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Monday Market Movement – Hedging for the Holidays

Image result for be carefulBe careful out there!  

That's how I often close my posts but I want to double-plus emphasize it this morning as we have the 4th of July next Tuesday and there will be very few Americans working on Monday (US markets close at 1pm) - as it's the perfect chance to take a long weekend.  In fact, next week is likely to be the slowest trading week of the year but that makes it very dangerous because any kind of panic into low volumes can cause a sharp sell-off so BE CAREFUL OUT THERE!  

We already took our winning commodity trades off the table (you're welcome) in an Alert I sent to our Members at 5:36 becasue we had nice pre-market moves up in oil, gasoline, natural gas – even coffee – all of our weekend longs, in fact.  These are the same trades we discussed in Wednesday's Live Trading Webinar and, of course, in Thursday morning's PSW Report, where I said:

Gasoline (/RB) is a bit more encouraging, already racing back to $1.435 (up $630 per contract) after hitting $1.395 on yesterday's lows.  $1.42 is our long spot on /RB with tight stops below so it's game on again this morning, as it is with Oil (/CL) at $42.50 – if you are brave.  We still like Coffee (/KC) at $122 but it doesn't like us and Natural Gas (/NGV7) went from $2.95 to $3 (up $500 per contract) yesterday and now it's back at $2.95 so why not take it again?

Why not indeed as we cashed in 2 longs for another $1,760 profit on the rejection at $3.05 and that's certainly good enough for 2 day's work, right?  We teach people how to trade Futures contracts every Wednesday in our Live Trading Webinars as well as every day inside Philstockworld – you can join us HERE.  

Once you pick up a good trading channel, you can make these same trades over and over again for quick profits like this and that's the best way to get started trading Futures – quick in and out trades with tight stops to limit your losses.  I also mentioned a couple of other trade ideas on Thursday morning:

Index-wise, we are forcing ourselves to find bullish trades because the Nasdaq 100 (/NQ) is back over our 5,780 resistance and now we'll see if they can get over 5,800 and we're off to the races for our next major up-leg to 6,000 (3.8%) and the way to play that is to go long on the Russell (/TF) over the 1,400 line with tight stops below but only if the Nasdaq is over 5,780 and it will need to hold it all day today for us not to start shorting at that same line (/NQ 5,780).  

In yesterday's Live Trading Webinar, we decided to go long on the Biotech Ultra-ETF (LABU) with a nice $4,500 spread that will net us $15,000 (up 255%) by December if LABU hits $70.  As you can see, we're well on our way already as it really took off into the close!  

As you can see, LABU blasted over our $70 target already so we're well on track on that trade and, in case you like keeping score:

  • Gasoline (/RB) out at $1.435 (again) – up $630 per contract (again)
  • Oil (/CL) out at $43.50 – up $1,000 per contract 
  • Coffee (/KCU7) out at $125 – up $1,125 per contract 
  • Natural Gas (/NGV7) out at $3.035 – up $880 per contract
  • Russell (/TF) out at 1,417 – up $1,700 per contract 

That's a nice $5,335 profit (per contract!) just from our Thursday morning trade ideas – not a bad way to get us started into the holidays and you can see why we cashed out this morning – why risk great gains?  We can always find something else to trade and, in fact, Silver (/SI) just dove to $16.225 but it already back at $16.45 and we like it long here with tight stops below and especially over the $16.50 line again (tight stops) as it's down with gold, which is down on news that India will be restricting ownership in the World's top retail gold consumer.  

On the whole, it's not a big enough deal to keep gold down (we like /YG over $1,250 with tight stops below) but there's no reason at all that Silver should suffer too – they just tend to trade in tandem as, usually, anything affecting one would affect the other as well.  See, it's not hard to play the Futures – just read the news, watch for irrational selling or buying and bet against it.  

I'm heading over to the Nasdaq this morning to do Facebook Live with Jill Malandrino and we'll be reviewing the new portfolio we set up for the Nasdaq in April and, so far, our 3 trade ideas are all on track and, most importantly, well-balanced as even our hedge is making money – despite the rising Nasdaq.  Why is that?  Because we know how to "Be the House – NOT the Gambler!" and it's evident in all the trades we're teaching over at the Nasdaq:

Our Gilead (GILD) trade is up $950 from our net $4,450 entry, which is +21.3% in two months so far and on track for the full $5,550 gain we expected.  As the net is still just $5,400 and there's still $4,600 of upside, this is still good for a new trade.  In this trade we took a simple bull call spread and, by taking an in-the-money call for ourselves, we were able to sell all of the risk for a premium to some other sucker, who thought GILD was going to be over $70 by Jan 2019 but he needs it to be over $77.30 to break-even while we netted in for $64.50 and, while our profits are capped at $5,500 (at $70), our chances of getting to that 122% gain are excellent and I'll take good chances to make 122% every time!  

