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Worry-Free Wednesday?

Image result for money printing central banks45,204 infected, 1,116 dead, 5,085 recovered.

Not much point in even tracking the virus, which is now called Covid-19, since it doesn't seem to be able to affect the markets or, as Powell said yesterday, whatever economic damage is done, China will make it up with stimuls because – STIMULUS FIXES EVERYTHING!!!  At least that seems to be the 21st Century's answer to all economic ills, why worry about anything when we can just print more money?  

As you can see from the chart above, the real virus that's infecting the World is FREE MONEY and just the Big Four Central Banksters have printed $25 TRILLION in the past 10 years and you know China, India, Australia and others were not slacking off at their printing presses either.  Overall, roughly 5% of the entire Global GDP for the past decade has come from Central Bank printing presses – all designed to make you think your Government is doing its job and growing the economy – even though it's really just growing the balance sheets of the Central Banks, which is really a hidden form of debt.

Image result for global debt chartThe non-hidden forms of debt have jumped up $50,000,000,000,000 in the past decade and that's another 5% of Global GDP added in debt each year as well so of course it FEELS like we're doing great – just like your children feel like you are doing great when you put a trip to Disneyland on the credit card – it's the time of their lives for them and you have to deal with the bills when you get home.  

Of course the great thing about adding $100Tn in debt to prop up the Global Economy is that EVERYBODY's doing it and no one is paying the bill.  With no responsible adults in the room, we are all partying like it's 1999 – only 150% more in debt than we were then.  Japan is, in fact, over 250% of their GDP in debt so it does seem like there's no actual limit to how much debt a country can go into – as they still seem to function.

Image result for global debt chartI mentioned China above and China's Corporate Debt has gone from essentially zero back in 2005 to about $20 Trillion in 2020 so that's about 150% of China's GDP added in debt in 15 years.  10% of their GDP, PER YEAR, added in Corporate debt alone in a country where GDP growth is 7% a year.  Hmmmmmmmmmmmmm

Does debt matter at all anymore?  I guess that's what happens when you max out your credit cards and they offer you a new one – what's the difference at that point?  Debt only matters if they try to collect it – or if they stop giving you more and, as I said, Japan is 250% of their economy in debt and the US is only 115% in debt so we could spend another $25Tn before we even catch up to Japan, who would be about 400% in debt by then so, as long as they don't implode, why should we stop?

NO CONSEQUENCES!  That's the gist of what we're doing and that's the perfect summary of the Trump error so far.  Nothing you do matters if you get away with it and Trump didn't start the fire, he's just throwing logs on it with his annual Trillion Dollar deficits, which are now the "new normal". 

To a large extent, all this money-printing is causing the markets to fly higher.  Printed money goes to the already rich through low interest rates, stock and bond buybacks and tax cuts.  Government spending also goes to the rich when 1/4 of it is Military Spending as not a lot of poor people own shares of Locheed Martin or Raytheon.  All this new money ($2Tn this year) has to go somewhere and Globally they are printing $10Tn and, if it's not going to help the poor – it tends to end up finding it's way into the stock market – so we have built-in 10% gains for the investing class. 

Image result for rich poor housingEven better, by keeping the money out of the hands of the Bottom 90%, we keep inflation low as they are not competing with us to buy food or housing (or anything else, for that matter) – so we get all the goodies for ourselves.  The Top 1% can only live in so many houses (5), so there are still plenty of places we can buy for a reasonable price.  We've seen what kind of chaos we get when poor people are able to buy homes, like they did in the early 2000s – we're not going to let them do that again!  

Meanwhile, our Oil (/CL) longs are doing well this morning at $51+ and this is the 3rd time this week we've had a winner playing oil long at the $50 line.  We still have our Copper (/HG) longs from last week's Live Trading Webinar as well as our Natural Gas (/NG) longs that are finally starting to pay off.  We'll take that money and run as the day is very uncertain and they are huge profits.  

