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Trade War Tuesday – Trump “Probes” China, A Welcome Distraction

Related image1, 2, 3, 4 – I declare a trade war!  

Those of you who are students of economic history know that nothing is more damaging to an economy than a trade war and those of you who don't know enough history to believe there are "alternate facts" aren't worth trying to convince, so I won't waste time here.  Our President, of course, is not one to let facts get in the way of a rash decision and Trump is proposing special taxes on Chinese imports, starting with aluminum but actually, this is a sneaky way to stop the flow of cheap solar cells into the US to boost Trump's beloved coal industry (and the Koch Brothers).  

It is not unusual for the U.S. to punish businesses it deems to be “cheating” on global trade rules, and one should not be too quick to judge any specific punitive measure taken. But the fear is that we are now on a slippery slope toward a trade war, as China is certain to respond by taxing U.S. sales of goods in China.

All of this trade talk ignores the basic fact that China is our factory floor, the way the midwestern cities once were in the mid-20th century.  They were dirty and polluted and the kind of jobs people had were not the kind of jobs people actually wanted, which is why the people in the Northeast were thrilled to export those jobs and the pollution out west.  As the US developed and as World Trade became more efficient, we exported the jobs and factories all the way to Asia and China became the new Japan (who were our factory in the 70s) and now China is pushing those jobs and factories to Africa because, in the end – NOBODY ACTUALLY WANTS THEM!

Image result for iphone assembly lineAssembling IPhones is not a dream job but those are on the high end of of what we have exported overseas.  I'm going to focus on the IPhone so I can explain to you what an idiot our President is, without making it too complex.  

 Though the IPhone is an American product, it's assembled in China and those IPhones are counted as Chinese exports.  This is not China doing anything bad to us, we ASKED them to make the phones for us and they do -  200M a year at an average price of $700 (not including accessories made in China or IPads or MacBooks).  That's $140 BILLION of "Chinese Exports" to the US or roughly 1/2 of our "trade deficit" accounted for by a single product and, as I said, if you include all things Apple, well over $200Bn right there.  

So, if we bring back the IPhone, we decrease China's exports by $140Bn and increase our exports (though not all to China) by $140Bn and the problem is solved, right?  Well, aside from the pollution, we have the issue of wages.  IPhone workers in China make about $750 a month, which sounds like $4 an hour but more like $3, because they work more hours than we do (2 12-hour shifts).  So it takes the average IPhone assembler a month's salary to buy one of the thousands of phones they assemble each month.  

Wages are roughly 30% of the price of an IPhone or $210 and we're talking about essentially tripling them so +$420 per IPhone is a 60% increase in the overall cost of the phone.  That extra $84Bn will be paid by you, the IPhone user, for the privilege of knowing that the deadly toxic run-off from the manufacturing process will be polluting American rivers and not Chinese ones.  America is going to be so great!  

Image result for robot assembly line animated gifWill we create some US jobs?  Sure, some crappy ones but it won't be 3.36M jobs, which is how many $25,000 jobs $84Bn pays for.  So why doesn't Apple (AAPL) just charge $420 more for the phones made in China and use that money to build clean energy factories in the US or put 3.3M people a year through college (15% of all students), so they will be able to compete in the future economy – rather than clinging to the World's last manufacturing jobs before they are wiped out by machines.  

And remember, there aren't 3.3M people assembling 200M IPhones, it's not even 100,000 so it's costing you, the consumer, over $840,000 for each $25,000 job President Trump wants to force back to America – that's just stupid!  Meanwhile, if you back out those factory orders from China's exports, we have a massive trade surplus with China, who buy tons of US goods and that's money that flows into many companies that really need the money (see above chart).  Even AAPL makes 22% of their Global sales in China and, if China retailiates with their own tarrifs, we're talking devastation for US retailers across the board.  

While the rah, rah, anti-China rhetoric plays well at Trump rallies – it sucks as a policy.  Something Obama learned early on in his own administration:  

Meanwhile, talk of trade war is strengthening the Dollar, which may even break back over 94 today and that unintended consequence of sabre-rattling is not good for the markets so we took advantage this morning and put in those short orders on the Futures in our Live Member Chat Room at Dow (/YM) 22,000, S&P (/ES) 2,470, Nasdaq (/NQ) 5,925 and Russell (/TF) 1,400.  As usual, we wait for two of them to cross under than then short one of the laggards with VERY TIGHT STOPS – because this market be CRAZY!  

Speaking of crazy, quite the brouhaha down in Charlottesville this weekend and yes, Trump did finally condemn the actions of the fascist right-wingers – so thanks for that – but, to those of you who don't understand what the big deal is to us "lefties" – you really need to watch yesterday's coverage of the rally, including the car attack, that was on Vice last night.  How long would it take you to condemn these people?

This is what's going on in our country folks.  This is the violence that's about to erupt in any American city at any moment because people are very angry on both sides and we don't have any leaders who are bringing us togehter – they are simply fanning the flames and making very poor examples of themselves in the process. 

This is why Bitcoin is hitting $4,400, nearly a double in a month and those GreenCoins I told you about last month are now up 500% at 0.0017 with over $5M in market cap already (you're welcome!) - definitely our Currency of the Year and PSW will soon be accepting GreenCoin as payment, which should build up the volume quite nicely.  Here's a link to my original article explaing the currency and why we think it will be a breakout Cryptocurrency star.  As noted by InvestFeed's Ron Chernesky:

“We’re seeing investors transferring their funds into cryptocurrencies as they try to diversify their risk in case of a severe downturn in the market. The space has gone from niche to more widely adopted with one of the main draws being that cryptocurrencies are seen as less correlated with other assets.”

bitcoin-moon.jpgWe're excited about this new market, a new safe haven asset in times of turmoil and, by gaining expertise early in the adoption cycle, we at PSW will be able to take advantage of new products and trading vehicles as they come out.  That's why I would encourage you to put some fun money to work in Crytocurrencies – just so you can educate yourself so that, down the road, you'll be educated, practiced and ready when they begin to become serious investment vehicles.  

Right now, no one has more of a ground floor entry into Cryptocurrency than you do.  This is the birth of a new asset class and you're right there – don't let it pass you by!  

 


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  1. GBTC – Speaking of bitcoin, GBTC is up 20% in the pre-market.


  2. Good Morning.



  3. Looks like some CEOs are finally gathering some courage… Under Armour, Intel. 20 to go!


  4. stjean, at this point, I think that was the last bit of testosterone to leave the room…. :(


  5. ~~DKS – Dick's Sporting Goods misses by $0.04, reports revs in-line; guides Q3 below consensus; lowers FY18 well below consensus.  

    From Briefing :

    TrendTracker: Really ugly report from Dick's (DKS)…  (34.91)

    DKS mgmt looks pretty foolish because analysts have been much more cautious than mgmt in recent quarters while co has bought back shares and continues to expand its footprint (co bought back 3.4 mln shares at $41.56 and opened 13 stores during Q2). More evidence that you don't want to hold retailers for more than a few days or weeks and not through earnings.


  6. Good morning!  

    I've got 5 short /TF, always my favorite.  1,395.30 is my avg.  Other than that, just seeing how things shake out.  

    Big Chart – Big bounces all around, not really bearish again until we lose some of those lines we just tested.  

    CEOs/StJ – Soon it will be an embarrassment to be on the President's council.  

    DKS/Albo – It's especially bad as their main competitor went BK so this is without competition.  Sports equipment is too discretionary and discretionary spending is in deflationary mode right now.   

    Consumer Spending Expectations Down Again: Dear Fed, Why Don't You Believe Your Own Survey

    Wheee on /TF already!  


  7. And stopped out with a quick $1,200 profit. 


  8. /YM is the fresh horse, just coming off 22,000 and that's an easy stop line.  


  9. Comment content omitted because it is too long.


    • Beijing will take action to defend its interests if Washington damages trade ties, the Ministry of Commerce declared, after President Trump authorized an inquiry into China's alleged theft of intellectual property.
    • "This is just the beginning," he said, while signing the memorandum. Trump administration officials have estimated that theft of intellectual property by China could be worth as much as $600B.

    • Germany's economic growth lost a little pace in Q2, but accelerated its best year on year rate since 2014 on strong household spending, rising state expenditure and higher company investments.
    • A first estimate of GDP rose by 0.6% quarterly pace in the three months to June, meaning the performance of the eurozone’s largest economy grew in line with bloc's average during the quarter.
    • August Empire State Survey+15.4 to 25.2 vs. 10 expected, 9.8 prior.
    • New Orders 20.6 vs. 13.3.
    • Shipments 12.4 vs. 10.5
    • Number of Employees 6.2 vs. 3.9
    • Long-term Treasury yields have already been on the rise this week as markets move past North Korea-related tensions.
    • Yields are moving higher still after July retail sales - both headline, and ex-autos and gas – topped expectations.
    • The 10-year Treasury yield is up 5.5 basis points to 2.277%. TLT -0.95%TBT +1.9% premarket
    • July Retail Sales+0.6% M/M to $478.9B vs. +0.3% expected, -0.2% prior (revised).
    • Ex-autos: +0.5% M/M vs. +0.3% expected, -0.2% prior
    • Ex-gas and autos: +0.5% M/M vs. +0.4% expected, -0.1% prior..
    • Control group +0.6% vs. +0.4% consensus., -0.1% prior.

