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Wobbling World Wednesday – Global Indexes Consolidate for the Next Move Down

Reuters GraphicI think we're heading lower.

Probably about 10% lower and yesterday's 8% drop in oil is a good indicator of how fast the "value" can come out of the markets – or any other asset you think is "stable" these days.  There are still MANY signs of Global Economic Weakness, including Japan's negative GDP, which we noted yesterday.  Even worse, Japan's Central Bank owns $5Tn worth of assets – the entire GDP of the country, including 45% of all Government bonds paying near 0% interest that will quickly become worthless if rates rise.

“The Bank of Japan’s policy is clearly not sustainable. The BOJ would suffer losses if it would have to raise interest rates to, say, two percent,” said Hidenori Suezawa, a fiscal analyst at SMBC Nikko Securities. “Also, in case of emergencies, such as a natural disaster or a war, the BOJ won’t be able to finance government bonds any longer.”

The BOJ has also been a very aggressive buyer of Japanese stocks and is now the largest holder of most of the Nikkei 225 stocks – over 10% on average.   This buying spree pushed the Nikkei up from 16,000 when Abe and Koroda unleashed this mad shceme in order to reverse that 20% correction.

Well, what if the 20% correction was correct and Japanese stocks, in an aging population with Government debts that exceed 250% of their GDP, are really only worth Nikke 16,000.  That means that, at 24,000, 33% of the money the BOJ spent to prop up the market was wasted and that's very likely the case as the BOJ shouldn't have to be a buyer and their actions created a false sense of demand for Japanese stocks and artificially raised the prices and those prices, in turn, encouraged other Global markets to move higher and now the whole World is a good 10% (still) too expensive but Japan has barely corrected 10% and easily has another 10% to go (19,500) before anything like real buyers begin to show up.

Image result for japan bubble 2018It's not even possible for the BOJ to unwind their positions, they'd destroy the market with way too much supply of stock – much as oil has recently plunged on over-supply.  A 10% drop in the BOJ's assets would be a $500Bn loss in a $5Tn economy or 10% negative GDP in a year and yesterday we were fretting over 1% – those were the days!  

Our own Fed has also been a buyer of assets but not so much our stock market – there seem to be plenty enough fools rushing in to buy that at any price.  And again, I'm not really a bear – I just think too many stocks are far too expensive to justify entire indexes still trading within 10% of their all-time highs.  Even that is misleading as there's an assumption that all-time highes are justified just because they were hit but you may recall paying $140 a barrel for oil in the summer of Bush and yet, today it's $55.  

Was oil ever worth $140 a barrell or were people wrong at the time?  Was GE (GE) ever worth $58, now it's $8, was Amazon (AMZN) worth $2,100, now $1,644?   In our Member Chat Room, we were just discussing the need to re-short Chipotle (CMG) as they come back to test $500.  Our Long-Term Portfolio's position on CMG is 20 of the 2020 $460/580 bull call spreads that we paid net $105,700 for but we're not actually that bullish on CMG – that position came from the profits of a much lower spread we cashed in and we flipped to the 2020 spread to cover short calls we sold last time CMG was up this high.

Just because we like a stock, doesn't mean we're blind to it's true value.  $500 on CMG is a $14Bn market cap but CMG only made $176M last year and, in 3 quarters this year, they have made $140M, so on track for the same so $14Bn is about 80 times their earnings – which is a bit much for a fast-food franchise (MCD trades at 27x earnings and that's way over their usual sub-20x).  

Chipotle was spun out of McDonald's, who bought the chain in 1998, when they had 16 restaurants and built them to 500 restaurants before spinning them out in Jan, 2006.  Chipotle was founded in 1993 so it took them 5 years to build up to 16 restaurants and then, backed by one of the largest companies on the planet, another 8 years to get to 500 stores and now, 12 years later, they have 2,461 stores.

Chipotle_sauceWhy is that important?  Because even with all the money in the world and a red-hot concept that was sweeping the nation 10 years ago – it took Chiptole essentially 20 years to get to $14Bn so, EVEN IF they come up with another great idea and EVEN IF it grows as fast as CMG and EVEN IF it all goes perfectly, they are still about 20 years from adding another $14Bn in market cap and that makes paying 80 times their current earnings INSANE when MCD and others only costs you 27 times earnings.  

You can fool some of the people all of the time and you can fool all of the people some of the time but you CAN'T fool all of the people all of the time and that is why things like this are simply unsustainable – it's just a question of when the investors realize it. 

That's why we cashed in our original calls when CMG hit $500 (and put on the current spread to cover the short calls which we've since bought back) and now that CMG is back on the crazy train – we can sell 10 of the Jan $485 calls for $26, collecting $26,000 against our $105,700 spread or about 25% over the next 65 days.  If we can do 6 of those sales over the next 12 months, that would generate $156,000 and whatever value was left on our $105,700 spread would be bonus money.  Not bad for a year's work!

We LOVED CMG when it was beaten down over contamination scares, we were sure that would pass and CMG would head back over $400 but $500 – PLEASE – that's just silly!  So we turned our longs into shorts but, because investors are silly, we hedge with a long-term cover.  Very simple concept.   It's the same with many stocks we have.  Back on Sept 26th, we put out a Top Trade Alert featuring 9 similar trade ideas to take us through the correction with the goal of making $109,000 by the January expirations including that CMG position (but we bought back the short calls when CMG tested $400 and now we'll sell new calls) and the smaller trades are also on track – I'll do a full review of those next week but this week November options expire on Friday so we will be reviewing our other positions first.