Fiat-Chrysler (FCAU) hasn't really gone anywhere since we started the trade but it was only a net $1,000 spread and, because we sold more risk than we bought (and here we sold puts as well as the bull call spread), our Gamblers are losing much more than we (the House) is so we are net up $325 (32.5%) in just over a month and off to a good start.  This trade will net $4,000 if all goes well so $325/month is exactly what we expect to be making to be on track.

Since this is a Nasdaq (our sponsor) portfolio, we're using the Nadaq to hedge and here we took a bear put spread on the ETF (QQQ) when we thought the market was toppy on May 31st.  It's up just $185 (4.1%) so far but that's fine as it's a hedge, portfolio insurance, we don't expect to make money – it's there to protect our other positions from taking losses when (and if) the market does finally correct.  

And that's what I want to emphasize this morning – especially into a holiday weekend.  It's much nicer to go on vacation knowing your assets are protected and good hedges will do that for you and, if you know how to BE THE HOUSE – you can let other people take the bulk of the risk (that QQQ will fail $136) while you take the sensible insurance play (that QQQ will test support).  The Nasdaq spread above is still good for a new trade at net $4,653 as it pays $11,000 if QQQ falls below support at $136 and, if not, just our first two trades are likely to stay on track for $9,500 worth of gains – more than double what we're spending on the hedge and, of course, having the hedge gives us confidence to take more long positions down the line. 

Tune in this morning (10:30) when we'll discuss hedging and we'll continue to build this portfolio throughout the year – as it's good to see how we create a PSW-style portfolio from scratch.   

And please – be careful out there! 

 

 


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  1. Good morning!  

    Have to run to NYC, back around noon.

    Yes, I'd play /CL back at $43 for at least a bounce (0.10, 0.20) but very tight stop below.  Watch the Dollar, it popped to 97.14 and that's knocking commoditioes down a bit.  



  2. Phil your scorecard on futures trading is a bit misleading since you neglect to mention the large loss you took on CL when you said at 6:41 AM that you stopped out this morning at $43.50 with a $44.50 average on 15 contracts? I think more than a few members were in that trade with you and had been counting on getting back above $44. Not sure how you got to a $1000 per contract win on CL? I fortunately was not in that one with you. I went with your more profitable RB trade on Thursday and Friday. I got even on KC but didn't have the cojones to hold on for the big win there after watching this one fall so often. I believe that KC is stacked against us when we all go in, due to the extremely low volume on this. Hard to believe we can move a worldwide commodity, but it sure looks like they don't like it when we join in that trade.


  3. I'm sure my previous comment will earn me a nasty comment back, but did I miss something on that CL trade that made $1000 per contract? 



  4. The US shale oil industry is booming despite low crude prices







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  7. Bitcoin is tumbling


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  9. Craig. Appreciate you speaking up. Phil not mentioning the hard shakeout in KC that occurred is surprising.  


  10. Gold drops sharply and suddenly



  11. $69 Billion Worth of Bezos Bombshells – Bloomberg Gadfly


  12. What are you guys talking about?   I was very clear in Thursday's post that we lost money in oil from $44.50 and now we made some back and I was very clear this morning In the alert that I decided to take a $15,000 loss and make it up with smaller trades.  If you are not happy about the documentation, believe me, it is MUCH easier to keep these trades to myself.  


  13. Good article on CTL.  Covers the charges of fraudulent sales practices and its likely impact.

    https://seekingalpha.com/article/4083852-centurylink-wells-fargo?isDirectRoadblock=false

    I agree with the premise of the article.  I think it will likely be settled for an amount not to affect their dividend.  Could also result in the firing of their current CEO, who is likely getting phased out once the merger with LVLT is effected anyway.  Corvex. their largest shareholder, added an additional million shares after the charges were made.

    The stock yields almost 9%.  Greatest risk I see is if the merger doesn't go through..  Unlikely, IMHO.


  14. Phil I was just trying to figure out where you got the $1000 per contract gain you showed on your score card in the main post today?


  15. Good Morning.


  16. Gain/Craig's – From  Thursday, when oil was $42.50 and I said that, despite our losses, I still like it to the upside.  I also said, on the original trades,  that tight stops should be used.  I didn't use them because I was busy documenting my tades and answering questions, rather than watching my account and stopping out.   So you can see why acting like I'm trying to trick people kind of pisses me off when I never intended to sit there and babysit futures trades. 


  17. VRX – A former falling knife of mine is having a nice run.  Was up 24% last week.  Now trading above the 200dMA.  Will take some partial profits, but keeping most of the position. 

    Pharm, are you still in it ?