    • Redbook Chain Store Sales+2.5% Y/Y vs. +2.7% last week.
    • Month-to-date sales up 2.6% through August 12.
    • August sales are expected to increase 3.1%.
    • Retail sales rose to their highest level since December during July as positive growth was seen in grocery stores, health/personal care stores, general merchandise stores, auto dealers and the food services category. The nonstore retailers category led the way with 1.8% M/M and 11.5% Y/Y growth, likely influenced heavily by the Amazon Prime Day event.
    • Flying under the radar was a notable adjustment in June sales to a 0.3% M/M gain from a 0.2% drop that raised some eyebrows at the time.
    • Retail sales rose 4.2% in July on a year-over-year comparison.
    • Keep an eye on Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) ahead of their earnings reports this week as the retail numbers are digested.
    • Previously: Retail Sales (Aug. 15)
    • Capital One (NYSE:COF) July credit card delinquencies rose to 3.81% from 3.63% a month earlier. Charge-offs rose to 4.79% from 4.76%.
    • Auto delinquencies rose to 5.76% from 5.4%. Auto charge-offs rose to 1.8% from 1.74%.
    • Barclays' Jason Goldberg calls the auto charge-off print way better than he expected, but the big rise in auto delinquencies was worse than hoped.

    BAML survey shows rising nervousness

    • The latest BAML fund manager survey shows just 33% expect corporate profits to improve over the next year – that's down a full 25 percentage points from January, and the lowest level since November 2015.
    • Those who think stock markets are overvalued rose to a record-high 46%.
    • BAML chief investment strategist Michael Hartnett: “Investors’ expectations of corporate profits have taken an ominous turn this year which is a warning sign for equities over bonds, high yield over investment grade, and cyclical sectors over defensive ones."
    • The survey results are likely to make a lot of news today, but the onus is on the bears – on one hand they say investor frothiness is ringing the bell for a market top, but on the other hand will point to this report's rising nervousness as signaling a downturn ahead

    EIA: Boom in U.S. shale output

    • A bigger thorn in OPEC's side? U.S. shale drillers will keep posting strong gains in August and September, with production from shale regions topping 6M barrels a day, according to the Department of Energy.
    • The total forecast figure has expanded to include the Anadarko region, a growing and prolific shale play that has the second-most operating rigs, at 129, after the Permian's 373.
    • via Ryan Dezember at the WSJ
    • The latest investment was last month, with Blackstone (NYSE:BX) agreeing to pay $1.57B for a 32.4% stake in the Rover Pipeline being built across Ohio. Added to other relatively recent moves, the P-E firm has put about $7B to work in drilling fields, pipelines, and a gas export terminal.
    • The size of the bet is comparable to the $10B Blackstone put into single-family rental homes following the real estate crash. Unlike with the homes though, the prospects for rising gas prices isn't that great. For Blackstone's part, it says the bulk of its gas investments are dependent on production volumes rising, not prices.
    • "It’s like picks and shovels for gold mining,” says David Foley, who heads Blackstone's energy investing. "We don’t really care about the gold price, we just need it to be sufficient that people continue to mine.”
    • Cheniere Energy (NYSEMKT:LNG) is setting up an office in Beijing to help it secure long-term supply deals with Chinese buyers, Reuters reports, making it the first operator of a U.S. liquefied natural gas export facility to establish a presence in the country.
    • Maggie Jia, senior marketing manager with Cheniere Asia who worked previously for Morgan Stanley and Mitsui, will relocate from Singapore to run the Beijing office, according to the report.
    • Cheniere already exports gas to more than 20 countries from its Sabine Pass export facility in Louisiana which began operating in 2016; China was the third-largest importer of U.S. LNG in 2016 but up until now has bought U.S. gas through spot deals, or from non-U.S. companies.
    • Rio Tinto (NYSE:RIO-1.8% premarket after RBC downgrades shares to Outperform from Top Pick; the stock drops as much as 2% in London trading.
    • RBC foresees a slowing Chinese property market and concerns on growth to increase following the Communist Party leadership conference in November, which "may weigh on sentiment, meaning an ‘iron ore’ fundamentals re-rating pushed out to later in 2018."
    • RBC remains positive on the sector and the iron ore market; the firm's Rio downgrade is reflective of an increasingly positive relative view on Anglo American (OTCPK:AAUKFOTCPK:AAUKY), where there is “a larger valuation disconnect,” and Glencore (OTCPK:GLCNFOTCPK:GLNCY), where there is “a dynamic growth story evolving.”
    • Rio's 8% total dividend yield "should underpin investment demand and continue to see Rio Tinto attract investor interest going forward," RBC writes.
    • An earnings miss and warning on industry headwinds from Advance Auto Parts (NYSE:AAP) hang over the auto parts sector today. Advance Auto Parts continues to see margin rates decrease amid a planned reduction in inventory. Shares of AAP are down 13.10% premarket to a multi-year low of $95.00.
    • AutoZone (NYSE:AZO) is down 3.16% in premarket trading, while O'Reilly Automotive (NASDAQ:ORLY) is 3.75% lower. Keep an eye on Monro Muffler (NASDAQ:MNRO), U.S. Auto Parts Network (NASDAQ:PRTS), Genuine Parts Company (NYSE:GPC) and LKQ (NASDAQ:LKQ) as well.
    • Previously: Advance Auto Parts misses by $0.09, revenue in-line (Aug. 15)

    Image result for because she's made of wood
    • The global push among automakers to make ever lighter vehicles, which is critical to bring electric cars into the mainstream, is leading some Japanese suppliers to turn to an unlikely substitute for steel: wood.
    • Denso (OTCPK:DNZOY), Toyota's (NYSE:TM) component maker, and DaikyoNishikawa (OTC:DKYOF), say cellulose nanofibers made from wood pulp weighs just one fifth of steel and can be five times stronger.


    • Wynn Resorts (NASDAQ:WYNN) moves higher after the casino stock catches the eyes of Deutsche Bank.
    • Analyst Carlo Santarelli points to the "mass ramp" at the Wynn Palace after a floor reconfiguration and thinks Q3 consensus estimates can be topped.
    • DB upgrades Wynn to a Buy rating and raises its price target to $150 from $138.
    • WYNN +2.52% premarket to $131.41 vs. a 52-week trading range of $82.51 to $139.67.

    • The sports apparel sector is setting up to have a down day as investors digest weak earnings and guidance from Dick's. The retailer also fired a warning shot across the industry by saying that it will be aggressively promotional for the balance of the year.
    • Premarket decliners: Foot Locker (NYSE:FL-3.59%, Big 5 Sporting Goods (NASDAQ:BGFV-3.39%. Hibbett Sports (NASDAQ:HIBB-3.23%. Cabela's (NYSE:CAB-0.55%. Nike (NYSE:NKE-1.72%. Under Armour (NYSE:UAA-2.55%.

    • Dick's Sporting Goods (NYSE:DKS) reports comparable sales edged up 0.1% in Q2 to miss the consensus estimate for a 1.8% rise.
    • E-commerce sales as a percentage of total sales rose 70 bps Y/Y to 9.2%.
    • Loooking ahead, Dick's sees FY17 EPS of $2.80 to $3.00 vs. $3.62 consensus. The retailer expects full-year same-store sales growth to be flat to lower at a low single digit rate.
    • "By design, we will be more promotional and increase our marketing efforts for the remainder of the year, as we will aggressively protect our market share," says CEO Edward Stack.
    • Previously: Dick's Sporting Goods misses by $0.05, misses on revenue (Aug. 15)
    • Shares of Dick's tumble 17.90% premarket to $28.66 (multi-year low) as the retailer's promotional stance worries investors.

