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Meaningless Monday to Kick Off a Wild Week in the Markets

It's a big week for the Central Banksters.  

The Bank of Japan kicks off the week with a 2-day meeting in which it is expected they will reduce their spending on ETFs that have been propping up the Nikkei for the past decade.  The BOJ has been criticized for favoring large-caps and, with the index at 22,580, the Central Bank has decided to give some love to the broader Topix Index to the tune of 6,000,000,000,000 Yen per year (only $54Bn in real money) but their previous monetary madness has made the BOJ the owner of 75% of the ENTIRE Japanese ETF market (about 4% of the entire market, 10% of the 225 Nikkei large caps). 

Image result for bank of japan owns stocks

In theory, the BOJ has made a lot of money buying Japanese stocks but, in practice – good luck selling them when they have been the primary buyer for the past 5 years.  Our own Federal Reserve doesn't dabble directly in stocks – they just print money and hand it out to Banksters, who then buy up stocks or, even better, lend Trillions of Dollars to Companies that buy up their own stocks.  In Q1 alone this year, S&P 500 companies bought back $190Bn of their own stock in a year that's on track for over $1Tn in buybacks – most of it on borrowed money.

Image result for fed treasury holdingOur Federal Reserve prefers to buy US Treasury notes, about $2.4Tn of those.  Isn't it great how easily we can throw TRILLION around?  As if it's not a big deal….

To put this into context, the Dow has a MONTHLY money flow that is up or down $10Bn for 30 large caps so imagine the effect of $100Bn worth of inflows through buybacks every single month!  The BOJ in Japan, the PBOC in China, the ECB in Europe and US Corporations using easy money from our own Federal Reserve represent ALL of the net buying of the Global stock markets.   What will happen when and if they ever do decide to withdraw their stimulus.

Of course, that doesn't mean we should be bearish.  Consider that Las Vegas is a city in the middle of desert and all of the water in that town is there arificially, right?  Logically, the fountains and pools would run dry and the people would die of thirst if the Government ever stopped forcing water into the town yet Las Vegas has grown and grown over the past 50 years from 100,000 to 1.4M so betting against growth there just because it's artificially supported would have been silly, right?

Image result for las vegas fountain animated gifThe safer bet is to bet on the collapse AFTER the stimulus is withdrawn, not before.  That's why we still have our bullish bets in the Long-Term Portfolio, Options Opportunity Portfolio, Butterfly Portfolio and Money Talk Portfolio while only our Short-Term Portfolio has bearish bets – which are generally hedges to protect the Long-Term Portfolio.  You don't go to Las Vegas and predict the fountains won't run the next day – no matter how much water is being pumped into the desert – the fact of the matter is that water IS being pumped into the desert – so the fountan show will go on.

Our Fed has another meeting on Wednesday and the show will go on either way, as they are still a long way from fully tapering or raising rates beyond 0.25% – even though the economy is growing at a 4.1% rate and unemployment is at an all-time low and inflation is picking up quickly.  In other words, NONE of the Fed's excuses for handing out Trillions of Dollars to their Bankster Buddies has any basis in reality anymore but – people like fountains, right?  

Image result for baby boomers hit retirement ageWe're also in the midst of Donald Trump's 2nd year of Trillion-Dollar deficit spending and that party is never going to stop because these are the "fiscal conservatives" who are in charge now.  That's another $21.3Tn bill that's long overdue (the US Deficit) but it's just a drop in the bucket compared to our $114Bn of unfunded liabilities and that Bill is coming due as the Baby Boomers hit retirement age with 25M of them over 65 this year but it will be 50M in 6 years (2024) and 75M 5 years after that (2029). 

Even Las Vegas has to manage their growth but we've got 125M MORE people (we aren't killing off the old ones fast enough) hitting retirement age over the next 11 years and that's 11M a year x $2,000 a month in benefits (low end) that kick in and that's $265 BILLION more required next year than this year and $530Bn MORE than this year in 2020 and $795Bn MORE in 2021 and $1.06 TRILLION more in 2022… get the picture?  What exactly do you think Donald Trump's plan is?  Will more tax cuts fix this problem?  Will ignoring it fix this problem? 

