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Trade War Friday – “You Maniacs, You Blew It Up!”

Image result for you maniacs you blew it up gifWell, Trump has started World War III.  

Sure it's "only" a Trade War, at the moment but that's how World War I started and this trade war is far bigger than that and the second biggest trade war in the 20s and 30s led to the Great Depression which clearly led to World War II so I don't think I'm jumping the gun declaring this World War III – just give it some time...

One good thing about wars is they create a lot of jobs and also they create a shortage of workers so we will be sick and tired of all the "winning" as this thing drags along over the next few years. Trump is heading off to kiss Putin's ring in 10 days and, now that he's declared war on Europe and China, Trump will make a trade pact with Putin (who we're supposed to be santioning) and declare it a victory for America and half the people in the country will actually believe that.  No really, they will! 

We shorted the Russell (/RTX) futures early this morning at 1,685 and they fell back below $1,680 for quick $250 per contract gains and the 8:30 Non-Farm Payroll Report showed 213,000 jobs added in June so the Futures are heading back up and hopefully we can short them again at about the same highs (1,690) or short the S&P (/ES) futures back at 2,745 as there's really nothing good about any of this as the strong jobs keeps the Fed on the table despite the tit for tariffs going on in the background.

The market is still complacent as China has not officially retaliated against our initial $34Bn worth of tariffs (at 25%) but the People's Daily (official paper) said the customs agency was carrying out a plan announced last month to impose 25% tariffs on a $34 billion list of American goods including soybeans, pork and electric cars.

Image result for iphone trade chinaTrump has already announced another $16Bn worth of tariffs to begin in two weeks and says the US is ready to trigger another $200Bn worth of immediate tariffs followed by another $300Bn more if Beijing does not yield bringing the potential total to $550Bn, more than the $506Bn worth of goods China shipped to the US last year (half was from iPhones and such we asked them to make for us, so imagine what complete assholes we look like to them!).

Imagine that you are running a business and you get a new CEO who gets angry and calls your manufacturing partner and complains that you buy a lot of stuff from them (the things you sell) but they don't buy enough stuff from you to balance things out. Let's say you sell fish tanks and they make 100,000 fish tanks a year for you for $200 each so $20M but they "only" bought 10 fish tanks from you for $2,000 – so you have a trade imbalance with your manufacturer of $19,998,000, right?  

Your new CEO says you can't tolerate this so he puts a tariff on fish tanks of 25%, a tax he will collect and give to the Top 1% Board Members in the form of tax breaks and the 25% will either come out of company profits or be passed on to your customers and he will keep the pressure on the manufacturer until they start buying another $19,998,000 worth of fish tanks.

That would clearly be insane, right? All of your customers would be hurt, your company's profits would take a dive and the only people we're helping are the people who get tax breaks paid for by the tariffs which is really just another way to transfer money from the poor to the rich from our con man President.  

Image result for trump putin puppet gifAnd no, it is not "more complicated" than that. In a truly free economy, we buy what we need from the low-cost producers and sell to the customers that are willing to pay and EVERY SINGLE TIME Governments have attempted to interfered with that process has led to a complete and utter economic disaster.

But this trade policy is not about "fixing" anything other than robbing the poor and giving to the rich along with forcing a situation in which a trade deal (rather than sanctions) with Putin suddenly seems like a "win" for our puppet President.

I'm disgusted – how about you?

- Phil



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  1. Things are holding up until they don't… They were holding up well in October 2000 and July 07.

  2. And Trump is a real sociopath – making fun of the #MeToo movement yesterday. Some women got raped for crying out loud. The GOP has now lost the women's vote by a wide margin. It's really now the party of old white men.

  3. I guess we keep on selling premium:

    “Our expectation at the moment is that you won’t have any real return from U.S. equities over the next 10 years,” said Dan Kemp, chief investment officer for Europe, the Middle East and Africa, at a company event Wednesday in London. In the chart he shared below, the black line is pretty close to zero for American stocks.

  4. Good Morning.

  5. stjean – those knuckle dragging, old white guys, usually have a willing female partner in tow….they can't be insulted.  :(

  6. 1020-Those willing "partners" are divorcing at record levels. Droves of men are on their own including my EX!! Over 50 are exiting at unprecedented levels. As far as #Me Too when I was growing up NO meant NO and if they crossed the line many went to jail. Being too passive as a female is very dangerous then and more so now.. IMHO!

