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Thrilling Thursday – Markets Yanked Around by Every Rumor

Wheeee!  What fun!  

At the moment, the Dow (/YM) Futures are up 200 points after being down over 100 points.  The downturn was caused by China threatening to escalate the trade war (yet again), with the Minister of Finance saying that China "would take necessary countermeasures" against any new US tariffs and said the new tariffs "seriously violated the consensus" that Trump and Xi has come to at the G20 meeting.   China meanwhile injected $2.4Bn of stimulus into Hong Kong and then said that Trump and Xi were engaging in phone meetings – flipping the Futures back up.

WalMart (WMT) had good earnings and positive guidance this morning and they are adding 50 points to the Dow by themselves with a 6% gain pre-market but I seem to remember WMT doing well in the last recession as more and more middle-class shoppers looked to cut costs so I'm not sure if what they see as a positive trend is really a positive for the US economy.

Meanwhile, remember that big blue line we drew on the S&P chart two weeks ago with bounce lines predicting the future action of the index?  Well we're still there:

We discussed the 5% Rule in yesterday's Live Trading Webinar as well as our hedges and, at the time, we decided not to get more aggressively bearish, despite the TERRIBLE DAY the market had yesterday, as we are pretty well-balanced and the situation is extremely difficult to predict – so why bet bearish when we are comfortably neutral?  2,880 is the weak bounce line on the S&P Futures (/ES) and we failed that so my note to our Members after the Webinar reflected what I said at its close:

So ugly.  Failed the weak bounces, looks like we're on the way to 2,700 (10% total corrections).

25,500, 2,850, 7,500 and 1,465 are the lines to watch, shorting the laggard if 2 go below and out if any get back above after that but could be a nice payday if we follow-through lower.

As I noted in the Webinar – I want to wait and see before adding more hedges as there are too many people talking up the markets.  Strong Dollar can also be knocked down to boost us.

We like playing the Futures rather than adjusting our hedges for short-term moves and, as you can see, we got exactly a 30-point overshoot (same as a weak bounce but the other direction), which gave our early-bird Members (or Asian night-owls) a lovely $1,500 per contract gain this morning – you're welcome!  

You might have noticed we haven't made any Futures calls this month and that's because we like to WIN when we play – so we wait for times when we see a high-probability play with good stop lines that allow us to make solid risk/reward bets and we simply haven't had any recently but our patience paid off and now we are back to hugging some very solid support/resistance lines and, hopefully, we stay around here long enough to make some extra intra-day cash.

Today we'll be watching those bounce lines closely and the great thing about our 5% Rule™ is that, unlike TA, we don't have to re-draw random lines after every day (because TA predicions are only pattern recognition and have nothing to do with Fundamentals, which are slower to change) so we are still using the same lines we've been using all month – the same lines we were using BEFORE the market tanked (yes, I predicted the last 1,000-point Dow drop that morning for a $2,500 per contract gain!):

  • Dow 25,000 is the mid-point and bounce lines are 25,550 (weak) and 26,100 (strong)
  • S&P 2,850 is the mid-point and bounce lines are 2,880 (weak) and 2,910 (strong)
  • Nasdaq 7,200 is the mid-point and bounce lines are 7,360 (weak) and 7,520 (strong)
  • Russell 1,440 is the mid-point and bounce lines are 1,472 (weak) and 1,504 (strong) 

As noted in the Webinar, the S&P carries a lot more weight than the other indexes (NYSE is actually 2nd but it has no Futures) and it's double-red while the other indexes have lost a combined 4 out of 5 greens they had on Monday and we've added 2 red boxes (Dow and S&P).  That's all we need to know to see whether the markets are weak or not but we also know it's not a disaster until we lose that last green box and gain at least one more red on the weak bounces – then we can get back to shorting the laggard.  

Also in yesterday's webinar, we talked about keeping a cool head in these downturns and using our hedging profits to add to our longs when they hit bargain prices and, to illustrate my point, Warren Buffett increased his stake in Amazon (AMZN) by 11% as that company tested its 200-day moving average at $1,750.  Amazon is also a holding in our own Hedge Fund, with a target of 2,200 in June of 2021.  

Yes the chart is ugly and yes, it might go lower but that doesn't change the VALUE of the stock and that's how Buffet plays and that's how we play as we're both long-term FUNDAMENTAL INVESTORS, not traders.  Meanwhile, we (our Hedge Fund) did sell short Jan calls on AMZN at $2,000 as we thought that was getting a bit ahead of itself at the time – so I guess we are traders too!  

