Phil's Newsletter

Tariffic Tuesday – Markets Ignore Another $200Bn Drag on Global Trade

Image result for tariff tax cartoonSo what?

$200Bn here, $200Bn there – after a while it might add up to something but investors only react AFTER something is a problem and these tariffs don't even take effect until next week (24th).  Our wise Negotiator-In-Chief has decided to hit China (ie. the suckers who voted for him and actually have to pay this tax) with a 10% tax on $200Bn worth of Chinese goods that are bought in the US and that tax will rise to 25% – taking another $30Bn out of the pockets of the poor so Trump can continue to give tax breaks to the rich.  

But $50Bn worth of taxes on US Consumers isn't going to be enough for President Trump and he also announced his intention to put another 25% tax on another $267Bn worth of Chinese Goods, costing the suckers who voted for him another $66.7Bn and that, plus the first $50Bn – balances the budget for Trump's $100Bn additional tax cut to himself, his family and his friends.

Of course, Trump has pushed most of the bite of these ridiculous taxes posing as tariffs out past the November elections because he knows he can baffle his base with BS for another 45 days and probably keep control of the Senate, which will make it difficult for the Democrats to roll back the tortures he is inflicting on the American people. 

As you can see from the cartoon above, at the start of the Great Depression – Trump is nothing more than Herbert Hoover in a new wrapper and history is repeating itself as another one-term President embroiled in non-stop corruption scandals takes a 10-year rally and turns it into an economic catastrophe that almost destroys the country (oops – spoilers!).  Interestingly, like Trump, Hoover also made his fortune through dealings with Russians!  

As was the case in the late 1920s, the markets are shaking off all the signs of a pending Global catastrophe and continuing to move higher, albeit on the lowest volumes we've seen this century.  You can see the "smart money" moving out of the market – even as it continues to make new highs as there are plenty of retail suckers still out
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Monday Market Madness – Denial is Not Just a River in Egypt

Image result for stages of deathHoly cow! 

I guess it's because I'm one of the last macro fundamentalists left in the markets that I am surprised – no, shocked, by the complete and utter denial the bulls are in regarding what is already the biggest Trade War since the 1930s and will very soon be the biggest Trade War in human history.  As noted on the chart to the right though, it's a very normal psychological phenomena – especially when experienced by those unprepared for a loss and, after 10 years of stimulus – there's a whole generation of traders who don't even know what a market loss is…

The market is clearly in denial and the Financial Media is merely a tool of the Investment Banks, so don't expect them to explain things to you and, unfortunately, very few people know what a Trade War actually is or what it does – thanks to a very poor education system – especially when it comes to Finance in this country.

Image result for china trade war cartoonChina does know what a Trade War is and, just this weekend, the Chinese Government's Global Times said "China will not be content to only play defense in an escalating trade war with the United States.  It is nothing new for the U.S. to try to escalate tensions so as to exploit more gains at the negotiating table."  Beijing may also decline to participate in proposed trade talks with Washington later this month if the Trump administration goes ahead with the additional tariffs, the Wall Street Journal reported on Sunday, citing Chinese officials.

The Journal report quoted one senior Chinese advisory official saying China would not negotiate "with a gun pointed to its head."  Besides retaliating with tariffs, China could also restrict export of goods, raw materials and components core to U.S. manufacturing supply chains, former finance minister Lou Jiwei told a Beijing forum on Sunday, according to an attendee.  "Lou Jiwei's approach would feed the most hawkish sentiments in the U.S. government," the person said, declining to be identified given the sensitivity of the matter.

Image result for china rare earth trade warAs I have warned since Trump first began…
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Fake Money Friday – Weak Dollar Makes Markets Look Like They Are Recovering

The Dollar is testing 94.

That's down over 1% since Sept 1st and 1.5% off it's highs so take the market "gains" with a Lot's wife-sized grain off salt since the indexes have gone nowhere for the month yet the Dollars they are priced in have lost 1% of their buying power – that's not good!  

We're picking up longs on /DX off the 94 line, looking for at least a $200/contract bounce to 94.20 and, of course, keeping very tight stops below the line but 94 should be nice and bounce – even if it ultimately fails.  Brexit still isn't finished and the Trade War is far from settled (despite the relief rally on White House happy talk) so it won't take much to jam the Dollar right back to 95, which would be $1,000 per contract gains if all goes well.

