Seth Golden: Horrendous Retail Stocks, Tremendous VIX Product Profits // shorting short volatility trading strategies UVXY TVIX VXX strategy stocks selling system contango derivatives options futures index david moadel
welcome to looking at the markets with David Modell I've got a frequent return
guest today he is mr. Seth golden he is in charge of the golden capital
portfolio which has had well really impressive returns that's all I can say
we're talking about doubling your money in some years okay so you know it he's
one of my favorite guests to have on and today we're going to be discussing yes
we'll talk about the short volatility product trade that is so popular but
we're going to start also by discussing retail because that is another area of
expertise for mr. golden you know what's the retail picture what's the overall
picture for JC Penney's Macy's and just overall are we long are we short should
we be cutting back and what's the outlook for 2017 2018 so mr. Seth gold
welcome back to looking at the markets thank you so much David this is really
great opportunity to be here talk to your guests because we've had a lot of
headlines just you know from Friday to this morning regarding retailers or so
fantastic opportunity and hopefully we have a lot of information to share sure
it's it's been intense just today alone I'll look at it really quickly
JC Penney's today down 8% Macy's down a little bit over 4% all of retail got hit
today and it's not even an earnings day for
these companies all right so some big moves so now let's get into the latest
news on this last Friday JC Penney announced a really really bad quarter or
pre announced a really really bad quarter and lowered guidance for the
full year so what's your tick with the stock JC Penney now in the two dollar
range and what's the endgame here for investors okay yeah like I framed that
so stock for a long time now you know since it
was $8 his share last year has been uh no touch for me and you know in most of
my articles since then and there's probably a dozen articles that I've
written since 2016 on JCPenney basically you know kind of weighing the
value proposition of all these number of initiatives that they put forth with the
potential to show some incremental improvement in same-store sales and
earnings and you know my my thesis has basically been don't touch it until you
see that these initiatives are bearing fruit and I like the initiatives you
know I've said many times I think they're doing the right things but doing
the right things and actually you know being rewarded for those right things
takes a long long time doing appliances adding more Sephora shops to your stores
doing Empire flooring in HVAC systems having whole tide apartments in their
stores all of these things are the right thing to do you're giving your customers
more in one shopping location then most retailers are and making the most of
your retail square footage but along with that comes you know the headwinds
or the challenges such as well appliances don't have you know very good
margins so their margin to creative you still have double-digit growth in your
online sales well that's also margin diluted and those are really you know
big initiatives for them closing all the unprofitable stores while the right
thing to do long-term that's never been a a positive for a retailer in in many
senses once you start closing stores you never stop until unfortunately you know
you reach bankruptcy I'm hoping that's not the case I'm hoping that JCPenney is
actually the one that is doing all the right initiatives while closing stores
and meets an eco with equilibrium you know but again I don't invest based
on hope so I you know I wouldn't be in the stock but for investors that have
been holding on I guess what I would say is you know maybe draw a line in the
sand if it breaks this point that's it for me you know you can't go any further
and there's always other opportunities out there look if Macy's is falling
somebody's picking up something so yeah I for me it's a know touch I don't the
results have been consistently poor from the day Marvin Ellison took took over
for the company I think he's missed but it was seven out
of the last eight quarters and II just lose trust from the investor base when
that happens you just lose all the trust and to some extent he's he's being
honest with investors on the conference calls he said during the last conference
call you know we're overhauling the women's
category because we're you know the sell-through rate is poor our sales and
there are down double digits so we're overhauling it and that's what they
reiterated on that pre announcement was you know they basically had to liquidate
a lot of you know merchandise and just do severe markdowns to get rid of it so
he told us you know on one hand what they were going to be doing but on the
other hand he didn't in his guidance he didn't forecast for this so that it's a
half-truth well in my opinion so you know I hope they do better I'm a
frequent shopper I hold a JCPenney credit card but we'll see yeah it's one
thing to shop there it's another to invest in a company that has store
closings liquidations you know that's probably like you say a no touch type of
situation if you're considering a new position especially a long position in
JCPenney I totally understand that do you envision that this JCPenney
