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Tempting Tuesday – A Sinking Dollar Lifts All Ships

This is how the Fed "fixes" the market.

Yesterday, the Chicago Fed's Charlie Evans said he would be "quite pleased" with 2.5% core inflation, a 25% increase in the Fed's Inflation Target.  That  was at 10:30 and the Dollar took a nose-dive all day, lifting the market over key techincal lines to give us the impression of market strength but, what we really got was Dollar weakness.

Equities are priced in Dollars so, if the Dollar is weak, you need to trade more of them for the same share of stock – the stock didn't get more valuable, your Dollar got less valuable but the chart doesn't know that, does it?  Here's an interesting way to look at the market:  This is the S&P 500 priced in Gold:

That's interesting, isn't it.  Priced in Gold, this market peaked out back in 2018 at 2.450 and fell almost 50% to 1.325 (SPX/Ounce of Gold) and is now back to 1.78, still 27% off the highs.  Of course gold isn't an absolute measure of the market but there's a reason GOLD (Barrick Gold) was our Stock of the Year for 2020 – inflation was always going to happen given our current monetary policies – the question was only "how much" and the Fed is now saying "a lot".  

Speaking of our Stock of the Year, I'm going to be taping a segment for Money Talk this evening for airing tomorrow and we'll be talking about our Money Talk Portfolio, which features our Stock of the Year and plenty of other good picks so let's see who we want to add.  Remember, the rules of the Money Talk Portflio are we only make our trades once per quarter, on the show, so we weren't able to take full advantage of the sell-off but we are still chugging along with a very nice 26.6% gain for the year so far:  

  • F – If we were assigned this position our net entry would be $3.65 so I'm not worried about this one.  $1,130 (42%) left to gain.
  • TM – This one is too expensive if it goes wrong so we should cash it out to reduce our downside risk.
  • VLO – I think it's a fantastic value down here and we have $4,463 (75%) left to gain.

  • GOLD – Our Trade of the Year has exploded past our expectations and we're 165% in the money so we're sure to collect the full $12,000 in 2022 and we're already at net $9,495 so $2,505 (26%) is respectable but we can replace it with 5 short GOLD 2023 $25 puts at $5 ($2,500) so let's cash this trade in and leave just those short puts.  Our worst case scenariou would be having just 5 longs at net $20, so we'd start our cycle all over again.

  • IBM – Our 2019 Trade of the Year is in the porfolio for a second round and pretty much on track but still only net $130 out of a potential $24,000 so this could be our 2021 Trade of the Year as well with $23,860 (17,142%) upside potential.

  • M – Still a long way from gaining traction but we got in at a good price and we're at net $2,680 out of a potential $15,000 so still $12,320 (459%) left to gain if M can get back to $10 but anything over $7 in 16 months is going to be great for us.  

  • SKT – I love them as a long-term play.  They are an outdoor mall operator and so undervalued.  We have the stock because they used to pay a nice dividend (suspended) but I see no reason to let them go.

SPWR – They exploded higher and are now net $5,150 out of a potential $10,000 if they simply hold $10 so $4,850 (94%) to gain in 16 months is worth holding onto.

  • VIAC – It was driving me crazy how cheap they were back in April and now taking off nicely and we're deeply in the money on our $14,000 potential trade, currently at net $10,180 so $3,820 (37%) left to gain over the next 16 monthhs is respectable enough to keep for now. 

So the current positions in the Money Talk porfolio are already up $26,638 and, over the next 16 months, we expect to gain another $52,943 in upside potential so we hardly need a new trade but we did a Top Trade Alert recently on Pfizer (PFE) and that value, at 10x earnings, is too good to pass up and, as a bonus, they are a leading contender for the Covid vaccine as well.  

We discussed PFE in the Morning Report:  The Week Ahead – 3,350 is Critical for the S&P 500

Let's add PFE officially to the Money Talk Portfolio as it's a solid entry:

  • Sell 5 PFE 2023 $35 puts for $6.25 ($3,125)
  • Buy 10 PFE 2023 $30 calls for $8.30 ($8,300) 
  • Sell 10 PFE 2023 $37 calls for $5.00 ($5,000) 

That's a net $125 credit on the $7,000 spread so our upside potential is $7,125 (5,700%) and our worst-case scenario is owning 500 shares at $35, which I doubt will be a bad thing. 

 


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  1. Good Morning.



