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Flailing Friday – Crazy Market Action Continues

And now we are down again.  

The Dow started the week at 25,900 and we hit 26,130 on Tuesday but now back to 25,830 this morning so, on the whole, we'll be lucky to finish the week out flat.  It's a clearly manipulated, low-volume market and JP Morgan points out that, despite the S&P 500 surging 20% from its December low – almost every catagegory of investors tracked by JPM, from individuals to hedge funds and computer-driven trading, has shown little inclination to chase the rally. 

Dwindling liquidity is often dragged into discussions of market meltdowns. In December, for instance, when the S&P 500 plunged toward the brink of a bear market, both President Donald Trump and strategists from Goldman Sachs flagged it as potentially escalating the sell-off.  While very dangerous if the market turns negative, JPM says these low-volume conditions could also keep the rally going:

“Given liquidity, it is plausible that just short covering, buybacks, dealers’ gamma hedging, and some limited re-leveraging drove the entire recovery.  This, in turn, opens the possibility that the current rally can continue during the spring.”

JPM cites the dramatic reversal in Central Bank policies as putting another floor under the market.  While I agree with their premise, I believe it, like most bullish premises, is ignoring the risks of the overall Global slowdown driven by the Trade Wars, Rising Oil Prices and Brexit as well as the dramatic slowdown in Corporate Profits we'll see now that they don't have additional tax breaks and, of course, rising wages will eat into profits as well.  

Bullish but cautious is the best description of our stance.  As long as we hold those 200-day moving averages, things are fine but I'd sure feel better if the Russell could manage to take back their 200 dma at 1,592 (the bar is lowered every day) it doesn't seem too much to ask, does it?

As I noted recently, as long as we're over the 50 dma, they keep on rising and, when they cross over the 200 dma, that will be a very bullish signal – just as the cross below in November was a bearish signal.  Meanwhile, we are simply printing money in our Member Portfolios.  The Money Talk Portfolio, which we don't touch unless we're doing the show, was just reviewed Tuesday at $130,260 and today, just 3 days later, those exact same positions are at $136,300, that's up 12.3% on our original $50,000 start (9/5/17) and up $6,040 (4.6%) from Tuesday's total.  

The Money-Talk Portfolio is a self-contained, very low-touch (once per quarter) portfolio with just 11 positions – a very good starter portfolio that's easy to follow that uses our strategies of "Be the House – NOT the Gambler" and "How to Get Rich Slowly" – though up 172% in 18 months is not very slow!  Of course, getting off to a great start in a portfolio means you SHOULD switch to being more cautious going forward as it's more important to lock in exceptional gains than to keep swinging for the fences.  

We do have a couple of hedges in the MTP (SQQQ and TZA) but we'll need to expand on those next time we're on the show (probably April).  In our more active Member Portfolios, we already made those adjustments last week and, if the market keeps going up, we will continue to spend about 25% of our additional gains on hedges as I'd rather lock in 75% and be sure of keeping it than gain 100% but possibly lose it on a December-like drop.  

Image Properties

Meanwhile, we can't take the down moves any more seriously than we take the up moves so we're pretty patiently just waiting out the month of Mach and looking forward to April earnings where, if the Q1 numbers don't push us back under the 200 dmas – we're very likely to be off to the races in May.  

Until then, still a bit cautious.

Have a great weekend, 

- Phil


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  1. Businesses don't seem to fear Trump anymore:

    Despite Mr. Trump’s vast media presence and his popularity among Republicans, he has not demonstrated the ability to do lasting damage to a corporate brand that crosses him.

    Mr. Houchois, the Jefferies analyst, said he was not surprised that G.M. was sticking to its plan despite Mr. Trump’s displeasure. Broader economic forces, such as lower gas prices and falling demand for small cars, compelled the company to abandon the Lordstown plant. And Mr. Trump’s metals tariffs, combined with the possibility of more levies on automobiles, have been a drag on the industry and made car companies less inclined to do the president any favors.

  2. BA showed the problem with the Dow:

    Boeing is not only one of the merely 30 stocks in the DJIA, it carries the most weight of any single stock in the index. As of market close on March 8, 2019, Boeing (BA) accounted for 11.26% of the index, while Pfizer (PFE) accounted for about 1.09%, according to a spokesperson from S&P Dow Jones Indices. But the two companies had nearly identical total valuations (market capitalization) at just under a quarter trillion dollars each.

