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Phil's Stock World

Daily stock picks and option trades, market analysis, and investing strategies for investors and traders of all types.

Last Build Date: Fri, 30 Sep 2016 02:55:31 +0000


Thursday Thrust – OPEC Cuts Back and Yellen Doesn’t Raise

Thu, 29 Sep 2016 12:23:55 +0000

(image) Well, we got through Wednesday.  

I love this chart which shows what the Fed has, in the past, SAID rates would be and what, in fact, they actually were for the past 3 years.  So it's not too surprising that, no matter what Yellen and Co. say about raising rates this year – no one is going to believe them.  If you bet against rates rising every single time (20) that the Fed said they would be raising rates in an upcoming meeting – you only would have been wrong once – last December.  

There are new traders who have been on the job for 7 years now and have never seen a Fed Fund Rate at 1%.  Money is essentially free if you want it – that's just a fact of life – why would you plan for anything else?  If you want to expand – borrow money, if you want to buy out a competitor – borrow money, if your stock price is too low – borrow money to buy it yourself.  


Non-Financial Corporate Debt is up $3 TRILLION since 2008 – and that is just the S&P 500 – globally, 16Tn has been borrowed by Corporations at a rate of $2Tn per year, 3% of our Global GDP is borrowed!  It took 50 years for corporations to rack up their first $3Tn in debt but the next $3Tn came in just 8 years.  Yes, of course the first $3Tn in debt led to a complete meltdown of the Global markets as companies found themselves unable to service that debt but this time is different – because they borrowed twice as much…  

(image) Less than 25% of that debt is considered "distressed" (yields that exceed Treasury yields by at least 10 percentage points), that's nothing to be alarmed about, is it?  Only 112 companies have been declared in default by S&P as of January of this year but, in 2008, it was 125 – so we still have room to improve on that front before panic sets in.  We have a long position on SJB ($25) in our Options Opportunity Portfolio, which makes money when junk bonds…

Window Dressing Wednesday – Quarterly Crash Ahead?

Wed, 28 Sep 2016 12:26:05 +0000

(image) We're just waiting for the other shoe to drop.

Yellen testifies before Congress this morning (10) but while she's doing that, both Jay Powell and Jim Bullard will be speaking at a Conference of State Bank Supervisors and, in case that's not enough to whip the market up and down 100 points, we have Durable Goods at 8:30 and Oil Inventories at 10:30, a 7-Year Note Auction at 1pm and the Charlie Evans speaks at 1:30 followed by Loretta Mester at 4:30 and Esther George at 7:15.  I'm sure by then we'll have a very clear picture of what's going on {end sarcasm font}.  

Meanwhile, we were happy to hear yesterday that the Saxo Group has finally (9 months later) caught up to our Trade of the Year idea on Natural Gas (UNG), saying:

Natural gas is being supported by an eroding supply glut and a potential tightening in 2017. Our breakout model has given a buy signal in natural gas today on the continuation chart above $2.998/therm.

Isn't that nice?  I couldn't agree more, our target is $4 in Jan 2018 but, sadly, you missed the easy meal we made for you last December, when, after choosing /NG for our Members, I laid out our long case in the morning post on Dec 8th, while it was still below $2, saying:


Our UNG play is proprietary to our Options Opportunity players but I'm happy to help you play along with Carl and the way I would set up an LNG play is as follows:

  • Buy 10 2017 $30 calls for $14.60 ($14,600) 


Testy Tuesday – Trump Slumps, OPEC Dumps

Tue, 27 Sep 2016 12:24:03 +0000

(image) What a crazy morning already!

As you can see, the S&P rocketed 20 points higher as Hillary put those Trump fears to rest during the debate last night and the markets had a huge relief rally but then, at the European open (3am), Deutsche Bank (DB) continued the 10% slide that was saved by the bell at yesterday's close and the EU markets followed down about 1% (so far).  No, in addition to DB having issues, Germany's 2nd largest bank, Commerzbank, announced it would lay off 18% of it's workforce (9,000 employees) in a massive restructuring.  Sure folks – everything is just fine – don't panic….

(image) Already the market is lower than we were ahead of the Fed on Wednesday and it turns out I was a few day's early with my market prediction but, honestly, it wasn't hard to call as they've tried FREE MONEY for 8 years now and it hasn't worked yet and it won't work now because they are giving the money to the wrong people. 

As Hillary said last night, "trickle down economics has not worked in the past and it will not work in the future" THOSE are the failed policies of the past we can't afford to repeat.  If we want to turn the global economy around, we need to engage in some massive infrastructure projects that consumer materials and put people to work building things that last and have long-term beneficial effects on society like roads, bridges, aqueducts, electrical grids, forest reclamation, carbon reduction…  These are not whimsical things – these are all things we NEED and have been putting off.  

(image) Rather than give another $6Tn to the Banksters to buy another 8 years of stagnation – why not give $6Tn to the people and see what they can do with it?  Instead, we are dooming the Bottom 90% to years of ZERO return on their meager savings, giving them no chance whatsoever of retiring in sound financial shape.  Even that isn't far enough and, as you can see on this chart, $7 TRILLION Dollars worth of debt (and that was Q1) is "paying" a NEGATIVE yield – we are punishing people for saving money –

Monday Market Manipulation – 12 Fed Speakers This Week!

Mon, 26 Sep 2016 12:34:18 +0000

(image) A divided Fed speaks!  

Last Wednesday, the Fed released the most divisive statement in many years with 3 Governors (Geoge, Mester and Rosengren), all of whom have expressed the opinion that the Fed needs to tighten now and stop dithering around.  Sadly, other than Bullard, the hawks are vastly outnumbered this week and the last word goes to Grandma Dove, Yellen, who rides in at 5pm on Thursday to help dress those windows for the last day of the quarter.  

If you think that makes it all seem like a gigantic, manipulated scam – you are catching on!  Notice the only hawk allowed to speak during trading hours is Bullard and he speaks right ahead of a 7-year note auction – a time when the Fed WANTS to scare investors back to the bond market.  There's a very strong correlation between days our Government needs to borrow money (bond auctions) and days when the market falls – making it look unattractive by comparison – even against 2% 10-year notes.  

(image) How else do you think a country can go over 100% of it's GDP into debt and still borrow money at rates that don't even keep up with inflation?  There has to be FEAR somewhere, but you sure wouldn't know it from record-high stock indexes, would you?  Keep in mind that being in debt 100% of your GDP is like you being 100% of your gross salary in debt, before taxes.  

If you make $100,000 and lose $35,000 to taxes and have a $2,000 mortgage ($24,000) and $1,500 in monthly home expenses (taxes, insurance, utilities, groceries), that's $18,000 and maybe you have 2 cars for $1,000 month ($12,000) which leaves you with $11,000 in discretionary income and THAT is what you have to pay back your $110,000 of debt.

Then there's interest on the debt.  If it's just 1%, like the US debt, then you are paying $1,100 in interest but that's still 10% of your disposable income.  What happens if rates go up – what will you be sacrificing?  Also, how's that saving for college and retirement going?  No wonder 80% of American families have little or no retirement savings – this is the example for