  2. Worse than the Russia vaccine process. Who is going to be willing to get vaccinated:

    https://talkingpointsmemo.com/news/wh-blocking-covid-emergency-vaccine-guidelines-that-would-prevent-release-before-election-day

    The White House is reportedly blocking the Food and Drug Administration’s guidelines on an emergency approval of a COVID-19 vaccine in yet another seemingly politically motivated intervention in the FDA’s vaccine authorization process.

    According to the New York Times, White House officials are doing so on the grounds that the guidelines would prevent the vaccine from being approved before Election Day on November 3.

    The FDA is reportedly keeping its fingers crossed that an outside advisory committee will bypass the White House’s meddling and enforce the guidelines anyway.


  3. Looks like markets might be pricing some clarity on the election. 


  4. FCEL – thanks for digging up the reasons for the drop yesterday, Phil. Yuck! Managed to dump it all for a nice profit today. 


  5. i keep getting these broken photo icons instead of the images people post.  i want to see what y'all see!!!! ;)


  6. Broken photo icon , been happening for the last 2 weeks!


  7. Good morning!

    Back above good support on the Big Chart.

    Vaccine/StJ – Wow, they are rushing this thing through to hit the deadline for Trump?  That's just nuts.

    FCEL/Ati – What a shame.  Makes me doubt their tech is good if the buyers were that deep and walked.

    Broken photos/Monk, Jasu – What's that about?  Can you give me examples?


  8. We'll see if 3,400 holds on /ES.


  9. jasu1: Try disabling your ad-blocker and reload the page. It worked for me.


  10. OPTT up 220% in the last couple of days. I think this is in one of the portfolios?

    Sold 1/3 at $2. 


  11. /RTY – looks like we get a chance to DD or yesterday's short at 1600


  12. Money Talk, Gold / Phil

    If I'm reading the money talk spreadsheet right, the gold bull call spread cost $5,700, and could now be sold for $5,025. Why are you suggesting we take a small loss? I get that the puts have done great. I'm just wondering, why we shouldn't keep the spread.

    Thanks.


  13. Hello, Phil if possible can you comment AYX? Did you see what happen today? Tks


  14. stj big chart has broken page icon…you have to load image in new page

    pepex, thanks, white listed philstockw…… on adblocker, we'll see what happens


  15. Phil / SPWR – I have the following position….  Would like your take on my plan>

    current position>

    long 60X Jan '22 $8 Call (4.3) 

    short 45X Jan '22 $12 Call (2.7) 

    short 20X Jan '22 $8 Put ( 2.5)

    I'm looking at selling the 20 X of the naked 8 Calls for a 100% gain and close out the 8 put and sell some 20 X jan '20 $10 puts for 2.4 .  and be left with 30 X ob the 8/12 BCS and let that ride out.

    My target price not this was 15 ( even after the split) and I think. there may be some upside to 16 or 17  if Biden wins….  I the '22 timeframe. What do you think of the above?  thanks


  16. Phil -

    Thoughts on LUKOY?  Pays a good dividend.  Thanks


  17. Thought that this was interesting, A utility company that is big in renewables and is the biggest rate-regulated electric utility in the U.S. by retail electricity produced. The future may be now. It would have been more interesting a year ago. 

    https://finance.yahoo.com/news/nextera-briefly-topping-exxons-market-212322844.html


  18. Randers / NEE – it's estimated that 60 to 65 % of the worlds CO2 emissions come from power plants…. by contrast only about 10% come from cars.  I think as we get serious about global warnings much more focus and money will go towards this.  Must is in this this space with Tesla its power business makes up about 10 to 12 % of sales.  NEE is a  good player in this space as well.  


  19. OPTT/Ati – Wow, they finally came through.  Very nice!  One of my old penny stock gambles.  

     

    RTY/MrM – Yes but have to give up if they are over it.

    GOLD/Saguro – What loss?  We bought the spread for $5,700 and now the 2022 $13s are $15.10 and the $17s are $12 so net $3.10 is $9,300 and we're up $3,600 and we can wait a year to make another $2,700, which is 29% of $9,300 or we can re-deploy our $9,300 into trades like PFE, where we're turning $125 into $7,125 instead.  Also, you fail to take into account the $3,795 profit from the short puts so we're making $7,395 now and then we're selling another $2,500 in the new puts so, if GOLD is over $25 in 2023, our total profit will be $9,895, which is very good from our $675 net entry less than a year ago.