    • Coach (NYSE:COH) reports North American comparable-store sales increased ~3% in Q4.
    • North American Coach brand sales fell 3.3% to $586M.
    • International Coach brand sales down 1.8% to $442M.
    • Gross margin rate squeezed 110 bps to 66.7%.
    • SG&A expense rate improved 180 bps to 50.9% for the quarter.
    • Adjusted operating margin rate grew 70 bps to 15.8%.
    • FY2018 Guidance: Revenue: $5.8B to $5.9B; Operating income: +22% to +25%; Interest expense: ~$90M; Tax rate: 25% to 26%; Diluted EPS: $2.35 to $2.4.
    • COH -9.43% premarket.
    • FBR lifts American Eagle Outfitters (NYSE:AEO) to a Buy rating after having the retailer lined up at Market Perform.
    • "AEO’s valuation is now attractive enough to compensate for mall risk in our opinion, and we see much lower risk to sales/EPS in 2017," writes analyst Susan Anderson. "AEO also has one of the highest FCF yields and dividend yields, to which we see little risk, unlike for some other spec retailers," she adds.
    • The firm sets a price target of $13 on AEO to rep 19% upside potential. AEO +0.13% premarket to $11.00 vs. a 52-week trading range of $10.56 to $19.55
    • Home Depot (NYSE:HD) reports comparable sales increased 6.3% in Q2 to top the consensus estimate for a 4.9% gain. Comparable sales in the U.S. were up 6.6%.
    • Customer transactions rose 2.8% during the quarter, while the average ticket was up 3.6% to $63.05.
    • The retailer sees FY18 EPS of $7.29 vs. $7.15 prior and $7.24 consensus. The buyback target is lifted to $7B from $5B.
    • Previously: Home Depot beats by $0.04, beats on revenue (Aug. 15)
    • HD +0.50% premarket to $155.03. Shares are up 15% YTD.
    • Corning (NYSE:GLW) is 2.6% lower premarket after a cut to Sell at Goldman Sachs, which sees a combination of factors adding up in the negative, including weaker glass volumes combining with forex risks and shares trading above historical valuations.
    • The TV supply chain is heading toward a "cyclical peak," says analyst Doug Clark, and smaller production targets from TV makers could pressure volumes over the next several quarters. (h/t Bloomberg)
    • He's cut his price target to $26 from $29, implying 11.6% downside.
    • Guggenheim, meanwhile, is reiterating a Buy rating and $35 target (19% upside implied)

    Snap +3.7% as Cantor boosts to Buy with unlocks passing

    • Along with yesterday's bounce, Snap (NYSE:SNAP) is up 3.7% premarket on an upgrade from Cantor Fitzgerald to Overweight.
    • The firm based the upgrade on a significantly better risk/reward profile following yesterday's key lockup expiration, and with some downside set in after last week's disappointing earnings.
    • Most of the lockups have expired, with 400M shares unlocked on July 29, 782M on Aug. 14 and another 20M to come on Aug. 29, Cantor says.
    • Price drops should attract more advertisers, the firm notes. (h/t Bloomberg)
    • The firm reiterates a $15 price target, implying 19% upside.

    CNBC: Next Apple Watch won't require iPhone tethering

    • CNBC source confirms reports that Apple’s (NASDAQ:AAPL) upcoming Apple Watch won’t rely on iPhone tethering and will instead serve as a standalone device.
    • The new generation of Watch, which will announce with the iPhone models next month, will have cellular connectivity possibly through an embedded SIM so that people can stream music and make calls without needing an iPhone within range.  
    • Cellular connectivity could harm battery life, which already suffers in the Watch Series 2 when using features like the GPS and heart rate monitor during runs. 
    • Intel will reportedly supply the Watch modems and the device will sell through AT&T, Sprint, T-Mobile, and Verizon. 
    • Apple shares are up 0.47% premarket.
    • Previously: Apple discusses bringing Watch to Aetna members (Aug. 14)
    • Horror film Annabelle: Creation (TWX +0.4%) took the biggest piece of a still-shrinking summer box office pie over the weekend, easily outpacing holdovers and a children's animated film.
    • Overall, the top 12 films brought a combined $103.8M, Box Office Mojo notes — down 6% from last weekend and setting the cumulative 2017 summer at 12% below last year's pace.
    • The Annabelle sequel drew $35M, clearing Dunkirk's (NYSE:TWX) fourth-week $10.9M, as well as Open Road's The Nut Job 2: Nutty by Nature, which debuted with just $8.3M.
    • Stephen King adaptation The Dark Tower (SNE +0.4%) was in the No. 4 spot with $7.8M while Girls Trip (CMCSA +1.9%) rounded out the top five, with $6.5M.
    • Dunkirk raised its cumulative domestic gross to $153.2M, and its worldwide total to $363.7M. Meanwhile, another film opening this weekend, The Glass Castle (LGF.A -0.8%LGF.B -0.1%) hit just the No. 9 slot with $4.7M.
    • Other producers and co-creators of AMC Networks' (AMCX -0.2%) smash hit The Walking Deadare joining co-creator Frank Darabont in a lawsuit against the network that could amount to the biggest profits litigation in television history.
    • Damages to AMC could reach $1B and most definitely have an effect on the future of the program — and possibly of the network itself.
    • Co-creator Robert Kirkman (who built the comic book that the series is based on) and producers Gale Ann Hurd, Glen Mazzara and David Alpert are joining in with their own claims that they're being cheated by accounting irregularities.
    • As in Darabont's suit, the plaintiffs question the amount "paid" by the network to its own studio arm for airing rights.
    • AMD's imputed license fee has moved from $1.45M per episode (in the first four seasons) to $2.4M, but is less than non-imputed license fees paid to outside series Better Call Saul and Mad Men (which haven't commanded TWD's killer ratings).

  10. Stuman – Our short on HLF is now working well.  Hope you're still in it.


  11. LB earnings tomorrow night   –  


  12. Phil/BDC/GreenCoin,

    I have done the setup on coinbase and coinexchange. Now I guess I have to set up a payment method on coinbase to buy/sell green coins. It says bank account is the only way that can allow both transactions but it is asking the bank login id and password. other way is to provide credit card to buy the coins and setup paypal to sell the coins. Is this correct understanding?

    thanks as always.

    regards


  13. CMG seeing some buyers… finally! hope this is sustainable.


  14. learner/CMG

    I do not see any news other than appointing a new communications officer. What I see is all the local law firms sending shareholder alert for the case….annoying.

    regards


  15. Phil

     

    What is the position on CBI today

    I have been on traveling last 10 days and may have missed your post

    Thanks for the help


  16. yes pat, I checked for news too.   Hopefully some big guy must be seeing value at these near $320 prices.  Hopefully the beginning of a institutional buy program… fingers crossed..


  17. scottmi/OMER  and there's your entry


  18. Bought some AMZA at $8.87.

    Have been watching this ETF that invests primarily in Midstream MLPs.  Also writes options.  Stock is at the yearly low.  ETP, it's largest holding is down today. 

    ~~ETP -4% (prices offering of 54 mln common units at $18.65 per common unit)

    AMZA pays a huge distribution (23%), which probably isn't sustainable, but think it's most likely a good buy here below $9.

    I'm positive on Midstream MLP space.  These MLPs are primarily in the energy infrastructure sector.

    https://seekingalpha.com/article/4093046-amza-numbers-lie


  19. FTR bouncing all over the place today…. 


  20. albo/ MLPs… I have sold some puts on MPLX.  This has organic growth over the next 3+ years as Marathon Petroleum drops down its energy infrastructure to its MLP.  It has a 6.7% yield right now and if my puts get assigned, I get in at 9%.  Hope they get assigned.  This also has some good options…


  21. With all that's going on in the country – Virginia, other planned events, curious why AAXN (Taser) is languishing.  


  22. Until the feds start withdrawing cash from the market, there is very little to suggest that a big down move is going to happen.  Sure, there will be a few bounces here and there, but the amount of cash sloshing around is huge.  The velocity of money continues its downward trend…


  23. STJ – Thanks.  Duly noted.  I agree AMZA has been a terrible investment up to now and has high fees and  numerous warts.  I'm aware of the points that guy makes.  But I like the Midstream area, and think from this level it's a buy.  We'll see.  Betcha $10 it has at least an 8% total return over the next 12 months. 8-)

    Thanks, Learner


  24. GreenCoin/Pat – I have to admit my system is to tell Greg to buy or sell – I have no actual idea what's going on behind the scenes.  I do know it's complicated to accept them and our programmers are working that out but that's important, because we want to work out a template that makes it easy for any retailer to accept them as well.  I'm sure either BDC or Greg can help out when they check in.  As I said above, this is good practice to get familiar with the ins and outs of using cryptocurrency (or to have one of your guys get familiar, as the case may be!).  

    CMG/Learner, Pat – No new (or rats) is good news! 

    CBI/QC – Well, it's going to change, but, for now:

    We wanted to make sure $12(ish) was a real bottom but now I'm ready to deploy more cash.  I don't want to change the short puts until 2020 comes out, as the premium should be good.  Even now, the 2019 $17.50 puts are $7.50 so we could 2x to those and then we'd be obligated for 30 at $17.50 ($52.500) less the $7,800 we collected is not big deal but we should do much better in 2020.  As to the calls, those I think we can roll down to the $10s ($4.25) for $1.75 and then 1/2 sell the $17.50s for $1.85 so a cheap roll with big upside.  Not official yet but almost certainly our LTP adjustment. 