    The DJIA is a price-weighted average, meaning the prices of the 30 stocks are added together. At the market close on March 8, 2019, Boeing traded at $422.54 per share, while Pfizer was priced at $40.89. Obviously, Pfizer had more than 10 times the number of shares outstanding. But a 1% decline by Boeing would have a larger impact than a 10% decline by Pfizer. 

    In the week ended March 15, 2019, Boeing lost 12.2% of its value in a drop that had a significant impact on the DJIA. In fact, it had a greater impact than if Pfizer stock had fallen to zero. 

  3. Good Morning!

  4. Good morning! 

    Sorry the post was late but I have the full-on flu now and I took Robitussin DM, which I thought would not make me sleepy but I passed out on the couch when I intended to lay down for a second.  

    Indexes not looking good at the moment, despite that little attempt to rally back at the open.  Below 2,800 and we have to up our hedges but that would be the 2.5% line for the day, so I doubt we get there.  Trump was going off on Powell again this morning, spooking the markets. 

    • President Donald Trump says the U.S. economic growth would have topped 4% instead of 3.1% if the Federal Reserve hadn't raised rates during 2018.
    • He also told Fox Business Network's Maria Bartiromo in an interviewed to be aired Friday morning that he doesn't care if he "influenced or not" the Fed's decision to put rate hikes on hold.
    • "The world is slowing, but we're not slowing, and frankly if we didn't have somebody that would raise interest rates and do quantitative tightening, we would have been at over 4 (%)" growth, he said.
    • As for the ongoing talks with China to reach a trade deal, "I think we're getting very close," he said. "That doesn't mean we get there, but I think we're getting very close."
    • Previously: Live coverage: Fed Chair Powell's post-FOMC press conference (March 20)

    Happiness/StJ – So things could be worse…

    I'm very unhappy that Trump's action keep backing up my theory that he has no intention of ending the tariffs, since it's a stealth tax on the American people that pays for the tax cuts he gave to his buddies. 

    • March U.S. PMI Composite Flash54.3 vs. 55.2 consensus 55.8 prior.
    • Manufacturing PMI 52.5 vs. 53.5 consensus, 53.7 prior.
    • Services PMI 54.8 vs. 56 consensus, 56.2 prior.
    • Global equity funds saw big outflows this week, a stark contrast to last week's inflows, as fears over economic growth drove investors to hunt for yield in credit and turn to safer assets such as bonds.
    • Investors pulled about $20.7B from equity funds in the week to March 20, while $12.1B flowed into bond funds, the most since January of last year, Bank of America Merrill Lynch strategists noted on Friday, citing EPFR data.
    • Even though stocks have been rising globally this year, equity funds have experienced $66.8B of outflows YTD.
    • For bond funds, $6.6B have poured into investment-grade bond funds, while $3.2B flowed into high-yield bond funds and EM debt drew in $1.2B.
    • German 10-year bond yields fell below zero for the first time in more than two years and the euro slid after a key gauge indicated the country's manufacturing activity contracted.
    • The euro weakened by 0.6% against the U.S. dollar to $1.1311, making European bonds more attractive for foreign investors on a currency-hedged basis.
    • Germany's 10-year yield fell 4 basis points to zero, its lowest point since October 2016, meanwhile the 10-year Treasury yield also fell 4 bps to 2.491%.
    • IHS Markit's Purchasing Managers' Index for German manufacturing sank to 44.7, the lowest level since 2012 and below economists' median estimate of 48.
    • The European Union will give the United Kingdom an extension on its Brexit negotiations, according to EC President Donald Tusk.
    • But how long of a delay is dependent on whether UK Prime Minister Theresa May can secure a parliamentary win on an exit agreement next week. If she can't, the delay will just be until April 12.
    • The EU "responds to UK requests in a positive spirit," Tusk says, and agrees to an Article 50 extension until May 22 if Parliament can reach a Withdrawal Agreement.
    • It's continuing "no-deal" preparations in the meantime, Tusk writes. May's failure to win a vote could mean it yet again faces a chaotic Brexit.

