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Fabulous Friday – Nasdaq’s Big 4 Come Through

Wow! 

What a big day for tech as Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Intel (INTC) all beat earnings estimates and all raised guidance – pretty much justifying the crazy Nasdaq run – 6,666 it is (see yesterday's Report)!  I hate to say it but it's not a bubble when earnings are blasting higher and all 4 of the big tech names are benefitting from the explosive growth of Cloud Computing and the Internet of Things.

I will be on Benzinga's Pre-Market Prep this morning – just in time to look over the GDP report and I'm sure we'll be discussing the Nasdaq and where we could go from here.  Last time I was on the show was September 29th and we discussed our Limited Brands (LP) spread, which has already moved up from $1,600 to $4,200, so up $2,600 (162%) in short order but only "on track" for our 800% projected gain.  

We also talked about using the Russell Ultra-Short ETF (TZA) as a hedge with 50 Nov $12 calls at $1.95 ($9,750), selling 50 $14 calls for 0.70 ($3,500) for a $1.25 ($6,250) net cost, which we offset by selling 5 Apple (AAPL) 2020 $130 puts for $11.20 ($5,600) to drop the net of the spread to $650.  Despite the rally, TZA is at $13.45 so the spread is $1.45 ($7,250) while the AAPL puts have fallen to $10 ($5,000) so net $2,250 is up $1,600 (246%), despite not even needing our hedge during this rally.  

Why does that work?  Because we are Being the House – NOT the Gambler and selling premium when we establish our spreads.  The only sure thing in the markets is that premiumd DOES expire – and that gives us an edge in every trade we make.  

This morning we discussed a variation of yesterday's long trade idea on Celgene (CELG):

  • Sell 5 CELG 2020 $80 puts for $9 ($4,500) 
  • Buy 10 CELG 2020 $80 calls for $30 ($30,000)
  • Sell 10 CELG 2020 $110 calls for $16 ($16,000) 

That trade nets you in for $9,500 and returns up top $30,000 for a $20,500 profit (215%) if CELG can get back over $110, which we don't think is too much to ask.  Worst-case is being assigned 500 shares at $80, which is 20% below the current price, which is already 30% below the summer price.  That's the way to buy a stock on sale!  

The next trade idea we discussed this morning was ABX, also from yesterday's Report.  ABX missed earnings but it was a one-time expense so we still like them and now you can:

  • Sell 25 ABX 2020 $15 puts for $2.60 ($6,500) 
  • Buy 40 ABX 2020 $13 calls for $3.60 ($14,400) 
  • Sell 40 ABX 2020 $20 calls for $1.30 ($5,200) 

That one nets you in for $2,700 on the $28,000 spread so the upside potential is a gain of $25,300 (937%) at $20 and, if we're still this low at Thanksgiving, that just beat out Limited Brands (LB) for our 2018 Trade of the Year!  The race isn't over yet because JC Pennys (JCP) is tanking the entire Retail Sector with terrible earnings and a 25% drop pre-market but that made us look at Macy's (M) again, as they come back to test $20 and that makes them another contender for Trade of the Year with the following:

  • Sell 20 M 2020 $18 puts for $5 ($10,000) 
  • Buy 50 M 2020 $18 calls for $4 ($20,000) '
  • Sell 50 M 2020 $25 calls for $2 ($10,000) 

That one puts you in a no net cost, $35,000 where the upside is infiity percent if Macy's is back over $25 in 2 years.  On the downside, you may have to own 2,000 shares of M at $18 ($36,000) so make sure you REALLY want to own them at that price.  Just the bull call spread is good with no margin at all at net $2, since it pays $7 for a $5 (250%) gain if all goes well but we have enough confidence to eliminate our cash outlay in exchange for promising to buy the stock 10% lower than it is now (and 18% lower than yesterday's close).

As I pointed out on the radio show, just because JCP sucks, doesn't mean all of Retail sucks, just like the San Francisco 49ers sucking (0-7) doesn't mean you should bet on every football team to lose (unless they are the Giants, of course).   Even with the evidence that both coasts suck, you can't extrapolate that the whole country sucks.  Only 90 miles away from the Giants, the Philadelphia Eagles are 6-1 but the Raiders are 3-4 and the Chargers are 3-4 so we can, scientifically say that California does, indeed – suck…  Oops, my bad, the Rams are back in LA and they are 5-2 – I guess we have to count that – even though they stole them from St Louis.  

