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Monday Market Movement – Trump Forces Iran to War Footing

Image result for iran strait of hormuzSanctions!

We love to impose them but what happens when we use them to completely cut off a country's income?  Well, that's what the US announced they would do this morning as Secretary of State, Mike Pompeo announced that not only would the US and Nato Allies refuse to buy oil from Iran but now ANYONE buying oil from Iran will face US sanctions as well.

Previously, we had specifically given waivers to China, India, Iran, Japan, South Korea and Turkey but that will now end on May 2nd, effectively crippling Iran's economy and, don't forget, Trump just declared Iran's National Guard as a terrorist organization so any action taken by their army will be considered a terrorist attack by our Nation – giving Trump a chance to enforce all sorts of executive powers.  

As noted on the chart, Iran controls the Strait of Hormuz, where about 1/3 of the worlds oil passes through and they have already theatened to shut it down if the US interferes with their shipping vessels and, of course, Oil (/CL) is back over $65 and Gasoline (/RB) is back over $2.10 this morning and that's nothing compared to where we'll be if war breaks out and nothing Team Trump has done this past month gives us any hope that it won't.   

Image result for bush war presidentTrump's best bet to be re-elected now is Bush II's "Don't change Presidents during a war" strategy – what's going to stop him from using it?  We knew Bush Jr was a disaster during his 3rd year but we were in the war that he started against Iraq and Afghanistan becuase the Saudis bombed the World Trade Center and it did seem like a bad idea and Kerry lost by 3M votes in 2004 – a mistake this whole country paid dearly for.

Meanwhile, we're still paying dearly for our last election and it's still 18 months until next November so we'd better move on and look at where we are at the moment.   Last week we reveiwed our 5 Member Portfolios and cashed in a lot of positions – close to $500,000 worth (1/3) in the Long-Term Portfolio – and we pressed our hedges "just in case" things fall apart.

They're not falling apart yet and it's a low-data week with Chicago Fed today, Richmond Fed tomorrow, KC Fed on Thursday and Q1 GDP on Friday but it's earnings we're going to be placing close attention to as we have about 20% of the S&P 500 reporting earnings this week and now we're very worried about airline guidance with Trump pushing oil prices back to the stratosphere – just in time for Summer Driving Season, maximizing the impact on airlines and consumers (and campaign donors, of course).  

Our markets  may be down this morning but Russia's market is popping on higher oil prices, along with the Saudis, of course – Putin wins again thanks to Trump but, thank goodness, there's no proof of collusions – just A LOT of coincidences…

The energy sector, of course, should get a boost from the high oil prices but energy is down to 8% of the S&P – not as much of a mover as it used to be – so it's not going to save us this morning.  

 

 


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  1. War / Phil – I guess we need a distraction from the total exoneration of the Mueller report! I don't know how much appetite there is for another war though – especially an unprovoked one. You have to think that some people learned from our Iraq adventure, including our generals.


  2. The Fox News cancer:

    http://nymag.com/intelligencer/2019/04/i-gathered-stories-of-people-transformed-by-fox-news.html

    But at one point or another, they sat down in front of Fox News, found some kind of deep, addictive comfort in the anger and paranoia, and became a different person — someone difficult, if not impossible, to spend time with. The fallout led to failed marriages and estranged parental relationships. For at least one person, it marks the final memory he’ll ever have of his father: “When I found my dad dead in his armchair, fucking Fox News was on the TV,” this reader told me. “It’s likely the last thing he saw. I hate what that channel and conservative talk radio did to my funny, compassionate dad. He spent the last years of his life increasingly angry, bigoted, and paranoid.”


  3. Good one on AI:

    https://www.worth.com/what-happens-to-the-economy-as-our-cognitive-capabilities-expand/

    What happens to the global economy as our cognitive capabilities expand? If we manage it well, it can be an unimaginably better future, where everyone can derive a good standard of living, without us crossing more planetary boundaries. We can imagine a de-risked economy of plenty, if not abundance, existing in equilibrium with a livable climate, and with the rest of biodiversity.

    What’s the best way to actualize a de-risked economy? Invest in it now, encourage it to flourish. But should we—is AGI something to fear? Not yet. Again, Kai-Fu Lee: “Our present AI capabilities can’t create a superintelligence that destroys our civilization.”  Which is good news, because we need the massive computational power AGI can bring in order to solve our problems. For, as Lee concludes, when it comes to destroying civilization, “My fear is that we humans may prove more than up to that task ourselves.”


  4. Good Morning!


  5. Good morning!

    Nice pop on /KC, I took my /KCZ19 profits and ran since I'm still waiting for /NG to pay off.  

    Of course $95 (front month) is going to be some resistance but, once over it, we can go in fresh and that becomes the stop.  

    No real panic over Iran yet, Copper indicates no excitement on China trade.

    Oil supply does not affect Gasoline demand – people always forget that:

    Expectations are for a big post-holiday draw but, if they don't get it, /RB is going to be a nice short. 

    Ugh!  Come on honey badger….

    War/StJ – You are right, WE don't want a war and that's why Trump is leaving Iran no choice as he's forcing them into bankruptcy and their only move is to blockade the Strait and demand we lift sanctions (or make less vague demands than "end terrorism), which, of course, we will consider an act of war (their reaction to our action means they started it to Trump) and there we are….