    Paulson says no to Newmont Mining's merger deal with Goldcorp

    • Goldcorp (NYSE:GG-1.4% as Paulson & Co. comes out in opposition to the terms of Newmont Mining's (NYSE:NEM) proposed acquisition of the company.
    • Paulson says the $1.5B premium to Goldcorp shareholders is unjustified given the company's poor performance, and as currently structured, the synergies from the transaction would only accrue to Goldcorp shareholders.
    • The hedge fund says it would reconsider its position if the undue premium to Goldcorp shareholders was eliminated and the full value of the recently announced Nevada joint venture was retained for Newmont shareholders.
    • Paulson says his group owns 14.2M NEM shares, which would make it one of the miner's largest shareholders; it is not known when Paulson acquired its stake.
    • With the quarter's end ticking closer, Tesla (NASDAQ:TSLA) CEO Elon Musk has set car deliveries as employees' "primary priority" in a companywide mail, Business Insider reports.
    • A memo titled "Vehicle Delivery Help Needed!" follows closely on an email from VP Sanjay Shah last week looking for volunteers for delivery shifts.
    • This is the "biggest wave in Tesla's history," Musk says in the mail, and it "won't be repeated in subsequent quarters," according to the report.
    • "As challenges go, this is a good one to have, as we've built the cars and people have bought the cars, so we just need to get the cars to their new owners!" Musk writes.
    • General Motors (NYSE:GM) reportedly will announce plans tomorrow to invest $300M in its Orion plant that builds electric and self-driving vehicles for Chevrolet and the self-driving Cruise.
    • GM is expected to announce it plans to build a new electric compact vehicle for Chevy based on the same compact architecture as the Chevrolet Bolt EV and the Cruise AV that are assembled in Orion.
    • Company execs are expected to make the case that the new EV, which had been considered for one of GM's Chinese plants, is being built in the U.S. because of the new USMCA trade deal that is awaiting approval by the U.S. Congress.
    • YRC Worldwide (NASDAQ:YRCW+8.3% pre-market after reaching a tentative agreement with the Teamsters union on a new contract covering thousands of workers.
    • A current labor deal was set to expire March 31, and as recently as last week, both sides remained apart on long-term wage and benefit packages; the union membership still must ratify the agreement.
    • The Teamsters wanted YRC to expand the pool of available money for wages and benefits after the union had granted givebacks several years ago to help the company regain its financial footing.
    • Facing competitive pressures from, UPS is readying a test of a home vaccination service that would provide further inroads into healthcare logistics, Reuters reports.
    • Outsourced healthcare logistics is an $85B market, expected to grow to $105B by 2021, and it's dominated by DHL Group.
    • The UPS test will involve packaging/shipping vaccines from the company's healthcare complex to one of its 4,700 franchised stores, where a contracted home health nurse would collect it, transport it the "last mile" and administer it.
    • UPS hasn't said which vaccines would be used, but Merck (NYSE:MRK) told Reuters it's looking at partnering with UPS on the project.
    • MillerCoors (NYSE:TAPfiles a lawsuit against Anheuser-Busch InBev (NYSE:BUD), alleging BUD's ad campaign associating Miller Lite and Coors Light with corn syrup is false and misleading.
    • TAP says the ads "deceive beer consumers into believing that there is corn syrup and high-fructose corn syrup in Miller Lite and Coors Light," adding that there is no corn syrup in either beer by the time it reaches consumers and high-fructose corn syrup is never involved at any point.
    • TAP alleges BUD singled out its use of corn syrup because it found that consumers do not understand the differences between corn syrup and high-fructose corn syrup; dietitians have said that the corn syrup is not unhealthy when used during the brewing process.
    • Tiffany (NYSE:TIF) reports comparable-store sales declined 1% in Q4.
    • Geographic revenue: Americas: $618M (flat); Asia-Pacific: $316M (-1%); Japan: $196M (+3%); Europe: $162M (-3%); Other: $29M (-25%).
    • Gross margin rate -10 bps to 63.8%.
    • Operating margin rate dropped 300 bps to 20.3%.
    • Inventory increased 8% Y/Y to $2.43B.
    • Store count +6 Y/Y to 321.
    • FY2019 Guidance: Net sales: increase by a low-single-digit percentage; Comparable sales: Low-single-digit growth; Operating margin rate: slightly above Y/Y; Tax rate: ~23%; Diluted EPS: increase by a mid-single-digit percentage; Free cash flow: at least $400M; Capex: $350M.
    • TIF -4.06% premarket.
    • Previously: Tiffany beats by $0.07, misses on revenue (March 22)
    • Nike (NYSE:NKE) topped profit expectations for its fiscal Q3 as it saw growth and higher margins in its core brand and broad geographical strength.
    • Shares are down 3.5% in early after-hours trade.
    • Net income came to $1.1B vs. a year-ago loss of $921M, not comparable due to effects from tax reform.
    • Its core Nike brand saw growth across wholesale and Nike Direct (led there by digital), categories including Sportswear and Jordan and "continued double-digit growth across footwear and apparel."
    • Converse growth in Asia and digital was more than offset by declines in the U.S. and Europe.
    • Gross margin rose by 130 basis points to 45.1% amid higher average selling prices, favorable exchange rates and growth in Nike Direct.
    • Revenue by brand: Nike, $9.1B (up 12% in constant currency); Converse, $463M (down 2% in CC).
    • Conference call to come at 5 p.m. ET.
    • Previously: Nike beats by $0.03, beats on revenue (Mar. 21 2019)
    • Press release

