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Monday Market Movement – Trouble Below S&P 4,400

This is not a good trend:

The S&P 500 is now down 5% from 4,550 at 4,322.50, on the way to a 15% correction at 3,750 so we're 1/3 of the way to our predicted correction and, so far, our Member Portfolios are holding up very well with our Long-Term Portfolio now at $2,030,974 (down from $2,072,429 in our Sept 16 review) and the Short-Term Portfolio now at $132,669 (up from $94,705 in Sept 16th) for a total of $2,163,643 vs $2,167,659 3 weeks ago.  NOW THAT's WELL-BALANCED!

We're actually quite bearish – our hedges don't really start kicking in until there's a 10% correction but losing just $4,000 on a 5% market pullback is wonderful so we're very pleased with where we stand at the moment – especially heading into the Q3 earnings reports.  We just had the final read on Thursday of our Q3 GDP and that came in strong at 6.7% so it's not the earnings we'll be watching, but the Q4 guidance.  

Things are really heating up on the inflation front and that's good for some companies but, for others, it can be a nightmare to manage.  The chart on the left shows the rapid rise of Acyclical Inflation – the kind that doesn't just go away – and we're up at levels we haven't seen since the late 80s.  This is the Fed's own chart yet, in speeches, they are still in denial and calling this inflation "transitory".  After a full year of "transitory" 10% inflation – we'll see what our Corporations have to say when they give guidance this month and next (not that you can believe their BS either).  

Currently, 80% of the Items in the Consumer Price Index are rising.  In the 70s and 80s, it was 100% but part of that is due to changes in measurments since that time as now, if you paid $1,200 for an IPhone with 256G of memory and now you pay $1,400 for an IPhone with 521G of memory, the Fed considers that to be a CHEAPER phone, since you got twice the memory for your money.(and processing power, etc) – so no inflation there – DEflation, in fact! 

There's also a substitution model in the CPI so, if you uese to eat Filet Minon at $13.20 a point and that went up 10% to $14.50 but then people switched to Hanger Steaks, which went from $11 to $12.20 – then your cost of steak went down $1, didn't it?   Yes, these are real tricks the Government uses to mask inflation in the CPI (so they have to pay less Veteran's Benefits, less Social Security, less Unemployment and, of course, LESS Ineterest on the Debt.

Then there is the whole voodoo BS of Owner's Equivalent Rent, which measures amount of rent that would have to be paid in order to substitute a currently owned house as a rental property.  In other words, OER figures the amount of monthly rent that would be equivalent to the monthly expenses of owning a property (e.g. mortgage, taxes, etc.).  When rents are rising (like they are now) the OER seems low (since you can rent your house for more and the mortgae hasn't increased) and it makes the entire CPI seem much lower than it is (as this doesn't help new home-buyers at all.  

According to Zillow, for example, housing prices went up 13.2% last year yet, according to the CPI, the cost of shelter only increased 1.8% – complete an utter BS on one of the most important components of the CPI and the CPI is the basis of many Government payouts and projection – like the Budget Plan and even your own COLA adjustments at work, etc.  It affects everyone and it's based on massive manipulation of the data to pretend inflation doesn't exist.  

In fact, as noted by Shadow Stats, if we measured inflation now the way it was measured before 1980 – it would be more than double what the Government claims it is today.  That means the inflation we are experiencing now is actually WORSE than the inflation that was considered a national emergency back in the 70s and the Fed is well aware of this but, by simply pretending it doesn't exist – they get everyone to ignore it.  

Isn't it dangerous to drive economic policy bases on fantasy models?  Probably – I guess we'll find out, right?  

After 13 Fed Speeches last week, we're down to just 4 this week and we have Non-Farm Payrols on Friday and before that it's Motor Vehicle Monday along with Factory Orders, tomorrow we have PMI and ISM and not much Wednesday or Thursday so it's a pretty boring data week until the NFP report, overall:

We remain "Cashy and Cautious" into earnings and our portfolios are marvelously well-balanced but that doesn't prevent us from adding new longs and last week we put out Top Trade Alerts on 4 new positions for our Members, finding good value in X, MT, BIG and XRX.  

Balanced doesn't have to mean boring.

