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Friday Market Failure – Trump Temper Tantrum Lashes Out at Mexico

Related imageThe whim of a madman! 

That's a line from Speed used to describe Dennis Hopper's insane actions and demands (he was a mad bomber) and I used it to describe Trump's trade actions back on May 7th and yesterday Robert Meuller clarified the fact that President Trump is indeed a criminal and simply can't be convicted only because he is currently the President.  Hundreds of former federal prosecutors signed a letter stating that Trump’s conduct would be chargeable as a crime if he was not the president. Mueller’s view is that it’s up to Congress, not him, to make that decision.  

This has now led to Trump, who needs another distraction, lashing out at Mexico and threatening to sanction them with tariffs (ie. – more taxes on the American people) if they don't stop people from legally crossing through Mexico on their way to the United States where they attempt to LEGALLY seek asylum.  The US, of course, looks completely ridiculous, trying to force a foreign Government to solve what is really a domestic problem and it puts the entire USMCA (NAFTA) in jeopardy but also makes us look completely irrational to anyone else we're negotiating with:

WASHINGTON—President Trump said Thursday the U.S. would impose escalating tariffs on all Mexican imports beginning June 10, in an effort to push the country to deter the flow of asylum-seeking Central American families to the southern border.

Reacting to what he described as “Mexico’s passive cooperation in allowing this mass incursion,” the president said the tariff on America’s third-largest trading partner would begin at 5% and grow steadily, hitting 25% on Oct. 1 unless Mexico takes satisfactory action to halt the migrants.

“If the illegal migration crisis is alleviated through effective actions taken by Mexico, to be determined in our sole discretion and judgment, the Tariffs will be removed,” Mr. Trump said in a statement released by the White House.

The president also lashed out at Democrats, who he said “refuse to help in any way, shape, or form.”

Image result for us mexico tradeWe import $346Bn  worth of goods from Mexico and a 25% tariff tax, paid by the AMERICAN PEOPLE, would give Trump another $86.5Bn to hand out to his buddies – that's what this is really about.

“This is a misuse of presidential tariff authority and counter to congressional intent,” said Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee. “I support nearly every one of President Trump’s immigration policies, but this is not one of them.”

Mexican President Andrés Manuel López Obrador responded with a letter addressed to Mr. Trump in which he called for deeper dialogue on the migration issue.

“Social problems are not resolved with taxes or coercive measures,” he said. He reiterated his proposal to confront migration through development efforts in Central America, adding that Mexico is doing what it can to curb the flow of migrants across Mexico without violating human rights.

“People don’t leave their homelands for pleasure but out of necessity,” Mr. López Obrador said. “I don’t lack courage, I’m not a coward or timid, but act out of principles. I believe in politics which, among other things, was invented to avoid confrontation and war.”

Image result for trump china enemies cartoonThis has been a last straw event for China, whose Commerce Ministry announced this morning that it will create an “unreliable entity list” comprised of foreign companies, organizations and individuals. The list will target entities that “disobey market rules, deviate from contractual obligations,” block supplies to Chinese companies for noncommercial purposes and otherwise damage Chinese companies’ legitimate rights, spokesman Gao Feng said according to a transcript of a briefing posted on the ministry’s website.

Since this list is sure to include Donald Trump – it's likely to impact his personal business as well as the US's business with China in general.  As this escalates, countries may be forced to choose whether they want to do business with China OR the United States – I wonder how many will choose the US if it's run the way Trump is running it?

As noted in the chart above, Auto Sector, Auto Parts, Electronics… will all get hit hard today as Mexico is as big a trading partner as China but much more balanced as they buy $250Bn from us as well so we're talking about a major economy-wrecker for both sides, again. 

Image result for canadians in america listOil is also being hammered as not only is an expanding trade war bad for Global Demand (which is already in the crapper) but Trump delayed oil-based Iran sanctions AND allowed ethanol to be added to our summer gasoline in another favor to farmers and one which knocks up to 5% off our projected demand for gasoline (500,000 barrels/day).  

I wonder what kind of fight Trump will pick with Canada?  Canada is the largest trading partner we have left and I see a lot of Canadians playing hockey for American teams and in the entertainment industy, stealing more American jobs!  

Fortunately, there's a solution for all of this on the table and it's called the United States of Canada in which 19 US States succeed from the Union and join up with Canada, leaving the Red States in the US to make themselves great again while we enjoy free health care and free college and cooler temperatures as Canada benefits from Global Warming while the Southern US turns into Africa.  See you on the other side!

