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Which Way Wednesday – G20 Time!

What a crazy vacation day. 

At Monday's close the Nasdaq went wild as a computer "glitch" sent the price of many stocks to $123.47 per share which, in the case of Amazon (AMZN) was a 87% drop, which briefly made us a LOT of money as AMZN is one of our hedges in our Short-Term Portfolio, along with our general hedge on the Nasdaq, using the Ultra-Short ETF (SQQQ).  

We were also long on Microsoft (MSFT), which went UP to $123.47, valuing the company suddenly at about $1Tn on the 100% instant gain.  The Nasdaq says the glitch was the result of "improper use of test data" but, of course, if they were hacked, they certainly wouldn't tell you, would they?

In other testing news, North Korea fired a nuclear-capable missile that, in theory, could reach Alaska and that will be used to justify another $50Bn in military spending in order to protect a state we bought for $7.2M and gave us Sarah Palin – I say let Kim Jong Un have it!  North Korea will certainly be a big topic of discussion at this week's G20 meeting but it's really the Trump and Putin show we have to look forward to.

In other bombshells, the Chinese Government is reigning in some of that free money and is asking for $11.5Bn back from Corporations by the end of next year, which is just a drop in the $162Bn bucket that Chinese companies have been usuing for M&A transactions around the World and it's an indication that the PBOC feels they have begun to overpay for these transactions and this is a "nice" way to review the quality of these loans.

ChinaMA_inline  

“We anticipate that yield levels for bonds from companies like HNA, Dalian Wanda and Fosun could rise in the near term,” said Anne Zhang, executive director for fixed income, currencies and commodities at JPMorgan Private Bank in Asia. “For now, we are advising investors to take a cautious view on those companies’ bonds and we are waiting for the dust to settle before taking further actions.”

The new debt has ballooned the firms’ balance sheets. A local bond market rout that began at the end of last year means the cost to refinance some of those liabilities has risen. Add to that the uncertainty of rising regulatory risks, and some investors are getting cold feet.  The companies’ high leverage is a key concern, according to Christopher Lee, managing director of corporate ratings at S&P Global Ratings.

There are many signs around the globe that indicate caution but we are well-hedged and our play this morning in our Live Member Chat Room was to go LONG on the Nasdaq Futures (/NQ) at 5,775, expecting at least a weak bounce (and a $500 profit) to 5,600 and maybe a strong ($1,000) bounce to 5,625 because we're still in a low-volume environment, so we're not expecting any major selling just yet.

The Nasdaq remains our primary hedge, of course, this is sort of a hedge on the hedge, which has made good money as the Nasdaq corrected from 5,900 (down 5%) and that's all the more reason to expect at least a bounce back to 5,650 (the 5% Rule™ kicks in).  

 


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  1. Phil – “The new debt has ballooned the firms’ balance sheets. A local bond market rout that began at the end of last year means the cost to refinance some of those liabilities has risen. Add to that the uncertainty of rising regulatory risks, and some investors are getting cold feet. The companies’ high leverage is a key concern, according to Christopher Lee, managing director of corporate ratings at S&P Global Ratings.”

    I suppose Lee said that this could affect cash flow and profits as such? http://i.telegraph.co.uk/multimedia/archive/03337/Christopher-Lee--p_3337836b.jpg


  2. High flying Nasdaq getting a dose of reality!


  3. Good morning, all!

    Just a reminder we will not be having our regularly scheduled webinar today, but we be back on schedule next week.


  4. Top global brand – pretty much a USA show there:

    http://ritholtz.com/2017/07/top-global-brands-2017/

    screen-shot-2017-07-05-at-6-43-34-am


  5. Good Morning.


  6. FU FTR!!!!


  7. NDX slammed its head into 5625, taking a breather at 5610.


  8. Well will you look at TSLA. Thanks GS!


  9. /CL July 4th broached 50% retrace level ($47.13) with a high at $47.29, since pulling back to $46.02 and trying to reload. 


  10. I am surprised that 'Trump' is not in the list StJean … I thought he had the best brands.


  11. malsg – "I am surprised that 'Trump' is not in the list StJean … I thought he had the best brands."

    You are correct as Trump is in a class by himself.  Absolutely and unequivocally, with reference to unadulterated bull shit and the ability to spew it, Trump is a world class "leader" and Out. 


  12. malsg/Trump —- The Trump brand of course has suffered tremendously since his coronation.  The Trump Tower in Toronto went bankrupt, in part, because of the name.  They have since chiseled off the T leaving the signage as " Rump Tower – Entrance in the Rear"


  13. LOL CDN!


  14. Labatt Blues – hilarious, you could say they have taken a probative entry position and are now tapping new depths.

    StJL – Drone – feelin the love, keep your eyes peeled to the sky, it could be a name brand, DJI, Yuneec, Parrot, Syma, 3DR or military grade.