We'll see what kind of bounce we get today but economic output in Germany, the world’s 4th-largest economy, contracted in the second quarter, according to a report Wednesday, while a report on factory output in China, the second-largest economy, came in lower than expected.  “It’s almost like we’re starting to see a textbook version of a pre-recessionary period,” Nicholas Akins, CEO of American Electric Power Co.,said in a WSJ interview Wednesday

Already, both corporate earnings and investment are sliding. U.S. corporate profits before taxes were down 2.2% in the first quarter compared with a year earlier, according to the Commerce Department. And U.S. business investment fell at a 0.6% annual rate in the second quarter, after achieving quarterly growth rates exceeding 8% in late 2017 and early 2018.

Yesterday, a sound-byte was released from Janet Yellen by Fox, in order to help Trump by stopping the market slide, in which she said: "I think that the U.S. economy has enough strength to avoid a recession" but she also said (in an inteview that will be fully available tomorrow):  “But the odds have clearly risen and they are higher than I’m frankly comfortable with.”

See how completely different that is when you include the rest of her statement?  

That's why this market is so tricky to play – you can't trust the Government to tell you the truth and you can't trust the media either – because some are now in bed with the Government and some are completely against them – that makes facts very hard to find indeed.

Be careful out there!  

 


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  1. Programming the bots is easy now since there is only one data source needed – Trump Twitter account!



  2. Thinking long term is hard:

    https://theirrelevantinvestor.com/2019/08/15/its-hard-to-think-long-term/

    People always talk about long-term investing without defining what it means. To me, long-term investing does not mean buy and hold forever, til death do you part. Thinking long-term means you don’t act out of emotion. It means that your goals don’t fluctuate with the market. It means having a plan and sticking to it. And just so we’re clear, again, a plan does not mean buy something and never sell it. All plans evolve.[...]

    Thinking long-term is hard, which is why it can be so rewarding. Acting on short-term impulses on the other hand are a short cut, which rarely work out well.

    The most successful investors are able to ignore the things today that they know won’t matter tomorrow.


  3. Good Morning!


  4. Morning, All!

    The webinar replay is up!

    https://youtu.be/zIm-kXyCsZI


  5. Good morning!  

    We keep getting to the bounce lines and failing – not good!  

    At least we've gone almost a day without a mass shooting (6 police officers were shot in Philly yesterday).  There were two on Tuesday and two on Monday but only 4-6 people were shot at each and only 5 people dead total – so they didn't even make the news.

    Protective puts/Winston – I'm not a big fan in betting against myself.  As I noted in the Webinar yesterday, if you don't think the market is going to go up then why have the longs?  What I like about hedging in the STP is we can make money in the STP on short-term corrections while still making money in the long-term on our LTP positions.  That's our premise – rocky going into the elections but things should pick up in 2021 because most of our damage is self-inflicted with idiotic trade wars and irresponsibly low tax rates running up deficits without improving conditions (infrastructure, climate defense, financial stability, etc.) for the masses.  

    Big Chart – Watch those 200 dmas – 3 fails already is NOT GOOD!

    Programming/StJ – So the whole financial system can melt down over a spelling error?  

    Very true on long-term investing.  Very hard to teach too as it takes a long time. 

    25,500, 2,850, 7,500 and 1,465 are the morning's shorting lines (tight stops above).


  6. In the STP, I want to add 200 Jan $35 ($7)/45 ($4.60) bull call spreads for $2.40 ($48,000) as that's another $200,000 cover and, more importantly, it lets us set stops on the 2021 $200 calls, which are up slightly ($15,000) and we'll be able to take a $100,000 gain off the table if it comes (or stop out with a small loss).

    In the OOP, I want to cash out our 50 SQQQ Jan $30 calls at $9 ($45,000) and our 50 short Jan $50 calls at $3.85 ($19,250) for net $25,750 (up $34,500) and replace them with 100 of the Jan $35/45 bull call spreads at $2.40 ($24,000).  


  7. Phil Like you to have a look at FTR dying on a daily bases. Bisisdes stock I am holding still 15 Jan21 5 Puts )short) 100% ITM the stock does not even cover any more to liquidate the puts. Would be great if I had the puts long I would sit on them with good feelings.?????