And just because some of the Big Tech names are going gangbusters doesn't mean all tech deserves sky-high valuations.  That was the mistake people made in 1999 and ETFs and index funds contine to make that mistake every day.  While it's nice that 4 of the greatest companies on the planet are doing well – it's not a true indicator of the World's economy as their performance is highly concentrated in an area of the economy that's a COST to most other companies (cloud storage, IOT devices). 

It remains to be seen whether the other indexes follow suit or take advantage of the mindless ETF buying to stage a little sell-off.  Gotta love those TZA hedges!   We're also short the Dow Futures (/YM) at 23,400 and the Russell (/TF) below 1,500.

Have a great weekend, 

- Phil

 


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  1. Good Morning.



  2. I wonder what they are hiding – probably don't want to do an assessment of the actual response:

    https://www.propublica.org/article/fema-had-a-plan-for-responding-to-a-hurricane-in-puerto-rico

    The Federal Emergency Management Agency, citing unspecified “potentially sensitive information,” is declining to release a document it drafted several years ago that details how it would respond to a major hurricane in Puerto Rico.

    Not sure why because apparently they got a "10"!



  3. IMAX upgrade - 

    8:19 AM ET 10/27/17 | MarketWatch

    RELATED QUOTES

     

    4:02 PM ET 10/26/17

    Symbol

    Last

    % Chg

     

    IMAX

     

    23.40

    0.00%

    Real time quote.

     

     

    Imax Shares Gain Premarket After J.P. Morgan Upgrades Stock To Outperform — MarketWatchShares of Imax Corp. (IMAX) were up more than 2% in premarket trade on Friday after analysts at J.P. Morgan upgraded the stock to overweight from neutral and increased their 12-month price target to $29 from $25. J.P.


  4. TSLA's Chief Accounting Officer dumped everything quickly in an SEC filing.  Hmm, wonder why?


  5. IMAX – More upgrades should follow on this….  


  6. AMZN is one stock you just watch from a distance.  You'd think they earned $20 a share for qtr.


  7. FU GILD!!!!!


  8. EXPE I am still in good shape there, but for the record they 20% down How low can you go?


  9. In return FSLR up 20 % I think market is just as crazy as Trump


  10. What just happened to oil?


  11. MSFT – Up 7 points.  I remember when they didn't move that much in a year !


  12. GOOGL stop the run I do have Nov 1060 sherry call


  13. TEVA about to hit another multidecade low… what a POS


  14. Wow, I know I probably shouldn't be shocked, but I'm shocked at how far AMZN is climbing.


  15. TSLA / Rustle123

    No that's not true. Check the filling more closely, he still holds 15,290 options .

     https://www.sec.gov/Archives/edgar/data/1318605/000135281617000009/xslF345X03/primary_doc.xml


  16. so Spain is fragmenting … remember when southern euro countries caused markets to go down?


  17. @enfilade

    True, was looking at stock held only.  


  18. JCP – Not sure why I bought it, but glad to see it gone….. :)


  19. Phil I am still wondering why nat gas seems to be dropping when all other energy is rising? Weather through December looks seasonal with most days forecast to be generally avaerage for the time of year. Exports keep growing if what I’m reading is correct. Wondering what your take is? Just a matter of patience or is there something else? Thanks 


  20. It's not going to end well in Spain… And a heavy hand in Catalonia will only make matter worse in other regions like the Basque country. 


  21. Pharm – I saw a buy recommendation on SGMO.  Do you have an opinion ? 

    Thanks.


  22. CELG is down to a RSI of 10.47.  Still wouldn't touch it yet.


  23. CVS/AET/WBA/ AMZN – Can you make some sense from all this? If rumor of AMZN pharmacy venture prove true, then they will be a factor but how much? WBA already has an app for online refills for pick up/delivery etc. WBA also very aggressive on efficiency/cost control and adjusting in store products to markets. Rite Aid integration will take some time but should be a positive all else equal but AMZN may intend otherwise. What's your take? 


  24. Something went wrong with my comment, trying again.


  25. Good morning!

    /KCH8 blasted up to $1.30 again, that's where I take my profits.  

    /RB stubbornly high and /CL popped to $53.23 (I still have /RB short, not /CL).  

    Dow bottomed out at 23,300, so good for 100 and maybe we get to reload later.  

    Same for /TF, which bottomed at 1,492 and anything below 1,495 is a bearish break in their channel if we stay below. 

    IMAX/Batman – $25!   It's amazing how much they got undervalued, isn't it?

    AMZN/Rustle – It will take me all weekend to decide whether I want to short them again.  Last time was so profitable…  Hopefully $1,200.

