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Faltering Friday – Poor China Data Ends the Week on a Down Note

Image result for china slowdownNow what?

China's Retail Sales were "only" up 8.1% in November, below expectations of 8.8% and below October's 8.6% gains and Auto Sales were a real disaster, with a 10% drop from last year, the worst result in 7 years while Industrial Output rose 5.4%, missing the 5.9% expected.  Exports and Imports also slowed but, overall, China is still on track for their 6.5% GDP goal for the year – effectively getting the "soft landing" they had been looking for – trade war or no trade war.

China’s economy, if it’s in trouble, it’s only in trouble because of me,” Donald Trump told Fox News in an interview on Thursday.

Meanwhile, US Retail Sales were strong at 0.2%, double the 0.1% expected and October was revised up to 1.1% from 0.9% so all is still well with US Consumers so I don't see any reason why we should be putting in new lows, which would be 24,000 on the Dow (/YM), 2,600 on the S&P (/ES), 6,550 on the Nasdaq (no way) though the Russell (/RTY) is testing 1,420 for the 2nd time in a week so that would be the best line to make a bullish bet at.

Speaking of Futures trades, we got a nice move in Gasoline (/RB) yesterday that netted a lovely $7,634 gain on 3 contracts off the $1.42 line as Gasoline was getting stupidly low again, also testing the same bottom we played last week.  It's often worth playing double bottoms for bounces – especially if you keep tight stops below the line so that your risk is far less than the potential reward – those are the kind of trade set-ups we like to look for in our Futures trades.

We also look for patterns and, so far, all of this week's pre-market moves have been erased and this morning, at 8:50 am, /YM is down 188 at 24,400 and that's a great line to play bullish off of as 24,400 should be good support and, if it isn't, then take a quick loss and try again at 24,000.  The same goes for 2,625 on /ES, 6,700 on /NQ and, as noted, 1,420 on /RTY so it's a great moring to take some futures longs as a 180-point recovery on the Dow would be good for $800 per contract – definitely worth a shot!  

More Brexit worries are causing the Dollar to spike and that's putting pressure on the indexes, which are down about 0.7% in direct relation to the Dollar gain so it's nor really a sign of weakness – simply a currency adjustments – another good reason for us to take a stab at some longs as the Dollar is not likely to move over 97.40 into the weekend since the US certainly has problems of our own – including a President who may be led out of the White House in handcuffs.

We'll have to see how today works itself out – we've generally called a bottom here but it's pending holding these bounce lines so we are ready to slap on some more hedges if things get worse but you can't go by what you see on the Futures, as we've had several 500-point reversals in the past couple of weeks and I'm sure there are more ahead.

Have a good weekend,

- Phil


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  1. Good Morning.

  2. Under investigation:

    The Trump campaign
    The Trump transition
    The Trump inauguration
    The Trump administration/
    The Trump Foundation
    The Trump Organization

    All very legal and very cool!

  3. Now that they are no longer in power in the House, the GOP deficits hawks will come out again:

    Deficits didn't matter the last 2 years when they cut taxes for the top 1% but will be a danger to our democracy when it's time to take care of the middle class or our vets!

  4. And more:

    After two years of being in power and ballooning the deficit, Republicans must pretend that now the deficit is suddenly urgent again. Just like it suddenly became urgent on January 20, 2009.

    It’s all such dumb, kindergarten-level stuff. But Bartlett is right: everyone will pretend to go along with it. Sigh.

  5. WPM

    WPM is up big (reaches settlement with Canada Revenue Agency regarding tax dispute regarding foreign income).

  6. albo – I saw WPM – been waiting patiently for that for a while. Now hopefully, the stock rises even from here.

    WBA – The manipulators at Goldman have downgraded to sell.  

  7. WPM. Very nice pop there. 'bout time.

  8. BBBY looking good as well. Let's hope it sticks.

  9. BBBY has a large short interest-5 days to cover. Everything in the financials appeared healthy however. Cash flow is a little light, but nothing drastic.

