November 7, 2016
Ignition? And Liftoff?
I have never forgotten late July, early August of 1984…I was vigorously selling my clients on the idea of buying calls in the S&P 500 (actually my second option trade ever), going dead opposite pretty much the whole investing community which had become extremely bearish the stock market…to the extent that the guys in the S&P trading pit from whom I was buying those calls were LITERALLY laughing at this rube kid from Georgia who thought stocks were a raging buy…and as the phone clerk told me, “Buddy, you can buy all of these you want. Everybody in the pit will sell them to you.”
But my timing could not have been more perfect…blind luck really, and I mean that…and the market actually started moving on the upside as soon as I had completed getting all my clients into the trade...After about five days of inching higher, the S&P suddenly had a fairly big (for then) up day, followed by one more that was even bigger, and I so remember being on the phone that morning (see chart following) with a prospect who HADN’T gotten on but had been indicating he wanted to do so…Quite frankly, he was a little bit on the pompous side, and with the market beginning to look like a rocket (to me), he said something like, “I’m pretty sure you’ll regret owning it here. I think I’ll be able to buy it lower…So I’ll wait…Anyway, I’d need to see more confirmation on the upside before I can believe this is the real thing”...And he then proceeded to watch, from the sidelines, while the market made an almost 15% jump in the space of three weeks. It was a BIG trade.
I think is exactly what we are potentially about to see here…Since this morning, I have seen numerous classic comments along the lines of, “This is just a relief rally after nine down days”, or this is “just because Clinton is off the hook”...or in the same vein as my sidelines guy back in 1984, “We need to see more before we can be sure this is the real thing”.
I SEE NOTHING BUT A MONSTER ECONOMIC YEAR AHEAD OF US IN 2017. IF YOU WANT TO LIVE IN THE PAST, KEEP BELIEVING THE ANAYLYTIC NONSENSE THAT CHINA, EUROPE AND THE REST OF THE WORLD ARE ALL ON WEAK KNEES (THEY ARE NOT)…OR THAT GROWTH IN THE UNITED STATES IS “STILL TOO SLOW.” I THINK THE USA AND WORLD ECONOMIES WILL BE DOING NOTHING BUT EXPANDING DYNAMICALLY AS WE GO FORWARD…AND WITH ONE OF THE FUNCTIONS OF THE STOCK MARKET BEING TO ANTICIPATE AND REFLECT THE FUTURE (MEANING STOCKS GO UP BEFORE YOU SEE IT ACTUALLY HAPPEN IN THE REAL WORLD), I CANNOT ENVISION ANYTHING OTHER THAN EQUITIES BEING ON AN “ANY DAY NOW” SCHEDULE TO EXPLODE HIGHER…I EXPECT TO SEE THE 1ST AND 2ND QUARTERS OF 2017 AS RESULTING IN STATS THAT ARE “DECIDELY BETTER THAN ANALYSTS EXPECTED”, AND WOULD THEN SUGGEST THAT BY THE TIME WE DO GET THOSE “SURPRISINGLY STRONG” NUMBERS, THE DOW WILL BE SOME 1000’S OF POINTS ABOVE CURRENT LEVELS.
I do not see today as a one day wonder. I think it is just the beginning of something much bigger. I continue to believe stocks are about to absolutely lift off from here…while at the same time Bonds and Eurodollars will be falling off a cliff as interest rates move up FASTER and BIGGER than all the talking head and Wall Street boobs would ever think possible. The public has been fooled into massively selling stocks and buying bonds for the past few years…and I expect the next six months will see them regretting it enormously.
THERE IS NO REASON FOR RATES TO REMAIN AT CURRENT LEVELS.
To remind you, back in August Janet Yellen made the comment that the economy “rarely evolves as predicted”, and my contention is that THIS economy will end up being tremendously stronger than all the Wall Street geniuses are currently expecting…and as a function of this, interest rates can ONLY be going higher…and I think sharply so.
I think is unquestionably time to be buying Eurodollar puts…Just like today in stocks, you never know when the switch will get flipped and markets will start to move...The markets ARE always full of surprises and I think some big ones, concurrently, are about to start occurring all over the board.
I still LOVE this June 9887 put…
Here’s the big picture…And I would note that where we are now is NOT normal…and rates at these levels are no longer needed…at all…As I keep saying, just look out your window…There is consumption and economic activity everywhere…On the streets, at the malls, at the airports, in construction, in Technology, etc…The economy is on the UP…NOT down, NOT sideways. Interest Rates are going higher…and they will do so BEFORE the Fed makes it official.
Get some…or get some more…Call me if you want to talk about it…
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