situation possibly spreading to the entire retail department suck
it's an ongoing problem you know spreading has been a problem over that I
would say the last three four years where ecommerce sales have just you know
kind of reached a point where brick-and-mortar sales are just being
siphoned you know it's kind of like having two full cup you know one full
cup of water and the other one is not full and the one full cup is the brick
and mortar and it's just pouring their sales in to the e-commerce cup so you
know this has been going on for a number of years now and I I can't foresee a
future where online sales aren't growing at the expense of breaking water sales
so no I I don't see this you know abating anytime anytime soon it may you
may reach a point in uh in you know between online sales in brick-and-mortar
or where brick and mortar has rationalized their footprints to where
you know they can grow profitably at least through you know the generating of
consistent cash flow you know so they're always doing this game of well we can
buy back shares that will increase our earnings that helps the stock sometimes
but then there's the count there's the argument against that which is retailers
are valued on sales they have not been valued against earnings for almost three
years now so when people will start you know there are the price to earnings
multiple has been you know at its lowest level that's because nobody's pricing
these things to earnings at this point they see that Amazon is doing or the
e-commerce space you know it's sales and if they're gonna siphon off all your
sales eventually no matter what you do financially you know to engineer profits
the long the long-term picture is still the same sales they're either there or
they're not so you know a lot of people you know
Maci's oh oh well they can sell real estate assets and that'll give it a
better valuation know no matter who's put that you know no matter how many
assets they have sold they're still gonna be valued on their sales because
that is the core business yeah sales is the bottom line and if the if
it's not a pretty picture then why get involved why why be a hero that's what I
always say yeah now I remember back in January of 2016
almost two years ago now you wrote an article on Macy's this is in seeking
alpha and I'm gonna put a link to that article in the description check that
below the video you actually warned investors about how flawed
you know you believed that you believed at that time the real estate to be when
offered by star board investors and you just gave an overall warning about
retail in general so what do you consider if anything to be the best of
breed in the retail department sector best and breed so brick-and-mortar I
would have to say is Walmart you know their size strength balance sheets it
gives them an opportunity opportunity to do so many things if they want to dive
into e-commerce in a big way like they did with the jet comm acquisition they
can and it won't affect their balance sheet you know target is another good
one but target can't do what Walmart can do otherwise they should have bought a
big brand ecommerce play years ago as well so I mean you could just look at it
from that lens balance sheet the ability to meander through this really
challenging retail environment it has to be Walmart would I be a buyer of Walmart
stock up here probably not but that doesn't mean they're not the best in
breed so I'd say Walmart followed by you know
the likes of Target if you know we're talking department stores but you know
there's other categories of retail but for this conversation yeah so if
somebody feels absolutely compelled if if you if they must invest in
brick-and-mortar retail Walmart maybe Target but really not any of these
sound like a compelling buy right now at these petitions yeah you're gonna get
into a battleground stock if you do anything beyond the likes of a target or
a Walmart you're you're in a battleground stock if it's not being
realized today you better believe it's probably gonna
be realized going out into 2018-2019 and so on so yeah gotcha all right
so bottom line what we're seeing now and based on everything you've said so far
is this the death of retail I mean is can we can we look forward to any good
news on the horizon momentary good news you know so they can beat a quarter if
they lower the bar a lot you know low enough targets done a really good job of
that this year they lowered the bar so much so that in q3 they you know raised
it some and in targets you know kind of writing the sales of a you know of two
consecutive quarterly beads off of those really low numbers but no I mean there's
no death of retail but dying can be equally as uncomfortable as dead so you
know this will go on for years and years that you know in the media media uses
the term death you know it's very it's a lot of hyperbole but they're definitely
you know dying or decaying because you're closing stores you're losing
sales this can go on for years and years I'm at shareholders expense you know
while these companies continue to try and do this and do that and you know
make these tiny acquisitions that don't amount to much yeah the dying is painful
but there's not really death we're always gonna want to you know go out of
our house you know and shop somewhere or dine at a restaurant but not as much as
we used to don't happen yeah yeah all right so not
