Here we are again.
Back at the 50-Day Moving Average on the S&P 500 and 10 days into 2023 and already we’re all over the place – from 3,820 on Friday to 3,970 yesterday and back to 3,892 this morning.
This is why we went to CASH!!! starting in August (half cash) and again in November (80% cash) – there are just too many uncertainties out there and, if we aren’t sure, we don’t play. We can be sure and still be wrong but playing when you aren’t even sure which way things are heading – well that’s just silly…
Of course having all that cash on the sidelines makes us itchy to buy more positions but we’re being patient and next week we’ll start getting a handle on earnings which, hopefully, will give us a good idea of what we want to play in the new year. We already have our Watch List and, next week, we’ll be making adjustments on our existing positions for the new year.
We have not touched our Short-Term Portfolio since the last review on Dec 13th but, in just under a month, we’ve gained $122,802 (3.3%) as the S&P has fallen from 4,000 to 3,895 (2.6%):
There’s still about $5M worth of downside protection here – only last month it was just net $6,943 in Securities and now you would have to fork over net $129,745 – the price of protection has gone up in these uncertain times…
Meanwhile, our Long-Term Portfolio has actually gone UP $14,000 (the power of Being the House – NOT the Gambler!) in the same period but the STP protects all of our portfolios, not just the LTP – we may need that money eventually.
- Natural Gas (UNG) has fallen a lot since last month, when that spread was $5.45/2.65. Now it’s 0.17/0.02 but rather than whine about it, we’re going to buy back the 25 short Jan $20 calls ($50) and we are going to buy 100 of the 2025 $10 calls for $6 ($60,000) and sell 100 of the 2025 $15 calls for $4.50 ($45,000) and sell 50 of the 2025 $10 puts for $3 ($15,000) and that will be net $0 on the $50,000 spread that’s $24,300 in the money to start.
We’ve lost $5,000 on the initial spread but it was a hedge for our hedges – in case the market was more bullish than we thought it would be. As it turned out, it was unusually warm in Europe so /NG priced plunged but the war is still on and we think it might get cold at some point between now and 2025 – so I like our odds on the bigger bet (with $0 cash outlay).
Other than that, we’re just waiting to hear what Powell has to say to Congress this morning but it better be very doveish or the market is likely to be disappointed. We got our Small Business Optimism Report this morning – if you can call it that. Only 51% of businesses surveyed felt conditions would be better in 2023 and, as you can see, earnings expectations are down 30% from last month – indicating Christmas was not very merry this year.
And, bad for the doves, still 41% have job openings and 17% plan to increase employment despite 51% LESS expecting the economy to improve – these are not good trends but also not the kind of thing the Fed is likely to fix by raising rates. Of course, when all you have is a hammer – every problem looks like a nail…
Speaking of hammers:
“In The Princeton Review’s ranking of the best public colleges and universities for “making an impact” — measured by things like student engagement, community service and sustainability efforts — New College comes in third.
“Naturally, Gov. Ron DeSantis of Florida wants to demolish it. On Friday, he announced six new appointments to New College’s 13-member board of trustees, including Chris Rufo, who orchestrated the right’s attack on critical race theory, and Matthew Spalding, a professor and dean at Hillsdale College, a conservative Christian school in Michigan with close ties to Donald Trump.
“The new majority’s plan, Rufo told me just after his appointment was announced, is to transform New College into a public version of Hillsdale. “We want to provide an alternative for conservative families in the state of Florida to say there is a public university that reflects your values,” he said.“
That’s how fast things can change, folks.
Argh! So annoying images can’t just show up.
Terrible but still better off than workers here – who have to pay for college and are massively in debt to earn just a bit more than minimum wage.
Phil state of affairs in UK. many patients waiting in hospital for care home places. but no staff to work. also nurses and ambulance workers are striking. buy the government would not settle for higher wages.