  10. BBBY/Phil- I got assigned 1000 shares at 30 from an old put that I left it. Given the dividenfs, would you recommend holding the stocks with covered calls or can you suggest an adjustment. Thx

  11. Good morning!

    Watch that Must Hold line on the RUT – if we can't get back over that's 2 days below and a very bad sign.

    P/E/StJ – Keep in mind those earnings include one-time realizations of overseas earnings as well as ridiculous tax deductions that were taken last year – it's really not a good indicator of future expectations.

    That chart is useful too, 15% of the companies that were around in 2008 no longer exist, 20% down from before the last crisis.  All that stock gone has reduced the /E that the P is being divided from so no additional money is being made – it's just being distributed to fewer people than it was before.  

    Deficits/StJ – Well we can cut Trump's $180Bn military increase for starters and then roll back his $300Bn tax breaks to the wealthy and another $300Bn for Corporate tTaxes.  See – fixed it already!  

    Corporate profits in the United States increased by USD 66.0 billion, or 3.3 percent, to an all-time high of USD 2,073.5 billion in the third quarter of 2018, following a 2.1 percent advance in the previous period and beating market expectations of a 2 percent rise, a preliminary estimate showed. Undistributed profits climbed by USD 38.7 billion, or 4.9 percent, to USD 823.2 billion, and net dividends rose by USD 27.3 billion, or 2.2 percent, to USD 1,250.3 billion. Meanwhile, net cash flow with inventory valuation adjustment, the internal funds available to corporations for investment, grew by USD 52.7 billion, or 2.1 percent, to USD 2,610.9 billion. Corporate Profits in the United States averaged 477.53 USD Billion from 1950 until 2018, reaching an all time high of 2073.50 USD Billion in the third quarter of 2018 and a record low of 14.70 USD Billion in the first quarter of 1951.


    And they are paying $150Bn of ANNUAL taxes with the Trump breaks!

    Yay, nice pop in the indexes! 

    WPM/Albo, Learner – Wow, very nice.  This is why I bang the table on stocks I have conviction on when they are down.  If you wait to see if things improve on a chart, you can miss half the rally.

    Submitted on 2018/11/21 at 7:56 am

    WPM/Pstas – Well, you certainly don't need to be as aggressive with the short put sale on a new trade but I'm still good with the target because it's the same company doing the same thing they were doing last year and the year before – only now you can buy them for $15.80 ($7Bn):


    This year, so far, they've dropped $400M to the bottom line. 

    In the third quarter of 2018, Wheaton generated close to $110 million in operating cash flow, and completed the acquisition of a gold and palladium stream on the Stillwaterand East Boulder mines (collectively "Stillwater"). During the third quarter, Wheaton received its first deliveries of gold and palladium from Stillwater. Through the first nine months of 2018, Wheaton had record gold production and sales volumes, and is on track to meet annual production guidance, and is currently on track to exceed annual production guidance.

    • The decrease in silver sales volume for the three months ended September 30, 2018, was due to the lower production levels, partially offset by positive changes in the balance of payable silver produced but not yet delivered to Wheaton.

    I do get very, very tired of making the same case for our stocks over and over again.  People have no idea how to read a report (if they read it at all) and bail out based on what some lazy analyst says about a company.  I prefer to focus on whether or not the company makes money and whether the financials are improving and whether the outlook is good or bad.  Seems to make me a madman in this market…

    Reconfirming 2018 Production Guidance

    ·   Wheaton's estimated attributable production in 2018 is on track to exceed its guidance of approximately 355,000 ounces of gold, 22.5 million ounces of silver and 10,400 ounces of palladium.

    Subsequent to the Quarter

    ·   On October 24, 2018, Vale S.A. ("Vale") announced the approval of the Salobo III mine expansion, which if completed as proposed, would increase processing throughput capacity from 24 million tonnes per annum ("Mtpa") to 36 Mtpa once fully ramped up (the "Salobo Expansion").

