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Thursday Thoughts – Powell Gives the Markets a lot to Digest

Image result for fed rate hikes 2018Wheeeee – such fun!  

As we expected, the Fed raised rates because they had to (because they didn't listen to me and raise rates at the November meeting, when it would have had less impact) and the market freaked out and plowed lower but we decided to remain bullish because all that really happened is SOME people decided to sell and, since we have a very low-volume market – some people is all it takes to jam the market much lower.  Once the rate-sensitive funds are done selling – the bargain-shoppers can step back in.  

And what bargains there are!  While I noted yesterday that the indexes are probably fairly valued as they are still propped up by the ridculous headline valuations of AMZN, TSLA, NFLX, any marijuana company…  there are now hundreds of companies trading at ridiculous discounts to their fair valuation including Apple (AAPL) who made $60 BILLION in the last 4 quarters and has $240Bn in CASH!!! (including long-term investments) yet you can buy the whole company for $760Bn at $160 so $760Bn – CASH!!! is $520Bn/$60Bn = a price/earnings ratio of 8.666.  That's pretty low!  

Of course there has been a lot of rumors that IPhones aren't selling well etc and maybe they are down a bit but I was just at a dinner yesterday with a lot of people and someone gave the waiter a phone to take a group picture with and the waiter didn't know how to use it because it wasn't an IPhone and about 8 people shouted at the same time to the guy who's phone it was "Get an IPhone, for God's sake!" and then we started talking about how Andriods suck and how annoying it is to try to send things to people with Androids, etc….  

Image result for iphone teens chart18 out of 22 people at dinner had IPhones and that's in a wealthy part of Florida but my ordinary town in NJ (middle to upper-middle class) is probably 80% IPhones as well.  Now, I'm sure it's different somewhere in America because, nationally, IOS (Apple's operating system) is only on 50% of the phones in the country but, as of April, 82% of the teens in the US had IPhones and that has grown by 60% since 2014.  Also, what's the only store in your mall you KNOW is going to be crowded (if you have one) – the Apple store!  

While other retailers are struggling, Apple has been setting new records year after year for retail sales with the average Apple Store generating $5,546 per square foot in revenues.  Tiffany is #2 at $2,951 and they sell diamonds!  Unlike diamonds, no one has been successful so far in making artificial IPhones that pass for the real thing so it's amazing to me that AAPL's stock is back at $160, $70 (30%) off it's peak.  We are long APPL in our portfolios and we just made an even more bullish call in yesterday's Live Trading Webinar to buy back all our short calls and wait for the bounce but, as a new play on AAPL, I like the following and we're going to add it to our Options Opportunity Portfolio:

  • Sell 5 AAPL 2021 $150 puts for $19 ($9,500) 
  • Buy 10 AAPL 2021 $150 calls for $34.50 ($34,500) 
  • Sell 10 AAPL 2021 $200 calls for $15.50 ($15,500) 

The net of this spread is $9,500 and it's a $50,000 spread that's $10,000 in the money at $160.  On the downside, below $150 you may be assigned to own 500 shares of AAPL at $150 ($75,000) and, if AAPL is at $120, for example, you would be down $15,000 on the stock PLUS the $9,500 you spent on the spread (less whatever value remains on the long spread.  Let's say, for argument's sake, that a $40 drop in AAPL would drop the value of your $150/200 spread to the value of the $190/240 spread – a reasonable assumption. 

That would be $19/7.50 of $12.50 or $12,500 so, at $120 (down another 25%) it's reasonable to assume you would be out ($15,000 + $9,500 – $12,500) = $12,000 so it's not an unreasonable risk to take in a $100,000 portfolio and, of course, we don't think there's a snowball's chance in Hell AAPL will trade down to $120 – so we like the risk/reward profile of the trade very much!  

On the plus side, if things work out, you will collect $50,000 if AAPL is over $200 in Jan of 2021 and the ordinary margin requirement for the spread is $10,774 so it's a margin-effient way to make up to $40,500 (426%) on cash in 2 years…

Image result for apple cash on handApple may go lower still and the markets may go lower still – they certainly look very weak at the moment but unless AAPL has actually dropped back below $40Bn in profits (2014 levels), I certainly don't mind buying the company for $760Bn – especially when it comes with a $240Bn CASH!!! bonus.  In fact, if a few of my wealthier readers would like to team up with me – I'd be very happy to put in a bid to buy the whole thing.  With all that cash, we could turn it into an LBO play!  

