FREEWHEELIN’! (DIA,VOX,XLK,XLF,XLF)

FREEWHEELIN’! (DIA,VOX,XLK,XLF,XLF)

 

We didn’t create the world we live in, but we inherited it, and that leaves us with just two choices with which to deal with it.

 

On the one hand, we can opt out.  We can attempt to move away from the reality that exists and forge something new, perhaps with like-minded individuals, or alone if need be.  We may even be able to do it where we’re presently situated – there may be no reason to relocate whatsoever.

 

The other option is to work with what we’re given and attempt to make the best of a sorry or compromised, or even downright miserable predicament.

 

And so it is, too, with the financial world.

 

Consider –

 

We live at a time of unprecedented government intervention in financial markets, a phenomenon created by (among other things) a concerted, global money-printing drill that abandoned all semblance of restraint with the financial crisis of 2008/09.

 

Have a look –

With the advent of Quantitative Easing the lid blew off, the Fed was fruitful and multiplied, and we entered a new era of falsity that continues to this day.

 

An Age of Lies

 

Adding to the deception was the creation and eventual conquest of the financial markets by ETFs.

 

This has been nothing short of a financial starburst, with nearly $2 trillion shifting out of individual stock purchases into ‘passive’ ETFs and other similar, index-tracking instruments over the last decade.

The changes that have been foisted on the equity arena by the ETF revolution are manifold, but they can be boiled down to a couple of uber-significant developments that we now list hereunder –

 

First off, traditional stock valuation metrics no longer apply.

 

When new money pours into the biggest Dow Index fund, for example, the question is not how, exactly, to purchase the Dow 30 – whether to buy a little more Caterpillar or a little less American Express.  Rather, the ETF buys the full basket, exactly how it sits, everything in equal measure, damned be the valuations.

 

So if Goldman Sachs has a PE of 14, the ETF buys it.

 

And if Goldman Sachs has a PE of 44?

 

That’s right, the index buys it.  And, again, damned be the importance of earnings or book value or dividend yield or anything that once carried weight in the world of stock selection.

 

That in itself is dangerous, friends.  But more so, perhaps, is the phony ‘diversification’ that ETFs are marketed to offer.

 

In truth, there is no diversification in an index ETF.  All the components move commensurately, perfectly in tandem with one another, going up when people buy the group and down when they sell.  The ETF is the unit, friends.  It’s patently NOT a diversified basket of anything.

 

Have a look –

So do we walk down Main Street,

or go off-roading with the 4×4?

 

The financial world is not the one we grew up with, the one we trained and labored in, and it’s certainly not akin to our fathers’ market milieu.

 

That said, how do we play it?  What’s the best way to navigate these historic times and come out the other side unscathed, or at least with our shirts on and in some kind of workable financial health?

 

And the answer is – we do both.

 

We play the market as if there were no impending danger AND plan for the danger as if there were no market.

 

And how do we do that?

 

The Normandy way – by partaking of our semi-weekly equity option trading startegies AND by adhering to our FOUR Gs financial survival strategy.

 

As to the latter, we’ve spoken at length here repeatedly, but to sum it up briefly, it’s all about GUNS, GOLD, GAS AND GRUB.

 

And we say – now is the time to begin accumulating all of these items, setting aside a small portion every month until the ideal minimum is achieved.

 

And how does that ideal minimum look?

 

Again, this is an IDEAL.  But if we could draw a picture, it would comprise:

 

1) a small plot of land in a rural setting with some tillable soil with which to grow some basics,

2) a small bag full of silver and gold coins, collected monthly over the course of several years,

3) a reasonable supply of fuel for your vehicles (or to trade) – call it 200 gallons, and

4) a legal weapon and the know-how to use it should the need arise.

 

Sound crazy?

 

It’s not.

 

Sound far off?

 

Again, it’s an ideal, so it can’t happen for most people tomorrow.  But the time is right TODAY to start building toward it.

 

Keep following us until you’ve amassed enough funds from the current equity market blow-off top to go out and buy all of the above.  Or do it in stages.  A better option, really.  You’ll be far healthier and calm if you’re not in a panic to acquire what’s needed in one fell swoop.

 

To the Trades!

 

We start with our December 20th trade, from a letter called The Finale.  There, you’ll recall that we recommended you buy the XLP January (2018) 47 PUT for $1.67 and sell the XLF January (2018) 23 PUT for $1.72.  Total credit on the affair was $0.05.

 

And now, the XLPs trade for $0.35 and the XLFs for $0.18.  Sell the former, buy back the latter and you net $0.22 on nothing expended.  Adjusted for minimal commissions gives you a return of 113%.

 

Next is our February 21st trade, offered in Run For Your Life! Inflation!  In that letter we urged you to sell the VOX July 21st 96 PUT for $2.40 and use the proceeds to purchase the XLK September 15th 50 PUT for $1.73.  Total credit on the trade was $0.67.

 

Today, the VOX option is in the money, so we’re forced to roll it out and up.

- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]

We’ll keep a close eye on this one.

 

And finally, in last week’s letter, When is a Theory More Than Just A Theory, we recommended you buy the DIA September 15th 215 CALL for $2.82 and sell the DIA September 15th 210 PUT for $2.60.  Total debit on the trade was $0.22.

 

Today, the 215s go for $3.35 and the 210s for $1.59.  Sell the former and buy back the latter and you haul in $1.76 on $0.22 expended.  That’s a ONE WEEK gain of exactly 700%.  (36,400 annualized!)

 

This Week!  More! More!  More!

 

We so like the result of last week’s move that we’re going to redo it with a slight modification.

 

Have a look –

- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]

With kind regards,

 

Hugh L. O’Haynew

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