Anyway, my point is that things are still very expensive and this morning we're popping on bullish rumors about China Trade Talks but we're still going to keep our hedges as I'd rather lose money on them than not be hedged and lose money on our longs if things turn lower.  Japan wasn't even one of our main concerns last month – now it is and, if the Trade War isn't resolved soon – China will move up the list of BIG problems.

On a positive note, Brexit seems to be moving along to a resolution and that's one worry off the table – so we have that going for us.  Don't forget – Powell is spreaking after the close today and it's probably not a good day to have a rally if you want the head of the Fed to change his mind about raising rates… just saying…

We're not doing a Webinar today because I have to go to the Cannabis Convention in Las Vegas (officially, the Marijuana Business Conference) so I'll be leaving early today but I'll take plenty of notes and look for investing opportunities to share.  If I have a chance, I'll do some live comments for the Chat Room too. 

We're considering setting up a $20M+ fund next year specifically to invest in the Cannabis Sector – let us know if you have an interest in participating (contact Greg) and, of course, it will only be for accredited investors (sorry).  If you have qualification forms, we'll be able to contact you post-conference with some early details.

 


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  1. This really doesn't look like a market that wants to bounce convincingly – good moves in the futures overnight get crushed during the day!


  2. Is the caravan not a threat anymore?



  3. Sold 1/2 of DGAZ up .80 or 20 %.  Stop at entry on balance.



  4. Morning All.

    We will not be having our usual Wednesday webinar today.


  5. Good Morning.


  6. Phil,  I have an IBM NOV $130 shout Put expiring in 2 days.  It was .90 now $9.15.  Been selling straddles on IBM for a while now and this one got me. What is a good roll?  Jan 2020 $120?   Maybe a silly question, but how does this work, I know the transaction records a loss, but if I roll this trade out to 2020 and it expires worthless, in theory, did I lose?  TIA
     


  7. Sold last 1/2 of DGAZ up $1.


  8. Grass IBM I would straight roll to Jan21 120 or 125 you will pay 9.15 but you will get 19.20 so just about 10$ in you pocket!!!


  9. Back to even on RB….maximum pain! Sold BABA calls for $6


  10. Good morning. Does anyone have a play that they can suggest for CHK? Noticed that there is a huge interest ion the jan 2020 $5 and $7 calls. Thanks in advance!


  11. Thank you Yodi…  


  12. Phil, are you long any /NGV19? If so what’s your entry?


  13. Good morning! 

    As noted, we're not having the Webinar today as I'll be at the Marijuana Business Conference and I wish my Dad were alive to hear that one!  We (New Age/PSW) have a lot of meetings set up and also, it seems, a lot of parties we're supposed to go to so this is going to be a very rough couple of days for me tomorrow and Friday.  And no, I don't smoke anymore (I'm tired of waking up on the floor) though really I quit when I had my kids and now they are off in college I guess I can be less responsible again.  

    That's what happened.  I smoked a lot in college but not too much after (movies, concerts) but then one time we were out at a show and Maddie was with a sitter (about 1 yr old) but she began throwing up a lot (turns out she's lactose intolerance) and we had to go to the hospital and it's not like I couldn't deal with it but I was so mad at myself for not being 100% when my kid needed me that it was the last time I smoked.  

    I have a good excuse tonight and tomorrow night as I have to get up 3am for work (Vegas time), so I can turn anything down, but I can't make any promises about Friday night…  Also, wouldn't it be irresponsible of me to at least sample our products?  

    Anyway, I'm leaving about 2pm, EST and likely the same tomorrow but I'll check in from the conference if I see anything interesting – too bad we don't have SnapChat but I don't actually even know how it works.  We'll be able to meet with people from all over the country and Ken (CEO of New Age) and I will begin a 6-month process of selecting the initial investments for our new Cannabis Fund.  

    Meanwhile, New Age just got approval to double up their facility in LA, the first in the county to clear the process with others months behind us and we have way more orders than we can fill so looking to triple up shortly – very exciting.  Remember, New Age doesn't grow pot or sell pot – we process pot into THC and CDC oils, which sell for $9,000 per liter and it takes about 20 pounds of pot to make a liter so you'd think the math doesn't work ($200/oz retail for pot) but it's cheap in bulk and the margins are roughly 30% so it's all about making more and more liters for us.  

    Since we're a middle-man operation with industry-known expertise, our main goal is to partner up with growers and distributors around the country and just become their go-to manufacturer and, since manufacturers are in very short supply (especially ones that can pass strict medical requirements) we are making deals where we own a bit of the businesses we supply – so we don't have to worry about them switching manufacturers as the market matures over time. 

    It's a simple plan, it's like being the only guy who sells shovels and pans during a gold rush and, rather than rip off our clients to make quick money, we're giving them what they need at a great price (we still make money) in exchange for a permanent percentage of their sales – like Kevin on Shark Tank!  

    So that will be my fun project this week and we have to review the portfolios too! 

