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38 Thursday: S&P 3,800, 3,800 Deaths Yesterday and Bitcoin $38,000

Image result for ignore virus deaths cartoonA lot of 38s this morning.

I'm not one of those numbers people but I just noticed it in my scans and found it interesting.  More so, I find it disturbing that 3,843 Americans died yesterday from Covid-19 and 118,991 people were infected (just under 1M per week) and you would think, listening to the news, that we have this situation well in hand.  People – this is denial.  Yes, we have a plan but you can't have 27,000 people a week dying and act like things are good.  That's 108,000 people per month – Burbank, CA has 102,511 people in it.  Green Bay, WI has 104,576,  Boulder, CO has 105,673.

This is still an ongoing crisis but the market is pricing in two things that don't go together – that the virus is "fixed" but also that we will keep getting Trillions of Dollars in stimulus while the economy makes a fantastic recovery.  This is what they call "pricing to perfection" but actually we're pricing perfection PLUS stimulus and have now moved well beyond perfection in our valuations.

Overall, we're still lurking about that 3,850 line, which is the 35% line (over 2,850) per our 5% Rule™.  I'm not going to get into the whole valuation discussion again but we'll either break out of this channel (back to 3,700) or we'll fail it and failure has no support all the way back to 3,560.  That makes the risk/reward play for shorting the S&P (/ES) Futures below the 3,850 line a very tempting play.

There WILL be stimulus – it's just a matter of how much but $1.9Tn is baked in and it certainly won't be more and earnings have been generally good so that's baked in and most of the big market movers have reported so there's no new catalyst and we're only vaccinating 1M people per day or 10% of the population in a month and Q1 ends in 60 days so can't improve much there and even if we get to 1.5M/day by the end of March, that's only 1/3 of the population vaccinated by the end of Q2 so marginal improvements then – not full improvements in the economy ahead.

Real GDP: Percent change from preceding quarterThen what are people so excited about?  The math is obvious, we are NOT going to be in a full, NATURAL recovery until, at best, the 2nd half of this year – and that's if all goes according to plan.  So last year, to keep our GDP near it's normal level ($20Tn) the Government spent $7Tn (1/3 of GDP) with the Fed pumping about $4Tn into the economy and our direct stimulus doing the rest.  

Keep in mind that there was no real effect of the virus on our economy in Q1 so we were only fixing a problem that began in Q2.  This year, we are hitting the ground running with 26.6M infections and 451,000 deaths so far but another 100,000 people will be dead in 30 days and another 3M infected.  If, at the beginning of the crisis, someone had projected that for our TOTAL, we would have had some real panic on our hands.  So congratulations for learning to live with catastrophe, I suppose – well, those of you who do manage to live, that is…

Just in case reality pays us a visit in February, let's take a look at our Short-Term Portfolio (STP), which is tasked to protect our Long-Term Portfolio (LTP) and other long positions in a downturn.  This insurance portfolio is down 37.6% (another 38!) since it's 10/28 reboot for a loss of $75,292 but those losses were much more than offset by gains in our long positions and our upside potential here in a 20% correction is expected to be $293,000 but now is a good time to make sure we have enough – just in case…

  • FXP – We think China's credit situation could be a huge problem this spring.  FXP is a 2x inverse ETF on the Chinese market but this spread is far out of the money at $26 as a 20% drop in the Hang Seng would be a 40% gain to 36.4, so what good are the March $33 calls?  Our calls are just 0.28 and we can roll them to 40 of the March $25 calls at $2 ($8,000) for net $6,880 and sell 40 of the June $35 calls for $1 ($4,000) so we're spending net $2,880 to put ourselves at the money on the $40,000 spread.  We're selling longer-term calls to get more premium and, eventually, we'll most likely roll our long calls to June or September.

  • TZA – This is a 3x ETF and April is far away but $5.10 x 1.6 is only $8.16 so that's our goal on a 20% drop so these are no longer offering protection.  We'll cash out of April $10s for $4,500 and buy 200 June $4 ($1.50)/8 (0.65) bull call spreads for $17,000 on the $80,000 spread.  

  • TQQQ – Hard to bet against the Nasdaq but TQQQ is also a bet on decay of the 3x ETF over the course of a year.  It's a $60,000 spread at net $28,000 and I still like it.

  • CMG – They recovered a bit yesterday but I feel confident they've reached peak idiocy in their valuation.  It's a $180,000 spread currently around $14,000 and we'll get to sell a lot more premium during the year.