necessarily death but definitely decay and deterioration and speaking of decay
and deterioration has that for a transition let's talk about Vic's
products shall we an ever popular topic ever since you
were featured in an article in The New York Times
you've become semi-famous shall I say for for maybe some people think of me as
infamous I think Z might think of me and you've been featured in other media
outlets as well for your I'll brag for you even if you're you're humble you're
amazing results year after year when it comes to shorting volatility products
CTP s exchange-traded products the most common ones being you VX Y T VIX VXX and
so on now something a little scary though happened for people who like to
short these products and I want to get your feelings on this you know the the
VIX spiked above 12 and it hasn't been there in a while
what do you think caused that spike and did you have to change your strategy at
all as a result of that yeah that was last week midweek I think it did touch
13 or even just about I may be wrong but what caused that it's hard to pinpoint
one thing I do you know look at a variety of metrics and market indicators
and things of that nature and last week we did have the 10-year yield tick above
2.4 for the first time in a little while you know and that is brushing up against
a December rate hike you know most people are expecting and a new Fed chair
person possibly being announced this week
but you know and that's you know kind of what you heard on whether it was CNBC or
Fox News is oh my gosh you know here's the 10-year yield up above 2.40 for the
first time in a while so you know markets pulled back a little bit from
all-time highs again and you know it's served to spike the
VIX itself which sent you know the likes of you V X Y and T V IX and VXX you know
all went up pretty pretty sharply you know that day subsequently crashed
you know since then but you know it's important for for folks who are
participating in the volatility complex you're asking a perfect question why are
the you know why did it spike and you know that's why I like to look at
everything regarding the the macroeconomic climate and you know what
I recognized and which was you know somewhat validated in on CNBC all all
that day and the following day is the 10-year yield and and it's correlated a
lot in the past as well I tweeted on Twitter you know when it when it was
lasted when it was this high in the past I had informed people keep watching the
10-year yield because as it was rising the VIX was rising and that's not to say
that the VIX will always correlate it to the tenure sir it'll correlate to
whatever it wants for as long as it wants before find something else to
react to so yeah and by the way you talked about tweeting I should mention
and I will mention again people you need to be following Seth golden on Twitter
his handle is at Seth CL and on stock twits dot-com the popular message board
which is a lot like Twitter for financial people stocks and options
traders and on stock twits comm Seth gold and has the
love at seth marcus and that's on your screen right now and in the description
now i wanted to talk more about shorting these volatility products UV x YT VIX
the XX i you know some people might try to simplify the process they might say
you know what every time you v XY goes up five eight
ten percent in a day I'm just gonna short it and I'll be fine well that
might work some of the time but you prefer to have greater reward with less
risk what are some of the things you look at and I'm gonna mention some of
them and tell me if I'm right or wrong I mean I'm thinking that you're looking at
contango I'm thinking yet for for the VIX itself for VIX futures I'm thinking
you're looking at a troll yield I'm thinking you're looking at the
macro-environment how's the economy doing how are corporate earnings doing I
think you're looking at that and today you mentioned you're looking at Treasury
yields because they have an effect on how people feel in terms of fear and
greed are you looking at all those things and yeah how do you how do you
synthesize that how do you put it all together yeah absolutely
um time it's it's definitely taken time just to you know familiarize myself with
all of those variables and to know what to have on my screen at all times
you know I've tabs open on all of my screens you know so that I can see them
in real time or as quickly as they do update you know VIX futures don't update
you know very quickly but you know that it's just yeah I've become accustomed to
this methodology whereby I know what to look at and what's important what's
relevant so like you said you know there's a lot of strategies out there
nowadays for folks that do you know have desire to or continue to short
volatility but you know this year has been a really unusual year you know I've
been shorting volatility for well it'll be six years now
and this year has been one of those years where which hasn't existed largely
in the past where you haven't had a 3% pull back in the market the VIX on
average maybe below 15 this year this hasn't happened before so yeah you could
have short you know if it goes up 8% you could assure no problem that may not be
the case next year or in 2019 or 2020 so to answer the question why do I look at
all those things it's because I want to short with a degree of comfort you know
