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Financial Failure Friday – Dollar Dips Below 90 as BitCoin Tops $23,000

Holy cow!  

I mentioned the Dollar weakness the other day but we thought the 90 line was going to hold and we did have a very brief bounce but now we're looking terminal as that line fails to hold as well thanks to Wednesday's Fed Statement and Powell's press conference where they said they won't be changing their policy – even if the US Economy does improve.  

While FREE MONEY FOREVER may be great for the stock market, it's not very good for the value of the currency those stocks are priced in and that too is then good for the stock market – how convenient!  Dollar weakness also reflected rising expectations that Washington lawmakers will finally agree on an economic rescue package that’s seen as necessary to shore up a sagging recovery.

The European Union project stands at a fork in the roadThe Fed, in its last policy meeting of 2020, on Wednesday reassured investors the central bank would maintain its easy monetary policy stance, including its bond-buying program, until the economy shows “substantial progress” toward recovering from the damage inflicted by the virus.  Fed Chairman Jerome Powell, in his news conference, indicated the central bank wouldn’t be hasty in unwinding its monetary stimulus measures even though the central bank’s economic forecasts appeared a bit more upbeat than previous iterations.

“The FOMC’s dot-plot looked hawkish…Mr. Powell’s comments were anything but,” wrote Kit Juckes, global macro strategist at Société Générale, referring to the individual rate forecasts produced by members of the policy-setting Federal Open Market Committee.

On top of Powell's comments, Congress does seem to be moving towards another $900Bn stimulus bill so the printing presses continue to fun at full speed as $900Bn may not sound like a lot these days but it's still 5% of an $18Tn economy – as our smallest stimulus of the year.  

Shahi's Blog: Wealth Distribution in the USYour household budget would seem fine too if, every few months, someone dropped an additional 5% of your income into the checking account, right?  And what possible harm could that do?  It's just free money.  Oddly enough, the same people who scream for more free money are the ones who think a Universal Basic Income would be wrong as it incentifies poor economic behavior – go figure!  

Since not many people are buying houses and money is free (for the rich), mortgage rates have hit their 15th all-time record low of the year, now averaging 2.67% for a 30-year mortgage.  Much like the low Dollar inflates stock prices, low interest rates inflate home prices as people don't really buy a house – they buy a mortgage.   

The monthly payment on a $500,000 loan at 2.67% is just $2,020 per month but here's the trap.  You buy that $500,000 home but the taxes go up so if $2,020 was a stretch – it makes it hard to afford to stay there and then, when you go to sell your home and rates have gone up to 4.9%, it will cost your prospective buyer $2,654 a month to pay you for your $500,000 home – and they'd be buying a home with a higher tax base than you did.  That then puts pressure on you to take a loss.

Opinion: we need a Government-backed mortgage lenderThat's how free money now can lead to decades of problems later as we could end up with an affordability gap in housing and commercial real estate that can take a decade to unwind (these are 30-year mortgages).  Also, when you buy home with a $500,000 mortage at 2.67%, what are the chances you'll be able to borrow by refinancing?  Pretty slim.  Even 1.67% would only drop you down to $1,767/month as most of your payment is principle, not interest – so there's not much effect from lower rates and 1% lower would be a Fed funds rate of -0.75% – they would be paying people to borrow money!  

17M American homes are currently behind on their mortgages – about 15% of all homes.  1/3 of them are facing eviction in the next two months (60 days) if Congress does not act to help them.  That's 17M families, about 50M people – facing homelessness in 60 days.  Trump and his ilk are doing the same nothing about this as they are doing about the fact that 3,500 of those people died yesterday of Coronavirus.  Oh well, right?  

Mapped: The Risk of Eviction and Foreclosure in U.S. States

Meanwhile BitCoin has blasted over it's bubble high of 20,000, set back in 2017 and we're at $23,000 now because people around the World are losing faith in Governments and the Fiat Currencies they back.  The ultra-weathly are starting to use BitCoin as a way to hide their money and there are only 21M possible BitCoins with 18.5M already mined and the last 2.5M getting harder and harder to create every day (as they were designed to be).  