    As a teaching point, if you just look at the 2019 $15 calls.  They were $8,900 ($4.45) and now $2.50 and we're spending $1,650 to roll them to the $10/17.50 spread – half-covered.  So that puts us in 20 $10 calls for net $10,550 and our break-even is basically $15 (where we started) despite the fact that CBI has fallen 30% since we bought those June calls.

    Our upside potential is just shy of $5,000 at $15 (not counting the short puts) and we can increase that by selling more calls but I'd rather wait for a move up or, if there's a move down, then we can roll to the $5s for another net $1,650 and still have a $3,250 upside, even if CBI falls another 30%.  This is why we stick with the FU trades – that's not even taking another year into consideration.   As long as CBI doesn't actually go BK – as long as we work the trade properly, it is likely to eventually pay off.  

    The argument could be made that we'd be better off taking an $8,000 loss (20%) and taking our $40,000 obligation and finding something that pays more than $3,250 in two years but it doesn't just pay $3,250, it pays $3,250 PLUS the $15,000 we're already down if things turn around and that's $18,000 back on $40,000 and all CBI has to do is get back to $15.  

    If we didn't think CBI was worth $15, THEN it would be silly but, if we do – then this is an easy trade to decide to stick with.

    CMG/Learner – Last time, there was serious support at $375 after a brief trip to $350 and if $350 is the new $375, then $400 will probably be the new $440 but, if we go back to $375 quickly, then that means the stock is likely just resting before busting back over $400. 

    My take on CMG is I don't mind pay $10Bn ($350) for $500M in earnings (normal year) because CMG is constantly experimenting with other restaurants and, if they finally hit one – well, these are the guys who built CMG, so there's a possibility of them rolling out another multi-billion Dollar chain as a bonus and, if not – it's a long-term play we can sell premium against forever.  

    FTR/Batman – As long as they keep paying a $2.40 dividend, I don't care what the price is!  In 6 years I get all my money back and whatever the stock is worth is a bonus (not counting option sales along the way).  

    Frontier Unlikely to Cut Its Dividend Like Windstream Did

    AAXN/Learner – Yeah, way out of favor at the moment.  You would think they are giving those cops IMAX cameras!  cheeky

    Velocity/Pharm – Wow, that's amazing.  Inflation is going to be like Brazil when that velocity picks up. 

    Indexes still looking weak, I wouldn't be surprised if we get another dip lower this afternoon. 


  25. AMZA / Albo – Not a gambler but I hope that you win that bet!


  26. Thanks, STJ.


  27. Trump making friends with CEOs – another one jumped ship after the usual nasty tweet from POTUS. This is like watching a NASCAR race now just waiting for the big wrecks.


  28. CTSH Butterfly: The short 65 calls are deep in the money and the only roll I see is to October 65s with a 0.30 credit. I sure wish we had sold a put at some point but I realize we didn't think this would just keep goingup.


  29. OMER/Hanj – i'll take it… one step back in the water


  30. Phil,

    With LB reporting tomorrow AH, any mystical/magical way of offsetting losses on some short 1/19 45 puts (now 11.25, sold  @4.50) which were regrettably suggested, way back when, by …..8800 ?

    Short 1/18 45.5 calls would fetch 1.60 (48s are 1.12) and 1/19 45s would bring 4.00 (47.50s are 3.20 – maybe).

    Especially poor environment given numbers from COH, etc

    Thanks as always,


  31. Very 1984ish that the Justice Dept is seeking information on visitors to a website used to organize protests against Donald Trump.


  32. RIG/Phil – taking a hit on news they are buying Songa. Overreaction? Hopeless situation?


  33. Wow, I just lost my STP update right at the end!  My bad as my stupid track ball slid and hit the keyboard (because it's old and the sticky feet wore off) and clicked the key which changed the page for an unrecoverable error but angrybroken heartangry.  Back to the drawing board…

    CTSH/Dave – Well we sold them for $5.50 and now they are $7 so worry about the $1.50 we're down, not the whole thing.  Meanwhile, we own 10 long 2019 $65 calls and they are up $6,000 so all is well (the long $55 puts are down $1,300).  I expect a bit of a pullback so I guess we'll roll to the Sept $70s at $2.45 (just 10) and the key here is we worked our way out of a jam and now we can just sell $2,000+ a month against a long position that cost us net $9,200 (not including previous collections) with 15 months left to sell ($30,000).  Probably I'll want to take the $65s off the table ($11,650) and move to a $70 ($9)/80 ($4.25) bull call spread at $4,750 so we pull $7,000 down and now we have a net $2,200 spread that's able to collect $2,000/month in premiums.  

    LB/8800 – Well this is going to have to be one crappy report to justify an $11Bn valuation ($40) with $12.5Bn in sales and $1.2Bn in profits (through last Q).  I think $45 is a fine target, you seem to be playing them to miss while estimates are already just 0.40 vs 0.70 last year.  Last Q was 0.33 and was an 0.04 beat (13%) and, in fact, they haven't missed estimates at all.  

    Consider that LB is at $40 and you sold $45 puts for $4.50 so your net is $40.50.  You shouldn't care what the current price is – only that you feel confident they'll be over $40.50 in Jan 2019.  If it's a margin issue, then you may want to deal with it but I think selling short calls is just paranoia and only complicates a simple position.  If LB does fail and drops 20% to $32, THEN you need a plan and the $35 puts are now $5.60 so you can 2x roll to those and you'd be in the same boat at a lower strike.  If you can live with that plan – then don't worry.   Also, you don't have to roll them all, you can just roll the loss and then, less margin requirement and getting even will be your reward.  

    By the way, $12.5Bn in sales is 10% of AMZN and $1.2Bn in profits is 50% of AMZN yet LB's price is 2.5% of AMZN – ridiculous!  

    1984/Rustle – Very disturbing. 

    RIG/Scott – Nice they have money to throw around.  I gave up on them because I don't see deepwater drilling coming back soon and they seem to have given up too and are trying to diversify.  I'd stay away.  


  34. MDXG – 2billion biotech with a breakout and steadily growing revenues, no LT debt. Anyone familiar with company or products?


  35. Pat / Greencoin;

     

    Coinbase accepts only 3 currencies, Bitcoin "classic" (not even Bit cash until January), Litecoin and Ethereum (just one too), they don´t accept any other, you have to use Poloniex https://poloniex.com/ or something similar to buy Greencoins.

    Most of the other CC values are related to value of Bitcoin BTC!, so  appreciation can be double one the natural growth trend, the other is the BTC gains or losses.


  36. Yodi!, I copy/paste   your armchairs trades,you have a lot of them,…funny because you live a good part of your time in the RV!..lol…

    Thanks for the effort.

     Best for Yola and you.


  37. CC / Phil;

    Phil ( Greg)  is any ETF or way to invest in cryptos as an asset class now?


  38. Phil,

    Thanks for the analysis. Understood – logically, but emotionally its another neighborhood. Of course, rather than sweating it I could bolster LB's sales by buying my underwear at Victoria Secret and let my wife laugh and entertain friends with photos.


  39. Nice 3Br by the beach my brother is selling.  I don't pimp his stuff but this is a really nice one.  

     


     


  40. Hi Advill, thanks for the greetings. Yes we do enjoy our life in our RV. The next trip should start somewhat end of Sept. South. Presently we hide from all the tourists all over Europe, in my home town in Germany. We are going via Madrid to our winter shelter in Miramar. Will meet my son end of Oct in Madrid.

    I find the armchair trading is a more relaxing trading and does not consume daily attention. Still my list of tree planting plays, seems to have no end.

    Say hi to your wife from us. Need to have another get together in Barcelona.


  41. M – 7.4% dividend here while waiting. not doubling down, but did round up positions here.


  42. Scott – Talk about high yields, how about CTL, now yielding 10.3%.  Class action re: possible billing fraud not helping.  But LVLT merger expected next month which is a big positive (Assuming  it goes through as planned).

    Long stock and short Jan 18 $20 puts.

    My version of FTR. ;-(


  43. CTL/Albo – I was a CTL customer who cut the cord about 18 months ago. Decaying company not investing in infrastructure, and the platonic archetype of evil customer service. I -despise- the company (well beyond my antipathy to T).
    Prefer FTR, which is offering 16% dividend now, and 43% for FTRPR…


  44. Short-Term Portfolio Update (STP):  $493,840 is up 394% and up $69,514 from $424,326 on our July 18th review.  Note that we have more CASH!!! ($518,415) than the portfolio is worth and that cash rightfully belongs to the LTP – as the whole point of the STP is to hedge the LTP but the LTP doesn't need any cash – as we have $1.2M there that isn't deployed (and little margin too).  

    That allows us to take some high-margin plays in the STP, like shorting FAS and AMZN that should not be followed by people who are tight on margin – as they simply aren't worth it.  The STP/LTP is essentially a $2M portfolio at this point (from a $600K start!) but, usually, we stick with plays in portions that reflect our original $600,000 start.

