Surviving the First Week of 2012 [14]
Courtesy of Phil of Phil's Stock World [15]
Yay, we made it!
Last Friday the Dow closed at 12,200 and Monday we started the new year at 12,450 and yesterday we closed at 12,415 so all the people who caught that move in the futures between 6am Tuesday morning and 10:05 Tuesday morning had a great week and the rest of you can go suck eggs.
What an appropriate way to start 2012 - screwing the Retail Investors over as the Big Boys jack up the futures and then spend the rest of the week unloading their stocks on the suckers who run in to chase the gains they never had a prayer [16] of catching.
Some people are confused as to why we keep making bullish plays when I think the rally is BS and the reason is that we don't fight the Fed.
Yesterday, we were down and then suddenly there was a rumor (unsubstantiated) about Obama announcing a $1Tn mortgage refinancing program and it wasn't long before it was $3.6Tn and, while it is something I myself have proposed to the Administration, it was hard to see how anything that actually helped the average American Citizen would ever be passed by the House. Nonetheless, the market did a 2% flip-flop and finished the day slightly higher - painting a much prettier technical picture than it would have if we has remained at our gap-down open.
Fortunately, we followed through with our plan to take the money and run on the morning dip as we didn't know what BS was going to move the markets higher but we were pretty sure that there WOULD be some BS to move the markets higher. My morning Alert to Members left our $25,000 Portfolio 100% bullish at 10:11 [17] and I don't want to sprain my arm patting myself on the back but just look at David Fry's chart (right) [18] - that says it all, doesn't it? (Charts by David Fry)
We went officially bullish on BKS, as planned, at 10:19, selling the Feb $10 puts for $1.20 - another bullish play for the $25KP (5 contracts) - and they recovered so quickly that the Feb puts are already down to .95, gaining $125 in a day on that one trade! That's pretty good for a small portfolio, right?
More importantly, it demonstrates our core concept - which is what these virtual portfolios are all about: ALWAYS sell into the initial excitement! Not BUY, but SELL - we sell premium and the drop in BKS for reasons we felt were fundamentally overdone so we took advantage of the pumped up premiums on the puts and sold them to retail suckers who were panicking. Our other trade idea for a larger portfolio was to just buy the stock for $10.50 and sell the 2013 $10 puts for a whopping $3 (net $7 entry on the put side). The stock finished at $11.25 (up 7%) and the short puts fell to $2.70 (up 10%) - not bad for a day's work...
THIS IS WHY WE LIKE CASH! There are always opportunities like this but they are only opportunities if you are ready, willing AND ABLE to take advantage of them. If you have your money tied up in positions that are just treading water for them and your daily purpose in following the markets is trying not to lose any money - then opportunities will pass you buy right and left.
One of the things traders need to unlearn is the idea that it's good to be fully invested - that's just BS fed to you by Banksters, who make more money when you are more invested.
Who are the richest people in the World? Banksters? Do Banksters take money out of their own pockets or do they ask you to put yours in so they can "help" you? Why does Warren Buffett have $20Bn in cash and never likes to be below $10Bn? Why is AAPL sitting on $60Bn in cash? MSFT $41Bn CSCO - $40Bn... In fact, the top 20 companies have $488Bn in cash on the books [19], AVERAGING $24Bn EACH! Does Apple have $60Bn worth of gold? Does CSCO have $40Bn worth of oil? No, they are not idiots - they are staying in cash because NOTHING is more valuable than cash in uncertain economic times.
According to Moody's, US Corporate debt to cash ratio is at a 5-year low, at 3.06. The Fed keeps pumping money into the economy but the "job creators" aren't passing it along - they are just sitting on their piles and watching the World burn [20]. $1.2Tn is held in non-financials alone (half of that overseas, where they are waiting for a Republican President to forgive them the $200Bn in taxes they owe on the money).
Don't be fooled by the ridiculous right-wing spin that says companies are worried they won't be able to borrow (which is the logic for the Fed putting you in more and more debt in order to give sweetheart 0.25% loans to their pals) - Do you think Apple can't get a loan? Cisco? Microsoft, IBM? It's nonsense - its a good sound-byte on Fox unless you actually THINK about what they are saying.
Never in human history has so much been held by so few and withheld from so many who are in need. Capitalism is broken, and don't let this morning's 200,000 job gain in the Non-Farm Payroll [21] fool you - 50,000 people were dropped from the work-force after 350,000 people were dropped last month and last month's 120,000 was revised DOWN by 20,000 but hey, what's 20% between friends, right? Just wait until next month, when they switch to base data from the 2010 census (yes, it takes them a whole year) - that should give us a totally random number.
Teenage unemployment is still 23.1% and, if you are Black (15.8%) or Hispanic (11%), you may have a slightly different view of the economy than White People (7.5%) but Asians laugh at all of us with a 6.8% unemployment rate. 13.1M people are officially unemployed but another 8.1M people are "employed part-time for economic reasons" - in other words, a guy who lost his $40,000 job and is now delivering newspapers (taking away a teenager's job) for $7.50 an hour 25 hours a week ($9,750 a year) is not considered unemployed in the official Government gobbledygook (yes, it's a word!).
Even more telling, in December, the Average Hourly Earnings rose by 0.04 to $23.24 - but that's for ALL employees. The AHE for "private-sector production and nonsupervisory employees" was flat as $19.54. ALL of the money goes to the top while the bottom 99% - that's right, you guessed it - suck eggs. Even as I write this, idiot Cramer is on CNBC (9am) telling the sheeple NOT to listen to people like me who "drill into the numbers" and distract you from a "terrific jobs report."
Pumpmaster General Cramer wants you to BUYBUYBUY because his Hedge Fund buddies need to SELLSELLSELL and, as we all know - the entire purpose of CNBC is to act as a propaganda vehicle [22] for the top 1% - chasing the masses out of stocks when the Funds want in and chasing them into stocks when the funds want out. If you want to see correlation - chart the rise in market volatility with the rise of the Financial "News" Networks and see how it culminates in the Foxification of the Wall Street Journal - which went from in-depth analysis to headline fear-mongering faster than you can say "Rupert Murdoch's a crook."
The bottom line on Unemployment Data (see Table A [23]) is that there were 14.393M "Unemployed" people in America in December 2010 and 13.097M Unemployed in December 2011. BUT - in December 2010 there were 85.276M "Not in the Labor Force" and that number jumped to 86.697 in December 2011. So, of the 1.296M people who went off unemployment in 2011, 1.421M of them left the labor force (whatever that really means).
From an investing perspective - what it means is that people (bottom 99% people) don't have more money and won't be buying more stuff in 2012 because THEY DIDN'T GET ANY JOBS! In Table B [24] we see that those poor non-supervisory workers earned 1.6% more than in 2010 per hour and worked 0.6% more hours so, overall, 130M workers have about $50 a month more to spend than they did in 2010 - that's $6.5Bn a month (before taxes) and $78Bn a year in a $16,000,000,000,000 economy or 0.4%.
Let's keep that in mind as we watch the Dow with half of it's components at all-time highs and Europe, Japan and China all sliding into recession. If the pundits are counting on the US to be the engine that drives Global growth - it's going to be a very slow year indeed!
We're still short the Dow Futures (/YM) below that 12,350 line but too dangerous to short oil into the weekend. I still like the QQQ puts (next week $58 puts, at about $1) as I'm still concerned that Europe can melt down over the weekend but, then again, it can also be "fixed" so - CASH!
Cash is good, cash is king!
Have a great weekend,
- Phil
Check out Stock World Weekly here. [25] For examples of Pharmboy's trade ideas, including new ones from last week's newsletter, click here. [26]