being replaced by Deputy Director Gina Haspel, who is an actual CIA lifer and was, in fact, Obama's Director of National Clandestine Services and I don't know exactly what it is but it sounds cool!  Essentially she's the female Jack Bauer, who's been on the ground all over the World fighting terrorism and she even ran a black site prison in Thailand – so she probably knows how to get people to talk!

Now, you would think, being a liberal, that I have a problem with this but I don't.  Terrorists don't play by the rules and you have to fight fire with fire – not that Haspel has been accused of anything very bad (other than, perhaps, "accidentally" deleting a few "interview" tapes).  What will be interesting now is how vigorously she will pursue Russian Election Hacking – something Pompeo hasn't touched during his year in office (though he did say the CIA concluded it definitely happened).  

Meanwhile, the Saudis have lost control of the price of oil (/CLand we shorted it this morning at $61.50 in our Live Member Chat Room.  As I noted to our Members:

I think the Saudis have, at great expense, been sustaining Brent above $65 and they are having trouble keeping a lid on production (for other OPEC members) and the US is killing them with their production increase and they can't sustain it long enough to make the IPO, so they are delaying the IPO.  If it weren't almost May, I'd bet oil would crash hard but, as it is, I just like the bet from $61.50 to $60 for now and then we'll see if that holds.  

As to the indexes – I would have said watch the 50 dma on the Dow at 25,304 but we blasted over that this morning so now just make sure it doesn't break down but the Nasdaq is 7.5% over it's 50 dma at 6,766 and the Russell is 3% over 1,554 with the S&P up 2.5% from 2,572.  Only the NYSE hasn't crossed back over their 50 dma at 12,974 and that's the last line we need to confirm the rally is back in full swing.

Nonethelss, I was on CNBC Japan last night and they asked me what my top concern was and I said it was Trade Wars but only because Central Bank tightening wasn't a "concern" – as it's already a fact in progress.  Given the current environment of monetary policy tightening and rising rates coupled with the possiblity of a Global Trade War – I told the interviewer we were still playing things cautious with our Long-Term Portfolio over 80% in CASH!!!.

I said we plan on deploying more cash when the S&P drops to 2,400, which is 15% down from the current 2,800 but that includes people paying $1,600 for a share of Amazon (AMZN) that generated $4.56 in profit last year for a return of 0.285% – Japanese bond investors laugh at Amazon shareholders!  

Not that we don't enjoy the rally.  Our Long-Term Portfolio (LTP) has jumped to $590,188, which is up 18% for the year (we started fresh with $500K on Jan 2nd) and that's up $32,000 since FRIDAY morning's Report - without touching a single position.  Come on folks, this is ridiculous – markets can't sustain these kinds of gains.  Even worse, it's all just the net $77,702.50 in positions we had on Friday (see the Report), the cash is the same $480,343.75 but now the positions are worth $109,845.  

Well, I shouldn't say "worth" but it's what they priced at at yesterday's close.  So the positions themselves popped $32,142.50 (41.3%) in two sessions.  Of course we are using margin and options for leverage but, NONETHELESS, this is a ridiculous amount of money to make in two days and it simply indicates that we have a completely broken system that will, one day – come off the rails in a spectacular fashion.

We'll be reviewing all five of our Member Portfolios over the next few days and, of course, we'll be adding more hedges to lock in our ill-gotten gains! 


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  1. ~~Politics

    Trump ousts Tillerson, will replace him as secretary of state with CIA chief Pompeo.

    OMG !   What's next ?

  2. Tillerson / Albo – My guess is that Tillerson had been calling out the Russians for what they are doing including the poisoning in Britain just yesterday. That must have been the last straw and Putin made a call to Trump and reminded him about the secret tapes…

  3. One day, it will come out that Trump was really the Manchurian candidate and it will not reflect well on his enablers in Congress.

  4. Unreal !

  5. Good morning…. Trump was busy creating new news.   On the market side, last night, he issued a presidential order blocking QCOM acquisition by BRCM permanently - national security concerns. 

  6. Albo – On the other hand, he was a real disaster as SecState. One of my friends is high up there and he told me that the Foreign Service is the worst he has seen in his entire life. It's really bad there and Tillerson (with Trump's help) has done a lot of damage to our diplomacy machine that will last years. So many good people have left and will not come back!

  7. From Briefing :

    ~~" Noticed that Valeant (VRX) priced senior notes at a whopping 9.25% coupon. The deal got run over with demand, as co was able to sell roughly double the amount it originally planned."

  8. Interesting news day for sure.  Its spring break here in Texas.  

  9. Good Morning.

  10. Good morning!  

    The LTP gains (see above) make me nervous because, if you multiply our little $500K by 100M that's $50Tn – about the size of the markets and if the markets made 100M x $32,000 in two days that's $3.2Tn and I have to ask myself – from where?  Where the F*ck did $3.2Tn come from?  Obviously, it didn't and, just as obviously, it means these gains are built on no realistic foundation at all.

    Keep in mind that $3.2Tn would be the entire planet's GDP growth in a great year and the stock market is a small portion of Global Wealth yet it sucked up all the potential gains of 2018 in 2 days?  This is what a bubble is folks!  

    Anyway, all we can do is lie back and enjoy it for now.  Fortunately, the STP is self-hedged and holding up pretty well, so we're not giving it back on the other side.  Even the OOP is now up 3.5% though and I'll do a full review over the next couple of days.  I'm not taking credit for it, it's like shooting fish in a barrel when the market is like this – just have positions (diversified) and you'll make money.  

    Oil turned back up from $60.75 and now back to $61.50 where we shorted but I'd let it play out before taking another stab at it.  /RB hit our long spot at $1.875 again but back to $1.89 already and /NG topped out at $2.92 (so far) on /NGV8 and /NG is about 0.10 below it. 

