This
Week in Barrons – 6-29-2014
Who let All these Sheeple into My room?
You’ve heard the old
adage: When a man with money meets a man with experience – the man with money
ends up with experience – and the man with experience ends up with all the money. The bad news is that first quarter GDP
estimates (that were for +0.1% growth) were revised downward to a NEGATIVE 2.9%
this week. Yes, the U.S. economy SHRANK
by 3% in the first quarter of 2014. And
this week, when the President addressed ‘The Sheeple’ (the J.Q. Publics of the
world) – he blamed the ‘slight miss’ in the GDP number on – wait for it – ‘The
Weather.’ Revisions of this magnitude
are a way of ‘publishing reality’ after feeding ‘The Sheeple’ a load a crap. This constant ‘blame it on the weather’ and
the ‘data is noisy’ has caused me to re-examine my perspective on the economy.
-
Do I think
the market is just a ‘Bit Frothy’, and I a little worried about a major correction?
If so – then buy some protective PUT options and go on with my life.
-
Do I think
that things are a little more severe, but not yet in the ‘Epic Chance of a
Major Meltdown’ camp? If so – then I
should just cut my debt levels, save as much money as I can, and ‘ride it out’.
-
However,
If I think that the ‘Big One’ is coming.
That is to say: I have examined the real numbers, the frauds, the
manipulations, the market distortions, the debt levels, and have decided that a
massive global currency and economic crash is pretty much ‘In the Cards’. Then I asked myself: What should I invest in
that will get me through those times?
We all need to take the time to try
and decide for ourselves just where we sit concerning ‘the scope’ of our
economic situation, but if I'm right:
-
There is
going to be a currency crash.
-
The
world will shun the dollar to the point it loses its reserve currency status.
-
And when
the world no longer needs U.S. dollars to buy energy and to perform international
trade, we (the U.S.) are in a heap of trouble.
Remember, hundreds of nations around
the globe have tried to print their way out of trouble and into prosperity. It has never worked. So, why has the U.S. been able to print so
much money and still ‘appear’ to be limping along? Well, if you're a solitary
country – not part of the global reserve standard – and you print money:
A.
You will
distort your internal country’s values – which will cause inflation.
B.
You will
be unable to value your exports efficiently – which will cause bondholders to
go crazy (knowing more inflation is coming).
C.
You
will shut down sovereign trade – which will cause you to ‘rinse ‘n repeat’ until
your nation goes bankrupt.
The U.S. has held a very interesting
position for the past 60 years. Its
currency has been ‘in demand’ globally due to its status as the world’s reserve
currency. Why is that important? A global reserve currency is a currency that
is held in significant quantities by governments and institutions as part of
their foreign exchange reserves, and is the currency that is most commonly used
in international transactions. But in
addition to that, the U.S. has held an even higher position due to a deal it made
many years ago with the Saudi's and the OPEC nations. The ‘petro-dollar’ deal guaranteed that oil
from the Middle East would ONLY be sold on the world stage in U.S. dollars.
Every nation needs oil. So when you have a ‘sweetheart deal’ that
requires every nation to first obtain ‘U.S. dollars’ via foreign exchanges to
buying oil – you have an ‘artificial’ demand for U.S. dollars that would NOT be
there without the existing petro-dollar setup.
Therefore, the U.S. has been able to print dollars and export our
‘inflation’ around the world. And the
world has been forced to use our dollars if they want energy.
Well, ‘Times – They are a Changin’. The world is tired of our constant printing
and their austerity suffering, while we live ‘high on the hog’ printing dollars
and running up trillions of dollars in debt. The world is tired of being dollar slaves and
yearns for currency freedom. That means
that one day (fairly soon) we’re going to see the Saudi's and OPEC openly declare
to sell oil for alternative currencies such as the Yuan, Ruble, Euro, Peso,
gold and silver. The very minute that
news hits the wires – no one will need to hold U.S. dollars any more. The world will instantly flood the system
with U.S. dollars, the dollar index will decline, and we will then become just
another Argentina & Zimbabwe.
So, what do you do about it? And perhaps more frightening is: how bad
could it really get? If you’re a hard-working individual, with a good to
excellent middle class income and some ‘savings’ – then things are going to get
‘exponentially’ tougher. I would expect
gold first and silver second to increase in value enough to offset the crush of
the dollar devaluation. Last week I
mentioned ‘good real estate’ and I should have qualified what I mean by
‘good’. While it’s generally a great idea having a
property and letting someone else pay for it – unfortunately in difficult
financial times your ‘renters’ will often NOT be able to continue paying – and
it’s incredibly difficult to evict tenants when they stop paying.