  15. Any thoughts on /NGV7?   Screaming buy or too much pain ahead?


  16. Drone / Naybob – I think that they had a couple of drone companies on that list of top businesses yesterday. I would not be surprised to see AMZN make some investments soon.


  17. This is so funny:

    http://talkingpointsmemo.com/livewire/indiana-gop-obamacare-horror-stories-post-backfires

    The Indiana Republican Party on Monday asked Facebook users to send in their “horror stories” about Obamacare in a post that readers instead flooded with stories about the legislation’s positive effects.

    Go read the post – it's 99% of people who have beaten illnesses because of Obamacare! And who will have the freedom to be sick if this GOP bill passes.


  18. Phil, anyone:

    /NGV7 at new 30 day low; Any PSW buyers at this price point?


  19. Jasu1 ;

    Gas has  a cyclical low in hottest months in N. Hemisphere I could feel ok buying lows but in next month contracts not front month.


  20. advill,

    The contract I am referring to is the Oct 2017 contract that Phil has been pounding the table with a buy point at $2.95, carefully though. Thanks for the input though!


  21. Good morning from London!

    Afternoon for me (4:30) and I've already had a full day taking the Eurostar from Paris.  Hotel is nice and I plan to work until dinner so 1pm(ish) and then tomorrow and Friday should be pretty normal workdays for me. 

    Looks like the Nas did have  the bounce we expected, so now we'll see what sticks.  

    On the Big Chart, Nas has to get back to 5,800 before it's back on track and failing at 5,744 (the 20 dma) is not good.

    TSLA – Very nice!

    Oil fell off a cliff now that they're done gouging us for the weekend:

    /NG got clobbered too:

    Gotta let /NG find a bottom before jumping in (/NGV7 is the one I like).  

    I still like /SI if they get back over $16 and, if not, at $15.50 we'll try again.

    Funny/StJ – More like a tragedy in the making.  That's why they have those masks.

    Image result for comedy tragedy


  22. /CL – no short covering today going from $47.21 high to a $45.18 low. Where did all that money go? Look at the index most in the green, all others getting clubbed or flat, it's the NDX. Big surprise there and Out.


  23. Phil / WPM

    How is your premise on WPM holding up? Thanks


  24. From Briefing :

    ~~TSLA –  Target lowered to $180 from $190 at Goldman; on Monday Tesla reported Q2 deliveries below estimates as deliveries for the first half of 2017 came in at 47,100 at the low end of 47-50K guidance.


  25. Oil/Naybob – It was all for show, the usual pumping into July 4th to set high prices and rip off consumers over the holiday.  What's amazing is how fast it spiked up and down this year – shows how little real support there is for oil over $45.

    Keep in mind retrace of the run from $42 to $47 is $1 (weak) and $2 (strong) so losing $45 is very, very bad.

    NDX/Naybob – Not a surprise, see post above. 5% Rule in action.

    IMAX/Jabob – They are pounding that box office story.  Earnings will be interesting.

    WPM/Enfil – Got hammered with Silver but just more of an opportunity to grab them at the bottom of the channel:

    In the OOP, we are in the $15/25 bull call spread with the $17 short puts so we're right where we need to be at $19 with 18 months to go:

    Long Call 2019 18-JAN 15.00 CALL [WPM @ $19.28 $-0.07] 20 12/16/2016 (562) $11,300 $5.65 $0.13 n/a     $5.78 $-0.23 $250 2.2% $11,550
    Short Call 2019 18-JAN 25.00 CALL [WPM @ $19.28 $-0.07] -20 12/19/2016 (562) $-5,500 $2.75 $-0.97     $1.78 $-0.22 $1,940 35.3% $-3,560
    Short Put 2019 18-JAN 17.00 PUT [WPM @ $19.28 $-0.07] -10 12/19/2016 (562) $-4,150 $4.15 $-2.04     $2.11 $-0.01 $2,040 49.2% $-2,110

    TSLA/Albo – The July $335 calls are what we shorted (after rolling) in the STP – funny if we end up hitting it.   


  26. M--what a tease today ;-(

     

    GO JO!!!


  27. TCEHY/Stockbern – back to where I bought in… but still small holding.


  28. IMAX – might sell another couple puts here..


  29. Looking over my list of "boring" stocks…
    K is offering 3% dividend at this price
    O with 4.5%
    BCE with 4.8% dividend and skimming along just under last year's all time high

    BCE/Phil – have you looked at them before? Not much action for options with them.


  30. Speaking of Drones… AVAV has really shot up in last week. New orders come in with the release of the Obama drone kill report?