Typically, banks will lend 7x EBITDA for an acquisition but let's just use AAPL's bottom-line $60Bn, which means we can borrow $420Bn from our neignborhood S&L (I wonder if we get a free toaster with that?) and then we have AAPL's own $240Bn so we've covered $660Bn which means we'll need to come up with another $100Bn on our own – that's all…

Apparently, MSFT or GOOGL can come up with $100Bn if they want to and I don't mind partnering with them (50/50) on the buyout but someone please translate this article into Chinese and Hindu – as I'm sure there's someone out there who'd love to own Apple with me?!?  Perhaps our pal Putin, who has been getting richer and richer and what better way to keep up with Trump's tweets than to manufacture the phone he holds in his tiny little hands?  

Someone asked me yesterday if AAPL should be our Trade of the Year for 2019 and the reason AAPL lost to IBM in November was I felt that AAPL could actually go quite a bit lower than $170 but IBM was going to be harder to panic people out of below $120.  I still remember pounding the table on AAPL in 2008 and 2009 as it languished around $75/share and that was before the 7:1 split so effectively $10.70 per current share and I STILL couldn't convince anyone to buy the whole company with me.  I'm giving it another shot now that they are down to $160 again and we'll see if I have better luck this time.

As to the indexes, we're coming into what is effectively a 2-week holiday in the US with the markets officially closed next Tuesday for Christmas and the following Tuesday for New Years and Monday will be half a day but no one is actually going to work in Christmas Eve and then, between Christmas and New Years – good luck getting anyone to show up for that either!   So the volume will be dead and we could drift lower but, officially, we do have new bounce lines off the lower lows so we'll be looking for:

  • Dow 27,000 to 23,000 is 4,000 points so 800-point bounces to 23,800 (weak) and 24,600 (strong) 
  • S&P 2,950 to 2,500 is 450 points so 90-point bounces to 2,590 (weak) and 2,680 (strong) 
  • Nasdaq 7,700 to 6,350 is 1,350 points so 270-point bounces to 6,620 (weak) and 6,890 (strong) 
  • NYSE 13,200 to 11,300 is 2,100 points so 420-point bounces to 11,720 (weak) and 12,140 (strong) 
  • Russell 1,750 to 1,350 is 400 points so 80-point bounces to 1,430 (weak) and 1,510 (strong)

As you can see from our color-coding, we're at a very dangerous inflection point as those lows may begin to turn red and then we can begin to calculate the 20% drop lines, rather than the bounce lines, for our next set of targets.  Those are Dow 21,600 (not far), S&P 2,360, Nasdaq 6,160, NYSE 10,560 and Russell 1,400 so we're already more than 20% down on the Russell and it's down 350 so a 70-point overshoot (1,330) is not a big deal but lower than that, with another index crossing below 20% – THAT would be a very negative sign!  

We have, however, gotten more bullish for the moment as even a test of the 20% lines invites a 4% bounce so, when we're this close to 20% – the odds strongly favor playing for a move higher – even if we go lower first…

 


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  1. Good Morning.


  2. I have been saying for a while that we are not done going down…. Not sure that we are done now either.


  3. And no Phil, Android doesn't suck… For a long time, the Apple hardware was better but not the case anymore (the Pixel 3 camera is regarded by most as the best phone camera) and Android is in some ways better than iOS. It's just that you communicate with people who have iPhones so it's inconvenient. But I have an Android phone and my kids have iPhones and we get along! And not everybody in the world can afford iPhones so cheap Android phones (85% of the world phone market) allow poor people to join the 21st century :-)


  4. Phil/aapl

    Good morning!

    Your Aapl thoughts comments are prescient!

    My thoughts exactly and I tri3d to buy at 163.80and 164.80 (with some built in protection, of course!)

