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Bozzie

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Dec 13, 2007
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5,479

Looking for Leveraged Long Plays

It is highly likely that the stock market will bottom out over the next few weeks and then begin a period of sideways chop in a wide range.

That range could be half the recent loss, a staggering 5,000 points in the Dow Average (INDU), or 500 S&P 500 points (SPX).

The math is quite simple.

With much of the country now on lockdown, Corona cases will keep climbing sharply in the US from the present 5,000 cases. They will keep doubling every three days for the next two weeks, the incubation time for the disease possibly reaching as high as 40,000 cases.

Just in the time it took me to write this piece, the number of cases worldwide jumped from 184,000 to 194,873 (click here for the link).

At that point, everyone who has the disease will become visible and can be isolated. The following week will bring a sharp falloff in the number of new cases, which many traders and investors will read as the end of the epidemic.

Shares will rocket.

The lockdowns and the “shelters in place” will come off. The economy will start to return to normal. Stock investors will pile in.

Then another spike in new cases will take place, prompting a secondary round of shutdowns and another run at the lows.

On top of this, the market will have to digest a coming set of economic numbers that will be the worst in history. All eyes will be on the Thursday Weekly Jobless Claims out at 8:30 AM, that will be our first look at the terrifying layoffs to come.

Our first look at economic growth comes at the end of April when the Q1 GDP is released. Since we had two months of growth before the crash and lockdown, it come in as high as zero.

Not so with Q2, which could bring in a 5% or more shrinkage in the economy at an annualized rate. No doubt more 1,000 point down days are setting up when these figures are printed.

This is precisely what healthcare officials want to happen. That way, Corona cases can be spaced out over a year, keeping the national civilian and military hospital system from getting overwhelmed.

Suffice it to say that there are some spectacular long side plays setting up. I’ll cover some of the best ways to play it.

One is the ProShares Ultra S&P 500 (SSO), a 2x long the underlying stock index. Since the all-time high four weeks ago, the (SSO) has cratered by 54.50%.

Another is the ProShares Ultra Pro S&P 500 (UPRO), a 3x long the underlying stock index. Since the all-time high four weeks ago, the (SSO) has cratered by an eye-popping 74.40%.

Needless to say, the velocity of these instruments is enormous, and the bid offered spreads wide. If you want your “E-ticket” ride for the stock market, this is it. Trade these with extreme caution.

Get a piece of either one of these and the gains can be huge. The (SSO) has to jump by 120% to the old high, while the (UPRO) needs to soar by 290%.

Good Luck!







 

Bozzie

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Joined
Dec 13, 2007
Messages
5,479
Investing on the Other Side of the Coronavirus

The Coronavirus has just set up the investment opportunity of the century.

In a matter of three weeks, stocks have gone from wildly overbought to ridiculously cheap. Price earnings multiples have plunged from 20X to 13X, well below the 15.5X long term historical average. The Dow Average is now 5% lower than when Donald Trump assumed the presidency more than three years ago.

I believe that as a result of this meltdown, the global economy is setting up for a new Golden Age reminiscent of the one the United States enjoyed during the 1950s, and which I still remember fondly. In other words, we are on the cusp of a new “Roaring Twenties.”

This is not some pie in the sky prediction.

It simply assumes a continuation of existing trends in demographics, technology, politics, and economics. The implications for your investment portfolio will be huge.

For a start, medical science is about to compress 5-10 years of advancement into a matter of months. The traditional FDA approval process has been dumped in the trash. Any company can bring any medicine, vaccine, or anti-viral they want to the market, government be damned. You and I will benefit enormously, but a few people may die along the way.

What I call “intergenerational arbitrage” will be the principal impetus. The main reason that we are now enduring two “lost decades” of economic growth is that 80 million baby boomers are retiring to be followed by only 65 million “Gen Xer’s”.

When the majority of the population is in retirement mode, it means that there are fewer buyers of real estate, home appliances, and “RISK ON” assets like equities, and more buyers of assisted living facilities, healthcare, and “RISK OFF” assets like bonds.

The net result of this is slower economic growth, higher budget deficits, a weak currency, and registered investment advisors who have distilled their practices down to only municipal bond sales.


Fast forward two years when the reverse happens and the baby boomers are out of the economy, worried about whether their diapers get changed on time or if their favorite flavor of Ensure is in stock at the nursing home.

That is when you have 65 million Gen Xer’s being chased by 85 million of the “millennial” generation trying to buy their assets.

By then, we will not have built new homes in appreciable numbers for 20 years and a severe scarcity of housing hits. Residential real estate prices will soar. Labor shortages will force wage hikes.

