Haughty, Haughty Boy! (NUS,NOC,SPY)
Much of the commentary here at Modern Bull over the years has been dedicated to preparing for a bear market – and a potentially devastating one, at that.
It has long been our belief that we’re now witnessing the mother of all bull markets, the final, euphoric blow-off top to an advance that began in the depths of the Great Depression some eight decades ago.
It’s an hypothesis shared by others, though to our credit, there are very few who are willing to stick out their necks and claim – as we do – that we still have one more ‘Old Faithful’ spasm of buying ahead of us, the likes of which has never been experienced by today’s market players.
What follows, of course, will not likely be pleasant. And we’ve been proponents of stocking up now in preparation for what’s liable to come.
Banking on Yourself
We, of course, were the first to introduce the world to the Four Gs Investing regimen – Guns, Gold, Gas and Grub, a catchy and poignant slogan that a number of ill-witted, unimaginative copycats have since gone on to pilfer.
As you’ve come to understand, the four Gs are both a way of life and an investment approach, insofar as one can both purchase these items for home use, and invest profitably in those who produce them. Taking both courses of action, we believe, offers the greatest likelihood of surviving the fallout of a deep and prolonged financial crisis that’s bound to hit once the inherent hubris and arrogance of the current system are laid to rest.
A Process of Rising Pride and Certainty
And that’s the rub.
The entire edifice upon which the current financial (and market) reality is based is cocksure pride melded with an arrogant know-it-all certitude that have no basis in reality. From increasing intervention on the part of central banks, to the excessive borrowing and spending of governments, to the so-called ‘planned’ economic management of both the developed and emerging worlds, we have simply lost our humility.
Unfortunately, when it comes to commerce, finance and trade, nearly everyone who has an influence in this country’s moneyed affairs believes that we humanoids can fix and tweak and frigger about with the tools of human action such that nothing bad economically will ever happen again.
Because while there may, indeed, be temporary methods of plastering over the inevitable breaks that occur in businesses, or of etherizing a particular sector or sub-sector of the economy until it can recover from some temporary malady, eventually the medicine only serves to exacerbate the disease, bloating the patient in grotesque ways and causing unintended stresses and growths to occur in every corner of the body financial.
This has continued now for decades, and it’s apparent to all that the patient can no longer handle the ‘therapies’ he’s been subjected to, and is currently on his way to exploding from the conceited excesses of his ‘health providers’ and the manifest cruelties he’s endured in the name of his so-called financial health.
The Disease is the Cure
The market and the economy are, in the main, self-correcting mechanisms. They follow boom/bust cycles that weed out the weak players and reward the strong. Intervening in that process in an attempt to smooth out the bumps, as it were, only brings a greater rupture in the end.
And that’s where we’re headed.
The fallout, as we’ve stated, could well involve a civil breakdown that would bring nearly all city life to a screeching halt – less so in small towns, while in the most rural areas, likely nothing likely would change.
And it’s with this in mind that we’re offering a long term trade today. We believe that as the reality of a potential fissure in our lifestyle becomes more widely appreciated, the trade we’re offering hereunder will produce sure-fire profits.
But first, we have one earlier initiative to report on.
It was opened in a letter called Where the Market Meets War that we sent out on April 5th. There, we encouraged you to buy the SPY May 18th 252 PUT for $3.72 and sell the NOC May 18th 320 PUT for $3.90. Total credit on the trade was $0.18.
And that’s precisely where it ended. Both options expired out of the money and we took home our initial credit.
In keeping with the theme we opened today’s letter, we’re going to look now at the cosmetics industry, a business that’s not only about covering over the ugly spots and making us feel less aged and worn out, it also speaks directly to the values of vanity, arrogance and pride that so typify the age and culture we live in.
It should therefore be no surprise that the industry is turning a tremendous profit, with giants like Inter Parfums (NASDAQ:IPAR) and Estee Lauder (NYSE:EL) leading the way, rising in the last six months as much as 25%.
But it’s to a different brand that we turn our attention today, a company that perhaps epitomizes the drive to be youthful at any cost. It’s NuSkin (NYSE:NUS), a $4 billion company based on the AVON model, with a global direct sales and distribution network that sells weight management and hair care products, though the bulk of its product line is dedicated to the ‘anti-aging’ segment.
Here’s a look at its chart for the last year and a half –
As you can see, the stock has moved in a rather predictable trajectory over the period, rising better than 80% and finding itself currently at the top of its trend channel after a nearly 20% move in just the last month!
And that makes for some potentially difficult treading ahead. Because even though all the moving averages are unfurled and coursing higher – with price above them all – RSI readings of late have also been flirting with overbought (in green).
It’s our feeling that the youthful shares of NuSkin are good for the duration of the bull market – but are currently due for a break in the action.
We’re therefore offering the following short strangle strategy –- Content protected for Normandy Executive Lounge, Option Trader Elite, Executive Lounge members only]
We expect NUS to range between 75 and 85 over the next quarter.
Many happy returns,