Posts Tagged ‘SAH’

Weekly Wrap-Up – Buffett’s Daring Derivative Deal Does Well

I was going to talk about Buffett's annual letter to investors.

Fortunately, I procrastinated and other people did some detailed reporting like Ravi Nagarajan, Andy Fry, Scott Patterson and Joe Del Bruno – who does a great job of pointing out that Berkshire's 4th quarter results were propped up by Buffett's $1.05Bn gains in derivatives betting (something Buffett himself once called "weapons of mass financial destruction" but, as we well know – if you can't beat them…), which accounted for 1/3 of Berkshire's $3.06Bn profits

Buffett's biggest bet was selling a put against the S&P 500 back in March – a move I said at the time was BRILLIANT and Buffett himself now says about his own options trading:  "We are delighted that we hold the derivatives contracts that we do.  To date, we have significantly profited from the float they provide. We expect also to earn further investment income over the life of our contracts."  

What did Buffett do?  Exactly what we teach you to do here at PSW - he took advantage of an irrational move in the markets and SOLD INTO THE EXCITEMENT, getting a fat premium from some sucker that bet the S&P would not hold 666 5 years from now.  Buffett effectively sold $5Bn worth of puts that expires worthless at S&P 700 between 2019 and 2027, putting $5Bn in his pocket and holding aside $1Bn in margin, which is how much he's already ahead on the bet.  Like a good options trader, he has a plan and he's trading his plan, making sure his investment is on track and patiently letting time do it's work as it eats away at the put-holder's premium. 

What about the risk?  Well I can't speak for Buffett's stop-loss technique but we're talking about a company that has (had) $40Bn in cash using their excess margin to make a $5Bn bet that the S&P would not stay below 700 for 10 years.  Buffett and I both tell people – NEVER buy a stock (or sell a put against one) that you are not willing to own for 10 years.  The S&P was 5% below at the time and would have had to drop, perhaps, 20% more to cost him $1Bn so let's call the stop 550 on the S&P where Buffett risked 2.5% of his cash against a posible 400% gain on his $1Bn risk allocation over 10+ years.  While it is true that if the
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Testy Tuesday Morning – Coincidence or Confidence Game?

What will hold up?

As you can see from our chart set, our major indices are trading very much in synch, more likely than not propelled by trade-bots that already have the next 25 trading days already mapped out to take us through the end of the quarter.  Of course you can argue that it's perfectly natural for 8 of 9 different indexes to follow virtually identical patterns as a result of the random trading of millions of individuals trading Trillions of Dollars worldwide and that's your perogative.  I prefer to think of it as one giant scam and then figure out ways to make a little money off it for ourselves

Several times last week I said to members I thought "THEY" were running the market higher so they could sell calls to suckers at high prices but, in general, the move was "fake, Fake, FAKE."  What do we do in the face of flagrant market manipulation?  What do you think we do – we play along!  We don't complain about good manipulation when we see it – we join in!  Don't be confused by the fact that I complain about it in my morning post – once the bell rings we move right to the other side of the table and happily run with the wolf pack.  We've tried to fight the power – it's not fun, nor is it profitable…

We remained fairly conservative last week and, as I discussed in our "Weekend Trend Spotting" post, we are more inclined to believe we are in a range that centers around 10,400 than about to break back over 10,700.  The bounce zones we predicted when we first began to sell off in January are finally being tested (red lines on above charts) but the 5% line (blue lines) are still exerting a pull and we NEED some healthy consolidation in between those blue and red lines if we are ever going to get serious about making a real move higher.

Speaking of healthy consolidation – Congrats to our own David Ristau of the Oxen Group and all the members who played along with yesterday's specially featured selection of SAH.  David nailed it in his 1pm post (also sending out a 1:06 Alert to our Members) and put us into the stock right in his target range at $9.45 and
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Zero Hedge

The Angels Are Falling: Macy's Downgraded To Junk; Stock Tumbles

Courtesy of ZeroHedge View original post here.

More than two years after Horseman Capital first suggested shorting BBB names on the expectation that a coming recession would lead to an avalanche of "fallen angels", or 'just barely' investment grade names being downgraded to junk, resulting in a major hit to the high yield sector which, sized just over $1 trillion would not be able to absorb the roughly $3 trillion in BBB-rated credits without a corporate bond market crisis, the thesis is star...