  • SQQQ – This one is the 3x Ultra-Short on the Nasdaq and, based on earnings – it's not likely to happen.  A 20% drop would take it from $13.10 to $20.96 but this is more like long-term insurance so we're simply going to roll the 200 2022 $15 calls at $4.30 ($76,000) to 200 2022 $10 calls at $5.40 ($108,000) and we can pay for that by selling 100 of the 2023 $30 calls for $4.75 ($47,500) so we're dropping our calls $62,000 in the money and putting $15,500 in our pocket.  At $21, this spread will pay back $220,000 so we are very well-protected.

  • TSLA – Mostly this is about selling short-term calls so we have a free put but the 2022 $600 puts are $105 and the 2022 $800 puts are $214 so let's spend $109 ($43,600) to move $200 ups in strike and we'll get half back by selling 4 of the July $600 puts for $50 ($20,000) and those can be rolled to the 2022 $450 puts ($48) and we'd be thrilled to collect $350 x 400 ($140,000) on our now net $54,040 spread and, of course, we have more short put and call sales ahead of us and we'll still make this free.

So now we have a good $500,000 in downside protection for our now $1.5M LTP (and the others) but they are all a good 50% CASH!!! so they don't really need all that much protection so now we have room for  a bit more bargain-hunting during earnings season!  


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  1. Good Morning.

  2. Phil,

    Thanks for the input on PSW mbshp numbers. I'll see how much interest some of the more popular sites (Zack's, Yahoo Finance, Tip Ranks, etc) have in the honor of making price accommodations for PSW members and report back (next week).

  3. Good snowy AM from No Wisc. Have food bank today so wish me luck. Complete white out conditions and is only get worse. Never a dull moment.

  4. Phil / ALB -

    company is raising money through stock sale apps 1.5 B – pricing at 151…. I'm looking at selling the jan'13 $100 Putters for $19 thoughts?

  5. Nice deal of selling short term calls on GOOGL yesterday, while all sheep were jumping on the train.

  6. Watch QCOM today while all sheep jumping down the cliff I am looking to sell the Jan 22 120 put set for 12.50

  7. I jumped the gun and sold it for $11.90

  8. stockbern good price,11.55 now not sure if 12.50 will fill????

  9. GLD down 4.20 possible a good time to set up a new play for the once who still out in the cold.

  10. Good morning!  

    Another up day in the market and it's impressive this week as the Dollar is getting stronger:

    That's crushing gold and silver:

    And oil took a nice dive:

    I'm being greedy as I still haven't stopped out but I should have at $55.50.


    Good luck Pirate!  

    ALB/Batman – To me they're not cheap but the $100 puts don't seem too risky though 2113 is a long way off, isn't it?

    GOOGL/Yodi – Tempting but no thanks.  With no more election spending I think they may have problems matching last year going forward. 

    QCOM/Yodi – Much as I love them, still too much.

    GLD/Yodi – Especially as it's based on a stronger Dollar.  I think we've got some serious global inflation ahead. 

    If $1,775 holds up or we cross back over $1,800, that becomes a good floor to play bullish on /GC

  11. I'm going to start working on a new Watch List.  Here's the old one:


    We can check on our Watch list from Nov 11th and see how they are doing in the crisis:

    Keep in mind that last set is all from our last LTP Review – not current picks – this is our new watch list which I will hopefully formalize once we see who's still worth watching.

    HBI still a solid buy:

    From Top Trades:

    Top Trades for Fri, 08 Nov 2019 15:12 – MO

    Top Trades for Tue, 29 Oct 2019 10:22 – NLY

    Top Trades for Fri, 25 Oct 2019 11:46 – Dividend Portfolio

    Top Trades for Tue, 22 Oct 2019 14:37 – IRBT

    Top Trades for Tue, 15 Oct 2019 11:04 – MJ

    /KC) and SPWR

    Top Trades for Thu, 03 Oct 2019 11:39 – LABU

    Top Trades for Fri, 27 Sep 2019 13:22 – TXN (short) and TCNNF

    As a short on TXN, I'd go for:

    That's net $2,375 on the $7,500 spread so $5,125 (215%) upside potential if TXN is below $125 into Jan.   Ordinary margin is $7,179 but hopefully short-term and a nice return either way.

    Also, we talked about Truelieve (TCNNF) who are still cheap at $8 (I liked them at $9.15 two weeks ago!).  They failed the falling 50 dma but Kim is speaking at a conference on the 2nd in NYC so this might be a good time.

    $8/share is $883M – I'd buy the whole thing for that price!

    TCNNF hit $13.73 in early Dec and now back to $8.90 this morning so another chance to get into that Pot Stock (my favorite one and I just had lunch with Kim, the CEO, in Miami).  No options, unfortunately. 