  18. Not questioning your motives Phil, I just couldn't figure out where you were coming from with that gain. Now I know. No, you didn't hide anything and I do understand your inability to get in and out. I wanted to be on the same page and understand what you were talking about when many were commenting about being in that oil trade at $44 last week and taking losses as you did. Your scoring was on your last call to go long at $42.50 on Thursday which I did not recall. Got it. Thanks for the explanation.


  19. No problem, that's why I have the link back to Thursday's post – so there's continuity.  

    Meanwhile, Europe is faltering and 5,850 is silly on /NQ, so that's a good short with tight stops.  


  20. Phil / RWLK – this small cap which was one that was mentioned on this forum before is on a tear.


  21. phil--thanks for your explanation this morning about the 5% rule with stocks. I really appreciate it.


  22. Phil,

    What about the Saudi IPO as a catalyst for oil? I liked that theory but you now think not enough to push oil up?


  23. VRX/Albo, small position for me.  Still a money loser, unfortunately.  I have not adjusted or done anything lately due to my company going through due diligence with a bunch of big pharma BD groups…..


  24. 5%/Jabob – the explanation was good, but the really cool part that Phil didn't put in there is that he used to be involved with the early trade bot programmers, and since programmers are fundamentally lazy creatures (that's why they write programs), they tend to put code in that takes action when things change in increments of 5%. There's also the whole Fibonacci thing, which I understand pretty well in nature – pine cones and so forth – but not so well in stocks.


  25. Pharm 

    Flexion Therapeutics, Inc. FLXN

    Any interest

    Thanks


  26. Phil – "I never intended to sit there and babysit futures trades."

    After the initial commentary, which you later addressed, I was half tempted to trot out old Hobson again. Reminding one… two witness the same event, two different accounts and conflicting descriptions. Memory distortions, bias, misinformation and unconscious transference can cause confusion and divergence in accounts. Now if we could only get our elected officials and judiciary to be cognizant of such. Oh well, wish in one hand and Out.  



  27. TSLA secondary has to be next couple of days because Morgan Stanley reiterated for the 100th time their overweight position.  Didn't work very well.


  28. Started a position in off-price retailer Tuesday Morning (TUES) at $1.85.  My wife shops there occasionally and likes them.  Apparently some great prices.  Been quite a bit of insider buying in the past two months.  Their slide presentation is below.  More info than you could possibly want on this speculative number.

    https://www.sec.gov/Archives/edgar/data/878726/000110465917037366/a17-14642_1ex99d1.htm


  29. I'm on my way back, that's it for the /NQ shorts, of course.  Fresh horse would be /TF below 1,415 if they fall again but looking strong now.  


  30. Gold flash crash – rumors of $2B notional in /GC futures, some estimates are claiming 18K lots or 1.8M oz. Round numbers…

    $1250 oz x 100oz per contract = $125K; $2B notional/125K = 16K contracts x 100oz = 1.6M oz = 100K pounds = 50 tons.  That's a lot of gold and the price only moved 1%.

    This was offset by USD/JPY spiking from 111.43 to 111.66 then up to 111.72 before dropping back to 111.36 right after US Durables goods slumped.  Chart here.

    Someone got an itchy or fat finger?  Maybe someone had to liquidate a large position, that's means exiting longs.  Is someone expecting the dollar to get squeezed?  Or does somebody need dollars? Or does somebody want to buy gold on the dip?  Maybe this guy and out.



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  33. Wow, crazy action.  From the S&P, I'd call it a strong bounce that's failing at 2,440 so let's watch that carefully.  

    In fact, 2,440 is a spike we'd throw out and cal the drop 12 points (0.5%) from 2,448 to 2,436 so 2.5 bounces are 2,438.50 and 2,441 and look what exactly happened/is happening.  

    That's an important thing to remember, the S&P 500 is much more important than the other indexes as an indicator!  

    Nas is clearly failing weak bounce and /TF is off in its own little World.

    Which is why it's the best short now.  

    /CL failing $43.50 again but what a ride.  



  34. TOO

    Phil – On June 16 I posted that I was buying some TOO at $1.84 and selling some Nov 2 puts for .60.  It was another of my "Dumpster Diving " stocks.

    Sold 1/2 the stock at $2.38.  Keeping the puts.


  35. Albo – "On June 16 I posted that I was buying some TOO at $1.84 and selling some Nov 2 puts for .60.  It was another of my "Dumpster Diving " stocks.  Sold 1/2 the stock at $2.38.  Keeping the puts."

    Now that dumpster diving is just TOO nice.   Reminds me of buying some automotive stock everybody thought was going BK for $1.40 in 08, as Mopar or GM piston heads might say in the day…  

    F-ed Over Road Debris; Fix Or Repair Daily; Frequent Overall Rapid Deterioration; Found On Road Dead and definitely not First On Race Day. My favorite: 

    "That's not a leak. His Ford's just marking it's territory." 