  8. M down again to 16 on a up market. God only knows what is going on there?



  9. Murdoch has seen enough




  10. It would be funny if it was not tragic but FTR is now valued at $3,000 per employee!


  11. The plot thickens around Epstein death it seems:

    https://talkingpointsmemo.com/news/epstein-death-broken-bones-hanging-autopsy

    An autopsy has revealed broken bones in Jeffrey Epstein’s neck, bringing up a flurry of new questions about how he died.

    According to experts who talked to the Washington Post, his injuries — including a broken hyoid bone — are typically more consistent with death by homicidal strangulation than by suicidal hanging.


  12. ….and the victims still want him present at the trials…$$$


  13. So the futures has stayed right at our key levels but the dollar index has gone higher.  DO we interpret this as the weakness will come or is this strength and if the dollar drops the market should accelerate higher?



  14. Wow, someone on CNBC finally noticed that down volume is much higher than up volume on a daily basis! 

    FTR/Yodi – If they don't go BK by 2022, we're going to have a very nice stock on our hands.

    M/Yodi – Good article in Yahoo.

    Maybe Macy’s (M) should only have 150 stores.

    The struggling department store retailer’s CEO Jeff Gennette told analysts on an earnings conference call Wednesday that sales continue to grow strongly at its ‘Growth 50’ stores. Hatched in 2018 as a means to jump start growth via new ideas, ‘Growth 50’ reflects Macy’s decision to invest an outsized amount in its top 50 stores. These stores — which reportedly are getting a cool $200 million investment — have received improved fixtures, updated in-store technology, better flooring and product assortments more tied to local shopping preferences.

    Gennette said Macy’s is moving forward with these type of upgrades at another 100 stores. Their overhaul is expected to be completed by October just ahead of the crucial holiday shopping season.

    All in, Gennette noted these 150 stores — essentially in the very best locations — collectively represent about 50% of Macy’s bricks-and-mortar store sales.

    So, all of this begs the question: What is going on at the other 500 or so Macy’s stores (or 50% of sales) not getting shown a ton of love? And more importantly, what’s their future look like if Macy’s doesn’t deem them worthy enough for snazzy remodels?

    The short answer to both those questions is not too hot. While Macy’s is adding its no frills ‘Backstage’ off-price model in many of these lower-tier stores, it doesn’t appear to be enough to dial up the growth.

    Macy’s top executive downplayed the need to close more of these lagging stores, reiterating an importance to serve a national customer in a digital shopping world.

    Fair point.

    But the fact is Macy’s has what may be hundreds of stores where sales continue to decline and may do so for the foreseeable future. As many Macy’s shoppers can attest, there remains scores of stores that are very underwhelming to visit. Indeed, all of that certainly took its toll on the second quarter, and will likely continue to do so for the balance of the year.

    “While Macy's is gaining traction with its various initiatives, we remain sidelined given secular headwinds. We believe realizing sizable, sustainable margin gains may be challenging as Macy's invests in [long-term] initiatives,” said Jefferies retail analyst Randy Konik.

    FTR/StJ – With 4M customers, they are valuing those customers at 0.50 each.  I don't know but it does seem like a bit of a mis-pricing to me.

    Epstein/StJ – Did people really think he killed himself?

    Epstein/1020 – Well, they want his money present – that's for sure!  

    Dollar/Fed – The strong Dollar (up 0.25%) means we should add 0.25% to the indexes, which are down about that much so, on the whole, I'd call it flat on a steady-dollar basis but we're flat at the -2.5% line from yesterday (5% off the top) and that's likely consolidating for a move lower.

    The markets like to make "M" or "W" patterns and right now, whether this is the 2nd base of a W or the middle leg of an M – there should be a strong tendency to bounce off this line, which makes sense as it's the -5% line and should provide good support.  BUT, breaking this line means your pattern is breaking down and the support line is breaking down and that would indicate a change in sentiment as the balance of the machines that buy and the machines that sold would have been altered to a lower average and that's where the 5% Rule predicts we get another 2.5% decline.  See, very simple to predict.

    W breaking on the Russell and Dax already lost theirs.


  15. Macy's/Phil – I am getting nostalgic in my old age, but Macy's "grew" by sticking their label on stores like Bullocks, Mays, and Gottschalks. Wouldn't mind seeing those reincarnate, myself. Won't happen, of course, but maybe if California secedes…..

