OPEC Production Cut

Going into this meeting with Russia, OPEC is looking to cut 1.5 million BPD. This is the largest since the 08 crisis. In the short term, if Russia does not agree, we could see more downside in the oil market. Russian energy minister Alexander Novak is indicting there will not be a deal for extensive cuts. So a better buying opportunity might present itself. As I am writing this, the market appears to be pricing this in. At some point though, Russia will jump on board.

Update: Russia rejects a deal for production cuts. As expected, Oil nose dived.

The Correction Comes

The correction I have been anticipating has arrived. This looks like a clear example of the market looking for a reason to correct. It found it with the Coronavirus. I think this is way over done. I do not believe the bull market is over in US stocks. This is the biggest four day decline since August 2015. The most overdone market is oil. It is a screaming buy at this price. The flu season is almost over. The Coronavirus will be long forgotten by all market participants one year from now. Here is your chance to make a classic “buy low sell high” with oil.

IRA Options

Standard IRA
A standard IRA lets you take the deductions up front , but taxes you when you withdraw the money. People get excited abut the idea of tax-free IRA money. It is not tax free. It is tax deferred. People live the rest of their life with “I can not get rid of my IRA, I would have to pay taxes.”
The advantage is they allow tax-free compounding. If your fund’s investment portfolio grows in value (a huge if) you are not taxed until you sell the portfolio and start living on the income. This assumes the tax code isn’t re-written to change the rules. Why do you assume this? I do not like standard IRA’s.

ROTH IRA
The ROTH IRA is for after-tax investing. The goverment promises to let you take that money out when you retire without paying any further taxes. This is a better deal. Assuming, of course, this promise is not broken. It’s better to earn future profits tax-free than to tax-defer your investment principal and profits.
Your two benefits of ROTH IRA are as follows:
1- You can make your own investment decisions.
2- You can avoid income taxes on future profits and deduct investment losses.
Peter Fortunato is a master real estate investor. He invested $2,000 in a Roth IRA in the late 90’s. It’s worth about $1 million, tax-free, today.  He used real estate. He gives seminars that discuss how he did this. The next one is March 28th in Atlanta. Details are located here. It is not easy and the laws are strict.
You will need to be in control of your IRA. This can be done legally. Rob Clayton is a CPA that specializes in this. You can visit his site here. Pay for his advise. DO NOT think you can do this on your own.

Retirement Questions
Things to think about:
1- How many years until I retire?
2- Rather than put my money into an IRA, what else could I do with it?
3- How much money per year will I contribute?
4- What do I expect my rate of return to be?
5- Who is going to make the investment decisions?

No IRA
I personally do not have an IRA. In fact, I think they are bad ideas. Congress has lured millions of people into these programs. When the goverment gives you something, it can take it away.
I have made the point at this site numerous times but it is worth a repeat. If the CPI prints 8% do you think the federal reserve will sit there with the federal funds rate at 1%? Do you think they will keep buying bonds? I do not. The Federal Reserve is going to tell the US Treasury, “you’re on your own.”
The US Treasury will need trillions of dollars to float its debt. At this point, the goverment will make you an offer you can not refuse: Your IRA must buy our special retirement bonds or lose the tax deferred status.
People do not like to hear about this. They have a fundamental belief in these words: ‘full faith and credit of the US goverment.’ Stringing those words together in a sentence make me laugh.
If you are over 65, it is possibly you will outlive the day the checks from Washington D.C. bounce. The bond bull market that started in September of 1981 will end one day. I do not know when. No one does. There is no sign it will end anytime soon. However, I think I will be around when it happens. The US governments last option will be default. Between the time the US Fed stops buying treasuries and the default, your IRA will be a sitting duck.
Instead of putting money in an IRA, why not build a side business? Buy a house from a distressed buyer and rent it.

Oil Back In The Buy Zone

Oil has entered into the lower range of its trading pattern.

I know nothing about epidemiology. Fair enough? But reading through a few articles I am willing to bet the coronavirus will recede from the headlines in a few weeks. The market always over reacts to events like this. I am not officially opening this position in the performance tab since it does not meet my trading rules, but this looks like a good entry point.

The Multi-Decade Base

If you look at the performance tab you will see I made a mini fortune by trading natural gas over the last 2 years. It was 1.011 points to be exact. That’s over $10K per contract. If you went long 10 contracts, that would be $100K. Let’s just say I could have enjoyed this entire year on a beach in Hawaii thanks to natural gas.
Natural gas is approaching a multi-decade base.

I am just like everyone else. 99.99% uncertain about everything. In that 0.01% of certainty, I am positive that natural gas will not got to zero. Forget about the weather. Not a single person knows what the weather will be in 2 weeks, let alone what next winter looks like. Forget about the weekly natural gas storage report. Not a single person knows what it will print one year from now. Forget about the LNG market. Boom or bust your guess is as good as mine. You buy things when they are cheap. You sell them when they get expensive. At $1.886 per MMBTU’s, I am a buyer.

