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Threatening Thursday – North Korea Threatens to Nuke Japan and US – Markets Shrug

Does anything matter?

This morning, North Korea threatened to use a nuclear weapon against Japan and turn the U.S. into “ashes and darkness” for passing fresh UN sanctions earlier this week - fiery rhetoric that is likely to exacerbate tensions in North Asia.  “Japan is no longer needed to exist near us,” the state-run Korean Central News Agency said on Thursday, citing a statement by the Korea Asia-Pacific Peace Committee. “The four islands of the archipelago should be sunken into the sea by the nuclear bomb of Juche,” it said, a reference to the regime’s ideology of self-reliance.

I love that that's a message from the Peace Committee.  I can't wait to hear what the War Council has to say!  

Keep in mind these guys just fired an actual ICBM right over northern Japan and no, it was not shot out of the sky or disabled in flight.  Japan simply advised it's citizens to seek shelter and hope for the best.  There's really no time to react as this would be like New York bombing Chicago – it's a very short flight at 15,000 miles per hour (yes, that's how fast they go).   Anyway, it's all just a fun fact as the Nikkei has already shaken off the news and headed higher this morning and our markets are flat though Europe is turning down slightly.

Meanwhile, in the United States, the war on the poor continues and the Top 1% have scored a major strategic victory by having their pet Congresspeople in the GOP plant legislation in the budget bill that essentially requires the IRS to audit all 28M recipients of Earned Income Tax Credits.  At the same time, the Republicans are cutting the IRS budget so, effectively, they are making it impossible for the IRS to do their actual jobs and audit high-income returns.  

Earned IncomeTaxCreditWithOneQualifyingChild.PNGThe IRS already spends 39% of their time auditing EITC under the current rules and these audits account for just 7% of their revenues, this legislation would triple the time required while lowering the overall budget.  The amounts at stake in EITC audits are relatively small. Overclaim errors are often just a few hundred dollars, compared with the hundreds of thousands or even Millions that can be recovered from deep-pocketed corporations and individuals.  There is no requirement to audit rich people.

Not only would this use 120% of the IRS's time but it will also force 28M low-income Americans to go through a long, tedious process in order to get the refunds, which are also now going to be held up for months, denying millions of people money they count on to live.  And, of course, these are the people least able to hire professional help to prepare their taxes – it's financial torture for the poor in a move aimed to discourage people from even applying for the credit in a stealth aim to nuke a $60Bn budget item to free up more money to distribute to the Top 1%.  

This legislation came straight out of the Koch Brothers' Heritage Foundation under the very Republican title of "Reforming the Earned Income Tax Credit and Additional Child Tax Credit to End Waste, Fraud, and Abuse and Strengthen Marriage" which laughingly states that: "A sound welfare system should encourage self-sufficiency through work and marriage."  So, in the Koch Brothers' World, you are self-sufficient only if you submit to being a wage slave or submit to a man who will support you – good luck with that!  What's next?

None of this matters because – TAX CUTS!  Not for you, really, unless you are in the Top 0.01% (making over $1.6M per year) but it sounds like fun anyway, right?  Remember, the budget bill passes and that screws the poor out of another $60Bn (and Medicare cuts will free up another $487Bn for distribution to the wealthy while the poor die on the streets), which paves the way for Trump to claim the massive tax cuts he, his family and his friends will be getting will be "revenue neutral."  

Trump tweeted out yesterday that tax cuts are needed "more than ever before" due to the hurricanes and, of course, the base loves that but do the people Texas and Flordia who were actually affected by the flood think it's a better idea to cut their individual taxes by a few hundred Dollars or perhaps the rich around the country should shave $100Bn (10%) off their own tax cut to directly aid the hurricane victims and rebuild vital infrastructure.   

THAT is what Governments are supposed to do – pool the people's resources so they can act in times of necessity.  Our actual Government is being dismantled and replaced by an Oligarchy that rivals Russia's and the most terrifying thing is how complacent people are about it.  Well, maybe it's the second most terrifying thing as the first has got to be how Trump can flat-out lie and no one calls him on it.

China, in FACT has a standard business tax rate of 25% and businesses are effectively are taxed up to 45.6% when factoring in additional fees levied by local governments, social security payments and other royalties.  By comparison, a study of corporate tax rates by Trump's own Congressional Budget Office published in March found that, while American companies were subject to a statutory corporate income tax rate of 39.1%, after deductions and credits they enjoyed an effective rate of just 18.6% in 2012, the last year for which complete data were available – already the lowest effective Corporate Tax Rate in the World!  

Imagine if Obama flat-out lied in order to push his legislative agenda?  Rember the big deal about him saying you could keep your Doctor under Obamacare which turned out SOMETIMES not to be true two years later, when the stripped-down legislation finally passed?  We never heard the end of it.  Yet Trump does stuff like this every day and the Billionaire-owned Media says NOTHING!

So the crackdown on DACA was simply a hostage-taking by Trump and the GOP to force Democrats to sign off on the ridiculous wall.  Really Republicans – what would Reagan say?  What would any rational person say?

Yes, we're still painfully short the indexes as well as oil, which is testing $50 this morning.  

 


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  1. Phil this SA author seems to think oil is heading higher and I was curious what you think of their premise?

    https://seekingalpha.com/article/4106777-listen-carefully-oil-bulls-wall-streets-change-tune


  2. Good morning, All!

    The webinar replay is now up!

    https://youtu.be/JMkgyd3PvwA



  3. Sick of the fear porn over N. Korea. He better fire them all at once because once he does he has maybe 20 minutes left to live. Everyone knows that including him. So seriously, lil Kim… I dare you. POS. I do understand we have been threatening him for the last 50+ years which I find equally ridiculous but we don't have to pay attention to his silly threats. We have a military for that.


  4. Sometimes it's better to be lucky than good:

    http://ritholtz.com/2017/09/my-friend-is-beating-me/

    First I’ll comment on your friend. Reading this reminded me of something Mark Twain once said, “It is strange the way the ignorant and inexperienced so often and so undeservedly succeed when the informed and the experienced fail.” This perfectly describes the stock market. The experience your friend is having in Facebook is the reason why millions of people show up to play this game every day. The potential exists for somebody without any skill or knowledge to make a lot of money, which entices the amateur and frustrates the professional.

    There is nothing you can say to convince your friend that having 100% of his account in Facebook is a bad idea. Everyone learns at their own speed and through their own experience. Some of this stuff just can’t be taught, so trying to change somebody’s mind is largely a waste of time.


  5. FTR x today.. 


  6. Breaking up with Mexico on NAFTA could be costly in many ways:

    http://www.politico.com/magazine/story/2017/09/11/donald-trump-us-mexico-relations-215594


  7. Is big tech in trouble politcally:

    https://www.buzzfeed.com/bensmith/theres-blood-in-the-water-in-silicon-valley?utm_term=.isyYBzdjD#.kge9EgxB4

    This isn’t to say that the end is near for these new giants — or even for Uber, whose business is, it says, still growing. Just that the golden age is over. The new era for them will be normal politics, normal regulation, with California senators deep in their pockets who fight for them as hard as Texans fight for oil, but with a deep bipartisan current flowing against them. They’ll win some and they’ll lose some, and some of their losses may be as bad as what happened to Microsoft in the 1990s when it flew too close to the sun — and then faced an antitrust lawsuit that almost broke the company up and probably changed it enough to benefit, among others, Google.