    I will try again at 160…I hope it helps your cause to buy the entire company! (Haha, but I AM trying g to help,you know!)

    But seriously, thanks for your perspective!


  5. Stupid tweet of the day:

     


  6. I really like my 2 for 1 LG V30's with unlimited everything for $30 a month….  :)


  7. It seems that Trump is rushing to pay back Putin because he senses that he doesn't have much time left… Lifting sanctions on some oligarchs' companies, pulling out of Syria! It's so disgusting now…



  8. Morning All!

    The webinar replay is now up!

    https://youtu.be/jMWILGy0xOQ


  9. Yikes, down we go again!  

    Hopefully we hold yesterday's lows but Dow already busted it (but Dow doesn't count).  AAPL still $160.

    Done/StJ – As noted above, even if we hit the 20% lines, it would be very strange not to bounce 4% so 27,000 x .8 is 21,600 and that's 5,400 down so 1,080 bounce to 22,680 should be the worst case for additional damage on the Dow.  The reason I didn't mind risking TZA was RUT 1,750 to 1,400 was 20% so even if there is a 20% overshoot to 1,330, that doesn't mean we still shouldn't get a bounce back to 1,470 and then, if that fails, we could re-cover our TZAs.  

    Unfortunately, we might be testing 1,330 today!  

    So it's the 70-point lines around 1,400 that matter:  1,330, 1,400 and 1,470, hopefully that's our consolidation zone for a move back up.

    Android/StJ – As I said, someone is buying it as iOS is barely 50% but, like cheap iPods, you can expect cheap iPhones to eat into Android's market share now that AAPL has iPhone 6s for $99 on AMZN (stores only sell 7s and up).  Tim Cook was the guy who ran the iPod division and he's using the same strategy to wipe out phone competition as well, relentlessly driving down the prices of low-end models so there's no room for competitors to get in.  

    There used to be 20-30 different music players but one by one they gave up, no matter how big the backer, as AAPL has a fantastic strategy of getting manufacturers to gear up to make 200M phones a year and then, 3 years later, AAPL has a new phone but the manufacturers still have the production lines and employees that they don't want to shut down so they continue to make the phones at lower and lower price points.  

    The difference has been, so far, that the games and software have advanced fast enough to make the old phones obsolete (wasn't as much of an issue with MP3s) but once that curve begins to flatten – then there's no reason a person wouldn't want an older model IPhone if it's cheap enough.  

    And don't forget, the watches are also, effectively, cheap iPhones and AAPL already has them down to $229 for the 3 and $400 for the 4 so that's another place they can crowd out the competition (like iPod minis).  

    Damn, I'm convincing myself to buy more AAPL!  

    Thanks Maya – I'll put you down for $50,000 so only $99,999,950,000 left to raise.  cheeky

    Shipp/StJ – Wow, isn't there some way to open the doorway to the alternate reality these people believe in and let them go live there?  

    Syria/StJ – Turns out Trump did not consult anyone on this – completely unilateral decision that is freaking out the Pentagon, who think it's a TERRIBLE idea.  

    Image result for dimensional doorway animated gif


  10. Phil if we expect more downside doesn’t it make sense to increment out of the Aapl short calls



  11. iPhones / Phil – The funny thing is that Google doesn't give a crap if we use Android or iPhones because they make money either way. Users care more than they do it seems. They probably lose money on Android… 


  12. Put/Call Ratio at 1.70.


  13. Just for the info. German court banned AAPL certain I Phones for sale in ref. of infringements to QCOM


  14. Good article about AAPL in India. I think AAPL is playing the long game there. Lots of cheap phones now. Betting on upgrades later:

    https://www.wsj.com/articles/its-been-a-rout-apple-stumbles-in-worlds-largest-untapped-market-11545146399?mod=searchresults&page=1&pos=2Largest Untapped Market

    With global smartphone sales flattening, Apple has looked to India for new growth, with little success so far


  15. Phones – it sounds a lot like the old PC vs. Mac battles – to my mind, it depends on what you want to do. (Before retiring) I needed statistics software, so a Windows PC, no question. (After un-retiring), I'm living 8 months a year in Korea, so an android phone, no question, as it's far and away more common, and most Korean software is android. Depends a lot on what you want to do.


