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Monday Meltdown – Commodities Collapse Ahead of the Fed

Brent crude is down almost $5 since Thursday morning.

That's over 10% off and getting much worse this morning as people are beginning to lose faith in the Global Economy due to the endless amounts of bad data I kept telling you it was a bad idea to ignore (see my entire last quarter of posts).  Well, I love to say "I told you so", so there it is – now we can move on

You'll notice that, at the bottom of each of those posts on Seeking Alpha, there is a disclosure statement and that statement has said since early August: "currently mainly cash and an otherwise slightly bearish mix of long and short positions."  That about sums it up for us.  In fact, we just did a review of our virtual portfolios for our Members and those are over 80% in cash and actually made a little money (very little) in last week's collapse.  

You'd be making money too if you followed our FREE advice on Dec 2nd and used our Futures hedges or even our SDS hedge, which is very much like the kind we use to protect our Long-Term Portfolio.  Our trade idea at the time was:

  • Sell 20 SDS March $19 puts for $1.25 ($2,500 credit)
  • Buy 20 SDS Jan $18 calls for $1.20 ($2,400 debit)
  • Sell 20 SDS Jan $20 calls for $0.48 ($960 credit)

SDS hasn't even moved up $2 yet but the short puts have fallen to 0.72 ($1,440) while the long calls are $2.72 ($5,440) while the short $20s are $1.37 ($2,740) for net $1,260 out of a potential $4,000 + the original $1,060 credit means we've got $2,320 out of our potential $5,060 gain already – well ahead of schedule.  I urge you to go back and read that post (it was just two weeks ago) and look at the charts at the time so that, hopefully, next time you will be ready to act when we have another cycle.  

SPX WEEKLYMost of the adjustments we'll be making today are BULLISH adjustments on our portfolio positions.  We're putting more money into our losing trades – as we don't expect this sell-off to be any more severe than the August flash crash (1,850 on the S&P), though that's still another 10% down from here.  We're still taking advantage of the Futures to take up short positions and this morning we grabbed Nikkei Futures (/NKD) short at 18,800, looking for at least 100-point gain ($500 per contract) but very tight stops above that line.  

We're already below 2,000 in the S&P Futures and the Fed is supposed to be tightening on Wednesday, which seems crazy while the market is in free-fall, but they don't have any choice if they want to maintain their credibility.  Of course, the Fed maintaining their credibility is like Congress maintaining their likeability (26%) but I guess it's better than hitting single digits.  Still, the Fed, via Hilsenrath, did some serious back-peddling this weekend:

 
 

Any number of factors could force the Fed to reverse course and cut rates all over again: a shock to the U.S. economy from abroad, persistently low inflation, some new financial bubble bursting and slamming the economy, or lost momentum in a business cycle which, at 78 months, is already longer than 29 of the 33 expansions the U.S. economy has experienced since 1854.

 
 

Among the risks to the economy are financial booms that could turn to busts. One is in commercial real estate. Another in junk bonds is already fizzling. Each of the past three expansions was accompanied by an asset price bust--residential real estate in 2007, tech stocks in 2001 and commercial real estate in the early 1990s.

 

Barrons', meanwhile, could not find a SINGLE economoron who didn't think the S&P was heading higher next year – not one!  The 10 prognosticators surveyed predicted an average gain of 10% for the S&P – from 2,100 (+5%) on the low end to 2,500 (+25%) by Federated's madman, Steven Auth.  Interestingly with Auth, he only predicts 2.6% earnings growth so, essentially, he's saying we should be paying 10x for each incremental earnings dollar.  

Kudos to Zero Hedge for pointing out that these same 10 knuckleheads predicted the S&P would be at 2,209 (up 10%) THIS YEAR with our man Auth once again leading the pack at 2,350.  The fact that they missed by 10% last year is not, of course, mentioned in this year's article.  Instead Barron's presents their "prominent market strategists" as the best and the brightest and caveat emptor if you didn't read last year's post so you'd know how clueless these people are.  

cat

China is the top concern for 2016 – a hard landing there could sink the entire planet.  We're already in the midst of a major melt-down in Junk Bonds – something I've warned people to stay out of for years.  Third Avenue Management is liquidating their $800M fund and the Junk Bond ETF (JNK) is now down 12% since June.  This, of course, is why Junk Bonds usually pay 12-18% interest, which is why buying bonds that pay 6-8% is INSANE!  The default risk is the same (10% in a downturn) – you just end up accepting lower rates because competing interest rates are so low but THAT IS STUPID!!! 

And we are only, just now, heading into default season at the energy patch as companies have to restate their viable reserves at the end of 2015 based on their average cost of extraction vs the average price of oil ($47.50).  The reserves considered "proven" on the books of energy companies now are based on last year's average price of $85, so this will be about half.  That means that all these hundreds of Billions of Dollars of loans made to all these energy companies are only backed by about half as many assets as were previously thought at the same time as the financial condition of those companies is rapidly deteriorating.  

CASHY and CAUTIOUS is how we're continuing to play the markets into the holidays.  We're not going to miss anything by sitting out the next couple of weeks and, as noted in our review – there are certainly plenty of bargains to be had.  

IBM is our 2016 Stock of the Year and it's back at the $135 line.  Rather than buying the stock, you can sell the 2018 $110 put for $10 and that then obiligates you to own IBM at net $100, which is 22% off the current price.  All IBM has to do is hold $110 and you make $10 but I'd pair it with the more aggressive 2018 $125 calls ($19.50), offset by the sale of the $150 calls ($9) for net $10.50.  

Overall, on this trade, your net cash outlay is just $50 per contract set and, at $150 in Jan of 2018, you would collect $2,500 per contract set for a gain of 49x the cash you put in (4,900%).  There is, of course, a margin requirement as you are promising to buy IBM for $110 if it goes the other way, probably about $1,000 per contract set so your return on margin is "just" 250% in two years.  Still, for many reasons, I think IBM will be well over that mark at the end of 2017.

We pressed a lot of our commodity trades in our Long-Term Portfolio in anticipation that the Fed will either not raise rates very much or will indicate a very slight slope for further increases.  Also, we expect more stimulus around the globe – some of it based on infrastructure and, for another thing – the prices are just too darned low with oil (/CL) at $35, gasoline (/RBat $1.20 and Natural Gas (/NG) at $1.89.  We like all those for longs with tight stops below the lines in the Futures and we'll discuss playing the USO, UNG and UGA ETFs in Tuesday's Live Trading Webinar.

 


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  1. Good morning! 

    Here comes that little rebound in /NG and others into the NYMEX open (9am) – we'll see what happens. 

    Still expecting $1.91 (weak bounce off 5% drop).


  2. oil rebounds a little and nat gas demolished again.

    WTF?

     

    FU nat gas!!!



  3. It was over 70 this weekend in southern NJ… Really surprised that we don't have a higher build of nat gas as consumption has to be 1/2 of what is usually is around this time of year. The LNG people must filling tons of tankers as apparently we have to give it away now.


  4. From end of Fri comments… "Also, that estate tax is $5.3M per child!"  I believe it's per estate, but could be wrong… do we have any CPAs here? Makes a huge difference if you do any estate planning.

    And what Jabob said… FU nat gas! :)


  5. A lot of science teaching is needed in this country. I guess this is the result of the anti-science movement. NC town rejects solar farm on these grounds:

    http://mashable.com/2015/12/14/town-rejects-solar-panels/#g.I2HU3owuqV

    The council had previously ruled in favor of three other solar farms that are yet to be completed, but suspicious locals put the kibosh on the latest application.

    Retired science teacher Jane Mann told the publication she was concerned the panels would prevent photosynthesis from occurring, keeping plants, which rely on the chemical process, from growing. Plants in the area around the solar panels are brown and dead due to not getting enough sunlight, Mann claimed.

    No reports have yet emerged as to whether science education is also "brown and dead" in Woodland.

    Local resident Bobby Mann, for his part, announced he was worried the panels would "suck up all the energy from the sun," the paper said.

    Insane….


  6. Closed my S&P shorts at close on Fri, expecting a bounce today… kinda makes up for nat gas. Wheee!


  7. ?Good Morning!