    "Our robust precious metals business continued to grow in the third quarter with the first production of gold and palladium from our latest stream, Stillwater, exceeding our expectations. With the addition of Stillwater, Wheaton had record gold production and sales volume in the first nine months of 2018 resulting in operating cash flow of almost $370 million." said Randy Smallwood, President and Chief Executive Officer of Wheaton Precious Metals. "In addition, we believe we are currently well positioned to exceed our production guidance for 2018.


    Submitted on 2018/12/10 at 10:52 am

    WPM still cheap (bang, bang, bang):

    Submitted on 2018/12/10 at 11:56 am

    LD/Pat – I'd rather play ABX/FCX/WPM than GLD.  I think the uptrend is sound but likely to be very choppy.

    BBBY/Pirate – There's another one.  As I was saying yesterday, analysts are idiots and the people who follow them are sheep so why on earth would you go by a chart that simply shows you which way the sheep are stampeding?

    I decide to get into or out of a trade at a certain VALUE and the chart is just a useful way to see where a buying or selling trend seems to be running out of steam but it doesn't tell you ANYTHING about the future movement of a company – it only shows you what a bunch of idiots THINK the future is – kind of like asking all the fans in a stadium who's going to win the game and then running to Vegas to bet your life on it since you took a "flawless" poll.

    BBBY/Ravi – You have 1,000 shares at $30,000 and the stock is $12 so you need a 150% gain to get even.  How is covering going to help you?   Realistically, you are down $18,000 less whatever you sold puts for so hopefully $3 so down $15,000 and the question is, how can you make $15,000 back on BBBY?   Well buying the stock for $12 and selling the 2021 $15 calls for $2 drops you net to $28 called away at $15 with a $13,000 loss – so you might get even that way in 20-30 years.  However, you can cash your $18,000, sell 20 of the 2021 $15 puts for $5.50 ($11,000) where all you are promising to do is own 2,000 shares for $15 vs the 1,000 you now own for $28 so really – you are promising nothing and being handed $11,000 to play with.  Now you can take that $11,000 and buy 40 of the 2021 $10 ($4)/17.50 ($1.80) bull call spreads at $2.20 ($8,800) so you still pocket $2,200 ($1.10 per $15 share if assigned) and now you have a $30,000 spread that's $2 ($8,000) in the money to start and NOW you are on your way to making your money back.  You can also sell 10 Feb $12.50 calls for $1.25 ($1,250) to start making some money while you wait.  10 sales like that will bring you $12,500 closer to your goal.

  12. Oh, by the way, there was a math error in that GE trade but not very consequential as you can either put a bit more money in ($1,700 + $950) or sell 10 more $8 puts (30) for $6,900 and that reduces the $950 to $350 so it's just a matter of whether you'd rather spend $1,700 more cash or risk owning $8,000 more of GE and gain $600 in cash.  I'd go for selling more as I firmly believe $60Bn is a stupidly low price for GE (bang bang).

    Thanks Robert for catching that one – this West Coast schedule is killing my cognitive functions!  

    Speaking of which, it's LTP Review time, so I'm not ignoring people – just very busy!  (and I have to leave about 1pm, EST today.

  13. pat_swap, cna you please acknowledge what I've written several times as to the what greencoin needed to be an on going project?

  14. AAPL getting whomped, back to $166 is down around 2.5% so it better bounce back and let's call the lines $167 and $168 for the day as we're down around $5 and keep in mind, AAPL is costing the Nas 0.5% and the Dow 50 points and it's also dragging the S&P, which is why the RUT is green already and the others are not. 

    RTY right at 1,440 so watch that test of our Must Hold line and marvel at how accurate the 5% Rule is!

    So, even on a bullish move, of course you will get resistance at a major line like that (from either direction) so now we look at the 20-point move off the low and that's 4-point weak retrace (1,436) and 8-point strong (1,432) but, if we're going to see a break over 1,440 – then we don't expect to see more than a weak rejection at 1,440.