  8. Wow, this market is simply not allowed to go lower.  

    I missed my chance to get out even (1,421.38) on /TF – it only lasted a few seconds and I was still finishing my post.  Hopefully another chance as I'm still nursing oil with 14 short at $49.30 now – I sure hope my premise holds into next week!  

    I wonder, if NoKo actually nukes Japan, if our market would still be up 15 mins later?  

    Aramco/Craigs – I agree that they will do whatever it takes to push oil higher but the reality is that they seem to have given up on 2018 entirely, which seems to me that this recent, desperate push to pump oil prices higher is failing.  Do I agree that the whole thing is a manipulated scam coordinated by oil producers and Banksters?  Of course I do.  

    Saudi Arabia is preparing contingency plans for a possible delay to the initial public offering of its state-owned oil company by a few months into 2019, according to people familiar with the matter.

    Saudi Arabia is also contending with weaker oil prices, which will help determine the value of Saudi Arabian Oil Co., as Aramco is formally known. The government has previously said the valuation may reach $2 trillion, while analysts, including those at Sanford C. Bernstein & Co. and Rystad Energy AS, have tended to give lower estimates.

    Riyadh built a coalition between OPEC and other oil producers last year to reduce supply and bolster prices that by then had already retreated for two consecutive years. The oil glut has yet to dissipate and analyst forecasts compiled by Bloomberg show prices won’t average $60 again until 2019. Brent crude on Thursday was trading down 0.2 percent at $55.03 a barrel as of 1:36 p.m. in Singapore.

    As I have often explained, it's not free to manipulate oil prices.  All those profits we make shorting oil off those BS run-ups come out of the pockets of the traders who goose the prices but that's their real job and the oil producers pay them to do it.  100M barrels of oil are sold each day globally and getting an extra $10/barrel is $1Bn more PER DAY so what's losing a few million to guys like us in the process?

    With 250Mb left in Oct, they only had to trade 87M barrels ($4.3Bn) to get prices from $48 to $49 so they made $100M selling the oil and will lose less than half of that when they have to dump back out.  That's the game but there's only so far they can push it before they lose more than it's worth to maintain the price.  The trick is in figuring out how long they can spin the plates.  

    Big Chart – Madness!  

    NoKo/Mkucs – Sure, can wipe them out (but while avoiding contaminating China or SoKo?) AFTER he obliterates a major city and sends markets tumbling 20% or more in a few days.  I think ignoring the situation would be a bit of a mistake – especially from an investing perspective.  If you can ride out a 20% dip by being very well hedged, then fine but don't be complacent about what can happen.  And, of course, threatening to Nuke Japan has a resonance over there that will necessitate a reaction – they actually remember being nuked – for us it's an abstract.  

    Related image

    NoKos bomb is at least 10x more powerful than Hiroshima, which leveled 2 major cities.

    Image result for nagasaki bomb animated gif

    Image result for nagasaki bomb animated gif

    Ugh, had to stop out of oil at $50 with a $10K loss, will get back in below with tight stops but who knows when this will end!  Still in the /TF shorts with 15 at 1,421 and down $3,500 there – not a good week for shorting!


  9. Phil, can you recommend any SCO plays for future impaired? And with SCO what time frame is best to follow? i.e. month vs 3 months vs 6 months, etc…


  10. FTR/Jabob – Only down 0.33 so far on paying an 0.60 dividend.  Happy to collect the money on our shares.  

    • U.S. crude oil hits $50/bbl for the first time in five weeks, extending yesterday's strong gainsafter forecasts for stronger oil demand by the International Energy Agency; energy stocks (XLE+1%) open strong as WTI currently +1.5% at $50.05/bbl after gaining 2.2% yesterday.
    • WTI popped above its 200-day moving average level of $49.55 earlier in the session, a level it had not breached on an intraday basis since Aug. 10.
    • Brent crude now +0.9% at $55.69/bbl for its highest since April, after rising 1.6% on Wednesday.
    • The gains followed an IEA report which raised its estimate of 2017 world oil demand growth to 1.6M bbl/day from 1.5M bbl/day.

    SCO/JMD – Sure.  We can assume the nonsense will be over by Nov (but before Thanksgiving has another rally) and SCO is a good way to play that.  

    In the OOP, let's add: 

    • Buy 20 SCO Nov $33 calls for $4 ($8,000) 
    • Sell 20 SCO Nov $39 calls for $1.80 ($3,600) 
    • Sell 10 SCO Nov $35 puts for $3 ($3,000) 

    That's net $1,400 on the $12,000 spread that makes money as long as oil is under $50 in November.  Upside potential is $10,600 (757%) in 64 days.  That should pay for our Christmas shopping and also makes a nice market hedge. 

    In the STP, let's do the same spread but with 50 bull call spreads and 25 short puts.  


  11. Dipping my toes back in with 5 short /CL at $50.50 but tight stops. 


  12. GNC up nicely. 

    Trading above the 200dMA.


  13. Nattering, it feels like I should fear neither the reaper nor QT


  14. for MoviePass to work, doesn't Emma Stone have to take a large pay cut?


  15. Muck – You were on fire yesterday.  Proud to stand to arms brother. 


  16. MZ – "Nattering, it feels like I should fear neither the reaper nor QT"

    Too late to have any feelings, it have wrought a dead man walking, viz. zombie.



  17. TY Natter, just stating the obvious. Truth is treason in an empire of lies. 


  18. Options Opportunity Portfolio Review (OOP):  It's been a quiet month, with just 3 new trades (XRT, MO, SCO) including one we just made today.   The last review was Aug 17th and we stood at $311,063 which was a pullback from our July 18th high of $325,753 so we decided to get more bullish and now we're back at $321,930 – up $10,867 for the month and up 221.9% overall in the first month of our 3rd year.  

    We've been very conservative this summer and we're only using $43,500 of IRA margin – so no impact on our buying power, which is over $600,000 of ordinary margin.  That leaves us flexible enough to handle whatever the market throws our way going forward.

    With North Korea threatening to nuke Japan and the US this morning, I'm back to being concerned as to whether we are covered well enough – in case of catastrophe.  No, I don't think he'll actually do it but we could end up with a Cuban Missile-like tension situation in Asia because Japan cannot let a threat like that go unanswered from their next-door neighbor – especially as Abe likes to present himself as strong on Defense.  

    For those who are new, we transitioned this portfolio to more of a long-term portfolio as our first few months (back in Aug 2015) made us realize most people were not able to follow active trading due to the platform restrictions at SA.  We've moved towards a hybrid portfolio that mirrors the style of PSW's Long-Term/Short-Term paired portfolios, which relies on long-term positions, short-term premium selling and hedging to create a steady income stream.  

    • CHL – Right at the money and it will expire on Friday.
    • NLY – On track but a long way to go.  With the Fed next week, I prefer to take the money and run, rather than risk giving back our gains so let's kill this trade.  
    • WTW – Not worried about them at all, just waiting to collect our last $800.  
    • FXP – Our short China hedge failed for the summer.  May as well salvage what's left on the long $22 calls and let the short $26 calls expire worthless.
    • TZA – Our primary hedge.  The net of the hedge was $3.35 and we can still salvage $2 from the Jan $15 calls so let's roll them to the April $14 calls at $3.35 for net $1.35 ($10,800) and we've paid for another 3 months of insurance while gaining $8,000 in strike protection.  If TZA hits $20, the April calls will be at least $6 for $48,000 vs their $26,800 current value so this is about $21,200 in protection against a 10% market drop but, more importantly, it's $48,000 of ready CASH!!! right when we'd need it most.  

