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Testy Tuesday – All Time Highs Ahead of the Fed, What Can Go Wrong?

What can go wrong?

Well, for one thing, the Fed could tighten.  As you can see from the Fed's own projections, which are to be released tomorrow (but are on their web site today), the Fed is projecting a Fed Funds Rate of 2.9-3.9% next year.  This year it was a much wider -0.1 to 2.9% and we're right in the middle at 1.25% but what if we're in the middle next year at 3.5%?  Are you ready for a 2.25% rate hike?  Is anybody?

Certainly people with adjustable mortgages are not ready or revolving debt (reccord highs) or variable loans like Corporations tend to have, which would add $400Bn to their $2Tn debt balance.  Are the banks ready to have their loan margins squeezed as rates climb, which is often the case?  

Even just 3% would require 7 rate hikes in 8 meetings – unless the Fed hikes us this year, then it would be 6 of 8 or, if they surprise us and hike tomorrow, they buy a bit of fexibility next year and "only" have to hike rates 0.25 every other meeting, plut one.  Their other projections are on track.  The market thought lowering the Q3 GDP forecast (see yesterday's Morning Report) would keep the Fed off the table but they are only projecting 2.0-2.4% GDP for 2017 and LESS next year – so we're right on track.

Unemployment is below their target, Inflation is above – there's really no excuse for the Fed NOT to raise rates so don't be surprised if everyone is surprised tomorrow by a quarter-point hike, hurricane or no hurricane.  Of much more concern than the rates going up (though the repercussions of that alone will be tragic) is the potential unwinding of the Fed's Balance Sheet, which currently stands at $4.47 TRILLION and that's up about $3.7Tn since 2008.  

Even if the Fed "only" withdraws their money over the same 8 years they put it in, that's $500Bn a year coming OUT of the economy – no wonder they project a significantly lower GDP next year!   Meanwhile, the BOJ and the ECB have been putting in $400Bn a month and Japan's stimulus is so out of proportion to their $5Tn economy (1/4 of ours and Europe's) that an unwinding there would be catastrophic but NOT unwinding while we do and the ECB does would collapse their currency and be equally catastrophic.  

Nonetheless, the Nikkei has flown back to it's century high of 20,200, which we last hit in late 2015 before crashing 25% back to 15,000 a year later.  A year is a long time and tops can last a while but let's keep an eye on /NKD as we are about to conduct a really good test as to whether a stock market can remain at a top – even as the economy of the country collapses.  

There is simply nothing sustainable about Japan's 1.2 QUADRILLION Yen Debt.  Yes, there are 90 Yen to the Dollar(ish), so it's "only" $13.3Tn but that's over 250% of their GDP and it's two thirds of our debt at 1/4 the size of our economy so, proportionately, 2.66 times worse off than we are.  How will Japan deal with rising rates?  Do you know what the interest on $13.3Tn is?  At 3% it's $400Bn – getting close to 10% of Japan's economy in interest payments alone.

Image result for japan budget deficit 2017Meanwhile, Japan's budget deficit is 10% of GDP and tax revenue is only 10% of the GDP and $400Bn x 90 is 36 TRILLION Yen so add that to the deficit chart and then contemplate whether you would lend Japan money at 3%.  This is pretty much what happened to Greece only Japan is many times worse off than Greece ever was with one crucial exception – Japan can print it's own money.

That's what it's all about folks – the power to print money allows contries to go into near infinite debt and Japan is the ultimate experiment in pushing QE to the limit.  Unfortunately, Japan's GDP growth hasn't even cracked the 1% line since QE started in 2010 but, rather than give up in 2012 (after 2011 reversed the gains of 2010) they doubled down – and then they doubled down again and again.

So hear we are, a bunch of economies that have been living on QE life-support for 10 years and now the Central Bank Doctors are going to pull the plug and see how it goes.  Wait, they are not just pulling the plug, they are going to start drawing back all the blood they've been steadily transfusing as well.  Well take two happy pills and call us in the morning – because you're going to need them next year!  

Did I say next year?  I mean next decade, of course.  Because, EVEN IF, the unwind goes smoothly, it will also go relentlessly and it will be a burden on our economy for a decade.  While that's going on, President Trump plans to cut our tax revenues to Japanese levels in hopes of stimulating the economy.  If we follow that plan and our debt trajectory matches Japan's – we'll be close to $30,000,000,000,000 in debt by the time Trump is dragged out of the White House in 2025 (yes, the next election will be fixed and no, he won't be impeached).  

Even if the Fed keeps rates at 3% and Japan doesn't collapse and Europe keeps it together and North Korea doesn't start WWIII and Russia plays nice and the collapse of Venezuela is contained and Global Warming doesn't destroy the East Coast – we'll still have to pay $900Bn Dollars a year in interest alone on our debt.  We're paying about $220Bn now so either we cut another $680Bn of Federal Programs (20%) JUST to pay the interest or we rack up another $680Bn of debt per year – which is the path Japan has chosen for their run.  

It's funny to watch Greece or Iceland collapse because we don't live there.  It might not be so funny when it happens to us – but we'll see for ourselves in the Future.   Meanwhile, we sit back and enjoy the rally, which has gone far beyond ridiculous at this point.  In fact, we just did a review of our Long-Term Portfolio at noon on Friday and we stood at $1,606,883 (we started with $500,000 on 11/26/13) and, as of yesterday's close, we were at $1,646,961 on the exact same positions – up $40,000 (2.4%) in one day!  

That's just stupid – you're not supposed to make that kind of money – it's simply unsustainable.  To be fair, our Short-Term Portfolio, which we reviewed on Thursday at $487,027 (started with $100,000 at the same time), which contains the hedges for our LTP, fell to $478,875 so down $8,152, which is down 1.6% so our net gain is only about $32,000 but my issue is with the longs – as that's what non-hedging bulls are being rewarded for being in this market.  2.4% per day???  Can that really be sustained?  Can society afford to make the investing class this rich (and then not tax them)?

Image result for 1999 market chartOf course not, it's going to collapse!  When it will collapse is another matter entirely.   The market was similarly out of control at the end of 1998, when the Nasdaq flew from 1,063 to 2,250 in April – more than double in less than 6 months.  People thought that was overdone but , 6 months later, we were up 50% at 3,500 and then Q1 of 2000 saw us run 33% higher than that – to 4,816.  

That was a gain of 3,753 (353%) in about 18 months.  18 months ago, the S&P was at 2,000 – we're "only" up 25% since then – hardly a dent in the dot-com boom.  Of course, in the dot-com boom, other indexes didn't fly like the Nasdaq, which was relatively small at the time and full of start-ups that had very low IPO prices which made the index jump up as they doubled in value.  

The other indexes followed and, for a brief periold of time, the "value" of the Wilshire 5,000 (pretty much all stocks) exceeded the GDP of the United States by 40%.  I don't have a more recent chart but add 25% to this chart for the S&P and 4% to the GDP (since 2015) and the numbers are now $18.5Tn in GDP and $27.75Tn so we've now achieved 50% more "value" in the stock market than the "value" of the entire US economy.  

Related image

If I wanted to make a bullish case, I'd say the Wilshire 5,000 does more business internationally these days so the "economy" we're measuring against should be expanded.  Also, the Dollar was indexed at 120 back in 2000 and now it's barely holding 90 so of course stocks are going to be relatively more expensive but, on the other hand, that means we should discount GDP 30% to keep it in constant Dollars and that would bring it back down to $13Tn and that would make the markets 200% of constant GDP, which would be completely ridiculous and oops, I accidentally just made the bear case while trying to make the bull case.  

So that, in a nutshell, is why we took about 30% of our LTP profits and put them into more hedges in our STP.  By sacrificing 1/3 of our profits on the way up, we hope to lock them in on the way down because – well look at that 1999 chart – imagine having 2/3 of Nasdaq 4,800 money (3,200) after the bubble bursts and we're back to 1,000?  You'd be 3x richer than the suckers who didn't hedge and, if it never bursts – we're still 2/3 as rich as the maniacs who don't hedge at all.  

I know I sleep better at night!  