    Kalytera reports positive mid-stage data evaluating CBD in prevention of acute GVHD

    • Kalytera Therapeutics (OTCQB:KALTFreports positive data from its ongoing Phase 2 study evaluating cannabidiol (“CBD”) for the prevention of acute graft versus host disease (“GVHD”) following bone marrow transplant.
    • The study will evaluate the PK profile, safety, and efficacy of CBD at doses of 75, 150, and 300 mg BID.
    • To date, 3 of the 12 patients in the first cohort have died from causes unrelated to GVHD. The data for the remaining 9 patients demonstrate encouraging preliminary evidence of efficacy.
    • No patients in the first cohort of the study have developed grades 3 or 4 acute GVHD while receiving oral CBD treatment, and only one patient developed grade 2 acute GVHD.
    • The first cohort in Phase 2 study is the low dose cohort, with patients receiving only 75 mg of CBD twice daily ("BID").
    • The company is now enrolling the second 12-patient cohort which will receive 150 mg of CBD BID.

    NextEra Energy, Con Ed warn patent dispute could roil solar sector

    • NextEra Energy (NYSE:NEE) and Consolidated Edison (NYSE:ED) warn future solar development could be harmed if Hanwha Q Cells prevails in barring solar panel imports into the U.S. from rivals; ED says the move could trigger "significant job losses" in solar.
    • The comments to the U.S. International Trade Commission show the solar industry's desire for stability after Pres. Trump's tariffs on imported equipment; more than a dozen companies wrote to the ITC, urging it not to block imports as it rules on Hanwha's complaint.
    • The ITC has authority to block imports, and it asked for input on how the case would affect the solar industry as part of its standard practice when investigating complaints.
    • ETF: TAN

  5. Fed rates / Phil – Trump is such an idiot. It would really be interesting to see his grades at Wharton. How did we manage to grow the economy in the 90's when the 10Y rate was over 5% or so? Where is the correlation between low rates and high growth?

    Image result for correlation between fed rates and gdp growth

  6. apple up bpeing dowm which one  rules the day

  7. Sundevils- thx for the LLC info.

  8. Ugh!

    • Chipotle Mexican Grill (CMG +0.6%) is upgraded to Neutral from Underperform with a $640 price target, hiked from $500, at Wedbush, which no longer sees risk to near- and medium-term same-store sales growth.
    • Wedbush analyst Nick Setyan says he is no longer bearish on the restaurant chain, and says his channel checks with stores suggests Q1 same-store sales growth was 6.6%, in-line with consensus expectations, caused by digital/delivery and marketing pushes which are driving brand loyalty.
    • "We view loyalty as a compelling value, with 10-11 transactions equating to a free entrée at CMG's current in-store average check of ~$12," Seytan writes. "Therefore, we believe the adoption/use of loyalty could sustain Y/Y growth rates in digital at levels we previously believed were unrealistic."
    • Earlier: Chipotle price target raised to Street-high $770 at Argus (Mar. 21)

    I think the bandwagon is full at this point.