  31. Comment content omitted because it is too long.


  32. Boring/Scott – Lots of nice ones to pick up at the moment but option prices still suck with the low VIX.  O and K are both good stocks I would hate to add because it would be so difficult to search discussions!   BCE is yet another minitel but a very nice one to play long-term.

    • Said preconditions, according to the WSJ's Greg Ip: Full-strength labor market, frothy asset prices, tightening central banks, and a pervasive sense of calm. In other words, by definition, recessions need to start from a position of economic strength.
    • Timing, of course, is a far different matter. Unemployment fell as low as the current 4.3% in 1989 and 2006, and recessions hit about a year later. It also fell to that level in 1998, but the recession wasn't for another three years; in 1965, it took four years until the contraction.

    Crude oil -1.5% as Russia reportedly opposes deeper production cuts

    • U.S. crude oil -1.5% to $46.37/bbl, snapping eight straight sessions of gains, following reports suggesting that Russia will oppose any deeper supply cuts beyond the existing OPEC agreement, which was extended into 2018.
    • Russia wants to continue with the current deal and believes any further supply curbs would send the wrong message to the market, according to the report, which cites unnamed government officials.
    • Also, Reuters reports OPEC exports rose by 450K bbl/day in June from May and 1.9M vs. a year earlier, totaling 25.92M bbl/day.
    • Exxon Mobil (XOM -1.4%), Chevron (CVX -1.3%) and other energy companies are expressing concerns over a bill to toughen sanctions on Russia, arguing that it could shut down oil and gas projects around the world that involve Russian partners, WSJ reports.
    • The pushback could affect House passage of the legislation – aimed partly at punishing Russia for the country's efforts to interfere with last year’s U.S. presidential election – after the bill breezed through the Senate last month on a 98-2 vote.
    • XOM’s advocacy also presents a potential political problem for the Trump administration, which has been trying to avoid conflict of interest questions involving Secretary of State Tillerson, the company’s former CEO.
    • Exxon Mobil's (XOM -1.4%organic growth could be hurt by problems at the Groningen gas field it shares with Royal Dutch Shell, as production caps caused by rising earthquakes in the region eventually could even lead to a total shutdown, says Raymond James analyst Pavel Molchanov.
    • "An eventual field shutdown, which cannot be ruled out, would erase nearly all of Exxon’s organic growth through 2020," Molchanov writes, seeing little chance that the top Dutch administrative court will grant the oil companies' appeal against the most recent strict cuts.
    • For XOM, compliance would mean an incremental reduction of 72M cf/day from Q4, erasing 0.7% of the company’s gas volumes, and 0.3% of company-wide oil and gas volumes – more of a hit than might first appear, given the context of a company with a 1% targeted organic growth rate.
    • The government is not in favor of a total production halt, but the current policy essentially seems to amount to a controlled phase-out, the firm says; whether it occurs abruptly or gradually, a full shutdown – with the resulting loss of 2.9% of XOM’s production – "cannot be ruled out over the medium term."

    • Gazprom (OTCPK:OGZPY) will start supplying fuel to China through Siberia sooner than expected, beginning in December 2019, CEO Alexei Miller says following a meeting with China's CNPC (NYSE:PTR), without providing further details.
    • While the start date seems ambitious, analysts say the volume on the pipeline – which has a planned annual capacity of 38B cm – by the end of 2019 likely will be low and ramping up to full capacity will take some time since Russia needs to develop two new gas fields in order to fill it.
    • "Clearly this announcement is a big push to show the project is still alive," says Massimo Di Odoardo, VP of global gas and LNG research at Wood Mackenzie.

