Well, don’t say I didn’t warn you. In fact, when we asked Bing to summarize what I said in yesterday’s morning report, he was quite clear about it:
🤓 Here is a summary and analysis of the article:
- The article is written by Phil Davis, a stock market expert and founder of PhilStockWorld.com, a website that provides stock and options trading ideas and tips.
- The article discusses the upcoming testimony of Jerome Powell, the chair of the Federal Reserve, to Congress on March 7th, 2023. The author predicts that Powell will signal a more hawkish stance on monetary policy and prepare the market for a 0.5% hike in interest rates in March.
- The author argues that this would be a bold move that would surprise many market participants and could send stocks and real estate back down again. He advises readers to check their hedges and protect their portfolios from potential losses.
- The author also provides some charts and data to support his views, such as the inflation rate, the unemployment rate, the GDP growth rate, and the bond yields. He compares the current situation with previous periods of high inflation and interest rates in history.
- The author concludes by saying that he is not bearish on the economy or the market, but he is cautious and realistic about the risks and challenges ahead. He says that he will be watching Powell’s testimony closely and adjusting his positions accordingly.
So this would be a good time to look at the hedges in question. Our Short-Term Portfolio is mainly in CASH!!! and CASH!!! is, itself, a good hedge but we did also have net $537,375 worth of positions as of our Feb 14th Review, and we made no changes as we calculated that we had about $5M worth of downside protection and that’s more than all of our long positions. On that day, the portfolio looked like this.
The S&P 500 was at 4,126 on the morning of the 14th and yesterday we fell to 3,986, which is 140 points (3.4%) and those untouched positions in the STP jumped to $748,805, which is up $211,430 (39.3%) – so it does seem like our hedges are working just fine.
For small dips like this (3.4%), the main function of our hedges is to allow us to ride out the bumps without worrying about our long positions. Our Long-Term Portfolio (LTP) paired with our Short-Term Portfolio (STP) had a peak combined balance of $7.5M and they still do – the positions have just switched and now the STP is bigger than the LTP.
Should there be a real market disaster, we would then use some of that CASH!!! from the STP to buy more longs, closer to the bottom but, in the 3 years we’ve been running these portfolios, we haven’t had to make a transfer yet as the market keeps recovering before we need it. That’s why we have so much CASH!!! sitting in the STP. The cash in the LTP is at 66%, simply because we don’t trust the market that much.
We would, in fact, do better if the market fell 20% than if it went up 20% at the moment – so we’re a bit bearish but the overall stance is what I like to call “Cashy and Cautious” as we were not that impressed by Q4 earnings and there are too many headwinds to expect the market to move much over that 4,000 line in the near future – so we’re in no rush to deploy our capital.
Having a well-diversified portfolio with good hedges allows investors to be more bold during market dips. As Buffett likes to say, “Be fearful when others are greedy and greedy when others are fearful.” By having good hedges in place, investors can be more confident in taking advantage of market dips, knowing that they have protection in place in case they are early.
The classic hedging strategies are to use options, such as buying put options or selling call options, to protect against downside risk along with using inverse ETFs or short-selling to profit from market declines. As you can see in our STP, we combine them to teach our PSW Members very powerful hedging strategies. However, it’s important to note that these strategies can be complex and should only be used by experienced Investors who understand the risks involved and have put in a good portion of Gladwell’s 10,000 hours of practice in the craft.
Having good hedges in place can allow Investors to be more aggressive during market dips, while still protecting against downside risk. By diversifying across different asset classes and sectors, and using options or other hedging strategies, Investors can take advantage of buying opportunities when they arise, without worrying too much about short-term market fluctuations. As Buffett also says: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
With good hedges in place, investors can be ready to put out the bucket and take advantage of those opportunities when they arise.
Good morning. Here is the link to today’s webinar
Phil/ AI: What would be the top AI stocks to keep on the watch list? MSFT, Meta, Googl, IBM, ?
Tully – I ran this query last weekend focusing on Hardware —- NVDA, AVGO, in MU, I mentioned memory in general
That’s perfect-Thank you! I forgot about the chips, a big component to forget about.
We’ve spent the past two weeks discussing those. Haven’t decided which ones to add to the Watch List yet. https://www.philstockworld.com/author/phil/
I said to Bing (which now allows 10 questions vs 6 last week): “Which AI-related stocks have I liked the most in the past two weeks? We’ve spent the past two weeks discussing those. Haven’t decided which ones to add to the Watch List yet. https://www.philstockworld.com/author/phil/ How about adding a quick summary of each stock’s AI investing premise going forward?”
🤓 Sure, I can add a quick summary of each stock’s AI investing premise going forward. Here it is:
He missed a bunch but that’s pretty good.
Off to a poor start but at least we’re not going lower – yet.
It’s not likely Powell will say anything different to the House but you never know what Q&A will uncover.