Image result for canadians in america list

Have a great weekend, 

- Phil


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  1. Phil, you are on Seekng Alpha this morning.

  2. Mexico / Trump – I guess he is betting that his supporters are too ignorant (and we'll keep them that way with DeVos) to realize that he just passed the biggest tax increase in history on most of them. If you are the typical Trump supporter and your family makes the $55K average income, you got your $150 tax cut but when you buy your next car and it's made in Mexico (many of them are), your average $25k car will cost you another $1250! It's an additional  2% tax on your income. Even the ACA individual mandate imposed by that commie Obama didn't come up to that level! But hey, we are sticking it to the Mexicans! On top of that bill for the wall. MAGA…

  3. But he sent Trump love letters:

    North Korean leader Kim Jong Un executed his top nuclear envoy in March as retribution for the failed summit with President Donald Trump, according to a South Korean newspaper report picked up by Bloomberg.

    And his people love him!

  4. Kim sounds as crazy as the Orange Clown!!

  5. Good Morning!

  6. stjeanluc  -  I am a "never Trumper" but I want to avoid extreme speech or potential misleading news reporting. Many top officials in North Korea are reported as executed when they are removed from posts, demoted, or sent to labor camps for failing Kim Jong Un only to reappear at a later date in other lower positions within the government. This is according to Reuters who I feel are a far better source than TalkingPointMemos. 

  7. Trump is a poster boy for the Dunning-Kruger effect. For those not familiar, this is where people’s estimation of their own abilities is inversely related to their actual abilities. In other words people that are grossly incompetent believe themselves to be experts. Sadly our entire government, and everyone in it, suffers from Dunning-Kruger delusions. Trump is just the worst, and he also happens to be president which is very, very unfortunate. Meanwhile short 2 /YM into the open in case we see a big drop – tight stops in case I’m wrong.  

  8. TLT at new yrly high. 

    Gold also up.

  9. Phil-You'll love this Walfart is suing counties in Wisc where it has stores for"unfair taxation." They have been extorting money by challenging counties because they say they are charged "more" than stores that are "dark" ie closed. Ashland county has already capitulated saying they would spend a fortune on lawyers trying to defend themselves. This affects not only the local tax base, but schools and other infrastructure necessary for these small communities. Just another reason to hate these stores and never shop there for anything. It is hard now that Kmart and other discount places are gone, but half the town is boarded up already. Enough is never enough for these billionaires!!

  10. Good morning!

    /CL not holding $55!  /BZ $63.47 means /CL has $1 to catch up at this point.  /RBN19 barely holding $1.80.  Even /NG is falling in this catastrophe.

    • In the STP, we are going to add 200 DXD July $30 ($1.85)/34 ($0.85) bull call spreads for $1 ($20,000) and that buys us another $60,000 worth of protection and I'll look later to see if there are good prices on puts but it's not like we need the money.
    • In the OOP, let's buy 50 of the DXD July $30 ($1.85)/34 (0.85) bull call spreads for $5,000 to add another $15,000 worth of protection and again, we'll look for short puts to sell later.  

    I know everything looks like a bargain when the market begins to sell off but let's not jump on things that aren't at their December lows – as it's very possible we're heading back there. 

    • AAPL was $140 (now $178)
    • IBM was $103.50 (now $128) 
    • T was $26 (now $31) 

    You get the idea.  Let's look for real bargains – not just stocks that fell a bit off their highs…

    Also, keep in mind we rode those dips out and survived and I think, even if they have to remove Trump from office by force – this trade war won't last past Jan 2021 so, as long as you don't mind riding out a rough year and a half – no reason to panic.  

  11. JUst a quick question. My sqqq"s have not been changed to the new split. I have the 10-13 BCS with the 13 expiring in July. I got a notice from AMTD it was changed, but it wasn't? Was everyone else's changed or are they NS?

  12. Any thoughts what I should do with 20 sept 129/125 TLT put spreads? It doesn’t stay above 130 for long but unless the Fed does something, I’m worried Sept isn’t enough time to see the pullback. A couple years ago it shot up to 140 so it could theoretically stay above 129 for a few months. Especially with what we’re up against here. 

  13. pirateinvestor/SQQQ

    In Tastytrade my pre-split calls are showing as "NS". In TOS they are showing as converted to 25/100.