    Based on the recent action, where the LTP dipped $100K with the market, I feel our $300,000 protection in the STP is a bit short, so my primary goal today is to add another $100,000 of protection.  

    • AMZN – We rolled our original 2 July $900 short calls ($10,140) to these when they were at $14,900 so $10,140 – $14,900 + $24,000 = $19,240 we collected on these 3 contracts is $64(ish) per contract so our break-even is $1,079 into Jan.  As long as AMZN stays under $1,000 – I'm pretty confident but anything over that isn't really worth the risk.  It's a $16,000 hedge as it stands.  

    • FAS – This one hurt us as bank earnings were strong but it's a leftover leg we already made a lot off so no worries.  What does worry me though, is that $37 is not a realistic target.  The short Jan $37s are $16 but FAS should calm down and let's say they are $50 by Jan so $13 to close.  the 2019 $50s are $10 so we could roll to 1.3x or maybe just roll the loss (1x) and then we can think about selling some offsets.  Meanwhile, it is a $48,000 hedge.  

    • AAPL – We have so much of this in other portfolios and there's not much left to collect so let's just kill it.  
    • ABX – Here we have half left to collect and we don't need the margin and we're confident in the target, so it stays.  
    • GOGO – Though it's 80% cooked, we don't need the margin badly enough to spend $950 to buy it out early, nor are we worried about it falling so we can leave these.  

     

     

     

     

     

     

     

    • SBUX – Also half left to collect and not at all worried.  Good for a new trade, actually.  TOS says $3,371 in ordinary margin to collect $2,000 and you have a 20% cushion over 16 months to make 60% returns.  Funny how we are so used to making over 100% that this kind of trade sounds boring, right?  
    • LABU – I love them when they are cheap.  Let's spend $5 to roll the Dec $55 calls ($13.80) to the March $50 calls ($18.50) and DD (10 more) and sell 10 of the March $70 calls for $11.50 so we move from 10 $15 Dec spreads to 20 $20 spreads with 1/2 the short calls expiring in Dec and the rest of the trade in March.  Cost of the change is $5,000 + $7,000 so $12,000 and potential at $70 goes from $15,000 to $40,000 so $12,000 more to make up to $25,000 more is a good deal!  Now we can buy back the short Dec $45 puts for $5 ($2,500) and sell 8 of the March $50 puts for $10.90 ($8,720) so we pocket another $6,200 and now we only spend net $5,800 for $25,000 more upside on essentially the same spread!  

    What, do you think we make 400% by accident?

    SQQQ – Jan $28 calls are at the money and green for some reason.  Don't look a gift horse in the mouth and let's rescue our money ($3.60) and roll out to the March $25s at $5 for +$1.40 ($14,000) and we'll get that money back buy rolling the short Jan $55s (0.65 = $6,500) 60 March $40 calls for $2 ($12,000) and that's left us more aggressive with 40 uncovered March $25s that we can take off the table on a nice dip or, otherwise, a $150,000 spread that's $3 ($30,000) in the money.  

    Overall, we're spending net $8,500 to get more aggressively bearish.

    TZA – Well, it's math time.  I see $150,000 less $30,000 current value on SQQQ is $120,000 upside (and more since 1/3 are uncovered) and $48,000 on FAS and $16,000 on AMZN is $184,000 so we need another $216,000 out of TZA to make our goal.  

    We're already aggressive on TZA with 1000 Jan $15s that are in the money and uncovered with short $20 puts so net cost is $14K and upside potential on a 20% drop would be a 60% bump in TZA from $17 to $27 so $120,000 is way short of our goal.  

    • TZA doesn't have March but the $22 calls are $1.15 and the Jan $15 calls are $3.15 so, if we add 100 spreads at $2 ($20,000) we have another $70,000 upside but it's really more than that since we have 100 uncovered and we should be able to make a 2x roll on the short calls without risk (as they'd all be covered) so even if the short $27s went $2 in the money, like the $15s are now ($3.15) they could then be rolled to 2x the $34s ($1.15 in theory) for $10,000ish and then we'd have 200 of the $15/34 spreads that pay $19 ($380,000) – so I like the cheapness ($20,000) and the flexibility of this adjustment.  

    So I feel a bit better about our coverage now and I want to find a $10,000 offset to pay for our TZA roll (or 2 $5,000s) but there's no rush.  


  45. Scott – No doubt that CTL has been poorly run.  Believe once the merger with LVLT goes through (again, if and when),  that Glen Post, CEO of CTL will be fired and Jeff Storey, CEO of LVLT will become CEO of the combined companies ahead of the already announced succession plan.  On LVLT's conference call two weeks ago, Mr. Storey spoke of the combined companies as if it were a fait accompli.


  46. Crypto ETF/Advill – Even if there is, how could you trust it with no track record?  It's like asking for a good cold fusion company.  

    Emotions/8800 – Gotta get those things under control.

    M/Scott – That one I'll be surprised if they don't cut back to 5%.

    • June business inventories+0.5% at $1,869.3B vs. 0.4% consensus and +0.3% prior.
    • Sales: +0.3% at $1,356.8B.
    • Inventory/Sales ratio of 1.38.
    • Though new CEO Brian Duperreault has vowed to focus on growth instead of divestitures and share buybacks, there remain assets the insurer continues to want to get out of – death benefits being one of them.
    • According to the report, AIG has hired Goldman Sachs to assist with the sale. Among the possible buyers would be P-E players like Apollo Global (NYSE:APO) and Blackstone (NYSE:BX), both of whom have been recent buyers of such assets

    Transocean sinks as Songa deal could dilute shareholders by 32%

    • Transocean (RIG -5.7%) plunges to all-time lows before trimming losses a bit, following earlier news of its purchase of Norwegian competitor Songa Offshore (OTC:SGAZF).
    • Under terms of the deal, Songa shareholders will receive 50% newly issued RIG common shares and 50% in bonds convertible into common shares; RBC analyst Kurt Hallead expects RIG to issue 128.2M shares, including convertibles, diluting current shareholders by 32% to 524.7M shares.
    • Evercore ISI analysts like the deal even if the market does not, saying it high-grades RIG's fleet, improves the balance sheet and near term liquidity, and sets up the company nicely for further consolidation of the offshore rig market.
    • The firm also says RIG will re-rank its combined fleet as a function of the acquisition, which may result in additional rigs being recycled, and the deal adds $4B in backlog which will be helpful in revolver extension negotiations and could be used to add asset-backed financing.
    • The deal is "a sign that we are near the bottom of the [offshore drilling rig] market, and people don't expect asset prices to fall much further," says Swedbank analyst Magnus Olsvik.
    • Pres. Trump is still expected to impose steel import tariffs on national security grounds despite last month's delay of the release of the Section 232 review of the U.S. steel industry, industry players and trade experts tell Reuters.
    • U.S. steel stocks have dropped ~10% since Trump delayed the probe, partly reflecting fears that his promises to protect the industry may not materialize, but industry analysts say the falls might be overdone and import relief may still happen.
    • "The most likely outcome is tariff rate quotas where the level of tariff changes dependent on the volume of imports. This structure serves as something of an upside cap on steel pricing so they do not get out of control," predicts Jefferies analyst Seth Rosenfeld.
    • "The healthcare bill went down – a big loss… He sees tough action on trade as a political winner. I think he'll return to the matter before the end of the year," says Gary Hufbauer at the Peterson Institute for International Economics.

    GE heads deeper into bear market territory

    • General Electric (GE -0.5%) is heading lower in early trade after news that Warren Buffett's Berkshire Hathaway sold its entire position in the conglomerate.
    • GE fell into bear market territory on Friday, tumbling 22.2% below its post-election high of $32.38 set on Dec. 20.

    Gilead set to unveil new Southern California campus

    • Gilead Sciences (GILD +0.7%) is set for the grand opening of its new $250M campus located in La Verne, California, about 50 miles east of Los Angeles, tomorrow. It will have the capacity to package, label and distribute products, including HCV meds, but will initially focus on the manufacture of AmBisome, an antifungal for HIV patients.
    • A spokesperson says the site, anchored by a 320,000 sq. ft. building, will package up to 14M tablets and make up to 5M vials of AmBisome each year. At full capacity, 500 workers will be employed.