The two forms of real estate that
I've found to be bullet proof are: (a) land that is rented by the U.S.
government, and (b) land that is leased to farmers. So, if we don’t collapse into total anarchy,
and the basics of the infrastructure continue to function – then having a good
stock of PHYSICAL gold and silver coins will help you immensely. They've printed $29 Trillion to buy stocks,
thus saving the rich from the embarrassment of losing money. This time
however, it's the printing that's CAUSING the problem. When the collapse hits, printing more money
won't fix it – only time and working through the fundamentals of a new economy
will supply the solution. If you believe
that a NEGATIVE 2.9% GDP in the first quarter of 2014 was caused by ‘bad
weather’, and there is (according to Ms. Yellen) ‘no inflation – just noisy
data’ – then completely disregard all that I’ve said above – and by the way –
‘I have some land in Florida (and a bridge in New York) that I’d like to sell
you.’
The
Market:
Before I get into the market, I
would strongly recommend that everyone sign up and read Michael Williams’ blog
on a daily basis: http://marketpreview.silexx.com/. How Michael can turn out (day after day) high
quality information like this is just beyond me – congrats to him.
Last Sunday we suggested that the
market may see a bit of red as they work off the previous week’s pop higher. Well, that's exactly what happened – as the market
sank on the week.
Factually:
-
Mortgage
apps fell 1% last week, on the heels of the previous week’s 9% drop.
-
First
quarter GDP came in at NEGATIVE 2.9%, the worst first quarter since 1958. Remember
when I was skeptical of the Fed's cutting QE because for the first time in
their history they'd be cutting a stimulus program in the face of weakness.
Well, you can't get much weaker than -3%. The good news is, with the horrific GDP data,
there’s virtually no chance that the FED will raise rates this year.
-
President
Obama is pushing for more sanctions against Russia.
-
Monsanto’s
stock jumped $7 (not because of earnings, new R&D, or expansion) – but
because they’re using ½ of their total market cap to BUY BACK their own stock.
-
In Venezuela
the electricity has been drastically shut down.
-
Argentina
has all but defaulted, and Putin is scheduled to go there in July. Yet another potential member of the ‘Dump the
U.S. Dollar’ Club.
-
Iraq
and the Ukraine are still – well – Iraq and the Ukraine.
On Monday this week, we mark the end
of the 2nd quarter of 2014. I
would expect some window dressing – meaning brokers buying the stocks that did
well and selling the stocks that didn’t.
On Tuesday and Wednesday we should see the effects of some 'new money’
coming into stocks. So I think we trade
sideways to higher into Thursday’s initial jobless claims and non-farm payrolls
reports.
Thus far they've been able to
engineer a magical levitation of the markets in the face of everything that's
going on. I expect this to continue on
into the mid-term elections in November – with a few 2% pullbacks sprinkled in
for effect. But remember that anything
could be that proverbial ‘last snowflake’ that lands and causes the avalanche. Just because they want it up, doesn't
preclude the fact that something massive can go wrong.
Tips:
I’m getting better at announcing trades, but I
really have a ways to go. I make (roughly)
20 trades a day, and announcing them via Twitter and StockTwits is tougher than
what I thought. But, I am getting
better.
When I talk of ‘stock manipulation’ – there was
nothing finer than the manipulation of MNKD stock following their receipt of
FDA approval on Friday. The FDA
announced their approval with a ‘badly worded’ release at 3:28 pm on
Friday. With the wording of the release
– the stock plunged from $10.50 to $8.20 in virtually 5 minutes – on volume
(roughly) equivalent to Apple’s entire trading day! Following that initial move downward, the stock
miraculously moved back to $10 and then to $11 (with a re-worded FDA message) in
after-hours action. Allow me put forth a
potential scenario:
-
If you are the the CEO
of MNKD, you need to make sure that your stock does NOT go ‘thru the roof’ upon
FDA approval. [Estimates were for MNKD
to rise to between $16 (a 60% gain) to $48 (a 400% gain) per share upon FDA
approval – and then result in a huge ‘sell the news’ collapse directly
following the rise.]
-
Gains to these
levels (if they held) would make partnerships and merger opportunities difficult,
and stock ensuing collapse would make those same discussions problematic.
-
At the same time,
you need your stock to increase because your balance sheet is becoming
‘squeezes’ – and you do have ‘short-term cash’ obligations on the horizon.
-
Now, hypothetically
you could ‘work with’ the FDA on wording of their original announcement (in
such a way) that would allow you to initiate a SALE of your own stock –
starting the dominos to fall.