    • SVXY – We hopelessly wait for the VIX to turn up.  It never happens but it's fun to hope!   The Sept hedge will expire worthless and the Dec spread – even if it pays in full, will only turn a small ($3,500) net profit – even if we hit it finally.
    • SQQQ – Our other big hedge was already rolled to March but up and up the Nasdaq goes.  The March $26 calls at $3.70 can be rolled down to the $23 calls at $4.90 for net $1.20 ($6,000) and we'll make that cost up later with a call sale as the Jan short calls wear down.  A 10% drop in the Nasdaq would pop SQQQ 30% to $35, which would pay $60,000 vs the $24,500 current value so $35,500 protection on this hedge. 
    • F – Right on track (we're in it for the dividends).  In fact, let's double down as we're going to let GM go
    • AAPL – This one gives us violent fluctuations but essentially right on track.  The Sept $140 calls are $19.15 and earnings are the last week of Oct, so after expirations.  The Oct $140 calls are $19.60 and I still want the protection so let's just do a straight roll to those.  

    AAXN – I'm tempted to buy back the short calls as it had such a nice drop but, as I'm worried about the overall market – let's just keep our powder dry.  Great for a new trade.  

    ABX – On track and not at all worried. 

    ATI – Wish we had more.  On track.  

    CDE – On track, not worried.  

    CHK – I like this for a bottom.  They are going to make at least 0.50 this year so $4.14 is silly cheap and maybe 0.75, which makes 8x $6 so let's buy back the short 2019 $10 calls (0.18 was last) and roll our 20 $5 calls (0.85, $1,700) to 40 of the 2020 $2.50 ($2.15)/$5 ($1.15) bull call spreads at $1 ($4,000) so we're taking and $1,800 loss and spending $2,300 more to move from 2019 $5/10 spreads that would have paid us $10,000 to 2020 $2.50/5 spreads that also pay $10,000.  Our upside at net $4,100 (not including short puts) is still over 100% despite CHK being a big disappointment so far.   Good for a new trade, of course.  

    • CLF – On track.  
    • CSCO – On track and good for a new entry but I hope it gets cheaper (and we lose money), so we can add more to our position at lower prices.  

    DBA –  Well, the good news is there's no food inflation.  2020 is out so let's roll our 20 2019 $17 calls ($2.85) to the 2020 $15 calls at $4.85 for net $2 ($4,000) but it will take a while to fill as the 2020s are barely trading.  Make sure you get a good price in 2020 before selling the 2019s as we strongly believe DBA will go higher.  

    DIS – Let's buy back the Jan $105 calls at $1.45 and take advantage of the low price to sell 10 of the 2020 $85 puts for $6 ($6,000) and I'm not at all worried about the short 2019 $80 puts ($2.65) but let's put a stop at them at $4 so our worst case is we gain net $2 in our pockets.  Our 2019 $90 calls are $13.20 and the 2020 $90 calls are $16.20 but if DIS goes higher, our $90s should gain faster, so let's hold off on that roll.  

    FNSR – They took a big dip but not too much damage so let's take advantage and roll our 2019 $23 calls ($4.50) to the $18 calls ($7) for net $2.50 and buy 5 more for 15 total

    FTR – They just paid us an 0.60 ($480) dividend today, which is not reflected yet.  Since the net of that trade was $14,888 and we're collecting $1,920 (12.8%) in interest, it's hard to get upset just because the stock is down.  Because of ex-dividend, they are down 0.92 today and that's the 2.5% Rule so let's take advantage and buy another 1,200 shares of stock at $12.82 ($15,384) and buy back our 6 short 2019 $15 puts ($6.70, $4,020) and sell 20 2019 $10 puts for $3 ($6,000) and let's buy back the 5 short 2019 $15 calls at $1.40 ($800) and see if they can bounce back

    Long-term, we expect FTR to be a 10% dividend payer.  At the moment, they are paying 20% so either they will cut the dividend to save cash and pay down debts or the stock will jump back to the $20s and that will make the dividend effectively 10% again.  Either way, we just gained $900 on 5 calls we sold in July and $120 on the short puts so that's $1,020 plus the $480 dividend today is $1,500 back this quarter against the $15,384 net cost is on track to pay back 40% of our money in a year – of course we want to double down!  

    GE – Fairly new and still good for a new trade.  

    GM – Way over our target.  Max payment on the spread is $12,500 and our net is currently $11,535 so why wait 16 months to collect the rest?  Sadly, we'll let this one go (cash out) but we have F still.  

    IMAX – On track.

    JO – Perking up again.  cheeky

    LB – Taking a pause at $40 and I want to wait for 2020 before making changes.  We're uncovered so aggressively bullish and I like them for a new trade.  

    M – On track but we'll watch earnings closely.

    MO – Hopefully it was a good bottom call.  New trade.

    • SGYP – Just crossing our fingers on the next trial.  
    • SPWR – On track.
    • SVU – I think either they get bought or there will be a rumor that they are getting bought (almost as good), so let's buy back the 2019 short $25 calls ($3.20) and buy 3 more 2019 $13 calls ($9.30).
    • TEVA – Not dead yet!  We just adjusted this so let's let it play out.  
    • TGT – Way over goal already.  I wish we'd bought more.  Hopefully M follows suit.  

    • TWTR – Also not dead yet and at our goal already but it's a net $8,000 potential spread and currently at $5,950 so hopefully another $2,050 (35%) coming to us between now and Jan so I guess it's good for a new trade – I just hate chasing things.  
    • UNG – On track.  Not inclined to sell new calls yet and the short Jans will expire worthless, then we'll consider a new sale.  
    • WPM – Our Trade of the Year is halfway to goal so on track.  
    • XRT – That was easy money.  Also pays off in Jan and on track for the full $5,000 and currently net $2,700 so $2,300 (85%) left to gain in 4 months is still good for a new trade, even though you are chasing our quick gains.

    We've slowed down our activity as the portfolio has matured and now it's turning into a nice little cash machine where our leftovers, like XRT and TWTR put us on track for thousands in quick gains while we wait for our longer-term trades to play out.  

    Now we come into earnings season and we have tons of cash, so we'll do a little bargain shopping if we can and I'm pretty satisfied with our hedges – just in case this market actually pulls back one day.  


  19. Do markets go down? I can't remember….


  20. Oil… wow. I have 90 long calls, how sweet! I did try to warn you…


  21. Phil -Interesting article on N. Korea which draws the same parallel you mentioned regarding the Cuban missile crisis.

    http://links.hks-belfercenter.mkt4851.com/servlet/MailView?ms=MTgwNzY5NjcS1&r=MTk5MzkzMDA1NjA2S0&j=MTEwMDgxODkxOQS2&mt=1&rt=0


  22. FU FTR!!!!!


  23. GNC/Albo – About time on them.  Turnarounds can be annoying to trade as they often take longer than you think they will.  

    Movie Pass/Mike – Not really.  As I'm sure you've noticed, there are a lot of empty seats in movie theaters and, if you ask the average owner if they'd like to fill them up for $2.50 each – they would say "sure" and crank up the popcorn machine, which makes them more money than the ticket revenues they split with the studios.  