The middle-class standard of living will reverse a then 40-year decline. Annual GDP growth will return from the current subdued 2% rate to near the torrid 4% seen during the 1990s.

The stock market rockets in this scenario. And Corona has just given us a very low base from which to start.

Once the virus is beaten, we could see the same fourfold return we saw from 2009 to 2020. That would take us from The Thursday low of 18,917 to 76,000 in only a few years.

If I’m wrong, it will hit 100,000 instead.

Emerging stock markets (EEM) with much higher growth rates do far better.

This is not just a demographic story. The next ten years should bring a fundamental restructuring of our energy infrastructure as well.

The 100-year supply of natural gas (UNG) we have recently discovered through the new “fracking” technology will finally make it to end users, replacing coal (KOL) and oil (USO).

Fracking applied to oilfields is also unlocking vast new supplies.

Since 1995, the US Geological Survey estimate of recoverable reserves has ballooned from 150 million barrels to 8 billion. OPEC’s share of global reserves is collapsing.

This is all happening while the use of electric cars is exploding, from zero to 4% of the market over the past decade.

Mileage for the average US car has jumped from 23 to 24.9 miles per gallon in the last couple of years, and the administration is targeting 50 mpg by 2025. Total gasoline consumption is now at a five-year low and collapsing.

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Alternative energy technologies will also contribute in an important way in states like California, which will see 100% of total electric power generation come from alternatives by 2030.

I now have an all-electric garage, with a Tesla Model 3 for local errands and a Tesla Model X (TSLA) for longer trips, allowing me to disappear from the gasoline market completely. Millions will follow. Both cars are powered by my rooftop solar system.

The net result of all of this is lower energy prices for everyone.

It will also flip the US from a net importer to an exporter of energy, with hugely positive implications for America’s balance of payments.

Eliminating our largest import and adding an important export is very dollar bullish for the long term.

That sets up a multiyear short for the world’s big energy-consuming currencies, especially the Japanese yen (FXY) and the Euro (FXE). A strong greenback further reinforces the bull case for stocks.

Accelerating technology will bring another continuing positive. Of course, it’s great to have new toys to play with on the weekends, send out Facebook photos to the family, and edit your own home videos.

But at the enterprise level, this is enabling speedy improvements in productivity that are filtering down to every business in the US, lower costs everywhere.

This is why corporate earnings have been outperforming the economy as a whole by a large margin.

Profit margins are at an all-time high.

Living near booming Silicon Valley, I can tell you that there are thousands of new technologies and business models that you have never heard of under development.

When the winners emerge, they will have a big cross-leveraged effect on the economy.

New healthcare breakthroughs will make the serious disease a thing of the past, which are also being spearheaded in the San Francisco Bay area.

This is because the Golden State thumbed its nose at the federal government 18 years ago when the stem cell research ban was implemented.

It raised $3 billion through a bond issue to fund its own research, even though it couldn’t afford it.

I tell my kids they will never be afflicted by my maladies. When they get cancer in 20 years, they will just go down to Wal-Mart and buy a bottle of cancer pills for $5, and it will be gone by Friday.

What is this worth to the global economy? Oh, about $2 trillion a year, or 4% of GDP. Who is overwhelmingly in the driver’s seat on these innovations? The USA.

There is a political element to the new Golden Age as well. Gridlock in Washington can’t last forever. Eventually, one side or another will prevail with a clear majority.

This will allow the government to push through needed long-term structural reforms, the solution of which everyone agrees on now but nobody wants to be blamed for.

That means raising the retirement age from 66 to 70 where it belongs and means-testing recipients. Billionaires don’t need the maximum $45,480 Social Security benefit. Nor do I.

The ending of our foreign wars and the elimination of extravagant unneeded weapons systems cut defense spending from $755 billion a year to $400 billion, or back to the 2000, pre-9/11 level. Guess what happens when we cut defense spending? So does everyone else.
I can tell you from personal experience that staying friendly with someone is far cheaper than blowing them up.

A Pax Americana would ensue.

That means China will have to defend its own oil supply, instead of relying on us to do it for them for free. That’s why they have recently bought a second used aircraft carrier. The Middle East is now their headache, not ours.

The national debt then comes under control, and we don’t end up like Greece.

The long-awaited Treasury bond (TLT) crash never happens.

The reality is that the global economy will soon spin off profits faster than it can find places to invest them, so the money ends up in bonds instead.

Sure, this is all very long-term, over the horizon stuff. You can expect the financial markets to start discounting a few years hence, even though the main drivers won’t kick in for another decade.

But some individual industries and companies will start to discount this rosy scenario now.