    By the way, I'm back in LA for good, now – still have my lines into Korea, though, if questions arise.


  16. Phil / Protective Puts – thanks. I was thinking that it is not dissimilar to the classic 'Butterfly' plays you put on; first you buy LEAP Calls and Puts – admittedly these are quite wide meaning they cost less and protect against extreme moves. Then you sell short term calls and puts. With the M idea, It is buying the 2021 $15 calls and buying the 2021 $13 puts (which are quite tight). Then instead of selling monthly puts it goes for selling a big chunk of premium upfront (which I know you advocate) by selling the 2021 $15 puts. Then there is the possibility of selling monthly calls to pay off the insurance premium bought (the 2021 puts). When you think about it the concept is basically the same. 


  17. Phil, in looking at M, what do you think about a buy/write?  Sell 2021 5x $15 call / $15 put for $6.38 buy the stock at $15.87.  If stock is called away you make $2,755 which is 34.7% on your starting cash purchase of stock ($7,935) or if below $15 you are assigned  500 shares for total of 1000 shares at a cost of $12,245 or basis of $12.25 plus the dividends collected. Doesn't sound bad… With M's real estate there has to be a floor somewhere….


  18. To add to the VXX discussion: sold an Iron Condor: Aug 16; +20/-23 put /  -33/+36 call for $0.85. Should expire worthless tomorrow (famous last words). 

    As this was my first attempt at trading the VXX, I wanted to go 'safe' – the Iron Condor seemed the best way to go. The put side did go ITM for a while, but got rescued by the recent sell off.


  19. Phil / GE – Do you think there is any merit to the Markopolos presentation claiming massive fraud?  I vaguely recall rumors in the past questioning GE's accounting practices.  Thanks-

    https://markets.businessinsider.com/news/stocks/ge-stock-madoff-whistleblower-markopolos-calls-it-worse-than-enron-2019-8-1028450117



  20. Succession/Snow – Would be a good plan for a lot of things.  My main interest in So. Korea, at the moment, is hopefully getting our CBD products on the market there.  In Thailand, we are working with the NHS to be a supplier and then, hopefully, to get approved in the commercial markets as well.

    Butterflies/Winston – Well that's true, you could look at it that way.  I was thinking I don't like those plays because they are useless but it's fine when your real intent is to draw an income from short call/put selling and not to try to squeak out a profit from the long position.  Still, what's the goal?

    • Buy M 2021 $15 calls for $3.05 (so you need $18.05 to break even)
    • Buy M 2021 $13 puts for 2.30 (now you need $20.35 to break even)
    • Sell M 2021 $15 puts for $3.30 (break-even drops to $17.05 but, at $13 or less you lose $6.05) 

    So now you are risking $6.05 to make $2.95 at $20 when you could have just bought the $15 calls for $3.05 and risked $3 to make $1.95 at $20.  It's just not that efficient and really all you are doing is making yourself feel better because you're scared to make an actual bet and again, it goes back to my comment that you simply shouldn't play if you have no faith in the stock.

    You can sell M 2021 $13 puts for $2.30 so that nets you in for $10.70, which is 30% below the current $16.08 – if you don't believe in M enough to sell those puts – why would you even consider a long position in the stock?  If you have no faith but want to take a gamble on a big move up and you want to avoid downside risk, why not just buy the 2021 $20 ($1.45)/28 (0.45) bull call spread for $1.  Your max risk is $1 and a miraculous recovery can net you +$7 and you can even do a 1/4 sale of the Jan $20s at 0.52 to recover 0.13 per long so 4 sales like that and you knock the basis down to 0.48.

    M/Robert – Wow, everyone wants to play it but they are scared…  If I were M, I'd cut what is now a 9% dividend at $1.50 per $16 share so assume M goes to $8 while you own it, maybe $4.  That being the case, if my allocation were $25,000, then I could ultimately own 2,000 shares of M easily so I'd start with 1,000 shares at $16 ($16,000) and sell 10 2021 $13 calls for $4.10 ($4,100) and sell 5 2021 $13 puts for $2.25 ($1,125) to net in for $10,775 on 1,000 shares ($10.775/share) and then, if I collect $2.25 in dividends (6), my net/net is $8,525 and called away at $13,000 makes $4,475 (52.5%) in 16 months – which is very good for a conservative play!

