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Philip Davis
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  • Ilene's Interview with Damien Hoffman

    Damien HoffmanBy Ilene

    This week, Damien Hoffman founder of Wall St. Cheat Sheet talks with me about the stock market, the economy, politics, corporations, and about his plans and aspirations. Hope you enjoy our interview as much as I did. 

    Ilene: Hi Damien, can you tell me a little about yourself, how you got involved in Wall St. Cheat Sheet, and what your goals are?
    Damien: I am an entrepreneur at heart. I graduated college during the height of the dotcom boom and started a successful company with a few friends. When they decided to manage the company indefinitely, I decided to move on to build my skill set.
    To make a long story short, I went to law school, clerked at the Florida Supreme Court, and worked at an investment bank. With my newfound skills and relationships, I got involved in some very cool consulting projects for several years.
    Then, after the big crash, my brother and I thought it was the perfect time to get into financial media. We are both successful traders and come from a family which is passionate about investing. So, we launched a newsletter in November 2008 to meet the demand from friends and family who were screwed during the crash. It was an instant success.
    In the summer of 2009, we ramped up the blog. It’s caught on like wildfire. We are very humbled by how many people support what we’re doing and have appreciated our work.
    Ilene: Yes – I very much enjoy your site. What are your plans for Wall St. Cheat Sheet?
    Damien: We have a lot of exciting plans for 2010. The head of our Board of Directors is Larry Kramer, the co-founder of MarketWatch. Larry has been very active in helping us execute our business plan.
    In the next couple quarters, you can expect some awesome new resources like TV, educational webinars, and a few novel tools which I cannot reveal yet.
    Additionally, this week we are launching Leisure Cheat Sheet (, and this year you will also see DC Cheat Sheet ( for politics and The Sports Cheat Sheet ( for sports. We are in negotiations with some very exciting content partners for our new sites.
    Ilene: That sounds very exciting! Given all that you’ve seen from your perspective in the financial media, what is your world view of the events that lead to the financial crisis, and where are we now?
    Damien: The financial crisis is nothing short of a global scam gone bad. There are no coincidences on Wall Street. Everything is vetted by tons of junior staffers who work 100-hours a week, and then vetted by senior managers who work 80-plus-hours a week. When the credit markets disconnected from reality with CDOs and uncollateralized default swaps, smart people understood it wouldn’t end well. The same is true for lending money to people with no docs. It defies the fundamental laws of turning a profit.
    Unfortunately, since there are not enough service jobs in the U.S. to satisfy what might be called "a natural level" of demand for goods and services, we are now in the game of inventing more ridiculous financial schemes. Watch a few episodes of Flip That House. It doesn’t take a PhD to see we were treating the most stable and important part of our social stability as a board game.
    I also think a huge problem is the short-term profit motive. You can see it everywhere: on reality TV, in your local newspaper, road rage, parents fighting at school sporting events, etc. We have created an American culture around "I’ve got to get mine." So, when people get a chance to make some loot, they take it while the getting is good. No docs? No problem. My boss says we can work with you. You don’t have the collateral to pay if the debt defaults? No problem. We have some physicists who say it can never happen. So on, and so forth.
    At the moment, I think Barack Obama has really done a major disservice to the country. Not for all the tax issues which get the most attention. All those taxes would have happened under McCain because Bush burned down the house and we had to build a new one — and that costs money.
    The bigger issue is millions of Americans empowered President Obama to change all the crony shit that blew up the system in the first place. However, Obama is still waging a war, not a single financial executive has been properly punished for their unconscionable actions in abetting a global crime, and health care companies used lobbyists to turn the reform into another fat payday at our citizens’ expense.
    The conclusion: many people will stop caring who they vote for because we are literally in an era when the rhetoric of the two parties makes us think they are different, but business in Washington operates according to a franchisee manual which accomplishes the same goals no matter whether the profits come from war or bureaucracy.
    When we couple this disappointment with the imminent obligations to pay for the Boomers’ entitlements, and the bankers’ nuclear cleanup, we may need some time before we see glory days again. But I believe everything is cyclical. So this too shall pass.
    Ilene:  The financial system’s near-death experience and subsequent resurrection seems fake to many people. Because there have been no fundamental changes, the so-called recovery also feels like a scam.  Perhaps there’s a sense that certain entities did in fact benefit - like Goldman Sachs.   So, getting back to a question, what are your thoughts on the mechanism of and intentions behind the “global scam gone bad?”  If some actors came out ahead, did they plan it and profit from it?    