    • The Trump administration will propose that refiners use 15B gallons of renewable fuels next year, Bloomberg reports, matching the 2017 requirement set by the Obama administration and setting up a potential clash with oil refiners that pushed for a smaller quota.
    • Refiners say the ethanol requirement exceeds a 10% "blend wall” that can be easily blended into the fuel supply; The American Petroleum Institute had asked the EPA to set lower quotas that would reflect ~9.7% of projected gasoline demand.
    • Volvo's (OTCPK:GELYY) dramatically announced the end of its combustion engine era today, although it's expected to take a long time for the automaker to be a pure EV seller.
    • The long-term plan from Volvo is to transition to three fully electric cars from 2019 through 2021, although sales of older pre-2019 gasoline vehicles could extend out to 2025.
    • Volvo, which hopes to sell 1M electric or hybrid cars globally by 2025, is the only major automaker other than Tesla (NASDAQ:TSLA) to make the 100% EV commitment.
    • The Volvo announcement could have implications for Nvidia (NASDAQ:NVDA), which is an autonomous driving tech partner with the Swedish manufacturer.
    • Previously: Volvo to go all electric from 2019 (July 5)
    • The analyst community is buzzing after Tesla (NASDAQ:TSLA) posts Q2 deliveries of just over 22K and production of 25,708 vehicles. The company also said that it expects Model S and Model X deliveries in the second half of the year will top the tally from the first half of 2017.
    • Consumer Edge walks away from the latest development still confident that Tesla will top expectations. The firm thinks the narrative will shift to Model 3 buzz and reviews in short time. Shares are rated at Overweight and assigned a price target of $385.
    • Goldman Sachs moves to a price target of $180 on Tesla after adjusting its valuation for the automotive segment. "We remain sell rated on shares of TSLA where we see potential for downside as the Model 3 launch curve undershoots the company's production targets and as 2H17 margins likely disappoint," writes analyst David Tamberrino.
    • Cowen reiterates its Underperform rating on Tesla on its view the ramp is too aggressive.
    • KeyBanc splits it more down the middle, staying at Sector Weight with its expectation that investor expectations on profitability increase in 2018.
    • The average Tesla price target from Wall Street firms is now $308, off the 8 Buys, 10 Holds and 6 Sells on the books.
    • Sources: Bloomberg and CNBC.

      • TSLA -3.24% to $341.81.

    • CB&I (NYSE:CBI+2.1% premarket after winning a ~$200M contract by liquefied natural gas export company Venture Global for the engineering, procurement and construction of two LNG storage tanks for the Calcasieu Pass export facility in Louisiana.
    • Venture Global expects Calcasieu Pass to produce 10M metric tons/year of LNG supply; construction of the tanks is expected to begin in 2018.

    • Qatar's announced plan to raise liquefied natural gas production by 30% to 100M metric tons/year – equivalent to a third of current global supplies – within the next 5-7 years comes just after Iran signed a deal with Total (NYSE:TOT) and China's CNPC (NYSE:PTR) to produce gas from the South Pars field it shares with Qatar.
    • Bernstein analyst Neil Beveridge says Qatar's move to raise output "could be a response to Total restarting development work" on Iran's side of the gas reserves.
    • With low production costs and infrastructure already in place, Qatar is well placed to come out on top in an LNG price war, analysts say.
    • Energy consultancy Wood Mackenzie says Qatar's low cost LNG expansion is "pushing a lot of new projects out of the market" – the main producers challenged by the move are those who have yet to attract a final investment decision, especially in the U.S., where so far only Cheniere Energy (NYSEMKT:LNG) exports LNG but there are proposals with a total capacity of 150M metric tons/year.

    • Allegheny Tech (ATI -1.3%) and GE Aviation (GE -0.6%) are partnering on a new JV to develop a new meltless titanium alloy powder manufacturing technology.
    • The titanium alloy powders are being developed for use in additive manufacturing applications, including 3D printing.

  33. Retail traffic report hits mall names; Kimco down 5%

    • According to Bloomberg Intelligence analyst Poonam Goyal, retail traffic tumbled 8.1% in the week leading up to July 4.
    • Abercrombie & Fitch, Macy’s, J.C. Penney, Tailored Brands and Nordstrom reported slides in traffic and sales, says Goyal, noting those players are among the tenants of Kimco (KIM -5.2%) and General Growth Properties (GGP -3.1%).
    • Retail Properties (RPAI -3.2%), DDR (DDR -3.1%), Tanger Factor (SKT -3.3%), Kite Realty (KRG -3.1%), CBL & Associates (CBL -2.8%), Weingarten Realty (WRI -3.4%), PREIT (PEI-3.5%), Simon Property (SPG -3%), Macerich (MAC -2.8%)
    • Malibu Boats (MBUU -0.5%) announces that it launched new websites for both the Malibu and Axis brands which feature a "Build-A-Boat" configurator.
    • "Our new websites bring the sleek feel of Malibu technology to users' screens," says Malibu CEO Jack Springer.
    • Source: Press Release
    • Shares of Malibu Boats are up 40% YTD.

