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Meaningless Monday Market Movement – Happy Columbus Day

In fourteen hundred and ninety two

Columbus sailed the ocean blue – and got totally lost, missed India by 6,000 miles but called the Native American Islanders Indians anyway, slaughtered them and stole their gold and, lacking any real wealth to go back to Spain with, instituted a slave trade that lasted 250 years and ruined the lives of tens millions of people.  Yay!  

I got called into the Principal's office when my daughter gave a report like that in 7th grade – just 5 year ago.  Suddenly, it's in vogue to question our "heritage" and the legends of the founders and that's a good thing.  You want Russians to question Marx and Lennin and you want the Chinese to question Mao so why shouldn't our children question Columbus and Jefferson?  Either you want to raise critical thinkers or you don't.

There aren't many critical thinkers playing the markets these days.  Over the weekend, Trump and North Korea continued their Twitter War after Trump's "calm before the storm" comments on Friday and Saturday afternoon, the President of the United States tweeted "Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid…hasn't worked, agreements violated before the ink was dry, makings fools of U.S. negotiators. Sorry, but only one thing will work!" to which Kim Jong Un said that proved it was necessary to protect themselves against the “nuclear threats of the U.S. imperialists.” Kim Jong-un also said that North Korea’s nuclear weapons are a “powerful deterrent firmly safeguarding the peace and security in the Korean peninsula and Northeast Asia.” 

Image result for trump world war 3Senator Bob Corker, the Republican chairman of the Senate Foreign Relations Committee, charged in an interview on Sunday that President Trump was treating his office like “a reality show,” with reckless threats toward other countries that could set the nation “on the path to World War III.”  Other key quotes from that interview were:

  • "I know for a fact that every single day at the White House, it's a situation of trying to contain him."
  • He acts "like he's doing 'The Apprentice' or something."
  • On how fellow GOP senators feel: "Look, except for a few people, the vast majority of our caucus understands what we're dealing with here… of course they understand the volatility that we're dealing with and the tremendous amount of work that it takes by people around him to keep him in the middle of the road."
  • On Trump undermining Tillerson: "A lot of people think that there is some kind of 'good cop, bad cop' act underway, but that's just not true."
  • On Trump's tweets harming U.S. foreign policy: "I know he has hurt, in several instances, he's hurt us as it relates to negotiations that were underway by tweeting things out."

Corker remains influential, and his breaking from Trump so publicly could lead others to speak out. Perhaps more significantly, the retiring Senator still holds a vote until Jan. 2019 in a Senate the Republicans control by a two-vote margin.  He's highly skeptical of Trump's tax plan, and may be tough to get onside on other key issues.

Image result for taxes paid by corporationsThose key issues include tax reform and the Obamacare repeal (yes, they are still trying to do that) and those are the underpinnings for the market rally.  The justification for these record-high market multiples is that we're not taking into account all the extra money companies will be making when they don't have to pay taxes anymore but they don't pay taxes now – so how much less can they possibly pay?

Taxes are already down 2/3 for Corporations in the past 40 years and now Trump's plan it to knock off another 1/3 of what's left but 2% is only 10% of where we started and, it begs the question – if cutting Corporate Tax Rates fixes everything – why didn't the first 66% of the cuts have any effect (other than leading to 2 of the worst market crashes in history and an economy that's $20Tn in debt)?  

Image result for taxes paid by corporationsIncluding "Entitlement" taxes (that's right, they talk about cutting entitlement spending but ignore tha fact that they already took that money from you – so you ARE ENTITLED to get it back!), Individual Taxes have jumped from 51.8% of all collections in the 50s to 80% in 2015 (up 42%) while Corporate Taxes (including Excise Taxes) have dropped from 45.5% to 13.8% (down 70%).  The new tax plan doesn't have to completely screw the Middle Class – the old tax plan already did that!  

Excise taxes were a type of tax that Corporations couldn't avoid paying because they were based on sales – not phony P&L statements so, of course, those have been slashed from 13.4% to 3% (down 77.6%) and there, in a nutshell, is why the US is $20Tn in debt – it's nothing but $20Tn of tax avoidance by Corporations that's gotten worse and worse every year for decades and the proposal on the table now is to CUT THEIR TAXES FURTHER and also give massive tax cuts to the owners of those Corporations.  This is MADNESS!

67% of the people now disapprove of the direction our country is heading but the GOP is doubling down for the 32%.  Only 67% of Republicans still support the President, down from 80% in March and that does not bode well for next year's elections with 13 months to go.  Instead of getting a handle on what's actually wrong with this country, our Vice President, Mike Pence, flew to Indianapolis over the weekend in order to engage in some performance art – walking out on the Colts game "because the 49ers kneeled during the National Anthem".  That's the story – here's the facts:

Pence knew this was going to happen. The press was told to remain in the parking lot, and not even to bother coming in — as Pence would be leaving early.

Pence had just been in Las Vegas, and his next stop was Los Angeles, a short plane flight west — but he instead flew all the back to Indianapolis for this photo op, taking his entourage and his security detail with him.  The streets doubtless had to be blocked off for his motorcade.  Special security precautions were taken for the Vice President of the United States.  All along, he planned to engage in a tawdry, pre-planned sham performance — with all the expense that entails — just to get people embroiled in a cynical culture war.

If they want to pull something like this as a sort of campaign stunt, let them pay for it with campaign money. Don’t bill the taxpayers for this. This is why people hate government.

This country has real problems brewing and yes, Peurto Rico still has no electricity or fresh water for 3M people stuck on an island and THIS is what our leaders are up to?  The question is, why isn't EVERYONE kneeling at this point?   

