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Weekly Market Assessment
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BlackPacific Capital

Money For Nothing

Weekly Market Assessment
A blast from the past! Fifteen years later and the NASDAQ has finally returned to be 37 points away from the 5,000 level! This level was last reached during the Dot-com bubble! To be exact, it was March of 2000! Crazy timing!? Fear will creep back into the market as it exceeds all levels that most thought were unimaginable. DOW 18,000, S&P 500 crossing above 2,100 and the Russell 2000 breaking into all time highs! Has the market and investors become euphoric again while disregarding valuations like in 2000? Isolating the S&P 500 we are trading at only ~17X earnings, which is a far cry from the ~29X earnings seen in the 2000's. The difference this time is of course the extremely low rates that are pushing investors into the equity market in search of a yield. Have we become complacent and forgotten the past or is this time just different? The market is said not to have a memory but those who invest, do. Could a self fulfilling prophecy occur as those who lost it all in 2000 will pull their money from the market to avoid future losses? I have mentioned many times before that a secular bull market, in the right conditions, can last many many years and so far this seems to be the track we are on.The band Dire Straits have a song called "Money for Nothing", this is a perfect song to match the current yield environment. The 10 Year Treasury yield has recovered from below 2% however, around the world, yields remain at record low levels and in some cases have a negative yield! This monetary policy is not only forcing people into more riskier assets to achieve a better yield but also enticing people to borrow large amount of money for nothing. It is still amazing how the Federal Reserve is seeing inflation decline even in this type of environment. In the recent Federal Reserve meeting notes, the Presidents discussed the adverse effect of rates "being too low for too long" while also going on to note the "adverse effects of raising rates too fast". They have backed themselves into a corner by stating that they will be raising rates later this year but by their dual mandate and comments like this, it looks like money for nothing is here to stay!             

The Rant: Going Off on a Tangent with My 2 Cents:   Making the Watchlist: Below are the stocks that I will be looking at over the coming months.  I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them.  You will be able to see and follow their growth and/or decline. Chart links may be attached.

From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -No Trades 

 SPDR S&P 500 EFT (SPY)- Expired worthless  

VelocityShares 3x Long Crude Oil ETN (UWTI)- This trading vehicle mirrors the movement in crude oil. I have opened a long position in this quasi ETF at $2.79.   

FireEye (FEYE) - Multiple option positions to hedge out weekly risk on this large position. Expiring this week I have sold another Iron Condor at $45/50 and $44.50/43.50. Also to protect these positions I have purchased a Straddle option where I purchase both a "CALL" and a "PUT" at the same strike price which is at $43.50. This allows me to participate in the up and downside moves while also protecting my Iron Condor!       

6 Comments to Money For Nothing :

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