 


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  1. ~~Teva Pharmaceutical Industries Ltd., announced amendments to its USD and JPY term loan and revolving credit facilities, providing Teva greater flexibility in its financial leverage ratio covenants. The amended leverage ratio covenants in the credit agreements permit a maximum leverage ratio of 5.0 times through and including December 31, 2018, gradually declining to 3.5 times by December 31, 2020. Story link: {NSN OWIYM0MEQTXI <GO>}

    * As of June 30, 2017, the aggregate principal amount collectively outstanding
    under the USD term loan facility was $5.0 billion, the aggregate principal
    amount outstanding under the JPY term loan facilities was $1.4 billion and
    the aggregate committed principal amount (drawn and available) under the USD
    revolving credit facility was $4.5 billion. The amendments received the
    support of lenders holding approximately 98% of the aggregate loans and
    undrawn commitments across the five credit facilities.
    * The amendments include certain terms and conditions, such as an increase to
    the applicable margin and, in the case of the revolving credit facility, an
    increase to the commitment fee, in each case in the event of a downgrade of
    Teva’s credit rating, and payment of amendment fees.
    * Michael McClellan, interim Chief Financial Officer of Teva, stated, “We are
    pleased to announce the amendments to our credit facilities showing a strong
    support from our lending group. These amendments are an important part of
    Teva’s plan to obtain longer term flexibility with our credit facilities and
    manage Teva’s capital structure.”


  2. I went back to all my charts and it's the first time we have an all-green table since 2012! The previous time the Dow was the laggard but they added some fuel in that index to help so the NYSE lagged behind this time since it's harder to manipulate. Nonetheless, here we are!


  3. Phil-this article you posted shows how data science and machine learning are really going to shake things up in financial services (and many other industries as well). 

    https://www.bloomberg.com/professional/blog/implications-machine-learning-finance/?utm_source=Syndication&utm_medium=SB_SBRC&utm_campaign=PortfolioMgmt


  4. FWIW:

    Gerrymandering is probably going to make a difference! No way the GOP loses that many seats when they have made 90% super safe. They could lose the popular vote by 2M and still have a majority in the house. 

    https://www.thenation.com/article/republicans-only-got-52-percent-vote-house-races/

    The House is shockingly skewed toward the Republican Party. It’s always hard to oust incumbents—some 96 percent just won re-election—but now it extends to control of the chamber. In 2012, Republicans won a lopsided majority of seats despite securing only 48 percent of the vote, about the same vote share as Democrats this year. To keep the House in 2014, Republican needed only 45 percent of votes. Putting it another way: control of the House comes from winning 218 races or more. The 218th biggest Republican margin was fully 14 percentage points.


  5. Even the best ones can't time the market perfectly and they don't really try:

    https://www.bloomberg.com/gadfly/articles/2017-09-14/investing-hot-shots-didn-t-get-that-way-by-timing-the-market

    Investors who can stick to a measured market-timing strategy may be rewarded. But the next time you hear a billionaire investor calling the next correction, remember that they most likely didn’t get rich by timing the market.   


  6. Jefferies issued a sell rating on TSLA with 280PT.  Said they expect losses to continue into 2020.


  7. Good Morning.


  8. Trump to speak at UN at 10:30.

    Might see some risk off trading ?


  9. CBI

    ~~CB&I: Spike being attributed to renewed takeover chatter.


  10. Good morning!  

    Trump speaks at the UN (officially) today, yesterday was just comments at the general assembly.  

    Image may contain: text

    TEVA/Seer – People seem happy with that.

    TSLA/Scott – This is the kind of stuff that keeps me more in the camp that he's a flat-out con artist, rather than just a guy who gets excited and promises things he can't deliver.  There are too many machinations from company insiders covering things up and spinning things to make it innocent – not to mention the sheer volume of things like this they are involved in.

    It's funny because I heard the guy from KGC being interviewed on Bloomberg yesterday and I could tell he was BS'ing right away and the stock dropped as other people noticed as well.  I guess I have enough experience consulting for these guys (CEOs) that I know when one is sincere or not.  Musk sets off all of my alarms…  This is a key note from the article:

    Furthermore, testing data shows Tesla lags severely behind other companies seeking to deliver self-driving technology. This lag isn't surprising. Tesla started late, and is trying to solve a more difficult problem, because while self-driving leaders use a combination of LIDAR+cameras+radar, Tesla chose to leave LIDAR out of its hardware suite (given the present cost).

    In removing LIDAR, Tesla removed the most reliable way to currently detect the environment around the car. A car equipped with LIDAR can get a high degree of certainty regarding all relevant objects around it (even before recognizing those objects). A car equipped with cameras, can’t. It sees the world, but that’s different from actually detecting and measuring the distance to all objects around it.

    That Tesla hasn’t yet solved how to fully detect its environment using cameras, tells us just how far from FSD Tesla still is. Detecting the environment isn’t the end point of a self-driving effort. Instead, it’s the starting point. When using technologies like LIDAR or Flash LIDAR, the very first thing a self-driving developer gets is a reliable 3D picture of its (solid) environment. Using this picture alone, a startup self-driving effort would neither brake for overhead signage, nor accelerate into giant buildings from a standstill.

    Big Chart – So Big!  If we're holding after the Fed, we must upgrade. 

    Machine Learning/Seer – Cool stuff.  Sad for mankind, but we had a good run.  cool

    Gerrymandering/StJ – And it's a Trump court so nothing will be fixed. 

    Damn, maybe I shouldn't have hesitated on that short!  

    Wheee on oil!  

    CBI/Albo – Now that makes sense.  Yesterday I said I didn't get why they'd go up with Iron Ore selling off.  


  11. Trump thinks he's running for President of the World – touting the record high market.  OMG – Now says we're spending $700Bn in military like it's some great accomplishment.  He has no sense of proportion – that must freak out almost everyone in the room!  

    Image result for military spending by country 2017

    He's bumped us up $100Bn since this chart – that's more than Russia's entire budged ADDED to ours!  


  12. Also, $700Bn is a BS low number because it doesn't take into account Veteran's benefits ($200Bn) and interest on the debt that's attributable to Military Spending ($50Bn) so closer to $1Tn than $700Bn! 


  13. I turned it to 'Father knows best'….. 


  14. CMG said goodbye to 300.


  15. Still complaining about our "deal" with the UN – wants other countries to pay more or we pay less or whatever.  It's the same issue as taxes – poor countries can't afford to pay as much as rich countries.  He wants to raise Membership fees like an exclusive country club and kick out the people who can't afford a seat at the table.  

    OMG, Trump called Kim "Rocket Man" in his UN speech!  

    Brings up 1977 kidnapping of Japanese girl by NoKo as if it just happened.  

    Whoa – He pivots from NoKo to calling out Iran all of a sudden – so much for cheap oil!  


  16. Good morning… Phil, what is your latest /TF position? sorry, been travelling and have not kept up with your current futures positions.  


  17. He is complaining about the Iran Nuclear deal, wants to unwind it.  Demands all countries join him in demanding Iran stop all their nonsense.  

    "The US is willing to destroy North Korea" – wow, way to use that UN pulpit!  

    Followed by "The United States is a compassionate nation."  ROFL!  


  18. TMUS & S both up on talk of merging wireless units. 

    Maybe this time it's true ?


  19. /TF/Learner – Still short 10 at 1,425 down about $7K.  Don't want to throw good money after bad so happy to get even at this point.  

    TMUS/Albo – Well they need to do something, S is already going crazy with IPhone discounts.  


  20. Now he's calling Cuba corrupt and saying no lifting of sanctions.  Now Venezuela.  Geez, we have a lot of enemies.  I guess Trump's laundry list is to make sure the UN doesn't comply so he has an excuse to pull support.  That would be a fantastic gift to Putin, who's a no show.

    Vladimir Putin Skips U.N. Meeting to Watch Massive War Game Near …

    We will take action against Venezuela?  Tillerson is so pleased, this talk should jack oil up for weeks and it's helping the traders get out of their Oct contracts by driving buyers in today – smart!  

    Now he's saying Socialism is the problem in Venezuela – looks around and is surprised the room didn't burst into applause.  Has no idea  that we're the only truly Capitalist country and NO ONE wants to imitate us.  