    Retail stocks sluggish as Dick's and Coach disappoint

    • A stronger-than-anticipated July retail sales report is taking a back seat to key earnings reports in the retail sector. A promise from Dick's that it will ratchet up promotions to take market share and weak guidance from Coach are the two events weighing the most on apparel/shoe/sporting equipment sellers.
    • Early decliners include Vista Outdoor (VSTO -1.5%), American Outdoor Brands (AOBC -1.7%), Foot Locker (FL -4.7%), Finish Line (FINL -3.9%), DSW (DSW -6.2%), Genesco (GCO -2.8%), Boot Barn (BOOT -1.6%), Gap (GPS -2.5%), Finish Line (FINL -3.9%), Urban Outfitters (URBN-4.5%), Express (EXPR -6.4%), Abercrombie & Fitch (ANF -4.8%), Vera Bradley (VRA -4.5%), Movado (MOV -1.2%), Ascena Retail (ASNA -5.9%), L Brands (LB -2.2%) and J. Jill (JILL-1.7%).
    • Previously: Coach -9% after Q2 results (Aug. 15)
    • Previously: Dick's tumbles as promotions pressure margins (Aug. 15)

    What are hard drives even for anymore?  Samsung announces commercial availability of new portable SSDs

    • Samsung (OTC:SSNNFOTC:SSNLFannounces the commercial availability of the Samsung Portable SSD T5.
    • The portable solid-state drive can hit speeds of 540MB per second, which stands about 5x faster than external HDD products and aligns with the speeds of the company’s internal desktop SSDs. 
    • The T5 offerings range in price from the 250GB at $129.99 to the 2TB at $799.99 with options between. 
    • Meanwhile, Samsung, Google, and Phillips are working with start-up Puls to deliver repairs and tech demos at home as a combination Geek Squad and Genius Bar.  
    • Previously: DRAM stocks moving as Samsung prepares to raise Q4 prices (Aug. 14)
    • Bank of America Merrill Lynch reiterates its Buy rating and $18 price target for Advanced Micro Devices (NASDAQ:AMD).
    • Analyst Vivek Arya cites industry checks showing shelf-space improvements for the new Ryzen PC processors including an up to 50% share at online stores. AMD’s current desktop unit share is about 11%. 
    • Arya also expresses optimism about the new Vega gaming graphics cards. 
    • AMD shares are up 1.41%. 
    • Previously: AMD announces commercial launch of Radeon graphics cards (Aug. 14)

    Movie theater stocks tremble after MoviePass fee lowered

    • Movie theater stocks trade lower after MoviePass drops the cost of its unlimited movie pass to $9.95 per month.
    • The service started off with a tiered pricing approach that ranged as high as $50 per month in certain markets.
    • The $9.95 fee will cover tickets at any theater that accepts debit cards. IMAX or 3D screenings aren't included in the deal.
    • AMC Entertainment (NYSE:AMC) is down 4.41% to carve out a new multi-year low of $12.95. Regal Entertainment (RGC -1.2%), Cinemark (CNK -0.6%) and IMAX (IMAX -1.3%) are showing more moderate losses.
    LOL, it's called a RETAIL STORE, you idiots!  Amazon introduces Instant Pickup locations near colleges
    • Amazon (NASDAQ:AMZNintroduces free Instant Pickup for Prime and Prime Student members at select pickup locations.
    • The service includes curated daily essentials like snacks, personal care items, and Amazon devices available to buy through the Amazon app for pickup in less than two minutes. 
    • Pickup locations are in Los Angeles, Berkley, Atlanta, Columbus, Ohio, and College Park, Maryland. 
    • Previously: Retail sales impress with a boost from Amazon Prime Day (Aug. 15)

    • Apple's (NASDAQ:AAPL) MacBook shipments were up 17.1% to 3.98M units in Q2, according to a TrendForce global laptop shipment report seen by 9to5Mac.
    • Apple’s laptop market share moved up to 10% from 9.3%, which puts the company in fifth but closing on ASUS. HP, Lenovo, and Dell earned the top slots.
    • Apple shares are up 0.65%.      
    • Previously: Apple plans laptop upgrades (May 17)

  47. Phil/LABU -

    I don't ask lots of questions – still learning… but

    Why do you consider LABU cheap at $60 when it was $40 in June and $25 in November?  Just curious…


  48. Am I missing something?  Movie theater stocks fell today supposedly because of this

    http://www.marketwatch.com/story/former-netflix-executive-wants-to-shake-up-moviegoing-with-10-moviepass-service-2017-08-15

    But if they are going to pay theaters the full ticket price and put more butts in the seats why would this not be good for theaters (at least in the short run)?


  49. INFN/Phil – cheap again? puts for offsets to hedges?


  50. Phil, have 1000 sh of Imax (basis $24), sold 10 Dec 24 puts @2.25 and sold 10 Dec 24 calls @2.45.  Caller now .35.   Advice please.


  51. LABU/Jeff – It was super cheap because VRX took the whole sector down and crashed LABU, which is the 3x ultra-long Biotech.  That was, hopefully, a one-time thing and very unlikely to be repeated and, moving forward, there's a lot more upside to the sector than down.  

    Moviepass/Tangled – My understanding is you pay $10/moth for unlimited movies.  It's the studios that should be upset, the theaters still get to sell you 0.25 worth of popcorn and 0.12 worth of coke for $10.  

    INFN/Scott – We sold the Jan $8 puts for $1.68 in the LTP at the beginning of the month. They are 0.70 now and I'm super-glad we didn't commit more as they keep dropping so, no thanks, I think we'll just ride these out for now.  

    IMAX/Taihu – The good news is the short calls will go worthless but the bad news is the Dec $24 puts are $5.60 but still, you sold the set for $4.70, so no big deal.  This is what I want to work on with people over the fall because a lot don't seem to get it.  You own the stock and that's an asset that lets you sell calls and you are willing to own more stock, which is an asset that lets you sell puts.  

    You sold the Dec $24 puts and calls for $4.70 and you missed your target and lost $1 and now the March $19 calls are $2.20 and the $20 puts are $2.30 so $5.50 means you have sold net $4.50 so, if called away at $23.50, it's a small loss but, of course, you will roll it if that happens.  To the downside, you may have to buy another 1,000 at $20 but it's $20 less $4.50, which is $15.50 + $24 on your first 1,000 is an average of $19.75.

    The main point here is you have, essentially, a monthly opportunity to sell $4 of premium, which is $48/yr against your $24 position.  Some months you will win and some you will lose but any time you get lucky and hit it on the nose, you collect $3-4, which is 15% or more of your position.  

    That's all this is about.  You are being the house and you are letting other people bet on where they think IMAX will be each month and some of the gamblers will win and some will lose but, over time, you are the house and you will get your cut.  That's all these trades are about but the nice thing is – your cut will come year after year!  


  52. PETX/Pharm – what happened to these guys?  Good to add here or abandon them


  53. IMAX/Taihu – I'd buy back the short $24 calls (o.35) and sell the March calls now.  Either they recover and you don't owe the short puts as much money (getting back to even) or they go further down and thank goodness you sold another +$2 in calls.  


  54. Thanks Phil.  I'm only on hour 2500, so on my way to understanding  it all….:)


  55. Urban outfitters just beat. Maybe that bodes well for L brands. Retail isn't dead yet!


  56. Trump is mounting the most incoherent defense of his statements over the weekend.  The press conference was supposed to be about infrastructure but all he said was some vague BS and the press came right after him, which isn['t surprising the way he's talking about them - it's like playground name-calling. 

    In Trump's mind, the innocent white nationalists were peacefully protesting the removal of the statue of Robert E Lee when these horrible liberals attacked them.  Also, he said, if we remove Robert E Lee we should also remove Jefferson and Washington, because they owned slaves.  All the same to him...

    Trump also claims MRK guy quit the council because Trump kept pressuring him to bring jobs back from overseas, not because or Trump's handling of the riots. 

    WFC finally cleaning house:

    • As floated last week, Wells Fargo (NYSE:WFC) Chairman Stephen Sanger is out (as chair and from the board), effective at year-end. He's to be replaced by current Vice Chair Elizabeth Duke.
    • Alongside Sanger's exit will be the retirement of two other long-standing directors Cynthia H. Milligan (joined in 1992), and Susan Swenson (joined in 1998).
    • The bank is also adding another independent director - Juan Pujades (retired principal of PwC) - and expects to name three more independent directors before the 2018 annual meeting.
    • In addition, Wells is shaking up the composition of committee leadership.
    • Source: Press Release
    • Previously: Wells Fargo chairman reportedly stepping down (Aug. 10)

    Saved by global warming!  

    • Heavy rain may have softened the environmental blow of a large wastewater spill in the Delaware River near west Texas oil fields earlier this month, according to the Bureau of Land Management.
    • An over-pressured flow line ruptured and dumped 18K barrels of wastewater and 11 barrels of oil into the Delaware River, flowing for seven hours into the Pecos River and the Red Bluff Reservoir before it was discovered; Scores of fish were killed near the spill source, but a rain storm lifted water levels in the river three feet higher than normal, diluting the effect.
    • Cimarex Energy (XEC +0.2%) is owner and operator of the lease on which the spill occurred.

