Up and up we go.
If we knew voting for Trump was going to be this good for the markets, we would have doubled down on our longs. As it is, our Long-Term Portfolio gained $98,471 since Nov 6th and that's 20% in 15 days so thank you, Mr. President!
Of course our Long-Term Portfolio is all long, protected by our Short-Term Portfolio, which lost $10,968 (11%) on our hedges but not so bad as the net is still up $87,503, which is a gain of 14.5% in 15 days in our paired portfolios (we began with $500,000 in the LTP and $100,000 in the STP). Our self-balancing Options Opportunity Portfolio gained $7,843 (7.8%) over the same period and our well-hedged Butterfly Portfolio gained $16,100 (16%) – actually our best overall performer – even though it's our most conservative.
As you may have noticed, I've been banging the table on Gasoline Futures (/RB) and that finally took off this morning, breaking towards our $1.45 target. Natural Gas (/NG) hit $2.95 and that's a "take the money and run" level as $3 is going to be hard to break and the cold weather on the East Coast that's goosing the contracts will only last this week and then it's back to warmer than usual weather.
Speaking of weather, we figure out why Warren Buffett changed his mind on airlines and it's because of the weather. NASA just launched a very advanced satellite that will do for weather what Hubble did for astronomy and will improve our forecasting ability by leaps and bounds. That's going to benefit the arilines, a business where every penny counts and knowing where the storms are going to be can save them Billions. The current NOAA satellite is 40 years old!
More accurate weather info can help airlines plan better and save Billions of Dollars and that's right to their bottom line. United does $40Bn in sales and drops $3Bn to the bottom line (9%) so even a 2% increase in operating efficiency is about another Billion for them and a 33% increase in net income. Now THAT makes sense as a Buffett play.
While it has already "taken off" (get it?) we can still follow Buffett by playing the Global Airline ETF (JETS), which also benefits from global growth in air travel. The ETF is currently trading at $27.10 but we can drop that cost back to $25.40 by selling the March $27 puts for $1.60 and, we either own the ETF back at a 6% discount or we keep the $1.60 for a net profit of 6.3% in 3 months. Once it does have a pullback, we'll be more intereseted in a long-term position.
If you didn't get them on Thursday, today should be a good day to get those TZA rolls done as hedges. The Russell Futures are blasting up to test 1,320 and that's up 14.7% from 1,150 pre-election so probably 1,322.50 should do it at 15% and then we're up 172.5 points and a 20% retrace of the run would be 34.5 ponts per our fabulous 5% Rule™ so a weak retrace should bring us back (rounding) to 1,290 and a stronger retrace would be 1,255 and you can see on the chart that that line used to be resistance so anything below 1,250 is a breakdown to watch out for.
A 6% (strong) retrace on the Russell would be an 18% gain on TZA, which is a 3x Ultral Short and TZA is down at $22 so look for $26 as a short-term goal.
Other than President-elect Trump running wild, we have a pretty quiet week ahead as Obama will pardon the last White House turkey (Trump says kill them all, they are losers) on Thursday so it's a short holiday week with very little data and no Fed Speak (Fisher spoke this morning and caused no damage). Chicago Fed already came out this morning, Richmond Fed tomorrow, Durable Goods, PMI and Consumer Sentiment make Wednesday interesting and, other than that – just some housing reports.
Even the earnings calendar stops on Wednesday morning:
So it's going to be a low-volume, meaningless week. Let's lock in our election profits and spend time with the family – especially if your family immigrated to this country, as it may be the last time you get to spend Thanksgiving with them!