    • Behind today's big move down in bond yields was a plunge in the German PMI to its weakest level since 2012. That sent the German 10-year Bund yield down into negative territory.
    • Alongside, the U.S. 10-year Treasury yield is off more than nine basis points to 2.44% – its lowest print in more than two years. That pretty much makes the U.S. yield curve flat (the 2-year is at 2.34%, and the Fed Funds target is 2.25%-2.5%). TLT +1.35%TBT -2.7%
    • While the major U.S. averages are down about 1%, the financial sector (XLF -2.3%) is being hit way harder. The SPDR Regional Banking ETF (KRE -3.4%), The SPDR Bank ETF (KBE -3.3%).
    • Individual players: Bank of America (BAC -3.6%), Morgan Stanley (MS -3.3%), Wells Fargo (WFC -2.5%), KeyCorp (KEY -4.6%), SunTrust (STI -3%), Comerica (CMA -3.6%), BB&T (BBT-2.9%), Fifth Third (FITB -2.7%), Regions Financial (RF -4.4%), BNY Mellon (BK -2.8%), MetLife (MET -3%), Prudential (PRU -2.9%).
    • Best Buy (BBY +1.3%) opens higher after Oppenheimer upgrades shares to Outperform from Perform with an $86 price target, saying investors are still not fully embracing the company's improved sales and earnings power.
    • BBY "has undergone a significant transformation, whereby it evolved from a traditional chain of large-format superstores to one of retail's preeminent omni-channel operators, which utilizes digital well as a means to connect better with consumers and enhance underlying disciplines," Oppenheimer's Brian Nagel writes.
    • With online sales now consistently representing ~16% of BBY's domestic revenue, Nagel believes e-commerce is now a key sales driver.
    • Oppenheimer bumps its FY 2019 and 2020 EPS guidance for BBY to $5.70 and $6.18, respectively, vs. $5.54 and $5.80 previously.
    • A sharp move up in Twitter (TWTR +4.2%) is being attributed to positive chatter from Cleveland Research.
    • The firm is reportedly increasing estimates based on encouraging feedback from advertisers.
    • Twitter shares are up 13.5% YTD, trimming their decline over the past three months to -3.4%.

  9. Financials getting hit hard.  XLF, KBE & KRE down big.

    The 3-month to 10-year yield spread inverted this morning.

    That is the first time since July 2006

  10. Rates/StJ – The problem is that the Top 1% see rates as what it costs them to borrow money, so they want them low where the average American sees rates as what they get paid for saving their money.  If you want a robust economy, people have to feel secure about their retirement – that's not even a thing anymore in this country for the bottom 80% – who pretty much have nothing saved since they generally live from paycheck to paycheck.  Nothing trickles down and you can't expect the Top 1% or even the Top 10% to drive a $20Tn economy with 320M people all by themselves.  

    What actually happens is the Top 10%, with their windfall earnings from low rates and low taxes, are able to speculate in commodities, 2nd homes, etc, that drive those prices UP for everyone else.  The Fed just perpetuates this with their adjustments as the main thing they try to control is Labor Costs – because that's the kind of inflation the Top 1% really can't stand!  

    Financial/Albo – Real mess today.  Earlier in the week we had articles saying the Stock Market and the Bond Market can't both be right.  Today the Bond Market is winning the debate (as it usually does in the long run). 

  11. And do you see what I mean about thinking ahead on charts?  You could see the inversion coming from a mile away (not to mention the Fed's action set it in motion on Weds) but, on the day it actually happens, people are SHOCKED that they invert and panic sets in. 

  12. -1.25% on /ES so we're halfway there.  

    /RTY -2.3% at 1,532 so, if they fall below -2.5% (about 1,528), then we may see the other indexes double down on this morning's dip too.

  13. Phil / CMG – lots of analyst upgrades on this.   Earnings in April – they have fairly easy compares, and operational  metrics looked good last quarter – drive up / delivery, plus operational efficiency metrics are improving.  they are running at under 80% capacity and said they any upside in sales would drop to the bottom line in a big way…… I'm not sure it will not be significantly able 600 this summer.   Although the stock is over priced it can stay that way fo a while with all the hype.  I sold some June 620 short calls (for $53)  ( instead of the 600 I  think you put into the portfolios) and worried about this.  This of a another short call that was a looser.   Unless there is a food scare ( which they have minimized with some supply chain changes / food prep will minimize this) I don't see a pull back.  worried about the shorts, and think ing of getting l on on this

  14. CMG/Batman – Well, as you say, it could stay that way for a while with all the hype but it is hype and I'm a patient guy and, as I've said, if the earnings are strong, I'm very happy to add 20 2021 $550 ($200)/740 ($100) bull call spreads for net $100 ($200,000) for extra cover.  At $670 they are $120 in the money to start so, if I were to roll the LTP's 8 short June $600 calls that we sold for $50 and are now $92, to 16 of the Jan $760s that are now $51 – I would be $400,000 in the money before I owe them a dime back PLUS the $120,000 from our original $480/540 spread we paid $47,000 for so up about $270,000 on the longs and another $30,000 on the short puts is $300,000 so the 16 short Jan $760s would have to be up almost $200 ($960) before that roll is in trouble.  Or I could let irrational fear cause me to buy back the short June $600 calls for $74,000, take the $34,000 loss and leave my longs unprotected.  Which sounds more sensible to you?