and and knowledge because next year it may not be the same situation this year
has been really easy anybody who's come in no matter when and
shorted you know the VIX ETP SUV X Y or t VIX as long as they held on to it
they've made good money that may not be the case next year next year they may
short and have to hold it for a week or two weeks or a month or too much you
never know but you know that's why I look at all these different variables
because I want to know and I want to have a comfort level whereby the goes up
8% I know how much I'm going to short you know just in case it goes up but
another 8% on top of that so on and so forth so you know what I've been
expressing you know lately in my tweets and on Twitter I mean I've been trying
to open people up to you know that looking at the different metrics looking
at VIX futures you know that the CBOE and you know having that on your screen
during the day and you use that so that you can look at em1 and em2 the
different monthly futures convicts futures contracts so m1 you know let's
take sample M 1 and M 1 you know is trading today the last price 11 dollars
and 58 cents well what does that mean doesn't mean nothing anything in and of
itself for vixy TPS but if you're trading them you juxtapose the 11:58
price on the m1 futures contract with the VIX spot price itself and VIX spot
right now is 10 dollars and 58 and 50 cents so you've got a dollar 8 you know
roll yield is what we call it you have a gap there and typically you know as we
get closer and closer to that VIX futures contract expiration date it has
to compress and fill that gap and that's where your money is you know so there's
people that don't even play these instruments until they get closer to the
expiry dates but knowing the gap there knowing the role yield the difference
between the fixed futures m1 and the spot gives you a good degree of comfort
that you're still in good territory and that's represented in contango as well
you know you're still on the right side of the trade so far as your short
position if you've got a nice you know gap there between m1 and spot fix
because the closer we get to expiring the DK is gonna ramp up the decay in the
u vxy price or the the TVI x price so gotcha so you want a nice healthy
difference between the VIX spot price what it's selling for now and AM 1 and
m1 meaning a month or the next next the next month's VIX futures which is going
to cost more because that's how it is there's a cost to store these yeah it's
hard to imagine I always imagine like a storage unit what's storing these VIX
futures there's a cost to carry it and hold on to it so you want a nice healthy
difference between spot price and m1 and also I think you would want a nice
healthy difference between m1 and m2 and so on and so forth and
and so people who go along UV x YT VIX they're continuously holding something
that requires the fund to you know sell and saddle oh yeah yeah sell the current
months months you know Vicks product and then buy a more expensive they're
selling low and buying high because these things expire every month
am I correct am I thinking here hundred percent sir okay if a dummy like me can
understand it then you're doing great okay gotcha gotcha wow this is this is
really exciting I'm gonna contend my journey I'm gonna continue my journey to
to learn how to trade these VIX products correctly I'm gonna try to refine it the
way you've been doing it and I hope that people are checking out your tweets
which are free by the way free education and also in stock twits and your
articles on seeking alpha calm talk markets calm look for self golden on
those and I'm going to keep retweet retweeting them as well also speaking of
Twitter I saw you had an announcement regarding all these resources
it's about phenom group.com am i pronouncing it correctly and what's that
all about yes a little while back I had announced that
I would be launching a website come December the website still being
constructed it's going to be a financial news media based website subscriptions
for traders and investors all kinds of research and daily news articles there's
going to be a ton of information and a ton of sharing with regards to you know
VIX trading and the VIX complex because that is a specialty of mine but you know
I I've been on Twitter and on sock twits for for the last year you know trying
you know educating to the best of my ability
you know folks out there but this is going to be you know give give
buddy you know one collective place to get all that information and to get at
me as they say you know where I'm gonna be participating I'm gonna be delivering
my trades my research articles and all that sort so we should be launching in
December we are only going to accept you know during that period a thousand
subscribers will have a free subscription as well as a paid
subscription but you know that one of the goals here besides just the
educational dissemination is you know creating jobs you know I'd love to have
the site visa successful whereby you know I can employ other research
analysts and articles article writers there's going to be the opportunity for
for bloggers to participate with their own articles and thoughts on the website
as well as a chatroom you know just kind of like stock twits where you know
people can engage each other and share their ideas and thoughts and all that