  15. WPM  – Phil

    WPM looks uncovered in the OOP.  Good time to sell some calls?

  16. Greencoin/BDC – No one is blaming you – all the cryptos blew up and we knew it was a long-shop gamble from day on (and we did call to cash out while it was 100x higher than our entry).  What would be useful is for you to neatly summarize a timeline of what happened with Greencoin along with key events so people can get a handle on what to look for in other ICOs (if ICOs ever happen again). 

    If the coins do come back and we do have a chance to ground floor another coin, I'm behind you 100% as you really know the space but you can't be sensitive about it – just like any experiment, it's best to dispassionately document the effort and then try to fix a few variables and try again.

  17. BDC/Greencoin,

    Yes. you have written lot of things on greencoin but frankly speaking I sometimes find it challenging to conclude. I know it is just me and so I think it is easier to just ask you the latest about it and in my way. And now with one more coin with the same name came in the market, I was not sure how that impacted GRE.

    I really appreciate your inputs on PSW.


  18. BBBY/Phil- Appreciate the note. Thank you!

  19. Any link to the WBA downgrade by Goldman?

  20. I was over weight in WPM. Lightened up at 19.46 on the pop

  21. Long-Term Portfolio Review (LTP) – Part 1:  $847,390 is DOWN $86,175 since our last review but the STP is at $378,093 and that's UP $68,253 so the paired portfolios are working PERFECTLY as the hedges are not meant to eliminate all your losses – just mitigate them.

    How does loss mitigation work?  Well, we're essentially flat since 11/16 and the S&P is down about 5% and AAPL is down 10%, etc so the same cash we had on 11/16 buys 10% more stock – that's what the hedging is for – it puts CASH!!! in our hands when things go on sale.  They also keep us from having to panic out of positions as they go lower and, in fact, we often get to add to them – as often the best use of cash is improving strikes on the spreads we already have – especially when we're early in our scales, as we are with almost all of our first-year positions.

    Keep that in mind, we're doing ridiculously well for first-year portfolios.  I know you guys are used to it but we certainly didn't start out our 2014 portfolios (last time we started from scratch) with such big gains – our strategy causes gains to snowball over time, this is still early stages but most things just so happened to break our way this year – especially in the STP.  

    I am not going to say "On Track" as I don't have time so, I if don't mention a position (most of them) then I think they are fine as they stand but feel free to disagree with me and ask questions if you are concerned – because I might have missed something.  Next week, I'll be back in the command center and we can double-check things when I have 6 screens to check them with.  cheeky

    • HMNY – Not on track but hopeless so nothing to do but pray (not a valid investing strategy).  
    • AAPL $195 puts – Seem aggressive but value-wise, I don't think so.  Would take bad earnings to convince me to adjust.
    • All other short puts are generally in good shape – especially considering the sell-off.
    • Dividend plays are fine too.

    See, that was easy!  

  22. Long-Term Portfolio Review (LTP) – Part 2:  

    • AAPL – As with the OOP, it would be wrong not to roll the 2021 $180 calls ($24) to the $160 calls ($33) for less than $10 on the $20 roll.  If we're not willing to do that, we shouldn't be in AAPL.  Also, we may as well buy back the short $240 callers as they are only $35,000 so either AAPL goes lower and we sell $200 calls ($17.50) and roll down to the $140s with the extra money or AAPL goes higher and we get to sell $220 calls for $17.50 and that puts $35,000 more in our pockets on the same spread.  So it would be silly not to take this first step while we wait for additional information that will dictate our next action.
    • In the cases of ALB, AMGN, BBBY, C, CAKE…  On track isn't the best description as they are low in their channels but so is the market and it's not worth adjusting them until we get better information (earnings) or the macros calm down (good luck).  Best to watch and wait in most of these but lots of activity next month as we have a ton of Jan expirations! 
    • CZR I think is a gift down here.  Some analyst was super-negative on US casinos and they all took a dive but that analyst was an idiot as they are trending towards $8Bn in revenues (vs $5Bn last year) and last year they made $600Bn and this year $1Bn in reach so his analysis is all based on Chinese gamblers not showing up (and no one else filling the rooms).  Lazy, stupid analysis let's you buy CZR for $7.50 ($5Bn).     We have 40 2021 $10 calls, now $1.75 and we can roll them to the $5 calls at $3.40 so well worth the $1.65 to widen the spread by $5 and go in the money on our calls.