The same cannot be said about our index shorts but we're going to double down this morning at 3,372 on the S&P (/ES) and 9,575 on the Nasdaq (/NQ) – following the same pattern we have all week.  I said to our Members yesterday afternoon:

Back to 2 short /ES 3,365 avg (takes into account profits off the table), 2 short /NQ @ 9,576, 2 long /CL at $49.94, 2 long /NG at 1.775 and 3 long /HG at 2.547 but shame on me for missing $2.60 earlier to take at least 1 off.

We're doing another Live Trading Webinar this afternoon at 1pm, EST, and we'll see how things are shaping up then.


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  1. Good morning, All!

    Join Phil at 1pm for the live weekly webinar!

  2. No matter the facts, go to stoke the Dear Leader ego:

    In a towering act of sycophantry, the National Association of Manufacturers announced Friday that it will be giving Ivanka Trump the organization’s first ever Alexander Hamilton Award for “extraordinary support of manufacturing in America.” The organization made the outrageous claim that “no one”  — no one! — has ever “provided singular leadership and shown an unwavering commitment to modern manufacturing in America” like she has.


    But this ignores a key fact: manufacturing entered a recession in 2019!

    By October of last year, U.S. manufacturing had seen two consecutive quarters of contraction. The sector shed 5,000 jobs in December and 12,000 jobs in January. In December, the Institute of Supply Management’s manufacturing index displayed the fastest rate of contraction since June 2009. And although the ISM suggests an uptick may be on the horizon, the sector still lags behind most others.

    Don't people know that countries ruled by people with autocratic tendencies and their sycophants/cronies don't do well! Look at Russia today – brain drain, low growth, corruption. Oh well…

  3. Virus, what virus – the war on science has to go on and we have to cut spending to be able to afford these tax cuts! Rich people don't get sick:

    Amid an explosive outbreak of a novel coronavirus in China that has killed over 1,000 and sickened over 43,000 worldwide, US President Donald Trump proposed a nearly 19 percent budget cut to the Centers for Disease Control and Prevention—the agency primarily tasked with preparing for and responding to such outbreaks and other serious health threats.

  4. Wow, the monthly NASDAQ 100 chart looks like its about to do a parabolic rocket launch.  To infinity and beyond!

  5. Phil would you roll down BBBY puts here or just sell more? Maybe the $10

  6. Good Morning!

  7. TEVA – Gapping up.

  8. Phil -Nice call on /CL !

  9. GM Phil// Should we close the FXP Jun trade?  Thanks.

  10. Good morning!

    Looks like I got out of oil too soon…

    Still, it's a balance thing, I was losing on the index puts and the commodity longs much more than covered them so I cash those to let the index puts ride (while doubling down) and then I have very good hedges – which is what I mainly want in the first place.

    Big Chart – Nasdaq is totally in 1999 mode now.  9,600!  But, then again, we topped out at 9,609 yesterday when we DD'd and that worked out well with a 100-point drop.  Same thing today – Powell goes to the Senate now.

    Ivanka/StJ – WHAT??? WTF has she actually done?   Those guys don't care about jobs – they are like the Chamber of Commerce – just a lobby for big business with a clever name.  The NAM is all about profits through robots and lack of environmental regulation.

    A 2018 article by Business Insider described the NAM as "a behemoth in the US capital, receiving unfettered access to the White House and top lawmakers on Capitol Hill."[2] In 2018, House Ways and Means Chairman Kevin Brady commented that passage of the Tax Cuts and Jobs Act would not have happened without leadership from the National Association of Manufacturers.[3]

    In 2017, the NAM launched the Manufacturers’ Accountability Project (MAP), a campaign run through the Manufacturers’ Center for Legal Action (MCLA) to combat frivolous, politically-motivated lawsuits against energy manufacturers. As of August 2018, three of those lawsuits have been dismissed from court.[8]

    NAM was founded by Thomas P. Egan, late President of the Cincinnati Chamber of Commerce

