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What to Ignore Wednesday – How About $359Bn of Repo Failures?

$359,000,000,000.  

Even these days, that seems like a big number, right? It's not on the chart but you get the idea, the last time repo failure leaped up like this was ahead of the great crash of 2008 but why worry?  Both mini-spikes last year led to big market pullbacks but Trump's election saved us and now we're just happily ignorning over $1 TRILLION in failures in the past 3 weeks alone.  

A “ repo fail” is pretty simple and straightforward; when the obligation of any seller to deliver agreed upon securities remains open following the close of business on the agreed date of the transaction.  These are, after all, repurchase agreements, which means exactly what the name implies; I buy bonds from you today and agree to sell them back tomorrow (or whenever).  If I don’t sell them back to you tomorrow, we have a fail.  The reason for them relates to what repurchase agreements actually are; collateralized short-term loans, mostly overnight. They are structured as repurchases for historical reasons that since the 1980’s have been superseded by this reality.

In 2008, this relationship was very easily established; T-bill rates in particular would trade in equivalent yield far less than they otherwise “should” given money substitutes (such as the IOER). Bill rates fell sharply in the wake of Lehman’s insolvency, and repo fails exploded into what is now the textbook (well, one not written by an Economist, anyway) case.  Thus, whenever we find an outbreak of fails it is for various reasons a tightening of collateral conditions. Some prove innocuous; most do not, especially any that would linger.

Something is hindering the flow of collateral – what it is remains to be determined…

Image result for equifax hackI know there's a lot to keep track of but let's remember that Equifax was hacked and, if you are a US citizen who has ever applied for credit, then ALL of your personal information is out there.  Well, not ALL – just the stuff they ask you for on a loan application.  This morning we just head from Yahoo that 3 BILLION customer records were hacked at that company and, of course, there's the Wells Fargo nonsense – which shows you what someone with your financial information can do to you at will.   

So far, thank goodness, there has not been any significant malicious use of that data – that we know of.  But what happens if we wake up on day to find a million people have had their bank accounts raided or perhaps the reason there has been a surge in Retail Spending is because it's being done with stolen credit card data?  What will the unwind look like?  What will it do to day-to-day commerce.  

I am NOT telling you to live your life in fear of the worst but I am telling you, again, that this is not a good time to invest without fear.  We are pinning the needle on the Greed Index and that often ends badly.  We are now past the 5-year high for this index and the last time we were over 80 was last August, with the S&P hitting at 2,193 and we only dropped 110 points (5%) into the election – so not too terrible but it's still nice to be hedged when we have one of these little corrections. 

Speaking of corrections.  Solar energy capacity Worldwide grew 50% last year, led by China but our Republicans, in their infinite wisdom, are determined to keep the US firmly in the dark ages as the change in depreciation rules will make it more expensive for power plants to switch from coal to renewable energy.  That is they key reason why the S&P 500 has gained 18% since the election, while theSolar Energy Index has slumped 13%.  The framework the White House proposed Sept. 27 “would disrupt the economics of clean energy projects as a consequence of making profound changes to the U.S. tax code,” according to a research report Monday from Daniel Shurey, an analyst with Bloomberg New Energy Finance.

Lower corporate tax rates would threaten the supply of tax equity, an esoteric type of financing that often accounts for half the cost or more of wind and solar projects.  Already developers have scaled back projects this year, from $14.8Bn last year to $12Bn (19%).  If similar rules impact the home markets – the US wil have taken a huge step backwards in converting to clean energy. 

Image result for renewable electricity iea

Meanwhile, the rest of the World is embracing cheap, clean, renewable energy and the IEA is forcasting an additional 1,000 GW over the next 5 years, which is 1/2 of the global coal power capacity.  When it comes to power generation, the IEA said that renewable electricity was seen growing by over a third by 2022, hitting more than 8,000 terawatt hours. This figure, the IEA said, was equivalent to the power consumption of China, India and Germany combined.  That's right, we are possibly just 10 years away from wiping out the coal industry entirely – except in America, of course – we're like a rogue nation hell-bent on destroying the planet!  

Of course, we won't be just destroying the planet, we'll be destroying our economy as other countries, with affordable, clean energy will move ahead of us economically and, ultimately, they will sanction us for failing to follow the global climate accords that EVERY OTHER COUNTRY ON THE PLANET HAS AGREED TO.  If Russia wanted to find a way to crush America economically, pushing US outside the G7 and denying US access to cheap, clean energy could not have been more damaging if Putin himself took over the White House and drafted this legislation!  

Image result for solar vs coalIn fact, just two weeks ago the White House took another step to deny access to solar to US homehowners by proposing steep tariffs on imported solar panels.  Of course, we don't make solar panels in this country because the Republicans attacked the Obama plan to encourage the manufacture of solar products in the US (remember Solyndra?).  Funny how all this is coming right after solar energy became cheaper than coal – the proposed 70% tarrif will buy coal a few more years, at least.  

Tesla (TSLA) is building a US plant for Solar City – so this helps them but it's a disaster for the thousands of companies that make a living installing solar panels at low prices around the country so it's a massive net job killer with 260,000 people now making their living that way – 88,000 (1/3) are expected to lose their jobs.

Once again, the winner is Putin.  

Just a coincidence…

 


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  1. Morning, All!