  21. Learner – AAOI up sharply the past two days !


  22. Reading Obama's first speech to the UN, I can almost cry at what we've lost…

    I have been in office for just nine months — though some days it seems a lot longer. I am well aware of the expectations that accompany my presidency around the world. These expectations are not about me. Rather, they are rooted, I believe, in a discontent with a status quo that has allowed us to be increasingly defined by our differences, and outpaced by our problems. But they are also rooted in hope — the hope that real change is possible, and the hope that America will be a leader in bringing about such change.

    I took office at a time when many around the world had come to view America with skepticism and distrust. Part of this was due to misperceptions and misinformation about my country. Part of this was due to opposition to specific policies, and a belief that on certain critical issues, America has acted unilaterally, without regard for the interests of others. And this has fed an almost reflexive anti-Americanism, which too often has served as an excuse for collective inaction.

    Now, like all of you, my responsibility is to act in the interest of my nation and my people, and I will never apologize for defending those interests. But it is my deeply held belief that in the year 2009 — more than at any point in human history — the interests of nations and peoples are shared. The religious convictions that we hold in our hearts can forge new bonds among people, or they can tear us apart. The technology we harness can light the path to peace, or forever darken it. The energy we use can sustain our planet, or destroy it. What happens to the hope of a single child — anywhere — can enrich our world, or impoverish it.

    In this hall, we come from many places, but we share a common future. No longer do we have the luxury of indulging our differences to the exclusion of the work that we must do together. I have carried this message from London to Ankara; from Port of Spain to Moscow; from Accra to Cairo; and it is what I will speak about today — because the time has come for the world to move in a new direction. We must embrace a new era of engagement based on mutual interest and mutual respect, and our work must begin now.

    We know the future will be forged by deeds and not simply words. Speeches alone will not solve our problems — it will take persistent action. For those who question the character and cause of my nation, I ask you to look at the concrete actions we have taken in just nine months.

    On my first day in office, I prohibited — without exception or equivocation — the use of torture by the United States of America. (Applause.) I ordered the prison at Guantanamo Bay closed, and we are doing the hard work of forging a framework to combat extremism within the rule of law. Every nation must know: America will live its values, and we will lead by example.

    We have set a clear and focused goal: to work with all members of this body to disrupt, dismantle, and defeat al Qaeda and its extremist allies — a network that has killed thousands of people of many faiths and nations, and that plotted to blow up this very building. In Afghanistan and Pakistan, we and many nations here are helping these governments develop the capacity to take the lead in this effort, while working to advance opportunity and security for their people.

    In Iraq, we are responsibly ending a war. We have removed American combat brigades from Iraqi cities, and set a deadline of next August to remove all our combat brigades from Iraqi territory. And I have made clear that we will help Iraqis transition to full responsibility for their future, and keep our commitment to remove all American troops by the end of 2011.

    I have outlined a comprehensive agenda to seek the goal of a world without nuclear weapons. In Moscow, the United States and Russia announced that we would pursue substantial reductions in our strategic warheads and launchers. At the Conference on Disarmament, we agreed on a work plan to negotiate an end to the production of fissile materials for nuclear weapons. And this week, my Secretary of State will become the first senior American representative to the annual Members Conference of the Comprehensive Test Ban Treaty.

    Upon taking office, I appointed a Special Envoy for Middle East Peace, and America has worked steadily and aggressively to advance the cause of two states — Israel and Palestine — in which peace and security take root, and the rights of both Israelis and Palestinians are respected.

    To confront climate change, we have invested $80 billion in clean energy. We have substantially increased our fuel-efficiency standards. We have provided new incentives for conservation, launched an energy partnership across the Americas, and moved from a bystander to a leader in international climate negotiations.

    To overcome an economic crisis that touches every corner of the world, we worked with the G20 nations to forge a coordinated international response of over $2 trillion in stimulus to bring the global economy back from the brink. We mobilized resources that helped prevent the crisis from spreading further to developing countries. And we joined with others to launch a $20 billion global food security initiative that will lend a hand to those who need it most, and help them build their own capacity.

    We've also re-engaged the United Nations. We have paid our bills. We have joined the Human Rights Council. (Applause.) We have signed the Convention of the Rights of Persons with Disabilities. We have fully embraced the Millennium Development Goals. And we address our priorities here, in this institution — for instance, through the Security Council meeting that I will chair tomorrow on nuclear non-proliferation and disarmament, and through the issues that I will discuss today.

    This is what we have already done. But this is just a beginning. Some of our actions have yielded progress. Some have laid the groundwork for progress in the future. But make no mistake: This cannot solely be America's endeavor. Those who used to chastise America for acting alone in the world cannot now stand by and wait for America to solve the world's problems alone. We have sought — in word and deed — a new era of engagement with the world. And now is the time for all of us to take our share of responsibility for a global response to global challenges.

    Now, if we are honest with ourselves, we need to admit that we are not living up to that responsibility. Consider the course that we're on if we fail to confront the status quo: Extremists sowing terror in pockets of the world; protracted conflicts that grind on and on; genocide; mass atrocities; more nations with nuclear weapons; melting ice caps and ravaged populations; persistent poverty and pandemic disease. I say this not to sow fear, but to state a fact: The magnitude of our challenges has yet to be met by the measure of our actions.

    This body was founded on the belief that the nations of the world could solve their problems together. Franklin Roosevelt, who died before he could see his vision for this institution become a reality, put it this way — and I quote: "The structure of world peace cannot be the work of one man, or one party, or one nation…. It cannot be a peace of large nations — or of small nations. It must be a peace which rests on the cooperative effort of the whole world."

    cryingcryingcrying


  23. Anyone else having difficulties logging into TOS this mornimg? Mobile not working either.


  24. @albo/ AAOI –  Yes, nice surprise as I saw this after a few days.. go AAOI/FNSR… 


  25. I just spoke with TD Ameritrade. They told me that Verizon is having an issue with access to all TDA platforms. I think it only affects people trying to log in over wireless connections.  They said to contact Verizon because TDA can't fix it on their end.  


  26. Split over QE at the ECB – Reuters

    • In very much not-shocking news, the Germans want to move to end the ECB's QE program, while most of the rest of the Governing Council just wants to begin tapering.
    • The end result could be a delay in any QE decision until December vs. expectations for date to be set at October's meeting.
    • The euro (NYSEARCA:FXE), meanwhile, shows no signs of letting up, higher by another 0.2% vs. the dollar this morning to $1.1971.
    • The value of Norway's sovereign wealth fund has hit a major milestone.
    • "I don't think anyone expected the fund to ever reach $1T when the first transfer of oil revenue was made in May 1996," said CEO Yngve Slyngstad of Norges Bank Investment Management, which operates the fund.
    • It has grown to become one of the world’s largest investors, owning on average 1.3% of every listed company on the globe.
    • ETFs: NORWENOR
    • August housing Starts: 1.180M vs. 1.175M expected and 1.190M prior.
    • Building permits 1.300M vs. 1.220M expected.
    • August Import/Export Prices: Import prices Index +0.6% vs. +0.4% consensus and +0.1% prior (revised).
    • Export prices +0.6% M/M vs. 0.2% consensus and +0.5% prior (revised)

    Foreign Secretary to resign if May goes soft on Brexit – Telegraph

    • U.K. Prime Minister Theresa May is set to give a Brexit speech in Italy on Friday. At issue is whether May will advocate for a "Swiss-style" arrangement under which the U.K. will permanently pay for access to the EU.
    • Any hint of such would leave Foreign Secretary Boris Johnson no choice but to resign, according to the report.
    • The news has sent the pound modestly higher, now up 0.25% vs. the dollar at $1.3530. Stocks in London are up 0.2%.

    Total steps up renewables drive with two acquisitions

    • Total (TOT +0.9%) moves forward with its plan to expand in the renewable energy sector by agreeing to acquire an indirect 23% interest in Eren Renewable Energy for €237.5M ($285M), adding that it could later acquire full control of the business.
    • TOT also says it is acquiring Greenflex, a French company specializing in finding ways to use energy more efficiently, for an undisclosed sum; the company forecasts 2017 revenues of more than €350M.
    • Philippe Sauquet, president of TOT’s gas, renewables and power units, says TOT wants GreenFlex to be the “linchpin of its growth in the energy efficiency industry in Europe.” – BS, they are buying it to kill it.  How does using less energy do anything to help TOT in the near or long-term?