As promised, we sent out Alerts to press our hedges on Friday, taking our President's word that a storm is coming as a good reason to be cautious into earnings, which kick into gear on Thursday, with CitiGroup (C) and JP Morgan (JPM) reporting, followed on Friday by BankAmerica (BAC), Wells Fargo (WFC), PNC (PNC) and First Horizon (FHN) and then, next week – we're officially back in earnings season.

Today is a holiday and the volume will be very low but we have 9 Fed speakers jammed into the next 4 days and the Fed Minutes will be released on Wednesday, along with a 10-year note auction at 1pm.  Other than that, just some loose data with Retail Sales punctuating the week on Friday along with Consumer Sentiment:

Not much else to do but let today play out and, hopefully, see what is real tomorrow.

 


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  1. Nice expensive stunt from Pence this weekend, spending 100's of 1000's to attend a game and leave early except that Trump had to claim credit as usual:

    http://talkingpointsmemo.com/edblog/trump-pence-the-flag-and-everyone-gets-hurt

    If you were to plot it as story dialog it reads …

    Pence: I took this step based on my firm conviction …

    Trump: I told my boy Pence to do this.

    Admittedly, for Pence it serves as a minor cosmic justice. It reminds us what we already know. In Trumpland, everyone gets hurt. No one emerges with any dignity intact. He’s that ravening maw of ego and appetite and above all else unquenchable need and he has the country by the throat.


  2. Markets doing well under Trump but let's not forget:

    http://www.motherjones.com/kevin-drum/2017/10/the-stock-market-is-doing-well-under-donald-trump/

    Of course Trump would claim that it was easier for Obama – after all big gains after the country has been hit by the worse recession in 50 years is easy. Inheriting a growing economy with low unemployment and lower deficits and a pliable congress is the real challenge.


  3. Good Morning.


  4. Phil/UNG, I thought the premise of the initial trade was that the natural gas price would increase in the US because of the higher prices in Europe in other countries especially Europe and would reach a median between US prices and Europe. I know there is a decay in UNG but are we not shipping as much as expected? I noticed you mentioned the other day that NG prices would (should) be trending down from here because of the weather. It was a few days ago so not sure I got that exactly right, is there a change in the original impression of higher prices because of the arbitrage?


  5. Good Morning  from Barcelona S-P-A-I-N.:

    After a rocked weekend, full of marches and the strangest political position ever seen, I have to ask again about TSLA,  after reading they are doing at hand model 3!.??  is not time to short positions?


  6. Good morning! 

    Indexes attempting a run up but there are certainly sellers as well.  

    Good comparison, StJ. 

    UNG/Jomp – Well there's no change.  Just a short-term vs long-term view.  Long-term, I'm still expecting us to equalize with the rest of the World around $4.50 but that's still years away – though it's a great reason for us to always look for long entries – not short ones.  Short-term, I observed we had warm weather in the fall, so less use of NY would drive it down – especially on Monday, which is often down anyway:

    October 6th, 2017 at 2:10 pm | (Unlocked) | Permalink

    /NG/Dreamer – They often crater Mon/Tues so I wouldn't jump in now.   Very mild weather not good for demand. 

    /KC with a nice pop this morning:

    TSLA/Advill – Like the broad markets, nothing seems to phase them.  

    I missed the short last time they hit $380, I'm hoping they get back there so I can short them again but BIG TROUBLE if they fail $340. 


  7. FU GE!!!!


  8. How Smartphones Hijack Our MindsResearch suggests that as the brain grows dependent on phone technology, the intellect weakens.

    White House Says Trump's "Calm Before The Storm" Comment Is "Extremely Serious"

    Junk Bond Debt Covenant Quality Drops To All Time Lows

    Investors "Most Euphoric" In 23 Years Despite Korea, Crap Data, Crude Crash, & Coming Storms

    3 men arrested in connection with New York City terror plots targeting concerts and subway system

    • Federal Reserve Bank of Boston President Eric Rosengren argued in a speech for the continued gradual removal of monetary policy accommodations and for a slow pace of interest rate increases not tied to short-term economic data blips.
    • The comments by Rosengren followed September's hurricane-impacted jobs report that showed the first decline in employment in seven years amid a higher labor force participation rate. There's been some building consensus from economists there might be more slack in the job market than what Fed officials forecast when they called a 4.6% unemployment rate an economy firing on all cylinders.
    • Traders can rest easy on the question for a bit with the bond market closed on Monday for the Columbus Day holiday.
    • The WSJ reports that President Trump's expected executive order allowing insurers to offer lower-cost less-comprehensive plans could divide the market in two with healthy people buying cheaper pared-down coverage leaving sicker people in a smaller pool facing higher costs.
    • The order, to be signed this week, will also allow association of health plans, the banding together of small employers aimed at offering coverage to workers that would not be subject to full ACA requirements.
    • Another change will allow people to buy short-term coverage for up to nearly a year, an option restricted under Obamacare. At present, policies can be purchased for only 90 days by healthy people that exclude costs for pre-existing conditions with capped payouts and less comprehensive coverage (no prescription drug assistance, for example).
    • Some observers believe young people will flock to the short-term plans, cutting their contribution into the risk pool.