  8. I think Bobby Mann should plant a tree next to each solar panel, problem solved… :)


  9. Estate tax exemption is $5.43 million per person for 2015.  Not based on children.  Husband and wife would have $10.86 million together that they can pass to heirs.   – rbCPA


  10. TY rb


  11. Just off the top of my head, but what about a progressive generational inheritance tax that increases with each generation the fortune gets handed down to ? 


  12. NG- That was a weaker than weak bounce I guess. So, how low will this go before it bottoms? I think we won't know until there is a weather forecast with cold weather lasting more than a day or two . This will happen at some point, but it could be well into January as I have said before. 


  13. Albo… why wait? We could confiscate it all now and get it over with.


  14. Back in some UGAZ at $1.51.  Close stop.


  15. look at ugaz.. wow


  16. albo I hope you are right.. hate ng


  17. Jabob – I'm probably wrong.  I got stopped out from my last trade at $3.06 so I figured it was worth a shot.  Of course the way NG is tanking it could go to zero. :-)


  18. TSLA is up 1%…


  19. /NG/Jabob – Below $2 is the quit line!  Not long-term UNG stuff but short-term that's dead.  

    Big Chart – Waiting to see if Nas and Dow confirm the M's are Big M's (back to Oct lows) and not little ones (where we started popping in late Oct). 

    /NG/StJ – Don't forget, compression is 600:1 so they need quite a bit of it to fill a tanker.  The weather is unbelievable though – gotta be killing the winter clothing market.  

    Estate tax/Mkucst – Sorry, I have 2 kids and got mixed up as it's $5.43M PER SPOUSE, so the same $10.86M for 2 kids but not as good if you are a heavy breeder.  You can also additionally give your kids each $14,000/yr tax-free so start when they are 0 and contribute for 50 years is another $700,000 per kid, tax-free!  You can put the money into a trust that accumulates at 6% until age 25 and that would be $814,189 in the account at 25 and then you could keep putting in $14,000 until they are 50 while they draw 3% a year (about $25,000) as a small bonus and then, at 50, they'd have $2.2M – completely tax-free.  Of course, the stupidity of taking out the $25,000 a year for 25 years is that, if they left it in and kept accumulating 6%, they'd have had $4.3M!  

    NC/StJ – That's funny (and sad).  

    Progressive generational/Albo – Just $5.4M is a cut-off that affects only 0.02% of the people who die but that's where the tax BEGINS.  When you factor in $10.8M, it's above the 0.01% and again, the first $10.8M is still exempt so, at $21.6M, they are paying half of what someone with $1Bn pays.  

    /NG/Criags – We're in uncharted waters now but I just added 5.  

    Confiscate/Mkucst – I think, with $67Tn in wealth lying around with the top 1%, that it wouldn't be so terrible for the government to ask for 20% of it back ($13Tn).  It can be confiscated (tricky) or we could adjust the inheritance taxes but it would be enough to pay off the most of our deficit and still leave the top 1% with $53.6Tn to spread around ($17M per person for the top 3M people).

    AAPL down almost 2% on JPM cutting IPhone forecasts by 10%.


  20. UGAZ: 

    1-Year Total Return (Mkt):

    -96.17%


  21. Phil/BDC/UGAZ,

    what will happen if we load UGAZ now and NG turns up in feb and march..what are the risk to get into UGAZ now or little later. Of course we might catch the bottom but upside looks promising.

     

    regards


  22. Pat_swap – Very difficult to make money in a leveraged ETF over a two-three month period due to degradation.  Better for shorter term trades.  Buying calls on UNG might be a better way to go.


  23. albo/UGAZ,

    will not the leverage itself be more than the degradation in this case. for e.g if UNG goes to 10 in feb then what will be UGAZ priced at?

    regards


  24. What a world we live in I can heat my house for $0.70 per hour, or $0.00023 per SF per hour. Running a single light on whale oil used to cost that much. Now I can get an LED light (8W) that lasts 25 years and it costs $0.0014 per hour to run it, including the price of the bulb.

    For that price you can heat a 500 SF domicile and run a lightbulb 10 hours a day for less than 50 cents, or $15 per month. There's really no escuse for "getting ahead" any more. For that and $2 in food/day and you could study to become good at anything

    We are too efficient people….


  25. Phil,

    Good mornin…  What the hell was that candle 1min, to 2014 at 10:16AM on higher volume?? Currently at 1995.

    "NG now down 5% at $1.892 – f'ing incredible. Not even looking bouncy but I imagine 5% Rule kicks in when the NYMEX opens and we should at least see a weak bounce to $1.91 or strong at $1.93 but wow – what a complete collapse! "

    Amongst other places, we advised here in Aug/Sept of potential Q116 negative GDP and a Dec flash crash in commods,  due to long term contraction in means of payment growth, seasonal downturn in monetary flows and a "dollar" squeeze.  If it's not here, I don't know what is.

    Last week oil -11%, NG following, both with DXY pulling back for a rest at 97, so its not just the dollar, but also the SIDE EFFECTS of its wake.  Last year at this time, NG at 3.89 with DXY at 86.  Can the destructor get cranked up again via RMB devalue concomitant with further contraction in global economic conditions resulting in further eurodollar squeeze?  TBD.

    Equities are now following, as they historically do, the ongoing (started June 2014) junk HY vortex, which accelerated as the seasonal downturn in monetary flows hit in Oct. Ill-liquidity has not helped matters. Possible near term bottom between now and Xmas?  Post asset managers year end portfolio rebalance and window dressing, potential acceleration to the downside 1st week of Jan.  Potential bottoming for commods in mid March, TBD. Out.


  26. BioDieselChris,

    "There's really no escuse for "getting ahead" any more. For that and $2 in food/day and you could study to become good at anything. We are too efficient people…."

    Your just living the dream, aren't cha? LOL.


  27. The Nattering Naybob 

    chasing too much UNG! ;)


  28. Efficient / BDC – That's really the problem for the energy producers – gas heaters are getting much more efficient (I switched from 70% to 95%), incandescent light bulbs are nowhere to be found, gas mileage is up everywhere. And to top if off, economies are cooling and the weather is warming. What to do with all that oil and gas!


  29. Pat – One would think UGAZ should be higher in that case, but what if it barely moves up ?  Would rather use UNG.


  30. You assume the 13T would go to paying off the debt. That 13T would also come out of the markets. The government is so efficient at managing our money, how did we get 18T in debt in the first place?



  31. UGAZ / Pat and Albo – Good comments by Albo. These leveraged ETF are just not worth it long term as decay robs you of the potential gains. Look at a performance chart long term:

    UGAZ doesn't even track 3x like it should… Better to stick with UNG or even better, the futures if you want a leveraged play.


  32. UGAZ/Pat – Well it's an ultra-ETF at $1.50 so if /NG goes from $2 to $3 (up 50%) then UGAZ can go up 150% or $2.25 to $3.75 but, of course, if /NG drops 33% more ($1.30ish) – you're pretty much at $0.  I'm sure they'll do a reverse split soon.  UNG is at $7.30 so $10 is about 33% up and 3x on UGAZ would be up 100% to $3 but there's churn and fees that will cause it to underperform.  

    If, for example, you bought the UNG April $6 calls for $1.65 and sold the $8 calls for 0.55, that's $1.10 and you could sell the 2017 $6 puts for 0.70 to drop the basis to 0.40 and that would pay back $2 (up 400%) if Nat Gas just goes up a bit from here (and holds $1.50 for the year).  

    Using UGAZ, on the other hand, there are no options so you just buy it for $1.50 and you need UNG to be over $10 just to make 100% so I don't see any point in playing UGAZ at all when I can play 1/4 as much UNG and make just as much money on a much lower (just 10%) recover in Nat Gas.

    Efficient/BDC – That's why it's not necessary for more than about 1/3 of us to have jobs.  If we all learned to live on just what we need (instead of what we want), we could already have an idyllic society.  Anyway, Chris – don't you think now is a great time to write a featured article about how GreenCoin is the perfect solution for the carbon trading system everyone is saying we need after the Climate Conference?  If you put something together – we can run it in a lot of places.  

    Candle/Naybob – On /NG?  I don't see it.  I'm not sure how you can blame the Dollar when it's 97.50 at the moment. 

