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Fed Day Follies – Dollar Crashes in Anticipation of MORE FREE MONEY!!!

Is America great yet?

It is if you get paid in something other than Dollars, or if your assets are not Dollar-backed.  Otherwise, it's 3.4% less great than it was in November – as measured by Global confidence in our currency.  Cutting taxes, running up Government spending, threatening war (s) and easy money policies are no way to strengthen a currency.

US Household Wealth is roughly $100Tn so a 3.4% cut in the value of those Dollars means $3.4Tn was essentially taken from us – pretty much confiscated by our Government.   That's a lot worse than any tax because it's 3.4% of EVERYTHING we have.  Fortunately for those of us in the Top 1%, a lot of that $3.4Tn went right back into the market, where we have the bulk of our wealth anyway and, of course, we have enough money that we diversify our assets into other currencies and, of course, Gold, which has flown up from $1,125 to $1,325 (17%) since the election.

So thank you, Bottom 99%, for your contributions to our portfolios.  We couldn't have done it without devaluing everything you own!  In yesterday's morning Report, we discussed the massive debt bomb we are facing and looked at the Fed's projections and concluded the market may be wrong and the Fed may tighten at this meeting.  If they do, the Dollar will shoot higher and shorts will cover so I like Dollar Futures (/DX) long over the 91.50 line – with tight stops below.  

If the Fed surprises us and brings rates up 0.25%, expect the /DX to move up to at least 92.5 for $1,000 gains per contract.  Don't forget, Japan, Europe and China do not want a weak Dollar – this is the point they are likely to step in and prop it up anyway – so I feel pretty good about that play.  If you are Futures-impaired, you can use the Dollar ETF (UUP) as a proxy.  It's at 23.80 and the October $23.50 calls are just 0.45 so 0.15 in premium isn't bad for a month's worth of leverage, right? 

We'll look at that trade this afternoon at 1pm in our Live Trading Webinar and tune in because it's going to be a wild one with the Fed releasing their statement at 2pm, followed by Yellen's press conference – so big opportunities to profit from the changes but I'm already short the Russell (/TF) and Oil (/CL) again as the new contracts (/CLX7 – November) are at $50.50, which is the old $50, which I told you was a good short on Monday morning and we cashed those in for a quick $10,000 gain on 20 contracts (up $500 per contract) so – you're welcome!  

So our new shorting line is $50.50 and it's very strange that we haven't gone much lower but all that talk of hurricanes and OPEC cuts have allowed the NYMEX traders to get rid of all but 27,000 open contracts on the last day of October contract trading – effectively cancelling the delivery of (so far) 273 MILLION barrels of oil that were scheduled to be delivered to the US as of last Wednesday, when I told you the open interest was fake, Fake, FAKE!!! and would be essentially all cancelled

Click for
Chart
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Oct'17 49.84 50.10 49.75 50.05 08:01
Sep 20

 


-
0.57 3791 49.48 27432 Call Put
Nov'17 50.27 50.55 50.15 50.47 08:01
Sep 20

 


-
0.57 119987 49.90 598401 Call Put
Dec'17 50.54 50.86 50.46 50.79 08:01
Sep 20

 


-
0.55 20637 50.24 357897 Call Put
Jan'18 50.81 51.09 50.70 51.04 08:01
Sep 20

 


-
0.54 4186 50.50 219175 Call Put
Feb'18 50.97 51.25 50.90 51.21 08:01
Sep 20

 


-
0.52 1757 50.69 91264 Call Put
Mar'18 51.13 51.35 51.01 51.32 08:01
Sep 20

 


-
0.50 2265 50.82 170838 Call Put

Although 273M barrels were diverted away from the US (creating an artificial shortage and causing you to pay more at the pump) there are still 1.2 BILLION barrels worth of FAKE!!! orders open in the front 4 months vs 1.25Bn in the front 4 months a week ago.  It would seem like they've actually sold 50,000 contracts (50Mb) but then you have to consider that, as of this evening, Feb becomes part of the front 4 months and there's all 2.5Bn FAKE!!! orders accounted for – ready to screw Americans out of $10-$20 per barrel for another month by creating shortages in the middle of a surplus.  

You would think this is criminal, possibly even treason – as it threatens the energy security of the Unitied States of American and it's the kind of market manipulation that screws American consumers out of tens of Billions of Dollars each year yet it just goes on and on – even when I TELL you in advance how the crime is going to be committed and SHOW the evidence while it's being committed and EXPLAIN about it after it's been committed – it never changes.  

So what else can we do but profit from it?  While the OPEC cuts have put a good dent in their own storage – it has only dropped 92M barrels in 365 days since they said they were cutting production by 1.5Mb.  People with math skills may think that doesn't add up and part of that reason is because US production has been rising almost as fast as OPEC has been cutting but that still doesn't explain their own lack of dawdown locally.  

That's explained by rapidly declining demand and, as I have said before, things are getting tense in the Middle East because they have less than 20 years before they are sitting on stranded assetts – as the World pulls completely away from fossil fuel consumption (other than material uses).    Finally the IEA has caught up with my theory and published their own paper estimating $1.3 TRILLION worth of oil and natural gas could end up being completely abandoned by 2050.  Even if you assume 30 years until doomsday for oil, that's still $43Bn/yr worth of assets they should be depreciating or pretty much ALL of their profits.  

