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Which Way Wednesday – Powell and the 10-Year Note

Image result for brother can you spare a dimeBrother can you spare 410Bn dimes?  

That's what we need to sell in today's 10-Year Note Auction and, if you have $41Bn to spare for 10-years, our Government will be happy to pay you almost (but not quite) 1% interest for holding your money.  Needless to say, these auctions have been attracting less and less interest and, if it is perceived that the US has trouble borrowing money, that could put upward pressure on rates and we certainly can't afford that since we are $27Tn in debt – soon to be $30Tn in debt when Biden passes his $1.9Tn Stimulus Bill.

That's why Fed Chair, Jerome Powell is jumping in to make a speech at 2pm – we may need him to spin those auction results to calm the markets if the auction doesn't go well.  We are only in the early stages of the debt crisis that began in 2008 and has essentially kept going since – the pandemic is only the latest excuse to prop up our economy by printing more money and it won't be the last as our debt burden is projected to grow another 100% over the next 20 years:

After World War II, our Government initiated higher, progressive taxes to pay down our debt.  This Government doesn't have the stomach to ask the people to make sacrifices, so we force the sacrifices on our children and our grandchildren – who will one day have to deal with the mess we are making.  

Here's the real kille, even at 1%, the interest on our debt is $400Bn a year yet, NORMALLY, the government pays around 4.5%, which would be $1.8Tn so, if rates ever do normalize, we would have to find $1.8Tn (1/2 the entire budget and double the entire discretionary budget) just to pay the interest on the debt we already have and, since we would have to borrow that too, we'll quickly be in a cycle of ever-escalting debt until we finally have to default.  

Interest on the federal debt

Image result for federal budget interest paymentSo how long can we keep this up?  Well, Japan is 250% of their GDP in debt already and they still have a functioning country, so we'll see when the wheels finally come off that bus and that will be our 2-minute warning to get the Hell out of this country before it all hits the fan.  The difference between Japan being 250% of their GDP in debt and the US being 250% of their GDP in debt is Japan's GDP is "only" 5Tn and the Yean is still considered a reserve currency – especially in Asia – so there are always plenty of people willing to buy $12.5Tn worth of Japan Bonds.  

The US, however, is already $27Tn in debt and if we climb up to match Japan at $54Tn in debt – who would have the money to lend us?  There simply isn't that much money in the World which you would think would put a limit on our spending but we just keep making it up and now we can make up digital money because it's too much work making paper money with all those 00's on them, isn't it?  

So, from nothing, we have 11M $50,000 BitCoins that are "worth" $550Bn.  Was $550Bn actually spent on BitCoin?  Of course not.  The daily transaction volume of BitCoin is 400,000 coins and, for every buyer, there is a seller, so the net inflows are actually very very small – even if they were 10% it would be $2Bn and it's more like 0.1%.  Even at $2Bn/day, BitCoin hasn't been over $40,000 for more than a week and was below $20,000 in December so it would be very generous to say there have been $60Bn in inflows since BitCoin's total value was $200Bn yet we are now saying they are "worth" $350Bn more based on (again, generous) $60Bn of inflows.

So the price of BitCoin (just like most stocks) is what we who still believe in science call an untested hypothesis – and it remains to be seen whether or not these prices can be sustained under real-world conditions, like a market sell-off.  As we learned in 2008, just because you want to sell your stock for $100 during a crisis, doesn't mean you'll be able to find someone who wants to buy your stock for $100.  Unfortunately, many people then refuse to sell for $90, thinking it will bounce back but then it's $80 and you ask for $80 but then no one actually buys it for $80 and suddenly it's $70 and finally you sell it for $65 – a week after your stock was at $100.  Same company – new sentiment….

At the moment, market sentiment remains very strong and the money is, indeed, flowing in and $1.9Tn in additional stimulus should help, as it's over 1/3 of our quarterly GDP – it will be very scary if it doesn't give us a big bump – just like the first stimulus did.  


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  1. Good Morning


    Re: GOLD play

    So when you sell the march 25 calls and the march 20 puts — is that a "strangle"?  Which is basically a bet on GOLD staying between 20 and 25 and collecting the premium.  Correct?

  2. Phil/BDC/Pharm,

    What is your take on VERU? It is going up nicely over past days. not sure whether I asked you before. apology if I have.


  3. Good morning!

    Markets are zig-zagging this morning 

    Core CPI up 0.0% is 0.2% lower than expected but that's ignoring energy, of course and housing.  Cars were on sale and airfares got lower and that's what took it down.