Perhaps this is what the nonstop rally in stocks since 2009 has been trying to tell us.


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Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479
Trade Alert - (ROM) - BUY

BUY the ProShares Ultra Technology ETF (ROM) at $100.01 or best


Opening Trade

3-19-2020

Portfolio weighting: 10%

Number of Shares = 100 shares


I believe that shares are now more oversold than at any time in market history.

In addition, the Mad Hedge Market Timing Index is at a very low 6, a 3-year low.

I am therefore buying the ProShares Ultra Technology ETF (ROM) at $100.01 or best.

If you have a Great Recession type of stock market, you have to employ a Great Recession type trading strategy.

Fear has outrun the actual facts of the epidemic the market by 1,000 to one. You still have a greater chance of winning the lottery than dying of the Coronavirus. When markets figure this out, which could be in weeks, we could rapid recover half of the recent 11,000 point loss in the Dow Average in a gigantic rip-your-face-off kind of rally.

The 200-week moving average at 23,629 would be a nice initial target.

So, I have been dusting off some of my favorite trades for a decade ago, when we were dealing with similar levels of panic, despair, and desperation.

Suddenly, the (ROM) came to mind.

The (ROM) is the ProShares Ultra Technology ETF, a 2X long in the top technology shares. It holds the fastest growing cream of the cream of corporate America which you want to own and hide behind the radiator forever. Quality is on sale now and here is where you want to be loading the boat. (ROM) even pays a modest 0.17% dividend.

(ROM)’s ten largest holdings include:

Microsoft (MSFT)
Apple (AAPL)
Facebook (FB)
Alphabet (GOOGL)
Intel (INTC)
Cisco (CSCO)
Adobe (ADBE)
NVIDIA (NVDA)
Salesforce (CRM)
Oracle (ORCL)

(ROM) has held up pretty well in the crash. During the 11,000 point, or 37.3% collapse in the Dow Average, the (ROM) fell by 58%. Back out the 2:1 leverage and its underlying shares are down by only 29%. That’s because major holdings have barely moved, like Apple (AAPL), down 26%, and Amazon (AMZN), which is off only 25.2%.





 

Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479
Perhaps the biggest news of the last 24 hours was the order from the Governor of California to “stay in place,” effectively locking down the entire state (though much of the SF and LA areas were already under similar orders from local officials). Gov. Newsom says that modelling suggests that without distancing, 56% of all CA residents would contract the virus within a few months. Wow.

More social distancing, more economic damage. The steps needed to control the virus are exactly the ones that will cause further economic contraction. New York represents about 40% of the national count in terms of cases, so more steps could be taken there. The U.S. case load is 14,000 and rising at an accelerating rate, though the deaths, at around 220, have only now added up to the typical death toll per day from the flu.

The Fed may finally be catching up with the widespread financial market dislocations caused by the virus. The money market fund situation appears to be improved, repo is better, and cross currency swaps look better after the Fed and major central banks expanded to daily rather than weekly 7-day auctions of dollar liquidity, starting Monday. The Fed also just announced that it is expanding the MMMF to include munis that are top-rated and less than 1 year to maturity. The PDCF commences today. Next up is to get Treasury and MBS markets trading more normally, and the Fed is throwing $107 billion at those two markets combined today. If I had to guess, the Fed is not done yet, as officials have proven that they are going to be aggressive in defending market function.

On the fiscal side, Sen. McConnell released the Senate Republican proposal for major stimulus yesterday and hopes to vote on it Monday. Democrats are not on board yet. Both sides want to spend $1 trillion or more, but they differ widely on who to give the money to. Democrats, of course, want to focus on workers, while Republicans spilt their relief among households, small businesses, and affected industries. As I have noted before, while it is crucial to offer relief to households, mainly to those who have or will lose their jobs, at least temporarily, due to the virus fallout, business failures will wreak the most persistent damage on the economy, so this package needs to focus on keeping businesses that were healthy prior to the virus alive until the economy is able to return to normal. In any case, let’s hope that Washington can come to a bipartisan deal over the weekend and pass the bill by early next week.

Estimates with regard to the economic damage vary widely. I am going to be putting out a quick piece later today with some guesstimates for growth and employment based on one specific virus scenario, but clearly any estimate right now is no more than a guess and will surely be revised repeatedly over the next few weeks. The economic data are going to get ugly.



Stephen Stanley
Chief Economist
Amherst Pierpont





 

Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479

Taking a Look at the ROM


If you have a Great Recession type of stock market, you have to employ a Great Recession type trading strategy.