    Argus hikes estimates on Constellation Brands

    • Argus lifts its price target on Constellation Brands (STZ +1%) to $220 from $196 after taking in the company's strong earnings report.
    • Analyst John Satszak says Constellation's better-than-expected operating margin was driven by strong beer volume and a more favorable product mix. Looking ahead, the investment firm expects Constellation sales and earnings growth at to be driven by new products, new packaging, and line extensions.
    • Argus on STZ numbers: "For FY18, we estimate revenue of $7.8 billion, above the consensus estimate of $7.64 billion. Based on our expectations for greater-than-expected cost synergies from the Ballast Point acquisition and management's guidance, we are raising our FY18 EPS estimate from $7.90 to $8.30. For FY19, we are raising our estimate from $8.50 to $9.00."
    • Source: Analyst note

    Celgene up nearly 2% as Barron's stays bullish; Leerink notes catalysts

    • Celgene's (CELG +1.9%) up 32% since he turned bullish, but Barron's Jack Hough says it could rally another 20% thanks to a pipeline to help diversity away from Revlimid.
    • One of those drugs is the MS-treatment ozanimod, and the team at Leerink - which recently upgraded Celgene – expects it to be one of the stock's bigger catalysts.
    • "Ozanimod faces competition from multiple other second generation S1P’s, but so far has the lower rates of atrioventricular block and bradycardia, and therefore the best chance of a differentiated label to justify branded drug pricing and support significant share gains in multiple sclerosis (and inflammatory bowel diseases). "
    • Rite Aid (RAD -3.2%) and Fred's (FRED -5.7%) come off the holiday break with another swing lower.
    • Both stocks etched out new 52-week lows in trading earlier as investors continue to reset expectations to the reworked Walgreens-Rite Aid deal.
    • Previously: Rite Aid looks to next phase (June 30)

    Intel loses some CPU market to AMD, cuts 140 jobs due to IoT closures

    • The PassMark benchmarking utility shows Advanced Micro Devices (NASDAQ:AMD) CPU gaining some market share from competitor Intel (NASDAQ:INTC) , according to ZDNet.
    • At the end of last year, 17.8% of PassMark testing completed on AMD CPUs, which was down 3% from the beginning of the year. But the number has now jumped to 26.2%. 
    • AMD CPUs still only have two spots on the PassMark CPU Popularity list with AMD Ryzen 5 1600 coming in fifth and AMD FX-8350 Eight-Core in ninth place.
    • Meanwhile, Intel has cut nearly 140 jobs related to the company’s IoT product cuts.   
    • Intel shares are up 1.08%.
    • AMD shares are up 5.42%.    
    • Previously: Intel cancels three IoT products (June 21)

    Odeon analyst sees Micron production disruption as positive

    • Odeon analyst Jahanara Nissar is positive on Micron Technology (NASDAQ:MU) because the potential production issues at the Taiwan facility could turn into a benefit by driving prices up due to supply limits. 
    • Nissar notes that Samsung has informed customers about a potential price hike and that pricing already grew over 30% in the past few quarters.
    • Source: StreetInsider 
    • Micron Technology shares are up 3.95%.    
    • Previously: Micron denies report of significant production interruption (July 5)

    Charter hires new emerging-technology exec

    • As it looks into offering streaming live television and getting into wireless service, Charter Communications (CHTR +1.3%) is shoring up its executive ranks with a new engineering lead.
    • Andrew Ip has joined as senior VP, Emerging Technology and Innovation. He's charged with introducing, developing and commercializing new technology as the company enters new marketplaces.
    • Ip was most recently senior VP and managing director at Madison Square Garden Ventures after nearly five years at Cablevision
    • Morgan Stanley has dinged China's top telecom, China Mobile (CHL -1.9%), with a two-notch downgrade and cut it from its Asia Pacific ex-Japan telecom portfolio, where it made up 10%.
    • China Unicom (CHU -6.9%) fell out of favor as well as MS sees a heavy 5G spending cycle ramping up beginning in 2019 with a peak cycle in 2020-2023. China Telecom (CHA -0.8%) remains in that portfolio as the only China stock.
    • "This is a painful journey for CM," the firm says, "considering: (a) higher capex for nationwide coverage using high spectrum bands (3-6GHz)
    • It's cutting 2018-2019 EPS estimates by 3-5%, now 5-7% below consensus.
    • Alongside cutting China Mobile and China Unicom from that ex-Japan AP telecom portfolio, it's reduced China's weighting overall (to 15% from 40%) with those moves, leaving China Telecom behind and adding India's Bharti and Indonesia's XL Axiata.
    • Baidu (NASDAQ:BIDUannounces over 50 partners have now joined the Project Apollo self-driving car initiative and calls Apollo “the ‘Android’ of the autonomous driving industry, but more open and more powerful.”
    • Partners include vehicle manufacturers such as Chery, Daimler, and Ford and component providers like Nvidia and Microsoft.
    • Meanwhile, Baidu and navigation software company TomTom announce a new partnership for self-driving car digital maps. No terms were disclosed.
    • Baidu shares are up 2.73%.
    • Previously: Nvidia, Baidu announce new AI partnership (July 5)
    • Amazon (NASDAQ:AMZNoffers early Prime Day access for customers shopping through Echo devices using the Alexa voice assistant.
    • Prime Day officially kicks off at 9 pm on July 10 but Echo owners can start shopping special offers today. 
    • According to a DealNews.com survey, more than half of shoppers don’t want to shop using Alexa due to concerns the voice assistant won’t get the order right. 
    • Customer confidence might improve with the launching Echo Show, which has a screen to display the order details before confirmation. 
    • Previously: Amazon Prime Day set for July 11 (June 29)
    • EU antitrust regulators seek expert advice while considering another antitrust fine against Alphabet (GOOGGOOGL), according to Reuters sources.
    • The regulators think Google’s Android operating system unfairly blocks out rivals by barring alternate versions of the OS and forcing manufacturers to pre-load Google Search and Chrome in order to access other apps from the company. 
    • The Commission will turn to a peer review panel to decide whether the antitrust case has merit and if the regulators should pursue a fine. 
    • Previously: EU slams Google with €2.4B fine (June 27)