Of course, they won't do that.  They will instead continue to manipulate the trading at the NYMEX and continue to pretend this party is never going to stop – anything to push back the tipping point where people simply move on from Exxon (XOM) and their $339Bn market cap and from Chevron (CVX) and their $220Bn valuation, etc.   We're talking about a very major shift away from traditional energy that will drive the next couple of decades of our investing.

future-of-energy-infographic

Sorry I don't have a newer chart, but you get the idea.  This is why we took our money and ran on XOM – there's really no future in it.  That's doesn't mean things can't go up and down along the way and not every solar company will be a winner but this IS the way of the Future and we're investing in some of the companies that make battery and solar cell components – as those are the new raw materials for the 21st Century.  It's like picking chip stocks at the early stages of the PC boom – we didn't know WHICH brand of computers people would be using – but they were certainly going to have chips in them!  

We've been discussing investments in battery tech during our Live Trading Webinars this month and I'm still looking for you to bring us some ideas we can look into.  Last week we looked at ALB, LIT, VALE, BHP, OROCF, SYAAF and MGPHF and I can't tell you which ones we picked if you're not a subscriber - just that it's a space we're exploring.

One trade I can talk about is IMAX (IMAX), which has been in both our Long-Term Portfolio as well as our Options Oppotunity Portfolio this year.  Back on August 18th, in our LTP Review, I said to our Members:

IMAX – Going to call a bottom here.  March is out so we can roll our 25 Dec $29 puts ($10.20) that we sold for $3 (ish) to the March $26 puts at $7.50 so we'll spend the $3 but pick up $4 of position on the roll.  The Dec $28 calls can die on the vine and we'll roll our 20 Dec $23 long calls (0.50 = $1,000) to 30 Mar $17 ($3.30)/$22 ($1.20) bull call spreads at $2.10 ($6,300).  The spread pays $15,000 if all goes well and we'll be pretty much even at $22. 

In the OOP Review the day before, I had said:

  • IMAX – Ouch!  Way overdone sell-off so we'll take advantage buy buying back the short Dec $28 calls (0.10) and rolling the 10 $23 calls (0.45) to 20 of the March $15 ($4.70)/20 ($1.80) bull call spreads at $2.50 ($5,000).  That has $5,000 upside potential which will make up for losses on the call side but the 10 short Dec $29 puts ($10.30 = $10,300) will take some work, starting with rolling them to 20 March $22 puts at $4.30 ($8,600).   That's going to cost $1,700 to roll and we collected $3,150 when we sold the originals so still a $1,450 credit but that's not much (0.70/contract).  Still, it's an improvement and we don't try to win everything back at once – this would be a huge improvement by itself if $20 or better holds.  

As you can see, we hit our bottom call on the nose and IMAX has been up ever since but I'm bringing it up this morning because Goldman Sachs finally caught up with us and has raised IMAX to a Buy Rating and issued favorable comments on growth (duh!).  You can see me talking about a new IMAX Trade Idea on Money Talk on Sept 6th, and that trade was included in our Money Talk Portfolio, which we started that evening and is already up 18% – not bad for 2 weeks (WPM was our leftover Trade of the Year, so 14% without it)!  

Looking forward to the fun when Yellen speaks later.  As you can see, we have almost 80% of our $50,000 portfolio in CASH!!!, so we're really hoping that Dollar catches a bid! 

Be careful out there.

 


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  1. ~~S&P Global Ratings said that it had lowered its corporate credit rating on Teva Pharmaceutical Industries Ltd. to 'BBB-' from 'BBB'. The outlook is stable. At the same time, we lowered our rating on the company's unsecured debt to 'BBB-' from 'BBB'.

    * Our rating action follows news that Teva has reached an agreement with its
    bank group to amend its net leverage covenant, loosening the required ratio
    from 4.25x to 5.0x through fourth-quarter 2018 with step-downs through 2020
    to 3.5x. While the amendments provide Teva with much-needed covenant relief
    and lessen the likelihood of a covenant violation, we now believe that it
    will take longer than we previously anticipated for Teva to reduce leverage
    to its long-term target of below 4x. We have revised our 2017 and 2018
    forecast and now expect net debt to adjusted EBITDA of 5x in 2017 and 4.6x in
    2018.
    * While we expect generic pricing pressure will persist, we believe that Teva
    has taken steps to strengthen operations and the balance sheet. These steps
    include lowering the dividend, as well as appointing Kare Schulz, who
    successfully oversaw the restructuring of specialty pharma company H.
    Lundbeck, as CEO. This also reduces uncertainties regarding Teva's
    longer-term strategy in terms of restructuring, research and development
    (R&D), and divestitures in an increasingly challenging generic drug
    environment where we don't expect pricing pressures to abate until after 2018.
    * The generic drug industry has always been highly competitive, with constant,
    steady erosion of drug pricing. However, we have witnessed increased pricing
    pressure over the last year as a result of faster U.S. Food and Drug
    Administration (FDA) approvals and consolidation along the supply chain of
    drug customers--including among pharmacy benefit managers (PBMs),
    wholesalers, pharmacies, and providers--as they gain more bargaining power
    through scale and look to extract cost savings. We believe that this pressure
    is likely to continue over the next two years.
    * Furthermore, Teva faces looming generic competition to its branded,
    high-margin multiple sclerosis drug, Copaxone. We are currently projecting
    generic competition to emerge sometime in the first half of 2018. Should
    generic competitors take market share more aggressively than expected, it
    could further extend out the time period before Teva restores its financial
    leverage to less than 4x.


  2. Good morning, everyone!

    Webinar day! 1pm (Eastern).

    http://philstockworld.enterthemeeting.com/m/ZBMQ3KXK


  3. FU S&P!!!!!!!!!!!!!!!!!


  4. Imax – upgraded by Goldman Sachs to buy rating.  Issues favorable comments on growth….


  5. Good Morning.


  6. Phil,

    Looking at BLDP as a spec in fuel cell space.

    BLDP seems (to me, at least) the best of breed (>PLUG, FCEL).