    Anyway, as crazy as it sounds, MoviePass PAYS the theater for the tickets.  I'm sure they get a discount but their model is, well:

    MoviePass charges subscribers $9.95 a month, less than the price of a single movie ticket in some cities, and in exchange foots the bill for every film they attend during the period. The company plans to earn money by aggregating data on moviegoers’ habits, advertising and merchandise sold through its platform, and possibly a share of profits when subscribers splurge on in-theater popcorn and treats. Customers spend on average 123 percent more on concessions when their tickets are free, Lowe said.

    “I think it’s positive for the industry,” said Eric Wold, an analyst at B. Riley & Co. The most visible opposition has come from AMC, which may be plotting a subscription service of his own, he points out. “The exhibitors I have spoken with are very happy.”

    The company aims to acquire at least 2.5 million additional paying subscribers in the next year and retain 2.1 million of those, assuming it receives at least $10 million in additional funding from its new owners, according to regulatory filings. It was founded in 2011, sold a majority stake to Helios & Matheson Analytics Inc. in August and is shooting for an initial public offering next year.

    The movie service was inundated with sign-ups since cutting the price from $30, forcing some customers to wait almost a month before their passes arrive in the mail. About 150,000 people signed on in the first two days following the Aug. 15 announcement, and the site had boosted subscriptions to 400,000 as of Tuesday.

    MoviePass Chief Executive Officer Mitch Lowe, a co-founder of Netflix Inc., admits he “totally underestimated demand.” With a staff of just nine people, the company “was nowhere near prepared,” he said in an interview. It has since boosted the team to 35 to deal with the backlog.

    Some 75 percent of subscribers are value-conscious millennials, and a subscription encourages consumption of smaller, lesser-known films. That’s one reason Ted Farnsworth, CEO of Helios & Matheson Analytics, sees the service catching on. About 1 percent of all domestic ticket sales and 8 percent of e-ticketing for “It,” the blockbuster movie based on a Stephen King novel that hit theaters over the weekend, originated with MoviePass holders, he said.

    So they have to foot the bill for 1M people seeing maybe 4 movies a month and let's say they lose $10 per customer, per month.  That's $100M lost on the way to the IPO, which will ignore losses and focus on subscribers and they'll go public raising $1Bn on a $10Bn valuation and the founders and early investors will make Billions and the company can burn cash for a few more years and then who cares if all this analytics and on-line sales BS ever pans out?  

    Pompeii/Latch – That's cool, I was there on my trip to Italy, can't wait to see the film. 

    Down/Mkucs – What is that?  Good call on oil, hopefully that's the end of it. 

    NoKo/Albo – Traders have no sense of history.  A prolonged tension there can put a damper on the whole 4th quarter.  


  24. Cycle guy says up till end of month before a pullback. Right so far, he's calling for 54 by then. Half of that would simply close the gap in the spread with brent which is keeping up so far. Did gain 50c today I see, $5.50 spread now.


  25. Oil, that is. Black gold. Texas tea.


  26. Phil the GM spread is $7 not $5 so max payout is $17,500 versus $13,500 today.  Does that change your opinion?


  27. MoviePass/Phil – I have wondered why theaters haven't used a more robust variable pricing strategy (instead of matinee only discounts).  In regards to IPOs, "then who cares if all this analytics and on-line sales BS ever pans out? " — doesn't this kind of thinking have to not work at some point or is this back to Nattering's comment, the zombie economy and they'll print more money for anything and everything?


  28. Ilene – coming off of our GC discussions, this NASA global map of temperature anomalies and trends: default base years 1951-1980 gives some very eye popping results. 

    Talking monkey viewer discretion alert: This is not a hoax, and listening to Rush Limbaugh will endanger your families live's and FU your mind.  This is how science works, if you don't like it, tough shit, shut up and get the FU out of the way.  Warning: the graphic images may be disturbing and contain truthful data.

    You can run trends, anomalies, seasons, months, quarters against any set of base years, to your heart's content. Be sure to always check the poles, surrounding area, and hot spots along with the zonal mean plots.  Remember kids, cooler in summer (when ice melts) does not make up for warmer in winter (when ice forms).

    You can run anything from Jan 1880 to July 2017. Anomalies? Try the month of Jan which is dead of Winter on the north pole, for the years 2016-2017, base 1951-1980, use all three projections types. Note the north pole and everything surrounding it is smoking +10.6 C hotter which is +19 F.

    On trend? Wanna see some hot Russians, Alaskans, and Americans along with melting frozen tundra since 2010? Try running Winter, years 2010-2017, base 1951-1980, +10C on trend or +18F in the hot spots, Russia be en fuego.

    All the ice is melting and there is a reason why. Along the same lines, last two days, reamed and tore a #1 rated radio show host, a new one.  Part 1; Part 2  No Rush to judgment about a "hoax" here and Out.


  29. Yo Dip Stick, a little low there or what? - the link to the NASA site would be nice, it's definitely rum thirty and Out.


  30. Kids IRA/Phil – still sitting on cash for last year's contribution to kid's iRA. Hate it. Want a durable dividend payer, with some growth opportunity, and 'on sale.'   Anything leaping to mind other than FTR (already have plenty of that).


  31. Disney?


  32. MoviePass / Phil – It's really a mystery to me why theaters are not going along more. As you said, I would gladly get people in for free in my empty seats if they will pay $10 for my $0.50 popcorn bag. I don't really go to the movies myself since we have the projector at home, but for $10/month for unlimited I might make an effort. So it's one customer they would not have usually. Cheap customer acquisition path!


  33. AMC -  play from 9/5 (buy shares, cover with Dec 16 calls) is coming along nicely!


  34. Any reason TEVA is sinking today?


  35. What a tease at $50 on oil!  Well, got $2,500 of $10,000 back so far.  

    GM/Options – Well it makes it a tougher call but no, we can do better things with $13,500 and we doubled down on F, which is lagging in the recovery.   Auto sales got a big boost from the hurricanes and especially since insurance companies that provide loaners generally use American cars and then F and GM benefit from local inventory on the replacement cycle of TM, who would have to put cars on ships today so people can get them in a month with their claim checks. 

    IPOs/Mike – As long as the market keeps going up it's like 1999 in the dot-com era.  Pet food, for example, had a p/e of 10 or 12 as a low-margin, low-growth business but add a sock puppet and a web address and suddenly people are paying 1,000x earnings for the company.  I lasts as long as it lasts and then people get burned and no one can get funded for years – including legitimate businesses.  By the way, venture firms love when that happens because it allows them to buy into companies at rock-bottom prices.  Uber is pre-IPO at $60Bn while HTZ is $1.7Bn and Avis/Budget is $3Bn and every single taxi and limo company on the planet Earth combined wouldn't dent $10Bn but it's all about people believing in flying cars and Uber Eats and self-driving cars being shared and not bought, etc.  It's not too different than watching a science fiction movie in the 90s that was set 35 years in the future and making that your investing premise.  Speaking of which, Blade Runner sequel is out soon and they sure got the screens right! 

    Image result for blade runner advertising

    Still waiting for my flying car, though…  Pan Am would have been a bad bet too!  