  7. Phil,

    What are your futures positions? Seems like a lot of bargains in the commodities 

  8. Pirate – I hope they are leaving! Women like my own Mother (79) have been putting up with my dad's crap for what seems my entire life. Now while I can't speak to the amount of BS other family and their friends have put up with, I've have seen a HUGE change in the attitudes of the older women – Agreeing with their old man!  

    This is what I see with my middle class in-laws and friends in Las Vegas and my well to do folks and their friends….. and they live in a deep blue San Jose/ Los Gatos/ Saratoga part of the world!  :(

  9. It seems that getting old does damage to body AND soul! 

  10. We can all learn from others mistakes. As we age, Body and Soul just need a little extra up keep. :)

  11. …and get rid of the 'garbage' you're living with….

  12. 1020 NOt surprised by your observations at all. Most couples do reflect and most times compliment their partners deep attitudes, beliefs, prejudices especially if their whole lives were spent in the raising of children, which is a a full time occupation sometimes for both partners. However the maternal was the usual main support for children, though thankfully that is changing. Women identify with that role and therefore really don't have the time and energy to pursue their own interests and develop intellectual capacity. Therefore it is much easier to adopt their spouses attitudes, interests. I find the more educated the women and especially those with professional lives before, or behind them are "free" thinkers and see alternatives to the dead ends they find themselves in.  AND have their own monetary assets to rely on.

  13. Nice few days action in GILD & CELG.

  14. Good morning!

    Futures look flat, Nas up because they haven't been sanctioned yet.

    Big Chart – Still shakey and still doesn't matter until Tuesday.

    Futures/Japar – Just long /SI and /KC at the moment but will short /NQQ at 7,160 and, as noted /RTX 1,690 with stops over 1,700.

    I just can't get over the complacency the market has for this trade war stuff.

  15. Phil, The self proclaimed king of these United States, the one with no clothes, is going to eat crow and back down after he gets paid by the Chinese, and patted on the head by his Russian puppet master Putin. Hence the tariff complacency. 

  16. pirate – That's why (imho) having a career before having kids is the best way to go. It would allow for more personal and relationship growth to take place before taking on the HUGE responsibility of having and raising kids. The stay-at-home 'professional' needs to replace stay-at-home Moms!

    We all need purpose. That should not apply to just raising kids….


    ..and remember to take out the 'trash'… ;)

  17. Holy cow !   FTR is up 6%.

    What is going on ?

  18. 1020 I agree. Your right on, but the trend is "single" head of households now. Women with No partners. I now have 2 Grandsons who were raised with no Dad's. Both Mom's working, but not professionally. You want tough and that is what is happening. They are OK but have psychological difficulty with the absent father's noninvolvement basically their whole life. The demographics as well as everything else is changing. FAST. With the structure in this country I'm not sure about the future for young people. Thankfully the "Grands" are very bright. My hope is with them!!

  19. Nq/Phil- any stop above for nq shorts and holding over weekend?

  20. Phil any positives on VOD?

  21. FTR-Has almost a 47% short interest. There was an SEC Filing on 7/5 an 8- K that says all assets are being turned over to security holders? Not quite grasping, but it looks like a financial new agreement. JPM so possibly a short squeeze going on with volume low?

  22. Thanks, Pirate.  Interesting…..

    Meanwhile, my CTL keeps inching up.

  23. albo—looks like you are winning the bet?

  24. "selling  premium" via vertical call spreads – what key factors make some names more attractive than others?  ATVI, ENDP, AAPL, NTGR, look OK? for new vertical call spread positions -  strike price? expiration date?

  25. Jabob – As you recall, I bet Phil that CTL would get to 22 before FTR got to 12.  

    Looking good so far, but as Yogi said, " It ain't over till its over."

  26. ftr almost hit 12 first… 

    so close..

    but no cigar

  27. Phil/HBI,

    Question on the HBI trade.

    HBI (BCS of  15/23 and 20puts) trading at 22.26 and whole position is showing $5900 gain in 60 days.

    Could you please comment whether any adjustments needed at this point or we just wait for more premium decay? Thanks.

  28. Wow, these trade wars sure are great, we should have them all the time.

    FTR/Albo – Always confusing with those guys.