    Tech: Stk gapped (9/13)up on techn breakthrough (replace costly platinum in manu process)  from 3.72 to 4 and topped out at 5.02, last 4.60. Price sup 2.75 to 3.0 (4 mths)

    Funda: Last few qtrs beat estimates (by .02 last Q) with breakeven reached last Q. sales  26m which represented a 50% incr yoy. Positive developments: recent order from Nisshinbo, incr order backlog +10%, techn develop:–  btr catalyst to replace platinum in manu process, pos cvge by Wainwright (fwiw).

    Strategy:

    Sht puts – sell Feb $4 for .50 with a view to rolling to May $3 (.38) if price breaks <$4 which puts  price within support range

    BCS either May 3/5 net $1.00 or May 4/5 net.35

    Would like your thoughts on the above when  time permits – as we and market tread water awaiting Fed.

    Thanks in advance


  7. FU LB!!!!!


  8. Japan has been playing the debt game for how many years?  It has not affected them so far, as they have their own fiat currency…as do we.  As long as everyone is diluting with their currency, a race to the bottom it will be.  But, the bottom is when?  Inflation is not in the card game yet.


  9. Inflation = wages….again.  Not gonna happen.  We love our minimum wage.


  10. Phil, I have a small position in BBBY, short 6 of the 2019 25 puts at about $2.50, now $5. Wait for the dust to settle, roll lower, wait for 2020s to be out or add a BCS here?


  11. Good morning!  

    Petroleum status report shows 4.6Mb build in oil, Gasoline down just 2.1Mb – very disappointing and Distillates down by 5.7Mb.  Not at all bullish but hey – extended production cuts!  


  12. AAPL = looks like the more negative 'news' on the 8 orders, along with a software issue on the phone…. nothing to worry about but stock is taking it on the chin…. i hope i keeps falling i'd like to pick up more of the '19 140 here….  


  13. AAPL – software issue on the watch


  14. TEVA/Seer – Up anyway, I guess that was expected and not as bad (or not worse) than expected. 

    BLDP/8800 – That's another one I like, but not looking to chase a 100% run for the month, thanks.

    As long as you're going small and REALLY want them to drop 50% so you can triple down – then I like it.

    LB/Jabob – It's always something.

    Victoria's Secret owner L Brands gets downgraded on falling bra prices

    Still market perform so it's a bit of an overreaction. 

    Japan/Pharm – It's different when only one country it doing it.  If we all go down that path, then the whole system collapses. You could make a plan for everyone in the neighborhood to get together and buy a house for sale for a high price to boost the comps for everyone and that might work as long as there are outside buyers who don't know it's a scam but if you say "well, that worked so well that now everyone should buy everyone else's house for high prices" – then where does the money come from and what good does it do anyone?  That's where the Global CBs are – most of their money has come from devaluing currencies but we can't all devalue our currencies to boost the economy.

    BBBY/Jet – They're certainly not far enough below $25 to worry about.  I'd wait for the 2020s to come out so you can have a better look at the rolling options unless you REALLY want to improve the position but I'd still give it to next week before looking at something like rolling the 6 $25 puts ($5.20 = $3,120) to 10 of the $22.50 puts ($3.65 = $3,650) which would mean you collected $1,500 + $530 on the roll so call it $2K and that's $2 per contract and down to net $20.50 on 10 ($20,500) vs net $22.50 on 6 ($13,500) for an obligation.  So spending $7,000 more for 400 more shares is $17.50 and, if you don't believe in that number – then you should cut losses and get out at $23, right?

    The 2019 $20s are down to $5.20 and I'd take those and sell the $30s ($1.60) but no hurry on at least 1/2 of that sale and, as I said, no hurry on the whole thing.  

    AAPL/Batman – Suits me, we're a bit bearish on them (and the Nas) anyway. 


  15. Phil,

    Re BLDP –  understand your caution & counsel:don't get distracted by a pretty picture and overpay. Thanks


  16. BLDP – 1.15B in retained loss

    It's been a 20+ year science fair project — BUT they have steadily increasing revenue. If anyone in the world has figured out (finally) how to put together a hydrogen fuel cell cheaply enough for it to make money, it would be these guys.


  17. BDC 

    Thanks for the perspective/info on BLDP – at this juncture just a spec (albeit a promising one) . Seems to me – a science tech outsider – to be the strongest in the kennel. 

    " The batlte isn't always to the strongest, nor the race to the swiftest, but thats the way to bet 'em"

               Damon Runyon, I think


  18. I agree Phil, but it is a fiat currency party, and when the wheels come off, it will not be fun.  But, when do the wheels come off?  Buying bonds with fiat currency at negative yields.  Someone is making money somewhere, and it ain't the lower incomes.  So, again, we are in it for the long haul, and things can only go up Up UP!


  19. Drifting along into the Fed.  

    Traders Boost Odds of Third Rate Hike This Year as FOMC Meets

    Government By Goldman

    Elizabeth Warren urges Fed to 'step up' and remove Wells Fargo's(WFC) board

    China's Under-the-Radar Bond Boom May Be Next Risk TargetChina’s riskiest borrowers are ramping up sales of short-term dollar debt again, reigniting speculation the authorities will clamp down on what has become a way to raise cash under the radar. Beijing’s deleveraging drive — endorsed by President Xi Jinping and the Politburo in April — has inadvertently fueled a boom in short-end notes this year. As the National Development and Reform Commission started withholding approvals for offshore debt issuance by property developers and local government financing vehicles, companies got resourceful, selling debt due in one year or less as that doesn’t require permission from the authorities.