    Although 08 was at a market trough as opposed to apex, and apples to oranges on industry and competition, I can see similar BK fears in the current FTR situation. Out.


  36. Thanks, NN.

    Watching RAD, up 22% at the moment.  (not participating)

    Looks like speculation that the WBA deal might not be dead.


  37. Keep in mind I'm off to Europe Thursday night so my main focus is on CASH!!! and BALANCE!

    My vacation schedule:

    I'm flying to Paris June 29th, arrive 30th so normal day Thursday and maybe late on Friday, depending how soon I can settle down and work but don't expect a full day.

    Monday is July 3rd, most likely I will skip (but there will be a post) as it's a travel day for us, 4th is a holiday and Wednesday is another travel day but I expect to work pre-market and end of day.

    July 6th and 7th should be normalish.

    The following Monday (10th), will be another light day and Tuesday is a travel day but I expect all to be normal the rest of that week (other than my time-shift from London). 

    Back in the command center on the 17th.  

     No official webinars in Europe though I might test one for quality from London (affects my future travel plans)

    Big Chart – Anything Red on the Nas consolidates the failure at the 45% line, which is the weak retrace of the 50% move and then 5,600 (40% line) comes into play as the strong retrace.  This is why I didn't even used to use a chart for the Big Chart – it was just a spreadsheet you could apply the 5% Rule to – as long as you knew the baseline.  

    Coffee/Latch – The move down didn't hurt us much because there we stuck to our stop discipline and there have been many many moves up on the way down.  As I have said (and still say) every move down is just a better opportunity for the long-term player.

    VRX/Albo – Looks impressive (as long as you don't zoom further out, of course):

    RWLK/Toquio – Yeah, I wish we'd gotten them sooner.  Posted video of their stuff last week but figured the pop was already in from $1.  

    You're welcome Jabob – Monday's and weekends are good times to get long explanations. 

    Aramco/Japar – It's a good general catalyst and new Prince Mohammed is the 31-year old guy who came up with the idea of IPO'ing Aramco to cash in as well as the Project 2030, which is aimed at getting Saudi Arabia off oil dependence (below 50% of GDP) by 2030.  So his whole future rides on the Aramco IPO going well and that depends on oil being over $50 by next year when they go public so, one way or another – that's going to happen.  Meanwhile, timing is everything and sentiment is not running that way yet so I wanted to take that $1 gain off the table but it doesn't change the long-range premise – nor does the long-range premise affect the short-term weakness and pressure to go lower.  

    5% Rule/Snow – Just to clarify, the programmers have the best intentions and don't lazily code but they are instructed by committees made up of people who tend to round off and when you round off enough things and then multiply or divide them by each other – you end up with "surprisingly" round numbers.  The problem is the financial guys don't speak programmer and the programming guys don't speak finance and that's why we used to come in to consult – to bridge the gaps.  

    The essence of the problem is that, if I ask you at what point should I tell your custom program to start selling – will you say when it retraces 1.12%?  No, you are more likely to say 1% or 1.5%, etc.  Now, imagine we are, in good faith, studying 100 traders in your firm and forming a committee to set "rules" that the computer will follow – the more people involved the more these rules tend to congregate around whole numbers and then they get averaged and rounded off, which makes them even rounder than they were before.

    Now we throw your "custom" program out in the wild with 100s of other custom programs but all of which follow similar rules that are designed in similar ways – now we end up getting significant lines of convergence around whole numbers and the more that happens, the more the programs begin to start using them as their base-lines, so the whole thing is self re-enforcing as well!  

    THAT is why the 5% Rule works – don't blame the programmers – they are just doing what they are told.  

    And Fibonacci works great on things that have enough flow.  The larger the sample size, the better it works so you can expect to get great Fibonacci sequences with liquid stocks or ETFs but, for relatively illiquid stocks – it's useless.  That's why people think it doesn't work (5% Rule too) – they try to apply it to everything but these are both statistical predictions that require large samples to prove out (just like you can flip 10 heads in a row, even though the odds are 50/50 over the very long run).

    On the 5% Rule, AAPL went from $80 to $120 ($40) so above $120 we'd have the same $40 to $160 so from $120 to $160 (40) we expect to see $128 and $136 as weak and strong bounces while $152 and $144 are the weak and strong retraces. $144 is also the 20% line from $120 so that is the most significant area for AAPL and that's where we'd expect to see consolidation before a move over $160.

    As you can see, we consolidated under $144 in April, then broke over in May but it was too soon and the run to $160 failed and now we're back to $144 for more consolidation and earnings will determine whether we blast up to $160 of back to test $128, which now happens to be the 200 dma, so perfect timing.  

    Since $128 is a stupidly cheap price for AAPL, based on logic it's not likely to happen and THEREFORE having eliminated the impossible, whatever remains, no matter how improbable, must be the truth (Holmes) and that means odds favor AAPL heading 10% higher on earnings (around 7/26).