    /NQ/Dave – 7,175 should be the top but who knows?  May as well be closed this week with this volume:

    Date Open High Low Close* Adj Close** Volume
    Jul 06, 2018 273.140 274.930 272.715 274.815 274.815 15,491,746
    Jul 05, 2018 272.170 273.180 270.960 273.110 273.110 56,809,200
    Jul 03, 2018 272.870 272.980 270.420 270.900 270.900 42,187,100
    Jul 02, 2018 269.510 272.040 269.240 271.860 271.860 63,554,800
    Jun 29, 2018 272.120 273.660 271.150 271.280 271.280 97,592,500

    Anyone can move the indexes when there's no friction.

    VOD/Yodi – Well, they are now 2nd largest to CHL and, so far, not blocked by Trump, so that's a plus.  Nice 7.35% ($1.79) dividend too at $25.40.   India has been a drag for them but some M&A activity there should kick in next year.  The problem is it's hard to say if they are making money and it didn't matter that they lose $6Bn in 2016 and another $6Bn in 2017 as they had $26Bn at the time but now they only have $14Bn left with a 72% payout ratio on the dividend so, like FTR, they could go much lower as they restructure and the CFO just left so people are nervous about the new CFO.

    /NQ/Dave – Back at 7,200 I have to just DD (4 short at 7,175) and hope for the best.  

    Factors/Damoy – What matters is how well-behaved the stock is in the channel you want to sell into but depends what you mean by selling premium as some trades we take long spreads and sell short calls and others we just take a bull call spread with short puts. 

    ATIV moves a lot and is high in the channel, not one I'd play:

    ENDP  moves way too much to sell premium and also way too high in too wide of a channel.

    AAPL we do play because we'd LOVE to own them at $160 so no worried selling 5 June 2020 $170 puts for $15 ($7,500) and buying 15 June 2020 $165 calls for $37.50 ($56,250) and selling 10 June 2020 $195 calls for $23.50 ($23,500) for net $25,250 on the 2-year trade and then we can sell 5 Aug $190 calls for $5 ($2,500) so now net $22,750 with another $25,000 in short-term sales ahead so, if all goes well, you pay off the cost of the spread and whatever the value of the possibly $45,000+ spread becomes your profit.  You can't lose to the upside, you can only cap your gains and, if AAPL fails $185, you can sell 5 more calls with tight stops to pay off your longs twice as fast.

    NTGR would also be interesting to play if they come down in the channel (back to $55).

    Bet/Albo – I think I was close enough in May – especially as I said I'd take the profits and not wait for $12!  cool

    Dow testing 24,500!  2,760 on /ES.

    HBI/Ayyaps – They are right on track and, if you mean the OOP spread (where we sold 5 $18 puts against 10 of the $15/23 spreads for net $600, it's a potential $16,000 spread that's currently net $5,000ish so still $11,000 left to gain and I don't really have anything better to do with $5,000 that's more likely to make me over 200% in 18 months that I feel is safer so I don't see any reason to change it.

    The reason we cashed out THC was that it had relatively little (20%) left to give us over 2 years and, though it was very safe – we have 100s of ways to make more than 20% in 18 months with CASH – so taking that one off the table made sense.  

  29. Way to get out of the bet !

  30. Pruitt’s Resignation Is Just the Beginning

  31. APNewsBreak: US Army quietly discharging immigrant recruits

  32. EPA rollbacks already touching Americans’ lives

  33. Phil thanks for your comments on VOD, would have been good as an armchair trade but do not want an other FTR.

  34. OPK up big today. 

    Don't see any news.

  35. Bet/Albo – Well it can still be on.  From my perspective, I can either win twice or go 50/50….

    OPK/Albo – Lots of bets being placed:

    Options Traders Expect Huge Moves in OPKO Health (OPK) Stock

    1,700 on /RTY!  

    Lined up with 2,760



    What, us worry?

    China taking us to WTO so dragged out process puts little pressure on things.  Trump uses this as excuse to quit WTO, escalates tariffs leaving China and Europe no choice but to retaliate but it isn't happening today so the markets party on like it never will…

    Because of IQ, the STP is up 111% and the LTP is now up 32.2% ($660,867) so let's spend some of that STP money to lock in the LTP gains, like we're supposed to:

    • DXD – On track
    • SQQQ – Let's roll 80 Jan $15 calls ($1.85) to 80 Jan $10 calls $3.90 for $2.05 ($16,400) and now we're in position to sell 20 short calls, like Aug $15s (0.60) for $1,200 to pay for the roll but, of course, not yet, we're hoping for a bounce first.  We are also in position to roll the short $25s (0.80) to the short $20s ($1.15) but not worth it for just 0.35 nor are they worth buying back for that ridiculous premium.

