We are still rallying off of Friday’s wage slowdown. Â
Yes, workers are not being paid enough to keep up with inflation and that brought the S&P all the way back to where we were on December 22nd – before we dove back to the bottom of our recent range the same day – so enjoy it while you can! Â
I’m not sure what the thesis is for workers falling further behind the pricing curve preventing inflation but at least our Corporate Masters will see another quarter of nice income as lower wages certainly isn’t stopping them from raising prices, is it? Â
Was the market a bit oversold? Sure it was but the pundits on TV this weekend have been acting like we’re at the beginning of some kind of rally and they are simply clutching for ways to justify it while I’d rather wait until we have more evidence than a single day’s data and a low-volume rally.Â
There’s not a lot of additional data this week but Powell does speak to Congress (which we finally have on the EXACT 15th vote I predicted, by the way) tomorrow, so we’ll see what he has to say. There’s a few other Fed speeches including Bostic at 12:30 today and CPI is Thursday but not a lot of data. What matters is earnings, which begin in earnest on Friday with the Big Banks:
In other news, Brazil has their own insurrection going on as Conservatives try to overthrow the election over there as well. The US has given all losers in Democratic elections the playbook to overthrow Democracies with the same BS claims about stolen elections, baby-eating public officials, etc.Â
“The movement is in its nature and inner organization anti-parliamentarian; that is, it rejects… a principle of majority rule in which the leader is degraded to the level of mere executant of other people’s wills and opinion.” – Adolf Hitler
In other news:
- Economists Fret Over Perils Ahead for Global Growth.
- Wall Street Sets Low Bar for Earnings Season
- Americans Extremely Pessimistic About US Prospects in 2023: Gallup
- 11 Signs That The Economic “Tipping Point” That Everyone’s Been Waiting For Has Arrived
- Another World War Is No Longer Unthinkable
- While All Attention Is On Rates, The Real Risk Is That Global QT Is Just Starting.
- Charting the Global Economy: Core Inflation in Europe Hits a Record
- McCarthy pledges to tackle immigration, ‘woke’ school policies and IRS funding
- Risk Is Inflation Not Falling Back to 2%, Says Fidelity’s Timmer
- UK Manufacturers Say Soaring Energy Costs May Trigger Job Cuts.
- Conviction Eludes Emerging-Market Rebound as Pain Points Remain
- California Faces Another Week of Heavy Rain and Flooding
- Goldman to Cut About 3,200 Jobs This Week After Cost Review
- Public Transit Goes Off the Rails With Fewer Riders, Dwindling Cash, Rising Crime
- China suspends social media accounts of Covid policy critics
- 6-Year-Old Shoots Teacher At Virginia Elementary School
Happy Monday! Phil, how do you factor in the money needed for your occasional futures plays? For someone growing a portfolio, when should I carve out some cash for that?
Frankly, Jareds, if you have to worry about the money, you shouldn’t be playing. You can lose $5,000 in seconds on a Futures play – I’ve lost that much going to the bathroom. I lost $50,000 while flying to Texas once. Yes, I’ve made money too but you can’t take your eye off the ball and there’s not much you can do to stop a sudden loss so you shouldn’t play with more money than you are willing to lose at a craps table in a single night.
The above /NG play went $10,000 against us last week and it could just have easily dropped another $10,000 rather than making it back this morning. We stuck with it because there is a lot of prior evidence to suggest that $3.50 was simply far too low and my overriding premise is that /NG should be about $4.50, long-term but, short-term, there are no rules to commodities.
The best use of the Futures is to make a pre-market adjustment on news you were not balanced for in your portfolio and hedges but it’s still a very fast-moving, dangerous market to play in so I’d suggest very small gambles for a very long time until you get super-comfortable playing them.
much appreciated!
Good morning!
Especially for /NG traders – rough ride but we came rocketing back.
$4 is now the stop on all and $4.10 if we cross that on 2 and our average on the remaining 2 will be $4.20, which will be fantastic if we get back to $5.
January 5, 2023 at 8:52 am
January 5, 2023 at 11:04 am
January 6, 2023 at 12:02 pm
That’s what I was talking about.