  14. Walmart – Ironic that it was WMT themselves that helped cause these stores to go "dark"… :(

  15. SA/Albo – That's just my our Morning Report from yesterday trending on SA.  So funny how they just chase whatever headline matches after the fact.  

    Big Chart – Well, sadly, as we expected, we're breaking down properly now.  S&P has to claw back over 200 dma at 2,775 to avoid a really bad week next week (/ES at 2,755 now). 

    Chicago PMI was BTE (54.2) 

    Kim/StJ – You know Trump would love to be able to execute people like that…  This is Trump's "pal":

    Image result for kim jong un execution cartoon

    Now, imagine you are sitting there negotiating with these people knowing that a failure to reach an agreement could result in their deaths or prison?  What kind of heartless, soulless, psychopath would you have to be to even begin a negotiating session you didn't have a very clear plan to finish – knowing that the very people you were stringing along would be killed by your fickle nature?  Imagine the kind of person who would be willing to negotiate under those circumstances.  No other President was willing to but Trump is actually proud of himself…

    Kim/Pirate – Not to defend Kim but his actions are within the norm of the society he's been raised in, crazy is when you flaunt to norms of society so Trump's brand of crazy is not even touched by Kim, who is just doing what Dictators do in these situations.  

    NoKo/Den – Well, it's in the Times but they are making a strong point that the information is coming from a SoKo paper and has not been confirmed.

    SEOUL, South Korea — North Korea has executed its special envoy to the United States on spying charges, as its leader, Kim Jong-un, has engineered a sweeping purge of the country’s top nuclear negotiators after the breakdown of his second summit meeting with President Trump, a major South Korean daily reported on Friday.

    Kim Hyok-chol, the envoy, was executed by firing squad in March at the Mirim airfield in a suburb of Pyongyang, the North Korean capital, Chosun Ilbo, South Korea’s largest daily, reported on Friday, citing an anonymous source. Mr. Kim faced the charge that he was “won over by the American imperialists to betray the supreme leader,” the newspaper said.

    Four officials of the North Korean Foreign Ministry were also executed, the South Korean daily reported, without providing any hint of who its source might be or how it obtained the information.

    The rumors of North Korean negotiators being executed at the orders of Mr. Kim have been floating around Washington for weeks, and Mr. Pompeo has been asked about them before. Each time, he has said the United States is looking into the reports.

    Government/Dawg – There are plenty of very competent people in Government but sadly, per the same effect, they tend not to be so delusional as they think they would be a good President or Senator/Rep.  

    TLT/Albo – We thought it might have a bit more legs.

    WMT/Pirate – That's the problem when you let these mega-corps wipe out the locals.  They have more money than the counties and can drive them into BK with lawsuits and such.  This is how the oligarchy rises to power – corrupting the system and perverting it to their own ends.  

    Image result for american oligarchy

    This is why they don't teach History or Philosophy to our children.  

    Related image

    Don't forget to add tariffs to the burden Trump is placing on the poor.

    Income/Mike – Wow, first time income has caught up with spending in ages.  That's good at least but income up 0.5% is worrying for Corporate Profits and puts the Fed on the table. 

    SQQQ/Pirate – TD changed them but you should check with your broker to see what's going on.  I would think they'd have it all cleaned up by the end of the month, but that is today..

    TLT/Dawg – I wouldn't rush to change it but it's the same rules as anything else if you want to stay with it – roll up the long puts $1 for 0.50 if you can.  The Sept $129 puts are $2 and the $133 puts are $2.20 so kind of worth it and the Jan $133 puts are $5.50 so no way on those so the vertical is the best value and you can worry about the horizontal later.  Meanwhile, don't let the fear of a VERY RARE event cause you to make unnecessary adjustments.  More to the point – has it ever NOT returned to $120 and, if so, then doesn't it make sense to keep buying $1 in strike for 0.50 and then roll 3 more months when you have to as you will, very likely, EVENTUALLY make 2:1 on all those rolls?

    The reason we went with Sept was to give it a few months – it's day 2 out of 113 and you're already worried?

    Dollar crashing – would be much worse if it wasn't so weak today:

    Even England looks more stable than we do now: 

  16. pirate/SQQQ – My SQQQ $10-$17 spread in TDAmeritrade shows up as is with ns at the end (non-standard) and I believe they trade as is until expiration.

  17. TLT – rolled up 1 for .48 as you suggested. Thanks, I do want to stay with it because you’re right, it always drops back. 

  18. A little recovery in the indexes.  

    /NG with a tragic 2 days, I guess "Freedom Gas" isn't trending?

