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TGIF – Working for the Weak End

We're down for the week.

You wouldn't think so, listening to the pundits but we started the week at 3,916 on the S&P 500 (/ES) and this morning we're at 3,910.  Keep that in mind while you read your Financial Propoganda – does that FACT correlate to what you are seeing and hearing in the media.  Last week we passed a $2Tn Stimulus Bill, this week Powell and Yellen testified that the Fed and the Treasury are prepared to boost this economy forever and Biden just doubled the number of vaccinations they plan to distribute by the end of May to 200M AND the Democrats vowed to pass a $3Tn Infrastructure Bill, even if they have to do it over Mitch McConnell's dead body (preferably).  

What has all that done for the market?  NEGATIVE 6 ponts!  

So, what will it take to get us UP 6 points next week?  Colonize Mars?  Water into wine?  Straw into gold?  I think they are truly running out of ideas to stimulate the economy and, unfortunately, all of our hopes and dreams for a better, brighter, lower-interest future are already baked into these record market valuations and there really isn't anywhere else to go but down.  

"Keep on (love keeps lifting me)
Lifting me (lifting me)
Higher and higher (higher)
Listen, Now once, I was down-hearted
Disappointment, was my closest friend" – Jackie Wilson

Jackie Wilson is right, without a constant flow of love (or money) from the Fed, disappointment will be our only friend.  Perhaps the Fed will truly love us forever – they certainly promised to do so this week but again – how much MORE in love can they be?  I know people like to say "I love you more and more each day" and that's fine with an emotion but it's not real love the Fed is doling out so much as MONEY and money can be measured and how much more than this year's promised $6Tn ($500Bn/month) can they really love us?  

What Is a Prenuptial Agreement - Do You Need One Before Marriage?And if we measure our relationship with the Fed in terms of Market Value, this one may have run its course and now investors are starting to look at Housing, Commodities and TIPS and other fresh investments as potential places to seek their thrills, rather than this old, tired bull market.  And what will happen to the market if they leave us in search of some young, fresh thing?  What will it do then?  

You know the answer – it's just too sad to think about but, like a pre-nup – it's something you should plan for.  So make sure you have a break-up plan with your portfolio in place – just in case things do turn uglier!  

Our Short-Term Portfolio is up $34,000 for the week and, in last Thursday's Portfolio Review, we determined we had about $500,000 worth of protection against a 20% drop in the market (not including our BETS on CMG and W, which should pay us more in a crash as well).  So, I think we are well-protected into the weekend with our current pre-nuptual and we haven't yet gotten up the nerve to end the relationship in our Long-Term Portfolio, which is sitting at $1,713,505 so our paired portfolios are now at a combined $1,968,270 – and $2M is where we killed our previous Long and Short-Term Portfolios out of principle in the fall of 2019.

$2M is more than a 200% gain off our $600,000 start – as with the market – there's simply a limit as to what you should expect to make.  It's very, Very, VERY unlikely we repeat that performance in 2021 because there simply isn't enough money in the known Universe to goose the market up another 100% like they have in the past 12 months.  So KNOWING that we can't keep up this pace – as it was last time – it simply makes sense to take $1.4M off the table and start fresh portfolios with $600,000 ($500K + $100K) where we feel more comfortable taking risks as we know our $1.4M in profits can't be touched.  

That's what I'd prefer to do and that's what I will do if this market does begin to roll over but, for the moment – we are very well-balanced and keep making progress each week so this week's progress becomes next week's buffer and we can keep going forward until we see our combined portfolios begin to move backwards.

Until then, please be careful out there.

Have a great weekend, 

- Phil


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  1. i wonder how much end of quarter window dressing we will get,

  2. Good morning!  

    Quarter doesn't end until Wednesday, so plenty of time to paint a picture.  

    They have the Dollar cranked way up so they can drop it down and pop the market at will.

    turn it up to 11 gifs | WiffleGif

  3. Monring all! Phil – thoughts on GS? 

  4. Good Morning.

  5. I still like to comment on the MO play of Stuart.
    Not taken the Jan23 put sale in to consideration, I only looking at the potential profit of the call sale. Taking Phil’s Jan23 45 call @ 8.15 and my 52.5 call @ 4.40. Assuming MO will just be at 50 Jan23, Phil’s 45 call will bring a return of 17.5% and one will be assigned and lose 5.00. 
    My play at call 52.5 without upside potential will show a return of 20.5 % and you still have the stock. With upside potential up to 52.5 I show 26% return, and still hold the stock.
    Obviously the put sale remains in both cases the same. 