  15. Oh, and, if we were short on cash, our original $480/540 bull call spread is net $90,000, so we could cash that to pay for half the new position.  

  16. And how is CMG up from $400 to $700 on these changes in consensus earnings over the last 3 months???

    Come on, this is just silly!  And the bottom line is the $15.50 projected for 2020 – so 40 times earnings next year if everything goes great???  MADNESS!!!

  17. Phil / CMG – thanks for the feedback…  I Have the following maybe I can do something with the 540 / 740 spread to help, or possibly pair my short June 620 calls with some Short puts in June – I would be ok with owning some shares at under 550…  Currently:


    long  10X Jan '21 $550 Calls (145) 

    short 15X Jan '21 $600 Calls (97) 


    Short 2X June '19 $620 Calls (53)

    Short 5X Jan '20 600 Calls (85) 

    I could sell 2X more short of the June 620 Calls and get this average up to $65 

    Sell the June 4X of the June 600 Calls for $15 – if the stock stays above I can recover a bit with the shorts if it falls below 600 I'm ok with owning the stock at  540 ish and this would be covered bu the $600 Jan '21 calls.   What do you think about this?

  18. Wow, we lost 2.5% on /RTY (now down 3.2% at 1,516) and the others are down about 1.7% now – ugly way to finish the week. 

    I'm assuming, since it's quiet that everyone is happy with their hedges?  

    MTP gave up almost half the gains since this morning, now $132,735 but not bad considering this kind of drop. 

    CMG/Batman – You have more shorts than longs???  Well no wonder you are worried, we're 2x covered on CMG with longs, not short at all.  I hope 15x is 15 and not 15 x whatever your base is!   Assuming 15x is 15, you have 

    • 10 2021 $550 calls at $196 ($196,000)
    • 15 short 2021 $600 calls at $165 ($247,500) 
    • 2 short June $620 calls at $77 ($15,400) 
    • 5 short Jan $600 calls at $125 ($62,500)

    This is not like our LTP at all, you made a massive short bet on CMG and lost!  There's no easy fix here but, on the other hand, you began with a $53,100 credit (and I hope there WAS a long spread you cashed in) and now you owe $129,400 so it's a $76,300 loss and, rather than trying to salvage this FrankenTrade – I'd just kill it and start with something more sensible like:

    • Buy 20 CMG 2021 $600 calls for $165 ($330,000) 
    • Sell 20 CMG 2021 $740 calls for $100 ($200,000) 
    • Sell 5 CMG 2021 $550 puts for $50 ($25,000) 
    • Sell 7 June $700 calls for $33 ($21,000) 

    That's net $84,000 with a light commitment to own CMG and, if all goes well, it's a $280,000 spread and you have 3 more halves to roll the short calls or, if CMG goes lower, you can still sell enough short calls to get your $84,000 back and, if you have faith on a pullback, you can sell more puts to get money to help widen your spread by rolling the $600s lower (the $500s are $230, so + $140,000ish).  

    That's a much more sensible way to play CMG going forward.  

  19. CMG Phil – I did make a big gain on these last year,… and some of naked longs are left over…..  Ill take a look at your trade it looks more aggressive but makes me more bullish overall thanks 

  20. Just closed out a short trade in /NQ.

    May look to put trade back on if we get a bounce here.

    put/call ratio still below 1.

  21. CMG/Batman – If you mean aggressive as to $740 target, that because I don't believe in CMG enough to buy deeper calls but spending net $130,000 on the spread and being able to sell $80,000 worth of short calls against it (4 sales) puts you in for net $50,000 less the puts for $25,000 is $25,000 so that's the "risk" to me on the trade to the downside – providing you ultimately don't mind owning CMG for $550 and, of course, the short puts can be rolled too.  

    Shorts/Albo – Good call as we often get a push into Friday closes. 

  22. WTF!

    Well, here is the explanation:

    Mr. Trump spoke to Mr. Moore to compliment the economic commentator on an opinion article he co-authored last week calling the Fed Chairman Jerome Powell’s policy moves a threat to the U.S. economy….Moore for many years argued against the Fed’s postcrisis policies to keep rates low and to buy long-term bonds to stimulate growth, warning that the measures would stoke high inflation. But he has recently said the Fed is making money too tight, echoing Mr. Trump’s criticism of Mr. Powell and the Fed.