    Join us in today's webinar, 1pm EST.

    http://philstockworld.enterthemeeting.com/m/XMXF8TNZ


  2. Hussman & Hedging – Hedging is a key part of Hussman’s strategy. From the latest report on Hussman’s Strategic Growth Fund:

    “Strategic Growth Fund’s holdings of individual stocks as of June 30, 2017 were valued at $376,935,366. Against these stock positions, the Fund also held 1,000 option combinations (long put option/short call option) on the S&P 500 Index, 500 option combinations on the Russell 2000 Index and 100 option combinations on the Nasdaq 100 Index. Each option combination behaves as a short sale on the underlying index, with a notional value of $100 times the index value. On June 30, 2017, the S&P 500 Index closed at 2,423.41, while the Russell 2000 Index and the Nasdaq 100 Index closed at 1,415.359 and 5,646.918, respectively. The Fund’s total hedge therefore represented a short position of $369,578,120, thereby hedging 98.0% of the dollar value of the Fund’s long investment positions in individual stocks”.

    I believe his other funds are similarly hedged. That would be consistent with his view of a 60% market decline coming along the pipe.

    His post on Hedging is here


  3. Phil, lt is clear you have the balance in your portfolios, with the performance to prove that – which is something I am still moving towards. I got fed up of seeing TZA hedges expire worthless month after month – even though I know that is the cost of insurance! My bad.

    I very much liked an idea you shared a few years back, which was going Short Year 1, and skewing Longer Year 2 – I know that is a very broad description! I liked the fact there was an inbuilt hedge and that there were plenty of rolling possibilities of the Short Year 1 calls into OTM Year 2 positions. We discussed it concerning adjusting a Jan 2019, 2000/2200 BCS where the idea was to sell the long Jan 19 2000 calls for about $150 and use that to finance a new Jan 2020, 1750/1950 BCS. The Jan 19 2200 short calls are left open, and obviously closed out (or rolled) when they start to be challenged.

    Since Trump has ‘goosed’ the markets, many of the short year 1 calls in my portfolio have been challenged, and most of them have been rolled all the way to Jan 19. I’ll give a real example in a follow up post.

    Phil, lt is clear you have the balance in your portfolios, with the performance to prove that – which is something I am still moving towards. I got fed up of seeing TZA hedges expire worthless month after month – even though I know that is the cost of insurance.

    I very much liked an idea you shared a few years back, which was going Short Year 1, and skewing Longer Year 2 – I know that is a very broad description! I liked the fact there was an inbuilt hedge and that there were plenty of rolling possibilities of the Short Year 1 calls into OTM Year 2 positions. We discussed it concerning adjusting a Jan 2019, 2000/2200 BCS where the idea was to sell the long Jan 19 2000 calls for about $150 and use that to finance a new Jan 2020, 1750/1950 BCS. The Jan 19 2200 short calls are left open, and obviously closed out (or rolled) when they start to be challenged.

    Since Trump has ‘goosed’ the markets, many of the short year 1 calls in my portfolio have been challenged, and most of them have been rolled all the way to Jan 19. I’ll give a real example in a follow up post.

    And I have a hard time reconciling my internal conflict of selling puts when I instinctively 'know' this market has to go down at some point in time (whenever that may be).


  4. Good morning…

    MON higher after earnings, FCEL up 6% on Oppenheimer upgrade.  This market is scary high, hopefully our picks will continue to deliver. 


  5. FU TEVA!!!!!


  6. /NG ripping.


  7. New lines!


  8. ~~ NFLX – Netflix target raised to $225 at UBS ahead of earnings.


  9. Phil--are you going to pound the table on TEVA?

    This news was expected. Overreaction?


  10. Phil /Concerts – As a family we go to many concerts – the band that still do the unique versions of songs are 

    The old guys – Santana, Fleetwook Mac ( Saw them last year) and of course Tom Petty  even  Prince ( saw him on the 'Piano only tour last year)

    Trombone short opened for Red Hot Chilly Peppers this year and he was Phenomenal… also a real musician…..  Probably one of the newer guys best I've heard in a while…..


  11. Oct 4 (Reuters) – Teva Pharmaceutical Industries Ltd ( TEVA 
    Loading… 
    Loading… 

    * Teva comments on anticipated at-risk U.S. Launch of generic Glatiramer Acetate 40mg/ml and launch of generic Glatiramer Acetate 20mg/ml 
    * ‍Any launch by Mylan of generic version of Copaxone prior to final resolution of pending patent litigation should be considered "at-risk" launch? 
    * ‍Early assessment of impact of generic launches to earnings for Q4 ended Dec 31, 2017 is that it could be affected by at least $0.25 cents/share? Source text for Eikon: Further company coverage:


  12. Good Morning.


  13. Batman,

    The opening acts for Imagine Dragons, who were great by the way, were K. Flay and Group Love.  Group Love has been since 2009 out of LA but K. Flay is young, and a tremendous lyrcist.  Check out single Blood in the Cut and others.


  14. ROKU – Sold 1/3 up $1.  Stop up to entry on balance. 


  15. I asked Mark Spiegel yesterday afternoon what price target TSLA would have from Nomura if they met their

    production targets, without missing a beat, he said a trillion.


  16. As for concerts, see Keith Urban.  Incredible guitar player, band is incredible, they all do a little solo when introduced like concerts of old and songs are even better live.


  17. As much as NFLX is up, wouldn't think of going short yet.  Plenty of RSI room left and it wouldn't shock me to see it climb to 200 before earnings.  That's when I'll start looking at it on the short side.  Just for the record, not long NFLX either.


  18. oh i see. TSLA is going to $500 today!


