Phil's Newsletter

TGIF – Trump, Tariffs and the Game of Monopoly – Why You Should Care:

$505 Billion!

Trump has now threatened to put a tariff on every single Dollar's worth of goods we import from China, ratcheting up the Trade War talk to unprecedented levels.  Of course, we're still at just $50Bn and Trump never followed through with his threat to add $200Bn before doubling down to $505Bn but he is still the President of the United States and you can't totally ignore the things he says – no matter how much you wish you could.  

As you can see from this WSJ chart, despite all the bluster, not much has actually happened so far but thank God for that as just the $50Bn that's already been enacted is causing disruptions in Corporate Earnings and Economic Outlook – there's no question in rational people's minds that actually enacting $250Bn worth of tariffs, let alone $505Bn, would be devastating for the Global Economy and yes, deplorables, the Global Economy INCLUDES America!  

Tariffs are a TAX on the American people and the real reason your President wants to put a 25% tax on $505Bn worth of Chinese Imports is that it will generate another $126.25Bn that he can use to give more tax breaks to his family and friends and it will allow his budget committee to project collecting $1.26 TRILLION in revenues over the next decade, which he can then use to either claim he has brought down the deficit or use to offset more military spending, etc.  

And who pays this tax?  Attention Wal Mart shoppers – it's YOU!  Who do you think is the primary consumer of Chinese goods?  $505Bn happens to be the exact annual sales of Wal Mart and, if I had a TV show, I would challenge people coming out of Wal Mart to find something they've bought that didn't come from China.  Of course there are plenty of things but you'd be very surprised how much is Chinese as well as, of course, the Dollar Stores, phones, etc.   

So a tariff is just a fancy word for a tax on American consumers, especilly the poor ones who can least afford it and no, they will not switch to "lower-priced" American goods because we don't even have factories that make 90% of the stuff China ships to us and all a…
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$2,000 Thursday – Our Live Trading Webinar Makes a Quick Two Grand!

I love it when a plan comes together.  

In yesterday's Live Trading Webinar (replay available here) we worked our way into 6 short Dow (/YM) Futures shorts at an average of about 25,167 and we rode them down this morning to the 25,100 line for a quick $2,000 gain on the set and then, in our Live Member Chat Room, we called for a follow-on short below the 25,100 line, with a target of 25,000 for another $500 per contract gain.

It's been a busy week as we have options expirations so we're reviewing our 5 Member Portfolios, one of which we share with the viewers of Business News Network's (Canada's Bloomberg) Money Talk in a portfolio where we only initiate and change trades on the show so every single trade is available to the viewers live.  The disadvange to that restriction is that we can't make adjustments between shows (I'm on quarterly) so we try to stick to low-touch value trades but, as we teach our Members, trading does not have to be exciting to be profitable and our Money Talk Portfolio is already up 68.6% since we intiated it last September (10 months).  Not bad for free samples!  

You can see the review of the adjustments we made yesterday at www.philstockworld.com/moneytalk and here are the clips from the show talking about the market, the portfolio and adding a new trade idea on General Foods (GIS):

Money Talk segments #1 and #2:  

As noted, we are moving to a lot more CASH!!! and were shorting the market as we're taking the trade war more seriously than other investors seem to be and, just this morning, to prove my point, there was more saber-rattling from the President about Auto Tariffs, which would be a horrifically bad idea for the entire Global Economy.  That's what sent the market lower, despite pretty good earnings reports so far.

Just because we're generally bearish doesn't mean we can't find values in the market – they are just few and far between.  On BNN I noted that Barrick Gold (ABX) at
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Weakening Wednesday – Powell’s Testimony Doesn’t Really Help

The Fog of Truth.

That's what Robert Reich calls the confusion and bewilderment Americans feel when listening to the President but the same can be said for our New Federal Reserve Chariman, Jerome Powell, who testified before the Senate yesterday and will testify again tomorrow without actually saying anything at all but, like the parable of the blind men feeling an elephant – everyone will be able to draw a conclusion about what he said – even if those conclusions are diametrically opposed to each other

CNBC says "Powell backs more rate hikes as economy growing "considerably stronger"" while Market Watch says Treasury yeilds are heading lower on doveish testimony and CBS says "Jay Powell shrugs off trade worries, expects rates to keep rising" and Bloomberg says "Powell's 'For Now' Caveat a Sign Fed Rate Hikes Not on Autopilot."  So Jerome Powell, like the President, is all things to all people – whatever you want to think he said – he kind of said it.