    Dollar back to 89.735 is helping everyone – even gold and silver are up again and /KC, of course, a winner over $121 (tight stop there).  

    Congress/StJ – I think, if Trump is proven guilty of collusion, the GOP Members of the House Intelligence Committee would be just as guilty or at least of obstruction but more like treason if they purposely tanked the investigation (as they obviously did).  If the Dems take back the House, they will investigate the investigators.

    VRX/Albo – I don't like the pricing or the amount they sold but still long the stock as it's priced for BK (which is why they have to borrow this way in the first place).  Hopefully, in a year, when things normalize, they can refinance at reasonable rates.

  11. Phil/index illgotten gains

    Regardless, time for new levels on our charts? Or are you waiting for ‘sanity’?

    However, we have to take into account the supposed increase in productivity, tax gains for corporations, anticipation of repatriatin of money by the largest NASDAQ companies….maybe all these factors are playing a role in the market being up? 

    At least that’s what I am reading…wish I had studied economics instead of drinking ???? (beer)

  12. FU GE!!!!!

  13. HMNY? WTF

  14. Oh, here's why Tillerson was fired suddenly, in the middle of an overseas trip and forced to cancel important meetings that had been arranged for months:

    Tillerson Says Substance Used in Ex-Spy Poisoning Is From Russia

    And now this National Nightmare begins:

    • Larry Kudlow Emerges as Trump Favorite to Replace Cohn, Sources SayCNBC personality Larry Kudlow has emerged as President Donald Trump’s favorite to replace Gary Cohn, the outgoing director of the White House National Economic Council, two people familiar with the matter said. Trump may name Kudlow as his top economic adviser within a day or so, one of the people said. In addition to his duties at CNBC, where he is a senior contributor, Kudlow is a radio host, syndicated columnist and entrepreneur. He was an economist for Bear Stearns & Co. Inc. and served in President Ronald Reagan’s administration.

    Larry's also a pliable kiss-ass who will do or say anything Trump wants him to.  Even so, Team Trump will probably get him hooked on coke again so they can have full control.  As a side note, this will make Cramer even more insufferable as he now has a pal in the White House.  

    Damn, TSLA pulling back already.  I keep being greedy and missing my chance to short!  

    Stocks open higher as inflation stays in check

    • Stocks open with solid gains after the latest government data on prices showed inflation in check, with the CPI rising 0.2% in February, as expected, after rising 0.5% in January, and the core CPI also meeting expectations with a 0.2% increase, down from 0.3% in January; Dow +0.6%, S&P +0.5%, Nasdaq +0.4%.
    • Stocks seem little affected by the news that current CIA director Mike Pompeo will replace Rex Tillerson as Secretary of State.
    • European bourses are mostly lower, with U.K.'s FTSE -0.4%, Germany's DAX -0.2% and France's CAC flat; in Asia, Japan's Nikkei finished +0.7% but China's Shanghai Composite closed -0.5%.
    • In corporate news, Qualcomm -3.1% after Trump issued an order to block Broadcom's takeover attempt, citing risks to national security.
    • All 11 S&P sectors open higher, led by consumer discretionary (+0.6%), materials (+0.6%), tech (+0.6%) and real estate (+0.6%).
    • U.S. Treasury prices are higher following the inflation data, pushing yields lower; the benchmark 10-year yield is down 3 bps at 2.84%.
    • U.S. WTI crude oil +0.2% at $61.53/bbl.
    • The OECD will release new forecasts today for growth in major economies, and will likely raise its projections for the U.S. in response to the tax and spending bills passed in recent months.
    • While it's unlikely to incorporate the impact of new U.S. tariffs into its "Interim Economic Outlook," it could join other organizations and governments in warning of the dangers posed by a trade conflict.
    • U.K. Treasury chief Philip Hammond is due to present his Spring Statement today, but it's the first time the event will not feature the traditional "red box" and budget, which has been moved to the autumn.
    • Britain's economy in better shape than forecast, he's expected to say, while arguing that the U.K.'s national debt is still far too high and the need for fiscal prudence ahead of Brexit.
    • China has unveiled plans for overhauling government bureaucracy, combining some financial, competition and business regulators, as part of President Xi's efforts to strengthen Communist Party control over levers of power.
    • Since the beginning of last year, Beijing has cracked down on leverage and risky market practices, with China's various regulators releasing many new rules in attempt to rein in risks.

    China Creates Super Regulator for $43 Trillion Finance Industry. (videoChina is giving its central bank greater regulatory powers while merging the watchdogs responsible for banking and insurance, a key move in the nation’s campaign to curb risks in its financial sector.

    February Budget Deficit Surges As Interest On US Debt Hits All Time High

    NFIB small business optimism edges higher in January

    Redbook Sales Back to Lows: Growth of same-store sales slowed by 0.9 percentage points to 2.9 percent year-on-year in the March 10 week, posting the slowest pace in four weeks. Month-to-date sales versus the prior month were down 0.3 percent, while the full month year-on-year gain slowed by 0.5 percentage points to 2.9 percent, just a tick above the lowest reading of the year. Sales for Redbook's same store sample have fluctuated in recent weeks, pointing to some loss of momentum although still solid ex-auto ex-gas retail sales.

    • US markets suffered a sharp reversal in early February after notching a string of record highs, citing which all investment management companies have reported a decline in AUM for the month.
    • AUM decline has been in the range of 1-4%, with APAM AUM declining 4% in Feb, 2018.

    Hedge Funds Bet on VolatilityBullish wagers on VIX outnumber bearish ones for first time since 2016.

    Image result for german robot
    • Germany firms are struggling to fill around 1.6M job vacancies with nearly every second company is unable to find suitable candidates for job vacancies on a long-term basis and six in ten managers see the lack of qualified personnel as a threat to their business.
    • The government must increase its efforts to further boost the inclusion of women in the labour market, to expand vocational training and attract more skilled workers from abroad, DIHK manager Achim Dercks said.

