What?
I have been in the financial business for more than forty years and I thought I had pretty much observed the craziness that lies within the markets and the politics that surround it in Washington, but nothing has come close to this carnival. It wasn’t quite a three-ring circus because we were missing the third ring, but we certainly have witnessed the “greatest show on earth” for two rings. It is hard to know where to start on this one but let’s give it a shot.
Thursday a week ago, it appeared that Judge Kavanaugh would have his vote taken and if it went on party lines that he would be the next justice of the Supreme Court. Of course in Rome, I mean Washington, nothing is as it appears. Out of nowhere Democratic senator Diana Feinstein introduced a letter she had received from an undisclosed woman that accused Judge Kavanaugh of sexual misconduct at a high school party thirty-seven years ago. We eventually found out that the woman was named Dr. Christine Ford and she was an educated and viable witness.
The inquisition that followed on Thursday was one for the ages, even by Washington standards. It made the Clarence Thomas – Anita Hill confirmation fight of 37 years ago look like a small tiff. Never the less the Republicans called for a vote on Friday morning to go forth with the nomination process. In the middle of the vote, Jeff Flake a retiring Republic senator from Arizona called a halt to the proceedings until the FBI could do an investigation of what occurred. So, the vote has been re scheduled for next Friday when the FBI will release their findings. Trust me, the findings will be neutral as there is no court of law where this case could ever be heard, but it will give both sides a chance to reload. No matter what the findings are, the whole spectacle has been a polarizing disgrace to the country and the result will have significant impact that could resonate for the next hundred years.
The second ring of course was our old friend Mr. Musk. It appears that Mr. Musk had agreed to settle with the SEC over his August 7, 2018 tweet in which he claimed to have $70 billion in “guaranteed funds” to take Tesla motor company private. Turns out Mr. Musk may have exaggerated his claim and he recanted his tweet. The SEC was not happy and decided to go after Mr. Musk for “manipulating the price of a traded security”. After weeks of arguing the SEC finally got a settlement (which has never been made public) and was ready to settle the case, but here is where the fun really starts.
An hour before the deal was to be signed, Mr. Musk’s cadre of attorneys said that they had decided to fight the charges rather than to sign off on a deal that they felt was not accurate. What? The new defense is that Mr. Musk is claiming that the whole thing was a “cultural difference” and that the foreign money had made a handshake deal with him to put up the money. As crazy as it seems, Mr. Musk is playing the “misunderstood cultural card” as his defense. In this crazy world someone might actually buy into that, I don’t. Mr. Musk has consistently disappointed with his predictions of productions and sales. He has lost billions of dollars of tax payer money, and I think it is time that his ego be put in place!
Ask Mr. Seifert
I am constantly asked questions about trading and how important execution is to insure success. Each week, we will answer those questions with a short paragraph on a variety of trading subjects.
What is the VIX index and how is it calculated?
Answer: VIX is the ticker symbol for the CBOE’s Volatility Index. It reflects the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. It is a widely used measure of market risk as to the “investor fear gauge”.
The CBOE designed the VIX to create various volatility products. The VIX was the first successful attempt at creating and implementing such an index. Introduced in 1993, it was originally a weighted measure of the implied volatility of eight S&P 100 at-the-money put and call options. Ten years later, in 2004, it was expanded to use options based on a broader index, the S&P 500, which allows for a more accurate view of investors’ expectations on future market volatility. VIX values greater than 30 are generally associated with a large amount of volatility because of investor fear or uncertainty, while values below 20 generally correspond to less stressful, even complacent times in the markets.
The VIX is a computed index, much like the S&P 500 itself, although it is not derived based on stock prices. Instead, it uses the price of options on the S&P 500 and then estimates how volatile those options will be between the current date and the option’s expiration date. The CBOE combines the price of the multiple options and derives an aggregate value of volatility, which the index tracks.
The Wise Guy Report: The View from The Electronic Floor
Each week I talk about how the Wise Guys (floor traders) find the soft spots in the market and take advantage of price dislocation in three major commodity markets: Gold (GC), Crude Oil (CL) and Long-Term Interest Rates (ZB). On the equity side, I cover MSS which is the Mister Seifert Sez Composite Index. This is a proprietary index that I created which measures the dollar flow of the four major indexes (S&P 500, Nasdaq 100, Russell 2000 and the Dow Jones Industrials) on an unweighted basis. Let’s look at how the emerging markets are dealing with the price of Crude Oil.
Crude Oil Emerging Market (Possible Blowoff)
Although I rarely watch what is happening in emerging markets, if it needs to be addressed I will check them out. This week Crude Oil neared multi-year highs and Brent hit $80 a barrel in London trading late in the week. The emerging nations are paying for this rally. They have relied on borrowing from the West for years as a strategy for growth, but with interest rates rising they are having trouble financing their government deficits. Worst of all is the Ponzi scheme that is their currency. It is now coming back to haunt them. Although Crude Oil is up 20% for the year in terms of dollars, it is up over 100% in some emerging markets. Turkey is almost out of the game as Crude Oil is up 122% against the Lira. How does this crisis end?
A couple of ways are possible. First the IMF (Ponzi scheme) will cave in as usual and give Turkey the money to support the Lira. Second it could show some backbone and say that in order to get financed, Turkey must cut down their deficit spending. Finally, the whole deal could blow up and Turkey will have a revolution and a new group of thugs will take control. No matter what happens the bottom line is still the same, you cannot borrow your way out of debt. It is impossible and now Turkey is learning that lesson.
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The option trades and strategies offered by The Optionomics Group are very unique in that they all have limited risk while creating great leverage. Our basic BL – BR Credit Spread Strategy (and all of the others) let you control 100 shares of a $200 stock ($200*100 = $20,000) for only $500 (the spread differential) or 40:1 leverage with your risk limited to only $500. Plus our strategies produce winning transactions in four out of five possible outcomes.
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I offer a FREE Two-Week trial to the various subscription services with no cost or strings attached. Each strategy is explained in a 5-7 page booklet which includes sample recommendations and model portfolios. I doubt that you have ever seen anything like this. During your FREE trial, you can paper trade the various strategies and get a feel for the deal without risking a penny. Simply click on the appropriate tab on the Optionomics’ Home page to access the informative booklets and then sign up for one or all of the weekly subscriptions.
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Each Monday morning by 11:00 EST, the plays for the upcoming week plus updated model portfolios for each strategy are posted on the site. The prices in the reports are Monday morning’s opening prices. In addition, I have a webinar on Thursday afternoon where I discuss various option strategies, what is happening on the floor and answer any questions that you may have. Don’t worry if you miss the show. They are archived on the site. Sound Good? Good! You can subscribe to one or more of the subscriptions for only $19.95 each per month on a month to month basis with no contract or strings attached. If you subscribe to three, it is only $49.95 per month while you can subscribe to all six for only $79.95 per month, a 33% discount. I think you will agree that this is a super offer so give it a try. Click on www.optionomicsgroup.com to access the Optionomics Group web site and get started today doing what the pros do –
“Don’t Buy Them – Sell Them”.
Mr. Seifert