    Only GREED would make you take on more risk, right?  Meanwhile, assume the dividend is killed and the stock drops to $8 and you end up with 1,500 share at net ($10,775 + $6,500=) $17,275, which is $11.52/share and then you'd turn around and sell the $10 calls for $2 to drop the basis to $8 and then 500 $8 puts for $1.50 to drop to $7.50 and you STILL make 33% on 1,500 shares if you get called away at $10, which is 37.5% below the current price.  That's assuming you don't collect a single dividend.

    All in all, you're still only in for $17,275, which is just 2/3 of an allocation block so you could actually DD again if it's at $6 or less and then you'd have 3,000 shares for $26,000ish or $8.666/share.  

    So, if you don't want to own 3,000 shares of M for $8.666, why on Earth would you buy any shares for $16 now?

    These decisions should not be hard!  

    GE/EMike – I think he's looking for attention.  As you note, it's all been said before and, when you are dealing with hundreds of Billions in transactions and pension obligations and assets like GE is and has over the years, it's very easy to have a different accounting opinion and then extrapolate it ad absurdum.  

    Markopolos and his team primarily focused on GE's long-term-care insurance business. They said that through an investigation into GE's competitors in this sector, they found that GE was keeping huge losses hidden from investors through false regulatory statements. Markopolos also alleged that the conglomerate's oil-and-gas unit, Baker Hughes, practiced unethical accounting.

    Notice he focuses on the long-term care unit, where you can add or subtract tens of Billions of Dollars by simply estimating people live a bit longer or get a bit sicker or care becomes a bit more expensive.  Then you could assume rates stay low and GE can't generate revenues from the insurance reserves, etc and, before you know it – you've subtracted $40Bn from their books.  

    In a statement on Thursday, GE called the allegations "serious and unsubstantiated." It rebuked Markopolos' statements on GE's insurance and Baker Hughes businesses and said the conglomerate held a "strong liquidity position."

    "The claims made by Mr. Markopolos are meritless," a GE representative told Markets Insider, adding: "GE operates at the highest level of integrity and stands behind its financial reporting. We remain focused on running our businesses every day, following the strategic path we have laid out."

    Of course, this is why we don't play Genworth (GNW) which is no longer part of GE anyway – I've long been worried about the escalating costs of long-term care vs. the assumptions made in the policies.  Still, you can apply the same math to GE's pension obligations and it looks just as bad.  

    Still, if they come back to $6.50, I'm getting back in!  


  21. AMZN- first Berkshire and now you/hedge fund going long. Ben Graham must be turning over or there is something there that I don't see? Care to share your hedge fund premise? Stock? Options? Both?


  22. Here's an article on GE's long-term care issues from May!

    GE holds a substantial legacy LTC business through a subsidiary, North American Life and Health Insurance, which covers costs related to nursing-home stays, assisted living and home health care via reinsurance transactions with other insurers. GE stopped underwriting LTC policies in 2008.

    The company acquired these reinsurance obligations after spinning off Genworth Financial Inc. in 2004 and selling Employers Reinsurance Corp. to Swiss Re in 2006. In these transactions, GE retained the LTC liabilities of Union Fidelity Life Insurance Co. and Employers Reassurance Corp.

    GE has $20 billion in reserves to cover future long-term care claims for the more than 340,000 people covered by its insurance policies.

    So they have $58,823 per person set aside and they already said they have to pretty much double it.  National average cost is $4,000/month and let's say, at any given time, 60,000 (20%) covered people need care for $240M or $2.8Bn a year.  If they put away $35Bn and manage to get 5% returns, even assuming none of those 340,000 people are making payments (77% are at the moment), they are still only drawing down $850M/yr but, as you can see, just assuming 80,000 people and assuming costs go to $6,000 completely blows their model – that's how Markopolos can make those claims.

    AMZN/Pstas – For the fund, it's sort of an upside hedge (against our hedges) on a runaway market.  AMZN essentially owns on-line retail and that's not likely to change and that means they actually benefit from inflation and any increases in on-line spending habits as well.  They are making inroads into the home with their systems and that's a huge, untapped market and last year they dropped $10Bn to the bottom line and possibly $13.5Bn this year so not too long before it's $20Bn and $1Tn doesn't seem so crazy and they still only have about 5% of the overall retail sales market while WMT has 10% so there's no regulatory reason they can't double up.  