    The early history of NAM was marked by frank verbal attacks on labor. In 1903, then-president David MacLean Parry[16] delivered a speech at its annual convention which argued that unions' goals would result in "despotism, tyranny, and slavery." Parry advocated the establishment of a great national anti-union federation under the control of the NAM, and the NAM responded by initiating such an effort.[17]

    In an address at its 1911 convention, NAM president John Kirby, Jr. proclaimed, "The American Federation of Labor is engaged in an open warfare against Jesus Christ and his cause."[18]


    The NAM also encouraged the creation and propagation of a network of local anti-union organizations, many of which took the name Citizens' Alliance.[19] In October 1903 the local Citizens' Alliance groups were united by a national called the Citizens' Industrial Alliance of America.[20]

    NAM, in the late 1930s, used one of the earliest versions of a modern multi-faceted public relations campaign to promote the benefits of capitalism and to combat the policies of President Roosevelt.[21] NAM made efforts to undermine organized labor in the United States before the New Deal.[22]

    NAM lobbied successfully for the 1947 Taft-Hartley Act to restrict unions' power.[23]

    The advent of commercial television led to the NAM's own 15-minute television program, “Industry on Parade”,[24] which aired from 1950–1960.[25]

    Another great Corporate propaganda machine disguised as a people's organization.  So Orwellian!

    CDC cuts are insane.  Just as insane as cutting aid to countries where viruses can develop.

    BBBY/Coulter – Depends how much you want to own them.  They show a loss of about $750M in the last 4 Qs and they just warned on this one but Cash Flow has not been so terrible, down about $100M so a lot of write-downs mostly. 

    Year End 2nd Mar 2014 2015 2016 2017 2018 2019 TTM 2020E 2021E CAGR / Avg
    Total Revenue

    11,504 11,881 12,104 12,216 12,349 12,029 11,360 11,214 10,916 0.896%
    Operating Profit

    1,615 1,554 1,415 1,135 761 -87.1 -916      
    Net Profit

    1,022 957 841 685 425 -137 -802 148 160  
    EPS Reported

    4.79 5.07 5.10 4.58 3.12 -1.02 -6.27      
    EPS Normalised

    4.79 5.07 5.10 4.58 3.12 1.45 -1.36 1.22 1.41 -21.3%
    EPS Growth

    +5.14 +5.80 +0.596 -10.3 -31.9 -53.6   -16.0 +16.2  
    PE Ratio

              10.3   12.2 10.5  

                  0.754 0.765  

    Still, you are paying $1.4Bn for clearly declining sales and profits and who's to say they can turn that around or downsize to be profitable on just $11Bn in sales (costs would have to have not gone up for them since 2014, including COGS – very doubtful).  I did like them last year below $10 and that paid off but I wouldn't jump back in at $11 on bad news just because they were over $17 – people paying $17 ($2.5Bn) were simply dumb. 

    The saving grace is that you can sell the 2022 $10 calls for $3.80 so, if you are assigned the stock, you can lower the basis that way so it depends what your actual spread is but I'd be hesitant to over-commit to this one.  

    TEVA/Albo – Huge recovery off the summer drop.

    Thanks Albo.

    FXP/Rookie – I still like it as a hedge.  I'm more inclined to go bargain-hunting on China longs and keep FXP as a hedge than to just throw it out as I'm seeing a lot of conflicting reports on the virus, with 10% more people dying each day and 10% more infected.  Even if it tapers off, we're likely to hit 100,000 infected by March.

  11. Forewarned is forearmed. Phil, I miss your cashy and cautious exhortations!!

    Why anyone would think about hedging at a time like this is beyond me, but here goes:

    For example sake, managing a $1.0 million portfolio all invested in SPY.

    Remembering the Lehman Bros debacle when SPY over time was down more than 50%, and then fast forward to Q4 2018 when SPY was down about 25%. So let's say anything more than a 20% decline in SPY would be unacceptable and preferably avoided.