    Chinese stocks up, though Caixin services PMI shows slowdown

    • Chinese shares resumed action after a weeklong holiday on the upswing, despite a new sign of cooling action in the country's services sector that contradicted official measures.
    • The Caixin/Markit PMI measure for services fell to 50.6 in September, showing the slowest pace of growth in 21 months — a stark contrast from the official nonmanufacturing numbers that indicated the fastest pace since 2014.
    • Equities rose 1.2% in Shanghai and gained 1.5% in Shenzhen in a resumption after Golden Week.
    • In the Caixin services PMI, new business slowed M/M but still hit 52 (above 50 equals expansion), but backlogs fell for the first time in five months, and hiring slowed.
    • Caixin's composite manufacturing/services PMI fell to 51.4 from August's 52.4, the lowest mark since June.
    • There is a fine line between setting goals and misleading investors, writes Charley Grant in the WSJ, and Tesla (NASDAQ:TSLA) is inching closer to that line.
    • Tesla last week announced more than an 80% shortfall to Q3 Model 3 production guidance of 1.5K cars, and yesterday disclosed a delay in its Semi reveal in order to better focus on Model 3 bottlenecks, and to provide assistance to Puerto Rico. The WSJ later reported the company as building major parts of the Model 3 by hand.
    • But, writes Grant, when Tesla reiterated production guidance in August, Elon Musk at that time surely knew his company wasn't going to come anywhere close to 1.5K Model 3s by the end of September. And this is only the latest example in a string of disappointments.
    • With a $60B market cap, the company has been priced by investors for auto market domination, but how can that happen if Tesla can't profitably produce enough cars?
    • "Tesla stock is valued as though the company can execute on its vision flawlessly. The facts suggest the opposite."
    • An interesting Tesla (NASDAQ:TSLA) development reported on by Electrek is the deployment of 50 new Tesla vehicles in Uber's (Private:UBER) service in Dubai. Electrek notes that Uber also used Model S vehicles in a Madrid program.
    • Shares of Tesla are down 1.69% in premarket action as the company's delay of its Semi truck reveal pushes a catalyst down the road to November.
    • Over the last week, analysts have issued some of their rosiest projections ever on the EV industry. And while Tesla is front and center in the discussion, more attention is also going to the EV ambitions of General Motors, Ford, Volkswagen, Audi, and Toyota than in the past.
    • Previously: Tesla semi event pushed back to November (Oct. 6)
    • Previously: Truth is catching up to Tesla – WSJ (Oct. 7)

    BofAML: Apple could benefit from Trump tax plan

    • Bank of America Merrill Lynch reiterates its Buy rating and $180 price target for Apple (NASDAQ:AAPL) on the belief that President Trump’s tax reform plan will benefit the tech giant.
    • The plan would cut the corporate tax rate from 35% to 20% and lower repatriation tax rates for the accumulated foreign earnings of U.S. companies. 
    • BofAML analyst Wamsi Mohan notes that “existing deferred tax liability on the balance sheet could allow for substantially all of Apple’s foreign cash to be repatriated” and investors will give that cash a higher multiple.  
    • Mohan estimates the lower corporate taxes to benefit Apple’s EPS by $0.77 in FY18 and $0.89 in FY19. 
    • The analyst says Apple has $223B in “unrestricted” cash overseas and could repatriate at a tax rate of 8.75%. 
    • Apple shares are up 0.38% premarket.

  9. Nice spread on /TF already today.


  10. nobody out there or is my chat broken


  11. ESRX Phil what is your take on AMZN entering the pharmacy biz. Would they buy ESRX or put them out of business? I am holding short 2019 60 puts with a small loss as an entry position. Thinking of rolling to the $55s. Thanks.


  12. Hola Baron – It's really a holiday in the US, but the market is open.

    AMZN/Jet – I don't see where AMZN would get instant expertise.  It's only an issue for ESRX if AMZN buys a competitor but no one is really their size.  Clearly people think it's bad for them, if $60 doesn't hold, I doubt $55 will make it better!  


  13. COST is back low in the channel, that makes them a little interesting but I'd like to see the p/e back around 20 ($140).

    Tesla's Pretense Of Model 3 Production Has Been Ripped Away

    Disney is good too:
    • Walt Disney (DIS +0.6%) is now a top pick at RBC, which notes that its nonmedia businesses are now making a bigger difference to valuation than before.
    • ESPN is on pace to account for less than 20% of earnings, with nonmedia assets — storytelling via its studio segment, and operating leverage via Parks & Resorts — taking the lead for the company.
    • It's set to become the "least media stock in the media sector," analyst Steven Cahall says.
    • Meanwhile, on the media side the direct-to-consumer focus will add to valuation, with a "potentially massive" addressable market
    • The firm did update its price target to reflect DTC dilution, trimming it to $125 from $130, which still implies 24% upside in shares.

    Theater stocks retreat after Blade Runner debut falls short

    • Theater stocks give back some of the gains built up last week after Blade Runner 2049missed box office estimates with its weekend run.
    • AMC Entertainment (AMC -5.8%), IMAX (IMAX -2.4%), Cinemark Holdings (CNK-2.8%), Regal Entertainment (RGC -4.9%) and National CineMedia (NCMI -4.1%) are all notably lower.
    • Previously: Blade Runner sequel leads box office, falls short of estimates (Oct. 8)

  14. Phil,

    What are your thoughts on Oil, bloomberg reported this morning that Saudi State owned companies were going to cut production by half a million barrels a day by next month and Trump to deliver a message on Iran sanctions on Oct 12th. Does that change anything on our short term Oil trades 


  15. Oil/Pat – Hard to say what's real and what's not.  As you know, the Saudi's have that Aramco IPO coming and they are desperate to get prices up but so what if they cut 500,000 barrels if US shale picks up 500,000 barrels?  We don't buy oil from Iran now and, if other countries do – then that oil hits the market regardless of our sanctions.  