    China's bitcoin clampdown is likely here to stay, analysts say

    Another split likely coming for Bitcoin

    • via Lulu Yilun Chen and Eric Lam at Bloomberg
    • "There’s probably going to be another split between bitcoin legacy and SegWit2X version of bitcoin but that just gives me more coins that I can sell for the Bitcoin Cash version,” Roger Ver (otherwise known as "Bitcoin Jesus") tells Bloomberg.
    • It would be the second split this year, and thus a third version of the cryptocurrency. Bitcoin sold off briefly after this summer's split, before resuming its powerful rally.

     

    Cryptocurrency Concentration – Just 4% Own Over 95% Of Bitcoin

    Japan's Exports Jump 18% in Biggest Gain in Almost 4 YearsJapan has enjoyed a run of strong growth in exports this year, while rising imports add to signs that domestic demand is firming as well. The Japanese economy grew at an annualized 2.5 percent in the second quarter, more than double its potential growth rate. But while a weaker yen has improved trade data, inflation remains well below the Bank of Japan’s 2 percent target.

    Pennsylvania's credit rating downgraded at S&P

    • Noting structural imbalances going back at least ten years, and a history of late approvals of budgets (including this year in particular), S&P downgrades the general obligation debt of Pennsylvania to A+ from AA-.
    • The state this month has missed more than $1B in Medicaid reimbursement payments, as well as $581M in payments to school districts for PA's share of pension obligations.

    Credit card delinquencies back on the rise

    • Loans more than 30 days delinquent at Capital One (NYSE:COF) rose to 4% of total loans in August vs. 3.5% four months earlier; at Synchrony Financial (NYSE:SYF), they rose to 4.5% from 4.1%; at Alliance Data (NYSE:ADS), to 5.3% from 4.7%.
    • The absolute levels aren't that bad, but they are the highest in years, and the trend represents a reversal from the spring, when delinquency rates crept lower. One also wonders why delinquency rates are rising when the labor market is so strong.
    • "This was the most bullish set of meetings we've had with any payments company in many years," says analyst David Togut after spending time with PayPal (NASDAQ:PYPL) management.
    • "As PayPal transitions from a products to a platform company, its growth opportunities are expanding and the room for earnings outperformance is increasing. Competitive advantages generated by PayPal's two-sided network are substantial and sustainable."
    • He lifts his price target to $81 from $68. Shares are up marginally premarket to $63.92.

    McConnell Won't Promise Obamacare Repeal Vote as Foes Mobilize. (videoSenate Majority Leader Mitch McConnell refused to promise a vote on Republicans’ last-ditch proposal to repeal Obamacare as Democrats and other opponents started ramping up a new campaign Tuesday to block it. "If we were going to go forward, we would have to act before Sept. 30," McConnell told reporters when asked if the GOP-only bill will come to the Senate floor before next week’s procedural deadline. "We are in the process of discussing all of this."

    WTI/RBOB Jump After Smaller Than Expected Crude Build

    • EIA Petroleum Inventories: Crude +4.6M barrels vs. +3.5M consensus, +5.9M last week.
    • Gasoline -2.1M vs. -2.1M consensus, -8.4M last week.
    • Distillates -5.7M barrels vs. -1.6M consensus, -3.2M last week.
    • Futures +1.42% to $50.61.
    • Chesapeake Energy's (NYSE:CHKbig debt load prompts a cautious view from analysts at Imperial Capital, who today initiated coverage of CHK with an In-Line rating and a $5 price target despite a "significant asset base [that] remains undervalued."
    • While CHK "has come a long way over the past few years… there is still much to do to improve the financials, refine the portfolio and unlock its large asset base for investors," Imperial says.
    • Imperial is more upbeat on Gulfport Energy (NASDAQ:GPOR), which it starts at Outperform with a $19 price target, as GPOR remains something of a "show me" story but the firm says it can make money at current nat gas prices while operations continue to improve and drive improved economics.
    • The firm also initiates Gastar Exploration (NYSEMKT:GST) at In-Line with a $1 price target, as GST's valuable acreage is offset by remaining hurdles to clear operationally and financially before that value can be realized by investors.
    • Ocean Rig UDW (NASDAQ:ORIG-23.6% AH after announcing a 1-for-9,200 reverse stock split, effective after the close of trading on Sept. 21.
    • The move will reduce the number of issued and outstanding common shares to ~8,976 shares from 82,586,851 currently.

     

    • Aluminum prices surge to five-year highs following reports that Chinalco (NYSE:ACH) was cutting production two months before official winter restrictions begin and would soon trim stocks of available metal.
    • Concerns that an environmental crackdown in China would create shortages have lifted aluminum prices, +28% YTD on the LME at $2,191/metric ton.
    • In premarket trading, ACH +7.9%AA +1.9%CENX +1.6%KALU +1.2%.

     