HI phil, would UNG be a candidate for a butterfly spread and if so how wide a spread should i take. thank you in advance
A good butterfly spread is a stock that is volatile in a 20-30% channel but rarely breaks out of it. That is not at all the case with UNG, which has gone from $15 to $35 and back to $13 in the past year.
What do we play in the Butterfly Portfolio?
https://charts2.finviz.com/chart.ashx?t=aapl%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=amzn%20\&p=w&s=y
We picked them up in May as we thought it was a bargain but now we’ll have to adjust our June 2024 $125/145 bull call spread before we start selling short calls again.
https://charts2.finviz.com/chart.ashx?t=brk-b%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=dis%20\&p=w&s=y
We picked up DIS in Sept as we felt that was going to be a good bottom but we’re not selling short calls yet.
https://charts2.finviz.com/chart.ashx?t=f%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=ges%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=gild%20\&p=w&s=y
We sold some Feb $80 calls that will hurt a bit but we’ll roll them.
https://charts2.finviz.com/chart.ashx?t=gold%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=hon%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=imax%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=k%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=met%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=mj%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=ul%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=wba%20\&p=w&s=y
https://charts2.finviz.com/chart.ashx?t=whr%20\&p=w&s=y
Notice what they have in common is you can generally identify a channel and see the top (where you sell more calls) and the bottom (where you sell more puts) are pretty clearly defined and not often violated. We don’t care how the channels trend – as long as we can predict them and not get burned too often.
thank you very much phil
• 99 Good News Stories You Probably Didn’t Hear About in 2022: The world didn’t fall apart this year. You just got your news from the wrong places. (Future Crunch) see also What we learned from books this year: We read 37 books in 2022 — filled with research, insights, and advice for managing yourself and your team. Here are some of the most interesting things we took away from them. (Charterworks)
• The third magic: A meditation on history, science, and AI: Humanity’s living standards are vastly greater than those of the other animals. Many people attribute this difference to our greater intelligence or our greater linguistic communication ability. But without minimizing the importance of those underlying advantages, I’d like to offer the idea that our material success is due, in large part, to two great innovations. (Noahpinion)
• Economist Says His Indicator That Predicted Eight US Recessions Is Wrong This Year: Cambell Harvey’s work showed link between curve inversion and growth Strong labor demand, risk avoidance support US economy now. (Bloomberg)
• Romer: Fed faces ‘difficult’ call to avoid overdoing rates shock: The Federal Reserve’s effort to shock the economy back to lower inflation is in its early days, making it tough for the U.S. central bank to avoid overdoing it with higher-than-needed interest rates, a top economic adviser in the Obama White House said after a fresh review of Fed policy since World War Two. (Reuters)
• The Story of Japan’s Lost Decade: Japan’s Bubble-Burst: The Party That Wasn’t Supposed to End Uncovering Japan’s lost decade (1991-2001); The tragic tale of the economic bubble burst and its consequences. (Konichi Value)
• Inside the Jan. 6 committee’s massive new evidence trove: The panel’s evidence provides the clearest glimpse yet at the well-coordinated effort by some Trump allies to help Trump seize a second term he didn’t win. (Politico)
• Investing Novices Are Calling the Shots for $4 Trillion at US Pensions: Public-employee plans are underfunded, chasing higher returns and underperforming international peers overseen by professionals. (Bloomberg)
• Venture capital’s reckoning looms closer: Valuations on holdings will have to converge sooner rather than later with listed tech sector (Financial Times)
• Will Remote Work Continue in 2023? With recession worries growing, power may shift back to employers and threaten perks gained during the pandemic. (Bloomberg)
• What Can We Learn from Barnes & Noble’s Surprising Turnaround? Digital platforms are struggling, meanwhile a 136-year-old book retailer is growing again. But why? (Honest Broker)
• How Not to Play the Game: Magic beans, Bahamian penthouses, old-fashioned fraud and other important SBF-inspired insights. A postscript to Bloomberg Businessweek’s The Crypto Story. (Businessweek)
• How Jersey City Got to Zero Traffic Deaths on Its Streets: This town outside of New York City scored the biggest traffic safety success story of 2022. Here’s how they did it. (CityLab)
• ‘Consciousness’ in Robots Was Once Taboo. Now It’s the Last Word. The pursuit of artificial awareness may be humankind’s next moonshot. But it comes with a slurry of difficult questions. (New York Times)
• Riddle solved: Why was Roman concrete so durable? An unexpected ancient manufacturing strategy may hold the key to designing concrete that lasts for millennia. (MIT)
• The truffle industry is a big scam. Not just truffle oil, everything: You may be familiar with the truffle oil scam, but everything else you think you know about truffles is probably a lie too. (Taste Atlas)
I wish they would show how buying a property to rent and renting a property to live in compares
I would say when it’s a better time to buy than rent (not now, of course) then, logically, it would be a good time to buy a property and rent it out.