    India inflation eases at 4.44% in February, relief to bond investors

    • India's inflation rate eased at 4.44% in February offering bond investors a temporary relief as the central bank can keep interest rates on hold for a longer time.
    • The sharp dip in retail inflation will propel monetary policy committee to keep the repo rate unchanged policy review in April resulting in a further easing of bond yields in the immediate term.
    • The RBI targets inflation over the medium term at 4% with an upper limit of 6% and a lower threshold of 2%.

    Rising money markets rates a boon for banks, and a bonus for investors

    • An increase in Treasury issuance in short durations, rising fed funds rate, and corporate savings moving onshore are all helping lift key money market interest rates. As T-bill yields rise, other riskier money market interest rates also increase, like Libor, and the unsecured bank commercial paper rates.
    • The tax incentive for corporate savings abroad to move back onshore has also reduced demand for short term bank paper, as those funds were large buyers in the unsecured markets, raising costs for banks to fund their balance sheets.
    • “Banks still need funding and they need to entice investors,”said Jerome Schneider, head of the short duration at PIMCO. He added, “We are in a new paradigm..” “..The clear focus for the market is where will incremental demand come from to meet this supply.”
    • Investors have responded, as rising yields increase returns on cash to levels we have not seen in a decade. Holdings in government-only money market funds has risen to $2.26T last month from $2.07T last year.

    U.S. Steel -3% as Vertical Group cuts to Sell, says upside priced in

    • U.S. Steel (NYSE:X-3.1% premarket after Vertical Group analyst Gordon Johnson downgrades shares to Sell from Hold with a $23 price target, slashed from $41, saying the shift in consumer sentiment on steel could mean Section 232 upside on U.S. hot-rolled coil prices has played out.
    • Also considering updated guidance - which was less than spectacular – and how multiples behaved "last time," Johnson surmises that the upside also has played out for X shares.
    • Analysts at BofA Merrill Lynch also downgraded shares earlier this month, but J.P. Morgan raised its stock price target to a Street-high $48.

    GE gets new Street-low price target from the JPMorgan bears; shares down 2%

    • via Notable Calls
    • "Breaking The Buck: How $1 Becomes $0.50 and Why the Great Reset is Not Quite Reset," goes the title of this morning's note from JPMorgan.
    • Normalized free cash flow per share looks to be in the $0.50 range vs. Street consensus of $1, says the team. More frightening still, JPM reminds that $0.50 in not a trough number as aviation is well off the bottom and healthcare is not that cyclical.
    • They cut their price target to $11 from $14.
    • GE -2.2% premarket to $14.77.

    Micron(MU), Nvidia(NVDA), Broadcom(BRCM) lead booming chip sector to seventh straight day of gains

    Credit Suisse launches coverage on Macy's

    • Credit Suisse notes that the "flurry" of initiatives by Macy's (NYSE:M) are only producing modest results for the department store operator in terms of comparable sales growth and EPS lift.
    • "M is doing a good job launching initiatives to stave off structural headwinds, but excluding asset sales/lower tax/53rd wk, ‘18 Retail EPS is still guided down -7% YOY," sums up the analyst team.
    • The investment firm estimates another 100 Macy's stores are at risk of being closed.
    • CS sets a Neutral rating and $31 price target on Macy's.

    Credit Suisse sees 20% upside on Nike

    • Credit Suisse launches coverage on Nike (NYSE:NKE) with an Outperform rating on its view that revenue bottomed out in FQ1.
    • The investment firm points to drivers such as the World Cup, diminishing U.S. sales headwinds and a higher sell-thru rate for the basketball shoes business.
    • "We think Nike, with revenues accelerating and naturally reversing margin headwinds driving upside to Consensus, will continue to trade at a premium to peers," writes the CS team.
    • Credit Suisse's price target of $78 reps 20% upside potential for shares.

    GBH: Amazon and Facebook could disrupt live sports broadcasting

    • GBH Research analyst Daniel Ives sees Amazon (AMZN +0.6%) and Facebook (FB -0.2%disrupting the live sports market.
    • Ives calls the next 12 to 18 months a “pivotal window” for the tech giants to secure professional sports program rights.
    • Ives: “We note in 2021, the year when the NFL, MLB and NHL media rights deals mostly end, will be the first major opportunity for Amazon, Facebook and other major tech streaming platforms to potentially bid on some of these rights versus the likes of traditional entrenched media/cable players.” 
    • Both companies have pushed hard into original content with Facebook willing to spend up to $1B this year and Ives estimating that Amazon could spend over $5B.  
    • Ives will monitor the Facebook deal to stream 25 MLB games to gauge whether streaming platforms can disrupt this market.
    • The analyst calls Google (GOOG +0.4%) and Apple (AAPL +0.8%) “wild cards” in the live sports battle and says Snap (SNAP -0.8%) and Twitter (TWTR -1.1%) are “tangentially in the mix.”  
    • Previously: Facebook in exclusive deal to stream 25 MLB games (March 9)

    Finland invests $1.04B in Nokia

    • Finland’s government-backed investment arm Solidium spent $1.04B on a 3.3% stake in Nokia (NYSE:NOK).
    • The collapse of Nokia’s mobile phone business drove a decade of economic troubles for its home country. Finland has started to recover and wants to help Nokia do the same with the investment. 
    • Nokia employs 6,300 people in Finland with the global workforce totaling around 102,800. 
    • Solidium isn’t seeking a board seat at May’s shareholder meeting but could take a seat in the future.      

    Apple(AAPL) hits a new all-time high and briefly climbs above a $925 billion market cap

  15. Jabob

    From Briefing :

    ~~ HMNY follow Up- early speculation on weakness is being attributed to comments from the CEO that could push back expectations for positive cash flows; Checking around to verify; stock trying to hold the $4 area 

  16. New Levels/Maya – See above.  I just told Japan we're going to pull back 15% – no need for new levels.  Yes, all those factors are valid reasons we should be at 2,400, not 2,800.  The main factor adding 15% is that bonds are so unattractive under 3.5% but we're two Fed hikes away from that.  