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    China's Fake Numbers And The Risk They Pose For The Rest Of The World. 

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    Bloody Sunday: Sri Lanka Easter Church And Hotel Bombings Kill Over 200. 

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    Bond Traders Take Stock After Rebound in Yields Stalls Out.


  6. MJ stocks catching bids this morning.  i.e.  CGC, PYX, HEXO, etc.


  7. Phil / Good review on the OOP last Friday. I understood that last summer you had closed down the SA subscription service, but (FYI) it looks like they have gone rogue and are still accepting subscriptions. I just thought you should be aware of this.

    From last summer….:

    phil 
    July 18th, 2018 at 12:14 pm | Permalink | Tweet thisIgnore this user

    Options Opportunity Portfolio Review (OOP): We no longer carry this portfolio over at Seeking Alpha – I hardly even write for them anymore as the only reason I was putting up with their editors was because we were doing that project.  I found it to be distracting going back and forth so we didn't renew it  


  8. MJ/Albo – Canopy (CGC) just bought Acreage for $3.4Bn so things are heating up really fast!   Very exciting for New Age and, of course, our new $100M MJ HedgeFund.  


  9. SA/Winston – Yes, we had a falling out and they certainly shouldn't be taking any new subscriptions in my name!  



  10. The media are complacent while the world burns






  11. RUT not coming back but others erased damage.

    This is why you take the money and run on a move like that:

    Remember, we don't take the long-term contracts because we don't intend to sell them, we take them because we don't know they'll pop any time soon and if they go against us, we don't have the same pressure to roll and we can average down over time but, when there's a nice profit – we still take it and wait for the next dip.


  12. Speaking of Acreage getting bought for $3.4Bn – here's their Q4 report from 3/12:

    Fourth Quarter and Full Year Highlights

    • Acreage reported fourth quarter revenue of $10.5 million and full year fiscal 2018 revenue of $21.1 million, up 380% and 173%, respectively, compared to the same periods in 2017.
    • Pro forma revenue* for the fourth quarter was $22.9 million and $77.2 million for the full year fiscal 2018.
    • Acreage reported fourth quarter net loss of $217.6 million and full year fiscal 2018 net loss of $219.7 million, primarily driven by non-cash charges and non-recurring items.
    • Pro forma adjusted net loss*, which excludes certain non-cash charges and non-recurring items, for the fourth quarter was $10.8 million and $30.3 million for the full year fiscal 2018.
    • During the fourth quarter of 2018, Acreage opened two dispensaries under its The Botanist brand in Buffalo, NY and Worcester, MA, and acquired one dispensary in Thames Valley, CT, ending the year with 19 dispensaries (as of today, Acreage has 24 operational dispensaries).
    • For the full year fiscal 2018, Acreage deployed over $200 million of capital in various strategic transactions and invested approximately $37 million to build out our operations.

    *Acreage issued a detailed presentation of Acreage's fiscal fourth quarter and full year results, including definitions and reconciliations for non-IFRS measures (see note regarding non-IFRS measures below), which can be viewed on our website at investors.acreageholdings.com, under "Results Center."  

    So I guess New Age must be worth a couple of hundred million already and we should be worth Billions by next year!  This is like dot com-level insanity but why not take advantage of the situation – especially as we're still very early, with CA the only seriously populated state that's fully legal.  Over 80% of the US still to legalize over 100 other countries – it's as if they just discovered tobacco and we're getting in at the ground floor! 

    Aside from, obviously, going through PSW Investments, I also like the MJ ETF as they already have a nice bit of the biggest players.  Also huge option premiums in both directions is good for us as sellers.  As  a new MJ trade, I like:

    • Sell 5 MJ 2021 $30 puts for $5.50 ($2,250)
    • Buy 10  MJ 2021 $30 calls for $9 ($9,000) 
    • Sell 10 MJ 2021 $45 calls for $4.10 ($4,100)

    That's net $2,650 on the $15,000 spread that's $4,000 in the money to start so $12,350 (466%) upside potential in 20 months is quite nice and a good way to get started!


  13. Super-quiet today, people still on holiday?

    Not much going on – market slow, no volume.  Silly Monday for me to be working actually…


  14. /ES just went red again, looks weak





  15. Debt situation is getting worse and worse in China:

    https://www.ft.com/content/160bcddc-626e-11e9-b285-3acd5d43599e


  16. Must be bad, they finally pulled back on stimulus this weekend.  


  17. Drifting into the close, only the Nas is green at the moment (Futures).


  18. Phil, any ideas why is RTY so much worse than the others?


  19. I think because it's the hardest one to manipulate.  The Nas Comp has 2,000(ish) stocks too but it's weighted so the top 10 are 47% of the index (AAPL is 15%), so it's as easy to manipulate as the Dow and S&P are but, to manipulate /RTY, you would have to massively coordinate the buying of hundreds of stocks that don't normally have a lot of volume – so a bit too difficult to use /RTY that way vs the others.  


  20. Quiet/Phil – I thought you've already retired from Monday's?!


  21. I did, but that doesn't mean I can't hang out here, right?


  22. Don't get me wrong…I'll take as much Phil as I can get…including Monday's! 




  23. CNN 2020 town hall: 3 winners and 3 losers


  24. Trump says US Congress ‘can’t impeach’ him