    • January Consumer Price Index: +0.3% vs. +0.3% consensus and +0.4% prior.
    • Over the last year, the all items indexed rose 1.4% before seasonal adjustment, the same increase as in December; the gasoline index continued to increase, rising 7.4% in January, accounting for most of the seasonally adjusted increase in the all items index.
    • Core CPI0.0% vs. +0.2% consensus and +0.1% prior.
    • In the core CPI figure, indexes for apparel, medical care, shelter, and motor vehicle insurance all increased over the month.
    • The indexes for recreation, used cars and trucks, airline fares, and new vehicles declined in January.
    • The core CPI index increased 1.4% Y/Y, slowing from the 1.6% increase in December. The food index jumped 3.8% over the last 12 months.

    Why are things cheaper – because no one is buying them:

    • December Wholesale Inventories+0.3% to $651.5B vs. +0.1% consensus, 0.0% prior.
    • Total inventories declined 1.6% on Y/Y basis.
    • Inventory/sales ratio was 1.29 vs. 1.34 a year ago.

    Oops, so much for the markets holding up.

    Nice dip on /CL – back to even – still short 2 at net $58.50 now.

    EIA out in 10 mins.

    GOLD/Jeff – Yes, a short strangle.  It's our typical Butterfly play and we simply roll the loser (if any) along over time.

    VERU/Pat – These biotechs are not my thing.  This one is still burning money ($20M/yr) but at least they have some sales ($45M) but does that justify paying $1.45Bn?  I have no clue.  2 months ago, at $500M, I'd have probably thought it was worth a gamble.

  4. Headline draw but big build in gasoline brings demand into question.  I'm sticking with my shorts.

    • EIA Petroleum Inventories: Crude -6.6M barrels vs. +1.0M consensus, -1.0M last week.
    • EIA Gasoline +4.3vs. barrels vs. +1.8M consensus, +4.5M last week.
    • EIA Distillates -1.7M vs. -0.8M consensus, -0.0M last week.
      • EIA expects lower oil prices later in 2021 as a result of rising oil supply that will slow the pace of global oil inventory withdrawals. EIA also expects that high global oil inventory levels and spare production capacity will limit upward price pressures. EIA expects Brent prices will average $55/b in 2022.
      • EIA estimates that U.S. crude oil production will average 11.0 million b/d in 2021—down from11.3 million b/d in 2020 and 12.2 million b/d in 2019—and will rise to 11.5 million b/d in2022.
      • U.S. gasoline consumption is forecast to average 8.6 million b/d in 2021 and 8.9 million b/d in 2022, up from 8.0 million b/d in 2020 but lower than the 9.3 million b/d consumed in 2019.

    • Futures (CL1:COM -0.3%)

  5. In the chart above, they are counting on a massive draw in /RB through the summer.

  6. Is there a webinar today?

  7. Pirate

    Little Chilly up there where you live now?

    February 10th, 2021 at 8:13 am | Permalink | Tweet this 

    Good morning everyone. Here is the link to today's webinar.

  8. my play of yesterday possible not toooo late to jump on it.

    AMGN230120C210 20-Jan-23 210 2 CALL 44.1 45.775 3.80%

    AMGN230120P210 20-Jan-23 210 -1 PUT 28.05 27.7 1.25%

    AMGN230120C240 20-Jan-23 240 -2 CALL 29.9 29.975 -0.25%

  9. Every one is buying pizzas today again PZZA up to 107.23

  10. randers-Ahh a little chilly is definately not the term. We have had a arctic blast that sank its teeth into us for about a week so far. However this am it was ONLY -6 and then went -8 before sunrise. We are also getting some lake effect snow so white and hazy is the fun for today. Usually I am out of here by now BUT with this never ending pandemic I've been stuck here. My son's house in TCI is gone and my sister and husband in Fla are wanting me to get there. However, what I am reading on those two variants from England and So Africa is not reafirming at least to me. I have antibodies BUT not to everything out there that seemingly is changing by the minute. This is holding on for another 5 days or so, but it numbing to say the least.

  11. Re oil . Crude prices in Bakken shale have jumped to highest level in six months due to doubt on the Dakota Access pipeline. ET is afraid the some producers may renege on contracts. The Dakota Access pipeline runs under Lakes in No Dakota and is key source of water for the indigenous communities there. So another reason for the spike I guess.