    Also, keep in mind I like AMZN because we can have a fat June 2021 $1,800/2,200 bull call spread at $100 (when we bought it) with 1/2 short $1,300 puts at $75 to net $67.50 on a $400 spread and then we can sell, even today, 1/3 the Jan $2,000 calls for $53, using 150 of our 673 days so knocking off $17/share with 3 more to go means, essentially, we have a free whack at $400 x 10 is $400,000.  

    And, by the way, it was Prime Day that caused the July Retail Sales to be a beat this morning.


  23. CBD in Korea/Phil – Really interesting & complex topic. I'll post more AH.


  24. Butterfly Portfolio Review:  $178,301 is down $6,435 since our 6/16 review but that was the top of the market and we had made a silly $19,977 that month – much more than we were supposed to, so it was bound to balance out.  The Butterfly Portfolio is, by far, our most consistent portfolio and makes 30-40% a year and here we are, 2/3 through year 2 and we're up 78.3% – that's exactly what it's supposed to be doing.  

    • AAPL – Good targeting on the Sept $200 short calls so far.  Our long $160s took a hit and really that was our bad for not rolling them higher and taking some off the table – especially as we're only 80% covered.  The portfolio's entire loss for the month came from this position but, of course, we're not at all worried for the long-term.

      

    • DIS – This is the only adjustment we made last month (other than obligatory rolls) and how glad are we now that we sold those Jan $130 calls?  They were a rolling disaster right up until the moment they weren't and now we're up $21,688.  This goes back to what I was saying in the Webinar about knowing the VALUE of your stocks – not just when they are too cheap – but when they are too expensive as well.  
    • We're getting dinged on the short puts but they are rollable but no hurry there and we're not worried about our long position, which is still only net $19,262 out of a potential $62,500 so just this trade coming in next year would pay us $43,238, which is all we hope to gain in a year in this portfolio!  

    • MDLZ – Right where we want them for the short Sept puts and calls.

    • MJ – This is what happens when we try to get bullish and forget to sell premium!  Actually, the biggest problem with the MJ ETF is there's now a new one and people are taking money out of this one and forcing sales, so it's underperforming the new one and more people take money out and force more sales.  Will be a while before it gets stable.  

    • OIH – Thank goodness we sold those calls for $6,000.  Another disaster ETF but rules are rules and we can roll our 2021 $15 calls at $0.55 down to the 2021 $10 calls at $2.10 for net $1.55 ($15,500) and we'll get some back by selling 30 of the Jan $11 calls for $1.05 ($3,150) and we're waiting for longer-dated options to roll the short puts.  

    • WHR – Another one where we stuck to our guns on the short calls and now we're right on target and keep in mind that anything between $120 and $140 in Sept nets us $8,200 over 4 months against a $10,040 long position that was good for 20 months – so potential returns of 5 blocks like that for $40,000 (+300% PLUS whatever value the longs end up with).  THAT is why this portfolio works so well…


  25. Hemp Boca Portfolio:  $40,790 is down 18.4% on this still-new portfolio so bad timing as we had new positions and no hedges AND 3 of our 4 positions disappointed on earnings!   Fortunately, we haven't deployed much capital yet but we have to be careful and make sure we have a very realistic shot of recovering our $10,000 loss over the next 3 months.  Can't make any official changes until Tuesday's radio show.

    • IMAX -  I wish they were lower so we could buy more. 

    • M – This is only an opportunity so we're going to roll the 2021 $20 calls at $1.45 down to the $15 calls at $3.05 for net $1.60 ($2,400) – that's a no-brainer.  Would rather wait until 2022's come out to roll the short puts, which have $2 in premium still.  By the way, look at that volume yesterday and we held $16. 

    • MJ – We can roll the 2021 $25 calls at $5 to the $20 calls at $7.50 for $2,500.

    • TAP – Another one that's just an opportunity to buy.  New CEO is coming in so the usual kitchen-sinking of the Q but he officially starts 9/27 so this Q may get tanked as well.  Even with the charges, Free Cash Flow should be $1.4Bn and $50 is $11Bn for the whole company – I'll take it!  The 2021 $50 calls are $7 and the $40s are $11.75 so net $4.75 to roll down $10 would be $9,500 but then that's a lot of eggs in one basket and the $45s are $8.50 so net $1.50 is less than half to make the $5 roll so I think we'll do that for now and just be happy with the $3.50 bonus ($7,000) if they do pop back up.