    After all, they made 0.52/share!  34% more revenue is kind of exciting but includes WFM.  Still, they can keep buying earnings for quite some time – that's the real reason they are getting into all this stuff, it gives them an excuse to acquire earnings they can't possibly make on their retail sales.

    EXPE/Yodi – Well the p/e was kind of ridiculous so a lot lower.  That's why we stopped playing them.   FSLR is crazy but good for solars, hopefully.  

    EXPE/Stock – Old table-banger for me.  They used to be super-undervalued, now fairly priced around $100.

    Oil/Baron – No idea but someone said something.  Brent just popped $60! 

    Oh, here it is, still at the oil-boosting conference:

    Big oil urges OPEC to extend output cuts beyond March 2018

    MSFT/Albo – It's very 1999 in the Nas.

    TEVA/Jabob – Thank goodness we have your insights – so we know when to buy….

    IMAX/Pat – Well, not sure what's official at the moment but, from scratch, I'd sell the Dec $22 puts for $1.70 and you can use that to buy the $22 ($3)/$27 ($1) bull call spread for $2 to net 0.30 on the $5 spread that's $1.15 in the money to start.  

    jabobeast  Submitted on 2017/07/05 at 3:48 pm

    FU IMAX!!!!

    jabobeast  Submitted on 2017/07/06 at 9:38 am

    FU IMAX!!!! wtf!

    phil  Submitted on 2017/07/06 at 9:54 am

    IMAX/Jabob – Congrats, we're going to get to own a lot of it!  cheeky

    phil  Submitted on 2017/07/07 at 11:57 am

    IMAX/Learner – Makes you wonder what actually happened to ruin their business model since April, right?  

    B. Riley analyst lowers Q2 Imax estimates amid struggling box office

    3 Reasons To Own IMAX Shares For The Long Term

    It's idiotic to revalue IMAX based on current box offices which any half-assed analyst would know, are fairly random and have nothing to do with the company's long-term prospects.  Sadly, people are generally idiots and invest in companies they don't understand – which leads them to panic in and out of positions based on whatever the last thing they read said to do. 

     

    IMAX/Jabob – LOL, they were doing good for a minute.  CC must not be going well.  

    Total revenue in the second quarter of 2017 was $87.8 million, down 4.34% year over year. The figure also missed the Zacks Consensus Estimate of $91.8 million. Adjusted EBITDA margin in the reported quarter was 37.9%. The company’s top line was hurt by below-par performance by some films in the second quarter.

    Is that a reason to sell IMAX?  People are simply idiots.  

    Film distribution and post-production soared a massive 96.26% year over year to $5.1 million

    That's their future revenues, they can't help it if the current batch of films didn't excite people.  

    Liquidity & Share Buyback

    IMAX Corp. repurchased $46 million shares in the second quarter, thereby exhausting the previously announced $200 million buyback program. The company’s board authorized a new share repurchase program for an additional $200 million. The program is scheduled to end on Jun 30, 2020. The company exited the second quarter with cash and cash equivalents of $158.2 million, compared with $204.7 million at the end of 2016.

    Network Growth Statistics

    The company installed 34 (including 1 upgrade) in the reported quarter compared with 40 (including 2 upgrades) in the second quarter of 2016. It signed 95 theatre agreements in the second quarter of 2017, flat on a year-over-year basis. As of Jun 30, 2017, the total theater count in backlog was 580, compared with 498 at the end of 2016. Total theatre installations as of Jun 30, 2017 are 1,257 compared with 1,215 at the end of 2016.

    That's 10% of their stock they are buying back while the backlog indicates a 50% increase in the number of theaters going forward.  Those films are going to have to really, really suck for them to live down to these expectations.  

    IMAX/Batman – I'm fairly sure $20 will hold but if you have a big batch at $24.75, I'd sell the March $22 calls for $2 and the $20 puts for $2 and then you drop your basis to $20.75 and THEN, if IMAX is lower, you will have a DD at $20 to move up to about $120K on 6,000 (from $75K on 3,000 now) where, of course, you could sell 120 more calls for $24,000 and drop back below $100K.  Other than that though, you'll probably roll the puts or calls (whichever are in the money) and you'll still be at 3,000 with a much lower basis.  Even if it flies up and you get called away at $22 – that's still up $1.25 ($3,750) from the current $11,250 loss so net +$15,000 is your worst upside case.  Always leave yourself room to adjust when you can.

    IMAX/Yodi – They are good for $50M in profits and $1.4Bn valuation is p/e near 30, not 80 and very solid growth prospects.  