    Gas heaters/StJ – I run the gas fireplace in my living room all day at these prices!  

    $13Tn/Mkucst – Where did it come from?  Wow, do you have Bushnesia?  Take the money, use it to pay off the debt (I'd negotiate a pay-off of all $18Tn for the $13Tn cash now and then pass a balanced budget act).  

    U.S. National Debt

    Notice Obama's contribution to the debt is pretty much entirely things that were trying to fix Bush's mess. 

    And again, I will say that our problem is simply that we don't tax enough.  We still collect more SS than we pay out but Medicare/Medicaid out of control.  Defense is a sickness but all of it could be handled if we simply collected more than $297Bn in Corporate Taxes against their close to $3Tn in profits (10%):

    Obamacare brings Medicare and Medicaid under control – take that away and they explode over the next decade.  Cut the military by 5% a year for 10 years until it's $400Bn (still the biggest in the world by more than 200% over the next highest), raise the top tax rate to 60% for over $10M ($400Bn more per year), uncap SS contributions ($150Bn/yr) and tax corporations 10% of REVENUES (no exceptions), which would be $1.5Tn and then they don't have to worry about taxes at all!   Now we have a huge surplus and we can pay down the debt.  There's day one of my Presidency!  cool


  33. UGAZ needs to RS and then we need to hit the "real bottom" like Nattering is saying maybe March and then it's possibly a play. If you want to get in now buy Jan17 UNG 10 calls for 0.75 and you're basically betting that NG won't hit bottom and/or just "stay low" for 13 months. If you can muster just one price spike over the course of the next year, it's a winner. In the past it's been hard to imagine this wouldn't happen at some point in time, though it is getting easier and easier to imagine energy will never stop going down! let alone level out even. 


  34. Phil/Stj/Albo/UGAZ.

    THANK YOU!!! for getting rid of my ignorance…it all makes sense now. 

    lot of things look tempting if you not sure why is it that way in first place….

    regards


  35. GreenCoin – it's annoying we have to swoop in and save the world. Can't anyone else be bothered to do it? 


  36. My sunglasses guy doesn't post but he was supposed to be at the end of my last comment …. 8)


  37. Actually something like GreenCoin might be a GOP get-out-of-jail-free card. Once they've stopped this denial stuff anyway, they'll need something and a free market solution is (at least theoretically) palatable to a lot them as a group.


  38. Wow, reducing poverty has never been so easy:

    http://talkingpointsmemo.com/edblog/scrooge-counter-programming

    We've seen generations of conservatives arguing that liberal social programs are not simply unaffordable or ineffective but positively shackle people to poverty. If we could just embrace pure free enterprise and go back to the days before the New Deal when there were no poor people, everything would be great. But it's actually a bit better, or worse, depending on your point of view.

    The Kochs' 'war on poverty' includes classes teaching poor people – or at least people willing to show up for a free hot meal – how to prepare "dinner on a dime" and lessons on "couponing", along with the free hot meals, Turkey giveaways and guides for "learning about freedom."

    In other words, a good bit of the outreach is not only laissez-faire propaganda but actually tips on how to be poor more effectively, making the most of coupons, cooking more economical meals and other tips which certainly may be helpful at some level but seem like ones poor people might be in a better position to teach GOP operatives rather than vice versa.

    The reporter also got one of the Kochs' top lieutenants to concede that one additional benefit of the plan is to help secure Koch Inc's tax status with the IRS as a nominally educational and charitable organization …

    It's just so offensive… How do these people sleep at night with all their billions trying to teach people how to make diners on a dime!


  39. Phil,

    "Candle/Naybob – On NG?  I don't see it. "  

    Not NG, /ES, what happened for one minute? What the hell was that candle 1min, spiking from 1998 to 2014 at 10:16AM EST on higher volume?? Currently at 1989.

    "I'm not sure how you can blame the Dollar when it's 97.50 at the moment."  

    Since May 2014, DXY 79 to 100, thats a 26% wake in its path.  With all of the things the dollar touches globally, we cannot be anything less than observant of its tidal wave side effects.  


  40. LNG/CRS – The author fails to understand that LNG prices in Europe and Asia are declining BECAUSE US supply is coming on-line and Cheniere (LNG) has already sold most of it's 2-year forward supply to customers in Europe and Asia.  Gas is around $8 in Asia and $6 in Europe and $2 in the US.  While it sucks for them and their LNG export plans (which I always said would never work) – it's great for the US, who have the cheapest gas to sell.   Eventually, the whole world will probably stabilize between $4 and $5 and our local /NG should be about $3 with $1 added to the exported stuff.  Like OPEC, we will always be the swing producer of LNG as we have the biggest supply (and, by 2018, will have the most terminals).  

    Saving the World/BDC – It's a thankless job. angel

    Dollar failing 97.50, indexes looking crappy.  Europe really falling apart:

    GOP/BDC – Maybe you can rename it a Gospel Coin – that would get them right behind it!  devil


  41. PHIL / CIM – bouncing around 12  - looking to sell some puts 

    Either the

    MArch 13 for .8  ( i prefer this one because  this tends to move higher in first quarter of each year and tends to fall mid year, but nest year may be different due to fed )

    or 

    June 13 for 1.25


  42. /NKD goal at 18,600!  

    I'm telling you – I can't wait to retire and just make one trade a day in the Futures (from Europe) each morning.  Today was a rough one – it took 2 hours to roll over!  


  43. CIM is at 13 not  12


  44. AAPL $110!  


  45. speaking of LNG,  they fire their CEO four months after Icahn takes stake


  46. there goes  AAPL at $110


  47. AAPL even with the vix at 26 the Jan '18 90 puts are only at 9.7…


  48. Max Keiser and Alec Bladwin. Climate migration an interesting topic IMO


  49. CIM/Batman – I'd offer to sell the June $12 puts for $1 and see if you get a bite.  

    LNG/Stock – Yes and they put in Icahn's guy, who was the head of commodity trading at MS, which is just right for a company that will be buying /NG at $2 and selling it at $5+.

    AAPL/Batman – In the LTP, we are now asking for $15 to short 10 of the 2018 $95 puts (now $11.75). 


  50. Well, at least this is making for easy fills on our portfolio adjustments!  


  51. There’s been plenty of prognosticating about what will happen to the bond market’s unprecedented bull run once U.S. interest rates start rising from rock-bottom levels.


  52. I just got back from Houston, and its going to be ugly there.  Job losses left and right and way overbuilt on apartments.


  53. Two of the scariest words in financial markets these days are “commodities” and “debt.” Saying them in the same breath is virtually a profanity. Looking at the high-yield bond market, though, the first word on your lips may well be NSFW.


  54. As oil crashes through $35 a barrel in New York, some producers are already living with the reality of much lower prices.


  55. Saving the world isn’t going to be cheap. If you sell oil, coal or old-fashioned cars, that threatens disaster. For makers of stuff like solar panels, high-tech home insulation, and efficient lighting, it’s a potential miracle.


  56. Someday, inevitably, given the nature of entertainment, gravity and age, Howard Stern’s magical  will end. It could even happen this week. We’ll know soon. 


  57. Halliburton Co.’s takeover bid for Baker Hughes Inc. has come down to the wire with the U.S. Justice Department, which may decide this week whether to approve the deal after months of negotiations.


  58. Record warmth sent U.S. natural gas prices tumbling to a 13-year low as December appeared to be a bust for bulls.


  59. Brazil’s real declined the most among regional currencies on worsening prospects for the economy as President Dilma Rousseff fights attempts to impeach her.


  60. NLY below $9.


  61. Encana Corp. fell to the lowest in more than three months after the company cut its dividend by 79 percent and reduced spending and production plans for 2016 as oil prices dipped below $35 a barrel.


  62. Japan’s Mitsui & Co. wants you drinking beer from bottles made of sugar at the 2020 Tokyo Olympics.


  63. Canadian household debt ascended to another record in the third quarter, underscoring why policy makers are stepping up efforts to limit the risks of a collapse in the nation’s real estate market.


  64. 2100 to 1995(roughly 5%) in 8 trading sessions. Surely this is well in to oversold territory now??