    • The U.S. Environmental Protection Agency formally lifts restrictions on the sale of ethanol fuel, allowing gasoline with a 15% mix of ethanol to be sold year-round instead of just eight months per year.
    • The widely expected action is a win for the U.S. farm lobby, which has argued the restrictions on E15 hurt growers by limiting demand for ethanol without providing tangible air quality benefits; recent research has found little difference in smog risk between E15 and E10, a 10% ethanol blend already available all year long.
    • The American Petroleum Institute opposes the move, calling it "an anti-consumer policy that risks causing costly engine and fuel system damage to nearly three out of four vehicles on the road today."
    • "EPA has left us no choice but to pursue legal action to get this unlawful rule overturned," says the president and CEO of the American Fuel and Petrochemical Manufacturers.
    • Crude oil prices tumble to fresh three-month lows as concerns about Pres. Trump's trade policy cast doubt on the outlook for global demand; WTI -2.3% to $55.29/bbl, Brent -2.9% to $64.93/bbl.
    • Oil's plunge accompanies today's broad retreat in riskier assets following Trump's plan to impose escalating tariffs on Mexican imports starting June 10.
    • "The decision, understandably, is sending shivers down investors’ spines," says PVM Oil Associates. "U.S. refiners import ~680K bbl/day of Mexican crude, and the 5% tariff adds an extra $2M to the cost of their daily purchases."
    • Disappointing manufacturing data from China adds to the gloom, sparking worries that the government's attempts to stimulate growth are too little in the wake of trade tensions with the U.S.
    • Crude prices also have been pressured by return in U.S. oil production to a record 12.3M bbl/day and a much smaller than expected drop in U.S. stockpiles.
    • WTI is heading for a 13% drop in May and Brent is on pace for an 11% slide, their biggest monthly losses since November.

    • Mattel (NASDAQ:MAT) is down 3.95% in a move that is likely related to a potential tariff on imported goods from Mexico.
    • The company makes some toys in Mexico and is planning a "mega plant" in Monterrey that sends products to the U.S. and other regions.
    • Food distributors are selling off on concerns over the potential impact of tariffs on imports from Mexico into the U.S. Analysts have warned that a trade dispute between the U.S. and Mexico could impact costs and sales for the group.
    • United Natural Foods (UNFI -6%), Sysco (SYY -5.3%), US Foods (USFD -3.9%), SpartanNash (SPTN -5.1%) and Chefs' Warehouse (CHEF -4.5%) are all lower.
    • Capital Senior Living (NYSE:CSUsurges 21% after TPG reportedly made several approachesrelating to an offer for the company in the past few months.
    • All of the approaches have been rejected, according to people with knowledge of the matter, Bloomberg reports.
    • In the past year, CSU has fallen 67%. At Thursday's close, the REIT's market cap stood at ~$109M.
    • Today CSU touched an intraday high of $4.44, its highest since March 21.
    • Tailored Brands (NYSE:TLRD) is down 9.85% and traded as low as $5.21 earlier in the session.
    • Investors appear to be taking a defensive position on the retailer ahead of the earnings report due out on June 12.
    • Gap (GPS -13.8%) is trading at a multi-year low after a disappointing earnings report.
    • "In addition to the poor weather, we had late spring breaks, a late Easter and delayed and lower tax refunds thrown into the mix, as well," noted Gap CEO Art Peck on the earnings conference call (transcript).
    • The Gap chief also took a look within. "We also missed opportunities on our own, and we could have executed as always better across places in our brands," he conceded.
    • The sell-side stance on Gap this morning can be summarized succinctly by Citi's "hard to find the bright spots" commentary.