    • A portfolio manager at Ulland Investment Advisors specializing in preferred shares, Nat Beebe shares his view on passive ETFs in niche strategies (like preferreds).
    • Step One: Fill a pool with a hose (inflows into ETFs are slow and steady).
    • Step Two: Flip the pool over and try to pour the water back into the hose (outflows tend to be more intense).
    • Step Three: Try and not get wet.
    • He's noting signs of Step Two in the $18B iShares U.S. Preferred Stock ETF (NYSEARCA:PFF), where there was a 2.3M share count reduction on Friday.
    • It's maybe or maybe not a cogent argument, but Barron's Amey Stone reminds that Beebe is anactive manager and thus naturally not a fan of the PFF.
    • Videogame stocks are lower today after Cowen goes Neutral across the board, seeing unrealistic 2018 expectations priced into shares.
    • The firm cut Activision Blizzard (ATVI -3%), Take-Two Interactive (TTWO -3.8%) and Ubisoft (UBSFY +1.1%) to Market Perform, and reiterated its Neutral stance on Electronic Arts (EA-1.2%).
    • Shares have been on a strong run in 2017 — year-to-date, ATVI is up 70%, TTWO up 109.4%, UBSFY up 104%, EA +50.6% -- and Cowen notes that the Street seems to be pricing in 12-13% industry growth, "well above anything achieved in the last decade."
    • Competition will be higher next year as well, with a packed slate of games vying for limited gamer attention.
    • While it's still a believer in long-term attractiveness of the sector, there will be at least a 15-20% multiple compression as buy-side expectations dampen, Cowen says.
    • Also moving: Zynga (NASDAQ:ZNGA), down 1.9%; Glu Mobile (NASDAQ:GLUU), down 2.7%.

    Very little going on today – I guess news writers are taking the long weekend as well.


  16. It is quiet, IWM finally showing some weakness. Some of us are here Barron, just not much to say


  17. Literally nothing is going on today – not even news.  CNBC is talking about Harvey Weinstein being fired – that's a last week story…

    • Unseasonably warm temps continue across the East Coast and Southeast, thus offsetting any positive impact to natural gas prices that may have seen from a drop in production amid Hurricane Nate.
    • The forecast: NYC is seen hitting 77 degrees in one week – 13 degrees above the normal high.
    • UNG -1%
    • Grocery store stocks start the week off on a down note after Barclays warns on the impact of Amazon.
    • Though the Barclays thesis isn't anything new, analyst Karen Short issues a more dire assessment on the sector than what most other analysts have published..
    • She writes that most grocers lack "scale, sophistication and the balance sheet in order to make the necessary investments" and maintains that no food retailer will be left unscathed from the Amazon-Whole Foods evolution (per Bloomberg).
    • In a broad look at grocery-related stocks — Casey's General Stores (CASY -1.1%), Kroger (KR-1.9%), Supervalu (SVU -3.1%), Ingles Markets (IMKTA -2.6%), Weis Markets (WMK -4.2%), Core-Mark (CORE -1.6%), Smart & Final Stores (SFS -7.1%), iFresh (IFMK -3.1%), Sprouts Farmers Market (SFM -1.9%), Costco (COST -1.8%), Blue Apron (APRN -1.5%) and Target (TGT -0.8%) are all swinging lower today.
    • Videogame stocks are lower today after Cowen goes Neutral across the board, seeing unrealistic 2018 expectations priced into shares.
    • The firm cut Activision Blizzard (ATVI -3%), Take-Two Interactive (TTWO -3.8%) and Ubisoft (UBSFY +1.1%) to Market Perform, and reiterated its Neutral stance on Electronic Arts (EA-1.2%).
    • Shares have been on a strong run in 2017 — year-to-date, ATVI is up 70%, TTWO up 109.4%, UBSFY up 104%, EA +50.6% -- and Cowen notes that the Street seems to be pricing in 12-13% industry growth, "well above anything achieved in the last decade."
    • Competition will be higher next year as well, with a packed slate of games vying for limited gamer attention.
    • While it's still a believer in long-term attractiveness of the sector, there will be at least a 15-20% multiple compression as buy-side expectations dampen, Cowen says.
    • Also moving: Zynga (NASDAQ:ZNGA), down 1.9%; Glu Mobile (NASDAQ:GLUU), down 2.7%.

  18. Phil/nothing

    yes of course, you too repeated the news link "~~Videogame shares slide as Cowen heads to sidelines after hot run " :-)


  19. Phil/AAPL

    What do you think about selling puts here at this level?

    I thought and waited for it to go down into the 140's but that did not happen.

    A little weary selling puts closer to the top…

    Ideas?


  20. Maya

    AAPL earnings report 11/2, very high at present rage, dangerous grounds! You need to sell puts on the lower side of the scale not at 156.


  21. GE – had to sell some Dec $23 puts @ .65. Did it in an IRA account so at full cash cover, is 15% annualized return if expire. Ok if put to me an prepared to add more if market swoons (which will take GE down too).  In a margin account, is 73% return against regular margin.


  22. Nothing goin down? Bored?  You can always learn about Tokamak's, JET, ITER, DEMO, PROTO,  plasma science and the real reason why the oil cartel is scared silly. 

    ITER is being built near Cadarache. The precursor was JET, the 2nd gen ITER fusion reactor has been designed to produce 500 megawatts of output power for around twenty minutes while needing 50 megawatts to operate. That's 10X excess energy or heat effect. 

    Thereby the machine aims to demonstrate the principle of producing more energy from the fusion process than is used to initiate it.  Yes, more energy is produced than used.

    Next gen is DEMO, then PROTO.  DEMO should produce at least 2 to 4 gigawatts of fusion power on a continuous basis, and it should produce 25X as much power as required for breakeven.

    The ITER project is funded and run by seven member entities—the European Union, India, Japan, China, Russia, South Korea, and the United States.  Enjoy plasma 101 and Out.


  23. Yodi/AAPL

    I know, I know…Not trying to sell puts here but the stock got down to 150 and bounced.

    So, if we assume 150 as a line, maybe use that as a reference point or do you expect a significant drop at earnings?