    1997 long for a trade


  65. Phil – BHI/HAL – Phil, what's your view BHI/HAL at the moment?  I know you like the break-up premium even if the deal doesn't go through.  The stocks look like they are priced assuming the deal is at risk.  Any thoughts on a good new position here?


  66. Are there any of the butterfly postions that are good for a new entry?  Or did you say that in the update but I failed to grok it?


  67. Phil; Can you explain how a 2018 short call in TWC (your updated rolled to the 175C) would be settled if the TWC merger were to close during 2016.  The deal called for TWC shareholders to get .54 share of CHTR per share of TWC.  They said at the time that the value of each TWC share was expected to be about $195 per share if CHTR was $177 at the close.  CHTR is currently trading about $175.  I just don't understand how an option expiring beyond the closing date is settled.

    Thanks


  68. phil--do you think there is any shot nat gas recovers a little today? oil popped a little and nat gas is just dead. where's my correlation??? dangit!


  69. Tried something different with VIX this time and sold a UVXY Jan 17 170 Call! Sold for $14 and they were just $6 last week! UVXY could rise much more if we take another dip lower, but I'll just add to the position as needed! It's a very small gamble but the premium on VXX are still quite low now.

    There is just no way that UVXY will be at 170 by Jan 17… It might get to 90 in between, but that's jut more opportunities to sell.


  70. Houston/Stock – All of Texas will be hit hard by oil collapse. 

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    NLY/Sibe – Forbes was doing their best to panic people.

    Sell Your Mortgage REITs Now!

    Oversold/Delboy – Yep:

    NYMO  DAILY

    BHI/Stu – We just doubled down as I think it goes through.  It's a big, complex deal and "THEY" are doing their best to panic people out of their BHI positions.  Nothing to do now but wait for the announcement. 

    Halliburton Reportedly Won't Agree On DOJ Extension

    See, they even make the headline misleadingly scary-sounding!  

    Butterfly/Tangled – Argh, we did that at the Live Seminar and I think at the previous review – don't make me go over them all again!  In general, they are all good – especially the ones where the longs are 2018.

    TWC/Options – Well it depends on how they handle it as it may be cash or swapped for stock – no way to tell.  On the whole though, as long as the value is over $175, then I can expect to net $20 off the $155/175 bull call spread – that's all I care about.  Currently the net of the spread is $9.

    Today/Jabob – The fact that it's not bouncing today — even while oil and /RB do, is a very bad sign.  

    As I said, I bought 5 more at 2.095 (/NGJ6) and it's just laying there and I was really hoping for a 0.05 bounce.  

    VIX/StJ – Good timing today, seems like it's had a good run, plus the obviously oversold NYMO.


  71. FLTX – wow. big drop in the last week, coming back down to reality and my short calls at $45.  Preview of how the rest of the market will drop…?


  72. Butterfly – how about one example of how one would enter the DIS positions now?


  73. VIX timing / Phil – Indeed – up 16% in about 1 hour… The crazy thing about these UVXY calls is that they are $130 OTM and still have a delta of 50. So a nice move down pays back very quickly!


  74. Report: Another high-yield fund liquidates

    • A high-yield credit fund begun in 2009, London-based Lucidus Capital Partners has liquidated its entire portfolio, reports Bloomberg, and plans to return $900M to investors next month.
    • The company began to wind down its holdings in October, says Bloomberg, after getting a redemption notice from a "significant" investor.
    • This follows last week's news of Third Value Management blocking redemptions from its junk fund while it liquidates holdings, and Friday's similar move by Stone Lion Capital.
    • HYG -0.95%, JNK -0.7%
    • Before it was fears about interest rates – first, with long yields too low and thus slimming margins, and then the Fed's promise to hike short rates (and slimming margins even more). Now we can toss credit worries into the mix, and the action's plenty panicky there -junk bonds are off sharply again today and two more funds have been forced to gate withdrawals and/or liquidate.
    • Once pure-play agency REITs like Annaly Capital (NLY -2%) and American Capital Mortgage (AGNC -1.7%) now have some credit exposure.
    • Others are more credit-exposed: Chimera Investment (CIM -3.5%), Invesco (IVR -2.7%), American Capital Mortgage (MTGE -2.8%), MFA Financial (MFA -2.8%), New York Mortgage (NYMT -4.7%), Western Asset (WMC -3.6%), Anworth (ANH -2.9%), Arlington Asset (AI -3.6%), Javelin (JMI -4.8%), Orchid Island (ORC -7.4%), Five Oaks (OAKS-12.3%)
    • Just to pick a few out, Annaly Capital sells at a 24.4% discount to Sept. 30 book value; American Capital Agency sells at a 26.3% discount; Invesco at a 30% discount; MFA Fnancial at 15.4% discount; New York Mortgage at a 25% discount (this sold at a premium to book as recently as early fall).
    • ETFs: MORLREMMORTLMBS
    • The price of oil has stabilized, but the major averages are moving lower, Treasury yields are moving higher in front of this week's expected Fed rate hike, and high-yield continuesto sell off (with more funds gating withdrawals/selling holdings).
    • It all adds up to continued panicky liquidation in the business development complex. Prospect Capital (PSEC -4.8%), Fifth Street Finance (FSC -4.1%), Ares Capital (ARCC-4.9%), FS Investment (FSIC -3.4%), Triangle Capital (TCAP -4.8%), TICC Capital (TICC-9.1%), PennantPark Investment (PNNT -4.3%), New Mountain Finance (NMFC -5.8%), Monroe Capital (MRCC -4.5%), Oxford Lane (OXLC -10.4%).

    Wells Fargo talks energy portfolio stress

    • The bank has been in discussions with clients for a number of months about preserving cash and cutting borrowing limits, says Kyle Hranicky, who has headed the corporate banking division since May. Prior to that he spent nine years in charge of the bank's Houston-based Energy Group.
    • "Some have liquidity to survive the cycle but others will be under significant stress and may be forced to sell assets or recapitalize … We’re comfortable with cycles. But this one feels deeper and broader and could last longer.”
    • In general, reports the FT, bankers are cutting E&P companies' borrowing limits by an average of 10-20% as the value of their reserves has plummeted, and U.S. bank regulators say total oil and gas sector loans in danger of default has risen to $34B – five times higher than a year ago.
    • Carl Icahn, who last week raised his stake in Cheniere Energy (LNG -1.2%) to 13.83% from 12.65%, praises the company's board for having the "guts" to fire CEO Charif Souki, a move he "fully" supports.
    • LNG's board voted this weekend to replace Souki, looking to "clamp down" on the former CEO's goals to expand the company beyond its core business of exporting liquid natural gas, and feeling the need for a more experienced CEO.
    • Icahn says Souki is a "talented entrepreneur… [but] there is also little doubt that the board wished to move the company in a direction that differed greatly from the path Souki wanted," and that Souki's plans were "win-win for Souki but not necessarily for the shareholders."
    • Kinder Morgan (KMI -5.2%) resumes its sharp slide after a three-day respite, as Barron's says its stock price does not look cheap at $17/share, and fair value could be closer to $13.
    • KMI is not likely to increase its dividend until 2017 at the earliest, and that the stock still looks pricey when considering its $42.5B in net debt and a ratio of nearly 6x for debt to annual EBITDA, Andrew Bary writes.
    • Barron's, which has long been bearish on KMI, also says the company's recent 75% dividend cut underlined the vulnerability of pipelines that depend on external financing for most of their capex.
    • Encana (NYSE:ECA) -2.5% premarket after saying it will cut its 2016 capital budget by ~25% to $1.5B-$$1.7B and reduce its annual dividend by $0.01.
    • ECA says most of its 2016 capital spending, down from this year's $2.2B, will be directed to its four core assets in the Permian and Eagle Ford shale fields in Texas and Montney and Duvernay shale fields in western Canada, and is based on an estimated WTI price of $50/bbl.
    • However, ECA estimates its overall 2016 production at 340K-370K boe/day, with output from its core assets at 260K-280K boe/, up 12% from 2015.
    • ECA also lowers its dividend to $0.06 from $0.07 and discontinues its dividend reinvestment plan; it expects the moves will save ~$185M/year.