    Big Chart – Same as yesterday but every day below the 200 dma makes it harder to get back over and NYSE officially death-crossing today, RUT right behind…  

    • Dow 24,300 with a weak bounce at 24,800 and a strong bounce at 25,300
    • S&P 2,640 with a weak bounce at 2,710 and a strong bounce at 2,780
    • Nasdaq 6,870 with a weak bounce at 7,080 and a strong bounce at 7,230
    • Russell 1,485 with a weak bounce at 1,530 and a strong bounce at 1,575

    Nas went green on the weak bounce this morning, popping 40 to 6,898 so we'll see if it sticks.  RUT at 1,529 so we'll see if they have trouble at 1,530 or not.  

    Caravan/StJ – What caravan?  I don't remember any caravan…

    Cryptocurrency/StJ – What cryptocurrency?  Where do you come up with these crazy things?

    BABA still going up.  $145s are now $6 in the money at $6.60 so stop is now $6 on our last 5 calls in the STP.

    Officially, in the LTP, we're going to sell 10 of the Jan $485 calls for $26 ($26,000) against our 20 long spreads.  I struggled with selling 15 of the $500s at $19 ($28,500) but, just in case it spikes up, the 10 shorts will be easier to do a 2x roll and, on the way down, we can cover 10 more if CMG looks extra weak and turn it into a $50,000 round!  

    /NG longs are off the table at $4.50, of course.  That was our NEXT YEAR goal!    /NGV19s are still good at $2.76 but I'd keep a stop at $2.74.  

    Submitted on 2018/10/02 at 3:17 pm

    /NG/Sun – I think, ultimately, we should be around $4-$4.50 so anytime /NGis low, I don't mind playing it long.  Given LNG exports this year and trends into the winter – I think we'll see $3.50 at some point this year or early winter and I think the day's of $2.50 and even $2.75 may be passing.

    Here's why:  US /NG prices are the lowest in the World by a mile but LNG lets us export it but it also lets other countries with land-locked /NG (Russia, China, OPEC) export it too so, in the short run – our /NG prices will move up towards the global $4.50 avg but, in the longer run, there will be a global glut and the whole thing will collapse.  But that longer run is 4-5 years so no worries for now.

    Image result for global natural gas prices 2018

    I know I say a lot of boring, wonky stuff but that's where these fundamental calls come from!

    IBM/Grass – The Nov $130 put is $8.25 at $121.75 so that's fair, right.  GREEDY not to take a 90% off the table and hopefully it's a cheap lesson.  The 2020 $115 puts are $10 so you can roll there or be more aggressive if you are feeling brave and can spare the margin.  Not sure what you mean by loss but, though we say "roll" for shorthand, you're just taking the loss in the short Nov $130s and then making a new trade to sell the 2020 $115s (or whatever) as a new trade.  Though you put $10 back in your pocket – you take a very real $7 (or whatever) loss now and you still have a similar margin obligation. 

    See, Yodi likes it more aggressive!  

    Good call Albo! 

    /RB/Lionel – Thank goodness!  

    CHK/Soma – I can't believe it's just sitting there but, then again, so are the long-term /NG contracts so I guess people don't believe the long-term story yet.   Our LTP position is:

    Short Call 2020 17-JAN 5.00 CALL [CHK @ $3.56 $0.00] -50 1/8/2018 (429) $-4,750 $0.95 $-0.49 $-0.25     $0.46 $0.02 $2,450 51.6% $-2,300
    Short Put 2020 17-JAN 4.00 PUT [CHK @ $3.56 $0.00] -50 1/8/2018 (429) $-6,000 $1.20 $-0.03     $1.17 $0.01 $175 2.9% $-5,825
    Long Call 2020 17-JAN 2.00 CALL [CHK @ $3.56 $0.00] 50 2/9/2018 (429) $7,000 $1.40 $0.31     $1.71 - $1,550 22.1% $8,550

    Despite being cursed out for it just the other day, I still like it, Fundamentally and that's why it didn't bother me that it went out of favor for a while.  Smart traders see these things as opportunities but you have to ignore a lot of noise when you play cyclicals while they are in a downtrend (you know, when they are cheap to buy).  Don't forget though, they just made an acquisition and will still have rough quarters ahead unless /NG simply stays over $4, in which case all is well.  To me, they did exactly what I would do – they bought an out-of-favor asset cheaply while cluless critics sat on the sidelines saying "FU" and downgrading them simply because they spent money when the thing they wanted to buy was at a low.  

    Submitted on 2018/10/18 at 2:27 pm

    CHK – They are chugging along under $5 but our goal is only $5 so we're good and this is good for a new trade as it pays $5,000 and is currently net $925 so $4,075 more if all goes well.

    That was our last STP review on this spread, which is still even:

    Long Call 2020 17-JAN 3.00 CALL [CHK @ $3.74 $0.18] 25 1/8/2018 (429) $4,500 $1.80 $-0.55 $1.80     $1.26 $0.14 $-1,363 -30.3% $3,138
    Short Call 2020 17-JAN 5.00 CALL [CHK @ $3.74 $0.18] -25 1/8/2018 (429) $-2,375 $0.95 $-0.43     $0.53 $0.08 $1,063 44.7% $-1,313
    Short Put 2020 17-JAN 4.00 PUT [CHK @ $3.74 $0.18] -25 1/8/2018 (429) $-3,000 $1.20 $-0.13     $1.08 - $313 10.4% $-2,688

    Less upside but cheaper entry.