    And THAT is how we use the 5% Rule….

    Hobson/Naybob – Good choice!  wink

    Tues/Albo – Well the bad news is they only made $3.5M last year but the good news is you can buy the whole company for $82M so the p/e isn't terrible but their chart sure is and deservedly so as expenses are climbing way faster than sales and these guys could lose $20-30M this year.   Since they only made $10M in their best year (2015) that means it will take then 3 great years (at least) just to get to net $0. I do like their plan – I like the new store-front and the co-tenancy BUT, that 136 store closings will cost them a fortune and take 3 years – investors aren't that patient and you'll have to be if you want to see this through.  Sorry but, on the whole, the presentation reminds me of the old "Prayer for the Dead" and needs an "Amen":

    Too much has to go right for them to pull this thing off and, most likely, in 2018, we won't have missed anything by waiting to see if they are really making progress.

    Gold/Naybob – Are people really this careless or do they keep rolling out the old "fat-finger" excuse to mask the serious liquidity issues that present themselves any time someone has to cash something in?

    TOO/Albo - 

    They're still a shipper, right?  No thanks!  

    Weren't there a couple of stocks we were supposed to be buying?


  38. Ilene mentioned FNSR on Friday.


  39. BIOC added to the Russ Micrcap - 


  40. FLXN/qc….well, their main drug is a reform injection of a generic drug for OA pain.  Worked, and FDA is in October.  Selling Puts in the front month and buying Nov Vertical Call Spread is a good way to cap any losses with a higher POS.

    How about the Nov 1.75/25 BCS for 3.80ish, selling the Aug 20s for 1.50 for a net 2.30 that is 100% ITM??


  41. Phil – Why? 

    That's an important thing to remember, the S&P 500 is much more important than the other indexes as an indicator!  


  42. 5%/ Whoa, thanks for that, Phil…..now it comes back to me. Fascinating. (and my apologies to any programmers in the room).


  43. And… thanks for the /CL commentary.  I was still down until today's dip and rally, which was what the doctor ordered.  I was about to ask Jabob to short /CL for me, for some extra support.  =)     Anyway, your strategy of selling 1/2 and then stopping the other half at a 50% retrace was instrumental in my ability to work this trade to positive territory.   In fact, I built my Futures bankroll to $9,800.00 (NET) in my first month of trading Futures.    NONE of this would have been possible without your commentary.  So, Thank YOU!   Hope you are not planning on retiring anytime soon.  I am only at the 400 hour mark and need to get back to studying this 5% rule and "Being the House".   But, Futures are so much more fun.  


  44. Snow – "and since programmers are fundamentally lazy creatures (that's why they write programs)"

    FU SNOW.  GOOD PROGRAMMERS write what makes the world go round. Not many these daze… 

    I know you apologized. But a day without a JABO FU???? Smiley.


  45. Joey – "NONE of this would have been possible without your commentary.  [PHIL] So, Thank YOU!  "

    Hobson approves and Out.


  46. Naybob – lol! Okay, that's why I programmed, back when I did. It was to avoid a repetitive tedious chore, and because I was fundamentally lazy. rofl!

    and thanks for the FU.


  47. FNSR/Albo – That and GE?

    FLXN/Pharm – Sounds good.  

    Why/Joseph – Because the S&P is diverse and difficult to manipulate and the sheer size of the companies means there has to be a serious flow of capital to move the needle and, of course, volume – by far the most volume, which is what we need to prove out a theory.

    Wow, how is it that Republicans want to make it a crime for kids under 13 to use a smart-phone?  Talk about a nanny state!  

    Scaling in and out/Joseph – That's the key to trading with conviction (as opposed to tight stops).  Glad it's starting to click but:

    Image result for don't get cocky animated gif

    Don't worry, not retiring – no more Monday's as of next March and, 5 years later, no more Fridays but, frankly, not sure I'd ever want to give up 3 days of trading in the usual week – would be a boring 5 days!  

    Programmers/Naybob – Laying the foundation for our ultimate demise is what they are doing!  crying

    Image result for robot efficiency cartoon

    Image result for robot efficiency cartoon

    Image result for robot efficiency cartoon


  48. CSCO is another one to consider for addition.  

    FRED and RAD both flying as FTC approval looks good.  

    RAD Aug $3s are only $1.40 and the $4s are 0.95 for net 0.45 on the $1 spread – that's a fun way to play.  


  49. Phil – thanks for the vacation schedule. I am off the same time – Italy and Isle of Wight, so nice to know.  Was wondering if you plan to hold TF short during this time? I just picked 1 TFU7 at 1419 to hold short.


  50. Hi Phil, 
    This is my reminder about looking into FNSR, possible option idea if you like it. It's down a bit today. 