    • IQ – Go back and read the adjustment from the last review.  That was a textbook case of taking a non-greedy exit and turning the trade into a massive money-maker.  Also a textbook case of sticking to our valuation targets – despite the stock's price going insane for a while…
    • TZA – July $10s will go worthless and that's a nice $4,150 bonus we picked up by selling premium.  Simply not covering again makes us more aggressive but we only spent $16,400 so far, and we think we'll get some of that back, so we can certainly afford to roll our 50 Oct $8 calls at $1.05 ($5,250) to 80 Oct $7 calls at $1.60 ($12,800) for net $7,550 as that buys us $8,000 of additional in the money protection (80 calls that are $1.50 in the money) while widening the spread by 20% ($8,000) and now we have 30 naked longs to play with.

    Now I feel better about the weekend!

  36. Butterfly Portfolio is chugging along at 17.4% (up about $2,000 for the month)

    Money Talk is up 90%, which is good as I'm doing the show next week.

    OOP down about 5% for the month and too big to go over now but we'll have our normal review soon.  If anything, we need more longs – not more shorts!  

  37. The difference between the OOP and the LTP/STP is that we could afford to be more aggressive in the LTP/STP and it's been a good year for aggressive moves (so far).  When the OOP gets bigger, we are willing to take bigger risks but, in our first year with a new $100K portfolio, we follow Buffett's Rule #1 – "Don't lose money!"  

  38. But Phil, you never won the first bet.

    Aren't you familiar with the saying that "Close only counts in horse shoes and hand grenades" ? 8-)

  39. And winning option trades that you take off the table early!  

  40. Speaking of early – closed out of /ZS longs $25 too early today. Hope somebody here is catching some of that move.

  41. Got to believe we will see some selling into the close. Insane to hang on to these gains going into the weekend. Trump has London, Brussels and Helsinki next week. Multiple times to shoot himself in the foot. Plus the immigrant chiildren and there's China. Spinning plates are eventually going to crash.

  42. /ZS/Ati – Very nice play!  

    /KC also having a nice day:

    Selling/Den – I really can't understand how people can take an actual trade war so lightly.  This isn't some BS thing, this is a massive upsetting of Global Trade and it's actually happening.  I guess people are so short-term that they think just because it didn't have an immediate effect – it's not something they need to worry about.

    Too silly for me by far…

  43. Dollar has been a big help, by the way:

  44. Are you still holding /NQ shorts? 

  45. Yep, hoping people get rational next week.  This is so silly and so low-volume too! 

    Indexes actually turning down a bit into the close as the fakers unwind their BS day-trades – maybe I won't need to wait the weekend.

    Glad we took advantage on the hedges…

    Have a great weekend folks,

    - Phil

  46. Who cares about the markets – France is in the semi-final of the World Cup!

  47. Watch out Watson:

    Citing a person familiar with Google’s plans, The Information reported the company is already in conversation with at least one potential customer that would like to integrate Duplex into its operations. That firm, an unnamed large insurance company, is reportedly interested in using the voice assistant to handle simple, straightforward customer service calls.

    In 10 years there won't be any human in these call centers!

  48. LOL SiJ, it's all about priorities, right? GL to you and France 

  49. Indeed mkucstars! And thanks…

  50. It will hurt, but it is time for California to walk away from high-speed rail fiasco

  51. New EPA Chief on Collision Course Over Conflicts of Interest

  52. Vive Le France!!!

  53. Thanks Advill…

  54. Phil / USAK,

    I was looking at the trucking company and seems like they are poised to have good growth so wanted to get your thoughts. 

    Thanks as alaways


  55. Phil,

    I take that back on USAK as further looking at it seems I missed the boat. KNX is a bigger company and seems to have more value. Please let me know your thoughts 



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  64. Good morning!

    Futures are up half a point as the Bulls give a final, low-volume push.  PEP has earnings tomorrow but it's Friday when we get C, FRC, JPM, PNC and WFC and earnings season kicks off.  Banks are low in the channel and low-taxed earnings should be good but not BTE, so we'll see what happens. 

    /NQ went against me so I added 2 more short at 7,262 so now 4 short at 7,240 avg.

    6,500 from here would be $14,000 per contract so playing the risk/reward game.

    Dollar is still holding things up by going down:

    Can't be too bearish with Dow over 24,500 if it holds.