    Gun stocks higher as Sandy Hook anniversary increases the spotlight

    • Smith & Wesson (SWHC +1%) set a new all-time high of $23.95 today as investors continue to pile into the stock.
    • The rally coincides with gun control groups renewing their calls for legislation today on the three-year anniversary of the Sandy Hook school shooting.
    • Congress has been hesitant to enact any new gun laws, including a recent proposal to ban firearms to people on government lists suspected of having ties to terrorism. Most analysts think the status quo will hold until at least the next round of elections.
    • Sturm Ruger (RGR +1.3%) is also higher on the day, but is short of its 52-week high.

    Wal-Mart seen as sweet low oil play

    • Nomura sees Wal-Mart WMT as one of the top hedges against lower oil prices.
    • The Japanese investment firm notes that a high percentage of Wal-Mart shoppers will have discretionary income freed up from lower gas prices and energy bills.
    • Wal-Mart will also see a significant benefit on the cost side with its fleet of over 6.5K trucks consuming a large amount of fuel.
    • The risk to Wal-Mart of higher labor wages costs is already factored into share price, according to Nomura.
    • The prolonged slide in Wal-Mart has pushed the dividend yield for new buyers up to 3.27%.

    Kohl's increases use of dynamic pricing

    • Kohl's (KSS +1.9%) is using electronic price tags to help it adjust pricing based on store traffic and inventory. Sales now can last hours, instead of days, depending on what algorithms determine is the best strategy.
    • The pricing changes are fired off remotely by the company
    • Dynamic pricing is being used across broad retail in an effort to improve margins.

     

    • Piper Jaffray upgrades Coach (NYSE:COH) to an Overweight rating after having the stock set at Neutral. Positive momentum for Coach with assortment and pricing is starting to be seen.
    • The investment firm calls the luxury retailers its 2016 value recovery idea.
    • Shares of Coach closed at $30.38 on Friday vs. a 52-week trading range of $27.22 to $43.87.
    • Downgrading GoPro (NASDAQ:GPRO) to Underweight from Equalweight, with price target of $12 from $23 previously, Morgan Stanley says the stock could be worth as little as $5 if pricing pressure persists.
    • Shares -6.5% premarket to $17.91

    Rackspace slides as UBS cuts target on cloud competition/transition worries

    • Citing concerns about cloud competition and believing Rackspace's (RAX -1.8%) investments in supporting 3rd-party cloud platforms bring transition risk, UBS' Steve Milunovich has cut his target to $28 (equal to 28x his 2016 EPS estmate), while reiterating a Neutral.
    • Milunovich doesn't expect Rackspace's 2015 deal to provide consulting, management, and support services for Amazon Web Services deployments (followed a similar deal for Microsoft Azure) will yield material revenue until 2017. However, he does expect margins to be comparable to existing deals (and ROIC above), and states early signs suggest most clients are selecting Rackspace's more costly Aviator support tier.
    • Milunovich cautions Rackspace's transition is looking expensive are more personnel are hired to support rival cloud platforms. He thinks a deal to support Google's platform could happen in time.
    • Shares are less than $2 away from a 52-week low of $23.65. RBC upgraded on Dec. 1.
    • In what would be a first-ever negative print, Morgan Stanley's Katy Huberty sees calendar year iPhone sales declining by about 3% in 2016. Noting weak smartphone supply chain data points, she's cutting her 2016 iPhone units estimate by 12% and EPS estimate by 6%.
    • It was only about two months ago when Huberty boosted her estimate of iPhone sales growth next year to 7% from 3%.
    • Huberty still rates Apple (NASDAQ:AAPL) an Overweight, but she trims the price target by $9 to $143.
    • Shares -1.7% to $111.26 premarket.
    • Apple suppliers Skyworks (SWKS -5.3%), Qorvo (QRVO -6.2%), and InvenSense (INVN-4.4%) are off sharply after Morgan Stanley's Katy Huberty (a long-time Apple bull)forecast iPhone unit sales will drop 3% in calendar 2016 (and 6% in FY16, which ends in September) in response to recent checks. She also respectively cut her calendar Q4 and Q1 iPhone shipment forecasts by 5M and 9M to 74M and 52M. Apple (NASDAQ:AAPL) itself is down 1.6%.
    • Huberty blames smartphone saturation in developed markets and (presumably due to forex) higher iPhone prices in emerging markets. Her remarks come amid news Applehas cut the price of the iPhone 5S by 43% in India to Rs 24,999 ($370). The company may be looking to clear inventory ahead of the launch of a 4" iPhone 6C.
    • Other suppliers such as Qualcomm, Cirrus Logic, Avago, NXP, and Synaptics are seeing more moderate declines; the Nasdaq is nearly flat. iPhone suppliers also sold off last month after Credit Suisse reported of iPhone component order cuts.
    • Added to the Nasdaq 100 (NASDAQ:QQQ), effective Dec. 21 will be: Ctrip (NASDAQ:CTRP), Endo International (NASDAQ:ENDP), Expedia (NASDAQ:EXPE), Maxim Integrated (NASDAQ:MXIM), Norwegian Cruise Lines (NASDAQ:NCLH), T-Mobile (NASDAQ:TMUS), and Ulta Salon (NASDAQ:ULTA).
    • To be removed: C.H. Robinson (NASDAQ:CHRW), Expeditors International (NASDAQ:EXPD), Keurig Green Mountain (NASDAQ:GMCR), Garmin (NASDAQ:GRMN), Staples (NASDAQ:SPLS), VimpelCom (NASDAQ:VIP), and Wynn Resorts (NASDAQ:WYNN). Also to be removed: LiLAC Class A Shares (NASDAQ:LILA), and LiLAC Class C Shares (NASDAQ:LILAK).
    • Source: Press Release

  75. Tang DIS Expensive but here would be a play Buy Jan18 105c 19.20 and buy Jan18 17.45 110put (cost 36.65)

    Against this you sell Jan16 110 c  3.40 and 105p 2.48 (credit 5.88) IF you manage to do this just about 20x you would receive 117.60 against your original investment of 36.65 plus what is left of the Jan18 combination.


  76. StJL – UVXY – reflects 2X the VIX short term futures index – yeah it was at $43 earlier today, now 37.70, I was just watching the delta on that, so far out yet sensitive. 

    IMHO, if we see a repeat performance of last Dec 15 – Jan 15 on that index, and lets just say a large 1st week Jan sell off or event which is not out of the question given current circumstances and looking at the last two Jan's, it could hit 850 – 950 by mid Jan. and I think that might translate to 160-170??


  77. Kohl's… so the price can change between the rack and the register… I agree that could be good for margins. Nothing I hate more than feeling like I'm being ripped off when the price is different when checking out. Of course you can make a stink and hold up the line if you catch it, but that's on you, sucker…


  78. UVXY / Naybob – Possible, but unlikely… The VIX peaked over 50 back in August and UVXY made it to 90 then. Going to 170 would mean something worse than that! I would certainly add the the position then or start a new one as I might cash the existing one on a calm day! 

    That's really the beauty of this method I think, there are always days where the VIX drops even in bad periods and you can cash of these calls if you sell as the ETF goes up. So you can really lighten up and reload as needed. 


  79. Question:

    National Wealth fund will be forced to sell assets sooner or later in the next months, a  portion of the last years bull trend was powered by  Qataris, Saudis, etc.

    It´s any scenario of how that can be affecting the 2016 market?.


  80. AAPL -

    executed  Jan '18  100/140 BCS at 14.7 net this AM .  I think there may be more downside but i like the 115 BE in Jan '15.  If it drops into the 105 to 100 range i'll add to this.  The usual hammering down of the stock into EOQ has officially begun.  Last wk 3 analysts lowered the iPhone targets for Dec qtr.  Lots of talk about supply chain weakness.  


  81. DIS/Tangled – Well, in the Butterfly Portfolio we have:

    We also sold 10 of the Jan $120 calls for $2.30 so our best case is between $110 and $120 in Jan.  There's nothing to change about that spread – it's about the same net price on the longs and it's good for two years.  We paid net $5.90 for the 2018s and, for the 4th Q in Oct, we collected $8.50 for selling the puts and calls so, if all goes well, we'll be +$2.60 with 8 more quarterly sales ahead of us.  There's a pretty huge margin for error on these trades!  

