Monday Morning Markets – More Stimulus as We Wait for the Fed
by phil - July 27th, 2020 8:37 am
More free money!!!
The Senate Republicans are expected to vote on the CARES Act 2 (it's a 5-act play) and this will be the beginning of two weeks of negotiations with the House, who already voted on a much more extensive measure to prop up the economy. The $600 weekly unemployment benefit will expire on Friday and most economists predict a complete disaster if that's not extended to 30M unemployed Americans. "We're not going to pay people more money to stay at home than work," US Treasury Secretary Steven Mnuchin said Thursday on CNBC using the poor grammer of a person who's never worked a day in his life and has sold his soul to Satan.
Mnuchin (who's father was a general partner at Goldman Sachs and spit out the silver spoon he was born with - demanding a platinum spoon on his way to Yale and a job with, you guessed it, Goldman Sach after which he took part in the total destruction of Sears, where they looted the pension and cost millions of workers their jobs while getting rich of the real estate they sold out from under the investors' noses) says 70% of minimum wage should be the cap for those lazy bastards who aren't risking their lives to go back to their closed businesses.
Really people, just tell Daddy you need another job and stop bothering the Government, who you've paid unemployment insurance to for your entire life, to actually pay you when you are unemployed! What do you think this is – Europe? At least we're all getting a second $1,200 stimulus check so the rents will probably be paid in August. It remains to be seen if the moratorium on evictions is extended. If not, expect total chaos in the housing markets and the courts since 1/3 of Americans have not paid their rents in the past few months.
While the House plan included $1Tn in aid to state and local Governments, the Senate plan has none. With so many areas shut down, tax revenues have gone down sharply and this funding was meant to help deal with that shortfall so expect this to…
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TGIF – Stop the Week, We Want to Get Off!
by phil - July 24th, 2020 8:33 am
Wheeeee, what fun!
The Dow fell 353 points yesterday and that's not a big deal but it was a great deal for our PSW Report Members who were alerted, pre-market, to the idea of shorting the Dow Futures (/YM) at the 27,000 line. The Dow ended up falling all the way to 26,450, a 550-point drop that paid $2,750 per contract but we took the money and ran at about $1,200 per contract early and as the Futures shorts are just extra protection while we wait for our primary hedges to kick in.
And what are our primary hedges? Well those are the positions in our Short-Term Portfolio, which we reviewed last Tuesday at $405,464 and, as of yesterday's close, the STP stood at $460,074, up $54,610 on the dip and the portfolio itself is up 360% for the year – despite the generally bullish market. That's because of clever (though sometimes painful) trades like our Tesla (TSLA) short, which is only just beginning to pay off.
At the same time, our Long-Term Portfolio (LTP), which we reviewed last Wednesday at $901,428, is now at $966,958 so that's up $65,350 for the week so it does turn out we are correctly bearishly balanced – and now you can see why we didn't make any portfolio changes last week (other than mechanical changes on expiring positions). We knew the "rally" was a house of cards so we were very happy to be neutral on the way up, knowing that we'd make a very nice gain on the way back down.
3,135 is the top of our range on the S&P 500 and we are still way over that but it's just a blip on the weekly calendar so don't get excited, especially when the unemployment bonuses and other stimulus measures are running out and Congress does not seem able to step up to the plate with additional funding.
As we are all painfully aware, the virus is still raging out of control and the US is up there with other 3rd World countries in the number…
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4 Million Infection Thursday – Virus Rages on at Dow 27,000
by phil - July 23rd, 2020 8:30 am
This is a good shorting spot.
27,000 is a good line on the Dow (/YM), which was around 18,000 from November 2014 through November 2016 so we can call that a good consolidation point. So we're 50% above 18,000 and that means, via our fabulous 5% Rule™, that we can expect a 20% (weak) retrace of that 9,000-point run, back to 25,200 or a 40% (strong) retrace back to 23,400 and, guess what? That happened already!
In fact, we fell yet another 1,800 point to 21,600 just recently but it was an overshoot and we quickly took back the strong retrace and the weak retrace and now we're back at 27,000 but the real question is – where should we be?
Let's consider that 18,000 was a realistic base. The economy was going well under Obama, America was at full employment and a respected World leader and the deficit was getting under control – all good things that help a market stay strong. The Dollar was strong too, it was at 102 in 2017 and Americans enjoyed great buying power and my kids loved going to the Dollar store to get knick knacks.