  16. Also, a brief history of GE and how it got where it is today:

    GE Powered the American Century—Then It Burned Out


  17. LB…wow


  18. LABu down to 31…wow




  19. C/Phil- why with rates raising, everyone hates Citibank? isn't it just cheap compared to other American banks?







  20. The 41 most unreal Donald Trump quotes of 2018





  21. We're apparently diving because Trump had another temper tantrum about his wall and called off the House vote on the budget extension and is now having a noon meeting in his office with GOP house members – looking to get them to shut down the Government.

    Downside/Coulter – See yesterday's discussion on AAPL, we bought back all the short calls (but not the new OOP, obviously) and we di expect a bounce here – as long as Trump shuts up.  

    AAPL/Yodi – It's really more of a fight between QCOM and INTC and AAPL is caught in the middle because they are using the INTC chips that infringe (apparently).  QCOM lost in US court but has been annoying AAPL and INTC in the rest of the World, where it can.  What you end up hearing about is the very few countries where QCOM hasn't been thrown out and those are all being appealed.  QCOM is trying to get AAPL to pressure INTC to settle as they disrupt AAPL's Xmas shipping if they can. 

    India/Pstas – Time Cook was the perfect pick to run AAPL for the iPhone decade – he methodically destroyed iPod competition globally, paving the way for the iPhone and now he's running the same playbook for the iPhone.  THERE CAN BE ONLY ONE!  

    Image result for ipod market share history

    Image result for ipod market share history

    LB/Jabob – Yeah, getting trashed.  

    C/Dave – Very hard to tell if a bank is cheap or not as there are so many factors.  C made $15Bn in 2016 but lost $6.6Bn last year but this year back to $16Bn, I think and the valuation at $52 is $127Bn so a very good price and certainly, for a long-term hold, I love it but there's no stopping them from dropping even lower in a big market sell-off (like this one).


  22. Phil, what is your preferred trading platform for beginners? I am using trade but thinking of changing


  23. Wow, we're heading into some real drama as the House, where the GOP has 20% more votes than the Dems, is possibly going to push the budget through over Trump's dead body (need 66% to override a veto) which will make him the lamest duck that's ever served out his final two years in office.  

    Platform/Millard – I like ThinkorSwim from TD Ameritrade.  You can open a paper trading account and practice but, overall, that's my favorite.

    1,330 being tested!  


  24. As I was saying yesterday, traders used to buy on any news, now sell on any news. There is just so much fear in the market now. No doubt stoked by a President simply driving off the rails now. The GOP will soon realize I hope that they need an intervention.



  25. Mexico Stocks Set for Worst Year Since 2008


  26. London Gatwick Shut by `Deliberate’ Drone Raid Amid Holiday Rush


  27. Two weeks notice




  28. RE: platforms

    I've liked Thinkorswim and have used it for the past 10 years or so. No issues with it and I still use it daily. 

    That being said – check out Tastyworks too if you're going to be doing much with options. Very, very cheap commissions/fees there, especially on multi-leg options trades, and I like some of the options trading tools better than Thinkorswim. The charting isn't as fully featured at Thinkorswim, though. 


  29. OOOPS – typo. The charting on Tastyworks isn't as sophisticated AS Thinkorswim! 


  30. FU TRUMP!!!!!


  31. Yuch, what a crap market, totally fell apart since Oct.  

    I'm giving today a pass because the volume is heavy again and the shutdown is just theater – it doesn't really mean anything.  On the whole, why not just give the baby his wall money?  AAPL lost $20Bn in market cap today so what's $5Bn to make the idiot happy?


  32. Holy crap, down 500 again.   22,700 is the 2.5% rule for the day, 21,600 is the 20% line.  


  33. Dollar is way down today also…..


  34. Yeah, would be much worse if Dollar not diving.


  35. Market is in a freewall – tomorrow will be worse unless there is some major change…. all the redemptions happening will put more pressure, in addition – there will be less appetite for risk going into the weekend with Monday 1/2 day and Tuesday closed.


  36. AAPL close to 155 today. 


  37. ?