    My other watch stocks are/were: 


    On the smaller cap side, by the way, there's also:  X, M, F, MYL, ECA, ADS, TECK, BHF, STLD, SVC, XEC, NRZ, GPS, LB, NWL, HUN, GT, UTHR, AUO, TWO, AGNC, PK, MTG, BSM, SLM and HFC.  

    So, since it's quiet, let's see what looks good.

    • MT – Love them down here ($14.30) but too risky with the virus spreading in Europe – 6 
    • TEVA – Hasn't come down so 4 

    • FCAU – $12.68 is cheap enough and turmoil priced in – 10!
    • DELL – $50 didn't hold so why should $45?  I like them in a bull market but this might not be one anymore.  7 
    • VIA(C) – $23.75, we're going to end up owning a lot of this as we started buying at $35 - 9
    • AAL – See, you put something on a watch list and say "I'd like to buy that airline if they get cheap" and then they get so cheap ($20.68) that you're not sure you want them anymore.  Well, that's a problem for TRADERS but we're investors and this is a 10 at this price!  

    • VALE we picked up, back to $10 and a great price but will take a long time to recover – 8 
    • MYL – Erratic income, changing environment, I don't love them anymore – 4 
    • ECA – Now OVV.  Glad we stayed out – dropped 60%.
    • SFBTF - Again, this is why watch lists are good.  By waiting we saw earnings that told us they were falling apart.  Still too expensive.  3 
    • ING – One we don't usually bother with but, at $9.70, it's a great entry – 8

    • SAN – Another bank too cheap to pass up (8% dividend too) – 8 
    • MUFG – $4.80 too cheap to pass on – 8 
    • LNC – Bigger banks are cheaper so – 6 
    • PUK – Virus could be an insurance nightmare (business interruptions, life, health) and, oh yeah, we're still way behind on our ark-building - 2

    More quick summaries from the watch list:

    • BCS – Not in love with them, can't get a clear line on financials  - 4 
    • MU – Didn't come down much – 5 
    • FCX – Love them below $10 and they have gold – 8 

    • PRU – Too worried about business interruption claims and weather claims.   Very good price though and 6% dividend  – 6
    • SNP – Not China Petroleum – 3
    • LEN – Didn't come down enough – 4 
    • KHC – My old favorite back where we started at $25 – 8


    • UBS – I'd rather take a chance on them than BCS. – 8 

    • CBS – VIAC now and we own them. – 9

    GS – A good price for them but not super-cheap – 5 

    • COF – Not excited by them – 5 
    • MET – A bit worried about life insurance and low returns on their reserves (bonds) so pass – 4
    • MFC – More life insurance, same problems – 4 
    • LYG – Too risky.

    $260 did not last long for AAPL.

    More Watch List:

    • X – Assuming we survive, very cheap – 8 

    • M – Crazy cheap – 9 

    • F – Big China trouble that may spread – 6 
    • MYL – Tricky as they are merging with PFE's Upjohn Division but a good price for MYL at $17 – 8

    • ECA – Not in this environment – 4
    • ADS – Too much turmoil – 4 
    • TECK – Good time for basic resources on sale – 7

    More Watch List:

    • STLD – Too cheap to ignore down around $25 – 8 

    • NRZ – $2 dividend makes them a 9!  

    • GPS – Only because they are so cheap do I like them – 8

    • LB – Love them but no longer cheap – 6
    • HUN – I love it when boring companies go on sale – 8 

    • GT – At this price ($9.50), I like them as you can make them much cheaper with options – 8

    • UTHR – Not on sale enough but a well-priced Biotech – 7 

    • TWO – Nice sale on a 12% REIT – 8 

    • AGNC – Ditto – 7 

    • PK – Tempting but too many issues with travel at the moment – 5 
    • BSM – Interesting as they just manage the reserves.  Great entry price for the long haul – 8

    • HFC – Low-cost, small refiner – 8 

    Unlike Trump, we were very concerned about the virus on 2/27!

  12. Phil// I see the watch list. Since the new ones are mixed with the old watchlist it is hard to see which one you are recommending now.  About F – What is your take on their new EV F150 coming and most likely they will be able to sell more commercial vans (EV Vans) to the gov. F should be a good story, right?  you also mentioned about their China problem, why do you there is a big China problem for F?


  13. McKinsey Settles for $573 Million Over Role in Opioid Crisis

  14. /CL at a new high, I've been shorting on and off since 50 but this thing is unstoppable, trends beat logic or value…

  15. Watch List/Rookie – Those are all old.  Those were our picks from last year but it's a good place to start to see where they stand after this earnings period.  On F, there are apparently chip shortages that are hitting the auto industry so things are a bit up in the air.  We'll see what earnings bring but my love of F was down at 6 – we're 100% over that so, next time they are low, I'll be excited about them.  That China comment was regarding the virus last year potentially disrupting sales.