    AYX/Marcel – I don't follow them.  $400M in sales running at a 10% profit selling for $10Bn – even as I write that out I lose all interest in them!

    SPWR/Batman – It's a good spread but I'd cash the 15 extra longs and that leaves you with the $8/12 spread you paid net $1.60 for and now it's $9/6.80 so $2.20 out of $4 is worth keeping, right?  Other than that, you can buy back the $8 puts but why would you pay $1.50 NOT to own SPWR for $8?  I don't see the logic in getting out.  If you want to make a new, bullish play – just make one but this is still good for almost a double if you leave it alone.  

    You'll be cashing $13,500, put that into a SPWR 2023 $12 ($7.60)/17 ($6) for $1.60 on the $5 spread and then you can make 200% more on that money if things go well.  

    I don't just don't trust them or their numbers.  All looks good on paper but very hard to believe they make $10Bn with a $37Bn market cap (down 50% this year).  The last two quarters show losses and maybe it is a great deal but it's not one I'd make a general pick for as it's just too risky (and they have no options).

    NEE/Randers, Batman – $142Bn is just a little too exuberant for me.  $19Bn total revenue and $3.4Bn in profits is not a cheap valuation and they were making $3Bn in 2016 too, so not much real growth going on.  They have the right buzzwords but it's not the kind of thing I chase after.

    Wow, so much for shorting things today.  Up we go again.


  20. Phil/ABBV

    The company is trading at a forward PE of 18, but forward PE expected to be approx. 7, has a 5.2% dividend.

    They are assimilating the maker of Botox and revenues should rise as a result.

    The stock is down from a high of 100 in mid July to 86.

    Would you buy here or expect further downside. I don't know why it fell from its high 15% ago.


  21. Phil / SPWR – thanks ….  selling the 15X and rolling up to the 10 PUT – I'm ok with owning this at 8 ish and taking some money off the table….  meanwhile still screaming up…. I wonder if there is a buyer out there for this?


  22. Gold / Phil – Thanks. I was confused. The spreadsheet said the long calls were up 31,950, and the short calls were down 26, 925.  I guess I shouldn't pay too much attention to those numbers. Thanks again.


  23. Phil – Thoughts on FCX? 

    I have 10x 2022 $5 – $15 Bull Call Spread, started with $10-15 and rolled the $10 to $5 on the way down earlier this year.    Currently the spread is at $7 with $3 and 15 months to go.

    Would moving up to 2022 $12 – 20 BCS (at $3.5) be more attractive (more upside)? They both have Delta 0.3. Would you call that chasing and shouldn't touch it?     

    Or just sell the 2023 $13 Put and call it a day (like GOLD)? 


  24. Hi jasu1, MonkMan and Phil, 

    What do you mean by, "white listed philstockw…… on adblocker, we'll see what happens", Jasu1?

    We're currently working on a problem that I'm having with the images, using Chrome. I don't have the problem using Safari. Could this be the same thing?

    Thanks,

    Ilene 


  25. Maya1
    ABBV  you can do various.
    Just sell a 75 jun 22 put for 10.30  or 1030 per one option, however this will not allow you to sell any short term covered calls.
    So buy 100 stk @ 86.45
    You receive over 619 days  811.00 div.
    You can sell aprox. 14 short term  covered calls say at ca. 2.00 per option, gives 2800.00.
    So over the period of 619 days you receive a total of 4641.00 by spending 8645.00 $ more than 50 % of your stock cost.
    Obvious you can go for the Jan 23 aswell.


  26. Trump – no stimulus until after election – and down we go


  27. ABBV   today looks like someone sold 1000 March $80 puts for $4.50  

    on Sept 29th there were 500 Jan23 $60 puts sold for $6.40 to $7


  28. Arrrgh! Daggone Trump, I was counting my chicks on some bullish day trades, then zappo!


  29. errr, chickens – before they hatch, see…..


  30. Yodi/ABBV

    Thanks!

    I have been doing pretty much a similar strategy. I got stung a little when the stock moved up on me from mid 70's to 100.

    I am just curious what Phil thinks and usually he comes up with a better solution than I do.


  31. Wow, from $3K underwater on 2x short /RTY @1585 to out even in two minutes!


  32. Ilene,

    Yes same thing…I'm using chrome too.

    Hi jasu1, MonkMan and Phil, 

    What do you mean by, "white listed philstockw…… on adblocker, we'll see what happens", Jasu1?