Is that really what we want in a Fed Chairman?  Why is our monetary policy a closely guarded secret?  There was, briefly, a movement to make the Fed more transparent and have them set firm tartgets for actions well ahead of time but investment banks can't make money if EVERYONE know what the Fed is going to do – who would they be able to bet against with their inside information?

It doesn't get more inside than Goldman Sachs, of course, who have alumni like Neel Kashkari, Stephen Friedman, Bill Dudly, Patrick Harker and Robert Kaplan.  In fact, there are 12 GS Alumni currently on the Fed Board (not to mention Carney heading the Bank of England, and, of course Draghi at the ECB)  and Goldman was even fined $50M after one of it's emploees was caught obtaining regulatory documents from former collegues at the NY Fed but don't worry, no one has been caught since!  Treasury Secretary Steve Mnuchin is also a former GS partner.   

And, of course, a few Trillion Dollars worth of our National Debt (which you and your children owe) was accrued by the Fed (who still have $4.5Tn worth of debt on their balance sheet) bailing out Goldman and other…
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$2,000 Tuesday – Netflix Earnings Give Us a Big Win on Nasdaq Shorts

Wheeeee!

That's the way to play earnings!  In yesterday's Morning Report we called for shorting the Nasdaq (/NQ) Futures at the 7,400 line in hopes that Netflix (NFLX) would disappoint and take down the index and that's exactly what happened.  Nasdaq Futures contracts pay $20 per point so the 100-point drop paid $2,000 for each short contract – not bad for a day's work and, of course, our other index contracts were also winners:

  • S&P (/ES) short at 2,800 fell to 2,792 is just 8 points at $50 per point for gains of $400 per contract.
  • Dow (/YM) short at 25,000 fell to 24,960 and 40 points at $5 per contract gained $200 per contract
  • Russell (/RTY) short at 1,690 fell to 1,675 and 15 points at $50 per point was a gain of $750 per contract.  

And, of course, our Netflix (NFLX) short play will be doing very well this morning as that stock dropped $50 (12.5%) on disappointing subscriber growth and we could see that coming a mile away as no stock is likely to justify 250x earnings – even in the best conditions and we simply didn't see the current economic conditions (rising oil prices, economic slowdown, political turmoil) as a good recipe for continued super-bullishness on NFLX. 

There is, however, still time to initiate our bullish earnings trade on Sketchers (SKX) as detailed in yesterday's Report.  That stock finished right at $31.07, down 0.22 for the day despite our bullish pick – but what do we know?  Speaking of what we know, my comments were featured in Investing.com's weekly commodity outlook and that led to yet another $2,000 per contract day's gain on Oil (/CL) Futures shorts at the $70 line – which is a follow-through from our $5,000 per contract gain from our original call to short oil at $75 on July 3rd (nailed it!).

Though we have a longer-term target of $65, we're now using our Ultra-Short Oil ETF (SCO) play to cover that, not the Futures.  Our goal in the futures, as noted
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Monday Market Movement – Trump has his First Debriefing

President Trump is meeting his handler this morning.

It's a private meeting, of course, and whatever goes on from there we will only know from what Trump and Putin say about it but, fortunately, both men are well-known for giving the public faithful accounts of their actions behind closed doors, right?  According to protocols, however, Putin at least should have a report and maybe one day we'll get to see it.

Futile though it's been, we're taking another whack at shorting the Futures this morning as noted in my 7:21 note to our Members:

On the whole, I still like the short side and we'll be looking to cash a lot of positions in our portfolio reviews.  /NQ below 7,400 (tight stops above for all) is good as is, /YM 25,000, /ES 2,800 and /RTY 1,690 – 3 below and short the laggard is the safest way to play but I'm hoping NFLX disappoints and hurts the Nasdaq and, of course, it's time for negative AAPL rumors!  