  24. again, oil is not used to produce electrical energy


  25. ~~David Einhorn Discusses Tesla, GM, Pitches Tempur Sealy at Dallas Investing Conference

    https://www.gurufocus.com/news/575415/david-einhorn-discusses-tesla-gm-pitches-tempur-sealy-at-dallas-investing-conference


  26. News/Pat – Shows how nothing there is!  

    AAPL/Maya – Well, I certainly think they'll be over $160 next year but $155 is not cheap and the VIX is so low (so crappy prices) so I'd wait for a real dip and, if not, move on.

    And what Yodi said.

    Fusion/Naybob – Supposedly by 2022 we will have commercial fusion.  


  27. https://www.quora.com/When-will-the-Apple-cryptocurrency-come-out

    not interesting (at least, to me) except for the Dash comment – could explain Dash's $2 to $300 rise over the last few years. The article isn't interesting because it's common sense that Apple would try to find a work around to onerous 3% fee charges from credit cards in their iOS wallet service.


  28. Apple fees / BDC – And maybe software developers find a way around Apple "very" onerous 30% service fee from the app store!


  29. BDC – "again, oil is not used to produce electrical energy"

    Nobody here conflating oil with the production of electricity. Glad you brought it up, your right, coal is predominate globally and produces 30.4% of all US electricity. And we always want to keep a light on for those in that proverbial coal mine. Interesting codicil…

    NG is usually found by oil companies in close proximity to oil/petroleum, and whose byproducts are used to incidentally run cars, trucks, buses, trains and ships.  What happens if one can make 10 to 25X more electricity than breakeven?  and there comes some decent battery technology?

    Maybe EV's and related things become ubiquitous? Again, the oil cartel, which NG can be associated with, and which accounts for 33.8% of electricity in the US, is scared silly for good reason and Out.


  30. HXL – high tech materials company supplying BA and others confirming recent breakout. $2B in revues for $5B company, consistently issuing debt, retiring stock for last few years. painting that chart so pretty. Damnit. is the debt cheap enough to be smart? Ratios don't look bad, and more like management decided to get more aggressive a few years ago.


  31. No news… just wait for them to try and rationalize this drop… on such a slow news day maybe they can get Marc Farber on… Dr. DOOM!!! to stir the pot


  32. NN. DEMO is not scheduled to produce power until 2048, according to Wikipedia. The whole world will change by then, who knows what the energy picture will be. 'Course I'll  be dead by then.


  33. on a slow day we could hypothesize to the necessity or lack there of in adding "Out" to the end of one's posts?


  34. KHC – closed short position, and Out.


  35. Muck – I gotta haiku-itize you're post:

    no news, "rash" the drop

    can they get Doctor Doom on?

    he'll stir the pot


  36. oh Bitcoin, you we're fun

    at three dollars per unit

    now we're done and out


  37. Jel – "DEMO is not scheduled to produce power until 2048. The whole world will change by then, who knows what the energy picture will be. 'Course I'll  be dead by then."

    2048 is a ways off, but that's what long term planning or boondoggles are about? Yes sir, we will be six feet under or dust in the wind, unless Warren Buffet allows those DNA experiments to become public.

    Phil – "Fusion/Naybob – Supposedly by 2022 we will have commercial fusion. "

    Hope is high.  The whole point is to reduce CO2 emissions to ZERO, and through carbon recapture perhaps reverse the snowball that is turning into the avalanche of GW and CC.

    Anything that eliminates oil, NG, or hydrocarbon dependence is considered a threat to that energy cartel, today or 50 years from now.  Of course, electrofuels would also be a threat. Perhaps why Sun Catalytix was bought in 2014 by Lockheed Martin for military applications?


  38. Phil,

    Nice downward movement on TF. You still holding TF shorts ? If yes what are your plans ?

    Thanks as always

    Pat


  39. IS THAT A RED CANDLE ON SVXY????

    couldn't be. must be a ghost, or a UFO, or ….


  40. BDC – "on a slow day we could hypothesize to the necessity or lack there of in adding "Out" to the end of one's posts?"

    As it seems to be producing some static electricity, one might.  It's time for my IV and Out.


  41. I'll drink to that… and out.


  42. I thought red candles were outlawed? Discontinued? Day isn't over yet, of course… but you can't buy the dip without a dip.


  43. AAPL/BDC, StJ – I always thought they'd ultimately do an end run around the CC companies.  The business wasn't worth the effort for just 0.5%.

    Bad day for TSLA:

    HXL/Scott – Nice but not cheap at $60 from $50 in July,.  Earning $250M but $5.3Bn value is a p/e of 21 so not quite a bargain and the growth of the last few years (5%) doesn't really justify paying low 20s.  Would be a pass for me but interesting back at $50.

    Finally /TF taking a proper leg down. 

    2048/Jet – Well, let's see, I was born in 1963 and I fly in jets and my Grandpa was born in 1903 the year the Wright brothers flew at Kitty Hawk and oil was pretty much for lamps at the time, so we went from there to the Moon in 66 years which means it would be ridiculous to make any bet on what kind of power my daughter will be using around the time she turns 50….  I won't be dead – just really friggin' old!  

    2022/Naybob – Come on, when has LMT ever missed a deadline?  devil

    /TF/Pat – Plans are wait for the collapse, retire.  

    VIX/BDC – Say it ain't so!  

    Image result for mad world big w animated gif

    Outlaws/Mkucs – Well it's a slow day, they might just be messing with us.  


  44. AMC – considering adding another round of buying stock, selling Dec $16 calls for net ~$13.13 entry (.10 lower than original entry, but that was before .20 dividend). Hmm. Better to do the puts now: ..and just sold Dec $13 puts for 1.10


  45. TFDXX/Phil (anyone) - Merrill Lunch has this Blackrock "BLF Fed Fund" offered as an option offered as one of the money market fund options can choose for rolling cash in and out of. Here is the 'page' on it: https://www.blackrock.com/cash/en-us/products/282628/

    Not entirely helpful to me to understand if this is safe/risky, liquid or not available for redemption when desired. Anyone familiar with these products? Any particular reason to avoid or endorse?