  26. Phil, that's why I like asking you questions – I always get good answers.

    I'm coming from the direction that I want to buy an asset that I can sell max premium against – and we know that the max premium comes from selling monthlies, (2nd place is quarterlies, and last is selling annual premium). I also want to have an in-built hedge, because although I might have faith, I want to protect my asset against vicarious markets and earnings. 

    I'm thinking that when my faith is confirmed, I don't need to have the long LEAP put in place, so I have the flexibility to adjust what kind of risk I want to entertain by selling down the long put.

    I have to be rigorous in selling monthly premiums, month in- month out. I'll sell as much monthly premium that I need to pay off the total excess premium paid, over the life of the trade.

    Of course the points you make are totally valid. I'm just trying to think of alternatives that may have a reason to exist in a trading toolkit.


  27. GE / Phil- Thank you Phil, appreciate the in-depth analysis.  Great point on the LTC insurance, you can change a few assumptions around by just a bit and GE is either bankrupt or it's their most profitable division!!


  28. LEAPs/Winston – It's a perfectly valid way to play but I'd go completely insane if I had to call out monthly adjustments, wouldn't I?  

    You're welcome EMike.  It's important to think about the data behind these analyst assumptions – as well as the company assumptions as clearly the current reserves aren't enough (as GE noted in May) and we could have calculated that many years ago and used it as a shorting premise.  Frankly, I didn't realize they had that block left – I thought they sold it all with GNW and it is a drag on the company's forward outlook until it's resolved – which won't really happen for another 5-10 years (avg age of insured is 77).

    Well, 2,850 on the button on /ES and 25,600, 7,501 and 1,463 so we added a red box on /RTY (1,504 should have been red this morning and now 1,472 would be too) which means, on the whole, the market weakened today – despite showing green in the close.  


  29. CBD in Korea/Phil

    Cannabis has a long history in Korea. Cloth woven from it is used for summer clothes and for mourning – funeral – clothes. The two clothing types are very different styles, with the funeral clothes being much rougher.

    People smoked it, of course, although I don't know how widespread it was. When I was there in the Peace Corps in the early 70s, I would sometimes come into a village home-visiting, and find grandfather sitting on the porch puffing his long pipe full of home-grown. He'd be slightly embarrassed, though, as that implied that he couldn't afford tobacco. In those years, marijuana was referred to by Koreans as "happy smoke", a bit of GI jargon that crept into Korean. It was regarded as something different from the stuff that grandfather smoked when he was a bit short on cash. The US military, though found it was a little too easy for GIs to get marijuana, so they persuaded Korea to pass laws against it. That proceeded slowly, as it took a while for Koreans to figure what the US military was talking about.

    Sometime in the 80s or 90s, marijuana got lumped into a class of evil drugs called "ma-yak" (this site doesn't like unicode, so I can't type this in Korean and Chinese). This includes the opiates, propofol (a popular drug with music celebs), the amphetamines and so on. All labeled as "marijuana". Sort of like the US calls evil chemicals "drugs". So that's a problem. Now, what the use is by grandfather out in the boonies on his porch I do not know. He's sort of a vanishing species anyway, but I note that there is still plenty of cannabis clothing around, so I suspect there is still country old boy use as a smoke.

    The other users would be traditional Korean medicine, what they call "Oriental Medicine" or "Han Yak". This is a very reputable field. They publish research articles that are well-done, they have a number of medical schools, they know the limitations of their field but also the strengths. The general public uses Han Yak as much as they use Western medicine, and in fact your typical pharmacist, if you walk in asking for, say, cold medicine, will give you two medications – one Western, one Han Yak. These Han Yak physicians have in the past used cannabis extensively. I do not know what the status is now – can they use it, can they do research with it – I do not know. It would be pretty easy to find out, though.

    Anyway, that's a quick and dirty look at cannabis in Korea – and I expect you know they recently began tentatively allowing medical use.


  30. CBD in Korea/Phil

    Ooops, I was a bit unclear above. "Ma-yak" means cannabis – the yak part means medicine, and the ma part means cannabis. There's an area in Seoul, Mapo, that back in the day was a port with a lot of dealing in hemp. Anyway, so all evil chemicals are thrown into this bucket called "ma-yak", marijuana -so a lot of non-cannabis drugs have the same label as cannabis. I think you'll need some clever marketing people.



  31. Weak global growth likely to mean US slowdown, not recession




  32. Asian shares mixed amid ongoing worries about US-China trade