    • Iron ore prices drop below $70/dry ton for the first time since July following fresh questions about the outlook for Chinese demand and a warning from Australia’s central bank that top buyer China may be nearing peak steel.
    • The benchmark spot price for ore delivered to Qingdao has plunged 10% in the past four days, ending at $68.85/dry ton on Tuesday, after nearly hitting $80 in August.
    • Iron ore is coming under pressure as weakening data from China have dampened the outlook for the coming months at the same time as the country plans production cuts for the winter to ease pollution.
    • The Reserve Bank of Australia has weighed in, saying prices will drop amid rising supply and prospects that steel output in China is nearing a peak on a per-head basis.
    • Citigroup says in a new report that it sees iron ore falling to $53 next year, driven by rising supply and concern over a China slowdown.
    • Ford (NYSE:F) says it will temporarily idle production at five North American assembly plants, three in the U.S. and two in Mexico, to reduce inventories of slow-selling models.
    • Ford is scheduling 1-3 weeks of downtime at the factories which mostly build Ford passenger cars, including the Fiesta and Fusion, whose sales have been hurt by the shift in consumer demand to larger crossovers and SUVs.
    • The factories involved employ more than 15K workers, and it is not yet known how many will face temporary layoffs.
    • China is considering a change to allow foreign automakers to set up wholly-owned EV businesses in designated free-trade zones in what would be a major development. Currently, automakers have to partner with a Chinese company in a JV to sell cars in China.
    • The new rules could allow U.S. automakers Ford (NYSE:F), General Motors (NYSE:GM) and Tesla (NASDAQ:TSLA) the chance to set up manufacturing facilities in China without a local partner.
    • Sources say the new policy could be approved for as early as next year.
    • The relaxation of the EV restrictions is seen as a win for Chinese automakers as well with the local supply chain likely to explode. BYD (OTCPK:BYDDFOTCPK:BYDDY) is up 12% in Hong Kong, while Geely Automotive (OTCPK:GELYFOTCPK:GELYY) and Anhui Zotye are both up around 6%

    Fedex(FDX) Tumbles After Missing Revenue, EPS, Guiding Lower; Blames Hackers, Harvey

    • BTIG backs up its bullish view on Cheesecake Factory (NASDAQ:CAKE) due to the potential for financial engineering.
    • "We estimate that a levered repurchase could generate impressive economics with the stock at current levels and also signify management’s confidence in the long-term prospects of its business," writes analyst Peter Saleh.
    • "We believe such a transaction is a worthwhile consideration for management given economics that drive considerable EPS accretion but should not result in significant changes to its cash flow profile," adds Saleh.
    • Shares of CAKE are rated at Buy by BTIG and assigned a price target of $50

    Bed Bath and Beyond(BBBY) shares tumble after worse-than-expected sales

    Meanwhile, The "Next Big Short" Is Quietly Blowing Up

    Uber Faces Widespread Asia Bribery Allegations Amid U.S. Criminal ProbeUber Technologies Inc., facing a federal probe into whether it broke laws against overseas bribery, has embarked on a review of its Asia operations and notified U.S. officials about payments made by staff in Indonesia, people with knowledge of the matter said.

    Bain consortium offering $22B for Toshiba chip unit

    • Reuters sources say the Bain consortium bid for Toshiba’s (OTCPK:TOSBFOTCPK:TOSYY) chip unit amounts to around $22B.
    • Toshiba swung back to the Bain group after talks fell through with the Western Digital (NYSE:WDC) consortium.
    • Toshiba’s selection of the rival bidder could send Western Digital back to court, where the company is attempting to block a chip unit sale done without its approval. Western Digital says its SanDisk acquisition last year granted approval rights as a Toshiba partner.
    • Western Digital shares are down 3.8% premarket.
    • Previously: Reuters: Toshiba swings again, chooses Bain group to buy chip unit (Sept. 20)
    • Update: Toshiba has now confirmed selecting the Bain consortium and says the deal was for $18B.
    • Toshiba also suggests that the bid winners agreed to deal with whatever legal obstacles Western Digital throws that direction.
    • Annual global DRAM bit demand will grow 19.6% this year and 20.6% in 2018, according to TrendForce’s DRAMeXchange.
    • DRAM supplies will remain tight since planned fab expansions won’t help supplies until at least 2019. The major manufacturers expanding will only increase wafer start volumes by up to 7%.
    • The firm puts Samsung’s (OTC:SSNLFOTC:SSNNF) monthly wafer start volumes at 390K pieces and notes the company will need to build a second 12-inch wafer fab to make more DRAM products. 
    • SK Hynix has a similar problem with needing more production room and is expected to average a monthly wafer start volume of 80K by year’s end. 
    • Micron (NASDAQ:MU) has some production room remaining at its fabs that could add 30K to 40K pieces per month but is the only one of the three market leaders to not disclose plans for a new fab building.  
    • Previously: Evercore raises Micron price target (Sept. 18)

    Amazon(AMZN) is firing on all cylinders to grow its retail presence

    Rosenblatt: iPhone 8 pre-orders lower than previous models

    • Rosenblatt analyst Jun Zhang says Apple (NASDAQ:AAPL) iPhone 8 pre-orders have come in well below the iPhone 7 and iPhone 6.
    • The firm’s Chinese market research shows 1.5M iPhone 8 pre-orders on JD.com in the first three days compared to 3.5M for the iPhone 7. China Mobile’s iPhone 8 volume was around 1M compared to 2.5M for the iPhone 7 and 3.5M for the iPhone 6. 
    • China accounted for about 18% of Apple’s iPhone sales last quarter even with a 10% drop on the year. Apple’s smartphone market share in the region dropped to 9% in the first six months of 2017 compared to 14% in last year’s period. 
    • Zhang says pre-orders were also low in the United States. 
    • Key analyst comment: “"We understand many customers could be waiting for the iPhone X, but we are concerned iPhone 8/8 Plus sell-through could bring some headwinds." 
    • Apple shares are down 2.46%.    
    • Previously: Reuters: Apple faces hard sell with premium iPhone in China (Sept. 11)
    • Apple (NASDAQ:AAPL) issues a statement about cellular connectivity issues with the Watch Series 3 days before the product ships.
    • The statement, via The Verge: ““We have discovered that when Apple Watch Series 3 joins unauthenticated Wi-Fi networks without connectivity, it may at times prevent the watch from using cellular. We are investigating a fix for a future software release.” 
    • Early reviewers for publications including The Verge and The Wall Street Journal expressed connectivity issues and those high-profile problems led to Apple’s statement. 
    • The Watch Series 3 starts shipping September 22.   
    • Previously: Apple iOS 11 launches today with AR, App Store changes (Sept. 19)

  20. Oil is spiking relentlessly higher – over $51 now!  


  21. Hi Phil looks like your AAPL 150 Sep 29 caller is going to be still a winner!!!!!



  22. Phil – Remember what we said in June? QE purchases ending in October 2014, were telegraphed in the July 2014 FOMC minutes release, which within 10 days began a 75% collapse in oil prices.