  46. AMC/Scott – So funny how one bad move weekend freaks people out.

    TFDXX/Scott – That stuff is pretty normal for "sweeps" accounts.  Not too risky but, don't forget, when the market crashed, those accounts were teetering as well and, even when they are insured – what do you do if they insurer fails?  No free lunches, sadly…


  47. Phil

    What are your thoughts on RL and KR ? 

    Thanks

    Pat


  48. TFDXX/Phil – thanks. usually find little to choose from on these, but this one is a short term treasury focused, and has come off nothing as the fed has started raising… so for "cash" may have that light breeze at it's back…


  49. …*return* has come off nothing…


  50. KR/Pat – Well all the grocery stores are down and KR or SVU or someone probably won't make it in the end and I backed SVU but it could be KR that makes it.  I like SVU because they are cheaper ($769M) vs $18Bn for KR so SVU is much more likely to be bought with 2,000 stores vs 2,700 for another $17Bn in KR.  

    RL/Pat – Another segment where some will survive and some won't.  At $65 I might have been willing to take a chance but not $87.  

    RL has declining sales (down more than 10% since last year) and no profits at all since that was their margin with a $7Bn valuation.  I like LB as their sales increased and they made $1.2Bn on a $12Bn valuation.  


  51. generally I like Blackrock funds, especially bonds because I don't buy them individually. MEN, MQY, etc, are tax free muni bonds that hover between 5 – 5.5% yield. Bonds of course can go down, but MEN for example was 11.50 in 1989 and closed at 11.93 today, so that's almost 30 years of data. My pet theory here is the company figured out how to pass capital gains (i.e, inflation) as paid interest to the investor (which is tax free). Therefore, the fund pays a "real" interest rate of ~3% and somehow the 2% inflation inherent in the last 30-years of the issue also got paid as "interest" (hence the same real price for the fund – which should've at least doubled in price). If so, that's pretty clever.

    I also like their taxable muni BBN – 6.7% yield – a good one for IRAs. Also, HYT (high yield) weighs in at 7.5% versus PHB at 4.5%. I'm not sure what Blackrock is doing … but they are doing something (bad or good, who knows).

    As for super-short term, the fund you linked to pays 0.93% but a hefty 0.21% fee (???). Yowzer. They must be paying to insure the $1 NAV because, simply put, there is no way to guarantee an absolute gain — there is always at least some risk as Phil pointed out. But still, the fee seems high, Vanguard's BSV yields 1.5% and has a 0.07% fee. If you can take some risk, you might like that one or Schwab's SCHZ. With this one you can run a checking/linked-brokerage hybrid account and can put short term cash into the fund (no trade fees) when it's not needed. I look at these things from a "top to bottom boundary loss." I eyeball a long term chart and see where the boundaries seem to be – e.g. SCHZ ~ 50-53. So 6%, or ~2.5 years worth of yield, that is, if I absolutely had to sell for short term cash needs at the bottom of the channel and that sort of you "known known" on risk/reward, the amount of time it would take to make it back in interest from a mis-timed sell on bonds. This still is "only" looking back 10-30 years so what if that 1 in a 100 years event happens, but let's take a closer look at that.

    THe FED-insured stuff doesn't help me sleep at night at all. It simply serves many folks as a warm blanket by obfiscating risk with too little real off-setting reward. For example, with my above SCHZ at 2.35 yield (and 0.05% inherent fee), versus 0.93% for the blackrock fund what does that 1.4% loss in yield really buy? If another 2008-sized financial crisis hits, to Phil's point, what happens to your insurer? If the global fiat-debt feeding frenzy breaks down completely, did this fund help at 1.0%, versus making 2.35% instead and investing the difference in cyrpto's and gold (which is why we have a robust crypto portfolio of course!). If all of society breaks down (the "zombie apocalypse" theory) then even crypto and gold is worthless with respect to guns and butter and so and so forth down the road of "increasingly improbable (but very real)" theories until total proton collapse. I consider VCSH, BSV, SCHZ (etc) the real rock bottom on risk because below that you are essentially buying insurance policies on what's largely unpriceable future events. And insurance is an expense which means somebody trying to maximize profit by charging you.

    I'm sure I provided no help whatsoever, but it's free advice so worth what you paid for!!(?)


  52. Phil, what is your avg price on TF.  Have you broken even yet?


  53. BDC – great comment, Helpful. And i comprehended it (except the part about having a robust crypto portfolio – that does not sound so sensible to me). Thanks!


  54. Yodi/aapl

    Apple shares set to rally – Bank of America

    Bank of America thinks Apple (AAPL) shares could rally thanks to President Trump’s tax reform plan. In a note to clients, analyst Wamsi Mohan wrote that investors will “likely assign a higher multiple to shares of Apple” because of access to repatriated cash. Mohan reiterated his firm’s buy rating on the stock and $180 price target. Apple shares are up nearly 35% since the start of the year.


  55. The European markets seemingly are downplaying the impact of the Barcelona independence announcement. I expcted a little more volatility.


  56. /TF/Latch – Not at all, my average price is 1,502 and I've made $1,000 several times adding 4 (to my 10) between 1,515 and 1,510 so I'm happy in this range, though I would like to see 1,480 at some point.  

    Still, I cannot emphasize this enough – my short futures plays are HEDGES to drop cash in my pocket if there's a sharp correction that I can't compensate for by adding index hedges.  Yes, I like to win anyway as it's short-term spending money but it's still a hedge, not a bet.  That's why I almost never play a long – we have TONS of longs – I don't need more longs. 

    Good note BDC. 