    AutoZone positive on earnings beat

    • AutoZone (NYSE:AZO) reports domestic same-store sales rose 1% in Q4.
    • Total auto parts sales increased 3.5% to $3.4B.
    • Total domestic commercial sales expanded 5.9% to $672.48M.
    • Gross profit rate fell 2 bps to 52.8% due tohigher supply chain costs (-16 bps) associated with current year inventory initiatives.
    • Inventory +6.9% Y/Y to $3.88B.
    • Domestic store count +168 Y/Y to 5,465.
    • Store count +215 Y/Y to 6,029.
    • AZO +0.99% premarket.

    Jefferies expects losses at Tesla until 2020

    • Jefferies jumps into covering Tesla (NASDAQ:TSLA) with a bang.
    • "Achievements to-date and vision are impressive, but we don't think Tesla's vertically integrated business model can be scaled up as profitably and quickly as consensus thinks and valuation multiples imply," writes analyst Philippe Houchois. "We don't think DCF [discounted cash flow] can justify the current valuation, let alone upside," he adds.
    • Houchois and team assign an Underperform rating and $280 price target (27% downside) on the EV stock. The negative view is based on expected losses for Tesla until 2020.
    • Current Tesla analyst scorecard: 9 Buy equivalent ratings, 10 Hold equivalents and 7 Sell equivalents (per Bloomberg).
    • TSLA -1.04% premarket to $381.00.
    • UBER grounded its fleet of self-driving cars in Pittsburgh for a few hours yesterday as the company investigated a fender bender involving one of its vehicles.
    • Uber, which last week celebrated the one-year anniversary of its autonomous car pilot program in the city, has reported more than 1M self-driving miles and more than 30K rides to customers in Pittsburgh, Tempe and San Francisco.

    • "Delta (NYSE:DAL) ordered the C Series because Boeing (NYSE:BA) stopped making an aircraft of the size Delta needed years ago. It is pure hypocrisy for Boeing to say that the C Series launch pricing is a "violation of global trade law" when Boeing does the same for its new aircraft," Bombardier (OTCQX:BDRAFOTCQX:BDRBFsaid in a press release.
    • "Boeing's self-serving actions threaten thousands of aerospace jobs around the world, including thousands of U.K and U.S. jobs and billions of purchases from the many U.K. and U.S. suppliers who build components for the C Series."
    • Previously: Trudeau, May to press Trump to intervene in Boeing-Bombardier rift (Sep. 18 2017)

    • Bayer (OTCPK:BAYRY) says it now expects to close its acquisition of Monsanto (NYSE:MON) in early 2018 rather than late 2017.
    • Bayer says it submitted an application to extend the European Commission review deadline for the deal in order to facilitate "an appropriate evaluation given the size of the transaction."
    • The EC last month started an in-depth investigation of the takeover, saying it was concerned about competition in various pesticide and seeds markets.
    • Bayer, holding a media event on its Crop Science business, also says the division will face volatile global markets for the rest of the year but would slowly return to growth from 2018.
    • Susuquehanna lowers Nike (NYSE:NKE) to a Neutral rating from Buy on mounting concerns over weakness in the business.
    • The firm thinks the basketball category is a particular concern and could see excess inventory due to a lack of momentum (see Adidas basketball momentum).
    • Analyst Sam Poser lowers his estimates on Nike to FY18 F/X-neutral revenue growtt of +3.3% from +4.5%. The estimate on FY19 revenue goes down to +6.1% from +9.1%.
    • NKE -1.50% premarket to $52.70.
    • Wells Fargo lowers Under Armour (UAUAA) to an Underperform rating after having the athletic apparel seller set at Market Perform.
    • Analyst Tom Nikic points to meaningful distribution issues and a current lull in product innovation as drags on earnings growth within the industry.
    • Wells expects Under Armour to churn up EPS of $0.37 in 2017 and EPS of $0.40 in 2018.
    • UA -2.17% premarket to $15.79. UAA -2.99% to $16.85

    • Biting downgrades on Under Armour and Nike aren't going unnoticed by investors looking at Foot Locker (NYSE:FL).
    • Shares of Foot Locker are down 1.21% on the day and are now off 52% for the last six months. The retailer often takes on collateral damage when footwear companies stumble.
    • Toys "R" Us is officially bankrupt. Facing imminent deadlines to pay off hundreds of millions in debt, the largest U.S. toy store chain has filed for Chapter 11.
    • Buyers have moved online over the years, as well as choosing home delivery, while discounters like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) have captured market share.
    • On watch: Shares in toymakers Mattel (NASDAQ:MAT), Hasbro (NASDAQ:HAS) and JAKKS Pacific (NASDAQ:JAKK).
    • Shares of Mattel (NASDAQ:MAT) are up 0.77% in early trading after the Toys "R" Us bankruptcy becomes official.
    • Investors have been selling off Mattel ahead of the news due to the expected disruption ahead of the holiday season.
    • Hasbro (NASDAQ:HAS) is down 0.90%.
    • Spin Master (OTC:SNMSF) and JAKKS Pacific (NASDAQ:JAKK) could also see some extra volatility today.
    • Previously: Toys 'R' Us files for bankruptcy (Sept. 19)

    Best Buy investor day preview

    • Best Buy (NYSE:BBY) issues a detailed update ahead of an investor conference presentation today.
    • The company says CEO Hubert Joly and other members of the executive team will discuss key insights gained from the company’s successful Renew Blue transformation, share the company’s analysis of the strategic landscape in which it operates and provide a closer look at key growth initiatives.
    • A key long-term target from Best Buy is to generate enterprise revenue of $43B in FY21 and non-GAAP operating income of $1.9B to $2.0B.
    • Some key snippets from the Best Buy update are posted below.
    • "Comparable sales and operating income rate are up, non-GAAP earnings per share have grown at a compound annual growth rate of 8 percent and total shareholder return over the last five years was 263 percent, ranking in the top 10 percent of S&P 500 companies."
    • "By the end of October, the company will enhance the smart home areas in all of its stores; roll out its Best Buy Smart Home Powered by Vivint home automation and security offering to 450 stores; and add 1,500 dedicated smart home employees."
    • "The company will seek to accelerate its growth by continuing to improve the customer experience within and across channels, more effectively addressing customer needs in underpenetrated categories and building its in-home channel."
    • "The company plans to make key investments in technology and people."
    • BBY +0.70% premarket to $57.75.
    • Source: Press Release

    Nvidia: Now Irrationally Priced 

    U.S. FTC signs off on Walgreens/Rite Aid deal

    • The U.S. Federal Trade Commission (FTC) has finally OK'd Walgreens Boots Alliance's (NASDAQ:WBA) purchase of a number of Rite Aid (NYSE:RAD) stores. Under the terms of the deal, WBA will buy 1,932 RAD stores and related assets for $4.375B in cash. Store purchases will commence next month and should be completed in Spring 2018. Most are located in the Northeast and Southern U.S., including three distribution centers in Connecticut, Pennsylvania and South Carolina.
    • RAD has the option of joining WBA's group purchasing organization, exercisable through May 2019.

