The Builders: Trump, China and the Depot (HD,XLP,XLY,XOM,USO)

The Builders: Trump, China and the Depot (HD,XLP,XLY,XOM,USO)

When the FBI demanded access to Apple’s encryption technology to unlock the iPhones of the San Bernardino terrorists, we were disturbed.  As far as we were concerned, Apple’s refusal to empower an already intrusive surveillance state was commendable. But others saw it differently.


Donald Trump, for one.


Trump went on the offensive, saying we ought to use ‘common sense’ and give the government what they need to fight the bad guys, to know if there were accomplices, etc. And that would be a great thing – to catch the bad guys. All of them. And lock them up.


But there was something unsavory about Trump’s appeal and his further suggestion that we boycott Apple products until they comply with the government’s dictate. To our minds, there’s something resolutely hollow about a government’s claim that privacy must be sacrificed for the sake of criminal justice.


In our experience, there’s always a larger, unaddressed problem that necessitates the need to pursue this type of ‘justice’. Somewhere, there’s a faulty policy, a bad practice, poorly conceived laws or just plain wrongheadedness that sets us up for intrusions of this sort, that allow, for instance, the state to listen to virtually every phone call we make, or monitor our websurfing, or follow us via drone, and then database the whole file along with our health details, music preferences and our at times obsessive penchant for porcelain deco figurines.


Hate you daddy

Quiet, Renata!


Maybe that’s what Trump has singled out in his call to halt immigration. Maybe a more or less open door policy is the bad thinking that leads directly to this ‘need’ for eavesdropping on our telephones.


Maybe. But if so, then the answer doesn’t lie in breaking down the encryption walls that secure our private chats with family and friends.   Rather, it may be as Mr. Trump sees it: to build a wall to keep out the nut-jobs.


The fellow should really make up his mind.


Like The Commies Do


The Trump story passed on the same day that a completely different item flashed across our screen – this one from the far side of the Pacific.


It came from China, where the ruling commie chieftans openly lamented that state-run media, on the one hand, and ‘unofficial’ news sites and bloggers on the other, had wildly contradictory opinions regarding the general state of affairs in that country.


Said the grand masters in Beijing –


“…[I]f the gap lasts, it will erode the legitimacy of the rule, and destabilise the root of the party and the state…”


Oh, my!


In other words, at a time when the country’s growth rate is shrinking in such dramatic fashion, there’s a need to threaten those who might think or write contra to the state’s official propagandists.


Moreover, as reported by the official Xinhua News Agency, China’s President Donald Xi JinPing ordered news media run by the Communist Party of China (CPC) and the Chinese government to strictly follow the Party’s leadership and focus on “positive reporting.”


“All news media run by the Party must work to speak for the Party’s will and its propositions and protect the Party’s authority and unity,” Xi said.

China jails

Xinhua also reported yesterday that controlling public opinion was essential for a ruling party:


“With one hand we grab the guns; with the other we grab the pens… Mobilising public opinion is the great tradition of our party.” According to Xi, the mission of the Party’s media work is to provide guidance for the public, serve the country’s overall interests, unite the general public, instill confidence and pool strength, tell right from wrong and connect China to the world.


Ok, ok, so the Donald didn’t go that far. But it’s chilling to believe that we’ve been dragged to any length toward some whacked philosophy of ‘the state for the state’s sake’, and that we would even permit ourselves to discussing handing over the keys to our most private and sacred spaces.


More on this later.


In the meantime, the lesson for investors is plain. If a country like China decides to ‘unite the general public’ and ‘pool its strength’ in the interest of a higher stock market, it has the bullets, manpower and will to do so.


The Chinese market decline is over.


Let new prison construction begin!


We’re going to close a few trades now before offering you a new one for the week.


The first is a trade we launched on the 4th of February that pitted Exxon Mobil (NYSE:XOM) against the United States Oil Fund ETF (NYSE:USO). The letter was called Taking a Stab at Oil, and there we recommended you buy the USO July 10 PUT for $1.62 and sell the XOM July 65 PUT for $1.63. Total credit on the trade was $0.01.


And even though months remain before final expiry, we say shut her down! The USO PUT is fetching $2.02 while the XOM costs just $1.20. Sell the former and buy back the latter for a net gain of $0.83 on nothing spent. Call it 453% in three short weeks.


And blow us a kiss, Renata!


Hope you loaded up on that one.


Next trade was issued just a week later in a letter called Staple those Discretionaries!, wherein we urged you to buy the XLY (consumer discretionary ETF) June 72 CALL for $2.76, and sell the XLP (consumer staple ETF) June 51 CALL for $1.29, for a total debit of $1.47.


And today they breakdown as follows – the XLYs trade at $4.65 and the XLPs at $1.73. Sell the former and buy back the latter for a gain of $2.92 on $1.73 laid out or 69%.


In two weeks!


This Week’s Action


We Just Can’t Help Ourselves. We’ve played Home Depot (NYSE:HD) nearly half a dozen times in the last few months for great profit, and we’re continuing the tradition today.


Look at her chart –

HD technical

It appears all-systems-go for HD.


  1. RSI has surfaced above her mid-way waterline, with MACD fast in tow (in blue),
  2. Price has overtaken all her moving averages (in red),
  3. The short term moving average has ‘scooped’ price (in green), and
  4. We appeared to have passed an initial test of support at $123 (black arrow).


For that reason, we’re buying a CALL on Home Depot and selling PUTs to pay for it.

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Options Trader Elite recommends you purchase the HD March 24th 126 CALL for $2.88 and sell two (2) HD March 24th 119 PUTs for $1.40 each. Total debit on the trade is $0.08.


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Many happy returns,


Matt McAbby

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