    /NGV19/Japar – I had them from $2.60 and got stopped out at the last run to $2.80 (early Oct) and missed the re-entry so, fortunately, I flipped to a few /NGs on the dip back to $3.20 but all out now at $4.50 and, frankly, no longer interest in /NG as the reason I liked it (and made it my trade of the year in 2016) was that I thought $2 at the time was ridiculous and $4.50 was my goal then and still is now – even if it goes over so the next time I'll be into /NG is when it's $9 or maybe $3 but time to move on and find something else that's fun to play with - like Silver!  


  14. Caravan Who says my Caravan is dangerous?


  15. It looks again like big open get faded!


  16. Phil….check out my friends at Laurelcrest booth 3909.  They own Pharma Hemp in Europe and sell a ton of isolate (hemp) here in the states.  There company will be going public in January.  Michael Bernstein is the principal….


  17. Just trying to roll my AAPL jan 20 170 long to Jan 21 170 long for about 8 and sell 1/2 jan 21 165 put for 7.50. See what gives. Have to take advantage of the sheep jumping over the cliff!


  18. Submitted on 2018/11/11 at 6:51 pm

    UNG, in fact, was our 2016 trade of the year so imagine how much fun Winston could have had showing what a fool I was for doubling down when it hit $2 as the stock fell to $1.75.  Could have found dozens of comments of me saying "I'd stick to the plan and buy more" even though it kept going lower.  

    UNG was another one that did a split – a 1/4 reverse split this Jan.  We closed the old LTP position but we had 50 UNG 2020 $5 calls at $2.15 and we had 30 short 2020 $10 puts at $3.82 so that would be:

    • 12.5 2020 $20 calls at $8.60 (now $11.30) 
    • 7.5 2020 $40 puts at $15.28 (now $11.30) 

    So that's up $3,375 on the calls and $2,985 on the calls and we could sell the $30 calls now for $4.80 to put another $6,000 in our pockets and then close the $40 puts and sell 5 2021 $30 puts for $5.40 ($2,700) instead which leaves us with little downside risk and another $12,500 to pocket if UNG stays over $30.

     

    If not, I'd probably add more – despite all the complaining…

    That didn't take very long to resolve!  

    Submitted on 2016/07/02 at 9:26 am

    Faithful Thursday – G20 Will Fix Everything, Right? | Phil's Stock World

    We had a Live Trading Webinar yesterday where I demonstrated futures trading techniques and, in less than 30 minutes, we made $320 in profits (replay available here) - don't you wish school was always like that?  This morning we're long on Natural Gas (/NG) at the $1.79 mark and don't forget the Natural Gas ETF (UNG) is our Trade of the Year and I just did a PowerPoint on that at the NY Trader's Expo on Monday, which was essentially similar to our Trade of the Year notes we went over on Money Talk on Feb 10th.  

    If all goes well, our Trade of the Year will make $40,500 on a $9,500 investment with the worst case being you own 5,000 shares of UNG at $8.95 ($44,750), so it's a 90% return on risk (if you believe the Natural Gas ETF can go to zero).  UNG is currently $6.51, so the trade is still makeable (we have an aggressive upside target) but this may be the last time as the first US export shipment of natural gas left the port yesterday

    On Tuesday (because we pay attention and we knew this would happen), we added Cheniere Energy (LNG) as a Top Trade Alert and yesterday it blasted 10% higher but it's only just getting started (and of course we leveraged it with options) and you can hear the CEO discuss their operations here.  

    Keep in mind this is our 2016 Trade of the Year(UNG, not LNG) and our Institutional Clients andPremium Members are already long on this trade and usually you do not have a chance to get our prices by the time we're into February but, on UNG – it's actually LOWER than where we got in and that's a huge potential opportunity but, of course, consult your financial adviser to make sure it's a good fit for your portfolio.  

    Submitted on 2017/08/18 at 12:44 pm

    UNG – No point in staying in it if we don't roll the calls.  We have 40 of the 2019 $6 calls, now $1.40 ($5,600) and the $4 calls are $2.60 so let's spend $1.20 to pick up $2 in strike that's in the money, right?  If we could then sell the $9 calls (0.50) for $1 or better, I'd be happy with the spread – so that's our plan. 

    Submitted on 2017/09/15 at 3:11 pm

    UNG – Will this trade ever pay off?  I still like it long-term and I'd hate to miss it if it finally pops so we'll just leave it alone.

    Submitted on 2017/10/20 at 3:47 pm

    • UNG – 2020s are out here so we can adjust.  The 40 2019 $4 calls are $2.60 ($10,400) and we can roll those to 80 2020 $5 ($2.15)/$8 (0.95) bull call spreads at $1.20 ($9,600) and we can sell 30 Jan $7 calls for 0.33 ($999) because, if we collect $1,000 per Q just doing 1/3 covers, we pretty much pay for the spread and the rest is just a bonus (up to $24,000).  That's great as a new trade!  Our 30 short 2019 $9 puts are $2.70 ($8,100) but we sold them for $2.15, so no big loss.  Let's take that loss ($1,650) and sell 40 of the 2020 $7 puts for $1.10 ($4,400) and all is well again.