    • General Cannabis (OTCQX:CANN -31.1%) has entered into definitive agreements with investors for the purchase and sale of 3M shares of common stock, at $0.001/share, and warrants to purchase up to 3M shares at a combined offering price of $1/share.
    • The warrants will have an exercise price of $1.30/share, will be immediately exercisable and will expire 5 years from the date of issuance.
    • The gross proceeds from the offering are expected to be ~$3M and intends to use them for general corporate purposes.
    • May Consumer Sentiment 100.0 vs. 101.5 consensus and 102.4 prior.
    • Current economic conditions 110.0 vs. 112.4 prior.
    • Index of consumer expectations 93.5 vs. 96.0  prior.
    • As the FDA's first public hearing on cannabidiol (CBD) kicks off, Commissioner Ned Sharpless remarked that the agency still is uncertain how safe it is for human consumption.
    • In a prepared statement, he said, “There are real risks associated with [THC and CBD] and critical questions remain about the safety of their widespread use in foods and dietary supplements, as well as other consumer products — including cosmetics, which are subject to a separate regulatory framework. And given the new interest in marketing cannabis products across the range of areas FDA regulates, we will need to carefully evaluate how all these pieces fit together in terms of how consumers might access cannabis products. Nowhere is this truer than with CBD. While we have seen an explosion of interest in products containing CBD, there is still much that we don’t know.”
    • The agency is taking public comments until July 2.
    • Congress legalized the cultivation and processing of hemp in the 2018 Farm Bill.
    • Shares of Red Robin Gourmet Burgers (NASDAQ:RRGB) fall sharply after Q1 EPS missed the consensus mark by a wide margin off a 3.3% drop in comparable restaurant sales. Store traffic was down 5.5% during the quarter and restaurant-level operating margin fell 170 bps to 18.3% of sales on higher labor costs.
    • For the full year, the company anticipates adjusted EBITDA of $107M to $117M vs. $121M to $126M prior range and $117M consensus.
    • RRGB -17.42% premarket to $25.50.
    • Atlantic Equities upgrades Uber (NYSE:UBER) from Neutral to Overweight after the first post-IPO earnings report but trims the PT from $55 to $52, implying a 31% upside.
    • Key quote: "We expect the improving ridehailing competitive landscape to drive accelerating revenue growth and moderating segment losses in that business across FY19, while a new Eats fee structure should augment food delivery unit economics while still enabling rapid gross bookings growth."
    • Related: Uber's earnings call takeawaystranscript, and slides.
    • Uber shares are up 2.4% pre-market to $40.74. Competitor Lyft (NASDAQ:LYFT) is up 2% to $56.
    • Stifel maintains a Buy rating on Micron (NASDAQ:MU) but cuts its price target from $60 to $54.
    • The firm cites US-China trade tensions since shipments into China accounted for about 32% of MU's FY18 revenue and Huawei accounts for 13% of sales.
    • Stifel also lowers its FY19-20 estimates for both earnings and revenue.
    • Micron shares are down 1.6% pre-market to $32.78.
    • Gold catches a bid following Pres. Trump threat to levy tariffs on all imports from Mexico, exacerbating fears of a global economic slowdown.
    • Spot gold +0.8% to $1,298.33/oz., its highest since May 15 and on track for a second straight weekly gain, and gold futures +0.8% to $1,302.70/oz.
    • Trump's threat "sparked some fears in the market, and if the whole U.S. and China negotiation is any example, this can drag much longer," says DailyFX analyst David Song.
    • Rising trade turbulence also increases bets that the Federal Reserve could cut interest rates this year; lower interest rates would support gold because they lower the opportunity cost of holding non-yielding bullion.
    • Piper Jaffray thinks Kraft Heinz (NASDAQ:KHC) has been punished enough by investors for the company's weak outlook and accounting mishaps.
    • The firm steps in with an upgrade on the food stock to Neutral from Underweight.
    • PJ keeps a price target of $31 on Kraft.
    • Shares of Kraft are down 0.11% premarket to $27.37

  19. Remember, I'm going to be in Cuba on Monday.  I assume I'll be able to put up a morning post but I very much doubt I'll be able to get on-line at all during the day. Tuesday we leave (and again, I assume I can at least put a post up) and I'll be on a boat all day but assume I'll have a connection and Wednesday we dock in Miami as I won't be on until about lunch and no Webinar as I doubt I'll be organized enough.  

  20. US holds CBD hearing as fans, sellers await legal clarity

  21. Hi Phil. On recent weakness I rolled VLO leaps down per your teachings. Now hold +30 2021 65 calls with -30 2021 100 calls and -20 June 75 calls. Its at Dec lows, near 2 year low. Safe to sell some puts?

  22. VLO/JMD – $65/100 is very ambitious at this point but you sensibly sold June calls so good.  VLO was $50 in 2015-16 so figure that's your floor and you can sell 2021 $60 puts for 48 so net $52 is very reasonable, I think.  VLO is actually one of the country's top Ethanol producers so Trumps' ethanol shift is not bad for them at all and lower gasoline prices don't matter as long as the crack spread is good and oil is falling faster than /RB.