Powell testifies before Congress for the first time tomorrow – that's a biggie.  June Retail Sales this morning, Industrial Production tomorrow, Housing Wednesday and the Beige Book and NY and Philly Feds this week too!  So plenty of data to chew over.

TIME (ET) REPORT PERIOD ACTUAL FORECAST PREVIOUS
MONDAY, JULY 16
8:30 am Retail sales June   0.5% 0.8%
8:30 am Retail sales ex-autos June   0.3% 0.9%
8:30 am Empire state index July   -- 25.0
10 am Business inventories May   -- 0.3%
TUESDAY, JULY 17
9:15 am Industrial production June   0.6% -0.1%
9:15 am Capacity utilization June   78.3% 77.9%


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TGIF – Crazy Week Grinds to a Halt, Earnings Season Begins

21%.

That's the expected earnings gains for S&P 500 companies this quarter compared to the same quarter last year.  Most of that is due to the tax cuts and the rest is due to buybacks as there are now no longer $2 TRILLION worth of shares to divide the earnings among due to buybacks and M&A (which earases the shares completely while putting the earnings into another company).  

As you can see from the chart on the right (only through June), buybacks have been heavily oriented to the tech sector, as has M&A activity so it's no surprise the Nasdaq is plowing higher despite the actual companies not actually making more revenues or even more profits – it's just the same profits divided by a lot less shares.  

Still, it's real.  As an investor, if I buy a stock that makes $1Bn on 1Bn shares then I'm making $1 per share and I'll pay $20 ($20Bn) at 20x earnings but, if the company takes $4Bn and buys back 200M shares (20%) then the same $1Bn in profits becomes $1.25/share and 20x becomes $25/share – on the same revenues and the same profits.  So, for a CEO who gets paid based on stock performance, it makes sense to do share buybacks whenever possible and the $2.5Tn of offshore funds that have been "repatriated" from overseas (from where they were hidden to avoid paying taxes and are now being rewarded for their behavior) have gone almost entirely to this practice.  

Image result for stock buybacks debt 2018As I was saying, as an investor, you are getting your $25 worth from an earnings perspective as it's still 20x earnings but, consider that last year, this company had $4Bn in cash on the $20Bn valuation (or cash and no debt) and now it does not.  Wasn't the OPPORTUNITY to use that $4Bn to grow the business part of what made the company worth 20x earnings in the first place?  Now that opportunity is lost and the company is what it is at $25/share with MUCH LESS possibility of growth down the road as it WASTED 25% of it's market cap buying back it's own stock!

We're not building things anymore – the only kind of engineering US companies do…
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Thrilling Thursday – Senate Overrides Trump Tariffs – Everything is Awesome Again

Image result for trump nato cartoon88 to 11.

Just 11 Senators backed President Trump's call to impose additional tariffs on China and Europe and, in fact, the Senate passed a resolution calling on Trump to get Congressional approval before using "national security" as a reason for imposing tariffs.  This marks the first time Congress has actually taken a serious step to reign in Trump's powers but, watching Trump's speech at the NATO summit this morning – I don't think anyone told him what happened.  On Tuesday the Senate voted 97-2 in favor of a pro-NATO resolution and this morning Trump acted like it was his idea to keep the US in NATO – of course.    

"Let's be clear, this is a rebuke of the President's abuse of trade authority," said Sen. Jeff Flake, an Arizona Republican and a frequent and vocal critic of Trump's policies. "Can you imagine being Canada and being told your steel and aluminum exports to the United States (are) a national security threat?"  The tariffs measure was written by Sen. Bob Corker, a retiring Tennessee Republican who chairs the Foreign Relations Committee, and Sen. Pat Toomey, a Pennsylvania Republican and a free-trader from a steel producing state.  Everyone is suddenly very brave when Trump is on the other side of the Atlantic…   

The NATO talks have been well summed up in this one image of Trump looking in the opposite direction of everyone else in the photo leading people to speculate what it is he might have been distracted by during the group photo.

Was it the Goodyear Blimp? John Kelly jangling a set of keys? Another solar eclipse? A Space Force sighting? Someone carrying a Quarter Pounder? The skywriter he hired to spell out "OBAMA SUCKS"? The flaming wreckage of America's proud, hard-earned spot as the leader of the international community? The dot emanating from a laser pointer surreptitiously manipulated by Angela Merkel, as the others stifle their giggles and try mightily not to give up the joke?

None of the above as it turns out it was simply the President, already bored with meeting with his former allies, was looking forward to heading off to…
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Philstockworld July Top Trade Review

Image result for top trade ideasYes, this is Wednesday morning's PSW Report.

I don't have much to say about the markets this morning, other than "I told you so" as they give up the week's gains on more Trade War nonsense that we KNEW was coming (see yesterday's morning Report for my warnings about following that idiocy).   We'll see what holds today and we'll make adjustments in chat and in this afternoon's Live Trading Webinar – so no need to talk about what an idiot the President is here, right?   What we do need to do is bargain-hunt in case it's another shallow sell-off and we need to add more longs and the best way to do that is to look back on past trade ideas and see if we can find some that haven't gone up yet.  

We did our last Top Trade Review in Aprilso it's a good time to do one of those and, as our Members well know, the vast majority of those trades turn positive so, when they're not, it's usually just a matter of time.  As of the April review, we had looked at Top Trades that were initiated through last August and, out of 36 Top Trade Ideas in 35 weeks, we had 29 winners and 7 losers for a very solid 80.55% winning percentatge.  In fact, our only loser in July was TEVA, who have since recovered completely and turned into a winner and THAT is why these reviews are so valuable – those "losing trades" often turn into the best opportunities:

Our Top Trades are what we think are our best trade ideas of the week with the highest chances of winning and we send out Alerts to our Members via Text and Email but we don't have a specific portfolio for them as they ofen ended up in one of our 5 various Member Portfolios already.  

There's a bit of randomness to the reviews in that we check in on trades after roughly 6 months so they are usually in progress and may be randomly up or down at the moment but that's why these reviews are so great for identifying bargains that simply haven't
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2,800 Tuesday and the S&P – Are We There Yet?

66.6 Thousand

That's the volume the S&P's (SPY) ETF hasn't broken since June.  Yet the S&P, on no volume at all, has gained 100 points (3.7%) in the first 10 days of July and is now just another 100 points away from the all-time high, after matching January's high at 2,872, of course.  Things looked fantastick then – the S&P was on a run from 2,550 so up 322 points was 12.6% and, on the morning of Jan 18th, I noted the following in our report:

Up and up the markets go but we see shorting opportunities this morning IF we cross back below Dow (/YM26,100, S&P (/ES2,800, Nasdaq(/NQ6,810 and Russell(/TF1,585.  The rule of thumb for shorting the futures is wait for 2 to cross below and then pick the next one that crosses and keep very tight stops back above the line and if ANY of the indexes go back above their line – kill the trade and wait for the next set-up.

The Dow is much lower now, at 24,850 (-4.7%) but the Nasdaq is way up at 7,320 (+7.4%) and the Russell is at 1,711 (+7.9%) and we're short both of those indexes on the assumption the Dow and the S&P are not crazy (and the much broader NYSE is down at 12,776 from 13,637 so that's 861 points or -6.3%).  Of course, right after I wrote that note, the market dropped 10% into early February and boy were we glad to have been cautious then!

It was Tuesday, Jan 23rd, when Trump first declared his Trade War and now we're actually starting to fight it and the level of complacency is amazing but we were just a complacent on Jan 23rd, when the markets were blasting along to new highs – as if there wasn't a care in the World – until there was.

The Dollar hit a 3-year low on Jan 24th and fell below the 89 line to 88.50 before recovering back to 90.5 and, eventually, all the way to 95 so the same market levels look over 5% more expensive now to people buying it in foreign currencies.  This is what our Big Chart looked like on the morning of Jan 23rd – very impressive stuff, right?


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Meaningless Monday Market Movement – Time for Earnings

It's Monday so we must be up in the Futures, right?

Monday mornings have market the high for the week in 3 of the past 4 weeks (last week being the exception but it was low-volume, holiday training), so we're not taking today's open too seriously, especially at the start of a data-heavy week that gives us Consumer Credit this afternoon, Small Business Confidence and Job Openings tomorrow morning, PPI on Wednesday along with a likely disappointing Petroleum Status Report, CPI on Thursday and Friday, not only do we have Import and Export Prices and the Michigan Sentiment Survey but we'll have earnings from 5 big banks to kick off the season (C, FRC, JPM, PNC & WFC).

So far, the markets seem to be unconcerned about the opening round of the Trade Wars though shots have been fired with the US imposing $34Bn worth of 25% tariffs (taxes) on flat-screen TVs, aircraft parts and medical devices and China has fired back with $34Bn worth of tariffs on US goods including soybeans, Autos and lobsters.  Another $16Bn from each side is expected to be announce Thursday, as Trump heads off to Europe to fight with NATO on the way to kissing Putin's ring next week (read the excellent article from New York magazine titled: "Will Trump be Meeting with his Counterpart of his Handler?").

Whether Trump is actually just a Putin puppet or whether he decides on his own to do things that destroy Democracy and benefit Putin, there sure is a lot of chaos and turmoil out in the World that is already disrupting global trade, global business and global economies – simply not the kind of environment in which you expect the market to be making new highs.  

Oil (/CL) is trading $30 (75%) higher than it was last July and you KNOW that's going to impact the consumers by turning $40 fill-ups into $70 fill-ups and even once a week for 200M cars is $6Bn per week ($312Bn/yr) of after-tax income taken away from US consumers that they used to spend on something else.  Even if 2M new jobs were created and those workers were all paid $1,000 per week, after tax they would only make up about 15% of that drop in overall consumer buying power. …
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Zero Hedge

This Is What Happens Behind Closed Doors When U.S. Presidents Meet With Fed Chairs

Courtesy of ZeroHedge. View original post here.

Last week, Donald Trump ventured into what until recently was uncharted, for US presidents, territory.

First, during a CNBC interview, the president went so far as to say that the strong dollar "puts us at a disadvantage" then went on to do what so many consider anathema, and said he is "not thrilled" about the Fed rising rates "because we go up and every time you go up they want to raise rates again."

One day later, Trump doubled down, ...



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Phil's Favorites

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

Theory Time

Thom Hartmann suggests that the Manchurian Candidate theory is the least likely explanation for Trump's pro-Russia behavior in ...



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Insider Scoop

BofA Points To Yum China's Earnings Downside Risk In Downgrade

Courtesy of Benzinga.

Related 31 Stocks Moving In Friday's Mid-Day Session Benzinga's Top Upgrades, Downgrades For July 20, 2018 ...

http://www.insidercow.com/ more from Insider

Chart School

Small Caps Enjoy Best of Action

Courtesy of Declan.

There wasn't a whole lot going on today except Small Caps were able to attract some buyers despite finishing below resistance; bulls have been taking advantage of the 20-day MA test. Today's action coincided with 'buy' signals in the MACD and +DI/-DI.


The S&P held its breakout and today's losses - despite higher volume selling - didn't do a whole lot of damage.

...

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Digital Currencies

Citadel CEO Says Bitcoin Still A "Head Scratcher" But Billionaire Lasry Sees $40,000 Soon

Courtesy of ZeroHedge. View original post here.

Ken Griffin, the CEO and founder of the Citadel hedge fund, has reiterated his negative stance on Bitcoin (BTC) in an interview with CNBC this morning.

Speaking at the Delivering Alpha Conference in New York, ...



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Biotech

How summer and diet damage your DNA, and what you can do

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

How summer and diet damage your DNA, and what you can do

Bright sun and fatty foods are a bad recipe for your DNA. By Tish1/shutterstock.com

Courtesy of Adam Barsouk, University of Pittsburgh

Today, your body will accumulate quadrillions of new injuries in your DNA. The constant onslaught of many forms of damage, some of which permanently...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>