    That was before the 1/4 split in the LTP review (before we closed that LTP) so it would have been:

    • 20 2020 $20/32 bull call spreads at $4.80, selling 7.25 Jan (2018) $28 calls for ($1.32) 

    Ah, finally found the ORIGINAL Trade of the Year post for UNG – We went big:

    That makes the natural gas ETF, UNG, our Trade of the Year and the way we are playing it is:

    • Buy 100 UNG Jan $5 calls for $2.65 ($26,500)
    • Sell 100 UNG Jan $10 calls for 0.65 ($6,500) 
    • Sell 50 UNG 2018 $8 puts for $2.10 ($10,500)

    That works out to a net cost of $9,500 and pays $50,000 if UNG is above $10 in January and stays above $8 into Jan 2018.  Worst case is you end up owning 5,000 shares of UNG at net $8.95 ($44,750), which is about $2.40 on /NG contracts.  Best case is you make a $40,500 profit on a $9,500 cash bet, which is 426% back on your cash!

    In Jan 2017 UNG was $32, so $8 and 100 x $3 was a return of $30,000 when we closed it in 2017 but then we went back in on a dip to the above re-trade (like we did with WPM and LB – so a new normal for our Trades of the Year).  

    We also had the F trade, which was a runner up but we nailed that one (though it looks expensive now, F was over $12 in Jan, when the trade expired):

    Another trade we really like down here is Ford (F), who have fallen back to $11.40, well below our $15 target.  The US fleet has an average age of over 11 years so we're only mid-way through the replacement cycle and our play on F would be:

     

    • Buy 100 F 2018 $9.75 calls for $2.45 ($24,500)
    • Sell 100 F 2018 $12 calls for $1.35 ($13,500)
    • Sell 50 F 2018 $9.75 puts for $1.50 ($7,500)

    The net cash outlay is $3,500 and there is an obligation to buy 5,000 shares of F at net $10.10 ($50,500) if it slips below $9.75, which is down 14% from where we are now.  If all goes well and F gets back over $12 then the short puts expire worthless and the trade returns $22,500 for a $19,000 profit, which is 542% on cash in less than 2 years. 

    For people who like to own stock, it's also possible to play F the following way:

     

    • Buy 5,000 F shares at $11.40 ($57,000)
    • Sell 50 2018 $9.75 calls for $2.50 ($12,500)
    • Sell 50 2018 $9.75 puts for $1.50 ($7,500)

    Here we're laying out $37,000 but the advantage is that we will collect a 0.60 dividend ($3,000) in each of the two years of this trade for a bonus $6,000.  Our net entry is just $7.40 per share and, if we are called away at $9.75, we profit another $2.35/share ($11,750) for a total profit of $17,750 over the trade (48%) which is very nice for people who prefer to own stocks and not gamble on options.  The nice thing about this trade, of course, is F can drop 14% and you still make your full 48% as it's a very conservative target. 

    It's also worth noting that in both of these cases, simply making a short put sale puts money in your pocket and gives you a tremendous discounted entry on the stock (or you keep the cash) – that's worth discussing as part of our "Be the House – NOT the Gambler" strategy. 

    Caravan/Yodi – I thought that was your RV I saw coming up from Mexico!  cool

    Wow, what happened to the rally?  Silly buyers, tricks are for Trump! 

    Thanks Willsons, will do.

    AAPL/Yodi – Almost at goal ($184) but I'm not going to jump in while the Nas is primed for a 10% drop.


  19. Set up an armchair play on VOD Bought stock @ 20.56 and sold the Jan 21/20 strangle for 1.30 Monthly return 3.9%per month. VOD is on the low side of the channel and pays a six month div of 1.22 every six month. Small entry


  20. Phil Caravan this taks the cake!!!! But to assure you we are in Spain!!!!


  21. We might need to learn new lessons – fading the opening rally has worked well the past week or so! Dangerous lessons though but as I have been saying, I don't think that we are done going down yet. Too much uncertainty – it would be nice to have a clearer message from Washington but we might have to wait until January.


  22. For what it is worth set up an armchair on CPB on 11/9. Gone up but still playable buy stock and sell Dec 39/40 strangle. I sold 38/39 and as you can see the 39 is already ITM but bought the stock for 38.43!

    So as always hit the iron when it is hot.

    STJ in deed crazy market possible good for day traders.


  23. An other one CCL buys stock and sell the Jan 57.5/60 strangle. Just added it yesterday


  24. bye bye market


  25. Looks like good timing on the CMG short – added that one this AM!


  26. Phill/  Can you clarify on the above comment you made?  NAS is already down slightly more than 10%.  So do you expect another 10% drop?

    "AAPL/Yodi – Almost at goal ($184) but I'm not going to jump in while the Nas is primed for a 10% drop."


  27. I don't see any particular thing that knocked us down other than the start of selling today.  I think people realized Powell is not going to be a plus this evening.  