Trump took office in January of 2017 and he cut taxes drastically for Corporations and people in the Top 1% and the Dollar dove all the way to 0.88 a year later, a 14% collapse that we've only recovered half of 2.5 years later. Losing 7% of the buying power on every penny you've saved your entire life is a devastating shock to the average American, who was not able to offset the loss of buying power through their stock market gains.
Still the weak Dollar is also good for our Corporate Citizens (thanks Citizens United!) as well as for the Top 1%, whose stock prices were jacked up by the weak dollar which, of course, makes our exports cheaper too. This is how we make America Great, by devaluing our currency, running up the deficit and putting profits over people time and time again. Surely that's worth a 20% boost in the Dow, isn't it?
But now we should consider that 50% is MORE than 20% (math done as a courtesy for Fox viewers) so how exactly are we getting that extra 30%. …
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Wear a Mask Wednesday – President Trump Finally Sees the Light
by phil - July 22nd, 2020 8:35 am
“"We are asking everybody, when you are not able to socially distance, wear a mask," Trump said. “Whether you like the mask or not, they have an impact."
The US has learned "a great deal" about "the China virus", and unfortunately, things will probably "get worse before they get better" Trump said.
“Some areas of our country are doing very well, others are doing less well,” the President said. “It will probably, unfortunately, get worse before it gets better. Something I don’t like saying about things, but that’s the way it is.”
Yes, that's the way it is.
It's also the way it was in February, March, April, May and June but better late than never, on July 21st, in taking the most simple precaution against the rampant spread of a virus that has now killed 142,073 Americans (twice as many as died in the 20-year Vietnam war) and infected, by tomorrow, 4M others. Last night was the first "daily" briefing on the virus since April, when Trump decided Dr. Fauci was upstaging him and, even worse, contradicting him. At the time, the US had less than 1M cases.
You're a stock trader – how does that chart of US infections look to you? Almost as good as Tesla but, unlike TSLA, this chart won't suddenly turn around an uninfect people. In fact, it looks like it's about to have a massive breakout and that's why, finally, the President is scared enough to change his tune – he is presiding over one of the biggest catastrophes in human history and his name, his family name and his "brand' will forever be associated with this disaster.
And it is a disaster and, even if the stock market refuses to recognize it – you'd better because, like not wearing face masks, ignoring the virus will not protect your portfolio and you PROBABLY won't die – but you might. You KNOW you might. So you MIGHT make more money and that would be fun but your portfolio also MIGHT die and, with the virus, we are attempting to avoid dying by staying inside and not having fun for a…
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Testy Tuesday – 11,000 and Bust on the Nasdaq?
by phil - July 21st, 2020 8:30 am
Happy 11,000!
That's right, only 4 months ago the Nasdaq was at 6,771 and now we're over 11,000 this morning, up 62.5% in 4 months. OK, so we fell from 9,000 in January so we're "only" up 22% for the year and that's normal in such a booming economy with people out frolicking and shopping and fully employed with bonuses and rasises for everyone, right?
No, this is so wrong, actually. Last year, without the virus and with the tax cuts and with the Fed and with the China Trade Deal – the Nasdaq was at 8,000 but, since last October, we've one crazy and popped 37.5% overall and we gave it all up in a flash crash in March and now, despite the fact that the virus (remember the virus) is much, much worse than it was then, we're up much more than that now.
Will the virus be cured? Yes, probably by March we'll have a vaccine and certainly we'll have treatments that lower the damage done by the virus – hopefully it will be more like pneumonia or bronchitis – something people get and get treated for routinely. Still, that's not the case yet and ignoring the economic risks that lie ahead is insane. To a large extent, this is simply a reaction to all the money that's being thrown at the problem but that money can't all stay in the market because the problem is long-term and expensive – and it will suck that money right back out.
Speaking to CNBC’s “Managing Asia” anchor Christine Tan, Piyush Gupta said government stimulus in many countries is helping businesses tide through the current difficult period. But when those measures come to an end, many companies may not survive, he explained.
“Do you keep putting money … using public finances to support companies or do you let creative destruction happen a la Schumpeter? This is going to be a real challenge particularly in the SME space around the world, I suspect this will be a big, big challenge next year,” he added.
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Monday Market Movement – More Stimulus, of Course
by phil - July 20th, 2020 8:16 am
Yes, we still have the virus.