    No raise required, that's just icing on the cake. All they have to do is say exactly when the punch bowl is getting taken away, viz. Oct. and the wheels go into motion.  We covered some of the potential effects here.  

    Last time, QE buh-bye, this time, reduced Fed rollover and shrinking excess reserves means, both mean somebody has less money to speculate with. What gets run over this time??? TBD and Out.


  23. KHC – looks like maybe the new 29-yo 'financier' CEO is not instilling full confidence with shareholders


  24. NAT – are you familiar with a gentleman called Martin Armstrong? You and Phil have piqued my interest in finding more out about monetary policy and central bank operations and their relation to asset prices. Started a webcrawl through various resources – but when it turns up clues that end up leading to shadowy figures endorsed by mises.org - then I start to wonder if it is worth it.


  25. Winston – "monetary policy and central bank operations and their relation to asset prices"

    The scope and scale of the effect and affect is far reaching and non trivial. Yes, I've heard of Armstrong. With economics, in particular macro, like anything else you have various camps and religious sects.  Classical (Chydenius, Adam Smith); Marxian (Marx, Engels); Keynesian (Keynes); Austrian (Mises); and Chicago School (Friedman).

    I am non sectarian or agnostic, as other than seasonality in flows, which like a rotation of the planet or trip around the sun, is axiomatic and predictable, I don't subscribe to any one theory.  I take it all with a grain of salt and believe you should take the best and leave the rest.  And I also believe my IV awaits and Out.


  26. Thanks NAT.

    Phil – are you familiar with a gentleman called Martin Armstrong? You and NAT have piqued my interest in finding out more about monetary policy and central bank operations and their relation to asset prices. Started a webcrawl through various resources – but when it turns up clues that end up leading to shadowy figures endorsed by mises.org - then I start to wonder if it is worth it.


  27. Greg:  

    Do you have an app suggestion for viewing the webinars on an iPad.  Apparently, the new updates will make Meeting Burner obsolete.  The Adobe product that comes up when you hit the "webinar" button requires flash which is not supported on iPads.  


  28. So Yellen held rates steady but they are now tapering off from $60Bn to $10Bn per month over 5 quarters, which means the Fed will want back $600Bn a year beginning Jan 2019.  Can't see how that's in any way bullish.

    Dollar hit goaaaaaaaaaaallllllll!!! at 92.50 and UUP hit 0.60 for a 33% gain on the day ($750 per contract on the Dollar) – that was EASY!

    No joy on /CL or /TF shorts but I'm riding those out as I think it will take a few days for the market to fully digest the change of wind.  

    No raise/Naybob – Yes, that's what I said in yesterday's post.  I said they would withdraw $500Bn a year but they are making it $600Bn.  

    Image result for missed it by that much animated gif

    We liked LB and IBM spreads in the Webinar – as well as shorting /TF at 1,445 and /ES below 2,500.

    CMG with a nice move today. 

    Damn!  We forgot to talk about CAKE!   Oh well, in the LTP let's sell 10 CAKE Apr $40 puts for $2.60 ($2,600).  They got too cheap.  

    KHC/Scott – 20x $3.50 earnings is my limit for that kind of company.   They are $10 over that still.

    Mises/Winston – They are Austrian Economic fanatics, not my cup of tea.  Armstrong is a wave guy  and wave guys are always right sometimes (imagine predicting how ocean waves will come in and then give yourself enough time and you'll be able to find a set that matches your forecast, right?).  He ended up doing some shady stuff and went to jail for a Ponzi-like scheme that pretty much proved that, in practice, his model was complete BS.  I am dumbfounded that this is where my attempts to enlighten you have led you!  crying

    MeetingBurner/DC – Isn't there a MeetingBurner app?


  29. Wow, we're being jammed up into the highs again – relentless.  

    Fed's balance-sheet unwind will be moment of truth for financial …

     

    Some market watchers expect traders to eventually face what they expect to be a bracing reality check.

    Investors have shown a “delusional” complacency, said Peter Boockvar, chief market analyst for The Lindsey Group.

    He said that most are reacting to events instead of looking forward. This shortsighted behavior is especially acute in the stock market. Equity traders look daily for clues to the fate of Trump’s tax proposals, but disregard momentous shifts in central bank policy, he said.

    That about sums it up!  


  30. Fed Balance shrinking may not be bullish but not very much of anything as the pace of shrinkage amounts to less than 2% of average daily treasury volume. (approx. $500B /day)


  31. What a day!  So tempted to cash out positions but how can we when the market never goes down?  

    That was an obvious trade too!  


  32. 2%/Pstas – Well that's misleading as that's what's trade back and forth but they were taking more than half the SUPPLY of notes off the table and now they will be putting more supply into the mix – no way that doesn't punch bonds in the gut.  


  33. Phil,

    Is your average on /TF still 1425?


  34. Also, you think /NKD is too high (also overreaction)? 


  35. Phil/MeetingBurner

    Yes. That's what I used in the past, but it is my understanding that the new system updates AAPL is putting will make the current version of MeetingBurner inoperable. 


  36. This is just so f@cking insane:

    http://talkingpointsmemo.com/livewire/chuck-grassley-graham-cassidy-bill

    Grassley said keeping Republicans’ campaign promise to get rid of former President Obama’s signature accomplishment was as important as the contents of the most recent health care bill, penned by Sens. Lindsey Graham (R-SC) and Bill Cassidy (R-LA).

