DR JOHN (DR,XLK,PRI,MTD,IWR)
Our good friend, Matt McAbby, wrote in last week’s Options Trader Elite about a scenario that he referred to as the ‘non-bear’ market. That is, the possibility that the current bull run in equities would continue until… well, there was no market anymore!
He was referring to a complete shutdown in trading that he suggested might continue either temporarily or, conceivably long enough to count as permanent because by the time everything was up and running again, the new reality would have rendered the whole project superfluous.
McAbby’s contention was that the possibility of an attack on American soil, either conventional or non-, is not a risk that investors pay enough heed to, let alone plan for, and he believes that’s a mistake. He elaborated that we should start now, slowly and methodically, to prepare for such an eventuality.
His chosen path was to begin the move back into precious metals – after almost seven years deriding that ugly puppy – as the signals now appear to be pointing toward higher prices for the gold and silver.
And while we share in his belief that gold and silver are certainly worthwhile investments at this stage of the cycle, we want also to take Matty’s argument one step further, and recommend another, equally important course of action for those interested in the well-being of their families and communities at large.
We want to suggest that because the future was never so uncertain, it behooves us all to return to first principles and consider those basic necessities we rely on to get through the day. We’re talking about food, clothing and shelter.
As we’ve reported to you on numerous occasions, the coming migration of people from cities to more rural hideaways has already begun, is healthy, and, as we’ll soon find out, absolutely necessary. If you haven’t already secured a small patch of dirt in the country where you can stable a few goats or sheep and plant yourself a robust garden, you’re behind the curve. For those who don’t have the resources to do that, or who need some time to get it going, we would encourage you to commit all your energy at this stage toward that end, even in your own backyard.
After a few years of practice, any family of four or five can live independently off the land, or at least significantly supplement their basic needs, by producing something of intrinsic, tradeable value, either to consume, sell or barter with.
And that’s key. We’re not whole hog preppers here, but we’ve seen the light. And life is a lot easier under crisis circumstances if you’ve got what’s known as an operating farm or homestead, and you’re not reliant on the kindness of strangers to fulfill your basic needs.
We repeat, that an acre of dirt with a woodlot of no vast expanse is an investment in your future that’s without parallel. And even if you never use it, you can be sure that the demand for such properties in another five to ten yers will be galactic.
The Coming Dislocation
America may be made great again, and could well grow in stature and wealth for many years to come. But there are structural and systemic issues that plague our nation and economy that are now reaching their respective break-points.
We won’t delve into it to deeply today, but suffice to say that both in the socio-economic sphere and the politico-cultural, we’ve seen a polarization of our nation that we’re growing less optimistic will be resolved in a peaceful, evolutionary manner.
And that’s besides any potential foreign threat that McAbby alluded to.
We’ll have more to say momentarily on the proper way to invest in the new reality, but first we’ve got three open trades to report on.
Lay it down, Huey!
Our first item oin the docket is from a letter called Wonderful World of MidCaps that we penned back on November 14th. There, we urged you to you buy the IWR May 18th 210 CALL for $3.10 and sell the MTD April 20th 730 CALL for $3.30. Total credit on the trade was $0.20.
The IWRs are going for $7.40 and the MTDs for $4.17. Sell off the former and buy back the latter and you score $3.43 on nothing spent. Adjusted for minimal commissions gives you a take of 2187%.
A week later we opened an initiative using Primerica as the base. The letter was called Normandy Exec Charged With Manspreading… and in it we recommended you consider a) buying the PRI December 15th 95 PUT for $1.10 and selling the PRI December 15th 100 CALL for $1.35, for a credit of $0.25, and b) buying the PRI June 15th 100 CALL for $7.30 and selling three (3) June 15th 85 PUTs for $2.40 each. Total debit on part b) is $0.10. Taken together, we earn a credit of $0.15.
On December 4th in All Hail the Dipstick Trade, we sold the PRI June 15th 100 CALL $9.20. Subsequent to that, all the December options expired worthless. And today we’re closing out the three short June 15th 85 PUTs.
They sell for $1.10.
Buy them back and you net $6.05 on nothing spent. That’s a fantastic 3933%.
Take it to the bank!
Finally, just last week we wrote a letter called Two Cent Technology Trade in which we told you to consider selling the XLK September 21st 63 PUT for $2.03 and buying the XLK September 21st 73 CALL for $2.05. Total debit on the trade was $0.02.
Today, the PUT goes for $1.56 and the CALL for $2.54. Buy the PUT and sell the CALL and you net $0.96 on a two cent outlay. That’s a one week return of 4800%!
And Now We Wrap!
Among the best ways to play the coming return to small time agri-living is via iconic tractor maker John Deere (NYSE:DE). We’ve liked the company’s fortunes for a while now, and a recent pause in the stock’s rise offers a perfect point of entry.
Have a look –
This is DE for the last six months, and the unfolding pennant pattern (in red) is clearly bullish. On the weekly chart (inset), a bullish engulfing pattern offers another, longer-term buy signal. And finally, RSI and MACD offer no indication the stock’s overbought; they’re both muddling along close to their respective waterlines.
All of which means we’re going combine profit harvesting today.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
Wall Street Elite recommends you consider buying the DE September 21st 165 CALL for $13.15 and selling two (2) DE September 21st 150 PUTs for $6.80 each. Total credit on the trade is $0.45.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
With kind regards,
Hugh L. O’Haynew