  19. The Paddock story keeps getting more and more bizarre. Part 2 of The Mandalay Bay Massacre: The Lone Gunman is up.


  20. Barron2 – thanks I'll check them out.


  21. ROKU – Moved stop up to $21.70 on this 8% move.



  22. Now we know why Tylenol is colored red….


  23. Good morning!  

    /SI roughly rejected:

    Hussman/Winston – That's a bit TOO much hedging for me.  Why not just go to 98% cash and try to find something that will double with your 2%?  That's the problem with a lot of hedge funds – they feel like they MUST be invested in something at all times or the investors might ask for their money back.  Sitting on the sidelines is a valid strategy – the investors are paying you to identify a good opportunity, not just any opportunity.  

    Balance/Winston – A lot of trial and ERROR getting there.  It's even harder to test in a market that never pulls back.  You shouldn't let the shorts expire, you should try to roll the longs you have before their value drops below the net of the spread.   Then your continuing cost is just the rolling cost.  Big difference in what you lay out.

    There's also the Mattress Play but I don't use them anymore because people get very confused and execute them wrong.  But, for example, a Mattress Play would be as follows:

    • Buy 50 DIA 2019 $220 puts for $11.50 ($57,500) 
    • Sell 50 DIA 2019 $200 puts for $6.50 ($32,500) 
    • Sell 25 DIA Nov $220 puts for $1.05 ($5,250) 

    So that's net $19,750 on the $100,000 hedge that's at the money so, if the Dow drops 10% from here, you KNOW you will collect.  If the Dow does not drop, then you will get your $19,750 back after a few more rounds of selling short puts.  The big problem comes if the Dow drops fast and you can't do a good roll on the short puts.  A stop should be placed on 1/2 of them at $2 and the rest should be rollable, but that's where people got into trouble when there we big downturns that swamped the short puts.  

    Of course, as a straight bear put spread it's only $25,000 and pays 3:1 but then, of course, you are back to simply paying for insurance that you may never use.

    Deliveries/Learner – The LTP is looking like $1,660,879 this morning vs $1,606,883 two weeks ago.  I'd say our longs are performing!   The STP, on the other hand, was crushed back to $447,540, down from $487,027, so not a good net but it's still $10,000/week – I'll take it in a market where I would rather just be bearish.

    TEVA really hurt the LTP today.  We were waiting for $20 to cover and it never came.  

    Lost $7,200 on that one alone!  

    /NG/Albo – That's why I like to always have something in it.

    ISM NonManufacturing 59.8 vs 55.2 expected.  We're knocking it out of the park but I think this, like yesterday's auto sales, is boosted by post-hurricane replacement buying.  Not that that isn't legitimate economic movement – but it's no indicator of forward growth.

    Big Chart – Thanks StJ – Still looks crazy high.  NYSE should have some red as well as some others now under their lines. 

    TEVA/Jabob – In the LTP, we have 2019 short $25 puts we sold for $9.50 so net $16.50 is right on target.  We bought the 2019 $17.50 calls for $3.50 and they are now $2.90 so it's really just a disappointment that we didn't get a chance to cover but, other than that, no different than where we were when I was banging the table in Aug because it got oversold.  

    Concerts/Batman – Plenty of older guys still perform but sad when they start losing their voices.  I keep going to Who concerts and they keep depressing me – I have to break the cycle!  

    "Things they do look awful c-c-cold (Talkin' 'bout my generation)
    I hope I die before I get old (Talkin' 'bout my generation)"

    Image result for roger daltrey then and now

    Image result for roger daltrey then and now

    That's Ringo's son on the drums!  

    Some of those shots from the 70s are from my Uncle's studio (Tin Pan Alley in London).  

    TEVA/Jabob – Oh no, it will knock 0.25 x 4 off their $4/share earnings?  SELLSELLSELL!!!  Wow, people are so ridiculous.  I'll still take them at $16 earning $3/share.  

    TSLA/Rustle – Worth more than AAPL?  

    TSLA/Lunar – Thank goodness as I missed the last turn to short at $385.

    TEVA/Batman – What shocker?  This is why they've been trading down all year.  Also, I don't know why there's an assumption that TEVA will lose 100% of their Copaxone revenues ($4Bn) just because Mylan can now sell it too.  Other drug makers have had their drugs go off patent without going BK and TEVA is/was stronger than most.  Unfortunately, this is one where only time will tell.

    /TF back at 1,515 – amazing! 

    That's why you have to be thankful for a 5-point dip!

    October 3rd, 2017 at 4:07 pm | (Unlocked) | Permalink

    Adding 4 more /TF short to bring avg to 1,492 but very tight stops on the new 4 over 1,515 and very quick profits if I get 5 points down – just to get a little back hopefully.


  24. TSLA/Phil

    Spiegel was being sarcastic. 


  25. Spiegel/Rustle – I'm glad, I thought he was losing it. 


  26. Phil,

    The OPP has short calls for ATI that expire in Oct; what to do with that trade.  (Strangely, I no longer have the puts from that trade.)  Nice profit though.


  27. Oil moving up on good draw (6M) in crude and /RB is up but not as much as API so relief there as well:

    • EIA Petroleum Inventories: Crude -6.0M barrels vs. -0.8M consensus, -1.8M last week.
    • Gasoline +1.6M barrels vs. +1.1M consensus, +1.1M last week.
    • Distillates -2.6M barrels vs. -1.8M consensus, -0.8M last week.
    • Futures -0.38% to $50.23.

    ATI/Baron – Well we'll decide closer to expiration.  We sold the Oct $20 calls and we own the Jan $15s and the short puts will go worthless so our net on the Jan $15/Oct $20 spread was a $330 credit and it's not possible we collect less than $5,000 so it's a winner no matter what we do.   At the moment, the short Oct $20s care $5.25 with the stock at $25.18, so no premium.  The Jan $22.50 calls are $3.85 so it would cost us about $1.40 to roll them up $2.50 but I think we'll just cash it in and move on, most likely.  Then it's one less position we have to worry about covering and $5,000 more CASH!!! in our account (have I mentioned how much I like CASH!!! lately?).  