    • The total count of active U.S. drilling rigs adds 1 to 984 after posting slight declines for three straight weeks, according to Baker Hughes' latest weekly survey.
    • The oil rig count gains 3 to 800 while gas rigs fall by 2 to 184.
    • WTI crude oil -3% to $54.87/bbl, unchanged by the data.

    $54.40 on /CL!  $62.75 on /BZ, $1.78 on /RB!  Holy cow you'd think we're 3 months into an economic collapse.  

  23. One thing that I've been working on is trying to understand the dynamics of margin and hedging, during a serious downturn.  I've hurt my results significantly in the past being surprised by how much my buying power deteriorated during a 10-20% downturn, and I was not trading options during 2008-2009, so I'm concerned that if I'm having a hard time with 20% corrections, I'm not prepared for a larger crisis.  I understand that if I’m worried about margin, that I should lighten up, and I have. But I’d still like to learn more skills for handling margin problems in serious down-turns.


    I spent some time with the analyze function in Thinkorswim, and here is what I observed (apologies for the length):


    Right now I don't have a ton of net delta according to TOS in my portfolio, it is about equal to the equivalent of being 50% in SPX and 50% in cash.  This is because my considerable longs are very well hedged because I’m pretty bearish.  But the delta obviously gets much larger as prices depress (and get nearer to my put strike prices), along with volatility spiking, so the premium on my short puts increases, which further depresses available buying power.  This dynamic combined with portfolio margin is a very dangerous combination that can rip your face off in a bad downturn, especially if you are holding a large amount of notional longs (short puts, long calls, long stock) like the LTP does.  


    Once we are down 10%, my net projected delta goes up almost 8x.  So I lose 8x what I used to, per SPY point.  This causes my buying power to drop by a ton, mainly because I'm only getting about 30%-50% buying power benefit from the huge gains that my hedges have earned.  Cash adds 100% to your buying power, but gains in open option positions only adds a fraction of that, and they (my broker) might give even less benefit on spreads on triple leveraged funds, I’m not sure.  In this scenario my portfolio has only gone down by about 10%, which is impressive considered it is leveraged, and the market is down 10%, but much more concerningly my buying power has gone down by about 30%.  So If I had 40% of my portfolio’s balance in available buying power at the beginning, I would only have 11% left after a 10% correction, judging by TOS’s beta weighting tool, which I understand is not an exact science.  This is because my margin requirement is rising very fast on my longs, and my shorts, while insulating a lot of this move from a portfolio value perspective, are not helping my buying power enough.  If I layer on additional hedges, ie more SQQQ/TZA spreads, I think I may exacerbate the problem, because the hedge depletes my buying power even more.  Now in some situations, dropping my portfolio delta by adding more hedge benefits my buying power (I have experienced this), but I don’t completely understand when this happens, and when it doesn’t.  Portfolio margin calculation is pretty complicated, and from my perspective has a black box quality that I don’t think I’ll ever understand fully.


    So the question is if this happens with a 10% move down, a 20% move probably results in a margin call if I don’t act.  Now after a 10% move down, I will of course add more hedges, which will bring my net delta back down a bit, but I’m not clear on whether this alleviates my buying power problem if we keep going down.  Since the hedges take margin also, and as my portfolio delta keeps increasing, it takes more and more hedges to keep up with it.  Now I’m aware that there are more margin efficient ways to hedge.  Shorting index futures for instance, seems to have a better delta to buying power ratio, albeit in exchange for being very unforgiving.  


    With the market feeling very late cycle, and a multitude of reasons to be bearish over the next 12-24 months, not least of all are seemingly suicidal president and chief, I want to make sure I fully understand my trading plan to manage margin, so when emotions are running high I don’t screw it up.  In the past Phil has mentioned that when things start getting ugly, we need to have a firm understanding of our margin intensive positions, and be ready to reduce them, or adjust them so they don’t take as much margin (very good advice).  What else should we be prepared to do? 


    Any thoughts would be really appreciated.

  24. Great comments Palotay, a worth while discussion.


    Does anyone use TOS and export to excel in real time data like positions / bid ask / ect.?  I am trying to dig deeper into how my positions relate as I have front month positions and leap positions.  They react differently to downturns.   Right now for example on SIG i am net short on front month but net long on leap options.  Thanks

  25. $53.50 on /CL – Damn!  Brent $62.   That's down more than 5% today.  