  51. Kids smartphone / Phil – I guess they are trying to prevent possible injuries since their parents won't have healthcare anymore. Thoughtful if you ask me.


  52. Smartphones – As someone only here for investment advice, the political sparring here provides endless amusement, although distractions as well. Just this morning one of my staff was railing on the smartphone initiative (a citizen initiative out for signature, not a law). He called the group pushing it (a bunch of doctors) 'rich libs' and said the state assembly (54/46 Democrat) would likely pass it. So his take was the complete opposite of the perception here.  Which is why the sparring is mostly pointless, IMHO.


  53. /TF/Latch – I prefer not to hold things open when I'm away.  If I'm on-line from a hotel, I might day-trade but I lost $50,000 once between the time my flight left NJ and landed in Texas, so I prefer not to (even though sleeping with open options is no safer, of course).  

    FNSR/Ilene – Yeah, I need to do in the AM, when I have time to write something up.  

    Smartphone/StJ – I think it's the word "smart" that's upsetting Conservatives.  Can't have phones letting kids find out what's true or correct in the World.  One of the teachers in our school complained the kids fact-checked her history lessons – as if that's a bad thing!  

    Phones/MrM – Except the guy heading the group is a registered Republican and the Democrats already came out against it (and the Republicans haven't).  Just fun stuff there (for a change) not serious like denying health care to millions which will lead to tens of thousands of deaths or colluding with Russians to tamper with an election or trading legislation and trade agreements for patents on Trump brands in China or loading this country up with unpayable debt in order to further enrich the Top 1%, who now have half of our nation's wealth.  You know, fun stuff…  cool

    Weak close.  Nas almost the low of the day. 

    /TF is still the logical short below 1,415


  54. Phil – if you are still up for meeting in London it would be a pleasure


  55. Phil / "Weren't there a couple of stocks we were supposed to be buying?"

    You were thinking about a new TGT trade this morning-

    "TGT p/e 10 and COST p/e 27 makes this a no-brainer in favor of TGT, which we are already playing bullish in the Butterfly Portfolio (just long calls and short puts) but in the LTP we just have the short puts so I'll be wanting to add a bull call spread and adding to the OOP as well – please remind me in the afternoon, when I'm back from the city."


  56. Phil / phones – Thanks for the reply. I don't have time to fact-check, nor a dog in this fight.  Just pointing out, as a decade-long customer, that small stories like this that are glass half-empty, half-full and don't impact my portfolio have zero interest to me.  But of course it's your site, and you can probably retort that this bill could impact our telecom holdings someday :) .  Happy Monday!


  57. Latch – "Italy and Isle of Wight"

    Where on the boot? And I know some natives on Wight from the good old daze and out.


  58. Hey Nat, I am heading to Puglia with a required stop in Matera – my first time in this region. https://en.wikipedia.org/wiki/Matera

    The following week, I am here on the good ship Illiria.  http://www.britishclassicyachtclub.org/regatta/


  59. ScottMi – as I was just discussing with Phil, for every opinion there's a counter opinion, and for every study, there's a counter-study, it's so hard to find the truth these days it makes my head spin.  Here's this refutation of the study you just linked..

    http://www.epi.org/publication/the-high-road-seattle-labor-market-and-the-effects-of-the-minimum-wage-increase-data-limitations-and-methodological-problems-bias-new-analysis-of-seattles-minimum-wage-incr/


  60. Good morning!

    Waiting on the BOE rate decision, any minute.  Would be a surprise if they tighten.   Draghi already had his say:

    Mario Draghi called for continued euro-area stimulus even as the economy enters a new phase in its upturn, saying support is still needed to entrench the trend.

    “All the signs now point to a strengthening and broadening recovery in the euro area — deflationary forces have been replaced by reflationary ones,” the European Central Bank president said on Tuesday in Sintra, Portugal. “However, a considerable degree of monetary accommodation is still needed for inflation dynamics to become durable and self-sustaining. So for us to be assured about the return of inflation to our objective, we need persistence in our monetary policy.”

    The euro jumped as Draghi said that most factors damping inflation are temporary, and was up 0.6 percent at $1.1250 at 9:50 a.m. in Lisbon.

    Europe is flat, Asia was flat and we're flat – very exciting stuff!  Oil $43.84, might be finally going for $44, /RB $1.45 but Dollar back down at 96.61 so not at all impressive.  Silver was the right horse to back, just hit $1,000 per contract at $16.65 so done there and we'll look for fresh horses.  Nas was certainly the right short, still down at 5,760 and that was good for over $2,000/contract – it doesn't always have to be oil, you know!

    /TF short below 1,415 is the percentage play to make ahead of the BOE, assuming the Dollar bounces- tight stops above, I have to keep saying.

    Oh, I guess /DX long at 96.70 is good too!