    HMNY/Jabob. Albo – It's basically a penny-stock start-up.  Up or down 10% is nothing.  The whole market cap is $128M but they have 3M subscribers at $10/month = $30M x 12 = $360M and certainly losing money but if they can show they are going to hit 6M subscribers then they are NFLX or AMZN and can really pop if people get enthusiastic about them.  

    Helios And Matheson CEO: MoviePass 'Will Be The Biggest Theater Company Without Owning Any Theaters'

    MoviePass hires former Viacom, Spotify and Comcast exec to head product development: Report

    Indexes turning down now – don't know why.  I'm short /NQ at 7,200, of course.  /ES under 2,800 is a good short too.

  17. thanks albo…

  18. Cramer even more insufferable as he now has a pal in the White House.

    Reminds me of this scene from Goodfellas, where Jimmy is so excited that Tommy gets made.

  19. Phil / StJ / GOP Congress Obstruction- Last night Palmer report posted an article along the same lines of thinking, specifically citing Comrade Nunes-

    "Last year Nunes raced to the White House in the middle of the night to give classified intel about the investigation to Donald Trump’s team, in the hope of sabotaging the investigation. Earlier this year he published an intentionally dishonest memo aimed at misinforming the public about the investigation. Now he’s led the charge in publishing this demonstrably false “exoneration” of Donald Trump and his associates."

  20. Short-Term Portfolio Review (STP) – Quite the moving target this morning – going up as I write it as the market dips but we go by the snapshot and, as is now becoming the norm (Norm!), the STP is our outperformer – up 40% as we have had excellent timing adjusting our shorts.  

    We got pretty aggressive on Friday and have lost a few thousand but, as noted above, the LTP gained insane amounts of money so we are simply locking in those gains and, even now, those thousands are coming back fast.  

    The main purpose of this portfolio is to protect the LTP and we do that by looking for things that make money in a down market but we also indulge the occasional short-term gamble.  The NFLX short calls are a bit of both…

    • NFLX – Not working yet but not not working and I haven't lost faith in reality.
    • TSLA – I forgot we had these, I love these!  They expire on Friday so we'll look to sell more on any pop.  It's picking up $5,250 on TLSA and $6,600 on NFLX that keeps this portfolio in the green and, since they tend to work well in a downturn, they also add to our hedges.  TSLA's May $360s are $15 so close to where we liked the short last time but I was greedy as we could have gotten $17.50 yesterday but I was waiting for $20.
    • Short Puts – As a group, all fine though SKT and ABX are down a bit.  These are things we used to fund some of our hedges and, if they all go worthless, they drop another $31,000 into our pockets.  That's on a $100,000 portfolio – these little plays really add up!   The best part is, if they fail – we just dump them to the LTP and make a trade out of it!  
    • DIA – I think we should buy those puts back and clear the slot for another sale on the next dip.  They are left over from a Mattress hedge we dismantled already.  

    • DXD – At the money with 4 months of coverage and our $12,000 outlay provides $40,000 worth of protection.  Currently down a bit.  
    • SQQQ – We rolled down the long calls and went half-covered so these will gain great if the Nasdaq tanks.  80 x the $5 gap is $40K and, over $20, we get another $20K at $25, etc.  

    So, on the whole we have about $80,000 worth of protection not to mention the $40,000 we already gained.  Keep in mind (see above post and LTP review to come) that we only have 20% of our CASH!!! deployed in the LTP so that too is a hedge as we're HAPPY to DD on almost any of those positions in a correction.  

    I would say we are adequately hedged, certainly not over-hedged and, if this wasn't such a relentlessly bullish market – I'd be inclined to hedge a bit more but it's very easy for us to add or adjust if those 50 dmas break down.  

  21. Palmer/Mike – Well he's a bit slanted but generally very good analysis and very rarely gets his rumors wrong.  I've kind of lost interest in talking about Trump the same way I lost interest in talking about Bush Jr once it was obvious to all what a train wreck his administration was.  No point in saying the sky is blue….

    Dollar even lower (89.65) but not helping.  

    /KC topped out at $122 – Congrats to our weekly players!  

  22. Butterfly Portfolio Update:  Yawn!  

    Sorry but I still don't like the conditions so I'm not too keen on this strategy at the moment.  On the bright side, our old Butterfly Portfolio, over the course of 4 years, had just 25 positions in 48 months: AAPL, BTU, COST, CTSH, CZR, DIS, GIS, GILD, GS, IBM, JPM, LNC, MSFT, OIH, PG, T, TGT, TSLA (surprisingly profitable but we ditched it quick), TWTR, TXN, UNG, V, VLO, WMT and WYNN. 

    So we only average adding a position every other month as this is a VERY CONSERVATIVE portfolio geared towards generating income for retirement accounts, where losing money is NOT GOOD.  So, rather than risk losing, we go very slowly into things.

    But I am looking for another entry – certainly by earnings I'll find something that should flatline for us (while paying nice front-month premiums).

  23. QLD puts look complacent to me. You can buy April 78 puts for 1.20 and the issue was trading as low as 67 on 2/5

  24. Phil, the DIA chart – my predictions for remainder of 2018

    1) 2018 will end lower than it started. The big -30 to -40% crash may hit this year or next, however

    2) volatility will stay elevated

  25. Wheeee, that was fun!  

    Very nice profits on /NQ ($2,000/contract) and /ES ($1,250/contract) – not bad for 2 hours' work!  

    Now we're at 7,100 on /NQ so should bounce.  Lined up with 25,125, 2,780 and 1,595.  Fresh horse would be 2,780 short on /ES with tight stops if ANY of the indexes go over their lines.  