  28. Ilene – Two more please? – Into The Great Wide Open – my favorite Petty video with Johnny Depp, Gabrielle Anwar, Faye Dunaway, Matt LeBlanc, Terence Trent D'Arby and Chynna Phillips. 

    https://youtu.be/xqmFxgEGKH0

    <iframe width="560" height="315" src="https://www.youtube.com/embed/xqmFxgEGKH0?rel=0&amp;showinfo=0&quot; frameborder="0" allowfullscreen></iframe>

    and my 2nd favorite, the OFFICIAL Won't Back Down video… with George Harrison, Jeff Lynne, Mike Campbell and Ringo Starr. 

    https://youtu.be/nvlTJrNJ5lA

    <iframe width="560" height="315" src="https://www.youtube.com/embed/nvlTJrNJ5lA?rel=0&amp;showinfo=0&quot; frameborder="0" allowfullscreen></iframe>


  29. Phil/Mattress play

    ~~The big problem comes if the Dow drops fast and you can't do a good roll on the short puts.

    Can you explain by taking an example how this could be a problem?

    regards


  30. Big chart / Phil – I know, need to update the table but I had a hard drive crash this morning so preoccupied with restoring from backup (thankfully OK).


  31. Well Tillerson will be Trump's new favorite for a while.  Too bad some of his style can't rub off on Trump.


  32. Mattress/Pat – Well you have the $220/200 spread so you can make, at most, $20 on a 10% fall in the Dow but, if you wake up and the Dow is down 10% (not that that seems possible these days), then you owe the short putter $20 and maybe it's not so bad as you can roll down to 2x but what if the Dow keeps falling another 10% – then you lose the $100,000 you were hoping to gain WHILE your longs are getting crushed.  Not likely but not at all good if it happens. 

    Backup/StJ – Wow, that's a relief.  

    History/Pstas – Hopefully this time is different. 

    Tillerson/Tangled – I like this non-denial:

    "I'm not going to deal with petty stuff like that," Tillerson says about report of him allegedly calling Trump a "moron"

    Of course, Rexx wasn't lying, he didn't call Trump a moron (just):

    NBC’s reports her source said Tillerson didn’t just call Trump a moron, he called him a "f—king moron."

    Rex Tillerson reportedly called Trump "A MORON" now he calls Trump "smart" and that "accountability is one of the bedrock values they share"

    The story has just been totally refuted by Sec. Tillerson and Pence. It is . They should issue an apology to AMERICA!

    I mean about the moron part – I'm actually all about the fucking!


  33. Just for some members who did not get out of bed that early here a repeat.

    yodi
    October 4th, 2017 at 2:46 am | Permalink | Tweet thisIgnore this user

    Hi every one. I must say the market seems not stop climbing. I think, looking at the different comments, we really do not know what reality is any more.

    Tree planting plays are not too many to look at, as most candidates are too high for my liking to start a new position. Mostly I am holding my old positions, with rolling and adjustments.

    However I have some more armchair plays to renew or are falling angles and good for a new set up.

    Here are some of them.

    MBT buy stock @ 10.30 and sell the Mar 18 strangle 10/10 for 1.85 combined monthly return 3.28%

    NYCB buy stock @ 12.90 and sell the April 18 13/13 strangle at 1.50 combined monthly return

     2.19 %

    QCOM buy stock @ 52.00 and sell the Jun 18 Strangle 55/52.5 at 7.75 combined monthly return 2.12 %

    SBRA buy stock @ 21.80 and sell the Apr. 18 strangle 22.5/20 at 2.15 combined monthly return 2.01 %


  34. Nat Nay,

    Thanks for the video's, brought tears to my eyes.  Saw Tom at William and Mary in 1983.  Awesome.


  35. Phil,

    ATI, up 20% in a month, now at $25.  Seems like a good spot. After TEVA trouncing wouldn't mind taking some green off the table.


  36. Sold another 1/3 ROKU up $1.25.  Moved stop up to 22.


  37. Yodi – I've been doing something similar with NYCB for a while now. MBT is a new one, have to look into that. Not keen on QCOM just now. SBRA, why this one over any of the many other healthcare REITs? Not very big, not very liquid options.


  38. Added a bit more UNIT at $14.60 and sold a few Feb 17.50 calls at $1.22,  Call premiums are extremely high for a REIT.  Due, of course, to recent volatility.


  39. ATI/Baron – Yes, lots of ways to make money, no need to chase ones that already popped – even if we are already in them.  

    Wow, Nas hit 6,015!  

    /ES even stronger

    /CL failing though.



  40. Phil. Related to my earlier post, a set of positions that started off straightforward enough – but then started to run away. Your help appreciated.

    GS positions:

    Jan 18, 5; short 210 calls (a hanging leg of a short strangle that went rogue!)

    Jan 19, 20;170 ($77) /190 ($60) BCS – net $17 on the $20 spread.

    Jan 19, 15; short 200 calls ($52) – held hoping for a pullback (sold for $13)

    Jan 19, 25; 210 ($45) /230 ($33) BCS – net $12 on the $20 spread, seems to make sense to keep

    Jan 20, 10; 220 ($48) /250 ($32) BCS – net $16 on the $30 spread

    The genesis of the positions was selling the long call of a LEAP BCS in year 1, and layering on the Jan 19, 170/190 BCS. That meant rolling the short leg of year 1, hence the short 200 calls.