    EU just fined GOOGL $2.7Bn for anti-trust violations.  It's not because they monopolize search but because they use that monopoly to send people to their own services over others (ie, they cheat/lie to you).  This will be interesting.  

    And here's a great article for history buffs:  "For the love of Zeus, stop misusing Thucydides"  - Great example of how you have to be critical of information – even the citations that are used to verify the information you're verifying.  

    • The White House says it has evidence that Syria is preparing to launch another chemical attack and warned that it will "pay a heavy price" for doing so.
    • In April, U.S. forces fired 59 Tomahawk missiles (NYSE:RTN) at a Syrian air base that was linked to a chemical-weapons attack in Idlib province that killed more than 80 people.

    Crisis in Brazil deepens

    • The country's attorney general has formally accused President Michel Temer of corruption, making him the first sitting president to face criminal charges.
    • While the alleged bribery scandal at meatpacker JBS (OTCQX:JBSAY) has spurred impeachment talk, it will definitely reduce the chances Temer can push through reforms needed for Brazil to rebound from its worst recession on record.

    Big week for the IPO market

    • The IPO market is expected to see more deals price this week than at any time over the past two years, as a strong stock market and the performance of new listings boosts confidence.
    • Investors that bought U.S.-listed IPOs priced in 2017 are so far reaping an average return of 12%, according to Renaissance Capital, whose exchange-traded fund IPO has returned over 22% YTD.

    CBO evaluates Senate health bill

    • The Senate Republican healthcare bill would result in 22M more people uninsured by the end of the coming decade, while reducing federal spending by $321B during that time, according to the Congressional Budget Office.
    • The figures, which were released just hours after GOP leaders revised the bill, complicates the path forward for the already-fraught legislation.
    • Is a vote before the July 4 recess still realistic?

     

    • A trade complaint asking the Trump administration to impose tariffs on solar panels could devastate the U.S. solar industry, wiping out two-thirds of systems forecast to be installed over the next five years, according to a report by GTM Research.
    • The case, filed by bankrupt panel manufacturer Suniva, would cause equipment prices to spike in the U.S. and prompt installations to fall to as low as 25 GW during 2018-22, down from GTM’s current forecast of 72.5 GW, the report says.
    • The biggest impact of tariffs likely would be felt by large-scale unity solar farms, which compete as an alternative to natural gas, while residential rooftop installations would take a lesser hit, GTM says.

    Big oils can survive at $40 but need $60 to thrive, BMO says

    • Global oil majors including Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), Total (NYSE:TOT) and Royal Dutch Shell (RDS.ARDS.B) can survive in a $40-$50/bbl oil price range but they really need oil above $60 to thrive, according to analysts at BMO Capital.
    • The analysts say that at $40 oil, the group's operating cash flows fail to cover current capex and dividend expectations, even with the aid of scrip, whereas at greater than $50/bbl, the majors should on aggregate be able to match full cash outflows
    • BMO sees only XOM able to cover its full cash dividend at ~$50/bbl in 2017, although the others should be able to organically cover their dividends at $50-$55 with the aid of financial levers such as scrip dividends, project deferrals (for re-engineering), further cost reductions and efficiency gains.
    • General Electric (GE +0.2%) has been a longtime underperformer vs. the S&P 500 and has taken a 13% drubbing YTD, but Barclays analyst Scott Davis makes the stock his new Top Pick, replacing Honeywell (HON +0.4%), as he sees Ge earnings forecasts as too low.
    • Barclays believes the naming of John Flannery as the new CEO, "combined with a bottom-quartile valuation, significant cost-out program, better cash generation, accretion from BHI, and a top-decile dividend yield continue to make GE one of the most compelling stories in our universe."
    • GE's detractors point to an unrealistic earnings ramp through 2018 and weak free cash flow generation, but the firm thinks GE's cash deficit is "largely explainable given structural changes in the business and cyclical headwinds from new product introductions."

    California to list Monsanto's glyphosate as causing cancer

    • California's environmental regulator says it will add glyphosate, the active ingredient in Monsanto's (NYSE:MON) popular Roundup weed killer, to the state's list of chemicals known to cause cancer, effective July 7.
    • The agency says the designation under California's Proposition 65 state law will proceed following an unsuccessful attempt by the company to block the listing in trial court.
    • MON calls the state's action "unwarranted on the basis of science and the law," and has appealed the trial court's decision as it plans to continue its legal challenge.

    Best Buy looks to ride smart home products wave

    • Piper Jaffray analyst Peter Keith thinks Best Buy (BBY +2.1%) is in a good position to benefit from the smart products home trend. Key snippets from the firm's note are posted below.
    • "While Home Depot and Lowe's will participate in Smart Home product adoption, BBY's smaller revenue base provides greater leverage to the cycle."
    • "Additionally, BBY can sell products to strengthen wifi signals throughout homes as consumers add more and more connected devices. Further, BBY recently introduced Best Buy Smart Home by Vivint to provide increased home security and monitoring capabilities. BBY is also remodeling the Smart Home area at the front of the store to expand the product assortment. Finally, the "Connected Home" category has been called out as a key comp driver for each of the last 3 quarters."
    • The suite of "smart" home products offered by the company includes locks, cameras, lights, thermostats and nursery items (BBY Q1 earnings call transcript).