    Look at /NG fly – I feel brilliant, only down $16,000 for the day now!  

    KSS/Mkucstar – I don't know how that works but people seem to like it.  I think the specials are clearly marked (maybe a clock on the tag?) and I'm sure they do something about problems like that.  Even worse, imagine being on a line and watching the prices go up as a sale ends – clearly they have some way to deal with that.   

    Wealth Fund/Advill – Which one are you talking about or do you mean fundS in general?  I think the lack of a Santa Claus rally speaks for itself.  

    AAPL/Batman – that's a good price and now you can offer $5 to roll the $100s to the $90s – in case it ever happens.  

    As an AAPL play, if you are impatient about the short puts, I do like the 2018 $100 ($25.50)/$130 ($12.30) bull call spread at $13.20 enough to get 10 of them for the LTP and, if we execute our 10 short $95s for $15 (now $11), then those 10 calls are free and we can roll lower and add 10 more.  


  82. Phil, apologies for being behind on this, but what is your current recommended position on the BHI/HAL deal??


  83. VMware has changed its mind and is not going to spin out a new cloud computing company called Virtustream with its parent company, EMC, after all. VMware surprised everyone when it announced plans to create Virtustream in October, after Dell announced its complicated takeover…


  84. Local officials from China’s key Northeast region have reportedly admitted that they faked economic data over the past few years when the real numbers were much lower. Several officials have said they’ve significantly overstated data ranging from fiscal revenue and…


  85. guy on cnbc slamming nat gas..


  86. You might enjoy flying that new drone around the yard this holiday season, but there’s a new string attached. The Federal Aviation Administration said Monday that US residents must register hobbyist drones by February 19 at its drone registration website.…


  87. Perhaps each time you review the butterfly portfolio you could select the stock best positioned to enter the trade and say how it would be done?   Looking at DIS it appears that if one were to enter the position now at mid prices it would cost about 60% more.   If every quarter there was still an ~8.50 gain from selling puts/calls then still good though it would seem to me.


  88. Buying AAPL cheaper. For those cheapskates who think $112 is too much to pay for AAPL (and remember Phil said in the not too distant past he would be a buyer @ $120) then why not sell the Feb 16 $125 calls for $1.29. Still too expensive, then double up and sell the Mar 16 $125 calls for $2.40. The Lord strike me down, but if AAPL is at $125 by Mar 16, yowza.


  89. BHI/Tai – As noted in yesterday's portfolio update:

    • BHI – Love this one – good for a new position but I'd go with a lower short put from scractch.  HAL is at $37 so 1.1 x $37 = $40.7 + $19 is $59.70 would be the close at the moment and that's in the money for us.

    You can sell the 2017 $45 puts for $8.50, that's good money. 

    Nat gas/Jabob – There is a huge, coordinated attack that makes me think they are trying to force a bottom.  

    DIS/Tangled – Any of them are good if you can get a net that can be paid off with less than 1/3 of what you expect to (reasonably) collect in premium sales.  Do the math, that's how you'll learn how to spot good ones on your own.   You can see the prices we paid, you can check the current prices and you can see the sales we are getting – essentially, you are asking me to run all the calculations for you – every single month - just in case you want one?   Do you have any idea how much work I have to put in looking for the right plays in the first place?  I look at hundreds of these every month and find maybe one I end up liking.  

    AAPL/Winston – Why would we want to sell short calls?  Or are you saying sell them against the spread?  That's not something I'd want to do until the short puts are sold as $13 is not a lot of upside protection.


  90. I hope you are right Phil. Watching it sink so much every day after thinking ~~ 2.50 would be the bottom has really sucked.


  91. Selling AAPL. Why? Because I'm in the $90/120 BCS and I really would like to see that spread ITM!! But seriously, this totally BS manipulated seems to comes towards those who make counter-intuitive plays. Or am I deluding myself (don't answer that).


  92. Phil – Chinese Figures Faked – Are you kidding, NO WAY, those Chinese officials are as honest as a day is long, and would NEVER lie like an oriental rug.  Would they? Oh yeah…

    Walmart - savings from lower gasoline prices tend to grow the top line revenue of consumer oriented companies and the margins of those companies with significant transportation costs.

    Advill – Sovereign Wealth Funds – Excellent and non trivial question, I love Porto.

    "Question: National Wealth fund will be forced to sell assets sooner or later in the next months, a  portion of the last years bull trend was powered by  Qataris, Saudis, etc. It´s any scenario of how that can be affecting the 2016 market?."

    Energy/Oil got gutted, contraction in global economic conditions, less petrodollars to invest. Lower oil prices, lower energy export revenues, bigger budget deficits, more asset sales to plug the gaps, reversing the fund investment flows that were very haughty with oil over $100. 

    Yes, with oil under $35 today, and certainly under $50 for the near term, the effect or affect on markets of the reversal in investment flows will not be trivial.   Since 2008, over $3T in petrodollars were market windfalls for equities and bonds. It is estimated that $500B in annual AUM growth vaporized in 2015 alone, because those funds actually withdrew more than they put in for the first time in over two decades.

    Those flows helped in propping up equities, kept the cost of capital and UST yields lower, and provided much needed liquidity to capital markets. To put it in perspective, take your BRIC's and throw the Arab gulf states onto the contracting pile of money.  This offsetting of central bank balance sheet expansion or non negligible retraction in liquidity is already being felt.  At year end, asset managers for these funds are probably going to shift a portion of their holdings from equities to cash equivalents such as UST's with a positive yield.  What might that do to equities come 1st week in Jan?

    Liquidation of UST's can cause the "dollar" float to rise, depending on what those "dollars" are used for. On the other hand, any reduction in sovereign fund flows or petrodollars due to economic contraction, exacerbates the dollar shortage issue in countries that depend on eurodollar flows from net oil producers for the payment of dollar denominated debts. Oh there goes that little monkey on a rampage again, stop that King Dollar!! That 800 pound gorilla is a far worse destructor than MJ's chimp Bubbles ever was.  Out.


  93. Deluding/Winston – Actually, the way bots work these days, they really are out to get you.

    This will be interesting as Europe finished down 2%(ish) and now we're back flat.  Presumably, they'll try to catch up tomorrow (and /NKD has reset to 18,800) so I think I like /TF long here (1,107) as a fun play on the assumption that Asia and Europe will pop the futures. 

    Down from 1,200 to 1,100 you'd expect a 10-point bounce anyway so I think it's worth a small gamble.


  94. To all:  don't forget to stick to your position sizing.  One size does not fit all.  Just because we play 10 contracts of AAPL or UNG, or LL, or BTU or whatever,  it does not mean everybody should.  Each person should trade according to their investment size and comfort level. Also remember, many of our entries start at 1/4 of what you eventually plan to own.


  95. So.,.. who has any kind of "sure thing" play for January expiration? ;-)


  96. Good reminder stock!  

    Sure thing/Scott – CASH!!!


  97. Anyway, I just gave you a sure thing – /TF just hit 1,110 for +$300 per contract already, so that's now the stop.  


  98. Good enough for me – sold the UVXY call for $14 and bought it back for $10… Can't be greedy and there will be more where that came from!


  99. On /NG, since $3 was 60% of $5, I'm looking at $1.80 at 60% of $3 and thinking that may be the new low range for /NG.  The drop from $5 to $3 was $2 and a weak bounce was 0.40  and a strong was $3.60 and we never got there.  Now a weak bounce from $3 would be 0.24 to $2.04 so call it $2.05 and $2.30 as weak and strong for /NG (front-month) and we'll keep a close eye on those lines.  

    Meanwhile, in one year, /NG has dropped 40% twice without recovering!  


  100. Stj/UVXY,

    Nice volume also in those 170 calls. Cannot believe sometimes that who takes the other side of such trades..

    regards


  101. UVXY / Pat – I can't be the only one playing that game. OI is over 18,000! And 750 changed hands today.


  102. Phil what does it when you say they are trying to force a bottom in NG? Can you explain that? Also are you looking for it to bounce to 2.04 now before a new bottom is established? Do you think today was the bottom, is that what you are saying? Sorry for needing extra help, but I want to understand this. 


  103. craigs--looks like Phil thinks we could hit 1.80 aas a bottom. But he will probably say it could go either way and nobody can or likes to pick bottoms ;-)

    But I am also interested to see if that is what Phil meant.  