The rarity of the BitCoin coupled with the difficulty in creating new ones (unlike the Dollar) and the near-impossibility of counterfeiting them makes them a better currency than the rest that are out there but their lack of actual transactional use makes them a ridiculous currency substitute.  For example, you know lots of people with BitCoins but have you EVER bought or sold anything with BitCoins?  Then how is it a currency?

It's not a currency – it's a collector's item and it's in short supply with high demand so, just like beanie babies – it's a big fad and the prices are climbing to the sky.  

So be careful buying houses, be careful with Bitcoins – I guess stocks are still the only place to put our money – as crazy as that seems as well.  Speaking of crazy, Virginia State Senator Amanda Chase made headlines this week for publicly calling for Trump to invoke martial law so the military could hold a new election.

"Make no mistake. We are at war. The Democratic Party hijacked our 2020 Presidential Election and have committed treason.  Where the hell are the Republicans? Did Dominion Voting Systems buy you out too? I hear nothing but crickets.  If legislators, courts and Congress don't "follow the Constitution," the Virginia state senator said Trump should invoke martial law to allow the military to oversee a new "free and fair federal election."

It ain't over 'till the crazy lady sings.  

Have a great weekend, 

- Phil

 


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  1. Good Morning.



  2. 1 in 5 prisoners in the US has had COVID-19, 1,700 have died






  3. The UK has opened 60 plus clinics to treat Long CoVid patients. Figures suggest that 1 in 10 infections result in this condition. (I guess that's symptomatic)

    http://www.bbc.co.uk/news/health-54449145

    That's a frightening number  with a national health service… wtf do you do if you have no health insurance? 


  4. RMED – after the reverse stock split, the stock is now in positive territory.  I am going to reduce by 1/2 the total number of shares. 

    ABUS – the technology maker of Moderna's COVID-19 vaccine.  Selling Jan $5 puts for 1.25 or better. Just a few.


  5. Pharm….are you familiar with CYDY?


  6. CYDY/Willsons – I am not. As a scan of their website, there are already small molecules in the space and on the market (PFE).  CCR5 has been known for years as a viral entry into cells (aka, TCells – AIDs). At first thought, I think of them as a GILD type of play, but could be used as a cocktail of drugs. Too much risk for me.


  7. Phil / CGL – only waiting  because once they announce their dividend usually payable last week of Dec – the stock should spike up on this….  This legislature that is up for review is one of the few bipartisan supported legislature passed….. now waiting for comment…..    I doubt Biden will oppose this, and if he does not – I believe he will get our allies to go along…..   Which will be more pain…..   The only conceivable out is if China once pressure from more countries is applied ( and more pressure on stock) negotiates and complies in some fashion…..   this will take years.


  8. Phil / CHL – only waiting  because once they announce their dividend usually payable last week of Dec – the stock should spike up on this….  This legislature that is up for review is one of the few bipartisan supported legislature passed….. now waiting for comment…..    I doubt Biden will oppose this, and if he does not – I believe he will get our allies to go along…..   Which will be more pain…..   The only conceivable out is if China once pressure from more countries is applied ( and more pressure on stock) negotiates and complies in some fashion…..   this will take years.


  9. SRRA – disappointing that there is no options on this company. I am very bullish for treatment of MF anemia patients. Obviously there is plenty of risk, but the drug appears to work really well.  Think of the drug as a Jakifi on steroids…. :)


  10. LOL. Total call option volume.  What's not to like going long?


  11. KPTI – option spreads are horrid.  Buying a little stock (200 shares), and will try to sell some Feb 12.5 Ps at ~ $1.


  12. Good morning. Wanted to share with the group that one of my coworkers contracted Covid in March and has contracted it again. Both times pretty bad symptoms. Another coworker has a friend who contracted it twice. I was shocked as it's the first time I've heard of reinfections at the community level from a personal standpoint. Stay safe!!