    • Speaker of the House Paul Ryan says President Trump won't sign a Senate passed stopgap spending bill without border security provision.
    • That increases the probability of a partial government shutdown starting just after midnight on Friday. There's still a chance it can be averted, though.
    • Ryan says, "We're going to go back and work on adding border security to this."
    • Stock markets are hanging near session lows in early afternoon trading: S&P 500 -1.4%, Nasdaq -1.6%, and the Dow -1.7%.
    • 10-year Treasury yield down almost 1 basis point at 2.77%.
    • U.S. dollar index -0.6% to 96.35.
    • Previously: Stocks sink to session lows as Trump insists on `steel slats or wall' (Dec. 20)

    This isn't helping either, China tensions escalating well past 11:

    ?Related image

    • Stocks continue to reel from the Fed's surprising hawkishness yesterday, with today's renewed threat of a government shutdown adding to the excuses to sell.
    • In fast action, all three major averages have now fallen more than 2% on the session.
    • Gold is seeing something resembling a bid, up 0.9% to $1,268 per ounce, and now higher by about 6% over the past month.
    • As investors flee the volatile stock markets and the dollar weakens, gold rises; Comex February gold +0.7% to $1,265.70/oz.
    • For most of the year, it's been a bad run for gold, but precious metals are set for their biggest quarterly gain in almost two years, analysts say.
    • VanEck Vectors Gold Miners ETF (GDX +4.2%) up 2.6% over the past three months, -18% YTD.
    • Many precious metals miners are on the rise: (CDE +8.7%),  (PVG +4.7%), (AGI +6.9%), (AUY+6.7%), (HL +3.4%), (BVN +5.2%), (IAG +8%), (EXK +6.7%), (KGC +6.8%).
    • Previously: Gold miners rise as gold price hits three-month high (Oct. 23)