Fear has outrun the facts of the epidemic by 1,000 to one. You still have a greater chance of winning the lottery than dying of the Coronavirus. When markets figure this out, which could be in weeks, we could rapidly recover half of the recent 11,000 point loss in the Dow Average in a classic rip-your-face-off rally.

The 200-week moving average at 23,629 would be a nice initial target.

So, I have been dusting off some of my favorite trades from a decade ago, when we were dealing with similar levels of panic, despair, and desperation.

Suddenly, the (ROM) came to mind.

The (ROM) is the ProShares Ultra Technology ETF, a 2X long in the top technology shares. It holds the fastest-growing, cream of the cream of corporate America which you want to hide behind the radiator and keep forever.

Quality is on sale now and here is where you want to be loading the boat. (ROM) even pays a modest 0.17% dividend.

(ROM)’s ten largest holdings include:

Microsoft (MSFT)
Apple (AAPL)
Facebook (FB)
Alphabet (GOOGL)
Intel (INTC)
Cisco (CSCO)
Adobe (ADBE)
NVIDIA (NVDA)
Salesforce (CRM)
Oracle (ORCL)

(ROM) has held up pretty well in the crash. During the 11,000 point, or 37.3% collapse in the Dow Average, the (ROM) fell by 58%. Back out the 2:1 leverage and its underlying shares are down by only 29%. That’s because major holdings have barely moved, like Apple (AAPL), down 26%, and Amazon (AMZN), which is off only 25.2%.

It gets better. The (ROM) HAS OPTIONS. That means you can lay an out-of-the-money LEAPS on the (ROM).

I’ll give you an example.

You can buy the (ROM) August 2021 $120-$130 LEAP for $3.65. If the (ROM) recovers from the current $100 to $130 by August 2021 expiration, you can earn a profit of 174%. Remember too that a 2X ETF can cover a lot of ground in a very short time in a new bull market.

To learn more about (ROM), please click here for their website.


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rom-mar20.png

Bring Back the Uptick Rule!

When the Dow crashed 514 points in a single day a few years ago, the market lost a staggering $850 billion in market capitalization. High-frequency traders were possibly responsible for half of this move but generated a mere $65 million in profits, some 7/1,000’s of a percent of the total loss.

Are market authorities and regulators being penny-wise, but pound-foolish?

The carnage the HF traders are causing is triggering a rising cry from market participants to ban the despised strategy. Many are calling for the return of the “short sale test tick rule”, or SEC Rule 17 CFR 240.10a-1, otherwise known as the “uptick rule”, which permits traders to execute short sales only if the previous trade caused an uptick in prices.

The rule was created eons ago to prevent the sort of cascading, snowballing selling that we are seeing today. It was repealed on July 6, 2007. Check out a chart of the volatility that ensued and it will make your hair on the back of your neck raise.

Those unfamiliar with how algorithmic trading works see it as something akin to illegal front running. “Co-location” of mainframes with exchange computers or having them in adjacent rooms, gives them another head start over the rest of us.

Much of the trading sees HF traders battling each other and involves what used to be called “spoofing”, the placing of large, out-of-the-market orders with no intention of execution.

Needless to say, if you or I tried any of these shenanigans, the SEC would lock us up in the can so fast it would make your head spin.

Many accuse exchange authorities of a conflict of interest, allowing members to reap sizeable custody fees from HF traders, while the rest of us get taken to the cleaners. Co-location fees run in the hundreds of thousands of dollars per customer per month. This is happening while traditional revenue sources, like proprietary trading, are disappearing, thanks to Dodd-Frank. There is no doubt that the volatility is driving the retail investor from the market.

In fact, HF trading has been around since the nineties, back when the uptick rule was still in place and co-location was a term out of Star Trek. But it was small potatoes then, confined to a few niche players like Renaissance, and certainly lacked the firepower to engineer 500-point market swings.

The big problem with this solution is that HF trading now accounts for up to 70% of the daily trading volume. Ban them, and the market volatility will shrink back to double-digit trading ranges that will put us all asleep.

The diminished liquidity might make it difficult for the 800-pound gorillas of the market, like Fidelity and CalPERS, to execute trades further frightening end investors from equities. Is it possible that we have become so addicted to the crack cocaine that HF traders provide us that we can’t live without it?


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Quote of the Day

“Any sufficiently advanced technology is indistinguishable for magic, said Arthur C. Clark, futurologist and author of 2001: A Space Odyssey.