    Oil/Mr M – Very surprising move today.  Seems to  be based on a Barron's article that is starting a rumor that oil will be targeted by Reddit (because that's how the markets work now).  

    NG had a huge pop on weekly demand – should have guessed that one from the cold weather.

  16. Oil/ Mr M & Phil – Oh geez, do you suppose Barron's picked up on that offhand remark I posted here a few days ago suggesting that the redditors should go after the NYMEX crew of oil price-fixers that Phil complains about? I hope not!

  17. It's just too ridiculous but look what we just discussed in the Webinar – using the news reports to get ahead of the Reddit crowd.  So if hedge funds start doing that and piling into oil just because they think the Retailers are going to go in – then this market just gets crazier and crazier….

  18. i  think wall streetbets in under attack by the funds they screwed. They made fairly logical choices of companies to manipulate before last week silver and gold and oil dont really fit the mold. And bnn is spinning it for their buddies.

  19. Phil / APD – nice pull back I have a back. of the envelop price target of 300 ish on this one….

  20. Phil//  Thanks.

  21. This might fit in the Man who planted trees type portfolio. I bought SIMO about 10 years ago at $ 11 probably based on a Phil entry. This has been a good range stock between around $35 and $55. It pays a +3% dividend. I sell calls a few times a year for around $1k each time, this has really reduced my cost basis. It is nice to not have to say would of, could of, should of on occasion.

  22. WalllStreetBets/Tommy – Oh yes, the entire Financial Machine needs to grind these guys down before they disenfranchise all of them.  Unfortunately though, the nature of Social Media is that it can be appropriated by bad actors.  Very hard to stop – as we've seen for the last 4 years.

    APD/Batman – I think you licked too much glue on that envelope!  APD is good for $2-2.5Bn so say $2.5Bn if all goes great and $258 is $61Bn and $61Bn/2.5 is 24.4, which is ridiculous for an industrial supplier.  One day, this market will become realistic again and, through no fault of their own, APD will go back to 15-20x earnings and, unless earnings pop a food 50% – that's going to be lower than they are now.

    SIMO/Randers – Now that's a good growth story and STILL reasonably priced at $55.58 since that's just under $2Bn and they should make over $100M.  It is nice to just play these simple income-producers, isn't it?

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

    289 361 556 523 530 457 549 534 590 9.59%
    Operating Profit

    59.1 76.4 137 95.2 105 64.6 120     1.79%
    Net Profit

    44.5 60.3 111 75.0 98.1 64.4 104 108 113 7.69%
    EPS Reported

    1.30 1.73 3.12 2.09 2.71 1.82 2.96     7.01%
    EPS Normalised

    1.31 1.73 3.12 2.27 2.82 2.15 2.41 3.05 3.24 10.4%
    EPS Growth

    +54.3 +32.2 +81.0 -27.4 +24.1 -23.8 +12.4 +42.4 +6.02  
    PE Ratio

              24.5 21.7 17.2 16.2  

              0.577 0.513 2.85 1.27  

    It's also amazing how low that channel still goes.  People simply don't understand the cycles in semis (INTC being another example – even after all these years).  

  23. The real way to go after the 'old institutions' financial market is from the bottom up, hence the current interest in DeFi, (e.g., UMA, AAVE on Gemini). Peer microfinancing eliminates the need for consumer loans, payday loans, credit card loans, etc. UMA is worth $1.5B and AAVE is $6B and they could be 100x that.

    Gemini has an earn feature now. Coinbase has had it for awhile. You can manage the whole yourself. It's pretty straight forward interface but very powerful concept.

  24. Phil//  what is your take on SKT? Is it still a buy even though it has gone up so much from the lows of last year?  Thanks

  25. Oil / snow - if it was you, you owe me a couple grand for my shorting losses :)

  26. I do like having a few Lotto tix and a few sleep well at night plays. Look at SIMO Earnings last 4 quarters- All beat consensus, maybe that means they are due. Sometimes I think consistency of earnings should be rewarded more than level. 

  27. Phil / APD – LOL 

  28. Microfinancing/BDC – I do like that space but hard to judge how they'll perform at this stage.  

    SKT/Rookie – Well, we covered all at $20 - that was clearly overdone.  If they come back to $10 they are a good long-term hold again.  

    Consistency/Randers – I agree, give me slow and steady every time.

    /CL still up at $56.50 – I think I'm going to go short again.

  29. Yikes!  

    Opinion: Why the pandemic won't be over until 2024

    Dr Nicholas Christakis, physician and social scientist at Yale University, explains the legacy Covid-19 will leave behind and his prediction for how long the pandemic will last.