    • With oil sitting near its lowest level since August 2017, at least one large investor is dumping BlackRock's iShares Global Energy ETF (IXC -1.9%).
    • Two large blocks of the $1.4B ETF sold on Wednesday--one for 1.1M shares worth $34M at 10:37 AM ET, and the other a block of almost 2M shares worth $60M about eight minutes later, Bloomberg reports.
    • IXC's turnover for the day came to $144M, the most this month and about 10 times the daily average for the year.
    • Oil is down 4.3% in midafternoon trading at $46.12.
    • Of course, IXC isn't alone. Energy Select Sector SPDR ETF (XLE -3.1%), Vanguard Energy ETF (VDE -3.1%), VanEck Vectors Oil Services ETF (OIH -3.5%).
    • Previously: Energy shares cheapest (relatively speaking) since 2001 (Dec. 19)
    • Lockheed Martin (NYSE:LMTannounces hitting its 2018 target of delivering 91 F-35 fighter jets to to the U.S. and its allies.
    • The F-35 accounts for about a quarter of Lockheed's overall revenue.
    • Lockheed shares are down 3.7% to $264.19.
    • Buckingham Research cuts its Netflix (NASDAQ:NFLX) target from $406 to $382 citing the S&P 500 sell-off.
    • Analyst Matthew Harrigan sticks with a Buy rating as he still sees Netflix as the "top global streaming category winner" and is constructive on the company's pricing power beyond global member growth.
    • Source: Bloomberg First Word.
    • Netflix shares are down 2.4% to $260.28.
    • For those searching their memories for the last time equity markets reacted so poorly on a Fed day, don't worry about coming up empty. It's been nearly a generation since something like yesterday's selloff occurred on the day of an FOMC meeting (h/t Liz Ann Sonders).
    • In February 1994, Alan Greenspan and company surprised complacent markets with a rate hike, sending both stocks and bonds tumbling. The Maestro learned his lesson well (whether it was the correct lesson is highly debatable), and spent the rest of his career being careful never to upset the stock market (a trait he passed on to successors Ben Bernanke and Janet Yellen).
    • Will Jay Powell take away the same lesson?
    • Cruise ship stocks fell the pressure from this morning's Carnival (CCL -7.2%) report, which beat Q4 revenue and EPS estimates but included downside Q1 EPS guide at $0.40 to $0.44 (consensus: $0.45) and in-line FY at $4.50 to $4.80 (consensus: $4.69).
    • Earnings press release.
    • On the move: (RCL -2.9%), (NCLH -3.5%).
    • Previously: Carnival beats by $0.01, beats on revenue (Dec. 20)
    • Twitter (NYSE:TWTRplunges 8.4% after Citron Research says an Amnesty International report shouldn't be ignored by investors and the company "will be forced to clean up the site," leading to swift MAU impact.
    • Citron also calls TWTR the "Harvey Weinstein of social media."
    • Citron puts a $20 price target on the company.
    • Read more here about the Amnesty International report on "shocking" online abuse against women on Twitter.
    • IBM (NYSE:IBM) expands its strategic partnership with Samsung to include manufacturing 7nm processes.
    • Samsung will manufacture microprocessors for IBM Power Systems, IBM Z and LinuxONE, high-performance computing systems, and cloud offerings.
    • IBM was using GlobalFoundries for its process technologies, but GlobalFoundries announced earlier this year it would put its 7nm FinFET program on hold indefinitely. Samsung and TSMC (NYSE:TSM) are the remaining 7nm players.
    • The agreement expands and extends the 15-year strategic process tech R&D partnership between the companies.
    • IBM shares are down 0.9% to $115.49
    • November Leading Indicators: +0.2% to 111.8 vs. +0.0 consensus, -0.3% prior (revised).
    • Coincident Economic Index +0.2% to 104.9.
    • Lagging Economic Index +0.4% to 106.0.
    • Walgreens Boots (WBAQ1 results: Revenues: $33,793M (+9.9%); Retail Pharmacy USA: $25,721M (+14.4%); Retail Pharmacy International: $2,901M (-5.9%); Pharmaceutical Wholesale: $5,708M (-0.2%).
    • Net Income: $1,123M (+36.8%); EPS: $1.18 (+45.7%); Non-GAAP EPS: $1.46 (+14.1%); Non-GAAP Net Income: $1,386M (+7.0%); Quick Assets: $980M (+24.8%); CF Ops: $460M (-54.1%).
    • FY2019 Guidance: Non-GAAP EPS: growth of 7% to 12%.
    • Shares are down 2% premarket.
    • Walgreens Boots Alliance (NASDAQ:WBAslips 1.5% in premarket trading after Q1 adjusted EPS beats consensus, FY2019 outlook reaffirmed, and new cost management program targeting annual cost savings of over $1B by the end of the third year announced.
    • Sees significant restructuring and special charges related to the new cost-management plan; recognizes pretax charge of $30M in Q1 primarily related to retail businesses in Chile and Mexico.
    • Retail Pharmacy USA comparable pharmacy sales rose 2.8%; comparable retail sales fell 3.2%.
    • Retail Pharmacy International: U.K. comparable pharmacy sales fell 3.5% and comparable retail sales fell 2.6%.
    • Pharmacy wholesale sales slipped 0.2% to $5.7B, including negative currency impact of 6.8%.
    • Conference call at 8:30 AM ET.
    • Previously: Walgreens Boots Q1 revenues up 10%; non-GAAP EPS up 14% (Dec. 20)
    • The UBS annual consumer survey shows the number of Amazon (NASDAQ:AMZN) Prime members who shop for groceries at least once a month has dropped Y/Y despite the Whole Foods acquisition and Prime Now expansion.
    • Research firm Brick Meets Click finds that Amazon grocery shoppers spend an average of $74 per month compared to the $200 per month for those using grocery delivery services like Instacart, which pick up from physical retailers.
    • The news could benefit Walmart (NYSE:WMT), Target (NYSE:TGT), and Kroger (NYSE:KR).

  38. Weekend, Batman – If they don't reverse this tomorrow, the momentum will begin to be overwhelming to the downside.  

    The funny thing is the data isn't so bad (lots of data tomorrow morning) but if people lose faith in the economy, it becomes a self-fulfilling prophesy.


  39. Phil,

    How is the sell off affecting the PSW Hedge Fund?


