New Years Eve 2020 Option Professor Opinions & Observations
All of Us @ Option Professor Wish You A Very Happy & Healthy New Year!! Next week is potentially a very disruptive week as we have the deciding Georgia elections & Trump came back to D.C. early to get ready for the Jan 6 stupidity to reverse elections (59 lawsuit losses is indicative that you have no case)……but of course he has to continue the charade as he has pilfered hard working people to send in their money (much of which he will keep for himself) so if he doesn’t act like it’s a real fight….it would look like theft. We closed out 2020 with some pretty decent numbers with the S&P 500 up 15% Nasdaq up 47% on top of 30+% in 2019 Russell up 18% and the slow poke Value down -2.3%…….HOW did this happen during a pandemic??…..We Told You Back in MARCH…#1 LIQUIDITY & #2 OPERATING LEVERAGE #3 LOW INTEREST RATES ALLOWS FOR HIGHER VALUATIONS….to explain simply….when someone has a PRINTING PRESS in the basement and is willing to use it (The Fed-Treasury)..you must RESPECT that fact….AND when companies have less employees/real estate (overhead) and consumer spending comes back almost to pre covid levels you will get good EARNINGS which we opine will be evident in 2021 as we can see the massive and sad UNEMPLOYMENT remains stubbornly high. Finally NEGATIVE REAL INTEREST RATES helps expand & sustain lofty valuations……that’s the story for 2021 as not only stocks but GOLD BONDS EM BITCOIN REAL ESTATE all had banner years which happens when you DEBASE the unit of measure namely the DOLLAR which fell almost 15% from its peak and 3% for the year. We anticipate 2021 to see a CLOSING of the huge GAP between Growth and Value MUCH like we saw this year the GAP between Growth & S&P and the SMALL CAPS-TRANSPORTS tighten up considerably. Is there a run in the S&P to 3800-4000 area BEFORE a sharp decline toward 3400-3600?? We may know that answer by the end of next week and we & you should be prepared for both (liquidity-collars-replacement trade hedges)-do you really understand what was just said??..if not…email us @ [email protected] also learn what are the markets we are focused on for 2021….Cheers to All!!
Briefly…our view is really illustrated in the numbers we provided to you above…which is the ridiculously large gap between growth and the S&P/Russell and to a greater extent Value. Yields are rising as inflationary pressures are building. This is not great news for very high valuations (tech-stay at home stocks) as valuation compression through a real evidence risk (steepening yield curve) BUT it is great news for sectors we rotated into after FAANG peaked in September such as Cyclicals…Epicenter..Industrials. plus Banks/Financials-Energy….EM–Materials–Precious Metals & Real Estate We have been paid handsomely on dividend/distribution cash flow while watching the underlying assets appreciate…replacing Bonds for income. We have ideas we believe have value for 2021..ask @ [email protected]
Well when Jamie Dimon JPM says he wouldn’t touch 10 Yr Treasuries with a 10 foot pole maybe it’s time to trim:):):)…Listen we told readers back in March that the yields probably hit HISTORIC blow off LOWS not dissimilar to the Blow Off HIGHS Volker gave us in the 80’s. The number don’t lie..people do…The Fed’s balance sheet exploded…money supply up 25&..national debt 29-30 Trillion…Trade Deficit at record levels…dollar tanking (some forecast 20% drop IF we break 88-85 DXY….helicopter money with no end in sight (millions out of work/close to evicted)….Do you want to loan money for decades at 1%??…if you do you’re a better man than us. Our position has been all year to hide out in short term corporates and limited term munis and sprinkle High Yield-Preferreds-EM Govt Debt-Secured Loans to enhance yields…this has been spot on value added information to our readers…Do you have questions??…email us at [email protected]
US Dollar/International Markets
This is another area where we believe we added value to our readers as we told you of a market top in the Dollar around 104 and a breakdown on the break UNDER 100….we spoke of buy signals in the Euro at 110…the BP at 130…the Aussie at 70…Japanese Yen at 90…as the Fed wants & is getting a weaker Dollar….will we get a counter trend bounce?..the the Republican win this week and stocks sell off…very possible as the lean is very short. On the International Markets we have been adding value all year by pointing readers toward Asia…Europe & Emerging Markets…the lower Dollar is a blessing to them…their valuations are way lower (value) and we can see from the TRADE REPORT that they are sending our spend crazy consumers lots of stuff to buy. Questions on our focus list-email [email protected]
Crude Oil/Natural Gas
We told you when we went -37 on Crude and OXY bonds 10yrs out non callable were paying 35% that that smelled like capitulation and it was. Our view has been any pull back would be limited to 30 bucks a barrel and the future looked bright for oil & oil stocks (although XOM is struggling to maintain a dividend program that costs 15 Billion)…we still like thye sector (golden cross just occurred) an LNG our natural gas play is still a favorite BUT we have others-focus list..email us at [email protected] to Learn
Gold Silver BitCoin Copper
We believe our input on Gold & Silver this year added real value midst the over-hyped panic that BEGAN in March and ended in August….we told readers of the BREAKOUT above 1400-1500 Gold & Silver above 20 and WARNED of the OVERBOUGHT condition of 2100 Gold & 30 Silver where selling trimming hedging was the thing to do. We told you of pullback toward 1775 Gold & 22 Silver (close to the 1 yr Moving Average could be a time to buy some….and NOW we say if it can clear 1950-2000 Gold and 28-30 Silver then the big bucks rally will make sense….HOWEVER a break UNDER Q4 lows would suggest thatEVERYTHING that has gotten hot due to a WEAKER DOLLAR is cooling off and may need to chop more wood before going higher….Copper has been the All Star this year as it approached 4.00 (we got bullish at 2.50- our two main plays FCX and SCCO were big $$$$. We have been positive PLATINUM since it broke ABOVE $850 as it is 10 X rarer than Gold..may replace Palladium which has gotten expensive and historically trades at a premium to Gold…. BitCoin has been the big story and we have told you all year long GBTC was the play that has been a big deal to listeners….NOW….review the risks..21 million BitCoin which has 2% of ANONYMOUS ACCOUNTS controlling 95% of the supply…..which means ..yes…the supplies are far more restrained than FIAT CURRENCY & GOLD which is the allure BUT it also means Bad Liquidity (hence the wild fluctuations) and the hesitancy to approve ETF’s…..HOWEVER the year after halving (2017) has historically been great and some say 3X in 2021 is possible…dollar cost averaging and limits on cash exposure seems the reasonable to play this..Learn what we focus on @ [email protected]
Soybeans Coffee Sugar
These three Amigos have been on our and thus on our readers radar all year long so we’ll review our opinions…Soybeans we saw as a no brainer in the 8 dollar range as China had to buy before the end of the year… level above 9.50/10.00 confirmed our target to 12 which was achieved …after a brief pullback prices EXCEEDED 12 creating a buy signal which remains in force today……Sugar turned bullish on our radar at 12.30 when the 50-200 day MA’s crossed BUT we have said the 16 level must fall if big $$ is to be made on the upside (threatening to do so as we speak)…Coffee gave us a great rally to 137 and then pulled back and held the 100-110 area which held and now it’s back to the bulls trading at 128…take out 130-140 and this could be an exciting market in 2021..email us @ [email protected]
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