    Dividend/Scott – GCI is cheap and will remind your kids that there used to be newspapers.  PSO tests them and prints their school books with a 6% dividend and a great price.  GE is cheap, NLY has 2020 $12 puts you sell for $2.50, which is more than the $1.20 dividend and a great entry at $9.50.   DIS is good too. 

    Movies/StJ – Also, I don't know if it's all over the country but movie theaters around here pretty much let people go from one movie to the next without paying again so it's almost always 2 for 1.  The kids do movie days with their friends and see 3.  They wouldn't go otherwise as the price is too ridiculous. 

    Look at the numbers for IT, they took in $100M for the weekend and $1M of it was from MoviePass so, in a single weekend, they spent $1M of the $6M their 500,000 subscribers pay them.  That's a completely F'd business model but people will buy into them regardless because they get eyeballs or, as we call them these days "subscribers" – though subscribers don't necessarily translate into profits (just ask NFLX at 220x earnings or AMZN at 250x).  

    How long can the economy sustain capital sucks like these is the real question.  As long as there is an endless flow of easy money – then we can afford to waste it on companies that never turn a real profit but, once money becomes tight, investors will be forced to choose who will give them the best returns and these companies – like dot com companies – can implode in a spectacular fashion.  

    Don't forget, Yahoo didn't "lose" all of a sudden in 2000 – they were still the dominant force on the Internet – people just changed their minds about how much they were willing to pay for revenues without profits. 

    TEVA/Jabob – Hit $20 too fast, people are profit-taking.  $5 run means $1 pullback ($19) is weak and $2 ($18) is a strong pullback.  As long as $18 holds, they are still on a bullish path.

    Guy on CNBC is saying how baffling it is that stocks with no earnings are outperforming stocks with earnings.  


  36. IBM/Phil – like any kind of a new entry here?


  37. Thanks Phil!


  38. Thanks NN, that's a great graphic. I'm learning how it works. :-)  


  39. IBM/Scott – Oh I love them down here:

    Pretty much our LTP play works but moving out to 2020 would be:

    • Sell 10 IBM 2020 $120 puts for $9.50 ($9,500)
    • Buy 20 IBM 2020 $140 calls for $16.20 ($32,400) 
    • Sell 15 IBM 2020 $160 calls for $8.30 ($12,450) 

    That puts you in the $40,000+ spread for net $10,450 and you have 28 months to sell short calls and you have 5 longs uncovered so virtually no danger at all in selling 10 short-term calls and, for example, the Jan $150 calls are $3.75 so you could collect $3,750 against your $10,450 (35%) in 127 (15%) of your 855 days to expiration.  So you'll get 6 shots like that for about $20,000 of pure premium sales while you wait for IBM to hit $160 and pay you another $40,000 – probably long after you've collected your spread costs.  

    That's so good we should add it to the Butterfly Portfolio but WITH the short call sale as well.  Personally, I'd rather wait until IBM is higher but that's not what the Butterfly Portfolio is about (safety first!).  

    • Boeing (BA +1.3%) is easily today's biggest Dow gainer after Wednesday's upbeat presentation, as CEO Dennis Muilenburg told surprised analysts the company was increasing production of its flagship 787 Dreamliner from 12 per month to 14 by 2019.
    • Cowen's Cai von Rumohr, who rates BA at Outperform with a $300 price target, raises his earnings estimates: "Because the block extension increases the number of 787's still to be delivered by 14%, we estimate that it could add 4%-5% to the program's profit accrual rate and $0.15-$0.20 to 2017 "core" EPS and $0.30-$0.40 to 2018 EPS.
    • Jefferies analyst Howard Rubel, who rates the stock a Buy with a $275 target, says assuming a cost of $145M per widebody and ~24% cash margins, revenue and profit from the 787 increase could be in the neighborhood of $3.3B and $800M, respectively, in 2020.
    • Canaccord analysts say BA's announcement could be positive for its suppliers, particularly Triumph Group (TGI -0.7%) and Spirit AeroSystems (SPR +1.9%).
    • Morgan Stanley analyst Adam Jonas thinks General Motors (NYSE:GM) could hit $50 if the right strategic levers are pulled.
    • Jonas suggests the automaker should seed an auto tech portfolio and reposition Cadillac ahead of the shift in the global auto cycle.
    • Yesterday, Seeking Alpha contributor Seven Capital Corners Management had its own suggestions for GM. The investment firm thinks insider buying by management and the creation of a tracking stock for the GM China business would drive shares higher.
    • Shares of GM are up 1.81% on the day and reached a three-year high of $39.18 earlier.
    • Core CPI rose an inline 0.2% in August –  but that's a 2.4% annual pace. On a year-over-year basis, core CPI was up just 1.7% in August, but that's stronger than the 1.6% expected.
    • The "significantly firmer" price data has Goldman's Jan Hatzius boosting his odds of a third Fed rate hike this year to 60% from 55%.
    • Hatzius and team for years have been consistently more bullish on the economy than the consensus. They remain so: 30-day Fed Funds futures are pricing in about a 40% chance of another rate hike this year (though that is way up from a few days ago).
    • Twenty-First Century Fox's (FOX -0.9%FOXA -0.9%) $15B bid for the rest of Sky (OTCQX:SKYAY) has been officially referred to Britain's Competition and Markets Authority for a 24-week review.
    • That comes after several weeks of Culture and Media Secretary Karen Bradley saying she was minded to such a referral to look into Fox's commitment to broadcasting standards and into how much influence it will give Rupert Murdoch in the UK.
    • Fox expressed disappointment: "Yesterday we wrote to the Secretary of State expressing disappointment that she had changed her mind and decided not to follow the advice of the independent and expert regulator Ofcom regarding broadcasting standards, but informing her that we did not intend to make further representations and encouraged her to make a prompt referral."
    • The company says it looks forward to engaging constructively with the CMA and that "we anticipate that the transaction will close by June 30, 2018."
    • Previously: Fox's Sky buyout headed for expanded probe in UK (Sep. 12 2017)
    • China Carbon Graphite (OTCPK:CHGI) has announced that a pilot scale production of graphene oxide was successfully undertaken in an integrated process with Hunan University.
    • "Market demands of graphene are expected to be between $195M-$1.3B with a compound growth rate of 47% in the next 5 years beginning from 2018. We plan to produce 10,000 metric tons of graphene oxide once we secure sufficient capital support," CEO Donghai Yu said in a statement.
    • RBC Capital says it senses a shift in investor sentiment toward AMC Entertainment (NYSE:AMC) following a breakout box office performance from It.
    • The firm also thinks some of the fears over the narrowing of the premium VOD window are overblown. RBC keeps an Outperform rating on AMC.
    • AMC execs talked shop yesterday at the Goldman Sachs Communacopia Conference. Highlights from the presentation included the potential for AMC to increase its pace of buybacks and for it to introduce a subscription service.
    • Source: Bloomberg
    • Previously: It lives: U.S. box office returns to life (Sept. 11)
    • Previously: Theater stocks higher amid key media conference (Sept. 13)
    • AMC +1.64% premarket to $15.45. Shares are up 23% since August 18.
    • "Cryptocurrencies cannot be reliably valued and they have significant ‘tail risk’ that could come in the form of a regulatory ban," writes Marko Kolanovic, JPMorgan's global head of quantitative and derivatives strategy ('Gandalf' and 'Half-Man, Half-God' are among his nicknames).
    • "Moreover, the whole cryptocurrency market exhibits some parallels to fraudulent pyramid schemes … While we don’t know whether the price of cryptocurrencies will go up or down in the near-term, the history of currencies, governments and financial fraud tells us that the future for cryptocurrencies will likely not be bright."