    “You know, I could maybe give you 10 reasons why this bill shouldn’t be considered,” Grassley told Iowa reporters on a call, according to the Des Moines Register. “But Republicans campaigns on this so often that you have a responsibility to carry out what you said in the campaign.”

    “That’s pretty much as much of a reason as the substance of the bill,” he added.

    So they know that the bill sucks, is probably bad for the country and is not following the regular order but they are so bent of making good on their campaign promise of the last 8 years that they will vote on it anyway! When is "bad for the country" a stop sign for legislation?  They had 8 f@cking years to  come up with something "not bad for the country" and they come with that abomination in 2 weeks! 


  37. Just had dinner in the city, Trump and UN are making a traffic catastrophe.  Half of mid-town Manhattan is blocked off – took me about an hour to go 2 blocks.  

    /TF/Japar – 20 at 1,435 now. 

    /NKD/Japar – We hit 20,400, I was hoping for 20,500 before shorting.  Might not get there if Dollar can't get over 92.50 (which is where I got out – so no confidence it will). 

    MeetingBurner/DC – I don't see why the App won't work but maybe.  Maybe they'll update the App to a version that works.  If not, I'm sure Greg will check into it.  

    Health Care/StJ – It's such a farce, the only "country" they care about is the very small one that contributes to their campaigns so they can keep their phony-baloney jobs.  

    These are despicable people doing despicable things yet it's just treated like business as usual in Washington.  The lack of outrage by the people is what I find most disturbing.  Even given that Republican voters drank the Kool-Aid and actually somehow think this isn't an absolutely terrible bill being handled in a completely heavy-handed way that sets precedents that undermine our entire Democracy – it's still horrible enough (borderline premeditated mass murder) that you would think more than a handful of Democrats would be storming their legislatures demanding real action – even if it is just a sit-in, like they did last year.

    Blue Cross Plans Come Out Against Graham-Cassidy Trumpcare Bill

    The nation’s Blue Cross Blue Shield plans and the powerful insurance lobby America's Health Insurance Plans on Wednesday joined mounting opposition from health-care providers, patient advocates and the largest senior lobby against the Republican-led Senate’s latest effort to overhaul the Affordable Care Act.

    “We share the significant concerns of many health-care organizations about the proposed Graham-Cassidy bill,” the Blue Cross Blue Shield Association said. “The bill contains provisions that would allow states to waive key consumer protections, as well as undermine safeguards for those with pre-existing medical conditions. The legislation reduces funding for many states significantly and would increase uncertainty in the marketplace, making coverage more expensive and jeopardizing Americans’ choice of health plans. Legislation must also ensure adequate funding for Medicaid to protect the most vulnerable.”

    Blue Cross plans provide coverage for 106 million Americans in all 50 states.

    AARP's Public Policy Institute said Graham-Cassidy would cut more than $3 trillion in Medicaid funding, "including $400 billion for older Americans and nearly $900 billion for kids."

    32 MILLION to lose coverage under Graham-Cassidy

    Murderers! 

    I would not sign Graham-Cassidy if it did not include coverage of pre-existing conditions. It does! A great Bill. Repeal & Replace.

    Lying bastard!  

    And, of course, it's a stealth attack on Blue States:

     

    Blue States Face Biggest Cuts Under New Republican Health Care Plan

    Which states would gain or lose federal funding in 2026.

     

     

     

     

     

     

     

     

     

     

    Vindictive, lying, murdering bastards.  

     

     

     

     

     

     

     

     

     

    Yes, let's put a stop to this immediately, right?  

     

     

     

    I hope Republican Senators will vote for Graham-Cassidy and fulfill their promise to Repeal & Replace ObamaCare. Money direct to States!

     

     

     

    Sen. Rand Paul says no amount of minor tweaking to will change his mind: It's "a really crappy bill."

     

     

     

    Graham-Cassidy allows insurers NOT to cover pregnancy and new born care. Tell me how Republicans are pro-life again.

     

     

     

    "To date, not one major health care industry or advocacy group has expressed support for the Graham-Cassidy plan."

     

     

     

    Apparently they are psychotic too.  Could care less if this bill is even something ANYONE wants.  

     

     

     

     

     

     

     

     

     

     

     

    The Republican Party’s attempt to sell its latest bill to repeal and replace Obamacare relies heavily on scaring the public about what Sen. Bernie Sanders (I-Vt) wants to do to healthcare in America.

    The newest legislation to repeal and replace ObamaCare would slash federal funding to states by $215 billion by 2026 and cut more than $4 trillion over a 20-year period, according to a new analysis.

    The only reason this bill is being pushed at all is to make room in the budget for $4Tn worth of tax cuts to Billionaires – this is a sick misuse of tax dollars and the entire political process and it must be stopped!  


  38. LOL:

    Feeble dolt Donald Trump reluctantly describes Marshal Kim Jong-Un as "Rocket-Man," in recognition of Leader's mastery of ballistic science.

    They are going to cut $10Bn next month.  Barely a dent, each line on the chart is $4Bn.  

    The NRA strongly endorses Luther Strange for Senator of Alabama.That means all gun owners should vote for Big Luther. He won't let you down!

    Neofeudalism is a subtle control structure that is invisible to those who buy into the Mainstream Media portrayal of our society and economy. This portrayal includes an apparent contradiction: America is a meritocracy--the best and brightest rise to the top, if they have pluck and work hard-- and America is all about identity politics: whomever doesn't make it is a victim of bias.  Both narratives neatly ignore the neofeudal structure which disempowers the workforce in the public sphere and limits the opportunities to build capital outside the control of the state-corporate duopoly.  

