Testy Tuesday – Pelosi China Visit Causes Consolidation

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The Dollar is strong, the markets are weak.

That’s the story of the morning so far, along with all sorts of hand-wringing because Nancy Pelosi, who held up pro-democracy banners in Tiananmen Square 30 years ago, is still not backing down to the Chinese Government, who REALLY do not want her to visit Taiwan. 

Pelosi and China: The making of a progressive hawk - POLITICOAs Speaker of the House, her visit carries a bit more weight but Congresspeople go all over the place and their visits are not the same as state-level visits and Taiwan is a major trading partner with the US – especially with Pelosi’s California.  Should she back down and let China dictate our foreign policy?  China has threatened her life – saying they would shoot down her plane if it violated their air space (which is on the way to Taiwan).   Yet, if you listen to Fox News, you would think it’s Pelosi that’s doing something wrong. 

Of course, Pelosi isn’t just risking her life – she’s risking World War III or WWIIIb since we already started WWIII with Russia in Ukraine.  Still, being a “strong” country doesn’t mean pounding your chest and having military parades – like our previous administration liked to do – it means BEING strong and taking stands and leading by example – the way America used to do.

It’s very easy to look away or talk about how “it’s too hard” to get involved when Russia invades Ukraine or China isolates Taiwan or the Taliban takes back Iraq (Biden’s team just killed Bin Laden’s successor last night)…  Foreign Policy has always been this President’s field of expertise and reminding the World we don’t back down is a good thing.

Anyway, all this tension is making the markets nervous and Gold (/GC) is blasting higher this morning, back to $1,805 with Silver (/SI) at $20.50 and the Dollar is more than 0.5% stronger than it was yesterday and the indexes are 0.5% lower than they were yesterday – nothing unexpected and THIS IS WHY WE HEDGE.  

If Nancy survives her trip then I think this will become healthy consolidation as we prepare to test 4,160 (weak bounce) on the S&P 500 for the first time since losing it in mid-April:  

S&P 500 with 5% Rule

Notice we still have that strong MACD line but maybe too strong now as it’s getting toppy and, if we don’t get over 4,160 this week – that technical tailwind will be over and it will be more likely we re-test our baseline at 4,000 first.  That’s a shame but it’s been a good run – we’ve already made a bearish adjustment on our TZA hedges and we’ll do some more if we don’t get a Pelosi bounce tomorrow.  

We’ll be saying farewell to Cowen (COWN), who are in our Future is Now Portfolio, as they are getting bought by TD Bank (TD – another favorite) for $1.3Bn which is miles above our target price for January of $30.  

COWN

We worked on that one and stuck with it over time and now it’s paying off the full $15,000 so congratulations to all who played!  That’s the down side to value investing – they keep taking our favorite stocks away…

The up side is there’s always something we can buy that other people just don’t love – we just have to keep an open mind.

 

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Good Morning.

Go, Nancy, Go!

Hi phil

CMCSA has been beaten down after earnings, mainly due to failing to add broadband subscribers in Q2, even do they beat estimates.

What is your opinion on the company?
And your opinion on the following trade?

BC 35 GEN2024 AT 7
SC 45 GEN2024 AT 2.80
1/2 SP35 GEN2024 AT 4.20

may be also SP 30 GEN24 AT 1 for 1/3 of positions or wait for 1.5

thanks

Thanks
Appreciated your analysis.

SPWR getting some respect.

Good Morning. Yay on SPWR .. green is good!

Phil – NLY,
They just announced a 100M stock offering to raise 600+M for additional purchases. What’s your take? I’d like to sell calls against long stock but the premiums are serious crap.
Thx!

So BABA suddenly jumps by 5% because Pelosi landed in Taiwan?