    • Shares of global miners are poised for sharp losses after China reported a surprise slowdown in business activity during August: VALE -3.1%RIO -2.7%BHP -2.2% premarket.
    • China's value-added industrial output, a rough proxy for economic growth, slowed for a second straight month, rising 6% in August vs. a 6.4% increase in July, and growth in investments was the slowest in nearly 18 years.
    • Copper is lower again following the data, and prices have now unwound by more than 7% since hitting their three-year peak on Sept. 6.
    • With margin-seeking investors selling their copper holdings in to LME warehouses, stocks increased another 16% during today's trade, according to data from commodities broker Marex Spectron.

  40. Can you clarify what the IBM butterfly play would be?

    Going to replace the PG short put/call positions closing tomorrow with anything?


  41. IBM/Tangled – It's the 2020 spread above plus the 10 short Jan puts discussed right below it. 

    As to PG, yes, I'm working on the reviews.  


  42. Phil – "Still waiting for my flying car, though…  Pan Am would have been a bad bet too! "

    You stirred me from my stupor, you and I both, I'm still waiting for the Jupiter 2 (1997) and Discovery 1 (2001).  1968 was a hell of a year, the basis for Blade Runner, Do Androids Dream of Electric Sheep? by Philip K. Dick was published.  Also, Arthur C. Clarke's 2001: A Space Odyssey was published and the film was playing at a theater near you. 

    The WS Champ Tigers Denny McClain became the 1st 30 game winner since “Dizzy” Dean in 1934; and also the last.  What a thrill, the following July we landed on the Moon, even with the dead Kennedy's, the future was bright and the sky was the limit, or so it seemed.  As for Pan Am, in this video note the shuttle – space station docking sequence, lunar lander module and weightless walking shoes, all Pan Am.    

    They sold us a futuristic 2001, shagalicious James Bond world, which turned out to be a Fahrenheit 451 burn and A Clockwork Orange droog fest.  Kubrick nailed it on both ends, imagine that.  Great publicity with forward looking thinking is not a guarantee of future results. And now back to my rum and Out.


  43. Short-Term Portfolio Review (STP):  $487,027 is down $6,813 from our 8/15 review but no apologies there as it's fantastic that that's all we lost while the LTP made 6 figures.  That's because we made sensible adjustments back on the 15th but, otherwise, we didn't touch our STP, which has $481,657 in CASH!!! – just in case we ever need some money if things do go on sale.  

    Despite the mountain of CASH!!! (we started with just $100,000 on 11/26/13), we are highly leveraged but our advantage now is that there really isn't that much risk of the markets moving 10% against us vs the very good possibility they move 10% in our favor, which will trigger cascades of cash from our hedges.  It's like one of those penny pushing machines that you can't believe hasn't paid off yet.  

    Image result for penny pushing machine

    Always remember, these are NOT bets, they are HEDGES – this is a portfolio that protects our LTP, which started with $500,000 so 20% of that investment was geared towards hedging – as well as some fun bets we made along the way.  Though the market has generally gone up, every once in a while a nice bunch of pennies does fall into our cup.

    • AMZN – As I said last time, we should stop out if they pop $1,000 but they were at $983 on 8/15 and now $990 – so not too scary.  I'm more tempted to go with another short than get out of this one.  
    • FAS – Gave us a scare but also calmed down.  Notes from last time still apply:  "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."  So waiting and seeing hasn't hurt us so far, we gained $4K since last month, in fact – selling premium rules!  

    • ABX – Not worried.
    • GOGO – Will expire worthless.
    • SBUX – Not worried.  Don't you just love free money?
    • LABU – Easy money on that one.  I'm really starting to like that ETF.  Let's buy back the March $50 puts so we won't be too upset if we dip to $60 (where we'd sell more puts and roll the long calls for more time).  
    • SQQQ – The way we lock in gains on the LTP (about $100K) is to take some of that money to add hedges to the STP.   In this case, the March $25 calls are $4.15 and the March $23 calls are $5.15 so it costs us $1 ($10,000) to add $20,000 more protection AND increase the delta by 20%, which means our now $51,500 worth of March $23s will gain 20% more on a dip than the $25s would have.  A 10% dip in the Nas would pop SQQQ 30% to $35 and our gains aren't capped until $40 and even then only 6/10ths.  So, $35 would make the $23s at least $12 for $120,000 vs the current net $30 means we have $90K of protection here – that works. 

    • TZA has become our bigger hedge and again, we're going to invest some of our $100,000 LTP gains in improving our hedges.  In this case, it's the same as the OOP, where we'll roll our 200 Jan $15s ($1.90) to 200 April $14s ($3) for $1.10 ($22,000) and that's paid for 3 more months of protection and added $20,000 in strike for the low, low price of $22,000.  

    We'll roll the short puts down the line and, when the Jan $22s expire, we'll sell April whatevers (the $25s are $1) and recover some of the money but, meanwhile, we spent about 1/3 of our LTP gains to lock them in with better hedges.  At $20, 200 $14s would be $120,000 vs current price of $13,000 + $22,000 new is $45,000 so $75,000 to gain on these in a 10% correction means we have $165,000 on TZA and SQQQ (both pay more above 10% too) and another $45,000 from FAS so $210,000 to compensate us in the LTP if the markets go sour.

    Since we're up $100K for the month, we know that can be easy come easy go but it's hard to imagine losing much more than $250,000 – even on a sharp correction before we have time to add more covers with all of our side-line CASH!!!  

    That's what hedging is all about – it gives us confidence to deploy our cash and make the kind of plays that do make $100,000 in a month!  


  44. Oil down nicely at $49.65 and $50.50 to $49.50 is $1 so 0.20 weak bounce is $49.70 and that's my stop (reduce back to 5) and strong bounce would be $49.90 but if my theory is right and over $50 was BS, then the drop is simply $50 to $49.50 and that strong bounce would be $49.70 so I REALLY don't want to see that taken back.

    /TF about to put me even too – what a great finish! 

    I'm telling you, recovering from a $15,000 loss is as good as winning $15,000!  angel

    Rum/Naybob – Seems like you are getting it intravenously…  What was McLain's deal?  He had that one year  (31-6) and then 24-9 but lifetime fizzed out to 131-91, which is respectable but how can you be that great and then nothing?   Interestingly, Dizzy also flashed out, finishing in 10 years at 150-83.  2

    That's why they call it the Cy Young award.  22 years, 511 wins, 316 losses.  Probably the most unbreakable record in sports.  


  45. Phil:  I just signed onto the site and read your opening commentary on the war against the poor (and the middle class!).  It is excellent and I have sent copies to numerous friends and associates.  It is unfortunate that the points that you make barely surface as part of our national dialogue.  In any case, it is rare that they are as well expressed.


  46. Oh yeah, and Babe Ruth pitched only 8 seasons and was 94-46!  Would love to see the parallel earth where he stayed as a pitcher!   Wasn't even 8 years as he hit the Yankees in 1920 and only pitched one game there (won it) and 2 the next (won them) before being consigned to right field where a pitcher with a very bright future shagged flies in relative obscurity.  