    Snapchat signing more U.S. new users than Instagram, for now

    • Snapchat (SNAP -1.5%) is signing up more new users than Instagram (FB +0.8%) in the U.S., Recode reports, but that advantage is dwindling and Instagram has taken a dominating lead globally as Snap focuses on domestic users.
    • The numbers come via data from analytics firm Jumpshot. Between the two, 52% of new users signed up for Snapchat in August vs. 48% for Instagram. Snapchat was leading 64-36% as recently as April.
    • Meanwhile, Instagram started taking a bigger share of international new sign-ups in May, and in August had 61.5% of new sign-ups vs. 38.5% for Snapchat.
    • Kohl's (NYSE:KSS) announces it will offer returns for Amazon (NASDAQ:AMZN) customers at 82 stores in Los Angeles and Chicago.
    • The department store chain will pack and ship eligible Amazon return items as a free additional service at the select Kohl’s stores.
    • "This is a great example of how Kohl’s and Amazon are leveraging each other's strengths – the power of Kohl’s store portfolio and omnichannel capabilities combined with the power of Amazon’s reach and loyal customer base," says Kohl's Chief Administrative Officer Richard Schepp.
    • Source: Press Release

    MoviePass sized up by Seeking Alpha contributors

    • The bouncy trading in AMC Entertainment (NYSE:AMC) continues with shares down 5.41%today. Regal Entertainment (RGC -2.4%), Marcus (MCS -0.8%), Cinemark (CNK -0.9%), IMAX (IMAX -1.8%) and Reading International (NASDAQ:RDI) are also lower.
    • There's some mild pressure on the media sector in general today after Cowen downgraded Disney, CBS, Viacom, Fox and AMC Networks.
    • Investors trying to sort out movie theater stocks might want to take a look at a very intriguing article on the impact MoviePass posted by Seeking Alpha contributor Max Verline. Verline writes that MoviePass has the potential to utilize the Uber model in the exhibitor sector and could be an "unicorn" if all goes to plan. He notes that Matheson Analytics (NASDAQ:HMNY) is an owner of the upstart. SA's Mark Gomes also has a breakdown on MoviePass and HMNY.
    • via Notable Calls
    • China appears to be opening up to overseas Internet companies, says Mizuho, and Facebook (NASDAQ:FB) recently hired a Beijing-based government relations executive – a sign negotiations are underway.
    • Shares +0.45% premarket

    Sprint +4.2%, T-Mobile +1.6% on report of active merger talks

    • Sprint (NYSE:S) has jumped 4.2% to the $8 mark, and T-Mobile (NASDAQ:TMUS) has spiked 1.6%, on reports that the two are in active talks about a merger.
    • That comes after some very quiet weeks following the FCC auction quiet period.
    • In the potential deal, according to CNBC, it would be a stock-for-stock combination with Deutsche Telekom (OTCQX:DTEGY) emerging as the majority owner over SoftBank (OTCPK:SFTBY).
    • T-Mobile CEO John Legere would be expected to lead any combination, but SoftBank's Masayoshi Son would want a say in how the company's run.
    • The two haven't set an exchange ratio but are in talks to set a term sheet now, CNBC says. T-Mobile hasn't begun due diligence on Sprint.

    Morgan Stanley raises Apple price target, says iPhone X price will increase demand

    • Morgan Stanley raises its price target for Apple (NASDAQ:AAPL) from $182 to $194 and maintains an Overweight rating.
    • Analyst Katy Huberty cites brand aspiration, customer loyalty, and a weaker dollar allowing for increased prices without hurting demand. 
    • Huberty writes, "Innovation-led price increases historically boost, rather than hinder, Apple demand. 
    • Morgan Stanley’s April 2017 US smartphone survey showed that 92% of iPhone users who planned to upgrade in the next year plan to repurchase another iPhone. 
    • Analyst EPS estimate adjustments: FY17, $8.96 (from $8.95); FY18, $12.60 (from $11.80); FY19, $12.35 (from $11.38).    
    • Previously: KGI: iPhone X eating 8 pre-orders, Watch beats expectations (Sept. 18)

  27. Japan – all time highs yet funky economy.. has me wondering just what will happen to the stock market there. If the currency collapses, could that run the market numbers up?  If, on the other hand, have a Greek-type austerity (not likely, they do have their own BOJ?) then an 87% reduction could be ahead?

    for the below charts, click on "Historical", then "MAX"

    https://tradingeconomics.com/greece/stock-market

    https://tradingeconomics.com/japan/stock-market


  28. I just spoke to TD Ameritrade again and they said there is definitely a problem affecting only west coast Verizon wireless users in accessing any TDA platforms.  What a pain!


  29. I like what Kohl's (KSS) is doing with Amazon.  I think it's smart to join ties with the beast.  You know, if you can't beat 'em, join 'em.


  30. CMG/Rustle – I hear the Queso sauce is a dud.  Don't know why they thought that would be a winner in the first place.  Sushi burritos would be a game-changer for them.   

    TDA/Jet – Wow, that's a very specific issue.

    Japan/Scott – The Greek thing only happened because they were controlled by the ECB (which is ridiculous) and couldn't work out debts on their own and the ECB was there to make damned sure their banks got paid – they couldn't give a crap about the Greek people.   Iceland sailed through a similar crisis by simply telling their creditors to F off and erased any debts that wouldn't reasonably renegotiate and their "negative credit" lasted all of a few years before people loved their clean balance sheet and ran back to loan them money.  Japan will do something similar but their people own the vast majority of their debt and will take a tremendous hit – probably Japanese corporations too, who patriotically buy bonds at negative rates.  

    KSS/DC – That's why I said AMZN should buy SHLD ages ago – to do just that.  


  31. PCRFY – Panasonic..still kicking, though no options or dividends. challenging 2015 high following high volume (relative) breakout last week.  I'm actually happy to see this company still on its own… Have owned and enjoyed "Panasonic" branded products of various sorts my entire life.
    http://www.panasonic.com/global/corporate/profile/overview.html


  32. CMG/Phil Sushi burritos from the folks now famous for contaminated food? I think I'll pass ;-)  But I'm  still long as I think this is way overdone. It sure is one volatile puppy, though.


  33. Dumpster diving again.  This time I bought an initial small position in WIN at $1.97 and sold some Feb $2 puts for $.30.

    https://seekingalpha.com/article/4106451-windstream-full-panic-mode

    https://seekingalpha.com/article/4106797-windstream-holdings-win-ceo-tony-thomas-presents-goldman-sachs-communacopia-conference-call

    Last week someone sold over 1,000 of the Jan $7 puts.  Appears to be someone looking for a substantial move but didn't want to put up the cash.  But, of course, I could be wrong.  This may not be the bottom, so looking to add more on further weakness.


  34. CMG/jelutuck

    I don't think it's overdone.  Queso got very negative tweets saying it was grainy.  They scrapped the Chorizo after one year because that never caught on and that was supposed to be their big thing a year ago and the multiple on it is very high compared to expected earnings in that sector.


  35. CMG Queso  I owned a Mexican food restaurant for 25 years and we served good queso for years. BUT we had to use s special cheese melt to get it consistently uniform. CMG's recipe I just looked up and they use aged cheddar and milk. The criticisms are about it being grainy which is exactly the problem we ran into using regular cheese. I went to many vendor food shows and no one had an answer except the special melt product. You can get the cheese to melt, but when you put it on the line to hold, the continued heat breaks down into grainy cheese. So I can make a delicious queso one off and serve immediately, but not a commercial product that must sit in a holding pan. 


  36. Rustle/CMG –  When do you think it will be overdone? at what price point you think will be a good starting point for going long? 


  37. WIN/Albo – see some deep value or just wild speculation!? ;-) This is absolutely one I can wait on to see if recovers the 200dma… at a minimum. It's way down in the delisting/reverse split zone. Who's going to buy them out at this price, when the trend is just to get cheaper?


  38. Scott – It's obviously a spec.  But I like some of these plays because of the well-defined risk parameters.  That's very important to me. 

    Sometimes you can catch some really good percentage moves on these distressed names.  And sometimes fundamentals improve quite a bit – ala AMD. 


  39. CMG/learner

    I'd wait to next earnings which should include the norovirus quarter and see guidance but I'm thinking mid 200's.


  40. CMG/Learner

    That's just my opinion.  I don't have any position in it right now.  I never liked it when it got to 400 and shot up.  Thought from an earnings standpoint that was crazy then, think it's still high now.  And Ackman might still be in it, I wouldn't want any stock he has. :-)


  41. thanks Rustle…  mid-200s – is where I will initiate some put sells.   I hear you on Ackman :)


  42. FTR under 12 again


  43. ESRX/Phil – down, while almost all other healthcare up. Who's been drinking their milkshake?


  44. Tx very good commentary on cheese


  45. Phil – UBNT – thank you for the excellent strategy, it's like boxing an exacta.  Just reviewed Left and Citron's BS, and that would be giving it a kind name.  After printing and reading it, I tried to get some use out of the wasted paper and ink by lining my cat's box with it.  Claiming it would be redundant, he has refused to spend a penny or drop a deuce in the box.

