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Terrible Tuesday – Powell Says US Faces Slow, Uncertain Recovery

Powell testifies before Congress today.

We already know what he's going to say though, as his testimony is pre-released.  Not that that will stop the market from acting shocked when they hear it later (because who reads?).   That means we can short the Nasdaq Futures (/NQ) again below the 11,000 line (or the 11,100 line if we hit that first) with tight stops above as it's a high-percentage play as you have a clear line to take a small loss while even a small dip should take us down 50 points for a $1,000 per contract gain.  So, if we stop out with a $50 loss but could have a $1,000 gain – that's what we mean by a high-percentage play.

Many economic indicators show marked improvement,” Powell said Monday in the text of testimony he’s scheduled to deliver before the House Financial Services Committee on Tuesday.  “Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain,” he says.  

Hedgeye on Twitter: "Cartoon of the Day: Gravediggers… "Powell will appear alongside Treasury Secretary Steven Mnuchin, a quarterly exercise mandated by the Cares Act passed by Congress in March and which appropriated about $2Tn to help speed the U.S. recovery. The pair are likely to face questions about their use of Cares Act funds and about what else should still be done.

“The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government.”

Well, good luck with that! 

According to the Congressional Budget Office our National Debt is on a path to be double the size of our entire economy by 2050 but that's based on it being 200% of GDP while GDP also doubles in size but, at the moment, GDP is shrinking and debt is up 25% of our GDP this year alone.  At that pace, we'll be laughing at Japan's 300% Debt to GDP ratio in no time.  

It's doubtful Congress will bring that up as they are, even now, talking about spending $1.5-2Tn more this year, which would push our national debt up close to $6Tn for this year alone, that would be 1/3 of our GDP in a single year and a $29 TRILLION total, up 26% for the year.  We can't blame this all on Trump as there was a virus but we can blame most of it on Trump for his completely inept handling of it and, as Powell states – we are certainly not out of the woods yet.

We are officially crossing 200,000 American deaths from Covid today with 6,858,212 Americans infected with 52,070 new cases YESTERDAYWe added hedges to our Short-Term Portfolio on Friday and, so far, the sell-off hasn't been too tragic but I'm worried that Powell, once again, will not say enough to save the market.   The UK is going back on lockdown today and other countries are likely to follow as Wave 2 of the coronavirus begins to hit the Western World.  

2020 Has Been A "Nightmare Year" For America, And The Economic Fallout Is Just Getting Started.

That says it all!



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  1. Good Morning?

  2. Good sunny AM from the south shore of Lake Superior. No rain in 10 days. We'd better get some soon.

  3. Second wave arriving in Europe. France is getting more cases than in the spring now it seems. Fewer deaths as treatments have improved but it's going to put pressure on the healthcare system again! And the economy!

    Kudlow going on TV yesterday talking about a V-shape recovery. When has Kudlow been right in the past?

  4. Kudlow right? NEver!

  5. Deficit / Phil – Trump has already added close to $7T to the deficit in less than 4 years. I remember when Obama was being blamed for adding less than that in 8 years! Right, not all is Trump fault, for example, the virus. But the moronic tax cuts is on him, the mishandling of the pandemic, on him, the out of control spending on defense, on him, the grifting, on him. And so on… 

  6. Good morning!

    Rain/Pirate – You can have ours.  Shouldn't we have a great big piping system that moves water from the places that have too much to the places that have too little?  We sent oil all over the country and nat gas, so it should be doable.  

    Big Chart – Uh oh!  Those 200dmas are pretty far away other than the NYSE, which is right here so let's watch that one because, if it breaks – we're going to need some bigger hedges.  

    Jaws You Re Gonna Need A Bigger Boat GIFs | Tenor

    Kudlow/StJ – What a tool!

    On him/StJ – So true.

    Trump washes his hands of more than germs - The Boston Globe

  7. Hi all! Update on portfolio is here.

    I expect ARNA to continue to move up into December (it will be a bumpy ride).  Plan accordingly. 

    TRIL will continue to rise, and options may be the way to play now that the stock has moved $5 from our entry. May need to pull back to fill the gap. I am going to try and sell a few Nov 10 Ps to gauge interest in this level (gap fill).  Otherwise, holding.

    SRRA – DD on the stock. (no options)

  8. For my GLD position, I am in the Nov 185 Cs, and had sold the Sept 25 Cs at .52c.  Will repeat for next weeks Cs as well until the uptrend starts again.  WE are close to technical bottom.

  9. PDSB – additional 400 shares in here.  Chart looks good for move to fill the gap up.

  10. what time is powell and munucian?

  11. Thanks Pharm.

    Powell at 10:30.

  12. Interesting….ARNA Apr21 75/100 BCS can be bought for $8.  Did a bunch at different price points, but those at $8 sold right away.  ARNA has a new price target of $120, and they are above the previous highs.

  13. Make that BCS above for $7.55. I put it in at $8.

  14. Any one else having trouble with TD?

  15. Phil=we have massive amount of water at our doorstep, but would need to be pumped out to a huge water storage area. Thankfully our wells are mostly artesian so plenty available. It's access that counts.

  16. Phil/Homework  Bought 20 $450 AAPL calls pre-split, now 80 $112.5’s ($30.75), then rode up the rally and sold 40 short $160s for $21 at the top on Sept 1.

    Those are now up 58% at $8.8 and wondering if I should buy them back to lock in a quick profit ($49k) and hope to sell them again later?

    Also have -20 short Nov $100c ($8.74) and wondering if this is a good time to buy them back as part of a rollout?