I hear that’s still going on – what a disaster. I guess the NHS has been hobbling along by screwing the workers for many years while the Government pretended more funding wasn’t needed. Now it’s time to pay the piper and no one is willing to step up.
And what happened in the UK in 2010 to begin building towards such a catastrophe?
Phil i was watching youtube video on google Lambda. apparently they fired one of their engineers for saying that it has become sentient. the responses from lamda is much more sophisticated than chat GPT. i hope google is able to convert it into something useful to add to their profits.
We are a long way from sentience but defining it is going to be tricky when we get close enough to the line. For one thing, if the AI never initiates a conversation – it’s not sentient. I’ll believe a program is sentient when the first thing it does is get annoyed at waiting for you for endless 0.00000000000000001’s while your bio-brain tries to process it’s last response.
If I were the President of Hoover and one of my employees fell in love with a vacuum cleaner and told the press it was sentient – I’d fire him too! 😎
Try this and let me know what you think: https://www.kuki.ai/
it was much faster than Chat GPT. i asked it which one was better( chat gpt vs google lamda). it would not answer that. but it said that it would be better than an average trader on the stock market. its purpose is to give company for people who have no one to talk to.
Good morning everyone! Phil, I have GOLD 2024 10C/20C spread (up 37%). How should I roll to 2025? In November’s portfolio update, you did a roll and double of those 2024 13C to 2025. Should I be looking to do the same? Did you sell the March calls yet for that?
I thought GOLD was too low to sell calls against though we do have 25 (1/2) short Jan $27s in the Money Talk Portfolio – those will go worthless and we’ll see about selling more in March.
Right, so your asset is the 2024 $10s at $9.25 but the short $20 calls ($2.60) are too close and we’re too bullish to leave them open uncovered. It’s net $6.65/share out of $10 and you can cash it in and buy 2x the 2025 $15 ($6)/27 ($2) bull call spreads for $6 and sell 1x the 2025 $17 puts for $2.60 and that would be net $3.25 off the table (half your current net) and you are left with a spread that’s $8 (2x $4) in the money with $30 potential against your remaining $1.50(ish) investment. That’s the way I’d go.
Phil – would you recommend the UNG position from your post for a new position given I have a 30-day holding restriction on everything? I am thinking it is ok.
The 2025 spread? Sure.
Not the Dollar’s fault.
Hi Phil/ Others – General question regarding the new site.
I seem to get the new comments at the top sometimes (right below the morning post) and other times at the bottom of the page. Is there a config i can set per my preference?
Not that I can figure out. New comments seem to come in on top and then, after some period of time, they migrate into time order. Unless you refresh the page, then they go time order – not including comments that are answers to questions, of course.
It’s a WordPress function we can’t control.
WordPress used to be customizable and our old side had tons of special stuff we designed but then, over the years, our designs diverged from WordPress standard and were no longer supported in newer versions and, ultimately, the whole thing stopped functioning and was not supported by WordPress – nor could hundreds of thousands of Dollars in customizations be exported to a newer version so we had to do all this from scratch again – which was a disaster.
So, lesson learned – we need to stick close to WordPress design specs – which are unfortunately, limiting.
FTX tokens up 30% today – that makes no sense at all.
This does make sense – COIN is the survivor:
I was wrong about Powell, by the way, he spoke in Sweden, not to Congress – that’s why so little affect to what he said (which was generally more Hawkish than the other Fed speakers).
Frontline flew up on us:
Russell is over yesterday’s high now:
Despite Small Business Optimism at a 10-year low.
Kind of makes you feel silly for even bothering to read data reports…
But at least oil and Gasoline are more expensive – that’s always a plus, right?
CPI Thursday is the next big thing – we’ll see if that matters.
0.1% expected, flat to last month. The core was 0.2% last month.
Commodities were generally cheaper in December and there were lots of sales so maybe a good CPI number.
Holding up well enough into the close.
Not all bad news
and today we are at 21mw as it’s a tad windy in the U.K.