    Blockchain moves into mainstream finance

    • Meet the "Digital Trade Chain Consortium."
    • IBM is building a blockchain-based platform for seven big European banks that will simplify finance transactions for small- and medium-sized businesses.
    • The project, which aims to be up-and-running by the end of the year, will mark one of the first real-world use cases of blockchain technology for financial institutions.

    'Transformers' opens softly for franchise but tops box office

    • Transformers: The Last Knight took over for Cars 3 atop the box office charts over the weekend, but with a Transformers franchise-low opening.
    • The latest Transformers picture from Paramount (VIA +2.7%VIAB +2.9%) drew $44.7M to lead comers, including Wonder Woman (TWX +0.1%), which held its No. 2 spot with $24.9M. Cars 3 (DIS +1.2%) lagged that only slightly, with $24.1M.
    • Wonder Woman is lifting the DC Comics Universe as it plugs away: Now at $318.1M in domestic grosses, it's hit $653.9M on a worldwide basis in four weeks of release.
    • Cars 3 drew just under $100M cumulative domestic in its second week, and added another $11.9M from 26 international markets to bring its global cumulative total to $141.3M.

  61. Here’s what I learned: Republican institutions don’t protect against tyranny when powerful people start defying political norms. And tyranny, when it comes, can flourish even while maintaining a republican facade…

    BuTDiopIAAAMbYF

    Good article on Bitcoin:

    The popularity of trading Bitcoin has now reached the point where none other than the New York Times sees fit to declare cryptocurrencies, or more specifically initial coin offerings, “The Easiest Path To Riches On The Web.” Not to be left out, CNBC this past week published a brief tutorial on trading crypto with your smartphone and MarketWatch featured a teenage bitcoin millionaire who now forecasts a $1 million price target.

    These are exactly the sorts of headlines and stories that characterize a speculative mania otherwise known as a “bubble.” For anyone who was around during the dotcom mania this should quickly bring back memories of all the folks who flocked to day-trading tech stocks. But to really understand the mania, you need to look no further than the primary argument in buying crypto in the first place. Investors here claim the value comes from the limited supply. The trouble is there is an unlimited number of types of coins that can be created!


  62. Europe used to view the US positively — that's changed under Trump

    Bank of England raises UK banks' capital requirements by 11.4 billion pounds


  63. Phil saw someone on Bloomberg a few minutes ago who pronounced the dollar rally over and said he did not expect to see it go up from here now. I don't recall his reasons or who it was, so not much good info here. 

    What does the BOE news today tell us if anything? Some seem to be calling it a stealth rate increase, again on Bloomberg, so I am curious what you think it means and does it affect our markets at all today?


  64. London/Torquio – I'd like to but we'll have to play it by ear as I have family there and they are making plans out of my control.  I'll be in town on the 5th but only there (4 Seasons – Trinity Square) until Friday, when we're off to Bournemouth Saturday (more relatives) and then back on Tuesday for the following week, where I'll be working most market hours while the kids hang with the cousins. 

    As we're coming into London from Paris on the 5th, that's a bad day to do anything but the 6th is the day I will most likely be in the Hotel for dinner – probably the best times to meet with whoever is interested.  

    TGT/Mike – Thanks.  

    Wage Study/Scott – Seems straightforward but:

    But experts on the minimum wage questioned the methods of the University of Washington researchers.

    Most seriously, skeptics argue that the researchers confused the effects of a minimum-wage increase with the effects of a hot labor market. During a boom, which Seattle has experienced in recent years, employers bid up wages, effectively replacing low-wage jobs with higher-paying ones.

    Under such a scenario, one would expect to see a decline in the overall number of hours worked in low-wage jobs. In their place would be a significant increase in hours worked at somewhat higher-paying jobs.

    Also not taken into account when you look at gross wages is the fact that some people work several minimum wage jobs (ie, slavery) because they can't cover rent with one or even two and getting a raise to $15/hr allows them to cut back their hours to something humans can live with.   The underlying assumption is that people wanted all the hours they worked – take that away and their conclusion has no point.  

    Also, you would think Conservatives would tout this as a victory as it means they are paying net less money to their employees – so why are they still complaining and looking to roll it back?   See – hard to have it both ways.

    And what MrM said!  

    Dollar/Craigs – BOE is maybe 4% of the Dollar in relative size, they can call it whatever they want but it's not going to matter if ECB doesn't change.