    If anything, you could go long here for at least a weak bounce (20 and 40 points on /NQ)

    QLD/BDC – Yeah, it's 2x but should be very well on a small dip.   Not too liquid though.

    Big Crash/BDC – I don't see us going that low.  There's plenty of good in the economy – it's just that we're ignoring the bad.  

  26. QCOM I wonder if it is not time to slip in a short put sale for that stock. A Jan 20 55 put at 7.05 does not look to bad. It places you at 48 below the Sept 17 50.92 low.

  27. QCOM/Yodi – They are up from $50 before all this sale nonsense started.  At $60 they're at $89Bn with $2.5Bn in profit last year and likely lower this year and next so we're talking 40x earnings and AVGO has $100M to buy other companies with and no way to expand their business other than trying to take it from QCOM now.  No thanks!  

  28. Phil, -30/-40% isn't too much of a correction considering the market has tripled (+200%) since 2009. On a log curve you'd barely notice it. And stock prices are a prognostication of future earnings, which CAPE ratios indicate are off the charts right now.

    What's missing more so is negative narrative stream that you point out consistently from day to day (note that we are agreeing here). For example, remember the mini stock dump of August 2015? Not much changed from July to August that year except people began to question China growth and there was some uncertainty about US interest rate increases (but not much). Fast forward to today where Xi has become dictator for life (always bad for a country and their economy, generally because dictators focus much more on belligerence and war than economic dev), and the US economy uncertainty around rates is 10X what it was 2.5 years ago, and …. trump …. kind of a "WTF?" shrug with anything that guy does. In 2015, the Dow dropped 10% because some folks had sudden "china growth doubt" pangs, and this week Xi becomes a dictator and now we don't re-evaluate this at all? That's just weird. How about tariffs? Another shrug.

    Add to that the nature of currency itself may be beginning to change; a dynamically shifting, more economically integrated global society is beginning to tackle issues like climate change in new and different ways (both of these are subsets of a shift from individual nation-state based manufacturing dominated currency-economies, to a global Knowledge Economy/currency paradigm) and it's not just changing but accelerating. I'm not saying I'm right, because no one is except in hindsight, but just what I said right there, that's a LOT for a modern day investor to absorb.

  29. My interview last night on CNBC/Japan – pretty funny.  

    This is funny too:

    It's going to be hard to get good quality people to quit their multi-million Dollar jobs just to come and be insulted and fired by Trump.  

    Shrugs/BDC – I agree there are so many things being ignored but global rising wages is a huge thing that can have legs for years.  It's been decades since wages went up and we could hit a 90s kind of swing if they begin to go up significantly.  Anyway, we don't disagree – except in the degree…  cheeky

  30. Phil,  I was looking at QCOM as well.  I feel it is early but if their NXP acquisition goes through. Would you feel the same about Yodi’s suggestion.  I feel if this breaks $50, we might get some decent set ups.  Net pricing in the low to mid 40s…

  31. QCOM/Learner – Well $50 is better than $60.  I just can't see paying this much but, if I can sell $40 puts for $5+ – then we're getting into my value ballpark.

  32. Strong bounce on /YM and /RTY with /ES and /NQ between weak and strong so far.  Watch out if /ES fails 2,785 – I'd call that strong from 2,800 to 2,775.  /NQ, of course, has 7,120 and 7,140 and /YM 25,400 to 25,100 is 300 so 25,160 and 25,220 is the key (a bit over now).  /RTY I"d say 1,606 is strong 1,603 weak.

  33. Saudi Aramco international listing looks increasingly difficult: sources

  34. JO  I bought in March 2017   when it was $19 /20  2000 shares and sold 2019 $ 15 puts…..any suggestion?


  35. Phil/AAPL   Hi Phil.  Advice please:  long 20 Jan130 calls (basis 23.6); long 5 Jan 140 calls (27.2); short 5 Jan 175 calls (10); short Jan 180 calls (11.42).  Also 10 Jan20 150/180 BCS (13.50); short 10 Jan20 130 puts (10).  Suggestions?  Thanks.

  36. Advill, not sure if you are aware but JO is going the delisted April 12th and replaced with BJO.  I'm being stuck with JO from $18 down as well.  Going to look to get out in the next week or so as I imagine the liquidity in it will start drying up over the next month. 

  37. ultyguy--what doe it mean that they will be rplaced by BJO?

  38. MCD – beginning of the end? One of the benefits of their frozen patties, was.. near universal sameness, of good (if not great) quality, dependably, worldwide… and SAFE.  Toss that out and… they're on the slippery slope.

  39. STJ – This article agrees with what you said about Tillerson.

  40. Strong bounces failed – now we see if weak bounces fail, which would indicate we're probably going to break lower.  

    DAX was down 2% for the day, by the way:

    JO/Advill – Never sold calls?  Don't know what price the puts were but they are now $1.25 and had you sold calls for $1.25 (probably more) your net would have been $16 and you wouldn't be worried, right?  Everyone needs to stop singing for the fences and just aim to make nice, reasonable amounts!   

    Anyway, they don't pay a dividend so no need to own them.  I'd ditch the stock for $15(ish) and that's an $8,000 loss and the 20 Jan $15 puts at $1.25 can be rolled to the 2020 $17 puts at $3 and it's the same net $14 but you do much better if JO goes higher and it drops $1,250 in your pocket.  

    So now you need to make maybe $5,000 to get even and 30 of the 2020 $14 calls are $3 ($9,000) and 25 of the 2020 $17 calls are $1.80 ($4,500) so you're in the $9,000 spread for net $4,500 and then you have no reason at all not to sell 10 of the June $15 calls for 0.70 ($700) and that's 94 days and you have 675 to sell so 7 sales like that puts you in a net free $9,000 spread.  You only are selling 5 uncovered calls, so even a spike up shouldn't bother you much (like we had in June/July).