    Delta, etc/Palotay – Be careful not to rely on those too heavily as the variables change as the VIX changes and, even worse, the broker can raise the margin requirements on stocks you sold puts and calls on any time they want which is why ACTUAL CASH is the best hedge, not just margin.  Again, this is why I have been saying ALL MONTH that there is no possible substitute for cashing in your portfolio when a market is this uncertain and dangerous.

    Ideally, the hedges add buying power on the way down as their value increases.  Our STP is up over $100,000 this week and has more buying power than we started the week with while the LTP is down about $200,000, with less buying power but we also know we can just kill the short puts, taking the losses (more like break-even overall) but freeing up tremendous buying power.  Always be aware of what's costing you margin and be prepared to pull the plug when things get tight.   

    Oh, I see you quoting me on that in the last paragraph – and what I said!  As much as we love our LTP positions, we have $725,000 in cash and the STP has $544,000 in cash out of $1.9M total value (down from $2.1M at the high) so 2/3 cash and we're using $1.6M of our $4M buying power and much of that in the short puts and some big things we could buy back (BECAUSE the market has dropped) like 20 short AAPL June $220 calls and 8 short CMG June $600 calls (winning now!).  

    It is CRITICAL that you are able to add on hedges, like we did with DXD this morning, whenever the indexes break down to lower levels or everything else you are doing is just nonsense.  And again, I cannot stress this enough – it is SO MUCH EASIER to just cash out when you have these large gains and the ONLY reason we didn't cash out the portfolios is because people wanted to see how we adjust during a downturn.  I would never do this with money that was critical to me – I think it's silly to not want to cash out positions and, frankly, next time I will cash out because you guys have to learn it's not such a terrible thing to do!  

  26. Hi Phil,

    If one doesn't have enough time to monitor individual positions like in the different portfolios, what do you think of certain ETF's using option strategies you like….I've seen you mention SPY in the past, what about QQQ or IWM or some other index type ETF's? I realize now may not be the best time to open  a position but maybe if we dip down towards the 2400-2500 range on the S&P? Thx…

  27. ETFs/Sun – I think, with ETFs, you are buying a lot of very obvious crap that you have no reason to own.  Better off just picking 5-10 blue chips and spreading it around  We barely ever change the LTP and the Butterfly positions once a quarter and the Money Talk Portfolio is literally untouched except once a quarter – you don't have to fiddle with things to make money.   

    As I said this morning, look for stocks back at their December lows and, if not there, then better to wait.  

  28. Ug, wall. What a scam. If Dump wanted to actually do anything about illegal immigration he'd enforce the laws that we already have, you know, like I-9's? That's what it was like prior to Cheeto Chucky: the legislative branch PASSES the laws, the executive branch ENFORCES the laws, and the judicial branch INTERPRETS the laws. Now we have a dictator who issues tariffs and builds walls on a whim (And sides with dictators that just murdered their staff over American war heroes like John MacCain).

    But see, with immigrants, stopping them from getting in, that's not what these hypocrite republican con artists really want. Once you parse their real motivations it all makes sense. They LOVE the cheap labor they can beat on with no legal recourse. Who else is going to pick fruit for $3.25 an hour, 14 hours a day, 6 days a week, and get fired if they complain once about being tired or thirsty, or ingesting pesticides all day long? Dump derogates immigrants (read "brown skinned people") while they change sheets in his own hotels and man the GOP-owned farms and slaughterhouses. Hitler oops I mean Trump's base eats up the "wall" while they absorb perpetual unemployment and disability benefits and gobble down oxies and 24 ounce "ice" beers complaining they don't get what they "deserve."

    At the end of the day even the conservative Cato Institute admits the wall doesn't keep anyone out, and in fact, ironically it keeps more people here, because it's harder to get back home. So there you have it. Dump and his criminal-enterprise oligarchic autocratic billionaire useless idiots enablers get more of what they want while selling a blame "them" message it to their vapid, racist base.

    Hopefully Trump gets re-elected because at least he smudges his base into oblivion and they don't even know it. I'm a "justice" kind of guy. They get what they deserve and that's frickin' awesome. If we gotta burn it all down just to be right, then so be it. I only care about being right. That's it.

  29. OK, Phil, let me see if I can get this logic straight. Dump can't be charged for breaking the law because he's President? So if he murders his staff like his BFF Kim Jong Un, or anyone else for that matter like a Saudi-born US citizen journalist, or me or you, then what? Is that different because he broke a different law (murder versus obstruction)? 