Phil – What do you think of packaging stocks now? There has been a sharp selloff, and are looking very attractive to me. I am looking at International Paper (IP) in the low 40s – they used to supply all the cardboard to Amazon (do they still do?). Might fit well from a dividend side as well. BERY I think is the most undervalued of the lot (among the largest plastic packagers, and also big in the aerosols) – but no long term options. Westrock (WRK) is another big player who has fallen quite a bit here – but I think IP is better, though BoA claims WRK could be a M&A target (don’t see how, they are the second largest…)

Thanks Phil

Oil companies just reported outrageous profits. Oil has come down somewhat, and gas prices back to $5ish in CA which now feels reasonable. If you wanted to bet that oil will go back up, how would you do that? XLE? What about rig companies or oil service?

Phil, My second post ever. First was wishing you a Happy Birthday! I would like to say Thank You Phil. You are a gift to me from the Divine. Agree 98% with your views of the world/politics which makes it a bit easier for me to connect to your writings. Don’t know the character limit but will split my post. Been a member for a bit but was late in actually late in following you because I was waiting for retirement(this year) or the closing and restarting of the portfolios to follow you. Started buying from Top Trades and Long Term Portfolio buys. Unfortunately trusted Elliot Wave Trader that called a number of times that the Odds were in favor that a market low was struck having me to believe I didn’t need to worry about protection at that time. Also, mentally afraid to follow your advice when I didn’t understand the workings of hedges. When I couldn’t follow your Long/Short Term Portfolio (too late a start), I didn’t know the amount I needed to protect on what I did buy. Also, I didn’t know what the term 6mo.-9mo. 1 yr 2yr. should be. Prices at the time, one could buy 9 mo., 1 yr, 2yr for around the same money. Was afraid to ask. Well I have to swallow my ego and state my portfolio is down 40k to date with most purchases starting after the Putin invasion. Peter Ziehan and Neil Howe author of The 4th Turning (interviewed here by Tony Robbins https://www.youtube.com/watch?v=lX1Csk2vn5A an excellent interview) have me believing strongly in need for protection and I am not confident that the low is in. FWIW it is better for my account to learn more from you and follow you and the 5% rule than trusting others. Phil please suggest a hedge for me. S&P up 11% and my portfolio is up 14k from the low. Thanks!!!

Phil Trying to learn. First of all was told once that the better pricing is to place your trade as a spread. In TOS for BCS I build it and select the limit amount I will pay for both together and let the moneymakers pull the purchase and selling of the contracts. Is this wise? In the case for my hedges I have all 24’s TZA or SQQQ’s going for today as of writing as follows not that I would get a fill but they are: TZA 30/45@ 2.75; 33/48@ 2.15 and 35/50@ 2.30. SQQQ 35/55@ 3.60; 40/60@ 2.90; 45/65@ 2.73. My thinking TZA 30/45@ 2.75 is 15.00- 2.75= 12.25 then 12.25/2.75 = 4.45 buying me 4.45 times protection for my money and 4$ ITM. 33/48 @2.15 is 15 – 2.15 = 12.85/2.15 = 5.97 times protection [(if filled because it should be between the 2.75 and the 2.30)is this a function of thinner trading and unwise because they are not on the 5 dollar increment and if filled trying to close a position is costly too possibly in both time and money too?] 35/50@ 2.30 is 15 – 2.30 = 12.70 / 2.30= 5.5 times protection. SQQQ’s 35/55 @3.60 is 20-3.60= 16.40 /3.60 = 4.55 times protection and $5 ITM 40/60@ 2.90 is 20-2.90=17.10 / 2.90 is 5.9 times protection and lastly 45/65@ 2.73 is 20 – 2.73 = 17.27/ 2.73 is 6.3 times protection. Is it best to start at ATM spreads for protection as it is money not initially expected to gain? With the ratio of 4-1/2 times is it good to average? How does VIX screw with a strategy? Watch for VIX to below a certain value before you place an initial hedge? Then use VIX to watch along with other 5% Rule to adjust Hedges? Comments on my math and my lack of knowledge is most graciously welcome. Thanks Phil