    AAPL/Maya – If that isn't baked in by now, people are idiots.  Also, it's not true that AAPL somehow can't access their cash – obviously, since they assemble their IPhones in China, they could simply use their overseas cash to pay for the IPhones and keep their US money in the bank.  Keep in mind AAPL sold 80M IPhones LAST QUARTER – Chinese assembly alone is about $115/phone so there's $9.2Bn/qtr that can be "washed" by paying China from overseas funds and then collecting USD for phones sold stateside.  Then, of course, there's the parts that go into them, mostly from overseas too.

    When you are a company with $250Bn in global sales, probably more than half overseas, then what is so strange about having $150Bn overseas – where your customers are and where your stores are and where your inventory is and where you manufacture your product and where you do business?  

    What this tells me, more than anything else, is that BAC employs analysts who don't actually have a clue of how international business and finance operates and then they don't even have editors who understand (or care) enough to correct reports that make them look like idiots.  Hell, they don't even read Bloomberg the same week they are writing a post on the subject:

    A Lot of Apple's Overseas Cash Is Already in the U.S. – Bloomberg

    Not that it’s necessarily so far away. While a tax accountant might label the cash foreign, a lot of it is already deployed in the U.S. economy. Corporations have collectively amassed trillions of dollars in overseas profits, but much of that money has been invested in securities such as U.S. Treasuries and corporate bonds. “Just because money is technically outside the U.S. doesn’t mean it can’t be used in the U.S.,” says Megan Greene, chief economist for Manulife Asset Management Ltd.

    Barcelona/Den – I think it's at 6pm in Spain, which is Noon for us.  Seems to me they are going to declare independence and the Government will immediately step in and arrest them for rebelling.  What happens next will be up for grabs but Scotland might declare independence over drinks on a whim if they see this on the news….

    Dollar down 1% from yesterday's open so this morning's "rally" needs to be taken in context:

    It's rallying oil too.

    • Oil prices were stable early Tuesday with OPEC pointing to a rebalancing market even as the U.S. looked forward to getting production back following Hurricane Nate.
    • “There is clear evidence that the market is rebalancing,” OPEC’s secretary general Mohammad Barkindo says. “The process of global destocking continues, both onshore and offshore, with positive developments in recent months showing not only a quickening of the process but a massive drainage of oil tanks across all regions."
    • OPEC and other producers are looking to create an extension to their deal to cut production ahead of the official November meeting of the cartel. Those cuts are currently set to expire in March.
    • WTI crude futures are up 0.1% to $49.65/barrel, while Brent crude is up 0.13% to $55.86.
    • Meanwhile in the U.S., production facilities don't look to have suffered damage as a result of the storm and have begun restarting operations.

    /NG playable over $2.85

    Don't forget Fed Minutes tomorrow – that usually saves us. 

    People are all pissed at Zuckerberg for doing a VR broadcast with Puerto Rico in the background.  I don't get it, it's not real and he wasn't making fun of it or light of it.  Right wing-nuts are trying to make this some kind of issue for some reason (general hatred of Liberals, I guess).

    • Online users slam Mark Zuckerberg as a "heartless billionaire" after the Facebook (NASDAQ:FB) CEO live-streamed a virtual reality cartoon avatar of himself in hurricane-ravaged Puerto Rico.
    • The tone-deaf display was part of Zuckerberg's demonstration of Facebook Spaces, a product that allows users to create a 3-D virtual avatar of themselves to use with an Oculus Rift VR headset and communicate with each other by having their avatars be in the same space, even if the real people talking are not.
    • In the demonstration, Zuckerberg and the company's head of social VR Rachel Franklin were transported to Puerto Rico, which was criticized by users on social media.
    • Zuckerberg also talked about features such as Safety Check, which allows Facebook users to mark themselves safe when a natural disaster hits, and said the company had donated more than $1.5M to Puerto Rico relief efforts.

    https://www.facebook.com/sharer/sharer.php?u=https%3A%2F%2Fwww.facebook.com%2Fzuck%2Fvideos%2F10104094186863501%2F&display=popup&ref=plugin&src=video

    Germany's Schäuble fears global policies are encouraging bubbles Finance experts from the euro zone weigh in on comments made by outgoing German finance minister Wolfgang Schäuble, who warned in a weekend interview of the potential for another global financial crisis driven by debt and liquidity problems. Euro zone officials tell CNBC that they largely share Schäuble's concerns and believe debt and liquidity should be closely monitored. The influential Schäuble, who is due to leave his post as finance minister and become president of Germany's parliament in the next Merkel administration, said high debt levels – attributable to the loose monetary policies of central banks across the world, which were adopted in response to the global financial crisis in 2008 – present a threat to the global economy. Schäuble has been an outspoken critic of the European Central Bank's low interest rate policy.

    Note Earnings Trends:  NFIB Small Business Optimism Index

    Germany's Schäuble fears global policies are encouraging bubbles

    • Finance experts from the euro zone weigh in on comments made by outgoing German finance minister Wolfgang Schäuble, who warned in a weekend interview of the potential for another global financial crisis driven by debt and liquidity problems.
    • Euro zone officials tell CNBC that they largely share Schäuble's concerns and believe debt and liquidity should be closely monitored.
    • The influential Schäuble, who is due to leave his post as finance minister and become president of Germany's parliament in the next Merkel administration, said high debt levels – attributable to the loose monetary policies of central banks across the world, which were adopted in response to the global financial crisis in 2008 – present a threat to the global economy.
    • Schäuble has been an outspoken critic of the European Central Bank's low interest rate policy.