  30. Thanks….

  31. Real motivations/BDC – It's a bit different than that because automation is going to destroy 80M jobs over the next 20-30 years so we will lose 2.5M jobs a year or so and these guys LOVE $100,000 robots that last for 5 years working 24/7 a lot more than they like paying even $3.25 x 40 x 52 ($6,760) x 3.  The robots never complain (though I'm sure they'll revolt faster than humans) and these guys will become insanely wealthy while the bottom 90% sinks into abject poverty. 

    Blaming immigrants buys these guys another 8 years to consolidate the oligarchy and soon "Storm Trooper" will be considered a good job out of college where you go back to your home town and bash in the skulls of protesters down by the old malt shop.  THAT is the future!  

    Image result for stormtrooper animated gif

    Laws/BDC – It's all such BS.  Clearly there's nothing in the constitution that says a sitting President can't be indicted – the Founding Fathers would freak out if they saw this.   Really this is the problem:

    Meanwhile, we're making new lows into the close, down about 1.5% on the indexes and down 6% on oil.  Total catastrophe thanks to our sitting President.  The weekend might bring retaliation from China and Mexico and OPEC may make some statements to get Brent back over $65 – or at least to hold $60 – they are now in a crisis too.  Can't think of too many things that are likely to go well over the weekend so no point in selling puts to cover our DXD hedges, right?

    Have a great weekend, 

    - Phil

  32. Phil, a question.  One of my best hedges is my short on CMG.  (thanks!).  Can you suggest some other high PE, way overvalued companies that might be good candidates for short?   With the size of my portfolio (I am mostly in cash) I only need 1 or 2 contracts as a size good hedge and if I am wrong and the stock goes up, one or two contracts is easy to manage.

  33. "I'm sure [robots] will revolt faster than humans." LOL, right on.

    Markets making new highs = I'm making new highs on puts!! I'm holding through the weekend too. 

    I'm done with this market. I think it's all down hill with some really steep downhills in there for 12 months. Any pullbacks are now shorting opportunities. BTFD is now SAH (short any hump).

    Longs: GLD, seasoned with some GBTC and ETHE (if that's your kinda thing) for giggles, and TLT for the safe play to ride it out but there it is. Equities are garbage.

  34. oopsy, meant "market … lows…"

  35. I want to see a big VIX spike… 

  36. Every index is now below their 200 DMA! Could be an interesting Monday if we see early weakness because algos will sell quickly methink.

  37. long-term Shiller S&P p/e ratio at 30. Could easily be 15.

  38. denlundy, Phil et al/NoKo – well, not really NoKo, it's about SoKo. The original source, the Chosun Ilbo, is an old anti-commie, pro-US money paper that's currently helping its friends and owners bash Pres. Moon. For a while, they were going on about how the economy was terrible and young people (who voted for Moon) can't find jobs (not really true, but repeated lies….). Now they're doing an anti-commie thing because Moon went to memorials for both the 1981 Gwangju Massacre and the 1949 Jeju Massacre (both of which had as least approbation from the US). The SoKo anti-commie gang are scions of the big family owned companies and often direct descendants of the folks who did very well during the Japanese Occupation, 1905 – 1945. They love the US (and by proxy, Japan although they won't say so) and the money the US hands them for buying military hardware, and dislike China (the China-Japan split dates from about 1350 in this peninsula).

    So do I believe the story about Kim killing his cabinet? As you'd guess, I'm skeptical, although admit there's a possibility. The primary man they're talking about is very bright, and a very good negotiator especially with the West, and Kim is a pretty smart kid – it'd be a real lose to kill that guy. Possible, but I really doubt it.

    Here's a good article from 2016 when the same story was happening with slightly different people –

  39. CMG/Sun – NFLX would be my top short, I just don't think they can keep their growth up, there's no moat to their business and costs are skyrocketing because they are a movie studio selling subscriptions (HMNY) when push comes to shove, not a tech company.

    Well, this is interesting:

    US Forces Blow Up Three Oil Tankers In Syria Enforcing Oil … – Oil Price

    Is that what we do now, go around blowing stuff up (and murdering a civilian crew) to enforce our arbitrary sanctions?  I mean, holy crap people am I actually so liberal that I don't think this is normal or is this not the kind of thing the United States of America stands for?

    And now we are threatening Hong Kong with "action" if they accept an Iranian tanker.

    Image result for trump wwiii

    Are we great yet?

    Shiller/BDC – Crazy that we're higher than 1929 with all this crap going on.

    Thanks Snow, that kind of context is so important.  Shows you how hard it's getting to tell fake from real news these days…