  34. QRVO – took a knock back to daily 200ma, weekly 50ma… and has option activity.


  35. TER – hmm..


  36. BIIB/Phil – not at all time highs (unlike so much else). Been consolidating along here for a while. Anything to like about them for a new entry or better growth options with GILD, etc?


  37. Losers at the link…


  38. TXN – can try to sell Jan2018 $60 puts for $1.00  (sales today at .99).. 14% return on regular margin (26% annualized).



  39. Chart of the day: Oil Bear Rally about to turn Ugly


  40. Not surprisingly, a lot of losers in the oil exploration business…


  41. FOMC Minutes

    Participants noted that, with the process of normalization of the level of the federal funds rate continuing, it would likely become appropriate this year for the Committee to announce and implement a specific timetable for its program of reducing reinvestment of the Federal Reserve's securities holdings. Participants expressed a range of views about the appropriate timing of a change in reinvestment policy. 

    No specifics as to WHEN in the minutia. Later this year in one of the four meeting announcements or release of minutes, in other words…  and Out.


  42. hilarious Nat!!!


  43. BIIB/Scott – I used to like them as they were big on partnerships – spreading the risk.  Lost track of them as they got so big but still a very solid company.  I tend to stay away from $270 stocks as people get in trouble too fast but can't be helped these days.  I think BIIB is solid going forward and yes, I agree, reasonably priced.  

    As long as you REALLY want to own them, you can sell 5 of the 2019 $220 puts for $14.50 ($7,250) and buy 10 of the 2019 $250 ($57)/300 ($30) bull call spreads at $27 ($27,000) for net $19,750 on the $50,000 spread.  It's good but not great due to poor VIX but making $30,250 is 150% – not terrible either! 

    JPM/StJ – That's a good deal still.

    TXN/Scott – That's a good play.

    Fed/Naybob – Nothing exciting there but nothing to stop the rally – especially with volume so ridiculously low today.

    Date Open High Low Close Adj Close* Volume
    Jul 05, 2017 242.63 243.01 241.70 242.98 242.98 33,809,720
    Jul 03, 2017 242.88 243.38 242.21 242.21 242.21 39,147,200
    Jun 30, 2017 242.28 242.71 241.58 241.80 241.80 86,820,700
    Jun 29, 2017 243.66 243.72 239.96 241.35 241.35 103,933,000

  44. I'm off to dinner, will be on bright and early tomorrow!


  45. enjoy dinner Phil!!!


  46. Update on GS: I mentioned this idea on June 13th:

    "I like the following with GS currently at $224:

    Buy Jan 19 210/230 BCS for $11. Sell Sept 17 230 calls for $7.20. So net $3.80 on the $20 spread that is $14 ITM. You happily roll those calls until the cows come home. You could also sell the Sept 17 205 puts for $3.40, and then you have an insane combination which nets you into the spread for $0.40". 

    Since the option pricing seems to be insane on this combo, I added to my Jan 19 GS 210/230 BCS position (adding at $10.80) with GS now at $227 – so $17 ITM on a $20 spread. With the move up in GS, I pushed out the short call cover sale to the September $235 calls which I sold for $5.65. Did not want to push my luck with selling any puts (at the moment).


  47. slow day… so how about this?

    Huge Mystery Beam Shoots Down to Antarctica On MIMIC Map
    https://www.youtube.com/watch?v=ST1c2tXIB-U

    China recently built a deepwater port at Cameroon.. I wonder what all was installed…


  48. FU IMAX!!!!


  49. Phil I remember last week at inventory time you said something about this week's numbers being distorted by certain events , but as usual I can't find the post so I was hoping you could refresh us on what your thinking was regarding this week's inventory and the price action you expect . 


  50. I probably should have said oil inventory is what I was referring to , but I figured Phil being like the great Sherlock Holmes would deduce the subject of my query.