    Which proves two things, Citron and anyone buying in have no clue how a business is run and have never worked an honest day in their life. Wrote an analysis where they really "take it in the shorts", lets see if a certain outlet has the balls to publish it and Out.


  46. Phil – Walmart in Florida – I thought 191 sounded a little low.  Here are some numbers on their presence, and any other country or state for that matter, save the link and Out.


  47. Phil, I am thinking about initiating a position in FTR by selling  some January $12 puts.  But trying to decide if a bit more patience is in order if they are likely to cut the dividend to pay for some of the damage from the hurricanes.  Any suggestions?


  48. I can't believe oil isn't selling off more - so annoying.

    Panasonic/Scott – My friend used to work in their Jersey office.  Cool company.

    Sushi/Jet – Not all that dangerous these days.  Also, they should have couscous instead of rice as an option, much healthier.   

    WIN/Albo – Not bad, they go in and out of favor with investors.  Currently way out.  

    BBY down almost 10% into their investment meeting.

    • Best Buy (NYSE:BBY) swings lower after guidance issued by the company ahead of an investor day presentation disappoints.
    • The retailer forecasts FY21 EPS of $4.75 to $5.00, enterprise revenue of $43B and operating income of $1.9B to $2.0B. There aren't consensus marks yet for earnings out four years, but the numbers from Best Buy imply an extended battle on pricing, notes Bloomberg Intelligence.
    • Shares of Best Buy are down 8.75% to wipe out the gains piled up since May.
    • Previously: Best Buy investor day preview (Sept. 19)

    And this should be panicking people, but it isn't:

    • The bank's fixed-income and currency trading franchise – which generates about 25% of Deutsche's (NYSE:DB) earnings – can no longer be counted on the drive profits, says Autonomous' Stuart Graham.
    • The trading business is tough all over for the last few years, but Deutsche has underinvested in technology for a decade, making it a "clear laggard" to competitors.
    • "When we consider the basics of what makes a bank a winner — trust (or brand), balance-sheet muscle, technology and its people — Deutsche looks to be in very bad shape,” says Graham. "It is inevitable that some investors start to question whether the bank has the right leadership.”
    • Deutsche's stock is lower by 45% since John Cryan took over in 2015, but it's still not cheap enough, says Graham.
    • Previously: Deutsche's Cryan under investor pressure – Handelsblatt (Sept. 13)
    • Redbook Chain Store Sales+3.6% Y/Y vs. +4.5% last week.
    • Month-to-date sales up 4.1% through September 16.
    • September sales are expected to increase 4.3%.

    Queso/TX – Nice area of expertise!  

    CMG/Learner – I like them at $300 but to play conservatively, like our LTP entry:

    Long Call 2019 18-JAN 280.00 CALL [CMG @ $302.02 $0.15] 10 8/18/2017 (486) $70,040 $70.04 $-7.09 n/a     $62.95 $-1.05 $-7,090 -10.1% $62,950
    Short Call 2019 18-JAN 420.00 CALL [CMG @ $302.02 $0.15] -10 7/27/2017 (486) $-30,350 $30.35 $-15.00     $15.35 $-0.15 $15,000 49.4% $-15,350
    Short Put 2019 18-JAN 350.00 PUT [CMG @ $302.02 $0.15] -10 8/21/2017 (486) $-72,000 $72.00 $0.80     $72.80 $3.00 $-800 -1.1% $-72,800

    Well, not too conservative, as we sold the $350 puts but still net $278 on those and they more than paid for the spread so we have a $32.30 credit for a net $317.70 entry, worst case.  The payoff is $40,000 plus the initial $32,300 credit so I love the returns and I'm very comfortable CMG can get back to making at least $12.50/share once things go back to normal and then I like them long-term because they do try new things all the time and one day, MAYBE, they'll come up with something good – like MCD did with Chipotle in the first place (actually they bought them, grew them and then spun them out but, hey, Billions in profits!).  I'm telling you, Sushi and Veggi burritos (better ones) with couscous option instead of rice would be good for 25% more sales. It would cut half their calories.  That's where they're not thinking – Queso and chips is 770 calories and who's going to just drink the Queso.  Do that with a burrito the way they make it and that's a whole day's worth of calories in one meal – they're making it impossible for people to eat there every day.  

    Ackman/Rustle – You're right, that's a big concern.  That guy has become a great contrarian bet (against him).

    FTR/Jabob –  WIN has a better dividend:

    How Frontier Communications’ Dividend Yield Compares to Its Peers

    ESRX/Scott – Yeah, back in the bottom of the channel.  Hopefully it doesn't break but we'll have to wait for the report (10/24) to see what's up.  

    Keep in mind, in the LTP, we just have the 5 short 2019 $65 puts we sold for $5 back in Feb – just dipped a toe in the water to remind us to watch them so we'd actually be thrilled if they get cheaper (and our puts lose money).   From our Watch List:

    http://www.philstockworld.com/2017/08/22/tempting-tuesday-fools-rush-us-towards-the-strong-bounce-lines/#comment-6796611

    ESRX (2/17) – Another beaten-down Pharma that is worth owning.  They made $2.5Bn last year, up from $2Bn the year before and they did $1.4Bn in the last two Qs so pacing towards $3Bn yet you can buy this company for $42Bn (trailing p/e 17) at $70.   We can promise to buy them for $65 and get paid $8 to do it, which is net $57 which is 18.5% off the current price.  In the LTP, I'm just going to do those but you can be aggressive and add the $60 ($17.50)/75 ($9) bull call spread for $8.50 and then it's net 0.50 for the $15 spread that's $10 in the money to start.  ESRX was added to the Long-Term Portfolio (LTP) on 2/17, selling 5 2019 $65 puts for $7.50 ($3,750) to start

    Basically playing out just like we expected so far.  

    UBNT/Naybob – Well I'd like to read it in either case.

    WMT/Naybob – I imagine the thing I saw was older and did not include the markets or Sams Clubs - that's a lot of markets.  Still, I want to go with TGT as the math is the same for them either way.

    FTR/Skier – Hey, where've you been?  I'd wait for earnings unless you want to just pick up a 1/4 entry selling the $12s.  The hurricanes came at a terrible time for them as TX and FL were 2 of the 3 states they spent $10Bn buying.  Wouldn't surprise me if this costs them millions and that can easily lead to a 5% miss for the Q while they have all these other pressures – not good.  


  49. Scottmi – Nikkei – "Japan – all time highs yet funky economy.."  1989, Nikkei was 38915, 28 years later their stock market is just peaking over half that amount.  Definition of a crash, burn and lost quarter century.


  50. OK, let's do a proper write-up on TGT for the OOP:

    We're liking Target (TGT) because they are low in their channel, just under $60 and trading at a p/e of about 13.5, with no less than $4.30 in earnings expected this year and perhaps moving to $5 next year so that, in itself, makes them a bargain at $59.25.

    In addition to the fact that fears of Amazon are overblown, Target is well-positioned to benefit from hurricane damage in Texas and Florida.  Millions of homes suffered damage and will need to go to the store to replace a lot of goods and TGT is a go-to place – especially when people are looking to save a bit of money.

    Much more importantly, TGT has their grocery business and Millions of homes were without power for a week (some longer) and that means they have to throw out everything in their refrigerator and then they have to re-stock and that's huge business for the grocery stores.  

    Florida has 137 TGT and "just" $69Bn total sales so 2M homes x $300 more than usual spent would be a 1% pop but in 1Q it's a 4% pop. Should be enough to get them back over $60 – especially as they have very low expectations this Q (0.86 vs $1.04 last year) and they beat last Q by 3.4% at $1.23 – so I think the estimates are way low.  

    Not only that but ToysRUs is going BK and again, this is a place where TGT can fill a gap as they have extensive toy sections with a lot of the same things you used to find at ToysRUs.  Though the bankrupt ToysRUs can wage a price war, Target will have more pull with vendors to get the current toys kids want – just a cherry on top of the reasons we like them down here.  