    Not at all surprising:

    • Speaking on an American Banker podcast, Dallas Fed President Robert Kaplan - noting the unemployment rate still hasn't returned to its pre-recession low - says slack remains in the labor market.
    • While further tightening in employment should translate into wage pressure, he expects it to be lower than in the past.
    • It's appropriate, he says, to be patient on the timing of the next rate hike.
    • Previously: Dudley on board for one more rate hike (Aug. 14)

    Stock market not overheated - Tepper

    • "Any comparisons to [1999] are ridiculous," David Tepper tells CNBC. "Look at where multiples and rates were in 1999. I’m not saying stocks are screaming cheap, but you’re nowhere near an overheated market."
    • At the peak of the dot-com bubble, the S&P 500 had a P/E ratio of 30x vs. today's 19x.
    • By the Shiller P/E ratio – which compares stocks against their average earnings over the previous 10 years – stocks today are at their priciest since 1999 and more richly valued than prior to the 1929 crash.
    • Tepper remains bullish thanks to the pro-business policies of the Trump administration, and continued low inflation, which should allow continued low interest rates.
    • Noting the relatively invisible spread between European junk and U.S. Treasurys, Jeff Gundlach last week described things as "whack-o season," and said he was paring risk.
    • Joining him are Allianz Global and Brandywine Global, both of which are trimming exposure.
    • European high-yield has returned 4.5% this year, and 100% since the day 10 years ago when the financial crisis broke out.

    Pengrowth Energy seeks covenant relief

    • Pengrowth Energy (PGH -3%) is lower after reporting Q2 results and agreeing in principle on key elements of an amendment with noteholders to a framework that could result in relaxing existing covenant ratios for as long as two years.
    • PGH says the framework includes the elimination of ratios for debt to book capitalization and debt to EBITDA for the duration of the waiver period as well as amending the interest coverage covenant to reduce the EBITDA to interest ratio; PGH says it is working with the noteholders to prepare detailed formal agreements that are expected to become effective during Q3.
    • Among operational highlights, PGH achieved average daily production of more than 49K boe/day during Q2 and 51K boe/day during H1.
    • Gold prices suffered their steepest one-day drop in nearly six weeks, weighed by easing tensions between the U.S. and North Korea, a stronger dollar, and better than expected reading on retail sales and U.S. manufacturing.
    • December Comex gold settled 0.8% lower at $1,279.70/oz., slightly paring earlier losses after falling as much as 1.4% earlier.
    • “Unless tensions between the United States and North Korea escalate into a military conflict, there should be little upside to gold prices from current levels,” says Julius Baer commodities analyst Carsten Menke.
    • But RBC Capital analysts think inflows into gold ETFs could re-accelerate in the current quarter, boosted by a strengthening net speculative position and positive gold price momentum heading into a seasonally stronger period in Q3.

    Japan tries to hash out gambling rules

    • Gambling in Japan will be off limits for people under 20 even if the official age of adulthood is lowered to 18, according to Japan Times.
    • Separate reports out of Japan indicate that a proposal to limit casino games to house games of chance is being considered in a move that would deal a blow to poker.
    • Some form of legislation is expected to be passed in Japan this fall. Even with some rather tight restrictions likely, several U.S. casino companies are expected to apply for integrated resort licenses.

    Indian drug makers in the mix for Teva's European assets; Teva up 5%

    • LiveMint reports that Indian drug firms Aurobindo Pharma Ltd. and Intas Pharmaceuticals Ltd. are negotiating with banks to finalize funding for a portion of Teva Pharmaceutical Industries' (TEVA +4.5%) European assets, including its oncology, pain management and women's health businesses. The assets could fetch as much as $1B.
    • If the deal goes through, it would be the largest overseas acquisition by an Indian pharmaceutical company. The top spot is currently held by Lupin Ltd. who bought Gavis Pharmaceuticals LLC and Novel Laboratories for $880M in 2015.
    • Last year, Aurobindo was outbid by Intas for Teva's Actavis UK Ltd. and Actavis Ireland Ltd. units.
    • Credit Suisse slashes its price target on Dick's Sporting Goods (DKS -21.1%) to $28 from $44, although the firm's assessment on the long-term strategy in place is mostly favorable.
    • "Strategically, we believe DKS is giving itself the necessary cushion to invest to sustain its competitive position in this increasingly challenging category. Management provided a candid view on the evolution of this sector, and the changes needed to evolve, including sharpening prices, investing more in online and thinking much harder about its cost structure," write Seth Sigman and Kieran McGrath.
    • The $28 PT on Dick's works out to 4X CS' EBITDA estimate and 10X the EPS forecast.
    • Previously: Dick's tumbles as promotions pressure margins (Aug. 15)

    Telecoms dip alongside downgrade fallout for Uniti, Windstream

    • Regional telecom firms have moved down as a unit alongside a move down from Uniti Group (UNIT -8.3%), downgraded by BofA today to Neutral.
    • Windstream Holdings (WIN -8.9%eliminated its dividend in its earnigns report Aug. 3, sparking a debate about what that would mean for the lease payments it hands over to Uniti (the Windstream infrastructure spin-off formerly known as Communications Sales & Leasing).
    • While bulls argue that cutting the dividend makes Uniti's lease payments safer, BofA notes that while Windstream is a stronger credit "on paper," a rising cost of capital for Uniti risks creating a negative feedback loop for the stock. (h/t Bloomberg)
    • Also lower today: Frontier Communications (FTR -4.8%); CenturyLink (CTL -5%); Consolidated Communications (CNSL -3%); Telephone & Data Systems (TDS -1.8%).

  57. API inventories ?  looks like oil had a little bounce which is reversing now, so may not have been great. 


  58. API shows a draw of 9.2 million barrels of crude and a build of 300k gasoline. Distillates dropped by 2.1 million barrels. Should get prices up a bit maybe.


  59. Big crude draw but gasoline build is also higher 2nd week in a row.  Damper on the crude pop. 

    http://www.zerohedge.com/news/2017-08-15/wti-lifts-towards-48-after-biggest-crude-inventory-draw-september

    API

    Crude -9.2mm (-472k exp) – biggest draw since Sept 2016

    Cushing +1.7mm (+700k exp)

    Gasoline +301k (-450k exp) – second weekly build in a row

    Distillates -2.1mm (-250k exp)


  60. Sooo….I have "good" insurance. My 3 month old needs generic Zantac and our insurance has decided that his dose (which his doctor prescribed) is "excessive". Mind you, both of his parents are physicians and know the dosing is not anywhere near excessive. What is excessive is his discomfort from reflux when the poor guy is sleeping. So, I'm paying cash for it now. What the hell are we doing??? If I didn't have the cash for this he would be screwed. I'm told by the pharmacy that I need to appeal it, who the F has time for that?!?!? I'll be operating all day on people who's insurance also won't pay, so I won't get paid, and now my insurance doesn't pay.  The insurance company is now doctoring my kid from some computer. 


  61. Jeffdoc – Thankfully this nightmare will be over once Trumpcare is implemented </sarcasm>

    But sorry about your son – hope it gets better.


  62. API/Learner, Craigs – Seems bullish enough to me but apparently not enough to crack $48.  These guys are in big trouble.  Of course, don't forget all those open contracts with only 5 trading days left.  266,000 I assume is not including today or they are really f'd.  

    Insurance/Jeff – I'm curious, are you surprised by this?  I understand it's hard to grasp until you are personally impacted but people wonder why I'm such a liberal and I think it's because I have employed hundreds of regular people in various companies since the 80s and I've seen how abused they are by the system – so I've always been sensitive to it and clearly it's gotten worse and worse every year.  

    This is why the real problem with US medicine is the insurance companies – they are nothing but an impairment to the system and they add 30% to the cost of health care.  It's bad for patients, it's bad for doctors because the only way they make money is to squeeze you on both ends.  

    Image result for insurance profits health care costs

    Image result for insurance profits health care costs

    Image result for insurance profits health care costs

    Image result for insurance profits health care costs

    Image result for insurance profits health care costs

    Image result for insurance profits health care costs

    This HAS to stop.  This is our Government's "Let them eat cake" moment – they really have no idea how far they have pushed people and, if the put forth Trump's health care program, there will be blood on the streets.  As you've noticed, people get pissed when these things start affecting their children's lives…


  63. St. J, thanks. The kid is fine and he'll grow out of this. Many infants deal with reflux, in fact most do. It's only treated when it's disruptive to the child. 


  64. Phil /Surprised

    I'm surprised you think I might be surprised. No, I'm not surprised, just irritated. it's not hard for me to grasp either…I'm personally impacted by this every day when I hear my patients going through similar situations. My comments were predominantly venting, and to share that no one is immune to the stupidity in healthcare.  It's a shame, I often bear the wrath of patients and their families when they go through similar situations and I'm not the one to blame…it's the insurance company and the administrators. They've added so much crap to the system and are literally sucking it dry. Sure, we need both of them at some level, but there's a fine line between trying to save cost and dictating care. In this case as in many that line has been crossed….and I'm irritated by it. Some doc sitting at a computer without a clinical practice has decided that my kid's doctor is wrong. My recourse is to pay up or call and "appeal". Therein, the decision is neither mine nor his pediatrician's, it is the insurance company's, and that is wrong. 