Meanwhile, despite the huge boost from our weak currency, the S&P (/ES) is right where we left it at the end of August and the volume has gotten even lower by 10-15% – any lower than this and the last two guys trading can just get together in person to make their few transactions.  Professional traders do not like seeing low liquidity in the markets but it sure doesn't seem to bother the Robots and ETFs that are trading the market these days.  That's becuse people think things are great and aren't trying to sell but God help us all when they do…

In Wednesday's Live Trading Webinar we were shorting Gasoline (/RB) Futures at $2.04 and we let one contract ride overnight and that one contract made a nice $2,112 yesterday afternoon so – you're welcome!  It's too risky to keep playing over the weekend so we'll just hope "THEY" spike it back up over the weekend so we can short it again next week.  

More likely we'll switch to shorting Oil (/CL), which is still at $69 as oil is coming into a very difficult roll as December is already stuffed with almost 300M barrels worth of fake, Fake, FAKE orders and the 4 front months
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Philstockworld September Top Trade Review

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

We were discussing building portfolios using things like our Top Trade Alerts in yesterday's Live Trading Webinar and it occurred to me that we haven't done a review since July so I think we have some catching up to do – especially as we haven't finished reviewing 2017's trade ideas yet.  We're usually about 6-9 months behind because our Top Trade Alerts are usually for long-term opportunities, not short-term set-ups.  

So far, through October, we had 40 winning trade ideas and 6 losers for a very nice 86.9% winning percentage and the Sept/Oct trades had made $59,615 by July.  As usual, our losing trades tend to turn into winners and one of our losers was Celgene (CELG) but they popped right back from a $425 loss to, currently, a $250 gain but that's only "on track" for our projected $13,000 gain if all goes well so STILL great for a new trade entry – our losers often make the best future winners – that's why these reviews are important!  

That brings us up to 41 winners and 5 losers for an 89% winning percentage for 2017 so far and I very much doubt we'll beat that into the year's close – but let's find out together as we review our November and December Top Trade Ideas to finish out the year.  Of course, it's a fairly arbitrary snap-shot to see how 2-year trades are doing at any given point in time but I find that 6-12 months is a good time to make adjustments if necessary as you still have more than a year to recover and you have 2-3 quarters of earnings to give us better information to make our decisions on.

That's right, we are FUNDAMENTAL investors so we tend not to pay attention to the day to day BS the market does.  Often if a stock we like gets cheaper, we buy MORE because, if you're not going to buy low – when are you going to buy?  

Thursday, Nov 2nd was a busy day as we sent out a Top Trade Alert for 3 stocks;  TEVA, M & CBI:


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Will We Hold It Wednesday – Dow 26,000 Edition

Image result for dow p/e ratioNo, we won't.

I hate it when authors make you read the whole article (and look at all the ads) before answering the question posed in the title so I'm cutting to the chase and saying that no, the Dow will not hold onto 26,000 because the average Dow stock is overpriced by a fair margin, with the average p/e of a Dow stock now sitting at 23.37 vs. the historic average of 18.2.  Of course the Dow is still behind the S&P (24.20) and the Nasdaq (25.75) but that's because Apple's (AAPL) outsized earnings are bringing the average down considerably.  

"But Phil", you may say, "earnings we sooooo good, weren't they?"  I would answer you as Einstein would and tell you everything is relative and that last year, against last year's earnings, the Dow's p/e ratio was 20.24 and now it is 23.74 against this year's earnings so you are paying 17.2% more for each Dollar of earnings than you were paying last year.  That's a lot!  That's stock market hyper-inflation…

As you can see from the S&P chart (I couldn't find a Dow chart), we've only paid a higher multiple than this just before the great crash of 2000 but we also paid much, much more before the 50% collapse so there may still be room to run at the top – before the inevitable happens.