 

smartmoneyfollower

Active member
Joined
Sep 25, 2005
Messages
3,582
I'm buying MSFT Monday again. I have 1000 at 150 that has cost me 13k but I'm not worried , but I have been trading it every day, MSFT will be stronger when this pandemic is over. People working from home , more strain on the cloud and the jedi contract, Satya Narayana Nadella is a star. stack and stack of cash and a nice sweet sunder every 16 weeks. Its time to feast.
 

TheFalls

Their undisputed masterpiece is "Hip to be Square.
Joined
Dec 29, 2005
Messages
6,131
I'm buying MSFT Monday again. I have 1000 at 150 that has cost me 13k but I'm not worried , but I have been trading it every day, MSFT will be stronger when this pandemic is over. People working from home , more strain on the cloud and the jedi contract, Satya Narayana Nadella is a star. stack and stack of cash and a nice sweet sunder every 16 weeks. Its time to feast.

this. I bought IETC on Friday which has like a 20% allocation to MSFT
 

Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479
I'm buying MSFT Monday again. I have 1000 at 150 that has cost me 13k but I'm not worried , but I have been trading it every day, MSFT will be stronger when this pandemic is over. People working from home , more strain on the cloud and the jedi contract, Satya Narayana Nadella is a star. stack and stack of cash and a nice sweet sunder every 16 weeks. Its time to feast.


I like it.. solid.
I'm wounding about the bottom..I have a ton of dry powder but haven't jumped in yet.
C19 numbers are still growing just how much new numbers have been factored in is the 200k question ?
 

smartmoneyfollower

Active member
Joined
Sep 25, 2005
Messages
3,582
NASDAQ: MSFT
148.34 USD +12.36 (9.09%)
Closed: Mar 24, 7:59 PM EDT · Disclaimer
After hours 147.25 −1.09 (0.73%)

Bought and sold 2000 MSFT, shares today but played the market like a pussy , only got 2$ profit per share but ill have another 450k$ of free cash after T2, love the market right now. NextEra Energy Inc was too expensive above 270 for me, but i like it now.
 

Bozzie

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Joined
Dec 13, 2007
Messages
5,479
bought 1000 ROM a few days ago at 92.55....I don't normally like leveraged ETFs but this seems like the time So many funds dumped them over the past month..the x2 hurts on the way down.
 

Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479
ROM up to 111 today so I jumped too early ...weekly unemployment numbers "should" come out tomorrow although the White House has asked for a delay..
I haven't looked at short positions but I'd guess they are growing.
 

smartmoneyfollower

Active member
Joined
Sep 25, 2005
Messages
3,582
Solid investing Bozzie.. today was a shit show with democrats blocked the nearly $2 trillion package , but ROM is on my radar now. cheers.
 

Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479
This guy has been very good for a long time...

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Mad Hedge Hot Tips
March 25, 2020
Fiat Lux

The Five Most Important Things That Happened Today
(and what to do about them)


mti-pos-13.jpg
John-Thomas-image-e1535492954635.jpg

Don’t Buy This Rally, up 2,000 in a day, an all-time record rally. We have a series of horrendous numbers about to hit the market, starting with a 3 million Weekly Jobless Claims tomorrow. But this is the beginning of a bottom-building process. Get buying the 1000-point down days and selling the rallies. The BUY of the century is setting up, just not yet.

Click here to read the rest of today's Hot Tips
Bear-crossing-story-2-image-4-e1535684764932.jpg

This is not a solicitation to buy or sell securities
The Mad Hedge Fund Trader is not an Investment advisor
For full disclosures click here at:

http://www.madhedgefundtrader.com/disclosures

The "Diary of a Mad Hedge Fund Trader"(TM)
and the "Mad Hedge Fund Trader" (TM)
are protected by the United States Patent and Trademark Office
The "Diary of the Mad Hedge Fund Trader" (C)
is protected by the United States Copyright Office

Futures trading involves a high degree of risk and may not be suitable for everyone.[FONT=&quot][/FONT]





 

Bozzie

Well-known member
Joined
Dec 13, 2007
Messages
5,479
ROMs ...Just be aware that it's a 2x leveraged fund .. So basically everything is doubled, gains and losses. ETF's are basically the same as an individual buying twice the amount of stock via a margin loan from the broker..here's a link explaining leveraged ETF's and the RISK involved trading these...Just a heads up.

https://www.fool.com/investing/mutual-funds/2007/01/03/using-leveraged-funds.aspx

At some point I'll go long in ROMs
 

ECC

Active member
Joined
Nov 5, 2008
Messages
5,973
Anyone get in on BA when it bottomed out last week?
My buddy got it at 98 ... told me about it too. Smh...I’m newer to the market so still learning this crazy sh*t
any input or guidance or people out there to follow would be greatly appreciated.
 

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