    Oops, I forgot about the delisting.  I'd certainly shut it down and switch in that case!  

    BJO, unfortunately, only goes out to Sept but same concept as you can sell 10 of the Sept $49 puts for $3 ($3,000) and buy 25 of the $44 ($5.20)/$48 ($3.70) bull call spreads for $1.50 ($3,750) and that pays $10,000 at $48 (where it is now) and you can sell 5 April $50s for $1 ($500), which you certainly don't need but why not?  

    Let's add that to the LTP as it's a nice spread worth watching.

    AAPL/Taihu – Well, you seem to have 25 longs so I'll assume it's 10 short Jan $180s.  Not sure what the problem is though, they seem to be on track but it's a mess.  If you leave them alone, you'll clear about $75,000 off maybe $27,000 you laid out – nothing wrong with that.  

    If you feel the need to gamble more, I'd cash the 20 Jan $130s for $54 ($108,000) and buy 30 2020 $160s for $37 ($111,000) and roll 5 short Jan $140s at $45 ($22,500) to 10 short 2020 $190s at $22 ($22,000).  The 5 short Jan $175s are fine and the 10? short Jan $180s too as they can be rolled and offer nice protection otherwise.  That means for net $3,500 you end up with 10 2020 $160/190 bull call spreads and 20 2020 $160 calls covered by 15 Jan short $175/180s that you can, of course, roll much higher if things go well.  

    The longs pay $90,000+ at $190+ and, since you have 5 uncovered, you can sell 10 of the May $185s for $5.75 and put $5,750 in your pocket.  Do that 7 times and it's a bonus $40,000 and, if you are doing that, you can man up and roll the puts to the $160 puts at $13 ($13,000) and pick up about $7,500 there too.  

    As to the 2020 $150/180 spread, it's redundant so kill it if you don't want to be over-exposed or keep it for what will probably be an easy double.  

    MCD/Scott – Not at all.  Fresh beef is way, way better though I guess some people like the "sameness" but the fact that people all over the world pay $10-15 and more for gourmet burgers that are simply fresh beef tells you why MCD would like to get into that business over time.  

    Testing the lows again already.  This is fun!  

    Gotta love that 5% Rule…

  41. Japan video – that chick is awesomely bilingual

  42. I know, I thought that was cool but very distracting as I know some Japanese words so I'd be spending too much time reconciling what I thought she was asking me (in Japanese) with what she actually asked me in English.  

  43. Money Talk Portfolio Review:  Well, this one's easy as I only make changes for the show.  No show this month so no changes!  

    We are down about $6K from last time we looked as ABX fell considerably and GE (both new additions) a disappointment so far but the targets are fine and the SQQQ hedge is fine too.

  44. I’m back to 1x on the /NQ shorts. That was a nice move down. Patience paid off, got my avg up nicely. Learning…

  45. It appears rotation from equity to fixed income, at least on short term.   

  46. Albo – It's pretty much acknowledged now that State was dysfunctional but the same can be said of the White House. This is in general a catastrophic presidency and Tillerson is simply another symptom of the general cancer. We were supposed to get the best people and instead we got the worse….

  47. Thanks Phil.

  48. PG&E, Edison surge after California to work toward updating liability rules

    PG&E (PCG +7.2%) and Edison International (EIX +3.3%) spike after California's state government unveils a proposal to address impacts of natural disasters and climate change, which could reduce liabilities faced by utility companies.

    California's Gov. Brown pledges to work with legislative leaders and policy committees to craft solutions to, among other things, "update liability rules and regulations for utility services in light of changing climate and the increased severity and frequency of weather events."

  49. Options Opportunity Portfolio Review (OOP):  $96,473 is down another $1,114 (1.1%) since our 2/15 review.  Part of the  problem is we added a lot of leveraged positions and there's always a small loss when you enter an option trade as you suffer from the difference in the bid/ask spreads so, the more positions you have, the more you lose.  

    We now have 28 positions and, because we bought back a lot of short calls, we have used most of our cash at the moment so we need to evaluate things from the perspective of putting some cash back into our pockets.  

    • SQQQ – Our primary hedge is naked and quite large but I think we might need it so no changes.  At $15, we're at the money and, if the Nasdaq drops 10%, SQQQ will go up 30%(ish) to $19.50 and these hedges would be $18,000, which is only $4,800 more than they are worth now so these MUST be covered when we get a nice dip.  The Sept $20 calls are $1.70 and that would drop $6,800 back in our pockets and we'd still have a $20,000 spread but at net $6,800 – much more sensible!  Our goal is to sell 30 Sept $20 calls for $3 ($9,000) on a drop.  
    • AAPL – Not worried about these at all, still good for a new entry.
    • GPRO – I've lost faith in them.  Even though it's small, let's close it out and free up a slot.  
    • CHL – New and still good for a new trade.  
    • FTR – They suspended the dividend so now it's just a net $2,850 entry that will pay $12,000 if called away at $8 in 21 months.  I guess we'll keep it…  Only net $3,870 now so another $8,130 (210%) left to gain as a new trade.  

    • ABX – I can't believe how low these guys are.  Even at $15 we get $5,000 back and currently net $1,780 so great for a new trade and hopefully doesn't get any "greater" than that!  
    • ALK – This is why I love them.  Potential for $5,000 at $70 but we had a net $7,300 credit as we double sold the puts (to pay for the SQQQ spread) so we'll make $12,300 total at $70 and currently net -$3,415 is up $3,885 from our original credit but still great for a new trade as you make $8,415 at $70.