    Obviously it is the 15, Jan 19 200 short calls that are of a concern. They roll to the Jan 20 $220 calls for a debit of $4 – but do I really want to be hoping for GS to go down potentially all the way to Jan 2020!

    It makes sense to cash out the Jan 19 170/190 BCS, and use the funds to roll up and backwards to the June 2018 $220 calls for $22 – but that is a big bullet to bite. And may be unnecessary if there is a pull back.

    If GS stays where it is until Jan 2019, then I get to cash out the Jan 19 210/230 BCS for $20.

    Financing any roll by selling puts when I do not really want to own GS @ $200, does not feel right.

    So I hesitate, throw money on a costly roll when the overwhelming sentiment seems to be that ‘down’ is on its way. Or do I layer on more Jan 2020 BCS to provide firepower for a potentially expensive 2021 roll?

    Or something else?

    Thanks.


  41. B2 – "Nat Nay, Thanks for the video's, brought tears to my eyes.  Saw Tom at William and Mary in 1983.  Awesome."

    Welcome, slicing some onions myself, saw him many a time, sad day, one of the greatest troubadour's of broken dreams, ever.  Try this one with Steve Winwood, Dhani Harrison, Jeff Lynne and hang on to your seat for Prince's guitar finale, and Out.


  42. DF – still looking at them, wondering when i'm going to buy.


  43. And yes that is McCartney on keyboards.


  44. Weeps/Nat – thanks.. been meaning to queue that one up specifically. Damn fine. 


  45. Scotty – "Weeps/Nat – thanks.. been meaning to queue that one up specifically. Damn fine. "

    Welcome, and yes right about now, Petty is handing that guitar back to Prince, and Out. 


  46. KNDI – well, this old Chinese electric car parts supplier that (was yet another which) went to sleep on me has finally been kicked out of bed. Sold 2019 puts to buy 2018 calls. Now all back full black.  "Should I stay or should I sell now?"  Whoo!   https://www.youtube.com/watch?v=BN1WwnEDWAM


  47. All – got the updates to our Tom Petty post, http://www.philstockworld.com/2017/10/02/tom-petty-rip/ (I can keep this going forever, there are so many great songs.)


  48. Here's a hidden Wilbury's song from 1990 Jim Horn "Work It Out" the key is to look for the Trembling Blenders, aka Jeff Lynne and Tom Petty.  Bet you've never heard it, now go back three years.

    I still firmly believe that Petty was lurking in the studio and went uncredited on Duane Eddy's 1987  album, which if you never heard it, you've never heard twang before.  The album is a solid end to end masterpiece.  Here's The Trembler – written by Lynne and Ravi Shankar.

    A hint might be in who is on the album: Duane Eddy, John Fogerty, George Harrison, Paul McCartney, Jeff Lynne, Ry Cooder, James Burton, David Lindley, Phil Pickett, Steve Cropper, The Art of Noise and original Rebels, Larry Knechtel and Jim Horn (going back to the whole Trembling Blenders thing).

    Needless to say, the Wilbury's 1st album was the year after in 1988.  Here is Eddy's Grammy Winner from two years prior in 1986 with the Art of Noise – Best Rock Instrumental – "Peter Gunn" (1986) which kind of got the ball rolling on the whole thing.  Good times, RIP TP and Out.


  49. NIB has options..


  50. Scott SBRA Stock has been readjusted and I still do have it on my books. Just adding it for an other play.

    Still has not filled yet. But still gives you a combined return of 43 $ per 100 shares per month.


  51. DF – for dipping toe, sold March $10 puts, bot March $12 calls for .15 credit.  maybe more later. Also look to add nearer short call if moves up at all.


  52. CPST still going..


  53. Ok, just three more to complete the circle…  1990's Armchair Theatre, Track 10 – Blown Away, co written by Jeff Lynne and Tom Petty. Featuring Jeff Lynne, George Harrison, Ringo Starr, Richard Tandy. Phil Hatton, Jim Horn and at the end, Del Shannon uncannily invokes Brian Wilson of the Beach Boys.

    Here is Tom Petty interviewing Jeff Lynne to promo the album.  Lastly, 1987's Cloud Nine -  George Harrison, Jeff Lynne, Jim Keltner, Ringo Starr, Eric Clapton, Gary Wright and Elton John.

    Unknown to many, Track 5 – This Is Love was the reason that Harrison called Jeff Lynne, Roy Orbison, Tom Petty, and Bob Dylan to record a B-side, named Handle With Care, which spawned the Traveling Wilbury's.   Full Circle, time for an extra IV and Out.


  54. UNIT up 7.5% since my 12:15 purchase.  Sold 1/2.  Keeping the half that's covered with the 17.50 calls.  Also keeping the original purchase from last Thursday.


  55. Just got lucky.  No skill involved !


  56. Wow, there was like zero participation in the Webinar.  I don't know if that was because I was fascinating or boring…

    GS/Winston – Well, you have 55 long spreads at $22 avg so $121,000 potentially and you seen to have paid about $14 ($77K) and looking on track.  

    So you have $60,000 to gain (ignoring short call money collected) and you are covered with 15 short $203ish calls at $13ish and GS now $242 so down $40 ($60,000).  That's a really big oops – why did you not sell puts as well?  The 2019 $170/190 spread is a pointless use of $17 – can't imagine why you would have bought such a thing.  I'd cash those ($34,000) and put that to work with 20 more long 2020 $220 calls at $48 ($96,000) and sell 10 (1/2) more $250 calls for $33 ($33,000) and then roll the 5 short Jan $210s at $34 ($17,000) and the 10 short 2019 $200 calls at $53 ($53,000) to 20 short April $235s at $19 ($38,000) because at least they have $28,000 of premium you can collect.