    Image result for babe ruth pitching gif

    Welcome John!  Much appreciated.  It is my humble hope to forward the conversation, especially amongst our entitled class.  


  47. Nice recovery Phil. Looking for TF to hit 1420. Do you have any lines? I've seen 1430 from you but not sure about 1400, 1420.  Thanks


  48. All red except the Dow at the moment, we'll see if they can nudge the S&P up to close green (2,495 on /ES, 2,498 on SPX).  

    • The broad equity REIT sector had been on nice run for most of the summer, perhaps benefitting as long-term rates surprised everyone (again), and headed nicely lower. They gave back some ground this week as the 10-year Treasury yield jumped nearly 20 basis points, and markets again started to price in one more Fed rate hike this year.
    • Today, though, the IYR is up 0.55% and VNQ 0.75%, while the S&P 500 posts a modest loss.
    • Mall and shopping center names: Simon Property (SPG +2%), Macerich (MAC +2.6%), Kimco (KIM +2.9%), Taubman (TCO +1.1%), DDR (DDR +2.7%)
    • Self-storage: Public Storage (PSA +1.9%), CubeSmart (CUBE +1.7%)
    • Office: Boston Properties (BXP +1.8%), Kilroy (KRC +2.4%), Paramount Group (PGRE +1.6%)
    • Underperforming are the hotel names: Sunstone (SHO -1.7%), LaSalle (LHO -1%), Chesapeake (CHSP -1.6%), Pebblebrook (PEB -1%)
    • New court filings reveal that Google (GOOGGOOGL) lost an appeal in July related to authorities using a U.S. search warrant to access data stored overseas.
    • Chief Judge Beryl Howell last week decided to hold Google in contempt for defying the order and fined the company $10K per day but suspended the fine pending an appeal. 
    • Microsoft won a similar appeal in New York last year when the court found that the Stored Communications Act doesn’t apply outside the United States. 
    • The Supreme Court will decide later this year whether domestic warrants work for overseas data. 
    • In happier Google news, the YouTube TV service extends to 8 more cities, bringing the total markets up to 49 since rollouts started in February.  
    • Previously: Three former Google employees sue for pay discrimination (Sept. 14)
    • Visa (V +0.3%) and Mastercard (MA +1%) have warned financial institutions in the U.S. that over 200K credit card accounts were stolen as part of the Equifax breach, reports the KrebsOnSecurity blog.
    • The window of exposure for the cards in question was from November 2016 to July 2017.
    • Shares of Visa and Mastercard haven't been impacted by the Equifax story.
    • A day after noting a promising ratings rebound at MTV, Viacom has given a contract renewal to a key anchor on one of its other networks: Trevor Noah.
    • Noah's re-upping as host of Comedy Central's The Daily Show through 2022, due in large part to some steady recent growth in his audience.
    • Noah got a rocky start critically and in the ratings two years ago, but the show's viewership is up 14% Y/Y, and the cable program is third in late night in the 18-49 demographic, behind broadcast network programs: NBC's The Tonight Show Starring Jimmy Fallon and CBS's Late Show with Stephen Colbert.
    • “Jon Stewart was on the network for 18 years," said Viacom chief Bob Bakish. "Jon Stewart did not become Jon Stewart in one year. Trevor is on a very good path."
    • AMC Entertainment (AMC +5.8%) CEO Adam Aron discloses that he picked up 35K shares at $15.79 a pop.
    • SEC Form 4
    • Earlier today, AMC also announced a $130M sale-leaseback deal for seven of its theaters.
    • Previously: Explosive growth for MoviePass (Sept. 14)
    • An open letter from six advertising trade groups blasts Apple (NASDAQ:AAPL) for a new Safari feature called Intelligent Tracking Prevention (ITP).
    • ITP uses machine learning to identify and limit any tracking behavior in the Safari browser. Tracking can include third-party cookies and identification puts a 24-hour time limit on that behavior. 
    • Text from the letter, seen by Adweek: “Apple’s unilateral and heavy-handed approach is bad for consumer choice and bad for the ad-supported online content and services consumers love. Blocking cookies in this manner will drive a wedge between brands and their customers, and it will make advertising more generic and less timely and useful. Put simply, machine-driven cookie choices do not represent user choice; they represent browser-manufacturer choice.” 
    • Previously: Apple Face ID may recognize only one face; new charging case coming in Dec.?(Sept. 14)
    • The Wall Street Journal reports that SoftBank’s (OTCPK:SFTBYOTCPK:SFTBF) Vision Fund could buy between 17% and 22% of Uber (Private:UBER) through a combination of share purchases and a tender offer.
    • In return, SoftBank wants the two vacant board seats on Uber’s eleven-person board.
    • Sources say negations could finish up next week if enough investors agree to sell shares at a 30% or higher discount.  
    • SoftBank also has stakes in Uber competitors Didi Xhuxing Technology of China, ANI Technologies of India, GrabTaxi of Singapore, and 99 in Brazil. Last month, SoftBank expressed interest in investing in either Uber or Lyft.  
    • Previously: SoftBank CEO plans Uber or Lyft investment (Aug. 7)
    • Previously: SoftBank near finalizing joint Uber investment (Sept. 13)

    /TF/Latch – I don't have lines, /TF has lines.  

    So, in the bigger picture, we see 1,350 is solid support and 1,450 was our fail point so 1,400 is the middle of that range and then we go to the hourly chart and we know to use the consolidation at 1,400 and the run to 1,430 is 30-points so 6-point retraces are 1,424 (weak) and 1,418 (strong) and, so far, 1,424 is pretty much holding other than spikes down so we might be strong(ish) and heading back to 1,450.  

    Also, 1,350 to 1,450 is 100 so 20-points back is 1,430 so it's a weak retrace of that rally and 1,410 is the strong retrace and look how bullish we got when we popped back over it.  If the Nas wasn't weak I'd be very concerned about the RUT moving higher.  

    ORCL beats.  


  49. IBM- guess I am lost on this as a B-Fly play. I thought the premise was to hold an OTM long put and OTM long call and sell puts/calls in between? What am I missing? 


  50. 12 jobs robots are already taking over


  51. Japan’s Abe says U.N. resolution must force change in North Korea


  52. Ryan dismisses potential DACA deal between Trump and Democrats


  53. Oh Phil, you have lines, you're such a liner.  :)


  54. Everyone’s In The Pool







  55. These are the 25 best cities for jobs right now




  56. North Korea fires missile over Japan







  57. Closing in on cancer




  58. So NoKo fired another missile over Japan – this weekend will be interesting.  

    Butterfly/Pstas – In the case of IBM, we are very confident in the upside so we're playing it long-term bullish and using the 5 open long calls to generate an income selling shorter-term calls only.  The idea of the Butterfly Portfolio is using long positions to generate short-term income but you can never shoehorn yourself into a fixed strategy of you end up like all these hedge funds that are breaking down! 

    Speaking of hedge funds – ours is starting next month, please contact Greg at Philstockworld dot com if you are interested and didn't get info yet!  


  59. No major moves in the indexes yet but there was a little dip on the NoKo/Japan news.  

    Nikkei snapped right back:


  60. Butterfly Portfolio Update:  $371,174 is up 271.2% since 7/29/13 and we've gained a huge $38,945 since our 8/18 report due to the bullish adjustments we made at the time.  Like the OOP, we had a loss last month ($24,245) so, on the whole, this is just back on track as $10-20K/month is what we expect to make at this point in our conservative portfolio.

