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Wednesday, November 26, 2014

ISIS Terrorism Risk this Weekend – Hedge It

ISIS Nazarene symbol
As we enter the seminal American holiday of Thanksgiving, with the busiest travel day of the year Wednesday; major football games all weekend and the Macy’s (NYSE: M) Thanksgiving Day Parade receiving national attention Thursday; and then Black Friday filling U.S. malls, the media and the market are almost ignorant of terrorism risk. Yet, this is perhaps the most vulnerable time of the year for America. So, I suggest investors take risk off temporarily through the holiday weekend or hedge against the heightened temporary risk to stocks.

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Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Security
YTD
TTM
SPDR S&P 500 (NYSE: SPY)
+12.3%
+14.7%
SPDR Dow Jones (NYSE: DIA)
+7.6%
+10.9%
PowerShares QQQ (Nasdaq: QQQ)
+19.4%
+24.1%
iShares Russell 2000 (NYSE: IWM)
+2.2%
+4.5%
Vanguard Total Market (NYSE: VTI)
+11.4%
+14.0%

It has been a decent year, with the SPDR S&P 500 (NYSE: SPY) up 12.3% and the Vanguard Total Market ETF (NYSE: VTI) up 11.4% showing broad market rise. It probably will end up being an even better year, with the Santa Claus rally looking like its readying to roar. But, there is a risk of disruption to this story this weekend that should not be ignored. There is no reason to bear that risk.

Extensive threats have been made by the Islamic State and its supporters both home and abroad, and I think we agree this is a different sort of evil than even al Qaeda presented to us. Anything is possible and probable as this group of killers somehow finds sympathy among outsiders and psychopaths here at home. Where al Qaeda sought the catastrophic attack target, ISIS representatives have told their supporters to strike anyway, anywhere, anytime and anyhow. It’s a different sort of threat, more easily accomplished by lone wolf types and potentially just as impactful in terrorizing Americans.

The events I mentioned in my opening are high profile and will gather significant attention across the nation and affect almost every American either today or in their actions tomorrow should they be disrupted. Obviously, this group of terrorists is better informed about how Americans live and what they do, and capable of harming our confidence and our way of life. With today being the busiest travel day of the year, terrorists could strike planes, trains, buses and cause panic. With 50 million Americans watching the Macy’s (NYSE: M) parade tomorrow, any sort of attack would garner that many eyeballs and more as CNN and all American media outlets rushed to the story. And any sort of attack on a mall or two or three could affect the American economy in a dramatic fashion, and even put some ailing retailers like Sears (Nasdaq: SHLD), which employs tens of thousands of Americans, out of business. Increasingly, terrorists are gaining an understanding of these things, and so the likelihood of their striking at symbols decreases while the likelihood of their striking panic increases.

For this reason, just for this weekend, I suggest investors take risk off. I would sell the SPDR S&P 500 and other market instruments and individual securities. If for tax reasons this does not make so much sense, which will be the case for most investors, you can hedge your market risk by buying new and temporary stakes in various other securities. The table below offers some suggestions, but I would not hold them past Monday’s open, unless an event occurs, in which case I would only hold them for a day or two longer before looking to buy value in stocks driven down by any event.

Hedge Security
11-26-14 10:17 AM
YTD
TTM
iPath S&P VIX ST Futures (NYSE: VXX)
-0.7%
-36.7%
-39.9%
ProShares Short S&P 500 (NYSE: SH)
+0.1%
-13.7%
-16.1%
SPDR Gold Trust (NYSE: GLD)
-0.1%
-0.8%
-3.8%
ProShares Ultra Short S&P 500 (NYSE: SDS)
+0.1%
-25.6%
-29.8%
ProShares Ultra VIX ST Futures (NYSE: UVXY)
-1.5%
-70.7%
-73.9%
Direxion Daily Gold Miners Bull 3X (NYSE: NUGT)
-2.1%
-40.5%
-45.9%

The last three securities in this table here are levered instruments and will lose value over the holding period in the event that nothing happens, so be advised. You will note in the year-to-date and trailing twelve month performances that these levered instruments are only good as hedging tools for short-term holding periods, as they destroy value over the long-term. All of the instruments should appreciate in value if an attack occurs on America, though gold and the GLD may initially sell off before rising if an indiscriminate rush to cash occurs. These should offer some protection to portfolios without the cost of taking tax gains here at the end of the year before buying back stocks to enjoy the rally I anticipate into the end of the year.

