I sent out an early morning Alert to our Members that covered the important news and suggested some Futures plays and we reviewed our brand new, 2014 Long-Term and Short-Term Portfolio (we also sent out in Alert) yesterday afternoon (already up $4,400 in our first full month!) and we looked at our $25,000 Portfolio (just one trade so far) and we'll adjust our Butterfly Portfolio and Income Portfolio in Member Chat later today so, for now, let's take a look back at our "Five Inflation Fighters Set to Fly" (and Part 2) from last April and see who's on track and off in this "no inflation" environment.
Read those posts for our "inevitable" inflation logic – so far, it's been evited just fine… Still, hopefully we didn't get too far out of whack on our trades and, since Brazil has out of control inflation and India has out of control inflation and even Japan is starting to see inflation AND our TLT is back over 105 – I think this may be the perfect time to revisit some stocks that can give us some excellent returns in an inflationary environment.
Notice that we made these trades fairly straightforward and diversified our sectors – hopefully that kept us out of trouble as our premise hasn't played out yet. Some of the trades we liked well enough to play multiple ways. Again, please take a moment to read the original April posts for full explanations of our strategy as well as margin requirements (most of these trades were selected with margin efficiency in mind). Also, keep in mind these trades are "in progress" just 9 months into a 2-year cycle and, as I said at the time:
I'm not advocating you put your whole portfolio into trades like this, this is like our "5 Trade Ideas that Can Make 500% in an Up Market" – it's an upside hedge, especially if you are worried you are too bearish or simply not aggressive enough.
- 10 F 2015 $12 puts sold for $1.95 ($1,950), now 0.32 ($320) - up $1,630 (83.5%)
- 1,000 shares of F at $12.93 ($12,930), selling 10 2015 $12 calls for $2.25 ($2,500) and 10 2015 $12 puts for $1.95 ($1,950) for net $8,840, now $11,660 - up $2,820 (32%)
- 10 CLF 2015 $18 puts sold for $5.25 ($5,250), now $2.10 ($2,100) - up $3,150 (60%)
- 6 CLF 2015 $15/25 bull call spreads at $3.45 ($2,070), selling 10 2015 $18 puts for $5.25 ($5,250) for a net $3,180 credit, now $1,230 - up $4,410 (138%)
- 1,000 shares of BAC at $11.66 ($11,600), selling 10 2015 $10 calls for $2.81 ($2,810) and 10 2015 $12 puts for $2.06 ($2,060) for net $6,730, now $9,700 - up $2,970 (44%)
- 10 ABX 2015 $20/30 bull call spread at $1.90 ($1,900), selling 10 ABX 2015 $15 put for $2.65 ($2,650) for net $750 credit, now $390 - up $1,140 (152%)
- 10 DBA 2015 $26 calls at $2.15 ($2,150), selling 10 MCD 2015 $75 puts for $2.25 ($2,250) for a net $100 credit, now -$120 - down $20 (20%)
The last two trades did not have specified amounts so I chose 10 to keep them in-line with the others. Given that, had we put up a net of $4,340 on 7 positions, our current return would be a very healthy $20,440 – up 370% on cash (and these were all margin-efficient trade ideas!). That's pretty good considering our original premise was wrong and there has been, so far, "no inflation."
These are the kind of trades we like at Philstockworld, the "set and forget" trades where we SELL premium to other people (Being the House!) and simply sit back and let time do the work for us. Also, as Fundamental Investors, we like to pick out spots and we PATIENTLY wait for opportunities to go long. That's why last year's inflation-fighting picks didn't come out until April, when we thought the timing was right for our entries while, for 2011, we put up our "Secret Santa's Inflation Hedges" (also wildly successful) on Christmas day of 2010.
So, timing is very important but so is understanding our strategies and learning the one technique I have the most trouble teaching to our Members – how to be PATIENT! We're still "Cashy and Cautious" in the current market, expecting a drop as more and more earnings pour in. So far, all bad news has been ignored but perhaps there will be a straw that breaks the camel's back. Or perhaps not – either way, cash makes us comfortable at the moment and I will be making some new selections in our Member Chat Room and during our weekly Webcasts.
After all, when we know how to make 370% in 9 months – are we really worried the market is going to get away from us?
Have a great weekend,
- Phil