  13. Whoa….MYOV and KPTI both get FDA approval.  That is nicey nice! 


  14. perhaps Bitcoin should change its name to VanGoghCoin and then it can be worth $50M each?


  15. Man, INTC keeps getting pounded. Any news that changes the narrative?  Thinking of buying a bit more on the dip. 


  16. my 16 year old nephew convinved me AMD is the way to go. What Lisa Su has done at that company is nothing short of amazing.


  17. Good morning!

    No health insurance/Malsg – Fortunately everyone has one under Universal Health Care.  Unfortunately, America is one of the only industrialized nations on earth that doesn't have it.

    Survival of the richest!

    Small molecules/Pharm – I agree. Exciting stuff but wait for the big boys.

    CHL?/Batman – We can only wait and see.  I get that you strongly believe this is a bad investment.  I will continue to accumulate.  

    Reinfections/Jeddah – That's bad.

    LOL BDC.   BanksyCoin!

    Limited edition Pop Art Graffiti Bitcoin silkscreen serigraph image 0

    INTC/Jeddah – It's always something but, if you're in for the long haul – it's usually nothing.

    U.S. lawmakers question Intel, Nvidia on chip sales to China

    What a pounding – down $3 after going up $8 – ABANDON SHIP!


  18. Phil / TSLA

    Did lose my shirt shorting TSLA once before. I am with you that TSLA will go down after S&P 500 inclusion in to 2021. What do you think of this trade?

    Long TSLA Jan 2022 300 puts
    Short TSLA Jan 2022 200 puts

    Or 

    Long TSLA Jan 2021 500 puts
    Short TSLA Jan 2021 800 calls 

    If these are not good, do you have a different trade for TSLA?
     


  19. jeddah/bdc

    I disagree.  I work primarily in embedded electronics.  I am no financial wizard so I'll withhold my opinion on the actual stocks but, from a technological standpoint, I think both AMD and Intel are in for a downfall and Apple is the evidence.  RISC is the way of the future because CISC is just too power hungry.  Now that we're no longer making major gains in processing efficiency from node shrinks, you're going to see a continued growth in stripping out major processing functions from the CPU and moving that circuitry to dedicated ASICs.  The more dedicated circuitry you have, the less you need a strong CPU.

    In the past, you would get major performance and efficiency improvements from speeding up the CPU but that just isn't possible anymore.  You need dedicated logic for each major task and everything that doesn't get dedicated hardware just doesn't matter.

    If you consider the major processing demands:

    Graphics processing gets GPUs

    Machine learning training runs on GPUs but major AI players are creating dedicated logic

    ML inference is getting dedicated logic

    Video transcoding--dedicated logic.

    As far as heavy lifting goes, what is left for the CPU?

    I am firmly in the camp that RISC is going to take over every aspect of generalized computing which means either RISC-V or ARM are going to continue to push into the space of x86 & x64.  Apple has already come to this conclusion with their M1 processor and they are continuing to move more of their CPUs over to in-house architecture based on ARM ISA.  Personally, I'm staying away from both Intel and AMD until this all gets fleshed out!


  20. Crypto / VYGVF

    With Bitcoin going through the roof and Robinhood & Coinbase going IPO, VYGVF (Voyager Digital) could do well. Voyager is a crypto broker similar to Coinbase and just starting out as a startup. It has done great for me so far. 

    Any one has views?

     


  21. JPH….If RISC is faster than CISC, and may be advantageous to ARM, can we build a computer to outsmart the ones that are front running our entry and exits on options and stocks, and thus front run them due to the faster processing time??  Not really a joke….very serious on this one as we could put together a group to look into it!!!!