Looking at the Dow, we’ve been flat since November but really it’s been since mid 2021:
The other indexes do not paint a pretty long-term picture:
Remember our Nasdaq weekly chart?
We broke out of the triangle-squeezy thingy above the 50 WEEK moving average (which is essentially the 200 dma) and that line is 12,131 and /NQ is at 12,166 at the moment – failing that line would be — BAD!
As I have been saying for 2 years – you can’t count on the behavior of the market when it was injected with $11Tn worth of stimulus to be realistic. THIS is realistic – there’s no particular reason for us to be going higher in general.
Labor costs are rising, input costs are rising, consumers are running out of buying power and interest costs are rising – how does this generate a bullish outlook?
I’m sorry if makes for a boring time, where we don’t have a lot of new stocks to pick but – it’s a boring time when we don’t have a lot of new stocks to pick. I’m not in this for the ratings – I’m in this to consistently build value in our portfolios and, sometimes, that means not trading for long periods of time while we wait for better conditions.
That’s what Buffett does, but not many people are patient enough to participate in a trading strategy that does 10x better than the S&P over time, unfortunately.
I did say I like /SI long yesterday, that’s back at $2.25 already this morning. /GC is back to $1,825 too.
It isn’t boring. The waiting is the game – and getting 5% on cash to wait is nothing to complain about 🙂
It is when inflation is 7% but we can always sell a few puts.
And, by the way, check out the margin-efficiency in a PM account:
Are the F puts for a specific portfolio?
No, just an example of what you can do if you are sitting on too much cash and want to add a few points.
I told you guys the IPhone would eventually wipe out all other phones:
🤓 Summary: Apple dominated the global smartphone market in 2022 with eight out of 10 best-selling models. The iPhone 13 was the most popular phone for most of the year, followed by the iPhone 14 Pro Max and the iPhone 14. Samsung’s Galaxy A13 and Galaxy A03 were the only non-Apple phones in the top 10, catering to entry-level consumers in developing regions. The top 10 phones accounted for nearly one-fifth of total smartphone sales.
Analysis: The text shows that Apple has a strong competitive advantage over other smartphone brands, especially in terms of premium and 5G-enabled devices. Apple’s loyal customer base, innovative features and consistent quality have helped it maintain its market leadership despite higher prices than its rivals. Samsung’s performance was weaker than expected, as it faced challenges from Chinese brands like Xiaomi and Oppo in emerging markets. The text also suggests that smartphone makers are streamlining their product portfolios to reduce costs and avoid overlapping offerings.
Supporting facts and statistics:
Good timing as we added AAPL to the LTP in Jan with the $120/160 bull call spread (30) and 10 short 2025 $130 puts at net $40,100 on the $120,000 spread.
In the Butterfly Portfolio, we’re back to (as always seems to end up being the case) as huge AAPL spread, which is 150 2025 $120/160 bull call spreads with 30 short 2025 $140 puts (aggressive) at net $178,950 on the $600,000 spread. That’s the result of leaving some of our prior spread’s profits on the table each time we adjust but that position was brand new on 1/20 and still “only” net $317,325 so almost 100% left to gain.
lets see whats trading today :
MU Jan2025 $62.50 calls @ $11.20 x800
GOOG June24 $80 puts sold to open @ $5.65 x1000
Phil, did we decide we like SBSW? (for the other minerals beside gold)
Sell the 2025 $7.50 puts to plant a flag?
I have to look it over in the greater context and see what portfolio(s) it fits in.
🤓 News summaries:
Energy Information Administration Petroleum Inventories
Oil back below $76.50.
Can you give me some ideas on NVDA .. I own 1000 shares outright as well as the 1/2024 110/300 BCS. If I sell the shares I have a big tax bill. Same with MSFT. Thoughts?
I think NVDA is overpriced. That train has left the station.
If you don’t want to sell now, you can just cover your 1,000 shares with 10 of the Jan (24) 150 calls at $105 for a net exit at $255 so $15 more than it is now ($15,000) and you are protected from a 40% drop while putting $105,000 back to work.
As to the Jan $110 calls, they are $140 and the short $300s are $25.50 and you can buy a 2025 $300 calls for $48 ($4,800) and sell a June $250 call for $22.50 ($2,250) and you can then let your $110s ride until you have saved your tax bill and, when the short June $250s expire, you can sell the Jan $250s and the 2025 $300s become free and they can then cover your short Jan $300s when you sell your $110s.
We made a great case for CSCO during the Webinar but we built it in Chat GPT and Bing and Chat GPT is having issues with their history and Bing never saves stuff so take my word for it – and Warren’s:
CSCO is going to benefit from more traffic due to AI and they have several AI initiatives already ongoing and Warren came up with some other great ideas they could pursue.
Getting some stick into the close. 3,993. 12,230.