  51. Phil

    With the wipeout today in retail auto wonder if you have an opinion of GT at 8x's?


  52. Winston--I took your idea on the June GS spread – so as I understand you added to the same spread and sold the 235 Sept  rather than the 230 s am I correct? Thanks


  53. jabo — TSLA — nice!


  54. Winston/GS

    Are you selling an equal amount of Sept. calls (same as spread)?


  55. GS: Savi – yes, added to my existing Jan 19 210/230 BCS, and as GS had moved up in the last couple of weeks, I sold the September 235 call instead of the 230 call. DC / yes, I sold an equal number of September 235 calls as I bought the Jan 19 210/230 spread. 

    The rolling potential of the Sept 235 short calls is to the Jan 19 300 calls ($0.62 credit). For the Sept 230 short calls (the original idea) it is to the Jan 19 300 calls ($1.55 debit). With that kind of cushion I have no problem doing a full cover – but of course a more conservative approach would be to do a half cover of the short calls. 

    I am not selling the short puts because of CAUTION. So far that CAUTION has cost me an arm and a leg in lost premium generating opportunities. But better an old fool than a old, poor fool. But joking aside, my plan is that should the market correction, that has been so oft talked about, come about then I will follow the PSW principle of adjusting spreads when the price of the long option (in this case the GS Jan 19 210 long) declines to the price paid for the spread – i.e. $11.00. At that point, you sell out of the Jan 19 210 long call (thus preserving capital) and reestablish a new $20 wide strike BCS at the most favorable price point available when a support level has been found. The new, adjusted position would now be a spread with 1 x new $20 spread and 1 x Jan 19 $230 short calls. Obviously, any short covers would have expired worthless (because we are going to keep selling shorter dated (3 month out) calls throughout the life of the spread to reduce the cost basis.

    In the new scenario (i.e. after a market correction), if GS starts to move up, we judiciously start layering on additional long BCS to mitigate the impact of the original Jan 19 $230 short calls moving closer ITM.

    One critical point made much more eloquently by Phil (eons ago) was that we do not care excessively about the BCS. We are only using this to be able to sell more premium (i.e. the short calls and the short puts) in order to reduce the cost basis. Although we do care about the Jan 19 210 long calls, as mentioned above. Reducing that cost basis does not have to happen in month 1 after the original spread is established. You have the life of the spread to sell premium at strikes and expiration dates that fit your risk tolerance. One of my mistakes in the past was being too greedy and too impatient  by selling too much premium too soon. In order to get a zero cost Jan 19 BCS there are 18 months left until Jan 19 to sell that premium. Given the premium on offer, even at such low VIX levels, that seems doable.

    The maths can be looked at another way. The Jan 19 210/230 spread costs $11. You could do a full cover of the spread by selling the Jan 19 280 short calls for $10. With that perspective, selling short term puts takes on a different perspective – and of course selling short term calls would be pure greed. But if the view is that the market is toppy and will have difficulty sustaining a move 20% higher, then selling full covers at the maximum date (Jan 19) might make sense. 


  56. Scotty – Antarctica – A chunk of ice the size of Delaware and 600 ft deep is about to break off.


  57. Good morning!

    Markets have taken a small turn down but nothing alarming just yet.  Generally, we're failing at the same old lines.

    Asia Stocks Face Mixed Start as Fed Minutes Parsed. Stocks in Asia are headed for a mixed start as investors digested details from the Federal Reserve’s most recent meeting. Equity index futures in Japan and Hong Kong were flat, while contracts signaled gains for Australian shares. The S&P 500 Index posted small gains and technology shares boosted the Nasdaq 100. Oil recovered some losses after slumping toward $45 a barrel, snapping eight days of gains. Futures on the Nikkei 225 Stock Average were flat in Singapore trading. Contracts on Australia’s S&P/ASX 200 Index rose 0.4 percent.

     

    Fed Officials Ready to Start Shrinking Portfolio in MonthsJune meeting minutes show officials expect their balance-sheet reduction plans to have a limited impact on markets.

    Reading Between the Fed's Lines

    Trump suggests the pressure on China over North Korea may just be beginning

    Haley: US Will Use Military In North Korea "If It Must"

    China Bond Defaults Work Wonders in Introducing Pricing for RiskJust as global investors get a new channel to access China’s $9.8 trillion onshore bond market, it’s starting to look like one that they might recognize. Gone are the days when China’s corporate debt was all pretty much priced the same, with an implicit government backstop giving buyers little reason to demand higher returns from some borrowers over others. Things started changing in 2014, when the Communist Party leadership with little warning began to allow defaults. With a steady rise in delinquencies, investors are now distinguishing among issuers based on perceived credit quality.