Taking out Apple makes for a very ugly picture on the Dow since AAPL made $11.5Bn last quarter vs $78Bn for the other components and that means AAPL alone is 15% of the Dow's total earnings and MSFT and JPM are also around $10Bn in earnings so over 1/3 of the Dow's earnings made by just 3 companies.  So, if you want to buy AAPL or JPM or MSFT and pay a good multiple – more power to you.  The problem is that ETF buyers drive up the price of ALL the components when they are chasing the performance of just a few.

Still, AAPL is in the Dow and it is still a good buy – even at $223 as that's a $1.1Tn valuation but they earn $55Bn a year and that's growing so p/e about…
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Tumblin’ Tuesday (again) – China Retaliates on Trade (again)

Image result for trump china trade cartoonGee, who could have seen this coming?

China did what they said they'd do and took steps to retaliate against Trumps latest round of sanctions, only China is doing it by making a LEGAL appeal through the World Trade Organization while Trump just does whatever the F he wants because, you know, the US isn't part of the World anymore and we don't have to play by THEIR rules.  After all, Trump has already said "Trade Wars are good, and easy to win" and when has our President ever lied to us?

As noted by the FT: "It is possible that Mr Trump would accept a symbolic victory. But Mr Xi cannot afford a symbolic defeat. The Chinese people have been taught that their “century of humiliation” began when Britain forced the Qing dynasty to make concessions on trade in the 19th century. Mr Xi has promised a “great resurgence of the Chinese people” that will ensure that such humiliations never occur again."

Image result for trump china trade cartoonThis is not just about trade, so it won't be easy to "fix". This is about China's emergence as a global leader, something that really bothers Trump & Putin as they take a back seat to Bejing in setting the Global Agenda and China has their 2025 program – a 10-year plan for China to dominate Trade and Tech in the 21st Century. Rather than promoting similar efforts at home by encouraging innovation and R&D, like China is doing, Trump just wants China to stop it.

Seen from Beijing, it looks as though the US is trying to prevent China moving into the industries of the future so as to ensure continued American dominance of the most profitable sectors of the global economy, and the most strategically-significant technologies. No Chinese government is likely to accept limiting the country’s ambitions in that way.

Image result for china rare earth trade warUnfortunately, Trump has not learned or doesn't want to learn from Nixon's great mistake which is:  Don't get into trade wars with people you depend on and with Nixon it was OPEC and oil while Trump doesn't seem to understand
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Just Another Manic Monday

The Dow is up 116 points as of 8am.

Why?  Just because, it seems.  Asia closed down on Trade War fears but Europe is up slightly and US Futures are tracking higher on very thin trading (it's Jewish new year, people have off in NY) as Trump tweets about how GREAT things are, even though he's clearly lying as the S&P 500 was at 2,200 when he was elected and 2,300 when he took office but, even since the election, 2,850 – 2,200 is 650 and 650/2,200 is 29.5%, not "almost 50%" but, amazingly, no one bats an eye because, for Trump, that's a lot closer to the truth than most of the things he says…

We're just going with the flow for the moment.  We did add a bearish Top Trade on the S&P (SDS) last week but we also put out bullish Top Trade Alerts on  DLTR, OIH, HBI, LB, WPM, AAPL, MU and PZZA since Aug 15th, so still finding plenty of bargains – even in what we consider to be a very toppy market.  As I've said a lot recently – it's a lot like 1999 but the market doubled in 1999 before actually failing in 2000 so, if we are in a bubble – we can play it bullish while it lasts – as long as we are well-hedged and ready to act if things do begin to fall apart.

When a market is hot, we look for OPPORTUNITIES to pick up stocks that get sold off for bad reasons.  Back on Aug 3rd, China Mobile (CHL) got hit on news that two of their rivals were merging but CHL is so big, they are the reason their rivals have to merge to compete so I said to our Members:

CHL – Another one we just added to the hedge fund (also uncovered).  My notes to Doug were: They may get less per subscriber but China is smaller than the US so they are covering less area but they have 887M subscribers.  They have rich people who are as rich as our rich people and those people are willing to pay whatever for high-speed services.  China's Top


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Non-Farm Friday – Is America Working?

Another month another 200,000 jobs?