  6. Consumer spending dipped 1% as winter storms raked the US

  7. Alex Rodriguez Explains Why Sports and SPACs Mix

  8. what do you think of oil short back at 61 with that ten million dollar rent a wreck still stuck in the sand.



  9. China erasing H&M from internet amid Xinjiang backlash

  10. GS/Rick – We have GS in the LTP but our target was $210 from October so $335 might be a bit rich. 

    GS Long Call 2023 20-JAN 170.00 CALL [GS @ $334.35 $3.80] 10 10/15/2020 (665) $60,000 $60.00 $105.50 $60.00     $165.50 - $105,500 175.8% $165,500
    GS Short Call 2023 20-JAN 210.00 CALL [GS @ $334.35 $3.80] -10 10/14/2020 (665) $-40,000 $40.00 $90.78     $130.78 - $-90,775 -226.9% $-130,775
    GS Short Put 2023 20-JAN 165.00 PUT [GS @ $334.35 $3.80] -10 10/14/2020 (665) $-21,000 $21.00 $-15.55     $5.45 - $15,550 74.0% $-5,450

    Oil/Tommy – Canal still closed.  Longer than we thought.  Not enough data to make a stand on oil over the weekend.  Dollar still strong so a drop in the Dollar can pop oil back to $65 so simply not worth the risk.

    Who was it yesterday who didn't think OPEC was getting their $10M worth out of this?  

    In pictures: Efforts to dislodge huge ship from Egypt's Suez Canal - BBC  News

    Suez Canal Blocked After Giant Container Ship Gets Stuck - The New York  Times

    Suez Canal: Russia proposes Arctic shipping route as alternative to blocked  waterway | Daily Mail Online

  11. Phil,

    What's your current opinion about VIAC ?

    Is the price drop only because of the additional stock sales or are there other issues that caused the almost 50% drop from peak.


  12. VIAC/Gard – Boy am I glad we cashed out of those!  WTF?

    Of course, this is why we don't stay in stocks, no matter how much we love them, after they have run their course.  The only sold 20M shares of stock at $85 and 10M shares of 5.75% preferred for $100, raising $3Bn – that's got nothing to do with the sell-off – it was just a catalyst for people to realize it was way too high at $100.  I loved VIAC at $20 and $30, not at $60 and $100.  $50-60 is probably fairly priced for them – but don't tell that to NFLX.

    Great timing on this call:

    Mar. 22, 2021 3:32 PM ETViacomCBS Inc. (VIAC)By: Jason AycockSA News Editor11 Comments

    • The UK's competition watchdog is evaluating Penguin Random House's deal to acquire Simon & Schuster from ViacomCBS (VIAC +3%VIACA +3%).
    • The Competition and Markets Authority is checking whether the transaction creates a relevant merger sitution.
    • The deadline for comments from interested parties is April 7, and the CMA expects a phase 1 decision by May 19.
    • Meanwhile, the stock – already up 161% year-to-date – is up another 3% today, alongside a new higher price target from Benchmark.
    • The firm boosted its target to $120 from $80, now implying 20% upside. ViacomCBS is likely to beat Street expectations – consensus is too low for Q1 and the full year, and "we think the medium-term outlook will also likley exceed consensus," it says – and streaming should offer a tailwind.
    • Paramount Plus has launched, and when it comes to subscribers, "we have yet to see ViacomCBS miss a target and do not expect that trend to start changing now." The effect of stimulus checks on streaming and linear TV is generally being overlooked, the firm says.

  13. By the way – don't forget to buy Toilet Paper and Paper Towels – this Suez thing is a major problem if it goes into next week.

    Whatever you couldn't get in April and May will be the same problem.

  14. Resolving problem in the canal. They should use steel ropes and chains and pull from fixed objects on land. Pushing with tug boats is just replacing water.

  15. re viac-It had an almost a 19% short interest with over 5 days to cover in March so I think that is why it spiked so high. Now the dilution with the stock offerings etc is causing the balloon to pop. The volumes are heavy so possibly more down days to come.

  16. Ropes/Yodi – They built the pyramids, you would think they could figure this out!  Actually, I think it's all part of the same scheme – this should not take a week to fix.  Where is Archimedes when you need him?  

    Archimedes Lever Square Sticker |

    I think VIAC is just a preview of the whole market once investors realize these stocks aren't going to live up to expectations.  

  17. Phil-I  believe you are correct BUT what catalysis it going to take to implode the whole thing? Also MDT has a new valve that is done without open heart surgery to direct blood to lungs. With heart disease the number one killer in this country I do believe this is a sleeper though no big surge today.