-
And once your stock
hit a pre-arranged level ($8.20 for example), you again come in with a hint of
a re-worded announcement and cash to buy the stock (at these reduced levels) –
and thereby trigger the ensuing 25% increase from $8.20 to $10 per share before
the close.
-
This would have
limited your upside (and not priced you out of the partnership – merger
market), and would have garnered you the quick $32M (16M shares * $2 per share
increase from $8 to $10/share) that you (MNKD) needed for your cash obligations
going forward.
-
BRILLIANT – simply
a work of art!
This week I’m looking to SELL premium PCS (Put
Credit Spread) on the following:
-
COST – weekly &
daily squeeze = Directional, October $115 calls
-
AAPL – 15 min &
4 hr squeeze = Directional, October $85 calls
-
FEYE
– hourly squeeze = Directional, July $37 calls, AND July (monthly) PCS $37 / 35
= $0.25/share
-
BWLD – weekly
squeeze = July (monthly) PCS
$150 / $140 = $0.50/share
-
CMG
– hourly squeeze = July (weekly) PCS $577.50 / $572.50 = $0.52/share
-
GOOGL
– hourly squeeze = July (weekly) PCS $577.50 / 572.50 = $0.65/share OR $575 /
$570 = $0.45 OR $572.50 / $567.50 = $0.30/share
-
PCLN
– 4 hour squeeze = July (weekly) PCS $1170 / 1162.50 = $0.65/share OR $1167.50
/ 1160 = $0.57/share
-
TSLA
– hourly squeeze = July (weekly) PCS $227.5 / 222.5 = $0.40/share
-
VIPS
– 4 hour squeeze = July (weekly) PCS $180.00 / $175.00 = $0.40/share
Reviewing our Past Week’s Performance:
-
Our directional
Calls and our PCS (Put Credit Spreads) did very well indeed for us last week –
and continue our assult on a 20% return à FOR THE MONTH!
-
Mannkind
Pharmaceutical (MNKD) – will be interesting on Monday. The Options market is telling us that it
should settle around $14 per share.
-
Durata Therapeutics
(DRTX) – closed at $17.26 on Friday – allowing us to pocket the entire premium
that we sold. We’re continuing to hold
onto our position a little while longer.
-
My energy portfolio
(comprised mostly of small energy companies) continues to improve nicely (see
below):
My
current short-term holds (returning
> 15.7% for June) are:
-
**DRTX
(Drug) – in @ $13.67 – (currently $17.26), 27%
increase
-
**MNKD
– in @ $6.35 – (currently $11.00), 73%
increase
o
(Continued
Income Plays here…)
-
AKRX – In @ $30.96 – (currently $31.71), 2% increase / 3 days
-
AMKR
(Energy) – In @ $9.43 (currently $10.88) 15%
increase / mo.
-
ASX
(Tech) – in @ $5.81 (currently $6.51), 12%
increase / mo.
-
BAS
(Energy) – in @ $25.94 (currently $28.32), 9%
increase / wk.
-
ETP
(Energy) – in @ $57.60 (currently $57.61), 0%
increase / 2 days
-
FET
(Energy) – in @ $30.53 (currently $36.26), 19%
increase / mo.
-
GTAT (Tech) – in @ $18.09 (currently $18.2), 1% increase / 2 days
-
HK
(Energy) – in @ $5.25 – (currently $7.14), 36%
increase / mo.
-
KOG (Energy) – in @ $12.98 – (currently $14.45),
11% increase / 2-wk.
-
LNG
(Energy) – in @ $57.40 – (currently $69.95), 22%
increase / mo.
-
PQ
(Energy) – in @ $5.87 – (currently $7.50), 28%
increase / mo.
-
**PVA
(Energy) – in @ $14.57 – (currently $16.71), 15%
increase / mo.
-
**RFMD
(Tech) – in @ $7.96 – (currently $9.36), 18%
increase / mo.
-
SPIL
(Tech) – in @ 7.20 – (currently $8.12), 12%
increase / mo.
-
UIHC
(Insurance) – in @ $16.81 – (currently $16.61), 1% decrease / mo.
-
VTNR
(Energy) – in @ 7.35 – (currently $9.95), 35%
increase / mo.
-
SIL (Silver) – in at 24.51 - (currently 14.02)
– no stop,
-
GLD (ETF for Gold) – in at 158.28, (currently
126.75) – no stop ($1,316 per physical ounce), AND
-
SLV (ETF for Silver) – in at 28.3 (currently 20.16)
– no stop ($20.96 per physical ounce).
To
follow me on Twitter and get my daily thoughts and trades – my handle is:
taylorpamm.
Please
be safe out there!
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