You earned your performance this year, so why leave it at risk over this vulnerable weekend? Those managers hedging risk here might see a minor cost to performance if nothing happens, but will definitely see a beneficial divergence versus benchmarks and peers if something does occur. Stocks and the market are at risk this weekend, but no matter whether anything happens or not, America will persevere and stocks would rise again. God bless America and happy, healthy and safe Thanksgiving to you all. I cover the market regularly, so readers may find value in following my column or my blog.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Tuesday, November 04, 2014

Are Blackberry Shares Being Manipulated?

An article was published at Benzinga.com on Saturday October 18th and reached Yahoo Finance via Reuters on the 20th before being repeated within a weekly highlights piece over the weekend before last. Also a Bloomberg video report featured a strategist suggesting an investment in BBRY options based on the rumor. The original story, which is based on an unconfirmed rumor, gained steam and influenced the trading in Blackberry (Nasdaq: BBRY). BBRY was up 12.2% through the publishing of my piece on October 29 from the $9.49 close on Friday October 17th. Compared to the 7.7% gain in the PowerShares QQQ (Nasdaq: QQQ) through the same span, that’s an important gain. So the story influenced the movement of the shares significantly. But, given that rumors of a Lenovo (OTC: LNVGY) acquisition of Blackberry (Nasdaq: BBRY) were smothered in the past by regulatory concerns, which I first raised to the attention of the public in my article A Blackberry - Chinese Company Merger Serves Apple and Maybe Hackers Too, then how could this latest story carry any weight? So is it a rouse then, and who is the “source familiar with the matter,” who the author references? Might someone be manipulating the shares of the stock, and if so, how do we play it? See my latest report on Blackberry here.

Since my report was published, Lenovo acquired Google’s (Nasdaq: GOOG) (Nasdaq: GOOGL) interest in Motorola, so BBRY shares seem to have lost their support.

Disclosure: I have taken a short position in Blackberry (BBRY) through put options as of Friday October 31. Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Monday, November 03, 2014

Gold Dropping as Predicted – Are You Ready to Listen Yet?

Gold is collapsing as I said it would over recent weeks, and as I reiterated recently in an article and in a piece about the Direxion Daily Gold Miners Bull 3X ETF (NYSE: NUGT) yesterday ahead of the predicted collapse in that security. The NUGT is now down roughly 44% over the last 3 trading days. So are you ready to listen to me yet?

Precious Metal Relative Security
YTD
TTM
SPDR Gold Trust (NYSE: GLD)
-3.0%
-11.8%
iShares Gold Trust (NYSE: IAU)
-2.8%
-11.7%
Sprott Physical Gold Trust (NYSE: PHYS)
-2.8%
-12%
Market Vectors Gold Miners (NYSE: GDX)
-18.6%
-31.4%
ProShares Ultra Gold (NYSE: UGL)
-8%
-24.3%
Direxion Daily Gold Miners Bull 3X (NYSE: NUGT)
-60.2%
-77.4%
Direxion Daily Gold Miners Bear 3X (NYSE: DUST)
+7.3%
+53.8%
iShares Silver Trust (NYSE: SLV)
-17.2%
-26.5%

Over the years, I’ve been on the long side of the gold trade and the short side of the gold trade, which has confounded many followers of my column. In fact, my articles have been criticized by people on both sides of the trade who are unaware of my historical record and see me as a perma-bull or bear, aka their enemy. It’s a real shame, because while people are arguing they are losing opportunities to enhance performance through a more nuanced and nimble trading strategy around the securities tied to gold. See my latest report on gold here.

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