Month: March 2018

Bears Buckle Down. $AMZN $NFLX

So, the market finds itself in correction territory once again. That’s when the averages are down about 10% but not yet 20% which would be a Bear Market.  

The most recent selloff is being ascribed to the ‘Facebook Data Breach’. But in late January when the market started to roll over it was fear of inflation, manifested in good job numbers. We were just getting that behind us when President Trump tweeted that ‘trade wars are good and easy to win’.  

The real question is whether or not these events are really the cause of the sell off, or when the market sells off do we just look around and pick what we think is the cause. 

Take this morning, AMZN was down, below 1400 at 11:30. Why? Well CNBC’s answer was that Trump was going after Jeff Bezos because of his ownership of the Washington Post. Clips were played of him saying exactly that. 

Problem is, those clips were old, like 2 years old. He didn’t say them yesterday. In fact they could have played those clips on March 18 when AMZN was ringing the bell over 1600. 

I believe sometimes the market sells off, takes a breather, gets a bit nervous for absolutely no reason. Then the sentiment changes. It can happen both ways, up and down. 

However, the Bears always know the reason because they have been crowing about them all along. I’m sure you could find lots of Bears on March 18th saying AMZN was overvalued. 

Being Bearish always sounds smart. Bears are all about you not losing money, about preserving your portfolio and about getting a better price. Bears like technical analysis or fundamental analysis because you can find a Bear case in either one. 

But making money trading requires that you take some risk, that you put some money in a few areas that don’t fully make sense and is not obvious. 

Josh Brown retweeted a David Wilson (@TheOneDave) chart a couple of days ago. In 2003 when NFLX was mailing DVDs out one at a time, it would have been hard to imagine that today NFLX would have a market cap bigger than GE. 

I didn’t see that coming, did you? 

You know who else didn’t see it, for sure? NFLX Bears. 

I live in Austin, Texas. I want to thank the FBI, the ATF and the Austin Police Department for their hard work. We all owe them our gratitude.

If you have read my blog over the last few months, you know I really try to avoid commenting on the political climate now in the US. As far as investing and trading goes, I think it is counterproductive to do so. 

Recently, many in Washington have denigrated the FBI and the Justice Department, eroding trust in these institutions. I think this is dangerous. 

I probably wouldn’t comment on this today, but I live in Austin and there have been 4 local bombings and 1 bombing in a Fedex facility just south of Austin.  

There has been a HUGE influx of federal agents into town, according to our local news channels. This includes agents of the FBI and the ATF. 

I want this to be over as soon as possible and I believe it will only come to an end after a lot of work by these federal agents as well as our local police. 

Those of us here in Austin, as well as everyone else in this great country owe these law enforcement agents a huge debt of gratitude. 

The Middle Path $SPY $QQQ $IWM $DIA

It’s getting close to about six weeks since the start of the correction. SPY went from about 285 in the final days of January 2018 to a low of about 256 on February 9 or 10. 

There was a rebound to about 275 around February 25 or so and then another pull back to 265 around the first of March. 

Another rally to 277 and now we sit about 275. Let’s take a look. 

Here’s what I see, this looks like a couple of higher highs, after the pull back of course, and a couple of higher lows. This assumes this low holds at 275. 

Providing this happens I think we ultimately get back to the rally and a new high, maybe before the end of this month or the next.  

But until then I am banking a bit on us trading within a range from 275 to around 283. 

Since I am net long the SPY I am selling call credit spreads every time we have an intra-day rally. At the end of the day and selling occurs these spreads fall in value. 

Should we have more of a pull back, I will sell corresponding put credit spreads expiring on the same date as the call credit spreads and thus create iron condors for that date. 

Stocks can go up or go down or they can do the unthinkable. They can go sideways.  

Kevin O’Leary on buying Twitter $TWTR, “I just don’t get it.”

Well, duh! 

Can anyone be surprised when Mr. Wonderful can’t find it in himself to buy TWTR (or NFLX, AMZN . . . . ). He states that you look at the balance sheet and it’s a “piece of . . . well you know what I want to say”. Yeah, Kevin, we know. You mean piece of shit.  

I’ve said it before. I have experience with people like him. He’s an old white guy, very full of himself. Sometimes wrong, but never in doubt. I’m a doctor and a lawyer. I’ve met and I know plenty of people like him. 

Well, because I’m a moron I bought TWTR when it was around 32 and change. I even bought call spreads in it, you know, because I like to buy pieces of shit.  

Old white guys tend to use these platforms less than millennials and have less appreciation for the potential of these platforms. If I am going to follow someone’s recommendations about these types of names, it is not an old white guy pushing his own conservative ETF.  

My investment in TWTR was recent and it was based on a recommendation by Josh Brown, a millennial. As I said it was trading around 32 and change and he recommended a stop at 30. This was on Feb 22. My investment is up about 12% 

Contrast that with Kevin O’Leary’s trade on Boeing BA. It was trading about 350 on Feb 22, today about 327. 

Why do I pick on Mr. O’Leary? Maybe because he’s an old white guy who has no curiosity about the future, with no ability to admit that he could be wrong. 

Does this remind you of anyone else? 

 

@kevinolearytv 

Why Carter Worth is (probably) Wrong about Facebook $FB $TWTR

A very long time ago I decided I wanted to write some fiction. Rather than just haphazardly spending a lot of time writing, I decided I wanted a bit of help. Unfortunately, this was before Google and the only web searches one could do was to use services that compiled and indexed websites. Anyone remember Dogpile? It was advanced for the time, being a compilation of compilations, a meta-search engine.  

So, I went to my local Barnes and Noble and looked for books and came across a book by Stephen King called ‘On Writing‘. It was really, really good. But one of the main takeaways I remember is you have very little hope of being a good writer if you don’t read and read a great deal.  

On this past Options Action (3-9-2018) Carter Worth recommended selling Facebook. It seems his favorite technical indicator is whether or not the equity is underperforming the S&P 500, or underperforming their sector, in this case the $XLK or technology sector.  

I discount this analysis on its face. A technical analyst can say a name is an underperformer and will continue to do so, like CBW does here, or there will be reversion to the mean and outperform.  

That aside, I disagree with this analysis on more fundamental grounds. On January 12th of this year FB announced it was changing its algorithm which would result in less engagement with its users. FB fell 4% that day, understandably because investors that know the product know this could result in less advertising revenue. I was a buyer on that day, and a seller of put credit spreads. 

Why? Because I am an old white guy that uses Facebook. I was unhappy with looking at FB and seeing radical political views from either side and then realizing sometime last year that these were being sent to me by bots. The fact that FB was changing its core business meant they were serious about changing it for the better, so they could continue to make money.  

Since that time FB regained highs up until Feb 1 when the market took its hiatus from advancing. It has consolidated since but over the last week has stayed with its technology brethren.  

Carter Worth makes no mention of this huge announcement about changing algorithms probably because he has no FB account or is even vaguely aware of how it works. I think this is the reason the name has underperformed and why it may actually out perform in the future. I may not be a committed bull on FB, but I am certainly not a bear. 

PS – Dogpile still exists, I assumed they disappeared with many of the early compilers. For a great fictionalized look at this time see the last season of ‘Halt and Catch Fire’ S4E9 here. It’s the one where Yahoo! ends being on the Netscape portal page.  

PSS – kudos to Guy Adami for admitting he was wrong on Friday’s show about the market retesting the low. Contrast that to Dan Nathan making no mention of the put spreads he admitted to buying earlier in the week in SPY, QQQ and IWM. Dan didn’t even come up with a final trade. Just said goodbye and good luck!