    Damien: There are those who know how the system works, and there are those who do not. Those with this knowledge are able to lobby the government to turn otherwise illegal (i.e., socially harmful) behavior into perfectly legal action. In many respects, the U.S. offers corporations the same freedom of speech as voting citizens. Thus, corporations are free to use their disproportionate wealth to drown out the interests of the people through lobbying. In other countries it’s called bribery.
    The intentions behind the scam are simple: corporations don’t go to jail, they can easily pay fines, and they rarely get their charter revoked (no matter how many times they are fined). So, very smart people who control the reigns of these entities know they basically won the lottery. The game is to accumulate as much wealth as possible while these powerful positions are held. Of course, this doesn’t apply to every corporation, but it does apply to those which caused the crisis.
    Ilene: Do you think our laws for corporations have contributed to our problems with government being seemingly run by financial interests, lobbyists? Do you have any ideas for solutions?
    Damien: I don’t think the Founders ever imagined legal entities finding equal protections under the Constitution. It must have seemed too bizarre. What nation of human beings would give artificial entities the same protections when their goals are so different? Meaning, corporations turn a profit by any means legally necessary, while human beings care about things like love, relationships, clean water and food, communities, friends, etc. There is an obvious conflict of interests between the human race and a machine looking to monetize every square inch of physical reality.
    For starters, corporate lobbying must be abolished. Every person who works at a corporation has their legal vote in all elections. Therefore, they have freedom of speech to speak on behalf of the corporation’s interest (if they so choose). Why should there also be derivative speech by a non-living entity which has incredible wealth to speak on behalf of the handful of people running the entity? It doesn’t make common sense unless we treasure corporate goals over that of human beings.
    I am not a fan of debilitating taxes and wealth distribution. I think there is a healthy ground to tax and put that wealth into the commons, but those taxes cannot cause ambitious people to flee. I am also not a fan of Laissez Faire. We cannot allow the greediest people in the world to monetize everything until life is nothing but an Enron-like shell game. As a tribe, we must decide what areas of life are sacred — what things are more important than work and business.
    Unfortunately, the US is polarized due to the brain washing of the two-party system and their abetting media outlets. So long as the masses remain ignorant while believing they are getting fair and balanced information, the intelligent will manipulate them. This has been the case for as long as we’ve recorded human history.
    In the short-term, Americans need to read the Constitution and understand what we have been trying to build as a free society. There are many scary new developments which have eroded what makes this country special, so we need to wake up, if we want to preserve what makes this country unique.
    Ilene: How do you see the near term future unfolding, and the more distant future, for the U.S. and the world?
    Damien: I think China and India will continue to demand more global resources. As a result, they will become increasingly more powerful in the political sphere. At the moment, the U.S. has a lot of issues to fix at home.  I envision the next decade as what sports teams like to call "rebuilding years." Yeah, we’re still the New England Patriots, but we aren’t going past the first round of the playoffs for a while.
    Ilene: How would you invest - are there any asset classes you think are relatively better than others for investing - e.g., gold, stocks, emerging markets?
    Damien: Right now my #1 investment is in my business. The ROI of your own business is always your best bet. After that, I like gold for a long time since our debt issue is extremely complicated and there will be enough scary moments to keep gold in play.
    Our Premium Newsletter is also long Intuitive Surgical (ISRG) since $152, Systemax (SYX) since $12.75, and we just got stopped out of our remaining position in Google (GOOG) after our first portion of shares hit our profit target at $620.
    As you can see, we like companies with no debt and are doing very well executing their business model.
    Ilene: Do you think the dollar will keep dropping and if so, does that affect your investment decisions? Do you think gold will keep going up from here?
    Damien: I think the dollar will be in trouble so long as we monetize our debt. I also think the post-WWII era is falling below the horizon. So, there are now other nations (e.g., China) strong enough to diversify their holdings. If you were a growing economy, why would you rest your laurels on the U.S. Dollar? It’s backed by a promise. It’s hard to rest all your proverbial eggs on a promise.
    The natural hedge is gold. We think gold will continue to remain in the spotlight for a long time to come. As a result, we launched with Chartered Market Technician Jordan Roy-Byrne. Jordan is very passionate about the macro issues, and he covers an incredibly large universe of commodities, stocks, and debt. His Premium Gold & Silver service has been a huge hit — his research is deep and his picks are on fire.
    Click here for a free trial to Wall St. Cheat Sheet. Disclosure: I am an affiliate with Damien’s Wall St. Cheat Sheet.  And for a free trial to Phil's Stock World, click here. – Ilene
    Tags: GLD, ISRG, SYX, GOOG
    Jan 23 7:52 AM | Link | 6 Comments
  • Learn Profitable Options Day Trading Strategies at Philstockworld