  22. Or maybe we are already too late….


  23. TSLA/Sk – At leas you limit your losses in the first one but TSLA is almost $700 so it's a silly trade – just a long-shot gamble in the spread.  The other one sets you up to lose another shirt if things spike either way.  If I were going to play TSLA, I'd go this way:

    • Buy 4 2022 $600 puts for $140 ($56,000) 
    • Sell 3 Jan $650 puts for $51 ($15,300)
    • Sell 1 Jan $700 call for $51 ($5,100) 

    That's net $35,600 and you should be able to make 2-3 more sales of puts and calls to make it free and then whatever value is left in the 2022 $600 puts is your profit.  If you get lucky, TLSA only drops 10% between now and Jan expirations ($600ish) and the long puts go up in value and you just roll the short puts along.  Since the 2022 $420 puts are $51, your spread would be $72,000 in the money before the imbalance became an issue and then they could be $360 lower before it custs into your profits.  

    So the downside move is a nice, safe spread and the upside move is not too risky and we think the price is ridiculous so it's a fun way to play.  Let's add it to the STP as a good educational play.

    INTC/JPH – I think the original intent of RISC was to reduce the number of cycles needed to execute instructions but now that's accomplished through caching and I don't think RISC has a particular disadvantage.  RISC leads to code bloat so larger instruction caches are required negating a lot of the efficiency gains since a typical processor is now 25% core and 75% cache so getting more out of the core at the expense of cache is actually kind of a mistake, not a solution.

    Of course, for mobile devices and such, where power consumption matters, ARM has an advantage but advances in battery technology may make that irrelevant down the road as well.  As my phone already goes a day without charging almost all the time – I don't think this issue is a reason not to own INTC anymore.

    VYGVF/Sk – All too faddy for me.

    Far too late, Pharm – Have you seen the current state of the markets?  Someone is making money with this stuff.


  24. Speaking of making money – it's us!  

    Future is Now Portfolio Review:  $192,487 is up 92.5% on our one-year anniversary and up $25,094 (25%) since our 10/8 review – even though we killed ARNC, TOT and BYND.   We added JETS and CIEN and they are both doing great – another example of a low-touch portfolio that does fantastically simply because we pick good stocks and leave them alone.  Massive cash on hand too – a real worry-less portfolio!

    • All the short puts are up too much now – let's kill them and look for new ones.
    • CIEN – Brand new but they flew up since we picked them.  It's a $15,000 spread at net $7,185 so still 100% left to gain but we started at net $4,080!  

    • JETS – FREE MONEY!!!   Who cares if they are flying empty?  Also pretty new and already up from a $2,325 credit entry (aggressive put sale) to $3,337 (up 243%) and this is how the bailouts make the rich richer while the poor continue to pay full fares to ride in empty planes because the airlines have no incentive to lower their prices.  Don't you just love Capitalism?   It's another $15,000 spread with $11,663 to gain so that's a keeper too!

    • SPWR – The stock so nice we played it twice.  I couldn't believe it was so cheap in March so we played it again.  #1 is a $20,000 spread at net $17,150 but our target is $10 and the stock is at $26 – we just don't have anything else to do with the money so this is just collecting interest for now.
    • #2 is a $28,000 spread at net $21,400 so $6,600 (30.8%) left to gain over the next 12 months if SPWR holds $12 (down 53%).  We could have just made that our trade of the year – 30% returns are considered excellent for most hedge funds – you guys are spoiled!  

    We don't pick them often but we sure pick them right!  


  25. ETHE – out of the last 1/3rd of my position yesterday at $195. Thank you BDC. 


  26. ETHE split today, btw, 8:1. 


  27. Phil – TSLA – The Jan 2022 600 Puts are around $170. Did you mean $550 Puts for $140? 


  28. vkat_mn / TSLA

    Jan 2022 600 puts is still around $140.


  29. TSLA/VKat – Jan is Jan 2021, not 2022.  That's why I say Jan or 2022 – in theory it distinguishes them better but, apparently, failing to do so here…  cool  The idea is that the 28-day Jan $650 puts will lose their premium very quickly (100% of the price is premium) while our long 399-day puts will retain most of theirs so we will just keep selling premium, over and over again – until we get back our net $35,600 and then it's a free short.  