    In our LTP, we already have a play on TGT which looks like this:

    Short Put 2019 18-JAN 57.50 PUT [TGT @ $59.26 $0.17] -10 4/7/2017 (486) $-10,600 $10.60 $-3.88 n/a     $6.73 $-0.03 $3,875 36.6% $-6,725
    Long Call 2019 18-JAN 50.00 CALL [TGT @ $59.26 $0.17] 30 6/27/2017 (486) $19,950 $6.65 $4.75     $11.40 $-0.55 $14,250 71.4% $34,200
    Short Call 2019 18-JAN 60.00 CALL [TGT @ $59.26 $0.17] -30 6/27/2017 (486) $-9,000 $3.00 $2.70     $5.70 $-0.21 $-8,100 -90.0% $-17,100

    We're a little ahead and we aimed low so right on track as well.  

    In the OOP, we have an even lower spread that's well in the money:

    Long Call 2019 18-JAN 40.00 CALL [TGT @ $59.18 $0.09] 7 6/16/2017 (486) $8,750 $12.50 $8.18 n/a     $20.68 - $5,723 65.4% $14,473
    Short Call 2019 18-JAN 52.50 CALL [TGT @ $59.18 $0.09] -7 6/16/2017 (486) $-3,500 $5.00 $4.65     $9.65 - $-3,255 -93.0% $-6,755
    Short Put 2019 18-JAN 45.00 PUT [TGT @ $59.18 $0.09] -5 6/19/2017 (486) $-2,125 $4.25 $-1.95     $2.31 $0.00 $973 45.8% $-1,153

    I want to get more aggressive and the 2020s are out so let's:

    • Sell our 7 2019 $40 calls for $20.50 ($14,350)
    • Roll the short 7 2019 $52.50 calls at $9.70 ($6,790) to 12 2020 $65 calls at $5.50 ($6,600) 
    • Buy 12 2020 $50 calls for $12.40 ($14,880)
    • Roll the 5 short 2019 $45 puts ($1,150) at $2.30 to 8 2020 $52.50 puts at $7 ($5,600) 

    So we are pocketing $3,750, which is more than the $3,125 we started with and now we go from a potential (almost certain) $5,625 profit in 16 months to a potential $18,625 profit (still playing conservative) in 28 months.  I think it's worth waiting 12 more months for 3x more money, don't you? 

    As a new trade (if you're not already in it) – it's simply selling the new 2020 $52.50 puts for $7 and buying 50% more of the 2020 $50/65 spreads for $6.90 and that's net $6.70 and returns $30 for a $13.30 profit on each spread (192%) if TGT is over $65 in Jan 2020.


  51. ~~
    Windstream -18.6% as it eliminates dividend

    Aug. 3, 2017 10:25 AM ET|About: Windstream Holdings, Inc. (WIN)|By: Jason Aycock, SA News Editor

    WIN

    August 3, 2017

    •Windstream Holdings (NASDAQ:WIN) has tumbled 18.6% after a narrower loss than expected in a Q2 earnings report that also held the elimination of the company's dividend.

    •In a revision to its capital allocation strategy, the company dropped its $0.15 quarterly dividend (what had grown to a 16% forward yield) and authorized a $90M stock buyback.


  52. Math was wrong as a new trade on TGT, fixed now.  

    WIN/Albo – Hey, that makes FTR the dividend champ, especially as they just paid theirs without additional comment.  


  53. Phil – Yes it does !


  54. NYMEX closing and they are still holding $49.90 – Grrrrrrr.  angry

    It's going to be very exciting around the reports tonight and tomorrow – and then the Fed too!  

    Hopefully that's 3 chances for oil to crash but, realistically, it's 3 chances for "THEM" to find an excuse to jack it up so be VERY CAREFUL if you intend to play it tonight or tomorrow – it could get very expensive.


  55. FTR the champ?

    Champion of tax loss carry forwards?


  56. Speaking of crashing – you can see why I'm so patient with my coffee entries:

    I took the money and ran on /DX ($1,336 on 4 longs) and just added 2 short on /TF at 1,413.  Still in my /NGZ7 longs but tight stops as they are up $500 each and I like to lock that in to start the week.    No other longs, missed the re-entry on /KC.  

    /KCH8 is $138.50 

    FTR/Jabob – That too.  Nothing like a good deduction! 


  57. I'd buy your FTR but I've switched to the FTRPR. I'm at 48% dividends, 3 more of those before conversion and can't be cut until then. Watching, I will reinvest that healthy dividend probably before it gets paid as many might do the same and I want to get in before the rush… would love another smackdown on hurricane fears, I'll buy that. I do have 10 short 2019 $10 puts I sold for 3.80 but geez, I really want to own those at half off today's price…


  58. mkucstars1 -- I own both…

    And they are both champs!


  59. At UN, Trump threatens ‘total destruction’ of North Korea


  60. All – here's the Citron video and link to post. Place to discuss UBNT, if you like.

    http://www.philstockworld.com/2017/09/18/citron-exposes-ubiquiti-networks/


  61. The Madness of Donald Trump





  62. Japan/Naybob – yeah, not quite all time highs.. just recent enthusiasm. Understandable, though, because Japan is Awesome! https://www.youtube.com/watch?v=y60LqBSrDjE








  63. Phil – "there's really no excuse for the Fed NOT to raise rates so don't be surprised if everyone is surprised tomorrow by a quarter-point hike." 

    Indeed, I concur and in Dec, making four times this year and four times next year. The big question for us is: what will the Treasury do?  Higher deficit, less Fed rollovers, money can't just be printed up, the Treasury has to issue and sell more bonds to print that money.  Whose buying?

    Just because the Fed is not rolling over MBS and their current holdings doesn't mean they stop buying.  Fed purchases will still influence the float, and force foreign interests and banks to bid up price and lower short duration rates.  Since the reserves are going to slowly disappear, I'm more interested in what will happen with IOER and RRP rates.  Time for my IV and Out.


  64. FTR/Mkucs – Nice way to play them.

    Oil closed pretty much at $50 and flatlining now.   Hmm,. that's not an actual word…

    Citron/Ilene – To be fair, you should also run Naybob's critique of Citron.  Will be interesting to see who's got it right.

    • Ubiquiti Networks (NASDAQ:UBNT) shares up 0.66% after positive comments from Raymond James dismissing Citron Research’s fraud allegation.
    • Analyst Tavis McCourt says Ubiquiti has strong long-term performance and growth potential though he’s “less than thrilled” with the cash flows this year.
    • McCourt notes that companies in the hardware sector can report “lumpy” performance between quarters. 
    • McCourt calls fraud “unlikely” since FTI Consulting, an accounting consultancy, served as CFO and CAO for around a year. 
    • Previously: Ubiquiti Networks down on fraud claims from Citron Research (Sept. 18)
    • Previously: JMP analyst defends Ubiquiti against fraud accusation (Sept. 18)

    7.5 quake hits Mexico City.  The Earth is very angry, my friends…

    Worth a toss at $1.59 as it was $7 less than a year ago and this is very good news:

    • Thinly traded nano cap Rosetta Genomics (ROSG +12.1%) heads north on more than a 21x surge in volume in apparent response a new composition of matter and method of use patent (U.S. No. 9,765,334) covering microRNA molecules associated with the prognosis of gastric cancer.
    Also very interesting:
    • FuelCell Energy (FCEL +4.1%) moves sharply higher after Cowen analyst Jeffrey Osborne says Exxon Mobil's (XOM +0.1%) foray into carbon capture and storage technology with the company is "making progress."
    • The technology, which has moved from the lab to a commercial test at a power plant in Alabama, could be licensed globally to help countries reach greenhouse gas reduction targets, Cowen says, viewing "a successful launch of this technology, albeit in the outer years, as material to the outlook for natural gas demand."
    • Capturing 90% of the emissions at just 1% of U.S. coal plants would require 2,160 MW of fuel cells, equal to ~$6.5 B in sales and $9.7B in service revenue, Osborne estimates; FCEL's total sales in FY 2016 were just $108M.

    I like like these guys anyway – just haven't had a good reason to buy.  