    • F – Also stupidly low but we can't buy everything.

  23. ok thanks guys, I'm glad you appreciate my comments. Actually a timeline is a really good idea so I might do that this year.

    remember important things. GRE was never an ICO (the foundation never sold any coins, or its members, including me). If you bought any it was from third parties on open markets. Never participate in an ICO, I consider them all to be scams (with the possible exception of ethereum). It is not how crypto is supposed to work. Notice how Bitcoin was never an ICO.

    Since coins aren't securities they have different characteristics (idiosyncrasies).

    * There's no such thing as loss of ownership. Anyone could pick up the project and move it forward and whatever you own in it you keep forever (unless the coin got hacked or something like that). 

    * Namespace isn't the same like with traditional "companies." You could start a project called "bitcoin" but your coins can't hash onto the bitcoin network so calling it "bitcoin" doesn't mean anything except your attempt to fool people which will probably not go nowhere. There's no need to enforce this because the individual social groups do that via information probability (remember: in the knowledge economy, information isn't "right" or "wrong" it has probability function of value). Ergo, people can start other "greencoins" and since the namespace is quiet it could get picked up as the dominant form of the namespace. It wouldn't affect the GRE project at all. We could even call it something else. Only the secure blockchain matters and it doesn't have feelings, it doesn't need to have a nice sounding name. Here's yet another one. One thing new developers seem to respect is the currency symbols (e.g., this one is GRN) so coins listed on exchanges don't conflict with each other. Personally I don't like the name "coin" in anything, it sounds techy and detached. I would probably call it the Human Carbon Project, Social Carbon, or something carbonless, like how "Amazon" meant selling books online. I'm open to names.

    * Since coins don't "die" like traditional company stock and/or debt, interestingly, YOU could start a project around existing greencoin (though you'd probably just start your own thing from scratch, but it is possible of course). If you wanted to to this I could tell you exactly how it is done.

    Also, I've watched solarcoin go from own 2.28 to $0.02 and that's still an active project. Energycoin got delisted from bittrex and that still seems active but has no value. Coins are just very much so in a crypto-nuclear winter right now.

    The question does anyone care about carbon and think this is a good way to allocate the theoretical scarce resource of carbon reduction? That's the only thing that matters. If no, there is no point to the project.

  24. I have a  DXD BCS April 2019 $26/33 BCS that cost $3.35, long call is now over $7, how should I handle it?


    WBA – Pstas, I saw this.

    Goldman Sachs analyst Robert Jones downgraded Walgreens Boosts Alliance (NASDAQ: WBA) from Neutral to Sell with a price target of $68.00 (from $73.00).

    The analyst believes recent partnerships are not enough to offset pressure on the core business. He notes that US retail fundamentals have deteriorated and the company's leverage is "somewhat elevated."

  26. What would you do for new entry to CZR?

  27. Albo-thx

  28. Millardd CZR wait and see the bottom first!!!!!

  29. A few years ago someone asked Phil about JNJ.  He said he was never interested because every few years that have some big disaster. 

  30. "they" have some big disaster 

  31. NLY/Tangled – No immediate consequence but it depends what the new board does going forward.  Assuming nothing nefarious though, it's just legal shuffling.