  104. LL – And the manipulator is done

    Lumber Liquidators up 17.4% after Tilson covers short

     

    http://www.wsj.com/articles/lumber-liquidators-stock-surges-as-tilson-covers-short-bet-1450138558?mod=yahoo_hs


  105. Bottom – What I mean is there is a thing called a flush and that's when, just prior to the end of a big sell-off (or rally), there is one final, stupid move that breaks to a new low (or high) that gets stops to trigger or gets people to throw in the towel right before the whole thing reverses and goes the other way.

    The reason "THEY" do that is because THEY know that they are going to start buying so they first sell a few at really low prices to force stops and then, when the cascading sell-off begins, they begin to buy (see Trading Places or Jim Cramer) and the best thing about this is all the suckers who stopped out or capitulated now have to run back in and buy again on the way up – making THEM more profits.  

    You probably recognize it when you see it during the day but it's hard to see when it's being done on a long-term basis because the bottom can roll out for weeks or months.  When you have a MASSIVE, FUNDAMENTAL change in the supply demand situation – like we're heading into with LNG exports – then the manipulators KNOW they will have all of 2016 to make money so they don't care how low they drive prices in 2015.  Hell, even Cheniere and Icahn and the new CEO (MS Trader) could all be in on it because Icahn just bought 14% of LNG ($1.5Bn) for half of what it was last year (or most of this year).

    Aside from making money on the stock, LNG can now buy the whole Nat Gas strip out for the next 10 years at decade-low prices, which means they'll make a fortune on the spread selling the gas to Europe and Asia.  That's why a company with $300M in annual sales needs $2Bn in cash – they're buying all the Futures contracts people are selling.

    If Icahn is playing the game I think he's playing, LNG will own tons of futures for delivery on /NG for years to come – more than they actually need, and they'll book a huge tax-free profit (already offset with losses), not to mention the operating profits from the spreads and Carl's $1.5Bn will be worth $4Bn in pretty short order.  Next year, Carl will be 80 – I think a +$2Bn year is exactly the kind of gift he wants to give himself!  


  106. LL/Batman – Speaking of things that were obvious (to me) but took a long time to play out…  cheeky

    Very similar, they were under relentless attack for no particularly good reason and look how long it's lasted.  All you can do is wait for the next earnings report until people finally understand they are turning things around.  That's still my biggest problem as an investor – I see things way too early and I misjudge how long it will take something to play out (or become apparent to others).  


  107. LL / Phil – I've been holding lots of position in this one ( with huge pain at moment ) continue in to add and roll…. if this can see it's way over 23 / 25 next year…. i'll be in great shape, if not, i think i can minimize the losses.  The story is more straight forward now  - California will at some point release findings, and maybe a fine – but i  think worst case it in the 50 million and most likely sub 10.  They can now say ( without Tillson noise) that they were victimized by china suppliers – they stopped shipments and have ( or will) correct the gaps, and then start again with better control.  The first part will get sales up but not profits, the last action well improve profits.  Also, since they sourced a lot of the laminate in EU, the dollar should help them some… 


  108. Phil – So the weather has been the perfect reason to drive NG prices down just as the game is about to change with LNG exports, right? Can you reprint or post the links to the LNG story you have been talking about for quite some time. What you are saying makes perfect sense and I would like to revisit and study the information. Also I realize you have been taking big positions in UNG and /NG, but would you recommend a position in Cheniere (LNG) so we can play along with Icahn? I already have some UNG but maybe this could be a good addition as well. 

    LL- Up over 20% now after hours. I sure could use a winner right about now, so it sure would be nice to see this one start to move for us. 


  109. STJ – Nice trade on UVXY ! 

    Bird in the hand always wins.


  110. Thanks Albo. The hardest part of these trades is to wait for the right setup as they don't come that often… But so far, not one losing trade with either VXX or UVXY! 


  111. Finally I understood something Nattering Nabob said and it makes a lot of sense! With all those petro dollars now gone from the equity buying equation along with Chinese "growth" dollars being curtailed, that has to be killing the buy side for equities and it must be getting worse by the day. So, at some point unless the central banks fill the void, which it seems they can no longer keep up with the pace of demand destruction, the spit has to hit the fan sooner rather than later. 


  112. Phil__ I was hoping today was the flush in NG and oil!!!


  113. thank for the great explanation too!


  114. So, just to be clear.  If I buy my drone from a Drone Show I need to register it but if I buy my gun from a Gun Show …..


  115. A Pessimist’s Guide to the World in 2016 Oil prices soar after Islamic State destroys facilities across the Middle East. Angela Merkel is forced to resign, throwing the European Union into disarray. The dollar slumps as Russian and Iranian hackers…


  116. There’s some respite for riskier assets as the Federal Reserve begins its two-day policy meeting. Emerging market stocks are rising for the first day in ten after the longest losing run since June. Europe’s Stoxx 600 Index has rebounded from a five-day…


  117. After Wall Street has spent years trying to convince regulators that they could collapse without disrupting the financial system, the largest U.S. banks will soon have to take the additional step of showing how they can keep from failing in…


  118. ft.com > Markets > Currencies Register Subscribe Sign in Subscribe You are signed in Home UK World Companies Markets Comment Alphaville FTfm FTfm› Regulation ETFs Investment Strategy Pensions People Opinion Video Markets Data Markets Data› Equities Currencies Commodities Bonds &…


  119. The events of recent days surrounding the redemption freeze from Third Avenue’s Focused Credit Fund and Stone Lion Capital’s suspension of redemptions from its $400 million credit hedge fund, both just days before the U.S. Federal Reserve may raise interest…


  120. Dear Facebook, please don’t hand our data to the KremlinIn south-west Moscow in a 19-storey grey and white high rise block lies the heart of the Russian internet.Known as MSK-IX, it’s the oldest and biggest information exchange in the country,…


  121. There’s some respite for riskier assets as the Federal Reserve begins its two-day policy meeting. Emerging market stocks are rising for the first day in ten after the longest losing run since June. Europe’s Stoxx 600 Index has rebounded from a five-day…


  122. ft.com > World > Middle East & North Africa Register Subscribe Sign in Subscribe You are signed in Home UK World Africa Asia-Pacific Asia-Pacific› China India Japan North Korea Europe Europe› Brussels Latin America Latin America› Business Economy Finance Politics…


  123. Traders betting that U.S. crude prices will jump above those in the rest of the world if Congress lifts America’s oil-export ban may be disappointed.


  124. Every day around 5 p.m., a human wave builds at the west end of London’s Oxford Street. It gathers energy as it approaches a pile of gray stone and scuffed brick that takes up almost a full block, and then crashes through double doors into a cavernous space garlanded with bright T-shirt dresses and tasseled scarves.


  125. Charif Souki said he knew something was wrong on Dec. 8 when Cheniere Energy Inc.’s board of directors asked him to leave the room — and then spent 10 hours talking without him.


  126. The down-and-out men wait for the streetcars on Atlanta’s Edgewood Avenue, especially when the weather turns bad. The blue, blocky, two-car trains, installed at a cost of $98 million to revive downtown, have become a de facto rolling homeless shelter.


  127. Apple Inc. opened a production laboratory in northern Taiwan where engineers are developing new display technologies, according to people with knowledge of the facility.


  128. Venezuela President Nicolas Maduro has stepped up his attacks of voters who supported his political rivals after he suffered a stinging loss in congressional this month. That’s worrying bondholders.


  129. The iron ore collapse has pushed producers to the brink of survival, according to the head of the world’s second-biggest mining company.


  130. European stocks climbed for the first time in six days and the dollar fell against most major peers as a selloff in credit markets and crude oil abated. Emerging-market currencies rallied, while euro-area government bonds sank.


  131. Walt Disney Co.’s “Star Wars: The Force Awakens” will debut in more than 4,100 theaters this weekend, a record number for a December opening, according to the company’s estimates.


  132. You had to see this one coming.


  133. U.K. inflation edged back above zero in November for the first time in four months, a move that still leaves the rate a long way from the Bank of England’s target.


  134. U.S. travelers over the year-end holiday season will surge to a record 100.5 million as cheap fuel makes trips more affordable.