    Stephen Moore is a total hack who hated low rates when Obama was president but likes them aagin now. We could have both him and Kudlow in position to advise on economic policies. It's insane!

  23. The Crown Prince of Trumpistan

  24. STJ - I couldn't agree more.  They are both doofuses.

  25. Hi Phil,  I'm looking at my hedges to check their performance on a big down day like today.  My hedges mitigated about 15% of my loss today (13% if my appreciation in GOLD is not included, but I tend to view GOLD as a hedge and it generally goes up when the market is down big).  What percentage of loss mitigation should one generally be aiming for?   My sense is that I am under-hedged given what I am seeing in my account today. 

    (My hedges include the SQQQ Sept 11/22, 11/20,11/19, and 12/16, and Jan 10/20 spreads; the TZA Jan 8/15 and 8/20 spreads and short Jan 10 puts (about 1/3 short puts vs the spreads); and the DXD July 27/34 spread.)  My account has about 4% cash on hand.

    I'd appreciate any feedback that you can give me.  Thanks.

  26. Moore/StJ – What a disaster he would be. 

    Hedges/John – Well it's hard to tell on a day-to-day because the hedge, if it's a spread, won't gain much as an offset, it's better to calculate how far in the money the long part of the hedges went (if at all) and count that as your offset as the premium in the short calls are still too high.  Hedges only really pay off if the market goes down and stays down.  If the market comes back – then the longs come back and you didn't need the hedges.  Overall, we like to offset 50% of the loss with the hedge and 15% does sound a bit under-hedged but, on the other hand, we didn't change our hedges and all we've given up is the gains we didn't think were real anyway.  

    On 3/14, the LTP was $1,276,665 and now it's $1,249,650 and the STP on 3/8 was $741,190 and now $739,910 so we took a bit of a loss in our paired portfolios while the MTP is now $133,430 so still a nice gain and the OOP was $283,435 on 3/7 and is now $300,730 – so that set is up over two weeks and the Butterfly, which has no hedges, is at $151,919 and was $151,344 on 3/6.  

    I don't have yesterday's numbers but remind me on Monday and we can do some benchmarks.  Just keep in mind that if you sold a lot of puts and a lot of calls in your portfolio, you are getting killed by the jump in the VIX and that's just a transient thing, most likely.

    While we do mention the $$$ in the reviews, my main concern is whether or not my longs are on track and whether or not we have a good buffer for a 10% or 20% market drop.  As long as those are in place, over the long haul the rest seems to work itself out.  

  27. Stephen Moore being schooled by a journalist – precious:

  28. Hope it's not the start of a trend:

    Indonesia's largest air carrier has informed Boeing that it wants to cancel a $4.9 billion order for 49 Boeing 737 MAX 8 aircraft. Garuda Indonesia spokesperson Ikhsan Rosan said in a statement to the Associated Press that the airline was cancelling due to concern that “its business would be damaged due to customer alarm over the crashes.”

  29. /KC back in the buy zone if you are feeling brave.  /KCN19 says $96.70.  /NG too at $2.75 but next week is going to be warm all around the country so maybe we can wait on those.  

    Indexes trying to bounce but not very impressive at 2:30.  /ES bottomed at 2,806, 25,600 on /YM, 7,375 on /NQ and 1,510 on /RTY – yikes! 

    Just took my 3rd Robitussin – 3 more and my liver explodes!  

  30. Down "just" 250 now from 450 so strong bounce, I guess.  

    I'm certainly not impressed…

  31. Phil – I hope you feel better.

    Have a couple of margaritas and your liver really will be jumping !

  32. Yeah, I'm not so keen on those warning labels on medicine – why inflict that sort of worry on sick people?

    Well, right back to lows now, Nas down 2.5%, Rut down 3.5%.  Worst thing is the RUT failed the 50 dma – that's a whole different story if it keeps up.  NYSE barely over the 200 dma at 12,500 too.

    Bad way to end the week.  Also, it sucks to have a cough when you are 56 – people keep asking you if you need to go to a doctor!  When I was younger, I had pneumonia for two weeks and no one noticed…  frown

    Have a great weekend, 

    - Phil

  33. Good luck and rest. Don't go too long on the cough. It can be something more serious. I got a bad cough that wouldn't leave and had to go to the Caribbean to get rid of it. Found out later it was Whooping Cough that was going around! Wonder how many people on my plane got it!!!