    • BBBY – Another one almost at our target but only net $2,277 out of a potential $7,500, so more than $5,000 more to gain means 200% upside potential as a new trade, even after we already made $728.
    • CBI – Not going anywhere yet but I would think tariffs will be good for them – as will infrastructure spending if they ever pass it.  Net $1,300 currently and $10,000 at $25 would be a lovely, lovely 638% gain if all goes well.  
    • CDE – Now here's a gold miner that's doing well!  Only net $1,350 for this $6,000 trade makes it still great upside (a triple) as a new trade.  
    • CG – Still good for a new trade at net $775 with a $6,000 potential return – more than 5x as a new trade.  
    • CHK – I have a lot of faith that LNG exports will boost prices for Nat Gas and all these companies will take off.  So far, not good and we're down about $1,500.  As a new trade, you could sell the $3 puts for 0.90 and still net into the $5,000 spread with an 0.34 ($850) credit – that's good for a new trade!  

    • F – Nice dividend-payer, still good for a new trade.  Roughly $11,000 net and $18,000(ish) at $11.87 is +$7,000 and, every quarter, we get a $225 dividend while we wait!  
    • FNSR – On track but not much profit so far.  Net is just $3,950 but, if all goes well, it's a $14,000 spread.   Needless to say, very exciting for a new trade that can make over 300% if FNSR just nudges over $20.  
    • GE – Big loss here but I expect big gains one day.  One day….  At $20 the short puts would go worthless and the longs would be $21,000 vs about $4,000 now so $17,000 upside potential if GE goes up 50% BUT, let's say they go up $3 and we can sell the $18 calls for $2.50?  Then we're put $7,500 right in our pocket and our return at $17 would still be $12,000 so, of course that's our goal for a short call sale (now $1.50) 

    • GNC – Just made a big partnership in Asia so I expect good things.  We're aggressively long here and I still like it as a new trade.  
    • HMNY – Not good so far but a very speculative stock (Movie Pass people) and it's a $12,500 spread we paid $1,250 for so a 10-bagger if things go well.  Even better as a new trade – it's net $0 now!
    • HRB – Boring but usually a good play in the spring (when people remember they do taxes).  Only a $5,000 spread, already in the money and currently net $1,250 so a neat 4x return if they hold up.
    • IMAX – My hands are sore from banging the table on this one.  It's a $10,000 spread that's 100% in the money so all IMAX has to do is hold $20 through Sept and net $5,775 becomes $10,000.  We're already up $1,500 from our $4,300 entry.  You don't have to swing for the fences to make great returns!  

    JO – The ETF is being discontinued so we have to shut it down and replace it with BJO:

    • Sell 5 BJO Sept $49 puts for $3 ($1,500) 
    • Buy 15 BJO Sept $44 calls for $5.20 ($7,800) 
    • Sell 15 BJO Sept $48 calls for $3.70 ($5,550) 

    That's net $750 on the $6,000 spread and we only have to wait 6 months to collect!  

    • LB – Our Trade of the Year for 2018 and we just added it, so good for a new trade and we paid net $1,000 for the $10,0000 spread that's more than half in the money already.  It's like having the keys to a printing press at the mint!  
    • NAK – Very speculative and killing us since the EPA gave them a hassle about their permit to strip mine Alaska and kill all the salmon but we're betting our President let's it go through since the environment is for suckers, right?  At the moment, it's net $1,400 for 10,000 shares so really just 0.14/share so could be a MASSIVE winner at $2, where we'd be half called away for $1 and the puts go worthless.  Despite showing a $5,000 loss, our break-even is about $1.15 and the stock is 0.95 so we just have to wait for the premium to melt away. 
    • NLY – Still good for a new trade and pays a strong dividend of 0.30 ($300) per quarter while we wait..  We haven't even covered this yet because the 2020 $10 calls are only 0.85 and the $12 calls are 0.20 so hopefully we'll be able to sell the $12s for $1 on a move up.
    • SPWR – Another aggressive play that I like as a new trade.  Even if they just hold $7 we collect $6,000 against our $5,600 outlay but we made money on the short calls already and we'll sell more at some point.  

    • THC – These guys blasted higher and we paid just $525 for this spread in Jan and now it's net $5,700 but it's a $12,000 spread so we've got $6,300 coming to us still so I guess it's good for a new trade but 110% potential return sounds really dull after we're already up 1,000% in 2 months!  cheeky
    • TZA – Hedges are supposed to lose money so this one is doing it's job!  We got more aggressive and have a good $40,000 worth of protection here, currently priced at just $6,000.
    • VRX – New addition, good for a new trade with 10-bagger potential off the current net.
    • WPM – Last year's trade of the year that we cashed in early (twice) so 3rd time maybe we'll actually get to keep it to the end?  Though it's up $1,000 at net $7,000, it pays $20,000 at $25 and only half-covered from there so great for a new trade.

    Well, you can't make an omelette without breaking a few eggs and we broke a few to establish our positions but they have well over $100,000 (100%) of upside potential and we're very well-hedges, which is why we don't mind being heavily invested.

    From this point forward, however, we'll need to start making money before we jump on new trade ideas.  

  50. I think i recall some talk of high yield bonds on here before. Just read this interesting article on how high yield bond mutual funds are using high yield bond ETFs as part of their "cash component". Raises some interesting points would love to hear others takes on it?

  51. You guys have no idea how exhausting that is!  

    Great job Jeff and congrats.  I was too busy writing the review to get back in so I missed the sell-off I've been waiting a week for (well the 2nd half of it).  

    You're welcome Taihu.

    PCG/Pstas – Nice break for them! 

    High-yield/CRS – We were shorting JNK last year but it never came down.  Too annoying to play.   It's kind of like the VIX, you have to just be persistently short until you finally get paid.  

  52. Phil; please post the second half of the current OOP.  Thanks

  53. Just refreshed and saw it.  

  54. Yeah, I screwed up on the first print.

  55. forgot to post the above mentioned article link:


    "I think i recall some talk of high yield bonds on here before. Just read this interesting article on how high yield bond mutual funds are using high yield bond ETFs as part of their "cash component". Raises some interesting points would love to hear others takes on it?"