     

    Demographic Shock Ground Zero: Japan's Population Drops At Fastest Pace On Record

    WTI Bounces On Biggest Crude Draw Since 2016

    U.S. Strategic Crude Reserves Shrink to Lowest Level Since 2005

    Energy Stocks Slammed Most In 4 Months, Nasdaq Bounces Despite "Worse Than Lehman" Bearish Bets

    Canada has twice as many vacant homes as the US did before the crash

     

    Fed Officials Ready to Start Shrinking Portfolio in MonthsJune meeting minutes show officials expect their balance-sheet reduction plans to have a limited impact on markets.

     

    Get Able-Bodied Americans off the CouchNearly 95 million people have removed themselves entirely from the job market.

    Volvo Gives Tesla a Shock, As Others Plan Electric PushVolvos, Jaguars, BMWs and Fords, among others, will offer a system that uses battery technology to comply with emissions rules.

     

    Battle for 261 Million Wallets Grips China's Online Shopping Giants. To foretell where JD.com Inc. is going to expand in Indonesia, follow the cell phone towers. Wider mobile coverage means more consumers starting to shop online, so the Chinese e-commerce company tracks their construction to decide where to market its web store and set up delivery centers. JD has four warehouses in the archipelago, with plans to build another three by the end of the year. Staffing has almost tripled to about 400 people in the past 12 months. Within five years, the Beijing-based company plans to have refrigerated trucks delivering fresh food and frozen goods to homes.


  58. GS/Winston – Another expensive stock that's reasonably priced.

    Beams/Scott – Wow man, what kind of stuff do you follow?  Here's a leading scientist who analyzed the data.  

    Oil/Craigs – Well the distortion is that this is a heavy driving weekend so it would be ridiculous not to see a draw in inventories either before or after the event.  You can't control WHEN people go to fill up their tanks but you can be pretty sure it will happen.  I imagine the constantly rising prices into the holiday probably had a lot of people put off filling their tank last week (week ending before Sunday) but this week, which measures through this Saturday night is more likely to have captured an uptick in "demand" and that, of course, will be blown out of proportion by oil manipulators – just like this idiotic headline:

    U.S. Strategic Crude Reserves Shrink to Lowest Level Since 2005

    You KNOW that has nothing at all to do with demand for oil – simply Trump's decision to sell it.  What is important though is that they've been selling about 1Mb/week so that, in turn, has made inventory builds look worse than they are for the last 3 months.

    Anyway, so last week we did not have a big draw so more likely we have one this week and we'll find out later.  Of course oil is bouncy off $45 – we'll just have to see how much:

    GT/Kapella – I like GT when they are cheap because they may go down a bit when auto sales go down but, if people don't buy new cars, then their old cars need tires (who hasn't put off buying a new car and bought tires for the old car as a consolation?) and retail customers pay much more for tires than the auto companies do.   GT is actually not a bad butterfly stock – as they never really go anywhere but very violent on the way to nowhere.  $35 isn't actually very low in the grand channel, which goes down to $25 and tops out at about $36 so there's no compelling reason to get in but a great add to the Watch List.  

    Because of the violent action, you can sell 2019 $30 puts for $2.65, which is a net $27.35 entry – that's not a terrible way to start but the Delta is 0.27 so you'll be down 50% if GT drops $5, which is likely to happen eventually if you are more patient and the auto news continues to be weak.

    Speaking of weak though – UK economy is stronger than France from what I see.  In fact, US seems to be doing the worst at recovering so far as construction here is booming, stores are full, restaurants are full, people are shopping.  Perhaps a bit distorted by Summer travelers but both London and Paris are doing far better than New York from what I'm observing.

    TSLA down sharply again in the futures – looking like $318!


    I know it's painful but this is why I don't mind taking those small short call/bear put spread plays where we can roll ourselves out of trouble.  As long as you have the ability to ride it out (and you're not wrong about the price being too high to last) you eventually get your payday.  

    Great summary Winston.

    Ice/Naybob – Double plus ungood!

    But the thing about ice shelves is that they function like corks. They’re bottling up a much larger amount ice that’s on the ground, on the land in this case behind them. And when — that’s the glaciers that are carrying ice from the interior of Antarctica towards the sea. The ice shelves are really just sort of the floating ends of the glaciers. And so, when that flow increases, more ice is falling into the sea and raising sea level.

    Basically, it’s been an acceleration by several times. All over Antarctica, the loss of ice from the floating ice shelves has increased by a factor of 12 in the past two decades. So where in the mid ‘90s, they were losing six billion tons of ice. Now, they are losing 74.

    I guess Trump is going for 1,000!  Better stock up on swimwear…