    Day Trading StrategiesI don't want new Members to get the wrong idea...

    We don't day trade a lot at PSW, EXCEPT during option expiration weeks so call it 12 times a year we turn into day-traders as the front-month premiums get low enough to make the trades interesting.  The rest of the time, my usual motto is "I'm not a day trader but I'm certainly not adverse to taking profits in a day."  Our goal with any option trade is to make a 20% profit and we put up at least 20 trade ideas almost every week so that's over 1,000 opportunities a year to make 20% - that means when we do make it - getting back to cash and moving on is a wise strategy as there will certainly be something else to trade tomorrow.

    During expiration weeks, we have a unique (if 12 times a year is considered unique) opportunity to gain tremendous leverage on trades that have good risk/reward ratios to hopefully give us a series of small, quick wins so our focus shifts away from the longer trades (and we are often waiting out the week before rolling our longer positions anyway) to zone in on these wonderful opportunities.   

    This is covered under our Strategy Section so I won't rehash it here but I thought I'd use my new chart tools to try to illustrate what we're doing by going over a few of today's trades.  As we do discuss in the strategy section, allocation of assets is key and no single trade should ever be more than 5% of your portfolio and day trades should be more like 2% so, in a $100K portfolio, these quick trades should be opened in blocks of $1,000 or $2,000 entries.  Ideally, we want to be comfortable doubling down if the trade goes against us right off the bat (and we still believe in it).  

    Our first trade of the morning was a short on USO.  At 9:42 I made a comment to Members: "Jan USO puts have little premium left (the $41 puts are $1.06 - .19 premium) and can be played as a mo trade but I’m in the Feb $39 puts, now $1.01, patiently waiting to make .50." 

    The January trade was, of course, the riskier trade but these plays aren't taken in a vacuum.  We had been discussing oil as overpriced for days and we were watching the global market, the oil futures and the news out of China and I had mentioned in the morning post that CFTC data showed that oil speculation is at record bullish levels so don't confuse our brand of day trading with random picks - these are trades based on taking advantage of fundamental stories that we see shaping up for the entire month and the ones we trade on expiration week are the ones we feel have the best chance of success

    USO Oil Day Trading

    We had entered this trade on Monday at .85 so this was the second call on the same stock.  We love to short USO off silly spikes in oil and we got a good one to open the week and the Feb puts give us time to wait patiently for a pullback although up 50% in 2 days is hardly what I would call waiting...

    Our second play came at 9:53 when I said to Members: "I’m still liking the Qs as an upside play.  Tech doesn’t have AAs problems and the $45 calls are still the way to go at $1.03 with a stop at $1 or if they don’t break $46 on this run."  Those calls topped out at $1.15 at around 11 and finished the day at $1 - not very exciting but you can see on the QQQQ chart that we had a nice, clear signal to exit - one of the most essential elements of good day trading!

    At 9:42 I had reminded Pharmboy and our other DIA players to take the money and run on our DIA longs from Monday as the Dow peaked out, as you can see from the chart below, that was great timing but there's no trick to it other than not being greedy.  The DIA calls were up over 40% from our afternoon entry and we were testing the upside of the range so there was no sense risking the huge profits.  I had already warned in my 9:39 Alert to Members that: "We’re getting mixed signals in a low-volume reversal back up at the moment (probably won’t last)."

    Just like my 9:39 Alert, at 10:13 my comment to Members went the other way and I said: "10:10 volume is pretty strong 43M on the Dow and we’re right on the line at 10,650 so watch out for a rejection here."  That led to my 10:19 Trade Idea, where I said: "DIA/Pharm - at this point, I like a reload on the $106 puts at .56, out if Dow break 10,650 is easy stop."  We talked about that trade for the next 3 hours, watching it closely but at 1:32 I called the end of it saying: "Done with DIA puts at .80 - maybe reload later."

    We made another stab at the DIA $105 puts at .35 but they stopped out for a quick, .03 loss as my 2:17 comment was: "Back in those DIA $105 puts at .35, happy with a nickel and out at 10,600."  At 2:30, with the put side already not working I flipped positions (I'm not stubborn) and put up the following Trade Idea: "DIA - Above 10,600. as a bullish play, I like selling the naked Jan $107 puts, now $1.40 so about $1.35 as they have .25 in premium, which is a nice cushion but also a .77 delta so you get a lot of bang for your buck - 10,600 MUST be your stop line for plays in either direction!"

    Whenever possible, we like to sell premium rather than buy it and, as I said in the Trade Idea, the $107 puts had a .25 premium so that was our "buffer" on the trade as we know for an absolute fact that that .25 will go away by Friday's close.  On these plays, as we get near the close, we're really just looking to make a quick dime or even a nickel on the smaller positions.  It may not seem like much but, make a nickel 20 times and that's $1 and if those nickels and dimes are 10% of your entries, then every 10 wins is a 100% gain - nothing wrong with that on these quick trades!

    Unfortunately, everything went so well today that we didn't get a chance to scale or roll or double down to save any positions.  Oh well, maybe next time...

    If you are not a Member and are interested in learning more, you can sign up for our PSW Report HERE and that will give you access to our daily articles without the 48-hour delay (you even get an 8:30 mailing that includes my morning post in progress) and you have the ability to look back in Member Chat and view comments on articles that are 7-30 days old.  This is a great way to take a look at our old Trade Ideas and decide if a full Membership, with current Trade Ideas is right for you - a very good deal at just $29 a month (reduced from $49 until March)! 

    Joining as a PSW Report Member will also lock you into our current Membership pricing ahead of our March price increase (current members will not be affected but we are getting full once again and need to curb new entries) that will affect all categories of Membership and, once you are a Member, there are many ways to earn discounts on continuing Membership and even ways to make money by referring others to PSW - one of the many ways we help our Members fight the recession. 


    Jan 13 2:43 AM | Link | Comment!
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