Weekly Update Ended Feb 10, 2018
I hope everyone is well rested from the madness of last week. I also hope most of you were able to avoid the positional pain as well, as the downdraft was fast and furious.
Riddle me this, how many of your family, friends and/or colleagues have told you last week that they are moving out of stocks and into bonds because Wall Street is saying that yields are now closer to 3% than not? The answer? Not one single person would have told any one of us that they were moving out of equity and into bonds and/or switching their allocations from equity funds into fixed income funds. That is just the shite that Wall Street feeds Ma and Pa who lap it up eagerly as a reason for the sell-off.
The real reason is simple enough as far as I am concerned. The big macro notes predicting doom and gloom from the likes of Goldy, BAML, JPM had stopped working or were working only to a very limited degree (effect lasting intra-day or a day or two), so Wall Street came up with this shite. Bond yields, my axx. It's simple, most of the money-center banks and broker-dealers trading desks were probably caught short as the markets continued to climb and the firms had to come up with the next crisis as a reason to take Ma and Pa's money. So, they created a hue and cry about the FOMC being bearish (which we all know they were not) and that led to bond yields climbing and that was enough for the algos to take over.
Simple as that.
At least for me, it is. You might not agree with what I am saying or think me a conspiracy nut, however, I would love to hear your explanation for the "made on Wall Street" crash.
However, it is what it is and it is also the battlefield we have chosen, so it's all good.
Last week I wrote the following--"Will our markets correct? Of course, they will. Was the extent of the correction? Is there more to come? The answer to both questions is it remains to be seen. No one and I mean NO ONE can answer that for us except for with a guess. The markets have been on a tear in the first four trading weeks of 2018 and a pullback would be welcome by both sides, dark-side and those in the light."
So, we have had our correction (indices were down over 10% at one point) so does that mean it's "up, up and away" time?
Not necessarily, however, today could be a terrific day with The POTUS set to unveil the infrastructure investment plan.
As of February 10th, 2018, the jaysomaney.com options account is up $280,252 or 106% and the options account has a net liquidation value of $545,878 with cash of $475,971.
As of February 10th, 2018, the jaysomaney.com equity account is flat and the account has a net liquidation of $500,000, all of it in cash.
As of February 10th, 2018, the jaysomaney.com mini account is down $1,606 or 22% and the account has a net liquidation value of $5,714 with $5,268 in cash.
The combined liquidation value of the three jaysomaney.com accounts as of Fen 10th, 2018 currently stands at $1,051,592, up 36.1% overall for 2018. $981,239 is the net cash position of all three accounts combined.
Our cash position is down slightly from a week ago as I was able to add a couple of positions however if last week was the Big One and it is indeed up, up and away, I will need to deploy some of that cash quickly.
The S&P was down 5.2% (in addition to the -3.4% the week ago and were it not for the very late and last 20 minute bounce on Friday, the index would be down over 10% in 2 weeks)
The Nazz was lower by 5.1% ( in addition to the -3% the week ago)
The Dow dropped 5.3% (in addition to the -4.1% the prior week)
FB was down 7.4% (two-week loss of 7.4%)
AAPL was down 2.2% (two-week loss of 9%)
Bezos (AMZN) down 6.3% (two-week loss of 4.3%)
Flixsta (NFLX) down 6.7% (two-week loss of 9.7%)
GOOGL down 6.6% (two-week loss of 12.4%)
BIDU hammered down 7.7% (two-week loss of 18.1%)
BABA dropped 5.7% (two-week loss of 16.7%)
TCEHY down 6.5% (two-week loss of 15%)
SINA gave back 7.3% (two-week loss of 15.3%).