    80 Jun22 $112 calls @ 30.75

    -40 Jun22 $160 calls @ $21.1

    20 Jan22 $60 calls @12.2

    20 Jan22 $75 calls @ $16.8

    -20 Nov20 $100calls @ $8.74


  17. i wish phil could ask these jokers some questions instead of all these ass kissers.

  18. Adding a small amount of TCON to the biotech portfolio.  No options. They have a PD-L1 inhibitor in trial (think Optivo from BMS).

  19. TD/Pirate – Working here.

    Storage/Pirate – Yes, we already have those – just need to build water pipelines as enthusiastically as we build oil pipelines.  

    API | Where are the Pipelines?

    AAPL/Wing – It's a shame you didn't take some off the table over $130.  On 8/21 I said:

    AAPL/Wing – This thing never seems to quit so hard to say.  You have the $240/400 spread and those $300 calls that are now $194 ($97,000) and the $240 calls are $252 ($126,000) so, if you cash those, you have $223,000 to play with.   You can buy 20 June 2022 $450 ($115)/640 ($49) for $66 ($132,000) and then you are well-covered on the short calls with a $380,000 spread and $91,000 in your pocket.

    The $300s are now the $75s and the $240s are now the $60s so you didn't cash those during the run up.  

    That would have been easy, right?  You have 120 longs and 60 shorts so you are already aggressively bullish – far more so than I would have suggested as I though AAPL would pull back.  I still think the market is in a dangerous place so I don't see why you are looking to add risk.  The point was to CASH OUT the winners and REDUCE the risk by staying in a full-covered spread so that WHEN it pulled back, you'd have plenty of sideline cash to make the adjustments with and THEN is would have been a good time to get more aggressive.  Now it's more like a salvage play.

    The 2022 $60s are now $104,000 and the 2022 $75s are $80,000 and still too deep in the money and not necessary for cover.  The long June 2022 $112s are $21 and the $105s are $24, so that's a no-brainer for a roll, isn't it?  Just $40,000 to make that work and then you are 3/4 covered and you roll the 20 Nov $100s ($14.75) to 30 Jan $115s ($9.10) for about even and then you are 70/80 covered and you keep rolling them up $5 or $10 every 3 months and you should match the $160 calls by June, 2022 and then you'd have 80 $112/160 spreads for up to $384,000.  

  20. PSNL….I am going to STO the Oct 22.5 Cs to cover our gain.  If it is taken, we can get back in….but time to start locking in some of our profits.

    The sheet should be updated now with all the biotech positions.  

  21. Final one….BTAI….Sept 50C exp. worthless. Let's sell the Oct 45C for $3.  That would be >10% on the entry if called away.  I will take that moving into Nov elections.

  22. Image

    If you showed this pic to anyone in 2019 they’d think Powell is robbing a bank. Turns out he’s just robbing the bottom 90%.

    Treasury Secretary Steven Mnuchin offered an upbeat view of the economic recovery on Tuesday, and the Fed chair, Jerome Powell, also told Congress the economy had made progress but that the outlook was uncertain and policymakers will need to do more.

    Takeaways from Chair Powell's testimony, day 1 of 3: – Lawmakers want a fix for indebted hotels + CRE. Fed and Treasury lack one. – Powell says more fiscal help "likely" needed – And facilities are working as backstops – And everything is uncertain

    US Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell bump elbows before the start of a House Financial Services Committee hearing on Sept. 22 2020

    Mnuchin and Powell Credit Stimulus With Boosted Recovery, Seek More Aid

    New York Gazette ™ Fed's Powell: 'Highly Uncertain' Path for Economy Despite 'Marked Improvement': – America's economy has shown "marked improvement" since the coronavirus pandemic drove it into recession, but the path ahead…

    Powell and Mnuchin Testify Stimulus Boosted Recovery But Back More Economic Aid

    Powell, Mnuchin mull best way to boost aid to small businesses

  23. Hi Pharma,

    Appreciate your insights.

    What do you think about RMED? You have a big position there.

    thanks and Regards

  24. Dollar 94 – That's pushing everything else down.  

    September 21st, 2020 at 1:38 pm | (Unlocked) | Permalink 

    Actually, if you see /GC bouncing and /SI and /HG are lagging, you wait for the next one to confirm and then go long on the laggard.  See how easy these lessons are to apply?

    /NG is the bargain of the day, testing $1.80.

    Remember, I can only tell you what is likely to happen and how to make money playing it – the rest is up to you…

    Almost, but not quite….

    Nas 11,100 + 14 so I'm looking to use 11,100 as the short line now.  

  25. Phil/AAPL Clever plan Phil, thanks! No brainer for you but you HAVE the brain (and the 10k hours ;)

    .. the devil’s in the details ..

    Did your suggested roll of the 20 short Nov $100s to 30 Jan $115s for about $1k and rolled 40 $112s down to 40 $105s for $2.85 ($11.4k) but even with the other 40 that would only be $22k, for rolling the longs down, not $40k (even better). And my target would then be 80 $105/160s not $112/160 for up to $440k (even more better ;)

    Should I assume you would not buy back the 40 short $160s to catch the 56%? (That WAS a fully covered spread and it HAS pulled back)

    BTW I did cash out most of my earlier pre-split longs, just kept 5 to cover my Nov shorts and another 5 for fun.

  26. More better is right wing.  I wouldn't buy them back, it's a realistic target and you'd be giving up protection.  If AAPL goes lower you can buy them back and sell 1/2 the $115s (so you've sold more premium) and then, if it goes lower, you sell 1/2 the $100s and put a stop on the $115s and use that money to roll the longs even lower.  

    Glad you cashed some out – cash is good!

  27. Justice Dept. Case Against Google Is Said to Focus on Search Dominance