As we discussed last month, 200,000 jobs is not growth, that's just our population growth.  Job growth, in fact, has slowed markedly over the past 18 months and this chart shows you how far behind Obama's Trump's are falling – especially in the struggling Retail Sector, where jobs are trending negative over the previous period.  

Obama is credited with a net gain of 11.6M jobs during his tenure but that includes 2009's 3.5M lost jobs detracting from the 15.1M jobs that were gained under 7 years of Obama budgets and also not counting the 8th Obama budget – the one Trump takes credit for in his first year for another 2.4M jobs gained.  

Of course, so far, Trump's method for creating jobs has been very expensive as the deficit in 2017 was $666Bn (Obama's last budget) but this year we're already over $1Tn (up 50%) and, according to Trump's own budget, there's no end in site to Trillion-Dollar deficts through 2024, so another $8Tn will be added to the $20Tn we already owe – if all goes well.  When you consider the average wages paid for a job is $38,000, $1Tn SHOULD buy you 26,315,789 more jobs – each year!

Image result for trickle down economics trumpObviously, that's not happening but let's say that $666Bn of deficit was unavoidable and Trump spent just $333Bn extra Dollars to create jobs (wasn't that the point?).  Well, at $333Bn/2.4M it turns out Trump is spending $138,750 per job created and, as noted above, they are not really being created – we're just keeping pace with the population growth of 0.8%.

The rest of that $333Bn National Debt that Donald Trump is forcing your family to take on is going to pay for Tax cuts for Billionaires – like Donald Trump – sucker!  Notice even the GOP, who don't shy away from bullshitting when it suits their purposes, have even stopped saying the words "job creators" as it has, at this point, been exposed as the total farce that phrase always was.  I wonder what the BS will be for the next election?


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Floundering Thursday – Indexes Struggle to Get Back on Track

Just a minor set-back – so far.

We've lost a bit of ground in the past week but only halfway back to where we were two weeks ago (2,850), when we broke out to new highs – that's still pretty strong but, unfortunately, there's an outside chance that Trump could push through his next $200Bn worth of tariffs on China this afternoon and Asian markets were off 1-2.5% this morning but US Futures SEEM not to be worried at all, as they are up slightly.

I say SEEM because the reality is that the Dollar has dropped 0.6%, from 95.60 at yesterday's open to 95 this morning and that SHOULD be popping the markets 0.6% but they ae just flat so all this is doing is masking additional weakness.  Silver (/SI) is up to $14.30 so congrats to the players on that one as we're now up $1,500 per contract.  Even Gold (/YG) woke up and is now back at $1,211 but this is a Dollar-related move and can unwind quickly if the Dollar bounces.

Things can get ugly quickly on the trade front as China has already warned of retailiation over any new tariffs – so far they have matched the US dollar for dollar.  "If the U.S., regardless of opposition, adopts any new tariff measures, China will be forced to roll out necessary retaliatory measures," according to the country's commerce ministry.  Due to China's massive trade surplus over the U.S., many expect the PBOC could further devalue its currency or crack down on U.S. firms inside the country.

Meanwhile, U.S. and Canadian negotiators are engaged in "intense" NAFTA discussions, according to President Trump.  "If it doesn't work out, it'll be fine for our county but it won't be OK for Canada," he added. "I think they will treat us fairly."  Talks broke down last Friday after the two sides failed to reach a deal that would bring Canada into a new trilateral trade pact with the U.S. and Mexico.

It's very unclear what Trump s even trying to accomplish with Canada as we have a fairly balanced trade relationship with them so Trump's complaints that Canada is taking advantage of us makes no sense at all.  Even Mexican trade is barely out
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World of Worries Wednesday – Emerging Markets, Trade Wars Weigh on Markets

Wheee – this is fun!

Congratulations to those of you lucky enough to get the PSW Report yesterday, where we told you about our Gasoline (/RB) Futures Shorts at $2.05 as we plunged all the way to $1.98, which was good for 0.07 per contract and, while 7 cents may not sound like much, it was actually a huge one-day move and, at $420 per penny, per contract, it was good for profits of $2,940 for each contract – what a great way to start the month!