    The net cost of all that is $61,000 but then you have the 25 2019 $210/230 spreads and 30 long 2020 $220s with 20 short 2020 $250s against 20 short April $235s and a much better chance of getting a clean $110,000 out of the trade.  

    You could further reduce the cost by selling maybe 10 2020 $200 puts for $16.50 ($16,500) and, of course, you could cover more on the way down since you are only 1/2 covered but the idea is to work out of these covers – not into more!  If the April puts expire, then you can collect $20-30K a few more times and the money you laid out will come back to you over 2 or 3 quarters.  

    If all that is a budget-buster, then you need to be looking to reduce exposure and that's something that should be done after earnings – when we have a better idea of whether $250 will break or not (I'm thinking not). 

    KNDI/Scott – I don't trust Chinese companies but Government policies are very much in their favor.


  57. WIN& UNIT:

     Here's the reason for the strength.

    Windstream and Uniti Group (UNIT) seeing some strength following report that ISDA panel will not trigger a CDS payout in WIN notes  

    ~~•Note: In late September, Windstream received purported notice of default from noteholder that claims to hold greater than 25% in aggregate principal amount of the 6 3/8% Senior Notes due 2023 issued; will vigorously defend against these allegations. The Notice alleged that the transfer of certain assets and the subsequent lease of those assets in connection with the spinoff of Communications Sales & Leasing, Inc. (now known as Uniti Group, UNIT) in April 2015 constituted a Sale and Leaseback Transaction which did not comply with the Sale and Leaseback covenant.
    •WIN is UNIT's biggest tenant.


  58. Our old friends at XON:

    • The FDA's Center for Veterinary Medicine issues new guidance that transfers regulatory jurisdiction for Intrexon (XON +1.3%) unit Oxitec's Friendly Aedes mosquito (OX513A) to the Environmental Protection Agency (EPA) since it is considered a pesticide product.
    • FDA-CVM guidance clarifies "that mosquito-related products intended to function as pesticides by preventing, destroying, repelling, or mitigating mosquitoes for population control purposes, and that are not intended to cure, mitigate, treat or prevent a disease (including by an intent to reduce the level, replication or transmissibility of a pathogen in mosquitoes), are not "drugs"under the Federal Food, Drug, & Cosmetic Act, and will be regulated by the EPA under the Federal Insecticide, Fungicide, and Rodenticide ActWith the issuance of final guidance #236, Oxitec Ltd's genetically engineered mosquito, with its proposed claim to control the population of wild-type Aedes aegypti mosquitoes, now falls under EPA's regulatory authority and all related regulatory questions should be directed to the EPA."
    • Oxitec says once EPA registration is completed it will work with state and local authorities on the coordinated release of OX513A.

     

    Reuters: EPA to propose repeal of Clean Power Plan

    • The EPA will propose repealing the Clean Power Plan and plans to solicit input on a rule to replace it, Reuters reports, citing an internal EPA document.
    • The decision marks the EPA’s first formal step to repeal the Obama administration rule intended to cut carbon emissions from power plants, after Pres. Trump signed an executive order in March launching a review.
    • The Clean Power Plan currently is suspended by the D.C. Circuit Court of Appeals, which set a deadline of Friday for a status report from the EPA on how it plans to proceed.
    • The rule was designed to cut carbon emissions from existing U.S. power plants by 2030 to 32% below 2005 levels.

    Ratio of bond bears rises to record

    • According to a JPMorgan client survey, a record 39% have net short positions in long-dated Treasurys. Among active clients – think traders and hedge funds – 70% are betting on further price declines.
    • It's nothing the Treasury market isn't used to. For nearly every year since the financial crisis bottomed, one thing that's been consistent is the bearish consensus on Treasury prices.
    • Prices are lower again today, with the 10-year yield up another two basis points to 2.34%. TLT -0.3%TBT +0.6%
    • The monolines are having a tough morning after the president last night suggested zeroing out Puerto Rico's debt in wake of Hurricane Maria.
    • "They owe a lot of money to your friends on Wall Street and we're going to have to wipe that out," the president told Geraldo Rivera in an interview last night. "You're going to say goodbye to that, I don't know if it's Goldman Sachs, but whoever it is you can wave goodbye to that."
    • Puerto Rico's benchmark 8% GO paper has tumbled to $0.34 on the dollar vs. $0.44 yesterday.
    • The president is a powerful man, but beyond jawboning probably can't really influence the debt-restructuring process, says BTIG's Mark Palmer. He also holds little sway over Judge Laura Taylor Swain, who was appointed by Supreme Court Chief Justice Roberts to oversee the whole thing.
    • Bottom line: Trump's comments do nothing to change what the ultimate bondholder recoveries will be.
    • OMB Director Mick Mulvaney is on the wires now as well saying there will be no bailout. "Puerto Rico is going to have to figure out a way to solve its debt problem."
    • MBIA (NYSE:MBI) and Assured Guaranty (NYSE:AGO) remain lower by about 5%. Ambac (NASDAQ:AMBC) now down 1.6%.
    • Previously: Monolines lower as president mulls wiping out Puerto Rico debt (Oct. 4)
    • The European Commission has moved to refer Ireland to the European Court of Justice for failing to recover up to €13B of illegal state aid from Apple (NASDAQ:AAPL).
    • In a parallel case, Europe's competition chief said Luxembourg must collect around €250M of back taxes from Amazon (NASDAQ:AMZN), adding to a growing list of scalps for Margrethe Vestager in her crackdown on tax loopholes.
    • The Commission is also looking into the tax deal between McDonald's (NYSE:MCD) and Luxembourg.
    • Investors are getting ready for another dose of Janet Yellen. She will speak at the Community Banking in the 21st Century Conference this afternoon amid growing speculation concerning her position as Fed Chair.
    • Fed Governor Jerome Powell and ex-board member Kevin Warsh were both interviewed at the White House last week to replace her in February.
    • The events come as the three major U.S. stock indexes and Russell 2000 posted record high closes for the second straight day.
    • Catalan leader Carles Puigdemont has said that the region will declare independence within a "matter of days."
    • The latest comments throw the gauntlet down to Spain to do what it can to prevent one of the worst constitutional crises in the country's recent history.
    • Spain's King Felipe, who is normally silent on politics, has even gotten involved, showing how serious the matter has become.