    In the LTP, let's sell 50 FCEL 2019 $2 puts for $1.10 ($5,500) to remind us to keep an eye on them.  It's a net 0.90 entry ($4,500) if assigned.  


    • fire at Valero Energy's (VLO +0.7%) refinery in Port Arthur, Tex., appears to have destroyed at least one fuel storage tank, and the company says emergency response teams are on the scene.
    • The fire reportedly broke out in a tank supplying residual crude oil feed to the coking unit at the 335K bbl/day refinery.
    • The refinery had been shut down because of flooding caused by Hurricane Harvey, and was working at 40%-50% of its capacity.
    • Three billion dollars in debtor-in-possession financing eliminates collection risk for Toys "R" Us' vendors in Q4, says UBS analyst Arpine Kocharyan.
    • Kocharyan and team's checks show no meaningful cancellations or changes to H2 orders.
    • Mattel (MAT +1.1%), Hasbro (HAS +1.6%), JAKKS Pacific (JAKK+0.6%)
    • General Electric (GE -1.6%) tumbles to within ~$0.50 of its 52-week low as J.P. Morgan analyst Stephen Tusa reiterates his bearish view, suggesting that just because the stock keeps getting cheaper does not make it more attractive.
    • Tusa says as the stock's weakness continues, investors and analysts appear to try to create a bullish narrative based mostly on how far the stock has fallen, but analysts have been careful not to raise their ratings, which he believes "defines sentiment on the stock, which is somewhere between somewhat negative, and what we would characterize as 'chicken bullish'… essentially a denial that fundamentals could be this bad, and there is nothing that simple cost saves can't take care of, something that was not obvious to the previous 15 years of management."
    • In his earlier bearish note, Tusa looked at GE and saw "a core operating performance that is below plan, and, currently, a consensus expectations curve that we think remains too high, [free cash flow] that is the weakest in the sector, and, with that backdrop, a valuation that is expensive, with limited incremental catalysts to change the narrative."
    • JPM rates GE at Underweight with a $22 price target; shares, which closed at a two-year low $23.72 on Sept. 11, has fallen 24% YTD.
    • Best Buy slumped as much as 10% this session, and is currently down 7% after issuing disappointing guidance ahead as part of its investor day presentation.
    • The company's landlords – Simon Property (SPG -1%), GGP (GGP -1%), Weingarten Realty (WRI -1.3%), and Macerich (MAC -1.7%) among them – are under pressure today as well.
    • Fiat Chrysler Automobiles (FCAU +1.9%recalls 494K Ram pickup trucks due to a potentially dangerous issue with the water pump.
    • The recall includes Ram 2500 and 3500 pickup trucks from the model years 2013 to 2017. All the recalled trucks have 6.7-liter diesel engines.
    • 443K of the affected vehicles are in the U.S.
    • Procter & Gamble (PG +1.3%) issues an updated investor presentation to highlight the transformation overseen by its board and management team.
    • "The changes needed to accelerate growth are already being implemented. We have strengthened and streamlined our portfolio, simplified our structure and significantly enhanced P&G’s productivity," says CEO David Taylor.
    • The full P&G presentation is available at https://voteblue.pg.com/our-plan.
    • Previously: Procter & Gamble's battle with Nelson Peltz ratchets up again

  65. Another day, another record high.  

    That's why we HAVE to find things to buy…


  66. buy TEVA!!!! ;-)


  67. Phil and NN – yes, it would be great to have both sides. (NN – plz check email.) 


  68. Bernie!!!  

    BBBY misses and drops a quick 15%!  Glad we didn't press the LTP bet yet.  We sold 10 of the 2019 $30 puts for $6.10 so net $23.90 and no 2020s yet so I think we'll just roll our $30 calls, probably $2.50 to the $22.50 calls if they are about $4.  Some of it was hurricane and some was restructuring charges – seems a bit overdone at first blush. They did earn 0.67 per what is now a $23 share in one non-Christmas Q, figure more than $2.50/share makes this a bit silly.  

    The Union, New Jersey-based company said it had net income of 67 cents per share. Earnings, adjusted for restructuring costs, were 75 cents per share.


  69. API reports build of 1.4 million barrels of crude but drops of 5.1 million barrels of gasoline and 6.3 million barrels of distillates. This would be the hurricane effect I guess. Phil what are your thoughts on these numbers? 


  70. Sorry drop of 6.1 million in distillate not 6.3


  71. Remember when we had to make deals to cut the budget because deficits are sooooo bad! Or when we could not pass a stimulus package to fix the infrastructure because we have no money:

    http://talkingpointsmemo.com/news/senate-republicans-reach-tentative-agreement-on-tax-plan

    Apparently there is money when it comes to redistributing to the top 1%…

    Top Republicans on a key Senate panel have reached a tentative agreement on a tax plan that would add about $1.5 trillion to the government’s $20 trillion debt over 10 years, according to congressional officials.

    And keep in mind, we'll be borrowing at higher rates! When Obama proposed a stimulus package, we had negative rates taking into account inflation. But that was proposed by Obama and most of the benefits went to middle class. There is never money for that…


  72. API/Craigs –  That sounds about right.   It's logical, because refineries were shut down and couldn't make products. I can't see why that would be bullish for oil.   Not village for gasoline either, no particular sign of demand.  


  73. BBBY I would think there will be lots of buying to replace hurricane-damaged household items, so the next couple quarters should be good if they can get their stores up and running soon.


  74. BBBY/Jet – I agree, if sheets and linens get moldy, you get new ones.  Plus household items, cleaners, etc.  Still, I think TGT is the safer bet.

    This is cool, you can see them rolling contracts on the NYMEX (things flash simultaneously).  Unfortunately, no Open Interest column:  http://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html


  75. Watching coverage of the earthquake in Mexico City on Univision.  I don't see much of coverage of this on the English channels or outlets.  Trump effect?  Was a 7.1 quake.  Seems like we're heading for the end of days.


  76. End of days… is that bullish?


  77. I will be here after the rapture, that's why I ask… nothing fazes this market. 


  78. One of my friends who lives in Cuernavaca (30 or so miles S. of Mexico City) skyped me and told me it was total chaos there! She and her family are safe although some damage in houses.


  79. 7.1 is a pretty bad quake, I bet it is, hope for the best for those involved. Worse than a hurricane, it just hits you all at once. No warning I heard. Live every day like it's your last, you just never know.


  80. I don't think Americans ever care about things that happen in other countries.  Except the Tsunami a few years ago – for some reason, that got a ton of people to donate. 

    Post-rapture/Mkucs – Will they still accept Bitcoin?  Better keep a few shekels – just in case

    .


  81. No bitcoin here, had greencoin until my laptop was stolen. Any way to reclaim them? Only copy I had of the wallet. I assume it's gone?


  82. How is EGC doing? Looks like it has taken a hit.


  83. Phil/TF

    Good Morning. Are you comfortable with tour short with the upcoming fed. Thx


  84. Good morning!

    No Ravi – I'm not comfortable with my shorts but I'm sticking with them as I have a strong feeling. Oil burned me for $5K last night and for idiotic reasons so I'm taking my lumps and waiting for reality to set in in a week or two:

    Oil climbs on signs of slowing U.S. stockpile gains after Hurricane Harvey

    set for strongest third quarter since 2004, Iraq hints at OPEC extension

    Finally someone else has adopted my macro thesis on oil:  IEA warns $1.3 trillion of oil and gas could be left stranded - The International Energy Agency (IEA) has warned oil and gas companies that failing to adapt to the lower carbon energy agenda could lead to over a trillion dollars worth of assets being abandoned by 2050.

    Trump Admin Moves to Open Alaskan Refuge to Oil and Gas Drilling | https://www.dub.io/tw/28871728

    Just another chance to short /CL at $50.50 overall.

    Laptop/Mkucs – That's so annoying.  See, that's a bit of a problem with crypto – if you are not really into all the tech stuff (like ordinary people) - then you feel the burden of having to protect your money.  This is why we have money and banks – people don't want to have to fend off criminals in order to keep their money safe (so we give our money to even worse criminals to hold).

    Generally, things are very flat ahead of the Fed but that's not impressive with the Dollar under 91.50


  85. Imax – upgraded by Goldman Sach to buy rating.