How You Feelin’? (HYG,GS,GM)

It’s rare that we see the sun shining so brightly in the middle of February.   For stocks, that is.   In fact, can you name a time in the last ten years when a) we’d reached all-time highs in the indexes, b) consumer confidence levels were this robust, c) institutional investors were all-in, d) business confidence and homebuilder sentiment looked so rosy, e) emerging markets, like a horde of thunderous elephants, had just broken higher after eighteen months in the doldrums, and f) a stack of S&P 500 firms (36 of them – see below) just cracked through resistance into record territory?   It would be hard. Does that mean we’re living in the best of all worlds?  That the country and planet have turned a corner and are headed toward a gold tower utopia that will make all of us bottom feeders rich beyond our wildest imaginings? It’s more likely there’s something else at work here, and if you’ll permit us a Biblical allusion, we’ll offer it up thus –   “Pride comes before a fall.”   It was stated by King Solomon some three thousand years ago, and as he’s counted among the wisest of men, let’s…

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Running Numbers (XLK,IYH,GS,FCX,FAS,C,TLT,HYG,AXP,V,RSX)

We’ve got so many trades come due, there’s little time for anything else!   Let’s get right to it.   First, we’ll take a look at a trade we launched over a year ago, on the 12th of November, 2015, in a letter called The Sachs of a McMorAno.   There, we urged you to dump the commodities and move hard and bullish on the financials, using two stock bigshots to play the trade, Freeport McMoRan (NYSE:FCX) and Goldman Sachs (NYSE:GS).   The trade recommended you purchase the January 2017 FCX 10 PUT for $3.00 and sell the GS January 2017 GS 150 PUT for $4.95.  Total credit on the trade was a fat $1.95.   And now?   Wow!   First of all, we closed out the FCX PUT on the 10th of December, 2015 for a dandy $4.12 and recommended you “leave your GS PUT to rot.”   And so it did.   On the third Friday of January, 2017, the GS PUT took the chloroform, expiring worthless, and giving us a very large $6.07 on absolutely no initial investment.  We’d like to thank the academy, the directorate, the foundation and the makers of Turtle Wax for all…

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When Things Get Twisted Down Below (HYG,SPY,TLT)

Amidst all the brawling and tussling leading up to the election, several important items were pushed to the back burner that now require our attention.   But before we get to them, a quick word on the new president-elect, the market reaction to it, Whoopi Goldberg and Barbara Streisand.   Sound and Fury…   In the first place, Donald Trump won, apparently fair and square, and we wish him lots of luck trying to fix the deep, systemic problems that plague America’s financial system (snicker, snicker).  We really do.  It won’t be easy.   Second, we note that the market selloff was fast in coming.  Overnight, Dow futures registered a 1000 point loss.  That number has backed up significantly through the morning hours and reversed higher to pull the Dow within a mere 18 points of its all-time high (1/10th of 1 percent away!) – nothing like the Armageddon we’d been warned of.   Amazing, really.  In the same way the initial selloff in U.K. stocks plagued the post-Brexit vote before the LSE went on to post huge gains, so, too, will we see a tremendous climb before month’s end on the NYSE and NASDAQ.   Buy the dip, as…

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Smoke, Fire & Mirrors (Tesla,HYG,DIA)

The market is a perfect mirror of the mindset of the nation. (Tesla)     It’s not so complicated, really.   Consider: in the 1920’s a powerful liberal, even libertine trend prevailed in the personal sphere, an escapism, you could call it, and an exaggerated belief in debt financing and the constant growth required to repay it.   And lo and behold, the market at the time was characterized by an equally escapist blow-off top rally in 1928/1929, built on outlandish dreams of Gatsbean wealth and, of course, the exceedingly easy margin offered by the brokerage business of the day.  It was an era of anything-goes prosperity that fooled everyone into believing it would last forever.   Of course the whole thing ended badly, with millions jobless and the financial state of the entire planet thrown into ruin for a decade.   In a word, reality had the final say in the matter, and no matter how hard folks pined to divest themselves of what was right and true, in the end there was no escaping the bedrock that awaits every dreamy-eyed skydiver who insists on jumping without a chute.   Fast Forward a Century (Tesla)   In our case…

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Investment Basics: Fish Oil and Donuts (HYG)

We at Normandy have an outstanding track record.  Our trades since inception some eight years back have produced thousands of percentage points in gains, despite the occasional loser or brief streak without a grand slam win.   That said, holding on to one’s gains is just as important as making them, and that brings us to a crucial aspect of trading that’s rarely discussed in the investment newsletter world – the matter of cash management. In a word, cash management is everything.  Anyone who emerged a winner in the stock trading game did so on the back of a very deep understanding of the principles of cash management, of which we hope to provide you an outline below.   Ask anyone who’s wealthy who acquired his fortune by way of trading, and if he’s honest he’ll tell you he was minding his cash all the while, be he a pompous hedge fund manager or just a streetwise bloke who kept his mouth shut, his eye on the screen and never traded too big for his britches.   A Thumbnail Summary of Cash Management Principles   The ultimate purpose of a cash management plan is to avoid taking a catastrophic loss. …