    We're currently working on a problem that I'm having with the images, using Chrome. I don't have the problem using Safari. Could this be the same thing?

     


  33. Maya1 Getting stung? On an upgoing stock wlth a short term caller how does this happen? Stock will go up with a delta of one and your caller will only go up by say .5 to .7. So the worse thing you will get your money back of the stock, plus increase in stock price up to the caller´s strike price, plus the the value of the caller's premium.


  34. Now after the yellow clown with his fake corona attack, has spooked the market you even can buy ABBV for 85.75. Please note that the clown's wife is not heard off, as it would be funny if both would recover in three days time, even other people will take weeks to recover.


  35. Regret only the clown's cronies know when short sell stocks so they can buy them back 10 minutes after his FF tweets.


  36. Wheee, down we go!  

    • Update: President Trump tweets he has instructed his team to stop negotiating with Democrats over another relief package until after the election.
    • S&P (SP500) -1.2%, Nasdaq (COMP) -1.3% and Dow (DJI) -1.1%
    • "Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19," Trump tweeted. "We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith."
    • "I am rejecting their request, and looking to the future of our Country. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business."
    • Mnuchin and Pelosi were planning another phone call later today, according to reports. President Trump had a call with Mnuchin and Mitch McConnell, Politico reports.
    • Earlier Fed chief Jay Powell said it would be riskier for lawmakers to do too little on the stimulus front than too much.
    • General Electric (NYSE:GE) shares are sliding, -3.2%, after it's disclosed receiving a Wells Notice from the SEC.
    • The SEC has been conducting an investigation of GE's revenue recognition and internal controls over financial reporting tied to long-term service agreements. It had expanded the scope of that investigation in 2018 after disclosures tied to GE Capital and GE's Power businesses.
    • The notice advises GE that the SEC staff is considering recommending a civil injunctive action for possible violation of securities laws.
    • "GE has been informed that the issues the SEC staff may recommend that the SEC pursue relate to the historical premium deficiency testing for GE Capital’s run-off insurance operations, as well as GE’s disclosures relating to such run-off insurance operations," according to GE's 8-K filing.

    SPWR/Batman – That's why I love those undervalued stocks, once sentiment changes, they can really go flying.

    ABBV/Maya – I like the premise but it's not showing up in the quarterlies yet so probably a lot of disappointed people at the moment.

    GOLD/Sag – I was going off the actual numbers on TOS, the spreadsheet is often the worst case (as is true for most brokers).

    FCX/Mito – So it's "Dear Phil, I have a spread at $7 that is very likely to make $3 (42%) in 15 months if I leave it alone.  How can I turn it into a huger risk?"  So yes, I wouldn't touch it as your $5/15 is still worth $7 at $12 while your other spread is wiped out so, if things don't go well, which one would you like to have more?  The 2022 $15 ($5.20)/$20 ($3.85) bull call spread is just $1.45.  If you must gamble, why not add that? 

    If you are willing to own 1,000 shares of FCX at $10, you can sell 10 of the 2023 $10 puts for $2.20 ($2,200) and buy 20 of those spreads for $2,900 so it's net $700 on the $10,000 spread.  

    Ad Blocker/Ilene – A lot of people have Ad Blocker installed in Chrome and it may be messing up other things like images.  


  37. Images are appearing broken because

     

    1) The link for the image is via http (not https)

    2) The link has a broken https certificate.  image While Chrome 81 will auto update http to https, this does happen if the https link is unsecure


  38. Hi Jasu1, Captmorgan and Phil, 

    Thanks for the info. I'll pass it on and see if we can get this fixed asap. 


  39. Eddie Van Halen died, 55.


  40. meant 65




  41. AH

    The Trump canceling stimulus talks…a combination of potential reasons.

    Pre-existing underlying dementia, evidenced by behavior towards others, irresponsible personal behavior related (so MANY cases of proof)

    Pre existing, severe personality disorder- worsened by dementia.

    Possible brain injury by COVID via intravascular thrombosis, resulting in death of remaining cells of brain.

    Effect of drugs. We know steroids in moderate to large doses can cause a psychosis like effect. We do not know the effect of polyclonal antibody or Remdesevir on brain neurons.

    (ok folks, above is somewhat 'tongue in cheek') 


  42. i think those steroids are affecting donalds brain. he cancels negotiations but hes trying to negotiate with pelosi himseif on twitter the same night for things that would benefit his election chances of coarse.

    the man is incorrigable.