  56. Phil / QCOM – I believe we are at a buy point ( or if it hits  55).  Much of the headwinds are subsiding .   They are on track to close the NXP acquisition, they getting closer to resolving the issue w/ customer relative to royalties my view is in the next 2 to 4 quarters and they suggested as much in con call.   They are the leading technology co in the wireless comm and soon to be in the internet of things and autonomous cars with NXP.  NXP is a TOP player in this space and they are adding this to an already world leading technology business.  They are about to lap the quarters where apple and huwei stopped paying….and even in the quarters where they were not getting paid, the business was still growing.  Earlier with all the issues so blatant ( large question on NXP acquisition, major changes to royalty model, unsure where next growth comes from) they were in the mid 50s….  I don't see any way the profit does not improve, and even if the royalty payments are changed, they will have the best terms in the industry due to the technical leadership.  They a huge technical moat, and significant switching costs…..  I was into them earlier in the mid 50s and sold out in the high 60s shortly after the offer from AVGO popped the stock.  I've been wanting to get back in…. I think this is a $75 to $80 stock…. 

      They are in a much better position now than them in Q4 of last year.  I'm starting a new position in them now with small increments…..

  57. NXP/Batman – Well, NXPI does have a way better p/e than QCOM but they are also borrowing a lot of money to buy them and now it's possible AVGO bids for NXPI, since that's something they wanted too.  I agree I like them better with NXPI than without but we'll see how firm with looks.  QCOM needs several approvals to get NXPI and that's why they are trading under the $127.50 offer and, going forward, there's the integration costs and, of course, loan QCOM will have to pay back on their $45Bn all cash offer.  

    Anyway, as I said, net me in for $35 and I'll be happy to invest along with you!  

    Just picked up 4 long /YM at 25,000 – playing for the bounce of 80 (weak) or 160 (strong).  

  58. nice headline, "New Jersey’s New Budget Aims to Raise Taxes on Almost Everything"

  59. Nice interview on CNBC Japan, Phil.  FWIW, the announcer translated your comment, "Markets are insane" as "markets are irregular".  I was hoping she would translate your comments directly for the added impact, but it figures the Japanese version would be more measured and restrained, LOL.  

  60. Good morning! 

    Nothing like waking up to a nice $1,370 gain on the 2 /YM I went to bed on.  Hit our 160-point goal so no reason to press our luck.  

    Strong bounces have taken us also to /ES 2,780 (which is a good long or short line with tight stops), 7,115 and 1,605.  The Nas fell 150 points to 7,050 (but I missed the last $1,000!), so the bounces there should have been 30 and 60 to 7,110 so the same pretty perfect strong bounce all around.  

    As we paused at the strong bounce lines – now it comes down to news and data flow to see which way we favor.

    VIX more than a strong retrace hints that we're still bullish but just watch the lines, wait for 2 to go over and then grab preferably /ES with a stop below 2,780 or /YM as it crosses over 25,160 (the strong bounce line) with tight stops below.

    Japan/Kinki – LOL!  I don't think this is going to fix the markets:

    Image result for medicine for irregularity

  61. Phil,

    What I struggle with on the 5% Rule is the timeframe to use to calculate the levels. Can you comment on that? How do you choose the time frame?

  62. API inventory numbers are a bit bullish: Crude: +1.156 mb Gasoline: -1.262 mb Distillates: -4.258 mb Cushing: -156K mb

    Remember, it's the Net that matters but the market tends to react to the headline crude number first. 

    Timeframe/Japar – Ah, there's the art part to it.  You can go from spike to spike in whatever time-frame you want to use so, looking up at the Dow, if we're day-trading, we look at the hourly or 5 min chart and the then we are looking for bounces in similar time-frames.

    So the above chart is hourly and we look at yesterday's 25,400 to 25,000 as a 400-point drop for a day and we expect to see (as we played last night) and 80-point weak bounce or a 160-point strong bounce in less than a day (really less than half a day as a day drop has to recover in a day or two days tops – otherwise it's a weakening trend).  

    The previous drop was 25,500 to 25,200 and that should have had 60 and 120-point bounces and we pretty much nailed 120 and failed (with spikes above) so it's a classic step-down pattern at the moment (like a ball bouncing down stairs) and failing those strong bounce lines this morning could indicate another big drop ahead – probably testing 24,500.

    Since 24,500 is 1,000 points from the top, those bounces would be 200 points to 24,700 and 24,900 so we'll see what kind of support those provide on the way down (if we go down).  

    Now, in this case, spike to spike is also consolidation to consolidation but consolidation lines trump spike lines every time.  So usually, with the 5% Rule, I don't pick a time-frame first – I look for good consolidation lines across various time-frames and, of course, compare that to our Big Chart Lines, which are calculated based on the true value of the indexes and, when those align, then we know we have a great channel to play in.

    Here's where we were last week:

    Once we broke over the strong bounce line we flew up but, based on the Must Hold line at 2,200, the 25% line is 2,750 so that's the significant line we look for now:

    We blasted right through that on Friday but 2,640 (20% line) to 2,750 is 110 so we look for 22-point moves as significant which means 2,772 is a weak overshoot and 2,794 is a strong overshoot but, over that and we're looking at the 30% line again at 2,860 where the floor to that channel would be the 25% line (2,750) and the overshoots become the strong bounce lines.

    In a normal market, we make small, incremental moves each day towards these goals.  These days, we blow through them and fail them spectacularly, which is why we have to talk about 5% ranges like they are nothing!

  63. /RB/Ult – 0.02 is a way overreaction when there was a huge build in oil that offset the gasoline and $1.92 has been failing all month so just another opportunity to go short on the enthusiasm..  

    Below $1.91 now so that's the stop for a quick $200+ per contract locked in (tight stops all the way down).