cost money so hopefully you know people will find it of great value any any
persons that are interested because that's where my traits are gonna be
that's where I'm gonna be if you're you're interested please feel free to
contact me directly so you know we can put you on the VIP list because again we
are going to be somewhat you know having an exclusive launch and you know I'll
make sure that you know I have the names that will be delivered the appropriate
communication so that they can go ahead and sign up and face it if they so
choose absolutely and the way to get in on this and again there is limited
participation so you want to let mr. Saif golden know as soon as possible
that you are interested in this if you are and given golden capital portfolios
returns over the past number of years I can't imagine why you wouldn't want to
participate in those returns they've been extraordinary the email address
that you're going to see it on your screen right now and also in the
description of the video below Seth golden at
cooling sitcom co ho li n XIT dot-com shoot him an email he's very accessible
very responsive and once again check them out on seeking alpha calm for his
articles its frequent articles talk markets.com
and elsewhere on twitter at seth CL on stocked wits at seth Marcus did I leave
anything out seth golden um no but if i could you know just maybe briefly just
say one more thing sure on you know the VIX participation yes it's complex
you see we see a lot of headlines every single week and you know the headlines
seem to ramp up when volatility ramps up and you know my name gets you know
pushed out there more often than not in these headline articles like the ones
from Zero Hedge last week you know because i seem to be somewhat of a
public figure and and i'm not i don't shy away from from that you know
spotlight if you will but there is some well pointed risk aversion in those
articles and and some some prudent planning you know should be gleaned from
it you know that the fix the short vix trade is a highly profitable one it's a
highly successful one but it's not one that should be entered into lightly
without a basis of knowledge or or resources around an individual trader
and that's it's one of the things that why i've been participating on twitter
so so frequently over the last year is because you know it had become so
popular and i saw people going into shorting or even long these products not
really knowing you know their composition or how they interact or
correlate in the market or with what they correlate so you know take take
those you know hyperbole generated articles
a hedge in the light with the grain of salt but also recognize that I think
what they try to get across is be careful know what you're doing have the
right resources because if you don't what they are you know positioning you
know in the media can't happen to you and nobody wants that nobody wants that
situation so I totally agree sir shorting a mixed product shorting UV X Y
which is leveraged TT VIX leveraged product VXX not leveraged but still
shorting these products is not like buying and holding coca-cola or
McDonald's or something like that it's risky you have to know what you're doing
don't do this unless you've been educated and you have enough capital to
be able to handle unexpected events so and you have to have a certain amount of
risk tolerance as well also known as the iron stomach
that I always talk about so once again the website it's under construction
right now Phenom groov.com but you're still welcome to check it out fi n oMG
ro u p.com hey why not take a look at it and it's
not going to be under construction for much longer you're going to start to see
some content on there and you're going to want to get involved yeah we're doing
beta testing in November you know for folks that have frequented seeking out
talk markets and even stocked wits over the year
you know we're constructing the site to kind of give you the you know the best
of all world and sure don't you know takes time for us to generate content
and what have you but you know seeking alpha is a great site to need articles
maybe place a comment but you don't get a lot of interaction stock Thwaites it
stock twits is a great site for interaction you don't really see you
can't read articles there you can be linked to them so what we're hoping with
phenom group is that it kind of brings the both you know the best of both of
those worlds and so far as you know chat rooms it will be moderated so ya know
that languages it won't be a free-for-all
it'll be for educational purposes I like it alright I'm excited about phenom
group comm so check it out put in your bookmarks and keep checking back as they
work on it and fill it out meanwhile contact Seth golden at cooling sitcom
maybe you want to get in on this maybe you want to be a subscriber can't say I
blame you so you want to contact him because it's
limited openings right now at Seth CL on Twitter at Seth markets on stocked wits
calm Seth golden I enjoy having you here it's always an easy conversation you
always make it so you know so easy for me and I really appreciate that
so you welcome back here anytime I'm looking at the markets thank you David
everybody have a fantastic day thank you for watching please like comment and
subscribe and I'll see you next time
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