Well, it's worked so far…


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  1. Trump boasts about GDP

  2. For some reason, Google Finance doesn't update the Dow anymore! Maybe someone realized what a fraud that index is… Or they changed the abbreviation lol

  3. Good Morning.

  4. I guess it's time to get really worried:

    Larry Kudlow, the president’s top economic adviser, spoke after him. “This is a boom that will be sustainable,” he said. “Frankly, as far as the eye can see, this is not a one-shot effort.”

    That same Larry Kudlow who had been wrong so many times like calling the Bush boom in 2007!

    What's galling about this crew is that they can't simply be happy about a good quarter, it's that they have to brag about the best economy ever and lie about everything, even stuff that easily verifiable:

    Journalist John Hardwood noted on Twitter that 4.1 growth under Trump in the second quarter of this year would rank as the fifth strongest of the Obama presidency. The best quarter for Obama was in 2014, when in the second three months of the year the economy grew at 5.1 percent.

    They make it sound like they inherited this mess that only they can fix! Sad…

  5. This is the result of the Reagan revolution and never ending tax cuts:

    In 1980, the top 1 percent’s share of income was about 10 percent in both Western Europe and the US, but since then, the two have severely diverged. In 2016, the top 1 percent in Western Europe had about a 12-percent share of income, compared to 20 percent in the United States. And in the US, the bottom 50 percent’s income share fell from more than 20 percent in 1980 to 13 percent in 2016.

  6. Good morning! 


    Big Chart – Well, we can't go up every day but /RTY has to get back over that 50 dma at 1,670 and /NQ is right on the 20 dma line at 7,232 – you don't want to see resistance at those short-term lines if you are bullish.

    Sad/StJ – What's sad is that they get away with it.  Media either pro-Trump or cowered into not calling him out on, well, everything he says for fear of pissing off half their readers (and it's the half that can't abide a contrary opinion).  If the Dems don't get back in in Nov I'm seriously going to be making an exit plan that I'll execute if the 2020 election goes to Trump.  As noted above, the demographics are entering a critical phase and this administration is pouring gasoline on the bomb.

    Image result for gasoline on a bomb animated gif

    Woops, Nas down 1% already, 7,224.  

    Oil still over $70 at $70.20, need cross under $70 to short with very tight stops above.  

    Done with /RB shorts, in case anyone missed my comment earlier.  Congrats to players on that one!  

    /KC with a nice pop this morning.

  7. Stocks mostly dip amid tech wobbles, ahead of central banks

  8. How's /SI look for a small long? I'm adding a little – it hasn't really reacted to the last 15 cent drop in the dollar. Would love to make a dime on it.

  9. tDump may not make it to mid terms…. Insert toast pic < >   :)

  10. Hi Phil,

    Do you have any experience with Diagonals? A friend was trying to explain this strategy to me. He basically buys a deep in the money call  (jan 2019) with low extrinsic value and sells an out of the money weekly call with higher extrinsic value. The idea being that the short call you sell expires worthless at the end of the week and you keep the premium. Any knowledge you can add is greatly appreciated!

  11. tDump is a human version of HMNY…..

  12. From Dow’s ‘Dioxin Lawyer’ to Trump’s Choice to Run Superfund

  13. How Record Heat Wreaked Havoc on Four Continents

  14. Media / Phil – I think that the problem is not that the media doesn't call him out, it's that him and his guys simply lie so much that it's impossible to keep track! I mean, the people actually tracking lies are already well in the 1000's! You can't run 10 stories each day about all the lies. So he gets away with most of them simply by the sheer volume of lies!

  15. STJ It amazes me every day what this guy gets away with, Erdogan has not got a chip on him.

  16. TSLA will we see them at 250 or 350 on Aug 1st?

  17. It’s really frustrating playing /NQ. I sold on Friday for a loss thinking that earnings weren’t bad and the GDP number was good and it was end of quarter so I couldn’t see a reason to go down. I sold for a loss. If I held over the weekend I would have had a nice gain.????

  18. Yodi – I guess Putin could run close, but he doesn't have to lie so much, he owns the press so they do the work for him :-)

  19. Phil:  What are your expectations for Apple earnings?  Is there an earnings trade here?

  20. Interesting question Somavision

    I like to compare this with an option play 7/27 on TSN. Some members might not be too happy today as the stock has 6.8%  losses. I added some more long leap calls to my Jan20 BCS.