 


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  1. Leaked records open a ‘Pandora’ box of financial secrets



  2. Phil / MO  - Good Morning – Time to dip more into MO?


  3. Is BABA still in one of the portfolios?




  4. MO I think the train has left the station already. I bought the at 39, 42 and 44, so why buy at 46. If Phil's predictions come true, it is still time to wait.

    BABA, it is not a question if Phil has it in one off the ports. The question to ask is do I have it in my port? And yes I do, and by rolling and rolling I am still 900 in the plus. I feel it is a good stock, but a bad time for BABA.


  5. Biden administration plans to monitor bank transactions of $600 or more


  6. Leaked ‘Pandora’ records show how the powerful shield assets


  7. Good Morning.


  8. Good morning!

    Not a good start for the Nasdaq – we'll see if the others start following:

       

    Oil off to the races again:

        

    They are trying to prop things up with a weak Dollar but not working:

    Well, it's working for our /SIs"


  9. hi phil, any thoughts on this predicted supply shortage oil pop.

    tom


  10. FB and GOOGL really loosing feathers


  11. MO/Batman – I think we need to be patient unless something is very compelling.  We still have MO in the LTP and it is cheaper than our entry.  

    MO Long Call 2023 20-JAN 45.00 CALL [MO @ $45.86 $0.34] 30 6/1/2021 (473) $18,300 $6.10 $-1.95 $6.10     $4.15 $0.05 $-5,850 -32.0% $12,450
    MO Short Call 2023 20-JAN 55.00 CALL [MO @ $45.86 $0.34] -30 6/1/2021 (473) $-7,500 $2.50 $-1.18     $1.32 $-0.04 $3,540 47.2% $-3,960
    MO Short Put 2023 20-JAN 45.00 PUT [MO @ $45.86 $0.34] -20 6/1/2021 (473) $-10,000 $5.00 $1.43     $6.43 $0.03 $-2,850 -28.5% $-12,850

    There's no reason to adjust this position as it's 2023 so we just wait and see how things go.  

    BABA/Rn – As noted in the last review:

    https://www.philstockworld.com/2021/09/16/philstockworld-september-portfolio-review-part-1/

    • BABA – We were recovering but took another downturn. 

    We don't think there's anything wrong with BABA's business – just caught up in the uncertainty in China.

    And what Yodi said.

    Nas down over 300 points!   Hit the 2.5% Rule at 14,381 so down 369 x 20% is 74-point bounces and call it 75 off 14,400 so 14,475 (weak) and 14,550 (strong) are the intra-day bounce lines.

    Oil/Tommy – Goldman and other manipulators are pushing the story that demand is going up fast.  There's no actual evidence of this – they are just extrapolating the increase from last year to this year – which is asinine.  Here's reality from the EIA's Short-Term Energy Outlook:

    • We estimate that 98.4 million b/d of petroleum and liquid fuels was consumed globally in August, an increase of 5.7 million b/d from August 2020 but still 4.0 million b/d less than in August 2019. We forecast that global consumption of petroleum and liquid fuels will average 97.4 million b/d for all of 2021, which is a 5.0 million b/d increase from 2020, and by an additional 3.6 million b/d in 2022 to average 101.0 million b/d, almost even with 2019 levels.

    Takes 2 seconds to look that up buy these financial "reporters" just pass along the spin without checking a single fact.  

    And the only reason there's any kind of supply imbalance is OPEC running at 70% capacity.  

    https://www.reuters.com/business/energy/oil-falls-ahead-opec-supply-policy-meeting-2021-10-04/

    LONDON, Oct 4 (Reuters) – Oil rose sharply to multi-year highs on Monday after Reuters reported that OPEC+ would stick to its current output policy.

    The producer club will conform to their existing agreement and unleash a further 400,000 barrels per day (bpd) in November, a source told Reuters.


  12. PHIL:  At what price-level would you advise opening a new position in AAPL?  The same question applies to GOOG and FB.  Thanks.


  13. South Dakota Tax Haven for banks & some wealthy types- apparently.

    FRB: Large Commercial Banks-- June 30, 2021 (federalreserve.gov)


  14. the bounce on nasdaq from 14400 to 14470 was wacko. you would have to have balls of steel and lightning reflexes to play it and win.

    tom


  15. AAPL/John – Well FB and GOOGL are a long way from where I'd be taking a chance but AAPL Sept $105 puts were just sold by us for $7 on 9/10 and those are now $7.65 so net $98 or lower I'm very comfortable.  FB does too many bad things for me to want to be in them.  They may get legislated in many countries and, of course, they are currently rising an exceptional boost from the Pandemic – that may reverse on them at some point. GOOGL also got a huge pandemic boost and growth is extrapolated from that and may reverse – they'd need to be a lot lower than $1.82Tn before I want to jump in.