    GoPro shares down after Google launch event

    • GoPro (NASDAQ:GPRO) shares are down 4.28% after the debut of Google Clips.
    • The small Clips camera can clip onto a person or belongings and uses machine learning to determine what pictures or video the user would want to take – and will take those images on its own. 
    • Previously: Google Pixel 2 launch event: Live updates (Oct. 4)
    • Google  (GOOGGOOGL) will begin its launch event at 12 pm ET. Stream the event live here.
    • Check back for live updates.
    • Update:  Hardware SVP Rick Osterloh says there are now 55M Chromecast devices around the world. Google Wi-Fi is the top selling mesh router in US and Canada. Assistant can now answer 100M new answers.
    • "AI + software + hardware" is the event motto.
    • Google Home products: 
    • Update:  Home Product Management VP Rishi Chandra says Google Home will launch in Japan later this week.
    • Voice Match, the Home's voice recognition and customization feature, will launch to all regions this week.
    • Starting today, users can use their own phone number for calling through the Home., taking on Amazon's Echo calling push Hands-free calling coming to the UK later this year.
    • Update: As expected and leaked by Walmart pre-orders, Google Home Mini is the new smaller, budget-friendly addition to the Assistant family.
    • The Mini, which looks a bit like a fabric-covered hockey puck, comes in three colors and retails for $49. Pre-orders start today with launch on October 19.
    • Mini will come to all seven Google Home countries.
    • Update: The new smart home Nest products revealed a couple of weeks ago get some stage time to show off how the products can combine with the Google Assistant to create routines.
    • Routines can let a user turn on/off smart home features with a simple command like "good morning." Amazon announced a similar setup at its surprise hardware event last week.
    • Update:  The new Broadcast feature sends the same message to all Google devices in the house.
    • Kid-friendly features coming to Home including parental controls for accounts and a partnership with Disney.
    • Update:  Introducing the Google Home Max, an audio-focused smart speaker meant to take on Sonos speakers, Apple’s upcoming HomePod, and Amazon’s recently announced Echo Plus.
    • The 4.5-in woofers offer sound 20x stronger than the Google Home and has "smart sound" that can adjust the sound to the size and layout of the room.
    • Home Max costs $399 and launches in the US in December, the same month as the HomePod. Additional markets will come next year.
    • The Max comes with a free year of YouTube Red.
    • Google Pixelbook laptop: 
    • Update: Also as expected, here comes the Google Pixelbook laptop, which is 10mm thin and 1kg light.
    • Key specs: 12.3-in touchscreen, Quad HD LCD, 235 ppi, Intel’s Core i5 and i7 processors, up to 16GB RAM and 512GB storage, and 10 hours battery life.
    • Pixelbooks can “instant tether” to a Pixel phone, comes with Google Assistant pre-installed, and can run a user’s favorite mobile apps including a custom-built Snap experience coming soon.
    • Pricing starts at $999 with three configurations available and the Pen costing an extra $99. Pre-orders start today, available on October 31. Initial launch covers US, Canada, and UK.
    • Pixel 2 and Pixel 2 XL: 
    • Update: As expected (again), two new Pixel 2 smartphones with a smaller 5-in. device and the 6-in. XL option.
    • Update:  The all-aluminum bodies feature a glass visor and both include a fingerprint sensor, unlike Apple’s premium iPhone X.
    • No headphone jack, but an adapter is included and there is Bluetooth 5.0 support for wireless headphones.
    • The Pixel 2 has a full HD OLED display and comes in three colors: Black, Kinda Blue, and Clearly White.
    • Pixel 2 XL has a pOLED screen with QHD+ and comes in Black or Black and White.
    • ”Active Edge” lets users launch Assistant with a squeeze and can use the Broadcast and routine features through the phone.
    • Update:  The Lens feature in the phones uses machine learning to recognize and optionally provide information about items and people in the image.
    • The phones were also built with AR in mind, like the new iPhones, and the company has some exclusive Star Wars content.
    • The Pixel 2 has one camera on the back that’s still capable of portrait mode thanks to machine learning.
    • Pixel 2 users will receive free, unlimited photo storage.
    • Pixel 2 starts at $649 for 64GB and Pixel 2 XL starts at $849. Pre-orders start today in US, Australia, Germany, India, the UK, and Canada. Exclusive partnership with Verizon in the US.
    • Google Home Mini tossed in free with Pixel 2 purchase for limited time.
    • VR and Clips camera: 
    • Update: New Google Daydream View VR headsets with upgraded lenses and over 250 VR titles available. Headsets will cost $99.
    • Google Pixel Buds are the new touch-activated wireless headphones with Assistant integration.  Cost $159 with pre-orders starting today.
    • Google Clips is a small “hands-free camera” that can clip onto things or simply rest on a table. Users can “teach” the camera’s built-in machine learning what people or places are most important to the user. Eventually, the camera will take its own pictures of what it thinks the user wants to see.
    • Users can swipe within the app to save images to Google Photos. The images don’t get stored to the cloud automatically.
    • Clips is “coming soon” for $249.
    • In the are-they-or-aren't-they talks of a merger between Sprint (S -0.9%) and T-Mobile (TMUS+0.3%), discussions are continuing but some T-Mobile shareholders are frustrated with the pricediscussed, CNBC's David Faber says.
    • The two companies (and Sprint parent SoftBank (SFBTY +0.6%) and TMUS parent Deutsche Telekom) have been talking about a stock-for-stock deal where Deutsche Telekom (DTEGY-0.7%) comes out as the controlling owner.
    • But talks are locked on an at-market price now that gives no further premium for Sprint, CNBC reports.
    • Updated 10:00 a.m.: Sprint is now off 2.1%, to $7.74.
    • Apple (NASDAQ:AAPLreleases a watchOS 4 update that fixes the Watch Series 3 LTE connectivity issues.
    • Another update scheduled for later in the month will bring the promised music and radio streaming for Watch customers with the cellular Series 3. 
    • In other Apple news, TechCrunch reports the tech giant has “acqui-hired” the staff from small AI company Init.ai to work on improving Siri. 
    • Apple shares are down 0.71% potentially due to today’s Google launch event.
    • Previously: Google Pixel 2 launch event: Live updates (Oct. 4)