    Carbon/BDC – Most of the planet cares about reducing carbon – just not this country.  I think we need a way to uniquely solve the problem and adopting this coin or that may not be the real way to do that. I liked the idea that GreenCoins would go to the carbon producers but that was supposed to be (to me) in exchange for carbon credits, which would then be something of value backing each GreenCoin and, eventually, those carbon credits would rise in value, backstopping the coins.  The problem was, with 3.5Bn coins in circulation, we had not actually traded 1.75bn coins for carbon credits and some individuals had scooped up hundreds of millions of coins and weren't of a mind to "fix" the imbalance and get back to the purpose of the project so there wasn't anything worth fixing and it made more sense to start a new coin from scratch with a new foundation that stuck to the goal in a verifiable way and I did have people interested in that but then the market collapsed and now we'll have a hard time getting anyone to fund any sort of coin.  That's my summary.

    DXD/Millard – Well if you want to call a bottom and flip bullish (today that doesn't look smart), you can simply cash all or some of the calls and you instantly become bearish in DXD and bullish on the Dow.  The $33s are at the money at $3.50 and DXD is a 2x ETF so 10% on DXD is a 5% move lower in the Dow so you are betting the Dow is less than 5% lower in April.  To me, it's an easier decision if you are looking at a true insurance hedge as this one paid off so you take that $8 for the April $26s off the table and coverf the April $33s with 2x the July $30 ($5.70)/$40 ($2.50) bull call spreads at $3.20 so $6.60 of your $8 is gone but now you have twice as much in the money insurance coverage which will be somewhat mitigated by whatever you ultimately pay back the short April calls.  

    WBA/Albo, Pstas – What GS means is they feel like idiots for missing the boat on WBA so they're going to scare people out of it so they can accumulate some back at $70 before they steer people back into it.

    CZR/Millard – I'd sell 20 of the 2021 $8 puts for $2.50 ($5,000) and buy 50 of the 2021 $5 ($3.65)/$10 ($1.65) bull call spreads for $1 ($5,000) so worst case is owning 2,000 shares for $8 ($16,000) against the $25,000 upside potential at $10.  Down the road, calls can be sold, the March $9 calls are 0.50 and even if you just sold 10 of them for $500, that's $4,000 in 8 quarters and drops your worst-case net on CZR down to $12,000 ($6/share).  So, you can wait for a bottom with Yodi or begin what I consider a $6 entry in progress right now.

    JNJ/Stock – When you see a company with recall after recall on products, you know their internal oversight sucks and that means you're constantly open to problems – like DB.   

  32. The Year in Graphics: 2018

  33. J&J’s Intraday Plunge Wipes Out $30 Billion

  34. Phil – pretty good summary. I would argue a finer point that the coin itself replaces the carbon credit, which worldwide is the thing that doesn't work (who enforces it), but that's mostly a theoretical construct and in the end as you pointed out I couldn't get it to work anyhow.

    JNJ – holy smokes! They knew about asbestos in baby powder??? Oh boy, that's criminal! And babies??? Public support will absolute zero. Like -273.15 degrees C absolute zero. 

  35. Long-Term Portfolio Review (LTP) – Part 3:

    • FTR – We already have the short puts to jack us up to 15,000 shares at net $5ish ($75,000) and the 2,500 worth at $8 so net $6ish on 20,000 is $120,000.  We could sell the $3 puts for $1.35 and lower our basis to $4.65ish on 35,000 ($162,750) but it's really not that much of a discount vs just doubling down at $2.67 to  20,000 at $4.01 ($80,000ish) and closing the puts and calls out about even and selling those $3 puts for $1.35 and the $4 calls for $1.10 and then we'd be in 20,000 shares for net $1,56 called away at $4 for a huge profit or assigned at 3 to make 40,000 shares at $2.78 avg.  Since all that is fine – there's no reason to do anything at the moment and we can comfortably wait for earnings, despite the $26,600 paper loss that we now know we can easily adjust.
    • GIS – This one I'm worried will suddenly fly higher on a buyout offer so, while we can, let's roll those 2020 $40 calls at $2.60 ($5,200) to the 2021 $32.50 calls at $7 ($14,000) and now we're making a proper bet on GIS – the first was just a placeholder we put net $5,000 into.
    • MO – If the market wasn't so crappy I'd DD on them.
    • MT – An $8 move up would flip this trade +$40,000 and it's net $13,300 now so I love it as a new trade but again, the market is too weak for us to toss money into every bargain.  After earnings we will pick and choose. 