    What to do?

    Use SDS long bull call spreads, 6 months out in expiration to provide a $200,000 profit delivery; e.g. Sep 2020, $23 / $30 @ $1.10

    Sell puts in something I would really like to own to cover the cost of that hedge (e.g. AAPL)

    Or is there a more appropriate strategy to hedge (e.g. Long SPY put spreads – but that is kind of betting against yourself) – moving to cash based on a timing signal (HELP – has anyone found one that works???)

    I'm just very interested in a refresher on your way of thinking of hedging in this market (using protecting a portfolio of a certain amount of assets more related to SPY than QQQ as an example).

  12. Bernie Sanders Has Already Won

  13. 2 Russians flee virus quarantine, in dismay at hospitals

  14. BBBY actually a bit disappointing as the stock was prized a while back as a great trade and if I remember correct, the Jan 22 12 put was sold for some 3.70!!!! As well the stock was indicated as a high and good div. payer. On coulters question Phil asked "how much you want to own them”, showing the stock as rotten apple now. At this point I would not start rolling puts, the only thing I did is buy the May and April callers home, as they are next to worthless any way.
    Let the cliff jumpers do there act and wait and see. I did buy the stock, possibly foolish at 14$, but as usual in small doses.
    Sorry my two cents only.

  15. Phil, where do you receive these nice brake downs on stock from. Like on BBBY. TIA

  16. SPY/Winston – Well, if you have $1M in SPY you want a $100,000 hedge against a $200,000 drop (20%).  Your SDS Sept $23/30 spread at $1.10 is at the money and SDS is a 2x hedge so a 20% drop in SPY would be a 40% gain in SDS to $32 – so good logic there.  To get $100,000 ($200,000 would be way over-hedged) you need 150ish of the spreads for $16,500 and that would pay $105,000 back and likely around $50,000 on a 10% drop.  I guess you could go for 200 at $22,000 but the question is – do you feel your SPY will gain 10% and that the chance of gaining 10% on SPY is as good or better than losing 10% or else – why be in the trade at all?

    SSD is the ultra-long SPY and it's at $85 and you can buy the Sept $80 ($10)/85 ($7) bull call spread for $3 so $300,000 pays back $500,000 ($200,000 profit) if the S&P simply stays flat and you can pull the plug with a $150,000 loss and buy 100 of the SDS hedges for $11,000 and they would pay $70,000 if the S&P does drop on you and now you've only tied up $311,000 and you have $689,000 to play with with essentially the same upside.  

    Since you are not likely to lose more than $80,000 on a 20% drop in SPY, you'd still have $920,000 left to invest when stocks are 20% cheaper than they are now and you can start by selling some puts in things you REALLY want to buy if the market does drop like BA 2022 $250 puts, which are still $16 so, if you are willing to commit to $125,000 of BA, then you can collect $8,000 for 5 short puts.

    AAPL is a bit high but, like BA, you can sell the 2022 $250 puts for $16.65.  

    Do that with 10 stocks and there's another $80,000 in your pocket and you'll be up $280,000 if SPY goes higher with far, far less risk than keeping all that money in SPY.  

    SKT is $13.35 and you can sell the 2022 $13 calls for $1.80 and the 2022 $13 puts for $3.10 so that's net $8.45/10.725 if assigned so either you own 2x the shares at $10.725 (and then sell more puts and calls to lower the basis) or you get called away at $13 with a $4.55 profit (53.8%) and they pay a $1.43 dividend while you wait, which is 17% of $8.45 and would increase the overall profit by $2.51 (you missed the first payment) so $7.06 profit potential is 83.5% at $13!

    Let's add 2,000 to the LTP!   