So, what jumped out at my team and a few investors who watch my numbers closely, is the fact that despite the markets in major turmoil the last couple of weeks, our portfolio actually went up in value the last couple of weeks. Cash is and always will be the best hedge out there. Yes, Wall Street will love for all of us to spend money on rolling hedges (via derivatives and outright shorting) but that is all a crock of shite and most folks that spout off about hedging really have no clue about the cost of carrying a rolling hedge on a permanent basis. They hear stuff on the boob tube about hedges (most of which is pure shite) and will walk around telling everyone how they were short this and short that when we have an event like we have seen the last couple of weeks. The truth--reality is far different from the shite WS peddles to investors every day. In order to maintain hedges at all times in one's portfolio, there are massive costs involved, upwards of 1%/week or so depending on the size of assets under management, and no one can bear that cost because that is a cost that goes unused almost 95% of the time if not more. Which is why even dedicated short funds underperform most of the time due to the one simple fact-they have to sit around and wait on an event (manufactured or justified) like we have seen the last couple of weeks in order to make any money from the dark side.
So the next time an investor buddy asks how much money you made on the short side when we have had an event like the past two weeks, pat him/her on the back, congratulate him/her for his "brilliance", wish him well for the future and run as far away as you can and as fast as you can.
THERE IS NO BETTER HEDGE THAN CASH.
THIS NEXT SECTION IS FOR THOSE OF YOU WHO WISH TO HEDGE YOUR PORTFOLIO-- I HAD STOPPED INCLUDING THIS SECTION HOWEVER BASED ON WHAT I HAVE READ AND HEARD FROM MY INVESTORS/SUBSCRIBERS/IMAs, I WILL MORE THAN LIKELY ALSO LEAVE THIS SECTION IN GOING FORWARD.
Use the same hedges as last week as these hedges should provide you the most bang for your money all things being equal. Buy any one or buy them all depending on the size of your account and the extent you wish to hedge your account(s).
Go Long SQQQ or buy SQQQ Calls (SQQQ is proshares ultrashort QQQ-leveraged 3x)proshares ultrashort QQQ-leveraged 3x)
Buy QQQ Puts
Buy Puts on any of the FANG names (most volatile) or short the names individually if you prefer
Go long SDS or buy SDS Calls (SDS are the proshares ultrashort S&P500--leveraged 3xproshares ultrashort S&P500--leveraged 3x
Use VIX and VIX related ETF/ETNs (extremely risky as we all saw last week)
PLEASE NOTE THESE HEDGES ARE JUST MY SUGGESTIONS. AS SUBSCRIBERS VERY WELL KNOW, FOR ME, CASH IS (and has always been) THE BEST HEDGE. IF NOT CASH, IT'S EQUITY SINCE THAT CAN BE CONVERTED TO CASH IN SECONDS.
Remember, it is you who hits the buy button or sell button each and every trade and there are no exceptions there at all.
Also, I am bringing back the following section as well after what we all went through last week as a reminder:
Please keep your positions in size with your account size (value). Most importantly please remember that I am running a marathon here and not a sprint. I am in no hurry whatsoever for any position and thus will not enter a position unless I feel the risk/reward is stacked in my favor. Yes, I will occasionally have positions work against me despite the risk/reward prior to the trade but if I was batting a thousand, none of us would be in our little room. We would all be on our own private islands. Even more important for all of us to remember that trades and opportunities will come no matter what the markets are doing.
Please, please don't roll the dice and don't bet on anyone single position without keeping the size relative to your overall account. I promise you even 1 or 2 call options at a time add up to spectacular returns over time.
There is nothing worse than seeing someone (new or experienced) blow up his/her own account by going "all in", long or short. Please avoid those sort of "investments" As my dad used to tell me all the time, "Rome wasn't built in a day".
Remember together we will all get there, wherever that may be for each of us individually.
Not a sprint but a marathon. (This is the most important takeaway for all of us) Will always hold true as far as I am concerned no matter what anyone else thinks on the outside.
Until next week, may the trading Goddesses and Gods smile on all our trades, investments and dice rolls.
Our futures are up 30 on the e-minis at the moment. We could have seen the worst of the manufactured on Wall Street "correction". The key word is "could:
We shall see.