Friday, December 15, 2017

12/15/17-> Raging Bull!

The overnight bump in futures apparently presaged Marco Rubio's 'No'->'Yes' turnaround on the tax bill.  It's amazing how quickly markets price in these types of things.

http://thehill.com/homenews/senate/365147-rubio-now-a-yes-on-the-gop-tax-bill

That's a game changer, one which I don't think the subsequent +160-point rally in the DJIA fully prices in.  Sure, it's possible the relatively tame reaction means the market has incorporated a 'sell the news' effect into tax reform, but the effect of tax reform (and deregulation) is vastly understated.  Here's a great WSJ opinion piece penned by Maria Bartiromo last night:

Here's the correct link to the Maria Bartiromo article:

https://www.wsj.com/articles/dow-24000-and-the-trump-boom-1513294061

A thoughtful and though-provoking argument re the Trump effect on markets.  Here's the paragraph I like most (note the last sentence!):

Year One has been nothing short of excellent from an economic standpoint. Corporate earnings have risen and corporate behavior has changed, measured in greater capital investment. Business people tell me that a new approach to regulation is a big factor. During President Obama’s final year in office the Federal Register, which contains new and proposed rules and regulations, ran to 95,894 pages, according to a Competitive Enterprise Institute report. This was the highest level in its history and 19% higher than the previous year’s 80,260 pages. The American Action Forum estimates the last administration burdened the economy with 549 million hours of compliance, averaging nearly five hours of paperwork for every full-time employee.

Back to leaning bullish.  That's why they call it a market dance-> I'll make as many U-turns as necessary based on crowd behavior/ price action, which can change on a dime multiple times within short periods of time.

(a) Reopened both FXI ('H' Shares) and ASHR ('A' Shares) on the news, at approximately -1% discounts to Thursday's exits.

(b) The harder decision is reopening VEIEX/ VTWSX at the close.  Based on current prices for EEM/ VT, my reentry price for VEIEX will still lie below Wednesday's exit, but there's no question I'll be buying back into VTWSX at a premium (also no question that having exited on Wednesday rather than Thursday makes it easier, as the premium over Wednesday's close may be less than 0.2%.

Investors will digest the news over the weekend.  I think they'll return on Monday to drive prices much higher.

23 comments:

  1. USO is not breaking down on the 3-month chart, and XOP is also doing well. So I decided to pick up some more BTE at $2.75

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  2. NVTA finally hit my sell limit at $9 for the shares I purchased at around $8 via CBMX. I also have sell limits at $9.50 and $10.

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  3. GDX went straight up since the moment I sold January $21 puts on it at $0.41 each. I just covered those puts at $0.06, so that in case GDX pulls back, I could re-open them.

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    1. Should have sold $22 puts on it -- would have pocketed much more money that way...

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  4. A rising tide lifts all boats, even the leaky ones like BTE. Placed a sell limit at $3 for the shares I purchased at $2.75 a couple of days ago.

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  5. A second gap-up open did not materialize, which materially changes my outlook.

    As of Thursday's close, the portfolio was back to new YTD highs (after a one-week gain of +1.8%). I sold all non-mutual fund positions this morning at the open: EEM (emerging markets), FXI ('H' Shares), ASHR ('A' Shares), EWZ (Brazil), PBR (Petrobras), BABA (Alibaba). Plan to close VEIEX/ VTWSX end of day.

    One advantage to being a small player is that I'm able to reopen positions at any time and for any reason, an option I may exercise later today or next week. Looking ahead to 2018-> SPX 2860 (a +6-7% gain from here) definitely in play.

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    1. I'm already having second thoughts about having cashed out. The markets are indeed overbought, but so what? 2017 has been a tremendous year, and traders may pull out the stops to ensure it eclipses 1995.

      Trading occurs in real time, and I'm required to make 'on the spot' decisions every day. I happen to enjoy doing it!

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  6. There is some action in the dog house today! After lagging behind the ETFs, BTE is catching up the lost ground! It hit my sell limit at $3 for the shares I purchased at$2.75.

    I was afraid that traders finally started paying attention to it's huge debt and decided that it isn't worth a penny, but it looks like that moment is still some time away. :)

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  7. Scaling back into positions closed on Friday-> starting with BABA (Alibaba), off -4 points or -2.35%.

    Plan to reopen VEIEX/ VTWSX, which based on current pricing for EEM/ VT may occur at slight discounts to Friday's exit.

    What's changed in the past four days?

    (a) A -1% retracement in the Shanghai Composite on Monday (deeper declines in the Shenzhen on both Monday and Tuesday). The Composite recovered completely on Tuesday.
    (b) A -0.54% decline in South Korea.
    (c) A -1% decline in Taiwan.

    VT currently off -0.06%, EEM off -0.25%.

    None of the above presents a convincing case for reentry-> I'm relying more on the thoughts behind Sunday's second thoughts, which I'll summarize as follows:

    (a) How much of tax reform has been priced into the market? In my opinion, very little. There was doubt up until the final vote, and Thursday's rally might have started to price in the lift to corporate profits-> I don't think it's an exaggeration to say that less than 5% of the boost to corporate profits is reflected in stock indexes. The pullback on Friday, and again today-> simply sets up the next spike.

    (b) Just because the markets are overextended is no reason to think it won't continue going up.

    (c) Too many investors (and funds) have been left behind this year. I think they started buying on Friday-> were immediately tested-> many are having their own second thoughts and hesitating today-> the 'real deal' has yet to materialize. The real deal I have in mind is a +7% (minimum) to +15% rally into the first quarter of 2018.

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  8. Capital gains rule for NVTA. Any of you guys know how this works on an all stock transaction like this one? If you sell,(obviously short of a one year holding period), is it a LT of ST gain?

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    1. Mark, you have a good stamina holding on to your CMBX/NVTA gains for so long!

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  9. NVTA hit my sell limit at $9.5 for half of the shares I purchased at $7.8 on CBMX.

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  10. Reloaded at $2.92 the shares of BTE that I sold yesterday at $3. Placed a sell limit for them at $3.25.

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  11. GDX keeps going up. If the choppy pattern on the 1-year chart continues, then it might be close to its highs. But then, inflation expectations are picking up (https://fred.stlouisfed.org/graph/?graph_id=87988&category_id=0), and so gold might keep going up. In this environment, I think selling covered calls against a part of my position is a good way to make a little money or to sell that part at a better price than is available today.

    In September I sold $23 puts on GDX at $0.77 and those shares were assigned to me. Now, I just sold January 2018 $23.5 calls against these shares at $0.30. If these shares are taken away from me, then I'll effectively make $1.57 per share, which is a decent gain that I would be happy to take if I were trading GDX via regular buy/sell.

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  12. Looks like my brave re-entry into BTE yesterday is paying off. :) There was no reason for BTE to be down so much yesterday with oil basically flat. I thought it was just a shake off after a large jump the day before...

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    1. I like energy into 2018. XLE, OIH, and XES are my biggest total positions.

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    2. Mark, why do you think oil will do well in 2018? What positive developments might happen that, you think, are not priced in yet?

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    3. Do you think US shale companies will not be able to quickly add a lot of new supply at above $60, thus capping any further gains in price?

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  13. Staying bullish, but stepped off today.

    There's no contradiction to selling when bullish. That's why it's called trading.

    I think we see SPX 2860 within three months. But I also think (hope) we see 2580 before we see 2860.

    Barring any additional trades tomorrow, I will close 2017 up +22%. Note that I would have done better had I bought and held a combination of VTWSX + VEIEX for twelve months. But that's an unusual situation.

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