John McAfee Withdraws His 2020 prediction about Bitcoin

The very strange Mr McAfee just withdrew his famous $1 million dollar bitcoin prediction and now said Bitcoin is obsolete. I posted about his stupid $1 million dollar claim in January 2018 here. He wrote an incoherent op-ed that claimed bitcoin could never go into a bubble. I will repeat what I said back in 2018.
There are three components to every market top.
1- It has gone parabolic.
2- Everyone is talking about it.
3- There is mass stupidity at the top.
McAfee is the poster boy for point 3-mass stupidity.
File under: I told you so.

Platinum- Buy and Wait

Calling an end to a bear market is difficult. They tend to bounce along a bottom for a lot longer than you expect. Buying platinum at $800 is about as close to a steal as you can get.

I have detailed the bull case for platinum in previous posts so I wont repeat it here. A short term pull back looks likely. A confirmation that a new bull market in platinum is about to begin is a break above $1200. You should buy things when they are cheap and sell them when they are expensive. One day platinum will look like the palladium chart.

When your investment begins to look like a rhino horn it’s time to look for an exit.

Pay Attention to the Options Market

Qassim Suleimani was killed by the US goverment. This will not doubt enrage millions of Shia around the world who view him as a war hero. The Iran goverment will view this as an act of war.  Having said that, on November 30th I posted about the $1.75 million dollar bet. I stated the following:

Around noon in New York Wednesday, 5,000 lots of a gold option giving the holder the right to buy the precious metal at $4,000 an ounce in June 2021 changed hands. The bets were sold at $3.50 an ounce. This seems like a very aggressive position for the people who bought the call options. Insiders take positions based on upcoming geopolitical events that the general investing public is not aware of. Similar trades take place with the oil market when someone knows a war is going to break out in the middle east. This could just be a foolish bet. I don’t discount trades like this completely. It could be someone does know something.

A senior defense official told politico off the record, “We had authority before the strike to take that action”. The official did not comment whether the approval was hours, weeks or months earlier. Naturally, this is all speculation and I have no way of knowing if these two events are connected.  But leading up to today, gold had unusual price action that hinted someone knew something. It would be interesting to see the exact date the approval was given.

Make $400 an Hour Eating a Cannoli

File under: Possibly opportunity in your area.
Via Marktwatch:

Some people love their jobs. Some people hate them. Then there’s 38-year-old mother of two Paula Noukas. “I’m living the dream,” she jokes. “I get perfect strangers from all around the world to sit down and eat together.”
Her job: Giving food-and-history tours of Boston’s North End, the famous and picturesque Little Italy that is also home to the Old North Church.
Her tours, named “Off The Eaten Path,” combine a physical visit to the neighborhood with a metaphorical tour of Italy. And plenty of food — including not just pizza, arancini and cannoli, but Italian olive oils, cheeses, wines, and an aged Italian balsamic vinegar that tastes absolutely nothing like any balsamic vinegar you’ve ever tasted, and which you could probably drink on its own.
Demand is so strong that she is making a remarkable living for, effectively, showing people around her neighborhood, talking and eating. Tours last three hours. Noukas limits them to 16 people at a time. She charges $75 a person. That works out at $400 an hour. Plus tips.
“It’s not Wall Street,” says Noukas. “I lead a comfortable life.”
It may not be Wall Street but it stacks up pretty well. The average lawyer in Boston earns $80 an hour, say government statistics. The average surgeon makes $120.
And she’s busy. She gives up to eight tours a week through spring, summer and fall. The tours are full.
“I work anywhere between four and six days a week,” she said. “When I work, I work. I want to make more money, I open up a tour.”
Ten years ago, she was just another office worker. She had a job raising money for a nonprofit. “I hated it,” the Boston University art history major recalls. “I’m not an office person. I’m not a 9-to-5-er.”
At the time she was living in the North End. An elderly friend she knew in the neighborhood gave occasional tours to visitors. One day he called her up. “He couldn’t do it. He was sick. He asked me if I would do it. I’d never been a tour guide before.”
She couldn’t read his extensive notes. So she had to wing it for a bunch of strangers.
And she had a blast. “I was always a Chatty Cathy,” she says. “I was always involved in theater (at school). I loved it.”
Her friend retired, and she started doing her own tours on weekends. Noukas, whose family comes from Greece, is a foodie and loved the neighborhoods restaurants, cafes and delicatessens. So she built her tour around them.
“I had no idea what the hell I was doing,” she says, looking back. “I didn’t have a business plan. There’s no ‘university’ for how to become a tour guide. This was a total seat-of-the-pants operation.”
She read every book she could on the neighborhood. She tapped local experts. She ended up auditing a class at Boston University given by Jim Pasto, a history professor who is also the co-founder of the North End Historical Society. “I had a mentor,” she says. “He helped me with a lot of information. He gave me a lot of confidence I could do it.”
After getting married in 2012 she quit her job and started doing the tours full time. The first year was slow. “I was getting two to four people a tour, and doing two or three tours a week. I felt really frustrated. I thought, why am I not getting more people?”
“All of a sudden it got busy,” she says. “It got busy just as I had my first baby. People said I was really well reviewed on Trip Advisor. I’d never even put myself on Trip Advisor” But the online reviews and travel site proved to be the key.
The job isn’t as easy as it sounds, but Noukas is an extrovert. It’s theater. She talks almost nonstop for three hours. “It’s the perfect job,” she says. “My husband says, I can’t believe you have a job where people pay you to listen to you talk.”