  135. Gold is going to be a casualty of the Federal Reserve, according to Societe Generale SA.


  136. Sweden’s central bank kept its key lending rate unchanged and refrained from boosting it bond purchasing program in a bet that a surge in growth will propel the economy out of three years of zero inflation.


  137. Sumitomo Mitsui Finance & Leasing Co. agreed to buy General Electric Co.’s Japanese leasing business for about $4.8 billion, rounding off the country’s biggest year for acquisitions since 2012.


  138. A sharp slowdown in China’s economy to a 2.3 percent growth rate in the next three years would have “significant knock-on effects” across emerging emerging markets and corporate credit quality worldwide, according to Fitch Ratings.


  139. Boeing Co. rose in late trading after boosting its dividend 20 percent and expanding a stock-repurchase plan to $14 billion to let investors share in the benefits of soaring airliner deliveries.


  140. Shanghai warned children and elderly to remain indoors and everyone else to avoid physical activity outdoors as air pollution levels worsened.


  141. A week after laying out a new strategic plan, Yahoo! Inc. is facing additional pressure from investors who are running out of patience to see results.


  142. Sotheby’s expects a buyout program to result in a 5 percent net reduction of its 1,600 employees.


  143. Mornin…

    Craigs – you got it.

    Phil – NG and other manipulators. Great explanation of the dump and jump or stab and grab. I guess that would be the opposite of a  pump and dump?


  144. GoPro Inc. slumped the most in six weeks after Morgan Stanley cut its rating and price target on the stock, based on slower consumer pickup of drones and a later rollout of its next-generation action camera.


  145. The picture Fitch has just painted of businesses with outsize China exposure shows credit analysts are painfully aware of the nightmares that might await lenders if the mainland’s economy stalls. Why then are equity analysts so keen to keep investors in dream land? 


  146. NG- Well I guess they won't be done manipulating this as long as the weather keeps giving them good reason to drive the price down. All we have to do is look at the 10 day forecast for NY each day and as long as I see what it shows this morning, 66 degrees on Thursday Dec. 26th, it will be hard to raise that price. I said a while back, we will be on the golf course at Christmas or New Year's!


  147. Oops, I meant Thursday Dec 24th, not the 26th that will be 66 degrees. 


  148. Good morning!  

    As we expected, we're bouncy this morning.  /TF up to 1,115 – that was a good one!  

    Nothing too exciting going on – just bouncing ahead of the Fed – who are sure to save us, right? 

    China/Naybob – I've been saying for years that their data is fake – economies don't grow 7% a year without massive disruptions but cooking the books doesn't cause social upheaval at all.  Still something investors don't understand is the repercussions of unwinding $10-20Tn of fake growth so they can, one day, have real books.  

    What Will Become Of China's Ghost Cities? – Forbes

    This article actually has a positive spin on the cities because the author is willing to believe they will fill eventually.  His flawed logic is based on the assumption that China's urban population will hit 1Bn in the next 15 years yet already property prices are out of control and the economy is collapsing – how are they going to get 300M people to get off the farms and into the empty cities – even if it were logistically possible to move 2M people a month (they current refugee crisis suggests that is difficult).  

    It's simply a ridiculous premise but it's the kind of stuff they peddle to an investor population that is seriously lacking in basic math skills and then, 15 years from now – they puzzle over how they could have been so wrong.   

    Still, I guess I could write a great article for Forbes that suggests people invest in Chinese moving companies…

    Also, I'm using the author's BS numbers but, unlike some Forbes goon, I know how to take 2 seconds and look at Wikipedia to at least check a fact and they say:

    “In the 30 years since 1979, China’s urban population has grown by about 440 million to 622 million in 2009. Of the 440 million increase, about 340 million was attributable to net migration and urban reclassification. Even if only half of that increase was migration, the volume of rural-urban migration in such a short period is likely the largest in human history.”

    So, 30 years to get 440M people into the cities is the largest migration in human history but now China is going to kick it up a notch and double that pace in the next 15 years?  The numbers are thrown off by migrant workers, who seasonally leave the farms for the cities – there are 250M of them.  

    In 2011 a total of 252.78 million migrant workers (an increase of 4.4% compared to 2010) existed in China. Out of these, migrant workers who left their hometown and worked in other provinces accounted for 158.63 million (an increase of 3.4% compared to 2010) and migrant workers who worked within their home provinces reached 94.15 million (an increase of 5.9% compared to 2010).[5] Estimations are that Chinese cities will face an influx of another 243 million migrants by 2025, taking the urban population up to nearly 1 billion people.[6] This population of migrants would represent "almost 40 percent of the total urban population," a number which is almost three times the current level.[6][7] 

    That is not at all the same thing as filling empty cities with residents!  

    Also, you'll note Wikipedia's numbers came from a 2008 FT article and a 2009 Chinese study written by the same Government that cooked the books and decided to build dozens of empty cities in the first place!  Madness I say, MADNESS!!!  

    LL/Batman – Up 24% at least count.  I hope poor Tillson made it out in time…  

    Lumber Liquidators has been in turmoil since “60 Minutes” reported in March that the company sold Chinese-made laminate flooring with unsafe levels of formaldehyde. Tilson pitched the story idea to the news program and appeared in the segment. The stock plummeted more than 70 percent in the aftermath of the allegations, and the scrutiny prompted the U.S. Consumer Product Safety Commission to begin an investigation.

    I think the people who lost money in LL off of that report should sue Tillson because God knows the SEC will do NOTHING about this blatant market manipulation.  It wasn't just the FACT that they sold some sub-par flooring – that was true(ish) but then Tillson spend the rest of the year claiming management knew about it and engaged in a massive cover-up – that turned out not to be true at all but it caused tremendous damage to the company (and profits for Tillson).  

    Tilson, who spent months crusading against Lumber Liquidators, said he received information that leads him to believe senior management was probably unaware of the formaldehyde problems.

    “If there is no ‘smoking gun’ documents/emails, then the doomsday scenario for the company and the stock is less likely,” Tilson, the head of Kase Capital Management, said in a column on the Seeking Alpha website.

    LNG/Criags – I wrote about all that in a post last week – makes me sad that you don't read them. frown 

    You're welcome Jabob.

    LOL Malsg – sadly true…

    Stabbing/Naybob – Yeah, I think all stock market terms should be interchangeable with descriptions of a mugging for accuracy.  wink

    /NG/Craigs – Yep, the weather is amazing.  I wish I were going to be home this year – I'd have a Christmas Barbeque party.  Meanwhile, I can't believe it's next week!  Weather makes it feel all wrong.  Trading on /NG is paper-thin at $1.866 on the front-month.  My Aprils are down 0.02 at $2.085, which is where I bought 5 more yesterday but not with this low volume – strange.  

    Oil looks like it topped out at $37, which was $38.50 on Brent.  Remember when there was like a $10 spread between them? 

    /NKD made it all the way back to 18,900 before failing back to 18,600 and now almost back to 18,800 again – what a total joke of an index:

    And, lest we forget, 11,000 is the Must Hold line on the Dax and 10,500 is a bearish breakdown and they're still below that.

    SPY  5  MINUTE

    SPX DAILY

    This is why charts don't give you the real story!  2,339 declines vs 834 advance with 632 new 52-week lows and we finish up 0.5%?  That's incredible – as in NOT credible.

    Still, there was the good old support line at 2,000 so of course bouncy.  2,100 to 2,000 means 2,020 is weak and 2,040 is strong but when you get an air bounce off 2,000 (never quite hit it outside of a brief spike), then minimum expectation is a strong bounce:

    SPX WEEKLY

    MACD not looking to promising – we'll see how fast the oversold line wears off. 

    NYMO  DAILY

    The longer-term NYSE is in a Casey Jones Pattern:

    NYSI DAILY

    Trouble ahead, trouble behind…

    INDU DAILY

    INDU WEEKLY

    NDX WEEKLY

    RUT WEEKLY

    Another scary MACD line!  

    2.017 on /NGJ6 – Now I'm in!  


  149. Phil,

    That level on /NGJ6….is suspect…..at 2.07   is that a level to enter or wait for a better lower price. Maybe scale in a contract at a time?