Of course we began shorting /RB on Friday, at $2 so our average (as we doubled down) was $2.025 so we only picked up net 0.045 for $1,890 per contract gains but it was on 2x so it all works out in the end!  Silver (/SI) was also a huge winner as it popped back from $14.13 (even lower during the session) to $14.20 for an 0.07 gain and /SI contracts pay $50/penny so $750 gains per contract there as well.    As I said to Investing.com yesterday:

“From here, we’re expecting RBOB to go down to between $1.80 and $1.85 over the next month and stabilize there…There’ll be the traditional pre-Thanksgiving run up, where it could get a little higher, and we’ll be shorting it again at that time.”

In Davis’ logic, gasoline’s surge to 3-1/2 year highs of $2.2855 in May, matching US crude’s rally, was fundamentally flawed.


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Zero Hedge

These International Borders Have Become "No Rights Zones"

Courtesy of ZeroHedge. View original post here.

Authored by Simon Black via SovereignMan.com,

On June 15, 1215, King John sat in a field in Runnymede, England, surrounded by angry nobles.

His Barons - the big landowners throughout England - had rebelled and seized London, forcing King John to sign an agreement guaranteeing certain rights to the people of England... and restrictions of his power.

This agreement was called the Magna Carta. And it would become one of the most important documents in hist...



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Phil's Favorites

The Senate is set to approve it, but what exactly is the Trans Pacific Partnership?

 

The Senate is set to approve it, but what exactly is the Trans Pacific Partnership?

Courtesy of Pat Ranald, University of Sydney

These days it is called the TPP-11 or, more formally, the Comprehensive and Progressive Agreement for Trans Pacific Partnership.

It is what was left of the 12-nation Trans Pacific Partnership after President Donald Trump pulled out the US, after a decade of negotiation, in 2017.

Still in it are Australia, New Zealand, Canada, Mexico, Peru, Chile, Japan, Brunei, Singapore, Malaysia and Vietnam. It’ll cover 13% of the world’s economy rather than 30%.

What’s in it for us? ...

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Kimble Charting Solutions

Commodities attempting breakout off 7-year support!

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

Its been a rough 7-years for Agriculture ETF (DBA) as it has created a series of lower highs and lower lows while declining 50% inside of falling channel (1).

The decline this year has it testing channel support of late, where a double bottom might be in play at (2).

The rally of the past couple of weeks has DBA attempting a breakout above falling resistance at (3), while momentum is very low and could be attempting to turn higher.

While DBA is attempting a breakout, yields and Commoditie...



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Chart School

Weekly Market Recap Oct 14, 2018

Courtesy of Blain.

Wednesday and Thursday finally brought some fireworks to a very complacent market.   The S&P 500 had not had a 1% move in 74 days until Wednesday’s drawdown.

Rising yields were nailed as the culprit but months of rallying eventually require some sort of shake out – whatever the catalyst.  Wednesday’s sell off was the worst day for the S&P 500 since February and the worst for the NASDAQ since June 2016.

The market losses are “a reaction from investors finally realizing we are in a higher interest-rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “Higher interest rates typically bring on tighter ...



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Insider Scoop

Carl Icahn Doubles Down On Dell Technologies: 'One Of The Best Opportunities I Have Ever Seen'

Courtesy of Benzinga.

Related Barron's Picks And Pans: Apple, Dell, Netflix, Wells Fargo And More Jim Cramer Gives His Opinion On Mastercard, Dell Tec...

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Digital Currencies

A Wealth Management Point of View on Blockchain and Bitcoin

 

A Wealth Management Point of View on Blockchain and Bitcoin

Courtesy of 

I really had a great time discussing the blockchain, my Bitcoin Maximalism, fear and greed, the future of cryptocurrencies and more with the one and only Anthony Pompliano on his Off The Chain podcast. He’s super sharp and we went into so many great topics – I do regret the thing I said about ghosts and aliens though, that sounded dumb in hindsight.

I ...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Members' Corner

Why obvious lies still make good propaganda

 

This is very good; it's about "firehosing", a type of propaganda, and how it works.

Why obvious lies still make good propaganda

A 2016 report described Russian propaganda as:
• high in volume
• rapid, continuous and repetitive
• having no commitment to objective reality
• lacking consistency

...

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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

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

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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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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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

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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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 >>