  30. Phil/Pharm/ RISC versus CISC

    It isn't so much that RISC is faster but it has a massive advantage in terms of simplicity.  If a CISC architecture has the instruction you're looking for, it will smoke the RISC core every day of the week.  The downside is that all that extra circuitry dedicated to those extra instructions is a huge growth in die area and either complicates the power subsystem to have extra power planes or draws extra power--to say nothing of being more expensive to manufacture, adding complexity, and increasing signal propagation times within the IC.

    Phil, CISC actually decreases the number of cycles required for a process.  I think where you're a little confused is that AMD and Intel have both introduced micro-ops which allows more generalized instructions to execute in a way similar to RISC and will split up certain instructions to make better utilization of the core.  Either way, more complexity and more circuitry to get the same result.  As more and more instructions get delegated to dedicated accelerators outside of the CPU though, you lose the benefit of having those instructions in the CPU core itself.  Of course, we are still a ways off from the real downfall of x86_x64, but Windows on ARM cannot give you much faith in the continued existence of these systems.  RISC with accelerators is the way things are going.

    As to power consumption, that is a massive issue on desktops as well.  We can make processors faster without much issue but, at the point we're at, we are thermally limited, not by any other aspects of physics.  We just cannot evacuate heat fast enough to go any faster so we need either a big jump in materials (graphene circuits are expected to push CPUs from the low Ghz range to the low THz range) or some major developments in packaging tech (think fluid channels within the processor).  At the end of the day, right now, power consumption is by far the biggest limiting factor in every segment of computing whether it be embedded, mobile, desktop or HPC.

    Personally, I am really curious about RISC-V as an eventual upset in the market.  It doesn't have nearly as much development or support as ARM does, but it is open source and backed by UC Berkley so if you end up hearing of AMD or Intel deciding they are going to enter the RISC space, I wouldn't be surprised to see them go that route.

    Apple fired a shot across the bow with the M1.  I can't stand Apple products but even I was really curious about buying a laptop with that thing and using it as a Linux box (won't work because GPU drivers will never exist).

    Pharm, as to front running the HFT guys, that just isn't gonna happen.  I might be a backer of RISC, but these guys probably have specialty hardware interfacing with these systems.  You'll NEVER get a software-accelerated tool to run at 1/10th the speed of dedicated hardware and the billions at stake make it pretty straightfoward to pay another firm to develop some badass tech for ya.


  31. Wow, what a jam up into the close to fix the market.  

    What a joke this is!  

    Have a great weekend everyone, 

    - Phil


  32. I do not think it is even possible to compete with the HFT's.

    Michael Lewis wrote a book on it  called Flash boys. 

    https://www.wsj.com/articles/high-frequency-traders-push-closer-to-light-speed-with-cutting-edge-cables-11608028200


  33. Phil / VIAC – one  downgrade this week – Mrogan Stanley mood from 25 to 32 with a sell… harsh, and Macquarie took hem from 28 to 38 with a neutral…   I don't have access to any of the reports but I just don't see them below 40 at the end of '22….  with earn gins for 4.4 ish…  and a 9 to 10 multiple with the following year at about 4.6….  I don't see any nm major new other than the change of a President in the CO. but being replaced by a company vet… am I missing something here?


  34. Phil// Does this change your view on INTC?

    https://www.cnbc.com/2020/12/18/intel-falls-on-report-microsoft-will-design-own-chips-for-pcs-servers.html

    Looks like MSFT might be designing their own chip which would huge pressure on INTC.  

    Thanks.


  35. sk2020 – VYGVF – never heard of this penny stock play, and like all penny stocks watch out for the sucker scam, but maybe worth 1000 SH on a pump to 15!

    JPH – This is all way above my pay-grade and I appreciate the comments.

    Atitlan – I'm out of ETHE as well (last 20% sold at 198), but now post split watch it go to 50! 

    If you've got the stomach for TSLA shorts, 2022 is the only way to go. 300 puts for 19 are about right

    Phil/CIEN – that's a good looking chart!





  36. Analysis: The restaurant apocalypse is here