Thanks Phil, makes sense
Good morning Phil!
I recently took a lump sum payout of a pension from a previous job. It will be in IRA where I cannot sell naked calls or do BCS’s. Since I have to own the stocks, I am wondering if the Dividend portfolio or Butterfly portfolio is best model? I remember you set something up a while back as an example for parents – is that different?
Thanks
Actually the $700 Portfolio is the best model as we’re assuming an IRA/401K with no margin ability.
The Dividend Portfolio also plays a conservative game.
phil, what in your opinion is the likelihood that spx touches the 200 day at some point today? would you characterize it as ‘high’ or not?
i’m dying to short the futures but i just feel like the 200 days is going to pull this thing the last 30 points.
also, it seems like your 2 x the move in the dollar rule of thumb would indicate the spy can still climb today.
It’s not cooking — a 1% move down in the dollar means ALL THINGS BEING EQUAL we can expect a 2% move up in /ES but, if we don’t get it – it means look for what factors are hurting the S&P and stopping it from adjusting to the Dollar – the Dollar is not magic beans that move the indexes despite all other factors.
It’s just that, of the S&P’s 1% gain today – 2% of it could be contributed to the Dollar going lower. Now you have to figure out why we didn’t move 2% higher. That is not at all the same as thinking the index will “catch up”.
phil, i just wanted to fade the rise to the 200 and get your opinion on whether today, at the time i was asking, was a good day to do it. maybe i should have made it more clear what i was trying to do.
Hi Phil Just an other request. My SQQQ is running out this Jan. What is a good new play for Jan 25 TIA
I spent most of the weekend reading Bernanke’s new book (21st century monitory policy). Still got ~10% to go. It was an interesting read into his thoughts (however academic they might be). It was completed and edited in first half of 2022, so still obviously missed the inflation peak. However, it was instructive in some aspects. First, the Fed would like a higher interest rate so that they can cut when needed. Second, Powell introduced during the peak pandemic years the concept of FAIT, Flexible Average Inflation Targeting. While Bernanke and co had used a 2% inflation target, Powell revised it to have an average of 2%, i.e. have a moderately higher than 2% inflation rate if it had undershot the 2% number for a while so as to achieve a 2% average over time (moderately and over time not defined by the FAIT framework).
I think we stay above 5% into 2024 assuming no black swan, and the current movements pricing a rate cut this year are hard to understand. I am also not as convinced about a bad recession as everyone – primarily because if every economist is saying something will happen, it usually doesn’t (but that is subjective bias).
That was my logic for expecting rate cuts last year – the Fed had no dry powder so what would they do in the next crisis? They HAD to raise rates if they ever wanted to lower them again.
Still the logical flaw is believing the Fed has real control here. They can set a rate but the bond market is ultimately going either accept or reject it. Once Europe stopped lowering rates the Fed had no choice but to tighten or it would look like they were chasing the ECB.
Speaking of Global Policy – Davos starts on the 16th – that’s a big deal to watch.
When I clicked your Hitler quote to learn more, this is what I got!??
https://community.norton.com/en/forums/fake-virus-adsfiancetrackdll
That darned fuhrer – Always up to something!
Sorry, I didn’t get that but I open everything up incognito.
http://31.media.tumblr.com/tumblr_m89nmlnEAZ1qm7hh6o1_250.gif
Hi Phil, I am looking to add to my hedges so I am trying to go backwards through posts to look up the last portfolio review (which I believe you write around option expiration each month).