    Global Economy Shows Strain as U.S. Steams Ahead

    Whitaker Can Legally Serve as Acting Attorney General: Justice Department

    • Representative Maxine Waters (D-CA), who's poised to become chair of the House Financial Services Committee in January, says easing banking regulations will stop when she heads the committee.
    • "Make no mistake, come January, in this committee the days of this committee weakening regulations and putting our economy once again at risk of another financial crisis will come to an end," Waters commented before Randal Quarles, Federal Reserve vice chair of oversight for the banking industry, made his remarks in a Congressional hearing.
    • Since President Trump took office in January 2017, the administration has sought to lighten regulatory requirements on banks imposed by Dodd-Frank reforms that were adopted in the wake of the 2008 financial crisis.
    • Financial Select Sector SPDR ETF (XLF -0.4%) and SPDR S&P Regional Banking ETF (KRE-0.7%) are both down Wednesday.
    • Previously: Regulation in focus as Democrats take House (Nov. 7)
    • Previously: Democrat gains in midterms may not be bad news for banks (Oct. 30)

  28. CMG/Phil- never get to set-up the CMG trade… any advice on a trade/short?


  29. Rookie  AAPL I just bit by bit adjusting my AAPL BCS as always rolling the longs first and wait for the shorts to roll later.


  30. Clarify/Rookie – Well you have to clarify what I need to clarify.  We had a big discussion yesterday of why I think we're in the middle of a 20% correction (from the top) so 10% more to go.  AAPL $184 is their own 20% correction line from $230 (ie. $230 x 0.8 = $184) which I predicted ages ago and, since AAPL drives the Nasdaq, a 20% correction in AAPL is very likely to go along with a 20% correction in the Nasdaq from 7,700 x 0.8 = 6,160 and we were at 7,000 (ish) this morning, which was about the halfway point so another 700 points (10%) left to drop.  Not sure how else I can say it – 1/10th?  

    CMG/Dave – No, if you missed our good entry on the bull spread, I don't think I'd get into it from scratch just to sell short calls.  I suppose the 2021 $475 $100/560 ($67) at $33 is not a bad spread and then you can sell 1/2x of the Jan $480s for $24 so it's net $21 on the longs to start but, if CMG goes lower, you'll have to keep putting money into rolling down the longs to make sure your not too far above the short calls you sell.  Also, don't forget this is a big margin trade if you don't have Portfolio Margin.


  31. CMG/Phil- sounds like it's better that I sit this one out =)


  32. Well, I printed the portfolios on Friday and we haven't changed much and I don't have a good image capture on my portable system so I'm just going to use the Friday prints for the reviews but I'll be working off the current numbers – try not to be too confused.  Also, as I'm in Vegas with just 3 screens and short on time (leaving at 2pm, EST), I'm just going to focus on the things that need to be changed or commented on – not going to comment on every single item.  

    Still, if I skip something you think does need a comment – say so.

    First, I'm going swimming and then getting a bit – long day ahead! 

    I'm sure I'll get the STP done today but OOP, Butterfly and LTP will have to be done tomorrow and Friday. 


  33. Sitting out/Dave – Yeah, don't forget we were able to be brave because we pocketed a $100,000 profit on the first part of that CMG trade so +/- $25,000 wasn't going to bother us. 


  34. AAPL wait for 150

    GBTC begin accumulation, slowly


  35. I'm just doing tiny PSW "lite" trades on CMG since I don't usually trade it but I like Phil's analysis and underlying reasoning. Was short a few bull put spreads on the way up, and now with a few bear call spreads here. Maybe they'll pay for the Egg McMuffins next week.


  36. PCG rebound play?


  37. Phil, serious question.  At what point should I just decide to sell everything, and double down on Apple?  I have a very large position, that was very well hedged with short calls that you recommended.  But I'm very tempted to just sell the rest of my positions, and double down on my call spreads, to hopefully double up my account in the next two years.  Idiotic?  Or genius?


  38. palotay/YOLO- it's funny I was very tempted to do that with markets being so difficult…


  39. I don't think I'm going to be able to resist.  They have $120B to deploy for share repurchases.  No way this stays down for long.


  40. Well a lot of this selling seems to be related to Theresa May cancelling what people thought was going to be the announcement of a Brexit deal.

    Dolf should have kept his accent (though I guess that wasn't his accent in Rocky).

    AAPL/BDC – I doubt it but now we have to look for bounces off $184 from $330 so $46 is $9 bounces to $193 and $202 – if those fail – $150 might happen or, actually $161 is 30%.

    PCG/BDC – We did a trade on them last time they failed.  Last fire was good for a 20% hit to their stock price (there was $9Bn in damages) and there was a legitimacy to the recovery if it were a one-time thing but it's not a one-time thing and this time, possibly, they are criminally negligent in a much, much worse fire since they should have addressed the problem since last year.  You can sell the 2021 $23 puts for $6.50 so net $16.50 is not so bad but I wouldn't go crazy buying these guys as there are going to be congressional hearings, lawsuits and all sorts of nasty stuff coming their way.

    AAPL/Palotay – Well I said $184 was my point but, now that we're here, I would like to see the Nasdaq stop collapsing first.  Tempting though it may be, you just shouldn't put all your eggs in one basket – even if it's the greatest basket on Earth and the basket has over $250Bn in cash inside it….

    Meanwhile, I love how wrong Cramer and every other analyst were this morning when they were saying "of course we're rallying because we are so oversold".  A 10% correction off a 200% rally (since 2009 lows) is NOT OVERSOLD – I can't believe even TA people are that dumb…

     


  41. Palotay/AAPL- not as crazy as some may think. Read up on Monish Pabrai , a Value investor of some note. 

    His mantra is go big when you find a good opportunity. 