  34. Phil


    Drink lots of water

  35. Phil /. CMG – thanks for your help on CMG – I'm working through this…..

     Have a good weekend   Hope you feel better.

  36. Take Care Phil

    The Fed Yield Curve inversion will probably hit the headlines over the weekend to cause more selling next week?

  37. Chicken Soup….

  38. Phil

    Did The market  turn around when there was news out of the release of the Mueller report is that what happen this afternoon

  39. Thanks for good wishes, I'm on the edge of going to the doctor but I THINK I'm getting better. 

    Fed/Mito – I agree, it's a very negative story that's spreading.

    Chicken soup/1020 – I can't find good matzoh balls in Florida.  Chicken soup is not as much fun without matzoh balls…  This is my favorite, from Harold's Deli in NJ:

    Image result for harold's matzo ball soup

    Market/QC – Wasn't much time to react but a quick up and then down.  All we know is there are no new indictments but that doesn't mean anything – this report opens the doors to specific investigations that will take years more.

    Both Sides Hope for Political Fodder in Mueller Report

    Politicians across the political spectrum are calling for the public release of special counsel Robert Mueller’s report on Russian interference in the 2016 elections now that it has been delivered to the attorney general. 29 minutes ago

    What Happened, According to Mueller

    Robert Mueller’s team has told its story of a Russian campaign to upend the 2016 U.S. election in a series of indictments and court documents. Here is a timeline of alleged events.

    We'll just have to see how things go on Monday.  TONS of Fed speak next week along with note auctions – just as we're setting new debt records:

    U.S. Budget Deficit Grew 39% in First Five Months of Fiscal 2019

  40. Interesting thesis, arguing that commodities are significantly undervalued. What's your view Phil?  Is this time, truly different?

  41. This echoes a view Vanguard put out, arguing that commodities and emerging markets were due for a big bounce.

  42. Uber to Seal $3.1 Billion Deal to Buy Careem This Week

  43. Good morning! 

    Donald Trump remains at large…  markets still down.

    Commodities/Palotay – Economic slowdown, consumption efficiencies, mining and production efficiencies, less interest in speculation (so many other things to speculate in), more price transparency that lowers mispricing (usually to the high side) and better planning that avoids shortages are factors in lower commodity prices.  We're less than 100 years away from printing most materials we need – then commodity prices will be closer to zero.  

    Oil is down because we're using less of it, Gold is down because no one needs a hedge against non-existent inflation – things that are scarce we're good at substituting like composite materials instead of titanium, etc.   Crop production is managed globally by mega-corporations who have super-computers that tell them where to plant and when to harvest…  There's a lot of underlying reasons commodities are at lows.

    “The bourgeoisie, by the rapid improvement of all instruments of production, by the immensely facilitated means of communication, draws all, even the most barbarian, nations into civilization. The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians' intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, i.e., to become bourgeois themselves. In one word, it creates a world after its own image.” 

    Karl Marx, The Communist Manifesto

    “You are horrified at our intending to do away with private property. But in your existing society private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths. You reproach us, therefore, with intending to do away with a form of property, the necessary condition for whose existence is the non-existence of any property for the immense majority of society.

    In one word, you reproach us with intending to do away with your property. Precisely so: that is just what we intend.” 

    Karl Marx, The Communist Manifesto

    “And here it becomes evident that the bourgeoisie is unfit any longer to be the ruling class in society and to impose its conditions of existence upon society as an over-riding law. It is unfit to rule because it is incompetent to assure an existence to its slave within his slavery, because it cannot help letting him sink into such a state that it has to feed him instead of being fed by him. Society can no longer live under this bourgeoisie; in other words, its existence is no longer compatible with society.

    The essential condition for the existence, and for the sway of the bourgeois class, is the formation and augmentation of capital; the condition for capital is wage-labor. Wage-labor rests exclusively on competition between the laborers. The advance of industry, whose involuntary promoter is the bourgeoisie, replaces the isolation of the laborers, due to competition, by their revolutionary combination, due to association. The development of modern industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own grave diggers. Its fall and the victory of the proletariat are equally inevitable.”


    Karl Marx, The Communist Manifesto

    “Our epoch, the epoch of the bourgeoisie, possesses, however, this distinct feature: it has simplified class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other — bourgeoisie and proletariat.” 

    Karl Marx, The Communist Manifesto