    • PZZA – We took our profits and this is the leftovers but almost time to turn it into a proper trade by selling puts and rolling down the calls but, again, not in this market.
    • WBA – Well our target was $75 in Jan, so thank you GS!  Hopefully they go lower so we can sell puts and roll down the calls.

    All in all the portfolio is in good shape with lots of positions I'd like to buy more of if the market doesn't collapse.  The high VIX is also hurting us as we sell a lot more premium than we buy but one thing we know is all premiums go to zero on expiration day so simply waiting will make us about $200,000 in this portfolio.  We have a ton of short calls to deal with next month, so don't make any plans for expiration week (14-18).

  36. Speaking of ugly, back at the lows.

    All the S&P sectors are red.  I hope it wasn't a mistake to expose TZA in the STP but we can afford a mistake and it won't be too hard to fix as long as we don't gap down 5-10% – then it will be bad.

    Greencoin/BDC – See, that's where we differ as I never for one second thought anyone was going to accept the coin in lieu of a carbon credit.  Carbon credits exist (though poorly regulated/distributed) and I saw GreenCoiins as a way to create a proxy for easy carbon credit exchange, not "in theory", but in practice but the problem is we need to start a coin from scratch, preferably working with a credit producer like TSLA/Solar City, where we can utilize the credits their devices create to allocate coins in a strictly controlled environment and then it would be a piece of cake to sign up vendors like AMZN/WFM to accept the coins as effectively coupons to buy merchandise with because, in essence, they would be accepting a currency that's backed by ACTUAL carbon credits and they could do ads that say their customers helped take X many tons of CO2 out of the atmosphere or whatever.  THAT is what I wanted to accomplish but we need much tighter controls from day one than GreenCoin has as a pickup.

  37. If December continues along like this my two principal predictions for 2018 will have been correct:

    * The Dow will close lower than it started (24,148 now versus 2017 close 24,719)

    * Volatility will be higher (^VIX at 21.72 now versus 11.04)

    Not that I used my own wisdom and foresight to make any money!! but I did get out of the market completely over the course of the year, so there's that.

  38. Well, I have to run for my lunch meeting.

    Have a great weekend folks, I'll be back at the command center on Monday.

    - Phil

  39. Phil yeah, OK, we've talked about this 100 times and I 100% understand what you're saying and I disagree completely. The entire point here is carbon credits don't work. I'm a subject matter expert in energy and carbon and there's no such thing as an "ACTUAL carbon credit," as you say. The first thing to do is to see the exact thing that isn't working at the highest level and then you can disrupt it. A carbon credit isn't a thing because carbon, once emitted, isn't an actual commodity. It doesn't have any value. Only in an abstract, all-in sense, that every emission coming from every person's first-world activities produces a nebulous, nano-consequential aggregate marginal contribution to a concept of climate change / global warming, does it have any value. 

    This is one of the central thesis of the knowledge economy, how it works, and how it's different than the deprecated economy it is replacing. Your idea is force-fitting crypto (blockchain) to be something it's not, in this case a commodity, whereas you can do every single thing you said with no blockchain at all. The tools are currently all available to do just that (go to TSLA and make solar credits or whatever). You going to run into the same problems that exist for carbon credits now, either you need global enforcement network (UN?) for a mandatory system, or a trusted way to run a private, voluntary system. The problem with voluntary systems is a lack of incentive, except to "do the right thing." Superfreakonomics was the a-ha moment, nobody does the right thing (you can read the book). So it's a non-starter. It's actually an interesting book because there's a lot of there there that checks big boxes. Climate change no longer needs to be a political conversation, it can be an economic one. But we need a way to value the collateral damage from the emissions and there's no way to do this in the manufacturing economy which has no mechanism to value externalities.