    One cannot panic over a leap BCS, after you entered a play 3 days ago.

    The difference of your diagonal is you have no short call to your further out long call.

    Apply this to TSN you would have lost about 6% on you long call which in this case is not covered by a short matching caller. You only sold the weekly OTM caller with little gain. It takes a lot more to make up this loss over a shorter time.

    In respect to my Jan 20 BCS the call has a certain paper loss at this stage, but about 40% is made up by the matching caller. A further percentage of the loss is made up by the sold cherry call.

    My feeling is the stock will recover, as it is usual on a day like this, all rates jumping ship and that is why at this point I added more leap calls.

    Look at FB and TWTR they still losing but they were overpriced and sheep are still jumping ship.

    I picked up TSN on the low side of the channel not on the top!!!

    Further I have still 18 month to sell cherry calls, while I sincerely hope the stock will recover. Just my two cents.

  21. /SI/Ati – Monthly chart is pretty weak, weekly chart is nowhere near even a weak bounce, daily chart also not near a weak bounce from $17.25 to $15.25, which would be 0.40 so $15.65 is weak and $16.05 is strong and, on the hourly chart, we failed $15.65 this morning and Friday afternoon so we really have nothing to be bullish about until we're over that line so we'll watch the 5-minute chart and see if we get a test but, since we're not even testing it with the Dollar down 0.4% this morning – I have to say it's not strong enough to bet on today.

    Usually I just say "not good" but that's all the work I do before I answer – in addition to looking for news about Silver and, of course, general news commentary that may affect metals or currencies.

    Diagonals/Soma – That's kind of what our Butterfly Portfolio really is – the so-called "double diagonal" but I thought Butterfly Portfolio sounded nicer.  Short story is we tried both Butterfly and Diagonal strategies years ago and settled on the hybrid that's in the Butterfly Portfolio today.  You can go to the Portfolios tab at the top of the page and trace back all our Butterfly trades since the new portfolio began back on Jan 3rd – there's lots of strategy discussions in the reviews.  

    HMNY/1020 – Only down 40% today, the descent is slowing!  Also, though there are many, many people talking about how they ran out of money Thursday night, it seems like they made it through the weekend without further incident, which is interesting since they only borrowed $5M and, according to bears – they are burning a hell of a lot more than $300M/yr ($5M x 52 weeks) so the company's story that they can get through a year with $300M may not be untrue – though it's too small a sample to tell for sure.  

    I've got 500 new shares of HMNY, which is 125,000 old shares which topped out around $30 for $3.75M so I'm very excited in hopes they do come back.  If I have a good week (over $10K) in the Futures, I'll probably splurge for 500 more.  

    Volume/StJ – It's true, he came up with an ingenious way to get away with lying and that's to overwhelm you with so many lies that it becomes pointless to keep track (and it's over 3,000, not 1,000).  The best part for Trump is his little lies and big lies all get mashed together so he gets away with whoppers on a regular basis and, following Hitler's instructions, he repeats his lies so often that people can no longer remember the truth because, in normal human interaction – people who are caught lying stop lying about the thing they got caught on so your bias, as a listener, assumes that a statement that has been made for months or years must be at least partly true – or he wouldn't keep saying it.  BRILLIANT!

    Related image

    TSLA/Yodi – You think they'll still be in business on Aug 1st?  Hmmm….  Every day I wake up and find out they are still a company amazes me!

    /NQ/Japar – It's supposed to be frustrating or everyone would play and we wouldn't be able to make the money.  It is a nightmare riding them out when you mis-time the entries, that's why I take the quick profit on the Futures and let the ultra-short options do the long-term work.

    AAPL/John – I don't think anything very exciting happened in Q2 and they've beat the last 4Qs by a bit and last Q2 they made $1.67, which was an 0.10 (6.4%) beat and this Q people are expecting $2.18 which is up 0.51 (30.5%), which would be huge but last July the stock was at $154 and now $189 so up $35 is only 22% so it's not likely they miss and that would certainly justify $200 but it would be crazy to play them short-term since the market has not been taking disappointment well.  If you want to play AAPL on earnings, I'd go with:

    • Buy 5 June 2020 $165 calls for $40 ($20,000) 
    • Sell 5 Jan 2019 $185 calls for $14.70 ($7,350)

    That's net $12,650 on the $10,000 spread but you have 18 months to roll the short calls and the June 2020 $220s are $15 so, if all goes well, you can roll your way to a $27,500 spread and, if all doesn't go well, the short Jans will go worthless and you can then sell puts like the June 2020 $165s (now $11) for $15 or $20 and sell some 2020 calls for $15 or $20 and then you have a credit spread with a nice, cheap entry on the put side.  