    We only have a dozen positions, we don't make a lot of adjustments, there's very little variation in the monthly returns and, in 4 years, we're up 271%.  All we are doing here is Being the House – NOT the Gambler and selling as much premium as we can as often as we can but that doesn't mean ALL the time – we still pick our spots and try to take advantage of moves within the trading channels – that's the difference between making 20% a year and 40% a year.  

    Our new IBM trade is not yet reflected here:

    • AAPL – On track.  So glad we sold those $155 calls.  This trade alone will net $180,000 if all goes well and the current net is just $53,500 so $126,500 (236%) left to gain means it's still good for a new trade but we netted in for $32,500 (not including other gains that are off the table).  This was essentially a new trade on 6/22 so on track and, if all goes well, it's scheduled to make $8,000/month for the next 16 months.  See, it's not hard!  
    • COST – Right on track.  We intend to sell 2019 calls to cover but no hurry. 
    • CTSH – Hopefully the short Oct $70s will expire worthless.  We got a good pop so lets sell the 2020 $80 calls for $8 to cover our 2019 $65 longs (we'll roll those later) and that takes our original $7.30 entry completely off the table so the $15 spread is free and, of course, we can sell calls against it.  
    • DIS – Still waiting for them to turn around but we sold those $100 calls and we have lots of room to roll if they pop.  

    • GIS – Right on track so we'll watch and wait.  
    • MSFT – Up and up she goes – testing $75 now.  The Sept $67.60 calls are $7.30 and I still think they pull back a bit so we'll roll to the same strike in Oct.  Earnings are 10/30 and we can sell the Oct $67.50s for $7.50 so about the same but I still like the target.

    • PG – The short $87.50 calls are $6.50 and I still think we're due for a pullback so let's just roll them out to the Oct $87.50s about even
    • TGT – I guess we should sell puts.  Let's sell 7 of the Jan $57.50 puts for $2.55 ($1,785).
    • TXN – Over our target and the semi space seems strong but let's see what happens next month.
    • VLO – $70 should be the top so let's cover by selling the 2019 $75 calls for $5.30 ($10,600) and 10 (half) the Jan $70 calls for $3.45 ($3,450).

    This is the power of the Butterfly Portfolio.  Here we have a successful, mature position and last month we bought back the short Jan $67.50 calls for $3.10 and the 2019 $75 calls for $3.05 and now we're selling the Jan $70s for $3.45 and the same 2019 $75 calls for $5.30 so we made $2.20 ($4,400) by simply pulling off and putting back on the long covers based on playing the very obvious channel, the holiday weekend and the hurricane.  Now we're in the top of the channel so we cover back up.

    In either case, all $13,750 we just sold is 100% premium and it ALL will expire worthless and all we'll owe is the net of the strike to the position (if positive) and the rest we keep.  This is not complicated folks – that's why I love it for retirement accounts.  

    • WMT – The Sept $72.50s are coming in hot at $7.10 but we sold them for $7.75 so no tragedy and I still like the target and earnings are not until 11/16 so let's just roll them along to the Oct $72.50s ($7.40) and see how things go.  
    • WYNN – Still waiting for a pullback on these.  

    Well that was easy.  Only 5 adjustments to make plus the one new play for the month.  Not a bad way to make $38,945!


  61. FNSR / Phil

     

    Been watching this a bit now and think it’s getting really intersting….  I’m contemplating allocating a 10% allocation ( with a scale) which is on the high side for me.   Would like to bounce off my thought process  and get your feedback.

     

    On the negative side:

    -Legacy product sales deteriorating at a faster rate than new products ( networking bus) -

    -Capital intensive company with sporadic / lumpy sales ( not sure why they don’t outsource more aggressively) limits consistent growth in rev and profit.

    -Sales are contracting and margins are getting squeezed due to the issues above.

    -Sales of the 3D product ( a new product for them) pushed out due to change in mfg process to accommodate a customer (probably Apple) this is pushing sales out at least 1+ quarters they mentioned in earnings call that sales in would be in the 10millions range then after in the multi millions two  quarters out but less than 100 M. 

    - They just hired a new CEO – will he sacrifice the next quarter in sales and other expense items? 

     

    On the positive side:

    -They have $1.23B in cash about 10.7 / sh, and 700 LT debt, and good FCF.

    -They still have a good business model if they can manage through the transition. 

    -Current PE at about 10 – very low for them.  They usually sit about 15 or higher.

     

    -If they are (3D) on the new iphone the halo effect in other industries should be significant. 

    _There is some talk in China that Oct may bring direction on comms requirement, spurring growth – this would help legacy business. 

     

    At a high level with I see the ’18 / 19 years like this:  Revenue of 1.4 to 1.45B then about 1.8B.  EPS of  1.55 to 1.6/sh then 1.8 to 1.85 / sh.  EPS at 15 makes this a 25 to 30 stock at a 15X multiple.

     

    Using a DCF model with a 1.8 avg eps start and 5 yr 12% growth w/ 12% discount rate and BV of 12 I get a current value of 35. 

     

    So, my biggest worry is that in the short term given the new CEO and product transition I see added risk for a lower stock price.   In the longer term if they execute a see a 30+ stock.  Ideally I’d love to play this with a 2020 option play, but they are not available. I know you have an option play that you just adjusted.   18 / 30 BCS -  Is there any other way to position this given my concerns?

     

    Thanks for your help.


  62. Thanks Phil, thoughts on butterfly PG short Sept 87.50 calls




  63. What We Know and Don’t Know About the Equifax Hack


  64. Mazda plans to go electric by 2030



  65. Good morning! 

    It's options expiration day so anything can happen and so, far, not much has but that in itself is strange as there's been another terrorist attack in the UK (4:40am):

    • British police are investigating an incident at London's Parsons Green underground station following various reports of an explosion on a train.
    • A spokesman for Prime Minister Theresa May said Downing Street is monitoring the situation.
    • Updates: British police have declared the explosion a "terrorist incident."
    • FTSE 100 -0.7% to 7,246, while sterling flies higher, up 1% to $1.3527.

    The ability of the markets to just shake things like this off is truly amazing.  Sad commentary on the World we live in though, when Terrorist attacks get the same reaction as traffic accidents – too common to make a fuss over…

    Oil came all the way down to $49.50, but is back up since the attack (any excuse to boost it).  In fact, it might have been Rent-A-Rebel given that people are still on the hook for 169,000 open contracts with 4 days left to trade (though it's an improvement from earlier in the week).

    Loser terrorists must be dealt with in a much tougher manner.The internet is their main recruitment tool which we must cut off & use better!    

     

    6:48 AM – Sep 15, 2017

    Yes, what we need is censorship!  

    Thoughts with those injured in Parsons Green terrorist incident, and thanks to police, ambulance staff and firefighters who are responding.

    Gosh, this guy apparently has no idea how to be a right-winger! 

    Another attack in London by a loser terrorist.These are sick and demented people who were in the sights of Scotland Yard. Must be proactive!

    That's the way to do it!  

    NHS England has confirmed that 22 people are being treated in hospital following the explosion.

    Paramedics took 18 patients to hospital while four "self-presented".

    On the whole, it's another chance to short oil at $50!

    /RB coming up:

    Dollar down is giving us a boost and that makes /NKD a nice short at 19,900 (tight stops above):