    The coin changes the nature of this mechanism completely because the commodity-facsimile is no longer necessary. Coins can have value with nothing backing them based on their transactional value alone (e.g., bitcoin). The transactional value replaces the need for the "carbon credit." In the GRE mechanism, a non-profit Foundation hands out 50% of the mined coins to verified producers (so it is quasi-centralized in this regard) that otherwise has no participation in the market, selling coins, or otherwise. When others buy coins on an open market it raises the value for everyone, including the producers who get them for free, which increases their incentive to produce more (low carbon solar, etc), and the market finds the true price of carbon through open-market price discovery theory. Also, the incentive of people to "do the right thing" becomes one of asset gain instead, so they have a material incentive to participate. 

    You can't sell a carbon credit as they exist now to someone else because they have to be expired. The only thing you have is a "good feeling" from "doing the right thing." With a coin you own something. It's odd, you own a piece of community effort, which feels like "nothing," but the knowledge economy is weird that way, this is what actually has value. It's what bitcoin has proven so the data you need is already there. It's not weird to me because economics is purely a social science. There is no economics on Pluto even though gravity is the same on Pluto and the speed of light is the same on Pluto, as it is here on Earth. Money, for example, is not natural law. It's a way of organizing information, like fiat currency, which is a wholly-owned subsidiary of the human brain. Blockchain is simply another way of doing that. It's just more efficient, sort of like when fiat currency (law backed accounting units) replaced metal and gold currencies. Once you have stable nation-state's the inefficiencies of metal baked currencies are no longer more efficient. Now that we have a borderless, global digital network, the inefficiencies of separate nation-state fiat currencies are no longer as efficient at allocating scarce resources, and in the case of carbon, have no mechanism whatsoever.

    That's my take on it. But I don't really care anymore. It's obvious I'm wrong and no one has any idea what I'm talking about anyway. Bitcoin = tulip bulbs and beanie babies!!! Yeah, that's it. See? So easy.

  40. Soalrcoin seems to be a good, solid project to me (follow them on twitter) but the logisitics always bothered me. They (a foundation) pre-mined 98B coins and sit on them, and their charter is to give them out to certified solar producers over 40 years. This is all well and fine as a mechanism but it's tough to swallow that the private keys to the pre-mined coins will remain protected, especially if the project takes off. If you multiply the current $0.026 into the available coins you get a $1.3M market cap but total diluted coins is $2.55B. If solarcoin goes to $10, which is a reasonable social value that could be attached to a MWh of solar energy (which on the open market worth ~$100 in electrical energy), that gives the coin a ~$1T valuation total and the incentive to steal the private keys to the pre-mined horde becomes huge.

  41. This is also what's wrong with trying to turn a blockchain into a commodity-backed proxy. It's not the value of the solar energy, it's the value of the community effort you should be trying to capture. You can't do that in a 1:1 coin to carbon credit, or solar credit, mechanism. what the knowledge economy is beginning to teach us is there's far more value in the latter than the former anyways, and since value is a social science belonging to the human brain, that makes sense. 


  42. FU BEANIE BABIES!!!!!!!!!!!

  43. /NG getting crushed.

    DGAZ up 22% today.

  44. Are there Beanie Babies futures? Trading /BB now…

  45. Are there tulips futures?

  46. ugly day for just about everything…

    wonder what Monday will be like????

  47. Phil, Yodi,

    Some juicy Put Premium on GIS $35 P for 2021 between $12 -$15…..Am I chasing a Falling Samurai sword….Anybody want to address my dilemma?

  48. My only prediction for 2019 is:


  49. jasu1/ GIS $35 Puts for 2021 trading at $4.50ish. 

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  61. Phil in the December review you said regarding CZR, "We have 40 2021 $10 calls, now $1.75 and we can roll them to the $5 calls at $3.40 so well worth the $1.65 to widen the spread by $5 and go in the money on our calls.  Did you intend to double the position as well?  The current update shows the position with 80 5 Calls.