    If you vote to reorder one-sixth of the US economy without a CBO score, never call yourself conservative again. You are a dangerous radical.

    Alibaba's Jack Ma says people should stop looking to manufacturing growth for jobs

    WASHINGTON — As President Trump’s voter integrity commission looks under rocks for possible voter malfeasance, its members might want to examine a presidential nominee awaiting confirmation by the Senate Finance Committee.

    Documents indicate that Jeffrey Gerrish, the president’s pick to be a deputy United States Trade Representative, moved from Virginia to Maryland last year, but opted in November to vote in the more competitive state of Virginia than his bright blue new home.

    The Senate Finance Committee, which has been considering Mr. Gerrish’s nomination, was briefed on the matter on Tuesday, including the fact that Mr. Gerrish had almost certainly voted illegally, according to three Democratic congressional aides familiar with the briefing. Public records back up that notion.

    ROFL!  Republican hypocrisy is just too funny sometimes!  

    Trump adviser Moore on unfairness of the healthy subsidizing the sick: "people want insurance for their own families, not other peoples' "

    Republican lawmaker loses job for saying running over protesters ‘is a movement we can all support’

    Earlier this month, over an illustration that showed a truck driving into protesters, South Dakota Rep. Lynne DiSanto (R) posted, “I think this is a movement we can all support. #alllivessplatter.”

    Image result for all lives splatter


  39. Big business is getting bigger, which could be deterring would-be entrepreneurs

    A total of 414,000 businesses were formed in 2015, the latest year surveyed, the Census Bureau reported Wednesday. It was a slight increase from the previous year, but well below the 558,000 companies given birth in 2006, the year before the recession set in.

    “We’re still in a start-up funk,” said Robert Litan, an economist and antitrust lawyer who has studied the issue. “Obviously the recession had a lot to do with it, but then you’re left with the conundrum: Why hasn’t there been any recovery?”

    Ontario will try to sell legal pot for a price low enough to squash the black market

    Former President Barack Obama said it’s “frustrating to have to mobilize” so often to keep lawmakers from repealing the Affordable Care Act.

    Speaking at a Gates Foundation event on Wednesday, Obama addressed a health care bill Republicans are trying to hurry through Congress that could have major ramifications for millions of people.

    “When I see people trying to undo that hard-earned progress for the 50th or 60th time, with bills that would raise costs or reduce coverage, or roll back protections for older Americans or people with pre-existing conditions … for whom coverage would, once again, be almost unobtainable, it is aggravating,” Obama said. “And all of this being done without any demonstrable economic or actuarial or plain common-sense rationale, it frustrates.”

    “And it’s certainly frustrating to have to mobilize every couple of months to keep our leaders from inflicting real human suffering on our constituents, but typically that’s how progress is won and how progress is maintained,” Obama added.

    That's why you hear more about B2B than retail in real economic reporting.  

    Entire island of Puerto Rico loses power

    Senator calls out numerous factual errors in Trump administration’s national monuments report

    Why should North Korea negotiate nuclear limits with Trump if he kills the Iran nuclear deal for no good reason?

    Mine shutdowns in Africa could lead to a global Platinum shortage

    Two crude-oil measures tell very different stories about the market, for now.


  40. WARNING – rambling post ahead – could be a time sink!!

    Dumbfounded enlightenment – Fear Not! The bedrock of my financial understanding is still the stuff I pick up from you and other contributors on the board. But I was curious to experiment on how information is built when writers link to other writers and contributions are made via comments on blogs etc. You hope this would be a force for good, but when I took the following route (detailed below) I was somewhat surprised.

    Starting point was checking out Hussman – Eyes Wide Shut . This is typical Hussman, doom and gloom and still banging on about an upcoming 62% decline and trying to defend an already battered reputation. I look for third party commentary on Hussman to see whether he has any support from respected writers. I find this recent post from ‘Mish’ Shedlock  who positively critiques Hussman’s post Valuations, Sufficient Statistics, and Breathtaking Risks - to be continued


  41. Shedlock’s post contains some interesting comments about, on the one hand, the system is broken and the crash is coming and, on the other hand, central banks are so inextricably involved in shoring up the system that the Central Banks will never let it collapse. This comment stood out:

    “What is different this time is that Central Banks are directly buying private equity and corporate bonds for their own account. The ECB is currently buying 90% of the corporate bonds issued in Europe. The Bank of Japan now owns 75% the shares of Japan’s major market EFTs. God only knows what China’s Central Bank owns. The Swiss Central Bank is now the largest owner of Apple shares. The stock and bond markets of the developed world have been monetized and their companies nationalized by Central Bank purchases. These Banks will never sell their stocks or bonds and will only buy more using fiat money.

    In light of this situation, fundamentals don’t matter anymore. Sadly, Hussman still thinks they do and it has cost him and his clients lots of money”.

    Then comes a link to the Armstrong blog :  

    When you look at Armstrong’s bio you find out he has been jailed for 10 years for his Ponzi scheme.

    If there was any point I was trying to make (maybe only to myself) it was to be careful about the credibility of sources of information – I know that is something that Phil is continually exhorting us to do.

    The rider of this rambling is – thank goodness we have such a credible platform as PSW, and we are right to call out any disinformation that comes our way.









  42. Senate Republicans Embrace Plan for $1.5 Trillion Tax Cut








  43. Power is back on in Florida, but utilities still under fire


  44. IEA: Oil prices could skyrocket by 2020




  45. Good morning!

    Indexes holding up well so far after Fed news.  Oil with a nice dip to start the day.  

    /NG diving too:

    Armstrong/Winston – Thanks, that was very interesting to me to see what led you down the path to Armstrong.