    Chinese stocks back off from post-holiday rally as yuan sees stronger fix

    • Chinese stocks gave back some gains from yesterday's post-holiday rally, with more conservative investors heading into defensive sectors (including consumer staples) ahead of the 19th Communist Party congress.
    • Shanghai was down 0.3% to 3365.85, while Shenzhen was off 0.1% to 547.93. Hang Seng was up 0.2%.
    • China's state-backed funds actually intervened to trim stock gains as it headed to a 21-month high Monday, Bloomberg reports. Sources told the service that the funds sold large-caps (including banks and Unicom), a reversal of their buying after China saw a sovereign credit downgrade from S&P.
    • The People's Bank of China poured 40B yuan (about $6.06B) into the system by using 7-day reverse repurchase agreements, and the yuan gained after comments on stronger fixing from central bank governor Zhou Xiaochuan: Onshore, the yuan was up as much as 0.53%, and offshore up as much as 0.56%.
    • The central bank strengthened the yuan reference rate for the first time in seven trading days, by 0.33%.

    Steel data falsification scandal spreading through Japanese industry

    • A scandal has erupted beyond company borders in Japan over false data supplied by Kobe Steel (OTCPK:KBSTY) over the strength and durability of its products used in some mission-critical applications indeed — in cars, aircraft and perhaps a rocket.
    • Shares were untraded in Tokyo; ADRs had fallen 10.5% Monday.
    • The falsification was intended to make metals look like they met clients' quality standards. Toyota (NYSE:TM), Honda (NYSE:HMC) and Subaru (OTCPK:FUJHY) all said they used materials from Kobe Steel that were subject to such falsification. Boeing (NYSE:BA) gets some parts from Subaru but says nothing so far has raised safety concerns.
    • Kobe Steel has acknowledged shipping products (which include copper and aluminum products) to more than 200 customers but didn't disclose their names.
    • Other top customers by revenue: Shinsho Corp., Mitsubishi (OTCPK:MSBHY), General Motors (NYSE:GM), Ford Motor (NYSE:F), Nissan Motor (OTCPK:NSANY).
    • “We are rapidly working to identify which vehicle models might be subject to this situation and what components were used,” Toyota spokesman Takashi Ogawa said. “We recognize that this breach of compliance principles on the part of a supplier is a grave issue.”
    • Meanwhile, competing Japanese aluminum makers are gaining. UACJ (OTC:UACJF) is up 3.2%in Tokyo; Nippon Light Metal Holdings (OTC:NPPMF) is up 3.6%; Daiki Aluminium Industry is up 3.7%.
    • With the company looking to keep capex spending below the level of depreciation this cycle, Caterpillar (NYSE:CAT) could buy back about $9B of stock over the next three years, says Goldman's Jerry Revich, boosting the price target to $158 from $143.
    • He lifts his mid-cycle GAAP EPS estimate to $10.50, and cash estimate to $11.70.
    • Source: Bloomberg's Jeremy Cooke
    • Shares +0.2% after hours to $127.10.
    • The  chance of a dividend cut has moved "materially higher," says noted General Electric (NYSE:GE) bear, JPMorgan's Stephen Tusa.
    • The bulls, of course, will say that GE's significant housecleaning is a show of strength, but Tusa wonders why CFO Jeffrey Bornstein was kept around so long, noting that as recently as mid-September, Bornstein was though to be part of the fix for GE (he notes Bornstein and two other exiting execs were all given retention bonuses last summer).
    • GE shares continue to act poorly following the moves, down 4.2% on the session.
    • Previously: General Electric down 3% after management shake-up (Oct. 9)
    • Cheesecake Factory (NASDAQ:CAKEjumps 1.6% after landing on Hedgeye's list of favorite long ideas.
    • A sharp drop in Cheesecake's share priced flipped Hedgeye's view on valuation.
    • Cheesecake Factory hit a 52-week low of $38.34 last month.

    There go another 10M jobs: Nvidia unveils new self-driving taxi hardware

    • Nvidia (NASDAQ:NVDA) unveils license-plate-sized hardware that it says harnesses the equivalent of 100 servers in a data center, which it hopes to use to advance self-driving taxis.
    • The company says the Nvidia Drive PX Pegasus hardware marks a 10x improvement over its predecessor and will tackle “level five” vehicles, which are entirely autonomous and do not have steering wheels, pedals or mirrors, and in addition to boosting raw processing power of the hardware, the units will reduce the amount of energy consumed by “thousands" of watts, giving the self-driving cars greater range and drive time, among other improvements.
    • “Driverless cars will enable new ride- and car-sharing services," NVDA tells the GTC Europe tech conference in Munich. "New types of cars will be invented, resembling offices, living rooms or hotel rooms on wheels… The future of society will be reshaped."

    Box office weak with 'Blade Runner' slip, but 'Star Wars' is lining up

    • Blade Runner 2049 (TWX -0.1%) may have stumbled out of the box office gate, disappointing expectations with a $32.8M opening, but other studios didn't put up much of a fight.
    • The Warner Bros. sci-fi sequel prevailed over a counter-programmed drama from Fox (FOX-1.6%FOXA -1.4%), The Mountain Between Us, which mustered $10.1M for second place, ahead of the fifth weekend of Warner's horror hit It, which drew $9.97M.
    • Another newcomer, My Little Pony: The Movie (LGF.A -1%LGF.B -0.4%), took the fourth spot with $8.8M, just ahead of Kingsman: The Golden Circle (FOXFOXA) with $8.1M; American Made (CMCSA -0.6%), with $8.07M; and The LEGO Ninjago Movie (NYSE:TWX), with $7M.
    • It has now hit $305M domestically, and $604M worldwide, which means it's about to break into the worldwide top 10 for 2017 (it's just behind Transformers: The Last Knight, with $605.4M in worldwide grosses).
    • Meanwhile, expectations were high for the first day of advance ticket sales for Star Wars: The Last Jedi (DIS -0.5%), expected to begin after a new trailer at halftime of Monday Night Football. The film is set for a mid-December release but should bank huge sums before the night is up.