    Year End 31st Dec 2014 2015 2016 2017 2018 2019 2020E 2021E CAGR / Avg
    Total Revenue

    419 439 466 488 495 478 433 426 2.71%
    Operating Profit

    119 144 151 125 109 106     -2.26%
    Net Profit

    74.0 223 204 68.0 43.7 87.9 59.4 53.4 3.49%
    EPS Reported

    0.769 2.32 2.12 0.707 0.455 0.932     3.93%
    EPS Normalised

    0.854 1.05 2.06 1.02 0.988 0.870 0.660 0.597 0.363%
    EPS Growth

    -25.2 +23.2 +95.7 -50.7 -2.73 -12.0 -24.1 -9.55  
    PE Ratio

              15.4 20.3 22.4  


    Current market cap is $1.2Bn – I like them down here.

    I'm very surprised that we haven't played SKT as a Top Trade in this cycle so it's going to be today.  Last time they were a Top Trade was August of last year at $14 when we rolled and added to our original entry of $15.37.  

    Breakdowns/Yodi – Stockopedia.


  17. Thanks Phil

  18. Crude inventories build sharply

    • EIA Petroleum Inventories: Crude +7.5M barrels vs. +3.0M consensus, +3.4M last week.
    • Gasoline -0.1M barrels vs. +0.5M consensus, -0.1M last week.
    • Distillates -2.0M barrels vs. -0.6M consensus, -1.5M last week.
    • Futures +3.22% to $51.55.

    Energy stocks roar ahead as crude oil jumps 3%

    • The energy sector (XLE +1.5%) is easily the top performer in the early going, lifted by a sharp rally in crude oil on speculation that Russia will agree to go along with a production cut that has been proposed by OPEC+.
    • Also, China reported the lowest number of new coronavirus cases since the end of January, easing concerns about a dropoff in demand for oil.
    • March WTI crude +2.8% to $51.33/bbl and April Brent +3.3% to $55.83/bbl, trimming gains slightly after U.S. weekly data showed a larger than expected 7.5M-barrel inventory build.
    • Among noteworthy gainers: NE +23.4%, VAL +8.1%NBR +6.6%RIG +6.2%DVN +3.3%COP +2.8%NOV +2.7%HAL +2.6%OXY +2.2%ET +2.2%EPD +2.1%PAA +2.1%.
    • The energy sector has climbed 2.1% so far this week, trimming its Q1 loss to 8.6%.
    • In its monthly report, OPEC cut its forecast for oil demand growth this year, citing the coronavirus outbreak as the primary reason.
    • OPEC now expects 2020 daily oil demand growth of 990K bbl/day, 230K bbl/day below its previous forecast, while also cutting its full-year global economic growth forecast to 3%.

    Perhaps buoyed by speculation that oil demand in China is set to plunge as much as 20% if not more on the coronavirus "demand shock", on Tuesday OPEC slashed it forecast for global oil demand by almost a quarter million barrels per day as the coronavirus pandemic cripples fuel use in China, leaving the cartel facing a renewed glut despite its recent production cuts.


    The cartel reduced projections for demand growth in the first quarter by 440,000 barrels a day, or about a third, in its monthly report, and 230,000 for the full year, one day after oil prices sank to a one-year low on Monday as the infection has idled thousand of businesses and left millions quarantined in the world’s biggest crude importer.

    The plunge in oil prices has sparked a push by OPEC's top exporter, Saudi Arabia, to push for an emergency meeting and consider new output cutbacks, following a recent Vienna meeting that ended without a consensus after Russia – the biggest non-OPEC producer – refused to comply with further cuts as it is able to weather lower prices more easily.

    Ominously for Riyadh, the latest OPEC report showed that, even though many OPEC members made a strong start with fresh output curbs that took effect last month, the overhang from the virus will leave them with an even greater surplus. The group collectively pumped 28.86 million barrels a day in January, down 509,000 on the month, and if it maintains that rate there will be a surplus of 570,000 barrels a day during the second quarter, when consumption slows down seasonally.

    Furthermore, unlike bullish stock traders, OPEC doesn’t see the effects of the disease confined to the start of the year, and has cut its growth estimate for global oil demand in 2020 as a whole by a whopping 230,000 barrels a day to just under 1 million a day. Yet even with the cut, the increase remains slightly higher than last year’s.Related: Can Argentina Revitalize Its Oil Industry?

