2017: Year of the Hair-Ball (HD,LUK,HSY)

2017: Year of the Hair-Ball (HD,LUK,HSY)

With 2017 but days away, we feel it appropriate to take a moment to offer a few thoughts on the year to come, and to wax a tad introspective.


It won’t take too long.


We do it because the world is not just about investment money and the ‘pursuit of happiness’ (as our Founding Fathers euphemistically called it).  There’s also the healthy suffering and sacrifice that we invest in our families and children, in our communities and the institutions we hold dear.  For them, no amount of sweat and toil is too much.  We love and appreciate them, and so we stick our necks out, bend and wrack ourselves, going sleepless and aching for their sakes, in order to create a world that we hope will be better and safer and more humane for our efforts.

This coming year will test those commitments.  There will be both private and publicly sponsored efforts to distance us from what we love and cherish, and to render how we choose to commit ourselves to what we love and cherish as, if not downright illegal, then certainly immoral.


You will feel the press from forces near and far to abandon what you know is right and true and just.


You will also hear the most crazed slogans repeated time and again as homespun truisms.


And you’ll be shocked.


But it’s not all bad.




Because such pressure always serves, in the end, to test our mettle, to help us forge a renewed spirit toward what we believe in and know to be right and worth battling for.


And that’s always good for us.  The battle will always be won by those with greater resolve, and in challenging our resolve, those forces that desire to break us will only strengthen our determination to succeed.


And help us bring home the laurels.

On the other hand, efforts to undermine what we believe to be healthy and eternal also assist us in exposing those forces arrayed against us, revealing to us the individuals and groups both corporate and casual that have an agenda that’s opposed to ours.


And there’s value in that, too, even if it does lead to the shattering of some long held illusions.


Because we don’t want to believe that Philippa, the librarian, and Lou, the short order cook, don’t believe what we believe, let alone that they might take such a hostile view of it.  Nor do we have any desire to lock horns with the school board or the local Rotary Club.  Live and let live, we always say.


But it won’t work that way.


What you took for granted to be apple pie isn’t the same sweet dessert you grew up with – at least not for a great many Americans these days.  And you’ll soon find that out.


There will be a great clarification.  And everyone will show their true colors.


2017 will be the year all the hair-balls get belched up.  Keep yer eyes wide…


And remember who’s on which side.


Trading Fury!


Before we get to this week’s trade, we’ve got just one open initiative to consider.  It was presented two weeks back, on the fifteenth of December, in a letter called Cancel the Rally! The Prez is a Ruskie!


There we urged you to consider a pairs trade that matched the most popular Wall Street analyst picks against their least popular counterparts.  Yes, and you guessed it, we sold the prospects of the most hyped and best touted, Leucadia National Corp. (NYSE:LUK), and bought into the loser of the bunch, chocolate maker, Hershey Co. (NYSE:HSY).  The former had a perfect 100% of Wall Street’s analysts offering BUY ratings on the stock, while the latter had a mere 4.8% on its side.


And our instincts (and technical analysis) on this one was bang on.


The advice we offered was to buy the LUK March 24 PUT for $1.50 and sell the HSY February 95 PUT for $1.45.  Total debit on the trade was $0.05.  And after just two weeks, the LUK is trading for $1.30 and the HSY for $0.75.


We advise you to shut her down.


Sell the former and buy back the latter and you net $0.50 on $0.05 laid out.  That’s 1000% in two weeks.

And now we move directly to the play of the week.


It involves the housing sector, which we’ve highlighted in the last couple of weeks, surprised as we were by the number of home sales that have been transacted according to the latest data.


As it turns out, homebuilders, too, have been positively affected by the data, and are recording some of their most joyous sentiment readings of the last two decades.


Have a look here –

The National Association of Home Builders records its collective giddiness on a monthly basis, and as you can see, the latest results have surged to levels unseen since 2005.


Even Wall Street was caught off guard.


The consensus forecast was for this month’s read to match November’s indication of 63, while the actual reading surged to 70.  That’s the second largest beat relative to expectations going back to 2003.


And it should only get better in the near term.


As rates begin rising, it behooves anyone considering a home purchase to act now and lock in some of the cheapest financing of the last century.


Real estate should experience a strong boost in 2017, and that means companies like Home Depot (NYSE:HD) are going to thrive.


Have a look at her chart –

We like what we see here, as RSI and MACD are bullish but not overbought (in green), and good buying support comes in at 130.

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Many happy returns for the New Year!


Matt McAbby

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