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Kill the BuzzTurds! (GLD,HYG,NFLX)

Before we get down to the business of war, money and making a killing in general, we have a number of trades that require your attention.   We start with our December 1st initiative from a letter called Why Go To Hell in a Golden Hearse, wherein we urged you to sell the GLD March 109 CALL for $1.17.   Now, it goes without saying that we missed the bomb-blast higher in the precious metals that began just a few weeks after we entered the trade. So with just a week to go before expiry and the initiative in a losing position, we’ve got no choice – we’re rolling up and out.   We still believe the rise in gold was a flash in the pan (and we’ll show you why in a moment), so we’ve no problem buying the CALL back at its current $9.00 and selling the May 110 for $8.85. We recover $0.15 in that manner and prepare for further downside in gold.   Further downside?! What the sheet!?   That’s right, as the charts below show, gold bullion, silver bullion and the goldminers were hit with bearish engulfing patterns over the last week, all of which…

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Spy vs. Spy (HYG)

We once imagined a story-line for a movie we were certain would make a runaway box office hit. It pitted a pair of politicians running for President, but unbeknownst to all but the two – they were both spies!   One was a Russian agent, blonde, good looking and funny, the other a Mexican charmer, charismatic and debonair. The two hated America desperately, but put on a hell of a show to win their respective parties’ nominations before moving on to the national battleground.   The theatrics of the story, not to mention the irony – with the audience knowing that everything was not only staged and insincere, but outright diabolical – we believed would create an atmosphere of piano wire tension, as well as the potential for humor unlike any other cinematic event since Chaplin’s Great Dictator. Both leaders worked throughout the film, on the one hand, to earn the love of a lamb-like electorate, and, on the other, to deliver those same innocents to the wolves of their own nations.   Relevance?   First, we offer the idea for anyone who wants it. Go ahead – write the damned thing, call the hero Huey if you like, and…

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Follow the Leader (HYG, FB)

We’ve got a hoard of trades to run down today, as last Friday’s options expiry ushered in a bevy of new results.  We start with our HYG trade from October. Sharpen your pencils and take out a fresh sheet of paper, ‘cause here we go… On the 27th of October we wrote a letter called Launch the Dirigibles! in which we urged you to consider buying a beaten-down junk bond sector. Specifically, we wrote – We say junk got smacked because an overly sensitive, Prozac-popping news-addicted investment community can’t see the big picture sufficiently to wait out these minor storms. Nor will they be sufficiently wise to get back in early enough to capitalize on a tremendous buying opportunity. Our recommendation is to buy the junk sector using CALLs on HYG and at the same time sell some premium to offset the cost. HYG is the iShares iBoxx High Yield Corporate Bond ETF and it trades on New York. When we recommended the trade, HYG had just bounced off its bottom. Have a look at the chart – Since then, there’s been little excitement in junkland. Our recommendation was to purchase the HYG March 94 CALLs for $0.55 and sell…

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Assuaging Your Worries (XHB, GS, HYG)

The greatest risk any investor faces in a bull market is jumping early. We therefore want to dedicate this letter to reassuring you that despite all the noise, the bull is strong. And for those who are, indeed, considering selling – and even more for those who’ve yet to climb aboard, we say – We start this week’s shenanigans with a word on the homebuilders. You’ll remember that last week’s letter was all hot and bothered by the prospect of a homebuilder breakout above an ascending triangle, a technical development that normally brings with it a rush of excited buying. Well, looky here –   This is the SPDR S&P Homebuilder ETF (NYSE:XHB), and as you can see, the breakout (in red) occurred directly after our letter went out. Adding to the strength of the move, we saw the moving averages unfurl completely (in green), a development with profound long term implications for the stock and sector. With daily volumes on the rise and both RSI and MACD showing little sign of reaching ‘overbought’ levels, we believe the cruise is on for the homebuilders, and, moreover, expect the sector to ignite the rest of the domestic economy in the months…

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Nothing to Bloody Lose! (FB, HYG, GLD, CTB, AAPL, GDXJ, DIA)

Let’s get straight to business with some updates on a whole lot of trades. But before we do, a quick shout-out to good reader Jesper Markenstam, who queried us regarding last week’s Facebook/DJIA initiative. For some reason the strike of the FB CALL was not included in the recommendation at press time, and our efforts to make that known in the talkback section of the website were also unsuccessful. We pray it doesn’t happen again and thank Jesper for his insistence in the matter. As he was keen to discern, it was indeed the FB 70 CALL that we were recommending. BY THE WAY, is it true that Jesper was once a stand-in for Kiss’s Ace Frehley when the latter fell ill with a bout of mono in 1978? [click to listen] Don’t be shy, Jes…   That said, we move now to our October 27th recommendation on the iShares IBoxx Hi Yield Corproate Bond ETF (NYSE:HYG). The letter was called Launch the Dirigibles, and in it we suggested there was money to be had from buying a long-dated HYG CALL and selling a shorter dated PUT for the same price. And we have good news. The PUT expired worthless…

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