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A sampling of some of the analysis I've made that has come to pass is or happening now...
Welcome. The content below is free to the public. It might be worth what you are paying for it. Having studied economics and being in finance for over two decades, I have learned that only one thing is certain - that almost nothing is certain. As we endeavor to come up with our best analysis of the world around us, the opportunities and risks, we have to try to overcome a myriad of issues including our own ignorance, biases and emotions. What follows are my attempts to overcome those obstacles. Welcome to my view - publishing Monday and Friday afternoons.
This will be very quick before I head out to play poker, which is sort of appropriate for talking about our volatility trade (VXX).
Virtually everybody should have made money on this trade. The question to ask if you still own the calls is what now? Do you take the big profits to close out the week and see what happens or do you let it ride into another government shutdown week?
Nobody can tell you what to do here. The best I can tell you is what I did. Remember though, I manage money for other people, so I have to be very careful about "letting it ride."
Several of our VSL stocks have fallen to the lower-end or even below their assigned "buy ranges." I've discussed this long ago, but buy ranges are not absolute areas to be a buyer. Those are areas to do a last deep dive into the research in order to make a decision. Due diligence is an ongoing process.
Right now, for all the reasons I've discussed over and over, the stock market is overvalued. While we are on ice now, there is no telling how long that ice stays firm. From government to rising interest rates to trade wars to potential real wars, all on top of stretched valuations and what appears to be peak earnings, there is a lot of reason for caution.
I know that the feeling of "missing out" can be powerful. I get it all the time when I don't play a hand at the poker table or don't introduce myself to a nice woman. But the reality is that most success is found in saying "no."
I have about had it with the chasers, know-it-alls and greater fools right now. I'm telling you, the investor attitudes, lack of education and inexperience are very similar to 2007 and 1999 right now. The Millennials are in big trouble soon. They are about to get their first big fleecing. They should listen to me, I'm on their side, but boy, oh, boy, are the an interesting group.
I don't know if it's arrogance, ignorance, self-loathing, entitlement or some weird combination that makes Millennials think they are somehow smarter than those who came before them, but that is the vibe they throw off. They certainly don't like to stand on the shoulders of giants. That's how I got a boost and I think they should take the lesson.
In any case, I have three articles in the keyboard right now that will be out this weekend and early next week as a response to things I'm seeing and hearing, they are:
Here's the skinny.
I am selling the February VXX $27 calls for $2.75.
This represents a 36% gain in a little over a week.
It's a good trade, but let's not get greedy, these options move a lot and have a structural disadvantage.
I'm essentially playing with house money on the February VXX $32 calls after buying back in puts last week and selling the $27 calls as noted
His main point is that the companies are running out of new users to sustain growth and that could be a harbinger for different types of danger for them and behavior by them.
The nature of swing trades is that sometimes things swing against you. That is the case in the government shutdown not staying shut down. Our volatility speculation became a lot more speculative this morning when the Senate voted 81-18 to pass a continuing resolution to end the government shutdown for until February 8th.
I have been watching the drama in Washington D.C. over the budget. I have no real idea whether they cut a deal or not tonight, but it seems the Republicans don't have the Senate nailed down. If they don't get all but one of the Republican Senators, right now they're missing at least 3, then there will be a Government shutdown come Monday if there is no deal by then.
The only way to get Democrats on board for a budget deal is to include a deal on DACA, which seems remote, although it would be a no-brainer to do. Then again, who ever accused politicians of having brains.
So, here's where I am at. I am going to buy a few calls on the iPath S&P 500 VIX ST Futures ETN (VXX) to start a long position on volatility. Remember, this is a high risk move. We can't own VXX for longer than a month or so on options and the actual vehicle is basically a day trading security. So, this is very speculative. However, when it works, it works big usually.
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