  59. ROKU – Closed near session low.  May re-visit tomorrow.


  60. Nat Nay,

    I've seen that one, but will watch again tonight.


  61. Phil – You don't need participation to do a great webinar  :)


  62.  Not a very encouraging close.   Quiet day on the whole…

    Thanks 1020, but it makes me feel like I’m just rambling.   


  63. I leave the seminar question asking time to those who don't have you here in the chat room.


  64. Phil GS – thanks. The net prices on the spreads are today's closeout prices – not the price I paid for them. I thought it more useful to focus on cash available to use to roll than talk about profits or losses. But as always, plenty of food for thought and adding to the treasure chest of rolling knowledge.


  65. Phil – "Wow, there was like zero participation in the Webinar.  I don't know if that was because I was fascinating or boring…"

    Fascinating Jim, and so we dedicate The Theme For Something Really Important.  Smiley.


  66. Ilene – "All – got the updates to our Tom Petty post (I can keep this going forever, there are so many great songs.)"

    Thank you Ilene your a dream, so we dedicate Lift Me Up and Out.


  67. Phil,

      I'm short /TF like you with a lower basis than you (8 short with basis around 1445). I shorted 4 at 1515 but got out too soon at 1511. It went from 1517 to 1503 today. So 1508 is strong bounce and since it closed above that we would expect it to go higher. Is that correct? Also my understanding of yesterday's discussion was you expect /TF to go to 1600 before possibly correcting. If so when do you think about bailing on the short? Thanks 


  68. Tom Petty
    Great memories of listening to the sat. radio
    buried treasures station that he hosted. My son became a
    fan over many miles.



  69. /NGH8 – Out of /NG on the spike earlier this AM – I find it hard not to take $$$ and run.  Do you buy multiple contracts, and sell on the way up?  My target was $500 and only played 1 contract.

    Webinars – They are a favorite of mine, but being 12hrs ahead makes it a challenge to attend. 

    TOS – On your TOS screen in the webinars, your screen has multiple lines, is that a custom study?   I searched for FIBs, but didn't see that as an option.


  70. Thank you, TNN. 


  71. I'm just going to throw these out here..

    Car Seat Headrest – Ending of Dramamine
    https://m.youtube.com/watch?v=IS7wBgvcr1E

    Misfits – Astro Zombies
    https://m.youtube.com/watch?v=IEoduZK6vpU


  72. Automation in Everyday Life






  73. Good morning!  

    Another flat overnight but looks like we're ticking up a bit now.  Spain shot up 1.35% but the rest of Europe is flat.  Spain was off a lot on the vote so just a bounce I think.  China was closed today (holiday). 

    /RB got an early start this week but oil still $50.08.

    That's pretty unusual, /CL makes a good long with tight stops over the $50 line as long as /RB is over $1.60.  $50.07 now.

    /RF/Japar – Well at 1,445 on 8 it's a bit unrealistic to sit and hope for a 70-point drop (4.6%) to save you, isn't it?  If you DD here (1,512), your average will be 1,478 and if you keep very tight stops on at least the new 8, the risk isn't much more than you have by sitting on it.  It sounds like you are down $28,000 on this one and keep in mind you could lose another $400 per point with the 8 and $800 with 16 so 1,425 is $10,000 away with 16.  OR the Nov TZA $12s are $1.35 with TZA at $13.15 and a 5% move in the RUT would be a 15% move in TZA to $15.50 so you could just shut down the futures and buy 100 of those for $13,500 and get back $30K at $15 so at least your risk is limited and, if we do get a pop, you can get half your money back selling the $15s (not 0.29) if they double.  It's essentially the same bet you have now but with less margin and a limited downside risk if /TF does plow up to 1,600 which, even at $400 per point, is $34,000 more in the hole from here.  

    Thursday's economic calendar


  74. Thanks Phil. I know it's unrealistic to wait for a 5% correction. I'm trying to whittle down the basis and wanted to get your thoughts on where you thought /TF is headed. The options idea is fantastic but do you think Nov is enough time?