  12. there's alternatives to playing in the fiat-only game. Example. Watch this to get started. It's tricky until it's not.

  13. test Play 

    -2 TO OPEN DHT 16-Jul-21 7 CALL 0.25 1.1

    -2 TO OPEN DHT 16-Jul-21 6 PUT 0.85 CREDIT

    200 TO OPEN DHT STOCK 5.9 5.9

  14. M2 Money supply continues its upward trajectory…, until they stop this, debt can continue to be issued, as the fed will continue to buy.  It is like taking out a loan from yourself to pay back yourself… cheeky

  15. The top will use this supply to pump up the market.

  16. FWIW…..Also note that Santander was just relieved of its hold on Crypto Currency and how they are playing the game.  In the articles that say Santander has reached an agreement with the feds, it is what is not mentioned that is important.  I have learned through other sources that the bank was hiding gains of its sheeple from the fed, using overseas holdings of crypto as a means to shield gains.  With the fed no longer in pursuit, crypto should really take off as the wealthy are now diving feet first….look at TSLA!!

  17. On that note, if the dollar continues going down and money supply continues to climb….BTC will move. The Oil Barrons are also accepting BTC and are buying hard assets (I think I mentioned this before with their buy in of the cruise lines).

  18. Biotechs:

    ARNA …. Apr 75/100 is sitting very pretty right now.

    RMED, if still in it, looks like Robinhood traders are going to get ahold of it and run it >10.  I hope 100!

    TRIL – buy the dips.

    KPTI – see TRIL

    SRRA – see KPTI

    All biotechs are green….unreal. Only one loser in my portfolio, LQDA.

  19. NAK – Up 25%, inching towards the dollar mark.


    ENPH : Enphase price target more than doubled at Needham after strong Q4 beat • 2:43 PM

    Enphase Energy (ENPH +4.7%) rises as much as 11% after topping expectations for Q4 earnings and revenues, and guiding Q1 revenues comfortably above Wall Street estimates.

    Enphase's "solid beat and raise" pushed Needham analyst James Richiutti to reiterate his Buy rating and more than double his price target to $240 from $118 previously.

    The company "delivered a solid beat-and-raise Q4, driven by the continued recovery in its microinverter business from the pandemic lows in mid-2020 and incremental revenues from its ramping solar storage business," Richiutti writes, adding that margins were better than expected.

    Enphase's "business is ramping well, paving the way for higher Q1 and 2021 estimates," according to Roth Capital's Philip Shen, as he raised his target on the Buy-rated stock to $260 from $200.

    "Heading into the quarter, we were looking for volume and margin strength – we got both… Look for the stock to be up and to continue to work post-results," Shen said.

    Wood Mackenzie said in a recent report that the cost of solar power should fall another 15%-25% over the next decade, making solar the lowest-cost power resource in all U.S. states by 2030.

  21. DHT/Yodi – Huge dividend if they keep paying it.

    Off-shore crypto/Pharm – That has always been the dream.

    Nice list, thanks! 

    NAK/JiJ – Like the weather but don't forget to take profits off the table with them.

  22. Pharm, what do you think of NNVC?

  23. Pirate

    I know it is a lot to endure. Much different than when I was picking Blueberries on the Bayfield fruit loop in summer.

  24. Phil / NAK – Lucky kids. Congratulations on the 33K windfall.

    The short Jan 23 $5 calls at 0.40 look tempting.

  25. NAK – TOS not allowing any opening sell transactions on the calls for all listed expirations.

    So, selling your longs is really the only option at this point

  26. NAK / Daveo – That is strange, not sure why TOS is not allowing it. Schwab is allowing me to put in sell order on the Jan 23 $5 calls.

  27. NAK – It's odd. I have stock to cover so it's not like I'm trying to sell naked calls. Same thing happened with GME a few weeks ago.

  28. HMNY – Up $0.011 ~350% ;)

  29. HMNY/Daveo – Does that still exist?

  30. Pharm can you post the link to your spreadsheet please.

  31. Hi Phil,  What are your thoughts on AMYZF (American Manganese) these days?  The stock has shot up since December.  I bought at .15, AMYZF is now 1.32.  Manganese is used in battery production for electric vehicles.  The company focuses on Lithium-Ion battery recycling.  Company has applied to list on the OTCQB market.  Is this market froth, or is there really something here?  Should I take the money and run?  I can't find financials for the company.