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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: Sat, 25 Feb 2017 03:02:54 +0000

 



Faltering Friday – Minor Pullback Makes for a Nervous Weekend

Fri, 24 Feb 2017 13:24:18 +0000

(image) Who says politics don't matter?  

The whole World is freaking out this morning about the guy Matt Taibbi calls "The Insane Clown President" as he and his posse take a hard turn to the right at the Conservative CPAC gathering in Maryland.  I'm not going to get into all the hateful and offensive things going on over there other than to say the rest of the world is rather horrified and today, Trump himself will address the crowd and it's going to be a lot like waving red flags at a bull – so we have that to look forward to.

Unfortunately, I'm going to be live at the Nasdaq this morning so I won't be able to attend the 9:25 MAIN STAGE presentation entitled "If Heaven Has a Gate, a Wall and Extreme Vetting, Why Can't America?"  Oh yes, I wish I were joking but it's REAL!   The session is moderated by Colorado Rep Bob Beauprez along with CO's Ken Buck, Arizona's Andy Biggs along with Mike Gonzales from The Heritage Foundation and Helen Krieble from the Kreible Foundation.  

(image) After that, things get more serious with "Rustbelt, Religion and Realignment".  I know, I can't believe I'm missing the fun!  Pence, Bannon and the rest of the B Team were there yesterday and the Big Kahuna flies in today and it's interesting because last year he was so vilified at this Conference that he cancelled his appearance.

So, aside from the Conservative feeding frenzy, we had Mike Pence saying yesterday that "America's ObamaCare nightmare is about to end" and Steve Bannon saying "The Globalists aren't going to give us our country back without a fight" and warning the base that "It’s not only not going to get better, it’s going to get worse every day in the media" while Trump is calling China a currency manipulator and Treasury Secretary Mnuchin rolls out a "Weak Dollar Policy."

That's sent Gold and Silver (our Trade of the Year) flying higher while the weaker Dollar covers the flight out of equities by holding up the index (stock prices up as Dollar weakens) long enough to cover the tracks of the smart money crowd.  It wasn't enough to help oil though and you are very welcome
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Thursday Thoughts – Tesla’s Emperor Musk Has No Clothes!

Thu, 23 Feb 2017 13:30:31 +0000

(image) Our Tesla (TSLA) short is looking good!  

Despite releasing an earnings report that looks more like a sales brochure (and the CFO promptly quit, so he won't have to justify these numbers) it's pretty clear to investors that all is not well under the hood of the auto hobby shop.  You have to make much more than 8,000 vehicles a month to be considered an actual "manufacturer" – in 1914, with 13,000 employees, Ford (F) produced 300,000 Model Ts while TSLA's 13,058 employees have only managed to produce 75,000 cars (mostly the Model S) in their "amazingly automated" plant.  

You would think, 103 years after Ford invented the assembly line, that Tesla could do a little better but hey, give them a couple of more years and they might give the 1914 Model T a run for its money!  Given the shortfall in production (90,000 cars were promised for 2016) and the rapidly bleeding cash position, the departure of the CFO and the massive dilution of the shareholders (SCTY was given stock), we're very confident the $2,163 short we gave you yesterday will return the full $7,500 on March 17th (up 246% in less than 30 days) so you're welcome for that and happy St. Patrick's Day!  

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Other than warning you not to buy the dip in TSLA, I've lost interest and am moving on.  Paulo Santos wrote a great article analyzing their earnings if you are interested, but we have bigger fish to fry now that we're done with Tesla – no sense beating a dead horse, even an electric one.  Just be aware that there are only 790 Super Charger sites in the US and that's 36% growth from last year – how do they get to 300,000 sales with that slow growth (and there are 114,533 gas stations)?

(image) So, what else is going on in the World?  Well, we scored a nice win on Natural Gas Futures (/NGV7) from yesterday's live Trading Webinar with a nice $1,190 per contract gain for our Members – not bad for a half day's work, right?  