  18. I do wonder if they can take the S&P500 to 4300 with stimulus, reopening, and infrastructure. 

    thanks for the reminder of the GS long play: that was before I joined. I'm going to add a new GS trade to my portfolio to get some financial exposure. They look reasonably valued and should do well given the SPAC deals and trading environment.

  19. Catalyst/Pirate – What happens at a carnival when the bell rings and the machine stops pumping air into the balloon?  The catalyst is there every day – incredible amounts of stimulus.  Take it away and the deflation begins.  

    MDT/Pirate – I love them.  They just haven't been cheap lately.  This is 32x earnings at $157Bn but they should make $6Bn this year so let's call it less than 30x and great growth should take them to 20x in 2023 which means this ($117.50) is our target for 2023 and I'd buy them for $100Bn now for sure so 1/3 off ($80) is our floor.  That means I see no issue at all with selling a put that puts me in for net $80 – other than I'd rather wait for a pullback to get a better price.

    The VIX is high, so that's in favor of buying now and those valves will be huge but they won't impact Q1 earnings on 5/27 and Q1 needs to show a path to $6Bn or this valuation is likely to give them a 10% drop AND we think the market will drop so generally we should wait for $100.  2023 $90 puts are only $5 and very thinly traded, the $100 puts are $8.50 so that's what we hope for on a dip.  The $95 puts went for $8.80 the other day and that's not bad so I'd ask for $8.80 for the short $95 puts but only 1/4 of target as we HOPE MDT goes lower so we can roll to the $90 puts and DD – and then buy a bull call spread.   

    There's no hurry on the bull call spread because the 2023 $100 ($25)/120 ($13.50) spread is net $11.50 and the $110 ($18)/$130 ($10) spread is $8 so a $10 drop should give us a much cheaper $100/120 spread while a $10 pop (which we don't believe in) would only cost us about $3.50 – so better to wait for more information before deciding on that.

    GS/Rick – And the banks will be allowed to pay dividends again.

  20. Just sold 10 $35 puts on VIAC for Friday 4/1 for $1.40. Happy to own VIAC again at net $33.60, or if not collect some easy premium. Crazy round trip for this stock. 

  21. Threat of Another Lost Summer Stirs Cash-Crunch Fears For Airlines

  22. A tale of two press conferences

  23. VIAC/Rick – That is free money if you REALLY want to own the stock and hard to imagine a catastrophe that would make it not worth $35.

    They are jacking it up into the close again.

  24. Big finish but Nasdaq and Russell still down for the week.

    Have a great weekend everyone, 

    - Phil

  25. Meanwhile, trading in bullish call options tied to stocks has also calmed. Call options volume hit the lowest level of the year this week, Trade Alert data show, a sharp shift from earlier in the year when investors looked to wager on explosive stock gains.

    “I think some of the froth is coming out of the market, which is probably a good thing,” said Steve Sosnick, chief strategist at Interactive Brokers.

    Mr. Sosnick said that options activity may have played a role in the late-day stock rally on Friday.

    Higher yields have posed a particular problem to shares of technology companies, calling into question their current valuations when much of their profits won’t materialize for some time. A strengthening dollar, signs of growing strategic rivalry between the U.S. and China, strained global supply chains and the prospect of a rise in inflation have also unsettled the stock market, investors say.

    U.S. household spending fell 1% during a bout of cold weather in parts of the country in February, Commerce Department data showed. Personal income fell 7.1%.


    In the bond market, the yield on the 10-year Treasury note fell to 1.658%, concluding its biggest one-week decline since December. It was as low as 0.915% in early January. Yields rise when bond prices fall.

    “We’ve had a massive move in the 10-year yields since the start of the year,” Ms. Hutchins said. “Right now, the market is sort of digesting that move.” She thinks 10-year yields can rise to 2% without causing serious difficulty for shares.

    The 10-year yield has retreated from recent highs above 1.7%. That may be in part because pension funds are rebalancing their portfolios heading into the end of the quarter by buying bonds, Ms. Hutchins said.

  26. With that crazy finish, the LTP is at $1,739,785 and the STP is at $241,557 so $1,981,322 is up $13,000 for the day – still nicely balanced but I'll wan to put all $13,000 into more hedges on that silly run-up!

  27. TCPC  An other armchair, sell the Nov 21 12.5 straddle @ 2.90 and buy the stock present 13.90.
    Enjoy the 8.6% yield as long as it last. Combined return 3.3% per month.