    Ironically, despite OPEC's fatalism, oil prices recovered overnight precisely on the opposite, namely speculation the spread of the disease could be nearing its peak. Even so, Brent trading at $55 a barrel is well below the levels most OPEC members need to cover government spending.

    Last week an OPEC+ expert committee recommended reducing output by a further 600,000 barrels a day to offset the impact of the coronavirus. Russia, which held out, said it was “studying” the proposal and its energy minister, Alexander Novak, is consulting with oil companies today. Which may explain the latest gloomy OPEC outlook, which may encourage them to give greater consideration to taking additional measures.

  19. Phil – thanks. it's a brilliant answer (to a great question :) ), with one caveat – you're looking at the wrong ticker symbol for the 2x ultra long S&P 500 ETF which is SSO currently trading at around $164. UPRO is the 3X ultra long S&P 500 ETF trading at $79.

    As it went out together with the Top Trade on SKT then it would  be good to update it.

    Many thanks,.

  20. Planting Trees Won’t Save the World

  21. SPCE – Keeps setting new highs.  Still long the stock and some calls.

    Sold the warrants way too early.

  22. Here’s a way to beat the tax burden for IRA heirs

  23. Is the coronavirus peaking? Investors are hopeful

  24. Don't forget we have the long weekend coming up, certainly want to be hedged into that.

    After the weekend I'd be willing to buy longs but not before. 

    I'm leaving a bit early tomorrow and Friday I'm mostly off.  Will be a post in the morning but then I have to head up to Orlando and I'll check in from there.

    Monday we're off and Tuesday I'll still be in Orlando so there in the AM but then heading home at some point. 

    Only 6 more days off for the rest of the year – US holidays are the worst!

  25. Webinar time (almost).

  26. Phil, when you get back from the webinar could you follow up on the hedging suggestion – ticker mashup – thanks

  27. What is hedging suggestion ticker mashup?

  28. Look back at my previous comment – you used SSD as an Ultra long S&P ETF but I think that is incorrect. Changes the dynamic somewhat.

  29. BBBY – is this low enough to add a call spread to the puts? I get why the nervousness, no guidance, but almost 20% pullback…

  30. SSO/Winston – Yep, that was silly.  Was confused with SDS and SSO and made a mish-mosh.  I don't like the spreads on SSO, too wide.   You would think it would be more popular but it's not. SPXL does a better trade and is a 3x ETF at $75.25 and the way I'd play that is to buy the Jan $50s for $28.50 and sell the July $60s for $18 and though that's net $10.50 on the $5 spread, they both have the same delta so your net should not change and the Jan $75s are $11.50 so, when the July calls expire, your net would be $10(ish) and the July $75s are $7 so, if SPX is flat or higher, you should be able to collect $7 more and drop your net to $3 and, if lower, you could either roll or pull the plug with a small loss.

    Since the potential payoff is $15 to net $3 (if all goes well) then just $60,000 would return $300,000 so why risk more than that?  That makes it very unlikely you lose more than $30,000 – very easy and cheap to hedge. 

    BBBY/Dawg – As I said in Webinar, I am not enthusiastic here.  Still a lot higher than we played last year.

  31. Looks like we'll finish at the highs, another great day in the markets!

  32. To some extent it seems they have changed their methodology more so than there is a huge outbreak of new cases but, it’s very disturbing that they have been under reporting by 25% and it’s kind of hard to understand the huge jump in deaths, how could that have been “methodology”?

  33. Meet The Scientist Turning CO2 Into Liquid Fuels

  34. Why the world economy will be facing China’s coronavirus for a long time

  35. Coronavirus has many U.S. firms waiting for products to ship

  36. WhatsApp hits 2 billion users

  37. US on track for first $1 trillion budget deficit since 2012