The weak Dollar is boosting all commodities this morning as it slumps back to 101, down 0.5%…
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Will We Hold It Wednesday – Tesla’s 7% Solution

Wed, 22 Feb 2017 13:28:20 +0000

(image) How high can the market get? 

"The 7% Solution" was the "lost" manuscript of Dr. John Watson recounting his famous patient's recovery from cocaine addiction.  In a similar manner, we have a market that is clearly on crack and, coincidentally, the Nasdaq Composite is up exactly 7% (5,350) from it's 5,000 line since Jan 1st – time for a bit of reflection indeed!  

The real story to the Nasdaq is, of course, Apple (AAPL), which is up 19% at $137 from $115 at the start of the year.  AAPL is about 15% of the Nasdaq so it's responsible for 2.85% of the 7% gain in the Nasdaq, which is 40% of 7% – that's quite a burden for one company to carry.  However, we feel the move in AAPL is justified so it's not AAPL's value we're questioning but whether or not AAPL should have dragged his 99 brother and sister stocks up the hill with him or are they all irresponsibly flying too close to the sun and investors are about to get burned?

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There are a lot of overpriced (by normal standards) stocks on the Nasdaq but I think Tesla (TSLA) can serve as a good proxy this evening when they report Q4 results (or lack thereof) after running up 53% since Dec 2nd, when they were at $181.50 (now $277).  That's a market cap of $44.6Bn, just shy of Ford (F) at $49Bn and GM (GM) at $56Bn – even though TSLA produces just 50,000 cars a year and lost approximately $2Bn doing it.  That's a loss of $40,000 per car people!  How on Earth are they going to sell $35,000 cars if they are losing $40,000 per $90,000 car they sell now?  

We're short on TSLA in our Short-Term Portfolio as this Q should include the "earnings" of SolarCity, Musk's solar venture which had been bleeding cash before TSLA acquired it.  Musk has to check a lot of boxes and explain how he's going to sell over 100,000 Model 3s in 2017 when there isn't even an actual car yet.  Our short play is this:

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Nowhere to run on that one as it's a March spread, we need TSLA to disappoint tonight or it's an…
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Terrific Tuesday – Market Comes Back With Higher Highs

Tue, 21 Feb 2017 13:38:56 +0000

(image) Up, up and away!  

The markets are looking well-rested after a long weekend and US Futures are once again off to the races – for no particular reason, of course.  Who needs a reason when things are going to be so great – again?  Things in Europe are pretty great, despite the rampant Socialism and, ew, immigrants – as Eurozone Business Activity jumped from 54.4 to 56 in February – the best reading in 6 years.  

Those fools are still following those failed Obama-style policies the Trump team has vowed to reverse as quickly as possible so let's hope the President will be able to save us from impending prosperity or, even worse, successful diversity and that disgusting goodwill towards refugees and don't even get me started on free trade, free medicine and housing for the poor – it's a sick, depraved state and they're not going to fool us with all their "success" – we know a Socialist plot when we see one, right?

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Fortunately, our Top Trade Ideas (see review here) since the election have been 95% bullish with 11 of our 14 November/December picks already making money (they are generally long-term trade ideas).  The 3 "losers" (so far) are certainly worth a look, especially our lone bearish hedge using the Dow Ultra-Short ETF (DXD), offset with a short put on Bed, Bath and Beyond (BBBY), though the original trade is down so the new set-up would be:

  • Sell 10 BBBY 2019 $35 puts for $3.45 ($3,450)
  • Buy 40 DXD July $12 calls at $1.30 ($5,200) 
  • Sell 40 DXD July 16 calls at 0.35 ($1,400) 

(image) The net of that spread is $350 and it gives you $12,000 of upside protection if DXD goes from $13 to $15, which is up 15% and DXD is a 2x short so the Dow would have to fall 7.5% to collect in full but, at $13, the spread is $1 in the money and pays $4,000 (a $3,650, 1,042% return on cash) if the Dow simply doesn't go higher than 20,600.  That makes it an excellent hedge. 

You are, of course, obligated to
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