July 20, 2017
We are finally there…
WHERE STOCKS TRULY LOOK LIKE THEY ARE ENTERING THE LIFT OFF STAGE.
I’m pretty sure Congress is DONE with talking about healthcare, and going forward, I think the the Washington/Trump driven focus is going to be honed in on Tax Reform (meaning reducing taxes) and Rebuilding the Infrastructure (which means LOTS of stimulus with LOTS of borrowed money)…and as a result I think the odds have gone through the roof that WE WILL NOW SEE THE EQUITY MARKETS RALLYING HARD (this is the rumor) RIGHT UP UNTIL CONGRESS PASSES WHATEVER LEGISLATION THE REPUBLICAN’S DO WANT TO PRESENT (this is the fact)…AT WHICH POINT IT WILL FINALLY BE TIME TO SELL (which you haven’t heard from me in years)…BUT I would emphasize that the market could be MILES above its current levels by the time we do get to see the Great Carrot sign his bill.
Let’s be clear…Health Care and Economic Stimuli are two distinctly different subjects and I firmly believe that it will be FAR easier to get those 51 votes necessary to CHANGE the tax code and start REBUILDING the nation’s infrastructure than it has been to gut the health care system…And as I have stated for months, all of that proposed spending and expansion WILL lead to much higher interest rates than analysts, bankers, economists and the markets are currently anticipating…And yes, I may sound like a broken record, but I have watched the Fed repeatedly fall behind the curve for decades…I have seen the Fed TOTALLY misread the actual state of the economy on multiple occasions…and the end result has just as repeatedly become the same: THEY DRAMATICALLY CHANGE THEIR TUNE AND THEY START PLAYING CATCH UP…AND THAT IS PRECISELY WHAT I THINK WE ARE GOING TO SEE IN COMING MONTHS AS MORE AND MORE UNQUESTIONABLY BULLISH ECONOMIC NEWS BECOMES A NATIONWIDE REALITY.
INTEREST RATES ARE GOING UP. EURODOLLARS ARE GOING DOWN. I ENCOURAGE YOU TO NOT SIT THERE AND JUST HOPE IT HAPPENS BETWEEN NOW AND SEPTEMBER…BUY SOME PUTS IN THE MARCH, 2018 CONTRACT THAT I RECOMMEND BELOW. Do SOMETHING with it. Don’t just sit there.
And from a personal standpoint…As I infrequently remind you …I WILL BE WRONG. I WILL BE RIGHT…the point being that just because I have been “wrong” while we watched ED’s do nothing good for us since mid-March, does NOT mean they will continue to do so. I MIGHT BE DEAD WRONG, BUT MY SENSE IS, THEY ARE, AFTER 4 MONTHS OF DOING NOTHING, READY TO CRACK WIDE OPEN.
Here are the charts…
Start with the Stock Indices…which are all still a buy…
As I have written for years, when we DO get to the top, what you WON’T be seeing is a bunch of those FOREVER wrong New York City analysts telling you to sell…which is what all those know-nothings in suits are STILL doing…STILL presenting their reasons NOT to buy…which, to be clear, is just one more indicator that Stocks will continue to climb…and sharply I believe…Here are examples of their yakhead brilliance from just the past few weeks…
I mean, REALLY? Do you really think all of those guys are going to turn out to be right? WHEN has it EVER been that way in this mob psychology game?
And if I do have it right about the stock market…about this BAROMETER OF FUTURE ECONOMIC ACTIVITY…I say that today’s absurdly low 1.3% interest rate can EASILY…and QUICKLY…be turning into, at least, 2.5-3.0 %...
I AM STILL JUST AS BEARISH TODAY AS I WAS 6 MONTHS AGO. I STILL SEE THIS AS AN INCREDIBLE TRADE…WITH A TON OF TIME AND A TON OF LEVERAGE.
Here is the March, 2018 Eurodollar contract and what I am doing with It here…
And START with this…THIS MARCH CONTRACT, WITH 8 MONTHS TO GO, HAS ONLY ONE 1/4% INCREASE IN RATES BUILT IN BETWEEN NOW AND EXPIRATION.
Again, I think this IS starting to happen…AGAIN…and the next trip lower will be much bigger and much more non-stop than what we saw between December, 2016 and this past March…But the time to do something with this is now, while these options are so cheap…and not later, when you are thinking, “Oh Yeah! We’ve got it this time”. You do it now…when you almost “hate” to do it.
Been here before. Now IS when you act…
Give me a call…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Eurodollars