2.2% more cases per day now, up from 1.9% the week before. That's the very opposite of having things under control with 14.5M Global cases, 606,206 Global deaths and 3.8M in the US (26% of the World's total) and 140,534 Americans are dead – that's like 35 9/11s in the 120 days since Trump told us the virus was nothing to worry about.
Of course he's still saying that and our case count is skyrocketing. The chart above is not a chart of Covid cases but a chart of Hospital Capacity and we are at or over the limit in 7 states, including my own Florida which hit 127% of capacity this weekend. NOW people are going to start dying, big time. That's why the President stopped hospitals from reporting to the CDC last week – these numbers are going to get shocking and the Trump Administration has no intention of doing anything to stop it.
Why? Re-election, of course. Trump's only chance now is to keep you locked in so you won't go out and vote in November. The entire Republican party needs the lowest possible voter turnout in November and they are doing everything in their power to ensure that happens – even if it leads to another 140,000 voter deaths.
I think everyone saw Trump unleash the storm troopers in Portland this weekend and, of course, the situation got worse, not better. Rioting has become the new American passtime in Trumpland and just wait until they try to force the colleges to re-open and put 14,500,000 student lives at risk by jamming them into lecture halls and dormitories. It's very much like being drafted to risk your life for Capitalism in the 60s and we can expect a similar response as students are forced to leave the relative safety of their homes for the first time in months.
Of course, that's nothing compared to Trump and DeVos' anti-science experiment on our 56.5 Million young children (and their teachers) who are being forced to go back to school where they will, of course, be way too close to each other every day and then, every day,…
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Philstockworld July Portfolio Review – Members Only
by phil - July 17th, 2020 8:35 am
Rather than writing about news the market is ignoring, I thought I'd get started on our Portfolio Review.
I tried this last month and never finished it (finished in chat) but, seriously, I am trying not to be doom and gloomy so I'm going to ignore the news and focus on our nice Member Portfolios and this should be quick because we did the Long-Term Portfolio (LTP) Review on Wednesday morning (only 2 changes) and the Short-Term Portfolio (STP) Review on Tuesday (no changes) and the reason there is nothing to change is because we are super well-balanced, as we should be in a time of uncerainty.
How well-balanced. Well the STP was at $405,464 on Tuesday and the LTP was $901,428 on Wednesday for a combined $1,307,074 in our primary paired portfolios and, as of yesterday's close, we're at $928,128 and $381,501 for a combined $1,309,629 – that's pretty well-balanced!
There are two ways to play uncerainty and one is to go to CASH!!! and we topped out at right about $1.4M (up 133% for the year) in the LTP/STP and I said at the time that we should put a stop at $1.2M to preserve a double but then we had some craziness with TSLA so we rode that out and hopefully it will calm down and start making some money. In any case, we didn't cash out, we decided to hold our positions and being well-hedged is like cashing out as we're not likely to make a lot but, if we're quick, we have a better chance of catching a nice move than if we were just sitting on sidelined cash.
If we were not locked in our homes with nothing to do – I would have cashed out and been on a nice 3-week cruise at the moment – that is the more sensible thing to do. The advantage of either CASH!!! or balance in an uncertain market is that, if the market goes lower and you hold your value – then you have a lot of money to buy stocks when they are actually cheap – just like we did in March – which is why we are up so much now. We'd hate to miss another…
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Mask On Thursday – Surging Virus Numbers Push Many States to Lock Back Down
by phil - July 16th, 2020 8:39 am
Remember the virus?
The stock market sure doesn't but the US, on the whole, just reported it's second-highest jump in infections and governors and mayors were scrambling to issue new mask orders and limit the size of gatherings. Several large school districts also said they would open the academic year with online classes, bucking pressure from President Trump and his administration to get students back into classrooms as quickly as possible.
The new restrictions reflect a painful reality that America’s outbreak, which has increased in 41 states over the past two weeks, may worsen in the coming weeks and months. Wednesday’s tally of more than 67,300 new infections was about 1,000 cases shy of the record set late last week, according to a New York Times database, as the country’s total number of cases passed 3.5 Million. Meanwhile, 963 more of Trump's "Virus Soldiers" died yesterday in their brave struggle to keep the economy open for the President's Re-Election – no matter how many lives it costs.