    As an educational tool, let's put it in the STP.

    "One cannot panic over a leap BCS, after you entered a play 3 days ago." 

    Great point, Yodi!  

  22. See, Friday was very, very slow and today it's already past noon.  Time is certainly relative!  

    Image result for einstein relativity

  23. Market valuations are already relative and it looks like the constant is beginning to change…

  24. /SI calculations - thanks Phil! Saved that post for future reference.

  25. Telecoms –  T, VZ, CTL & FTR, showing some strength today,

  26. LB/Phil – good for new entry here? or add? do you have any kind of floor for it?

  27. You're welcome Atitlan.

    Telcos/Albo – Even FTR?

    $30 is always the magic number for T.

    LB/Scott – I can't believe they are this cheap.  We're waiting on earnings (2 weeks), which should be 0.30 for the Q and on pace for $2.75 this year (they make over $2 in Q4), which is a pretty good deal for $31.

  28. Trump says "We need border security because…. well ask this guy (the Italian PM)… he won his election on border security… so border security is very important."  "I have no red line, I just want great border security."  Wow, I mean WOW!!!  I can't believe this guy is the POTUS!  WOW!!!

    HMNY now 0.82, another 60% down day.  Time for another reverse split!  

  29. Looks like weak bounces are failing across the board.

    And look at the VIX banging higher:

    And the Dollar is still weak so what if it bounces?

  30. Phil

    Would NXPI  NXP Semiconductors puts be a good trade  now  ?


  31. Trump / Phil – No chance the Italian PM will confuse Trump with Cicero I guess…

  32. Phil:  Would you institute a trade in TSN at this time or would you let things settle?  Your thoughts?  Thanks.

  33. NXPI/QC – This is another one of those that only seems cheap because it's gone from Ridiculously Expensive to just Expensive.  Yes, they were $125 at some point but they were plunging to $90 and got "rescued" or who knows what they would have fallen to.  Of course, we don't care about charts, we care about earnings and those are running about $2.3Bn and revenues haven't grown much since 2016, when NXPI was $80 or about $28Bn so the p/e was roughly 11 but now it's $33Bn with a p/e of 14, which is good but only normal for a semi.  With the Nas in free-fall, I'd wait but, if you like the prospects – not terrible for a short put sale that nets in for $80.

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 4,358 4,815 5,647 6,101 9,498 9,256 9,402 9,487 10,002 +16.3%
    Operating Profit $m 251 537 1,046 2,015 -182 2,061 622     +52.4%
    Net Profit $m -115 348 539 1,526 200 2,215 973 2,395 2,581  
    EPS Reported $ -0.47 1.36 2.17 6.10 0.58 4.28 0.69      
    EPS Normalised $ 0.21 1.81 2.25 3.61 1.01 0.59 0.61 6.93 7.72 +22.7%
    EPS Growth % -82.5 +747.2 +24.5 +60.4 -72.0 -41.2 -89.0 +1,065 +11.5  
    PE Ratio x           159.8 155.3 13.7 12.3  
    PEG x           0.15 0.15 1.19 0.83

    LOL StJ!   If only Trump could be exiled!  

    TSN/John – Settle for sure but interesting at $58.50 which is $21.5Bn and they make a fairly steady $1.8Bn so p/e of 12 is fair – especially as they've reduced the share count so $6+ per $58.50 share is below 10.  

  34. Diagonals – Thanks Yodi and Phil!

  35. How AI Is Changing Sales

  36. House Democrats are riding high with 99 days until the midterms

  37. Another tech stock tumble pulls US indexes sharply lower

  38. Carr Fire in California is so hot it’s creating its own weather system

  39. MoviePass is down again

  40. EOQ window dressing was more like an undressing today especially for /NQ. I should have waited just a few more days…

  41. Feeling ‘Taken For Granted,’ Koch-Led Donors Turn From GOP

  42. Likely outcome of any current/future Tesla earnings call: