Trump Error, Day 100 – What Have We Accomplished?

Well, here we are.

And I say that with some amount of surprise because who thought we'd survive 100 days of the Trump Presidency?  Fortunately, so far, we've only escalated tensions with North Korea, Yemen, Syria, Iraq, Iran, Somalia and the US News Media and we've only actually bombed Iraq and Syria, so we'll call that restraint, so far.  

As you can see from Trump's own agenda, we have not actually accomplished anything so far and it's kind of hard to blame the "obsructionist Democrats" when they don't have the power to obstruct anything.  The President, of course, does not let facts get in his way and he held a "victory rally" Saturday, in Harriburg, PA – essentially counter-programming against the White House Correspondent's dinner which even President Reagan phoned into from a hospital bed after he was shot.  

Speaking to the coal miners, Trump vowed to cancel the US's payments to the UNs Green Climate Fund, a financial program intended to help poorer countries mitigate the effects of climate change and his budget blueprint includes “eliminating U.S. funding related to the Green Climate Fund,” but the proposal has yet to be enacted.

Trump did take credit for creating 600,000 new jobs but the 216,000 that were recorded as added in the January 6th jobs report came before he was actually President.  That made the February figure (216,000 jobs) for the Monday of January 2/3 Obama's jobs but certainly, in March, the jobs number was all Trump's doing – all 98,000 of them.  We'll see on Friday how he did in April, maybe there's 500,000 jobs coming?  

During President Trump’s first 100 days in office, he did sign 28 bills into law and the Senate confirmed his nominee for Supreme Court justice.  Trump had not signed into law ANY of the 10 pieces of major legislation in his 100-day plan. The White House has also pointed to Trump’s rollback of Obama-era regulations, but the OMB did a massive study that showed the benefits of these regulations outweighed the costs and the long-term damage Trump is doing by dismantling them could be immeasurable. At the same point, President Franklin D. Roosevelt had signed 76 bills into law, Mr. Obama had enacted a stimulus package and President George W. Bush had enacted major tax cuts.

BUT (and I like big buts), the Stock Market is at an all-time high and that, clearly, is the biggest accomplishment of his Presidency and now we have a President who stakes his reputation on the market and that can lead to a very market-friendly environment – at all costs – including the $5Tn tax cut he's promising the Top 1% in his new tax proposal.  

Speaking of proposals, on a brighter note, the House and Senate reached a rare bipartisan deal to keep the Government open through Sept 30th, though it denies Trump his wish list for at least another 150 days as nothing he asked for is on the list.  There is a $15Bn boost for the Pentagon but, even there, the Dems are holding his feet to the fire by holding $2.5Bn contingent on the Administration actually delivering a plan to fight the Islamic State.

Because of the dissent of the rank and file GOP members of Congress (ie, the sane ones), the far right had to drop key initiative like breaking the Fiduciary Rule, which means Financial Advisers will still have to act in the interest of their clients for a few more months.  The EPA remains intact for now, with only a 1% reduction in their funding, keeping the Great Lakes clean throught the summer, at least.  

Meanwhile, Europe is closed today (May Day) and we have a Fed announcement coming up on Wednesday (2pm), which we will cover live during our Live Trading Webinar (starts 1pm, EST) and there's no Fed speak until Friday, when we are favored with 7 speakers:  Fischer, Williams, Yellen, Bullard, Evans, Rosengren and Williams again – all during market hours.  Since this gab-fest comes after Friday's Non-Farm Payroll report and, as noted above, Trump's first full jobs report was a disaster – we can assume Friday's will not be good either and the Fed will be needed to avert a panic.

This morning, we already saw some worrying numbers on Personal Income, which was only up 0.2%, which is 33% less than 0.3% expected and not only was March Consumer Spending 0% vs 0.1% expected (100% miss by leading economorons) but February month was revised down from a very poor 0.1% to also flat.  This does not bode well for earnings from companies that have not been able to engineer their numbers (small caps), who mainly have not reported yet.  

As we found out on Friday, GDP for Q1 is estimated at 0.7%, but expect that to be revised down as well and that marks the worst economic performance in 3 years during Trump's first 100 days and we are many miles away from Trump's 4% growth target.  On the bright side (if you could call it a bright side), it seems the Fed will have to take another rate hike off the table on Wednesday though, by the looks of the speaking arrangements – I think they are leaning towards hiking and then spinning it more doveish on Friday.

In any case, last week we talked about hedging the uncertainty with the S&P Ultra-Short (SDS) May $13 calls, which were 0.30 at the time.  They were still 0.30 going into the weekend and we decided to stick with them (30 for $900) in our Options Opportunity Portfolio.  The Oil (/CL) and Gasoline (/RB) trades made some nice quick money but those we cashed and now we're waiting for a nice low to get long again.

One commodity I was about to throw in the towel on was Coffee (/KC), whose ETF (JO) is also in our OOP with the following trade:

We're down about $2,000 and we've been riding out the dip in Coffee and I wasn't going to throw good money after bad but Bloomberg ran an article on Friday featuring: The Scientists Fighting to Save Us From a World Without Coffee and the Coffee Market has been focusing on the positives but the list of negatives is very impressive as well:

Coffee crops are under siege from deforestation, abnormally high temperatures, a lack of precipitation, and disease.

The global market is heading for its fourth straight year of deficit, according to estimates from Rabobank International. At the same time, global demand for the beloved beverage is expected to reach an all-time high this year, led by demand from younger American consumers.

Production will need to increase at least 50 percent by the middle of this century to keep pace with the demand, says Conservation International, an environmental organization.

Land suitable to grow the arabica beans favored by Starbucks Corp. and other specialty roasters will be cut in half worldwide by 2050.

Leaf rust, a fungal disease that affects both arabica and robusta plants, is also devastating the industry. About 18.2 million bags of coffee worth about $2.5 billion were lost to the disease from 2011 to 2016, according to WCR. The loss put 1.7 million people out of work. A warmer planet means producers will be forced to contend with more frequent threats to their beans.

Coffee was the runner-up for our Trade of the Year for 2017 and the reason it lost out was that we thought we were a year too early to start going long coffee based on climate change issues.  Trump's unwillingness to help fix that problem (or admit it even exists) guarantees us an eventual win (in coffee – the planet is F'd) but you can go broke waiting for the macros to kick in.  Still, I think we will invest in improving our position in JO with the following changes:

• Roll 15 JO Sept $17 calls ($2.01) to 15 Dec $15 calls ($3.75) for net $1.74 ($2,610) 
• Roll 15 JO Sept $22 calls (0.35) to 15 Dec $20 calls ($1.05) for a net 0.70 credit ($1,050)

I'm happy enough with the short $19 put target that there's no sense in changing those and, as a new spread, the net of the Dec $15/20 spread is $4,050 less the short puts at $2,513 is net $1,537 on the $7,500 spread with $5,463 (355%) of upside potential and your worst-case scenario is you hold 1,500 shares of JO for the long-term and, as I noted, the macros are currently winning against the scientist.  

From our original trade of net $1,875, we're spending $1,560 more for our roll so we'll have less upside than a new trade entry but still looking forward to a nice double, despite the fact that we initiated the trade a bit too early.  

The earnings week ahead is going to be a wild one, highlighted by Apple (AAPL) and Gilead (GILD) Tuesday evening (and my GILD pick was featured last week at the Nasdaq) and Tesla (TSLA) and Facebook (FB) after Wednesday's close.  While we think Apple will do fairly well, we think it's already priced in and we did adjust our index shorts to be more bearish on Friday, in our Live Member Chat Room.

Be very careful out there – it's going to be a crazy week!