As you can see from the S&P Chart, we were rebounding just fine in May, while we were still locked down as life was ajdusting to the "new normal" – as it did in the rest of the World. 2 months ago, on May 16th, we had less than 1.5M viral infections in the US and we had drastically slowed the spread – even with many states not following the lockdown protocols. BUT, then we had this rush to "re-open" into the Holiday Weekend and, in just two months since then, we have added 2M more cases and the chart is RAPIDLY accellerating as we hit two new records in the past 5 days.
DESPITE pouring $2.7Tn of direct stimulus into the economy and another $4Tn of aid from the Fed – we are STILL not back at our February highs – excpet the Nasdaq, which is way off in fantasy land at 10,550, after testing 11,000 on Monday. The Nasdaq was at 9,500 in February so it's up 11% during the pandemic while the S&P is less than 200 (5.8%) points off it's high.
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Wonderful Wednesday – More Stimulus and a Vaccine?
by phil - July 15th, 2020 8:30 am
Goldman Sachs made money!
Yes, I know, that's not really a surprise but the markets are acting like it is this morning and the Dow is up almost 500 points, pre-market with Goldman Sachs (GS) contributing 50 points with their $9 (4%) jump on better than expected earnings. Mainly we're up because last night Moderna's Covid Vaccine showed positive immunity responses in all 45 people tested and now they are heading into a much bigger phase two study (30,000 subjects) at the end of the month.
The new “Cove” study, scheduled to start July 27, will aim to enroll about 30,000 adults at nearly 90 different U.S. locations. Many of the study sites will be in states where the virus is surging, such as Texas, Florida, California and Arizona, according to information posted Tuesday on a federal database of medical studies.
Among the people researchers plan to enroll are those at appreciable risk of infection because of where they live. Testing the vaccine in coronavirus hot spots could help generate answers about the vaccine’s efficacy sooner, because people there are more likely to be exposed to the virus in everyday living compared with people in places where new cases have declined.
Researchers, however, still don’t know what level of a neutralizing immune response would be needed to guard against either infection or severe disease, and for how long a vaccine could provide such protection.
More than half of the study participants had side effects including fatigue, chills, headache and injection-site pain. Three participants who received the highest dose level tested had one or more severe adverse events, the researchers said. That highest dose level isn’t being tested in the large phase 3 study.
This should give everything a nice boost but hopefully not Tesla (TSLA), which is killing our Short-Term Portfolio (see yesterday's review) but, fortunately, great for the Long-Term Portfolio,…
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Testy Tuesday – S&P 500 at 3,135 (10% line), As Usual
by phil - July 14th, 2020 8:33 am
Wheee, what fun!
Although the Dow fell 500 points into the close yesterday we still finished the day in the green as we had quite the low-volume rally in the morning (before the market opened). That brought in what they call the "bag holders" to buy the "rally" before they got whipsawed in the selling frenzy that over took the market in the afternoon as California announced it was going back to lockdown as the virus rages out of control (again).
WHO Says Pandemic to Linger; Cases Pass 13 Million: Virus Update.
See, that's what I'm talking about! What a coincidence that news item popped up there… That's right, not all the news is GREAT and we're still very concerned about what's going on in the World and, without new stimulus officially being announced, the market is looking just a little bit tired of rallying on rumors of virus cures, etc. and now we are getting REAL earnings reports that are not, on the whole, very pretty.
- Core CPI: +0.6% vs. +0.1% consensus and -0.1% prior.
- Citigroup builds up reserves as macro outlook worsens
- Wells Fargo misses on earnings, slashes dividend
- Travelers sees Q2 loss on catastrophe losses, non-fixed income portfolio
- Spotify -3% after two-notch downgrade
- Delta -1% after issuing cautious outlook
- Singapore Slumps Into Recession With 41.2% Fall in Quarterly GDP.
- Ten Thousand Day Traders an Hour Are Buying Tesla Shares.
- U.S. 12-Month Deficit Tops $3 Trillion as Virus Stimulus Spending Soars.
- Chinese Economy Faces ‘Unprecedented’ Challenges Amid Pandemic, Top Official Admits.
I'm sure everything will be "FINE" eventually but, for now, I'd say a little caution would be recommended – just in case it isn't. We keep our hedges in the Short-Term Portfolio (STP) but those are getting killed recently because of Tesla's (TSLA) wild ride though we did take advantage of yesterday's spike up to sell more short calls, we're still way behind on that position though it is an excellent hedge against a market crash as I very much doubt TSLA will be immune:
There's not much we're looking…
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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...
Ilene is editor and affiliate program
coordinator for PSW.