  42. CELG/Phil- what's wrong with CELG, last earnings they did well no? just got sold off like mad…


  43. ADNT: spun out from JCI. Probably a smart move by JCI! From 80 to 24 this year. That's bad. The car part sector is failing?? or does ADNT just simply suck?


  44. I got an eerie feeling the QQQ's are going to fall 10% over the next two days.


  45. Woz. I love the guy, he's often very right. But seriously, he needs to go keto. There's some things no amount of money can buy. Just ask Paul Allen.


  46. Phil, what did you think of EIA? Still think we see $60 by thanksgiving?


  47. Pstas – Also the philosophy of Druckenmiller who averaged over 30 % per year for a long time.  That's one reason I'm so heavy in CTL.  Huge dividend, that management says they are comfortable with.  Hope they're right !

    https://www.valuewalk.com/2017/11/stanley-druckenmiller-greatest-lesson-ever-learned-george-soros/


  48. Ah, no oil report due to Veteran's day.

    AAPL/Palotay, Pstas – Actually, on reflection, I so regret not putting every penny I had into AAPL when they fell to $85 in 2009 and we did take big positions and I did bang the table on them for many months (and they were still our Stock of the Year in 2013, 2014 and 2015) - but that was pre 7:1 split so $12.14 in today's shares.  I wonder if $184 will be $2,000 in 10 more years – doesn't seem likely ($10Tn?).  $85 was simply stupidly cheap when it happened.  

    CELG/Dave – That's a command center question as I don't follow them closely enough to give a quick answer.  Please ask me Sunday or later.

    Woz/BDC – Well I do think they are rushing things because cars do have accidents and our legal and political system is simply not prepared for what will end up being "Killer Cars" that will be forced to make trolly car decisions pretty much every day, many times, somewhere in our country.  This is one of the ways our total lack of ethical/philosophical education in this country is going to hurt our Global competitiveness.

    How Self-Driving Cars Will Solve the Ethical Trolley Problem | WIRED

    EIA/Japar – Eaton Vance – no possible way they hit $60 in two weeks.  MAYBE oil can bounce back as $56 is a good day's move away but not EIA…






  49. Buying Opportunity?



  50. Macy’s raises profit forecast before key holiday season



  51. Whats up with Maceys?


  52. Short-Term Portfolio Review (STP):  Now we're at $311,832 so not much gained on this dip despite adding 50% more SQQQ longs.  It was Friday the 2nd that I put up the portfolio snaps and we were at $309,840 then and the S&P was at 2,720 and now 2,703 so I guess we shouldn't have expected much change.  

    • IBM – In the last review, we closed those short puts at $20 and added them to the LTP (2020 $145 puts at $23.20) so it's the LTP's problem now!  
    • UGA – We added 30 Jan $28 ($2.00)/$31 ($0.80) bull call spreads and UGA is at $27.27 but the short calls are 0.55 so no point in buying them back – we'll just see how it plays out.
    • CELG – Back to the lows and the bull call spread is dead but it was anyway.  We'll decide next week whether we want to add a bull call spread when we roll the short puts (2021 $75 puts are $14 so 1.5x will put money in our pocket and drop 12% off our target). We're in for a net $1,300 credit and only 5 so net $2.60 credit even if the spread dies worthless means net $72.40 is our put side entry.  Even if we don't believe in them enough to add the bull spread – that's still pretty good!  

    • DXD – a $70,000 hedge that's mostly in the money but showing just net $30,000 so $40,000 downside protection here. 
    • SCO – That's hurting us and we have to roll but we think this is a good bottom so we're going to be aggressive and roll our 40 SCO short Nov $18 calls at $4 to 40 short SCO Jan $20 calls at $4 so we pick up $2 in strike without spending money.  We could cut our exposure and sell 20 $20 puts for $2 (or split the trade into 20 puts and calls at that strike so both sides can't lose and we expose less) but, I don't think we stay below $60 so this should work and, if not, then we split. 
    • SQQQ – We have 160 June $12s we bought for $3.50 (avg), now $4.25 and we have 80 short March $14 calls left from our last spread, those we sold for $1.25 and are now $2.  Seems fine to me.
    • TSLA – Will pay us in full.
    • TZA – Still the same though now all in the money.  It's a $40,000 spread currently priced at net $12,000 is so $28,000 upside protection there.   

    All in all, we're in good shape though the LTP has quickly given back the $70,000 it gained on the bounce so we are pretty much right back where we were two weeks ago and we're still waiting to see if those bounce lines break up or down.  While I think down is more likely – the whole point of keeping the bounce chart is to take the thinking off the table and we don't get more bullish until the chart is green and we don't get more bearish unless it flips red.

    Until then, we wait – PATIENTLY.


  53. Well, now I really have to go.  Will try to check in from the show but will only have my phone.


  54. Phil//  Thanks for the clarification.


  55. T

    AT&T at Morgan Stanley Conf. sees FY18 EPS and FCF at high end of range /

     

    Somewhat surprising.


  56. Bought back some DGAZ at $2.86.  Down ~$2 from my last sale.

    Only risking .$.15.


  57. No doubt a reverse split is coming.


  58. Out of DGAZ for basically scratch.  Not going to hold overnight.


  59. Now this is very interesting:

    Berkshire buys JPMorgan, Oracle, exits Sanofi


  60. /Rb back to 1.54. Hope everyone unloaded and got out earlier today. I’m going to wait before adding, maybe wait for inventories. 