  65. My dentist who is a very conservative guy once told me that it made no sense at all to have insurance companies in this country who are not non-profit entities. If we are going to keep the system we have (which I think is bad anyway) we should at least start there!


  66. And do something about the price of prescriptions! From what I understand, pharma companies make most of their profits in this market because other countries actually negotiate prices. Would that damage the R&D efforts if we did or only the companies bottom line. There has to be a simpler solution.


  67. craig-CL.  Are you shorting now or waiting till tomorrow's EIA numbers?


  68. http://oilprice.com/Energy/Oil-Prices/Are-Strong-US-Crude-Inventory-Draws-Sustainable.html

     Phil, Latch, Craigs -  Decent article actually from last week … state of the oil inventories currently.  Recent inventory draws are a combination of temporary increase in demand (which looks unsustainable) and lower net imports ( also unsustainable as disrupted production in other areas comes back on line).  The charts are quite good and the data tells the story.  


  69. DBA

    WHERE did we have the DBA spread for Jan?

    Did Phil make any adjustment to it?

    Someone please share if you know…I have been away.


  70. jeffdoc 

     

    I agree with you

     

    Standard of care determined by the MDs

     

    No need for insurance company


  71. Phil – "horrible" liberal – Go all the way, ins co, managed care org and pharma should all be nationalized to serve the public interest.


  72. Good morning!  

    I have to be at the Nasdaq this morning and should be back by noon and then we'll try a Webinar at 1pm, hopefully.  Bottom line is I'll barely be able to chat.  I have to get an early start as I didn't feel like sleeping in the city but I'm also worried about the morning commute with Trump in residence.  I'm sure I'm on some kind of list at this point! 

    Yet another nice pop in the Futures this morning at the EU open and they are up almost 1% – about to test 3,500 on EuroStoxx, which should get rejected from 3,400 so 20-points (weak) is 0.5% and a strong rejection would be 1%, so that then translates to expecting at least a 0.5% pullback on our own indexes from their runs.

    On the DAX I'd call it 300 points up so 60-points back from 12,300 would be 12,240 (weak) or 12,180 (strong)

    The Dow had a 400-point run (1.8%) to 22,050 so 80-points back is 21,970 and then all the way back to 21,890 but I'm only expecting a weak retrace for now.  

    Still, that's another nice $400 dip on /YM so why not play it short at 22,050?

    /ES had a 30-point run to 2,470 and that's 6-points back to 2,463 and then 2,457 if it's so inclined to fill that gap.  

    /NQ 5,940 is an air reject from 5,950 from 5,800 and, even though it's 150 points, the Nas loves those 25-point lines so we'll look for 5,925 and 5,900 and below 5,900 means the others are likely to at least do a strong retrace too.

    /TF 1,370 back to 1,400 was a narrow move (and we fell from 1,430 so it was a 50% bounce which failed at 1,400).  That was meant to retrace 6 and 12 points so 1,388 is the line to watch to see if we're really recovering and below that is a fail on the RUT.  

    In the bigger picture, 1,430 to 1,370 was a 60-point drop so 12-point bounces to 1,372 and 1,384 so that's our real zone of contention on /TF – between 1,384 and 1,388 and whichever way we break is likely to determine which way the market breaks.  And look what happens when we zoom into the 5-min chart:

    See, right where the 5% Rule predicts we'd consolidate with 1,386 the center of the triangle squeezy thingy.  

    2,470 on /ES is the easiest shorting line at the moment as it's a good place to stop out over.  

    Oil held $47.50 and this should be a good last effort to go higher before the weight of the contracts drag them down.  With 5 days to trade, there are 210,000 open so still 40,000/day to dump is still too heavy – though still a bit too crazy to play but I'd short a good spike after inventories, especially if we could hit $48.50.

    Brent is now MORE than $3 ahead of WTIC – that's a big stretch! 

    $2.80 on /NG is where I start having conviction so the entry is really a question of what you are willing to lose vs the risk of missing the next run.  Unfortunately, a 0.10 drop is $1,000 per contract, so it's not nothing but around $2.85 I feel compelled to begin scaling in. 

    Behold the full faith and credit of the United States (despite the Fed doveishness):

    /KC had a nice dip.  There's no evidence that this line ($135) has support yet.  It was the prior breakout so the 10-point dip should get a 2-point bounce ($137) at least but then we'll see if we get to $139.  The Dollar is not likely to help so it will be a good indicator of Coffee's real strength.  

    Can't get motivated to play /SI or /YG with the Dollar on the rise.  Copper ripped higher on tariff talk:

     


  73. Surprised/Jeff – Well I was surprised at your tone, so I asked to clarify as it's hard to tell sarcasm in print sometimes.  It's an evil system with inadequate regulations that allows some idiot working for an insurance company who has no knowledge of the situation to override a doctor who's made an actual diagnosis.  Sure they can claim some scientific model that's accurate to 99% but it's still an average and even if they set a high average for dosage (I doubt it) – it still allows them to reject thousands of requests that save the company millions of Dollars – unless you are the kind of person who has the time, education and perseverance to go through the appeal process but, if you do, you are probably in the top 10% and will likely just pay out of pocket to avoid the hassle – so they win anyway.  This isn't so much insurance as it is game theory with people's lives in the balance.  

    You don't need insurance if everyone is covered.  That eliminates about $800Bn of health care spending right off the bat.  That's $5,000 per taxpayer without even beginning to negotiate drug prices.  And the real dirty secret of Health Care is we already have a working system in this country that more efficiently provides care to 40M people because we cut out the insurance company - Medicare!  

    Image result for medicare cost vs private insurance

    Image result for medicare cost vs private insurance

    Image result for medicare cost vs private insurance

    Yet that's the program the GOP is trying to kill?

    Image result for medicare cost vs private insurance

    And, don't forget, Medicare is skewed towards the old and unhealthy – they do this with every disadvantage.

    Trump declares war on Medicare despite campaign promises …

    The neverending Republican war on Medicare – Daily Kos

    Cuomo: Plan To Cut Medicare Funding From Counties Is 'War On New …

    And people wonder why I'm a Democrat?  How can you be on the Republicans' side?

    R&D/StJ – Well, instead of dozens of companies hiring thousands of scientists to all come up with competing ways to prevent acid-reflux or give you erections, we could have an organized system that pools and allocates those resources so the finest minds in any specialty could freely work together and exchange information – which is how science functions best.  Instead we have top-secret labs working against each other to race new drugs to market (as long as the disease is profitable).  And God forbid they actually cure something, like GILD with Hep C – well the shareholders don't like that one bit, do they?  That is the very definition of a badly broken system, isn't it?  

    Speaking of badly broken:

    Do you know what's really driving Trump nuts this week?

    Former President Barack Obama's Charlottesville tweet the most liked ever

    Barack Obama's three-part tweet of a Nelson Mandela quote in the wake of is the most liked tweet in Twitter's history. 

    This must be driving the Tweeter-in-Chief nuts!   He's all about the popularity and Obama backslaps him from beyond the Presidency with a single (3-part) tweet!  

    Uh-oh – He's after AMZN again this morning.  I guess the WaPo said something he didn't like.

    Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!

    This is a sick, petty man who really should not be trusted with nuclear codes (or any other aspect of running our country).  

    For every CEO that drops out of the Manufacturing Council, I have many to take their place. Grandstanders should not have gone on. JOBS!

    Like a 5 year-old who says he doesn't want to be your friend anymore because you disagree with him.

    Made additional remarks on Charlottesville and realize once again that the  News Media will never be satisfied…truly bad people!

    DBA/Maya – In the LTP, hasn't been changed since last year:

    Short Call 2018 19-JAN 23.00 CALL [DBA @ $18.94 $-0.16] -30 8/5/2016 (156) $-2,550 $0.85 $-0.78 n/a     $0.08 $-0.00 $2,325 91.2% $-225
    Short Put 2018 19-JAN 21.00 PUT [DBA @ $18.94 $-0.16] -30 8/4/2016 (156) $-4,800 $1.60 $0.58     $2.18 - $-1,725 -35.9% $-6,525
    Long Call 2019 18-JAN 17.00 CALL [DBA @ $18.94 $-0.16] 30 6/19/2017 (520) $10,800 $3.60 $-0.68     $2.93 - $-2,025 -18.8% $8,775

    We'll roll the short puts and sell more calls and puts in 2019 (and probably roll the 2019 calls to 2020) – one day we'll hit it.  

    Nationalization/Naybob – Just finished watching Ken Burns' "The Roosevelts" and you forget how hard he had to fight to put an end to the Capitalism Hunger Games we used to have for a country but, sadly, even while you watch him putting programs in place – you can see that the same opposition forces have been fighting back for 80 years and now they've got the upper hand and they are rolling back many of his good works.  


  74. Latch I was long CL overnight. I will short after EIA if that spikes the price up as Phil suggests. We will see.