    South Dakota/Randers – First news item of the morning.  Very interesting.  Also, more Pandora paper revelations make AOC's outfit prophetic:

    AOC wears 'Tax the Rich' dress to Met Gala

    https://www.theguardian.com/news/2021/oct/03/pandora-papers-biggest-ever-leak-of-offshore-data-exposes-financial-secrets-of-rich-and-powerful

    Branded the Pandora papers, the cache includes 11.9m files from companies hired by wealthy clients to create offshore structures and trusts in tax havens such as Panama, Dubai, Monaco, Switzerland and the Cayman Islands.

    They expose the secret offshore affairs of 35 world leaders, including current and former presidents, prime ministers and heads of state. They also shine a light on the secret finances of more than 300 other public officials such as government ministers, judges, mayors and military generals in more than 90 countries.

    The files include disclosures about major donors to the Conservative party, raising difficult questions for Boris Johnson as his party meets for its annual conference.

    More than 100 billionaires feature in the leaked data, as well as celebrities, rock stars and business leaders. Many use shell companies to hold luxury items such as property and yachts, as well as incognito bank accounts. There is even art ranging from looted Cambodian antiquities to paintings by Picasso and murals by Banksy.

    The Pandora papers reveal the inner workings of what is a shadow financial world, providing a rare window into the hidden operations of a global offshore economy that enables some of the world’s richest people to hide their wealth and in some cases pay little or no tax.

    There are emails, memos, incorporation records, share certificates, compliance reports and complex diagrams showing labyrinthine corporate structures. Often, they allow the true owners of opaque shell companies to be identified for the first time.

    The files were leaked to the International Consortium of Investigative Journalists (ICIJ) in Washington. It shared access to the leaked data with select media partners including the Guardian, BBC Panorama, Le Monde and the Washington Post. More than 600 journalists have sifted through the files as part of a massive global investigation.

    These guys are the ones doing the digging:  https://www.icij.org/investigations/pandora-papers/

    Indexes are calming down.  


  16.    

    OPEC and a Russia-led group of oil producers agreed to continue increasing production in measured steps, deciding against opening the taps more widely, and driving crude prices to their highest levels since 2014. 4 min read

    The Nasdaq lost more than 2%, as bond yields ticked up and investors fled shares of the highflying stocks. 4 min read

    U.S. to Press China on Trade Pact, Keep Tariffs in Place

    The new initiative was detailed in a policy address by U.S. Trade Representative Katherine Tai, in her first detailed remarks on trade between the world’s two largest economies since she took office in March.60 5 min read

    Facebook, Instagram and WhatsApp Go Down in Major Outage 2 min read

    Users began reporting problems late Monday morning, according to Downdetector, a site that monitors website outages. A spokesperson at Downdetector’s parent company, Ookla, said the outage to Facebook and its other companies was “widespread and global in scale.”

     

    Facebook appeared to have made a change Monday morning to its network routing information, said Doug Madory, director of internet analysis at the network monitoring firm Kentik.

    This change affected the company’s domain name system servers, which function as a kind of Internet lookup system. They link domain names such as Facebook.com to the numerical Internet Protocol addresses used by browsers and web servers.

    The change made Facebook’s DNS servers unavailable, forcing its services—Facebook, WhatsApp and Instagram—offline, Mr. Madory said.

    Part SixFacebook Efforts to Attract Preteens Go Beyond Instagram, Documents Show

    Part FiveHow Facebook Hobbled Mark Zuckerberg’s Bid to Get America Vaccinated

    Part FourFacebook Employees Flag Drug Cartels and Human Traffickers. The Company’s Response Is Weak, Documents Show.

    Part ThreeFacebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead.

    Part TwoFacebook Knows Instagram Is Toxic for Teen Girls, Company Documents Show

    Part OneFacebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt.


  17. PHil HPQ would it not be a good idea to roll the long call Jan 23 30 to Jan 24 25 for about 3.30?


  18. HPQ/Yodi – I really want to see earnings before making moves.  


  19. Thanks Phil I got you