Is there a tab somewhere on the new site that links to these reviews? If not, it might be a good idea to add this to the wish list! I haven’t had any luck using the search feature on the site, which seems to not yet be at full functionality.
Thanks.
There’s a link to “Phil’s Posts” and then you see the last two weeks of my posts. Since I do a review each month, it stands to reason that you are unlikely to have to click back more than once (to the previous two weeks) to find the Portfolio Review.
This is, of course, for people who don’t know that expirations are the 3rd Friday of each month, which would have meant Dec 16th last month since the first Friday was the 2nd and the 2nd Friday was the 9th, which made the 16th the third Friday – the ones the options expired on.
Now, if we take that hard-won bit of knowledge and now apply the part where we know I write the reviews DURING expiration week – we can narrow our search criteria to the days leading up to the 16th, which would be Monday the 12th or maybe Tuesday the 13th of Wednesday the 14th of Thursday the 15th.
I don’t want to spoil all the fun of solving the puzzle for yourself but I’ll give you a couple of days and you can let me know how it all worked out!
I bookmarked it at home if you’d like me to post the URL later this evening, JohnC1
Phil,
Perhaps I am wrong, but your response seems extremely disrespectful. Thank you for that “hard won bit of knowledge,” “the fun of solving the puzzle for myself,” and “for giving me a couple of days” to “work it all out.”
Believe it or not, your members are not idiots and do not need to be spoken down to or ridiculed. Many of us, I imagine, are at least as accomplished in our professions as you are in yours.
Yes, I do know that option expiration week is the third week of every month. The point was that your Portfolio Reviews are a valuable reference and it might be useful to organize them all in one place, like they were on the old site.
This is a new site, which is in the process of being developed and perfected. If you find feedback or questions irritating, I’ll keep that in mind.
I do not think that it is a good business plan to distain your membership.
Sorry Jon but it was a bit of a silly question so I was having a bit of fun sarcastically
To start over again, it’s a fine suggestion, we should make a tab, but meanwhile it takes 10 seconds to just find the thing. How’s that?
Fine, and thank you.
However, keep in mind that the Portfolio Reviews are so useful that sometimes one wants to see earlier reviews from several months or more back. In that case, they are not so easy to find by combing through posts, even with the third week of each month as a target.
Thus, the suggestion regarding organizing them under one tab.
Two more lines of Watch List stocks updated. 3 left.
Phil-GILD I have the following Gild BCS
10 – 2024 55 call net 17.43 now 31.65
-10 – 2024 70 call net 11.03 now 19.95
-6 -2024 60 put net 9.30. now 1.75
Would it be better to cash out and take my gain or use my 300 plus days and sell short calls. Appreciate your opinion.
looks to me you still miss 3.30 to get the full gain. Sure selling calls that is the idea.
Thanks guys…..Not sure if I’m that bullish on Gild for another BCS spread, but I do agree that waiting another year for a potential 3300 isn’t worth it considering what is or will be on sale, just thought if GILD was in a trading range it might be “safe” to sell a few naked calls against the existing spread.
So it’s net $12 on the $15 spread and you have to wait a year to make $3 ($3,000) on $12 (25%) so the question is – can you do better?
The 2025 $70s are $22 and the $90s are $11 so net $11 on $20 but way further out of the money so is that really an improvement?
Now, if you can sell naked short calls, then I would cash what you have ($12,000) and buy 15 of the 2025 $80 ($16)/95 ($9) bull call spreads at $7 ($10,500) and sell 5 of the May $85 calls for $5.70 ($2,850) and 6 of the 2025 $75 puts for $7 ($4,200) and that’s net $8,550 or $7,500 back in your pocket after buying back the 2024 puts. Since you spent about $3,500 initially, that’s pretty good.
Now you have $7,500 to invest in something that hasn’t blasted higher and you have 739 days to sell and you used 130 of them so 4 more sales like that will bring in $11,400 – which is more than you could have made on the spread you have left and whatever you make on 2025 spread (up to $22,500) is a bonus.
What a crap finish.
this is why we do not get excited about unjustified, low-volume rallies. They are just as easily undone.
Dollar has not even bounced yet