Writing Conspiracy Premiums (TYL)

 

In last week’s letter we issued our annual investor challenge, seeking one of you to take the honor of prognosticator of the year. But as it turns out, we’ve got a tie between tens of thousands of you for procrastinator of the year!

 

C’mon, folks! Get off your bee-hinds; we want to know how you see the year ending. And we’re offering prizes, too. A bucket of mortar and a jug of WD-40 for third place, a cracked Top Flite golfball once shot by the Walrus, Craig Stadler, that we found in a pond at the Masters in Augusta in 1983 (dad took us for a family trip that year; it was the first time I ever tore a ligament). And the grand prize, still to be okayed by Normandy brass: a skeletal replica of John F. Kennedy’s assassin, Lee Harvey Oswald, issued with papers of authenticity from both the D.C. Federal Morgue and the Dallas County Medical Examiner.

 

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How Dare You!

 

You can always count on us for million dollar collectible giveaways, friends. That’s why we’re Normandy.

 

Just one more word on our own predictions before we get to this week’s action.

 

We got a number of emails and phone calls from puzzled subscribers regarding our Obama-as-President-through-2017 prediction, so we’re going to take a moment to explain.

 

First, it’s true, the 22nd amendment to the Constitution allows an individual to run for president only twice in his lifetime. If he chooses to come back as a doppelganger for a third term, we imagine the Supreme Court would have to weigh in. The law is the law.

 

But there are three ways of which we’re aware that a two-term president might sit for longer than eight years, and they’re all codified in law (please pony up if you know differently). They look like this –

 

1. Congress is empowered to set (or reset) the date for a presidential election in accordance with a simple majority vote. In the event of a national calamity or war or alien invasion, congress could conceivably decide that voters are not able to get to the polls in sufficient numbers and might therefore change the date for some more opportune time in the future.

 

2. Congress could for any of the above named reasons also grant to the executive branch (the President) the power to postpone or reset the date of an upcoming presidential election.

 

3. Under the War Powers Act of 1947, the Continuity-of Government Plan (COG) of 1949 and the Patriot Act of 2001, there may be space for a sitting president to issue an emergency decree that would institute martial law in the country and thereby suspend a great number of constitutionally enshrined rights and freedoms, including that of voting in federal elections.

 

But only a bona fide constitutional scholar could navigate that space. Heh, heh, heh…

 

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A Crisis Worthy of the War Powers Emergency Scenario

 

Should the possibility, indeed, exist for a president to extend his term in office, the pre-requisite would be a conflict far-reaching enough to keep Americans indoors and justify the imposition of a special set of laws to govern them – to keep them safe, as it were.

 

Could such a scenario be created? Indeed, is it within the reach of a president to craft a reality whereby, for example –

 

· There were numerous race riots on the streets of major American urban centers,

 

· There was a massive surge of illegal immigrants across our borders,

 

· There was an upsurge in terrorist activity within the country, at major sporting events or other nationally important occasions or venues,

 

· The military was involved in three or more theaters of conflict, like, say, Ukraine, Syria/Yemen/Afghanistan/the Middle East, and the South China Sea,

 

· And all of the above unwound precisely at a time of a calamitous national financial crisis…?

 

Could it Happen?

 

It seems, in fact, that all the pieces are already in place, and just a trigger needs be pulled here or there to stoke the existing coals into a full-fledged inferno.

 

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Our best guess is that the fires won’t start to burn in earnest until next summer, and that until then it will be necessary to give the impression that all’s quiet on the home front. That translates into rising stock prices and little else. Because there’s nothing that keeps the American body politic complacent like advancing equities.

 

And so it will be…

 

We’re not usually so forthrightly ‘political’, but the brain trust here at Normandy regularly convenes to discuss market related themes, and over the years we’ve seen a number of new lines being drawn that give shape to the above analysis. This is not a prediction so much as a possibility we see gaining traction as the 2016 vote approaches. If the pieces are, indeed, in place to pull off such a stunt, we believe it’s in keeping with our current president’s character to do so – as it was, too, with numerous other presidents in our recent past.

 

We offer the scenario as a potential guidepost to investors and admonish one and all to plan accordingly for such an eventuality. It’s not beyond credible.

 

Make us some money!

 

This week we’re going to focus on a single company that’s been a smash hit with investors for the last seven years, climbing over that period from a measly ten dollars per share to recent highs in excess of $150.

 

As the chart below shows, there was barely a hiccup among shareholders in software marketer Tyler Technologies (NYSE:TYL) as the rest of the market went into meltdown through the summer. TYL shares not only held their own since June, but gained some 20% over that period, cracking five successive new highs in just the last seven trading sessions.

 

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Remarkable

 

There’s no doubt this stock is a powerhouse, but there are signs she could be due for a rest. We’ve outlined them on the chart.

 

· First, the sheer distance the stock is trading from her long term MA (nearly 50%!) calls into question the potential for more powerful gains (in blue).

 

· Next, we had an overbought RSI read at the last set of highs in July (in black), and since then

 

· Both RSI and MACD have been diverging lower against price.

 

All of which leads us to believe we’ll have a sideways drigt for the next month or so, until the moving averages can ‘catch up and both RSI and MACD settle back into neutral, closer to their respective waterlines.

 

Wall Street Elite therefore recommends you consider selling a straddle on TYL. Sell the November 150 PUT and CALL for a credit of $7.00 and $7.10 respectively. Total credit is $14.10.

 

Stock today at $149.98.

 

Breakeven on trade is either $163.81 or $135.01.

 

With kind regards,

 

Hugh L. O’Haynew

See what people are saying...

  1. Jesper

    Hey chaps… Would be great to hear your views on Super Trader Karen at some point.

  2. Bill

    This play on TYL went sour very quickly. Should it be closed?

    • Mcabby Matt

      Yes

  3. keith

    please allow a sample trial of this service.

    thanks,

    k

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