  40. Hey, where is Santa??? Ouch!


  41. Yodi, I wonder how you manage the multiple sold puts in your typical butterfly/armchair trades in days like this? In the example you were given, the strikes are typically not that far from the market prices so they many of them would be heavily down. Do you tend to just take the stock at the strike price or roll forward/down? For instance, I think you sold Jan' CM 82.5 not that long ago – would be rolling it out or still happy to take it 82.5?


  42. Alter, I started to give a writeup yesterday but have been to busy to finish.

    Most stock at present will possible show a paper loss. Yes the puts you have to roll possible out to April or close the same.We do have a lot of worthless calls. But I can only say take the present situation with patience.

    Remember stocks do not expire. It is hard to predict the present situation two hours ahead never mind a day. I think the US is looking for a brave man to end this theater.


  43. And tomorrow is triple witching Friday.


  44. Hedge Fund/Japar – I'd say, at the moment, we're probably looking down about 10% for the year but that's because we just took a big hit on long positions (high VIX, lots of short premium) that we're not worried about and then we have things like TSLA March short $220-240 puts that are not likely to hit us but currently show a big paper loss as TSLA just fell to $315.  Unfortunately for the fund, we weren't ready to take full advantage of the Jan dip and also this has been a defensive year, establishing long-term positions, this Q screwed us but it's an arbitrary moment in time, that's all.

    Santa/Jabob – I'm in Florida, you really have no idea its Christmas…

    Well, a bit of a comeback to avoid a catastrophe but just weak bounces off the lows on the whole.

    Tomorrow will be interesting.  Maybe Trump announces a budget deal and a trade deal with China and we go up 1,500 points?  

    Paper losses/Yodi – They get severe when the VIX is at 30.  I used to hedge against a rising VIX but then it didn't rise for 2 straight years…

    Image result for trump wall cartoon


  45. Trump is laughing and joking while signing the farm bill which bails out farmers damaged by his idiot tariffs while he's destroying the rest of the economy by shutting down the Government.  Ah, good times..


  46. Anyone have suggestions on how to hedge VIX?  I work SPX and would love to have a good VIX hedge.  VIX options don't seem to be connected to reality.   I have thought about adding short VIX futures.  Any thoughts are appreciated.


  47. My concern is a dropping VIX not an increasing one. 


  48. ending ugly


  49. UGH-LY


  50. silver and gold… silver and gold… (song from the original stop-motion rudolph)!


  51. Trump says 'we'll see what we can do' about border and shutdown

     

    That should make it all better


  52. Wow this whole country has turned into a circus side show-think I'm getting my ulcer back. And what IS a "partial" shutdown??


  53. Dow back to 23,000, 2,487 on /ES, 6,326 on /NQ and /RTY held up at 1,337 in the end!  Not so terrible.

    VIX/Robert – That's because with the VIX, you are betting on where it will be exactly on expiration day and that has very little to do with where it is today.  That's why none of those ETFs seem to work right.

    Partial/Pirate – I think Trump thinks he can just shut down the Mueller investigation through lack of funding…


  54. I have 40 Jun19 SDS $32/38 BCS, should I think about cashing them?


  55. SQQQ I am short 10 Jan19 $15 and have 20 Feb $13/20 and 80 Mar$15/22 BCS; advice?


  56. If I recall, BDC predicted that AAPL would hit $150… Getting close now!


  57. It's quite amazing that 4 months ago I was worried about adding lines on the upside on the Big Chart and now I might have to add lines on the downside!


  58. Robert – you're looking to profit from a decrease in VIX? Can't you just sell some OTM SPX options? They get pretty rich on days like today.

    Or maybe buy some SVXY? 



  59. Oil and Stocks Are Locked Together in a Downward Spiral




  60. SVXY has painful memories for the board. It was a Top Trade on Jan 19, 2018 – see here and here: "SVXY/StJ – Killing the STP at the moment as we sold short puts (but bear put spread is a winner)". 

    The last post has extensive discussions by various members on the pro/cons of trying to trade SVXY. It was a great learning experience.

    Note: Phil is on compliance alert if he ever recommends another SVXY trade :) !





  61. Trump unleashed: Mattis exit paves way for global chaos