  61. MJ- getting roughed up a bit the past few days. Need to get those analysts attending the pot confab toked up to see things right :)

    Anyway, placed an order for some putters- 19-Jan 26's.  I want $2. We shall see. 


  62. MJ- no position at present. This would be my opening gambit.


  63. Mj. I've been selling short callers on my 35 / 50 bcs with a 30 short put.   I sell above  36 and 39 caller at 32 to 34.  Then close out on pull backs.  Two round trips so far.  Just closed out my Jan 36 and 39 callers    Now waiting for a spike again 


  64. Good morning!  

    Well, I said I'd try to report from the MJBizConference but that was a bad plan as I didn't have 10 seconds to breath once I got there.  We had a meeting as soon as I was there and very little time to check out vendors – other than ones Ken needed to see to buy some big-assed processing machines but that was good for me, as I got a firm handle on the supply chain.

    I think what struck me the most was the size and scope of the thing as it's both floors of the Las Vegas Convention Center with 10,000 people paying $700 a ticket to be there.  Having gone to Comdex since Shelly had it in the actual Sands Hotel with 1,000 geeks paying $99 to attend, I'd say the MJ Industry is way bigger than Tech was in the early 90s – or at least a lot more profitable! 

    Related image

    That's the strange thing about it – the ordinaryness of it.  Same as any convention – Biz guys in suits cutting deals in side rooms on the floor and cards being exchanged by everyone and no real competition yet as there's a general sense (like tech in the 90s) that this is the future and there's going to be plenty for everyone.  

    BIG companies like Siemen's are selling multi-million Dollar processors and SO MANY START-UPS – only the problem is most of them are profitable already – but that was true with tech too in the old days – the tricky part is picking the eventual survivors this early in the game.

    Image result for mjbizconference

    Do not short these companies and do not think this is a fad folks:

    Image result for mjbizconference

    This is a large, professional business and there's still 42 states that have to legalize as well as 204 countries over time.  Tech never had that issue constraining it's growth but it's not really a bad thing as it means this will be a slow, steady roll, with many, many opportunities over the next few decades. 

    Anyway, I'll be back there today for more meeting, etc.  Hopefully I have some time to walk around this time.  I went out for dinner with the New Age team and we have a breakfast meeting later (after the open).  Dinner was over about 10 and those guys went off to Snoop Dog's party and I was very tempted but decided I'd better get back as I'd only have 4 hours to sleep by the time I got back to the hotel.  

    So that was the end of that 19-hour day – this will be day 2.  Can't wait to go home and rest….

    Speaking of growth, LNG just started shipping out of Corpus Christie – that's the 4th export terminal in the US and that means our LNG exports will ramp up another 33%.   

    Still a chance to get into the MJ ETF as yesterday knocked it back to it's lows

    Meanwhile, markets are up a bit this morning but not very exciting so far.  /YG and /SI with nice $9 and 0.09 pops with /SI winning at +$450 per contract with /YG gaining $289.80 so, if you didn't take the money and run yesterday at $1,215 and $14.20 (I was at the show), don't be silly and let it all fade away. 

    Oil $56.65 also off thr highs and /RB $1.56 with /BZ at $66.72 and Dollar 97.055.

    Oh, one more thing about the MJ Biz – it's legal in Vegas now and people are smoking everywhere, of course but while waiting for all to assemble for dinner, there was a guy who was so wasted he fell down and the police came but it was no big deal and it was kind of funny as an EMT gave the guy a hug and some cold water and told him he was going to fine and just relax as two policemen watched over (he was a rappy-looking black guy, late 20s) and, then, once he was better, the policewoman just wagged her finger at him and sent him on his way.

    While the EMT was working I asked the policewoman if they got a lot of that but she said not more than drunks but she liked the stoned people better because they tended to be less scrappy and far less messy.  She said it's mostly out of towners with not enough experience with legal doses (stronger than street stuff) overdoing it – something I found true in Amsterdam as well.

    It really is a new World out there.  

    Oh yeah, that's another trend I see in Vegas – much more munchie food.  More places to grab a slice of pizza or a quick bite to satisfy cravings for stoned people with food getting the lead on alcohol for the first time I've ever seen in this town.  

    And lots and lots of frozen drink places – that's something I have mind to bring to Florida as they have taken over Vegas.  

    Related image

    $15 bucks gets you 3 shots in a 32 oz slurpee, usually in those tall plastic things for some reasons (the straw still lives in Vegas).  Additional shots are $4-5 and most places don't have coke – I had to go all the way over to the Luxor to get a Bourbon and Frozen Coke.  It may be more liquor (not to New Yorker's) than a normal drink but the threat of brain freeze keeps you from drinking it too quickly.  

    These places also sell jello shots for $3-4 – many flavors.  Like marijuana edibles – young people want to consume their alcohol in alternative formats!  

    I think these things are a gold mine as you are serving a minimum variety of drinks at double the price in a very small footprint.  My biz idea at the moment is to buy the machine and either partner with existing bars or possibly rent a corner of a bar and see if we can make it work on the Florida beaches..

    If that goes well and we can show numbers, there's hundreds of places we can franchise out to.