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Phil's Favorites

Trump supporters have little trust in societal institutions

 

Trump supporters have little trust in societal institutions

President Donald Trump speaks at a campaign rally on Jan. 28 in Wildwood, New Jersey. AP Photo/Mel Evans

Courtesy of Miriam Boon, University of Amsterdam; Andreu Casas Salleras, University of Amsterdam; Ericka Menchen-Trevino, ...



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Kimble Charting Solutions

Tech Leader Facing Important Long-Term Breakout Test!

Courtesy of Chris Kimble

Since the 2009 lows, Semiconductors have been taken a leadership role as they have far outpaced the gains of the S&P 500.

Gains since the 2009 lows; SOXX Index = +821% S&P 500 = +273%.

The SOXX index has spent the majority of the past 10-years inside of rising channel (1), which first started at the  2009 lows.

As the SOXX index is testing the top of this 10-year rising channel, it is also testing its Fibonacci 423% extension level of its 2001 highs and 2009 lows at (2).

This leading index would send a positive message t...



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Insider Scoop

6 Consumer Cyclical Stocks Moving In Tuesday's Pre-Market Session

Courtesy of Benzinga

Gainers
  • Tesla, Inc. (NASDAQ: TSLA) shares rose 6.9% to $855.12 during Tuesday's pre-market session. The most recent rating by Morgan Stanley, on February 18, is at Underweight, with a price target of $500.00.
  • Foresight Autonomous, Inc. (NASDAQ: FRSX) shares moved upwards by 5.8% to $1.10.
  • NIO, Inc. (NYSE: NIO) stock surged 2.4% to $3.87. The most recent rating by Piper Jaffray, on December 03, is at Neutral, with a price ...


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Biotech & Health

Coronavirus: the blow to the Chinese economy could be felt for years

 

Coronavirus: the blow to the Chinese economy could be felt for years

Courtesy of Chusu He, Coventry University

Investors are still being fairly complacent about the novel coronavirus. After the number of new daily cases suddenly shot up to more than 15,000 on February 12 following more than a week of decline, there were some jitters in the markets. With Chinese authorities saying the increase was due to a decision to broaden the definition for diagnosing people, there were falls in the region of 1% in European markets, and smaller retrenchments in Asia and North America.

It is...



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Members' Corner

How to Stop Bill Barr

 

How to Stop Bill Barr

We must remove this cancer on our democracy.

Courtesy of Greg Olear, at PREVAIL, author of Dirty Rubles: An Introduction to Trump/Russia

...



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The Technical Traders

Is The Technology Sector Setting Up For A Crash? Part I

Courtesy of Technical Traders

One thing that continues to amaze our research team is the total scale and scope of the Capital Shift which is taking place across the globe.  For almost 5+ years, foreign investors have been piling into the US stock market chasing the stronger US dollar and continued advancement of US share prices. It is almost like there is no other place on the planet that will allow investors to pool capital into such a variety of strong assets while protecting against foreign capital risks.  Yet the one big question remains – when will a price reversion event hit the US stock
market?

So many researchers, even our team of researchers, believe we have found the keys to unloc...



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ValueWalk

Russell 2000 Index (RUT) hits an almost one-month high

By Gorilla Trades. Originally published at ValueWalk.

Ad the Russell 2000 Index (INDEXRUSSELL: RUT) hit an almost one-month high today, commenting on today’s trading Gorilla Trades strategist Ken Berman said:

Q4 2019 hedge fund letters, conferences and more

Russell 2000 Index (INDEXRUSSELL: RUT) Outperforms Large-Cap Benchmarks

While the overnight session was nothing short of scary stocks held on to most of yesterday's gains and small-caps even extended their winning streak. The Russell 2000 Index (INDEXRUSSELL: RUT) hit an almost one-month high today, finishing higher for the fourth day in a row while outperforming the large-cap benchmarks, and since the Volatility...



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Chart School

Dow theory warning from the Utilities Index

Courtesy of Read the Ticker

Charles Dow died in 1902, and the investors should thank him for his ever lasting Dow Theory Analysis.

Carrying on this blog theme looking at the Utility stocks. Previous post.
Dow Jones Utility index could trade like the FANGs
Formula for when the Great Stock Market Rally ends



You can learn about Dow Theory here

This post is concerned wi...

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Digital Currencies

Bitcoin Price May Hit $27K All-Time High By Summer, Predicts Fundstrat's Tom Lee

Courtesy of ZeroHedge View original post here.

Authored by William Suberg via CoinTelegraph.com,

Bitcoin is primed for average gains of almost 200% over the next six months, one of its best-known supporters has told mainstream media. 

...



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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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

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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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