     

    phil  Submitted on 2017/08/02 at 10:03 am

    IMAX/Jabob – AMC earnings making people think movies are dying.   Just another chance to buy, on the whole.  

    phil  Submitted on 2017/08/18 at 3:47 pm

    IMAX/Jabob – On sale!  

    jabobeast  Submitted on 2017/08/23 at 9:37 am

    FU IMAX!!!!

     

    IMAX/8800 – Well, we knew that SOMETHING would get a huge audience because, as I noted before the holidays – there were no good movies to see for the past 3 weeks.  That's a lot of pent-up demand for pretty much anything that doesn't suck and It got 86% on Rotten Tomatoes with 89% of the audience liking it – that's the best score of any movie since Dunkirk a month ago.  Now though, we're into a strong cycle with Kingsman and Lego this weekend, Flatliners next week, then Blade Runner which has such high expectations there's no major release even the week after, then Geostorm and Leatherface, then Thor and then forget it because you have Justice League for Thanksgiving and Star Wars for Christmas plus Ferdinand – so, in short, I would not bet against the movie sector in the Fall!  

    I would trade the stock ($19.92) for 3x March $17 ($4)/$21 ($1.80) bull call spreads at $2.20 because, for $6.60, you have a $5.40 upside at $21 vs tying up $19.92 to have a $1 upside at $21.  That makes your 1x short Dec $20s ($1.70) and easy roll to 1.5x the March $22s ($1.40) and then you'd be 1/2 covered and you could put a stop on 0.5x at $1.80 and 0.5x at $2.20 and, if that happens, you won't care because you will have your $5.40 from the 3x long spread.  You can be fine with the puts but I'd still roll them to the March $22 puts at $3.20 as that's about how much you're down and why risk impairing your long gains – you can always sell more puts later but, when you miss an opportunity to sell premium now, that expired premium disappears on you while you wait.

    You do a good job of calling attention to stocks we should be loading up on – that's for sure.  I've learned there's no point in trying to explain these things to you, so that's essentially now your only function I suppose…

    AMZN/Rustle – That's a really painful squeeze.  We'd be buying too if we still had those short calls.  

    Spain/Malsg – Remember when SOMETHING/ANYTHING caused the market to go down once in a while?  Those days are gone…

    JCP/1020 – Recovering a bit.  

    /NG/Craigs – It wasn't inventories.  I think they are just squeezing people out.

    EIA Natural Gas Inventory

    I have 2 long /NGV8 at $2.98, now $2.97.  Patience is built into that play (next Oct). 


  26. hope you are right phil… i own imax so thank you.

    wish the fu theory worked for teva ftr m ge and jo-- which continue to hit new lows almost every day


  27. Phil – whats your take on LOW, had a good run, slight pull back.  Good for a new entry?


  28. Phil, what do you think about UGA Nov 33 puts at 2.05 for a futures challenged play on gasoline? I know lots of fees/churn in UGA and you don't often recommend it, so any other ways to short gasoline without futures? 


  29. phil, TWTR…ouch!  I was being clever and closed out the long leg of $15/19 bull call spreads when it was $20.  but TWTR keeps going up.  hopefully takes a breather at 21.5, the last peak.  else i have to buy 25/35 spreads i guess and roll.


  30. GILD/phil, how long to let it settle out before jumping back in.  or is biotech done for now?


  31. phil, an options strategy question.  let's say you want to accumulate a stock.  let's say you buy stock for 20 and sell puts and calls for $3. stock drops to 15 and a round is put to you bringing your average cost to (20+20-3)/2 or 18.5.  stock is still at 15.  do you sell more puts and calls at 15 strike (max premium) or for 18.5 strike.  thanks for teaching!


  32. FU Theory/Jabob – Well IMAX was taking 3 months ago and our trades are 15 months out so I'm not too worried yet.  I just picked M this morning, in fact.  JO, as I keep telling you, we gave up on.  I still like Coffee long but the ETF is too annoying to play.  

    CELG/Rustle – Down another 2.5% to $97.  

    AMZN/Pstas – Well I'm not even sure how on-line Pharmaceuticals would work.  I suppose if they got the Doctors to cooperate, it could be better because your pills would be delivered the next day without much hassle.  Of course, they liability they assume is massive and then there's the issue of theft – a lot of those pills are expensive and have healthy black markets but I guess that's why they want access to homes too.  As you say, WBA already does it so must be manageable.  In a way, AMZN is like TSLA – they keep announcing new things to distract you from the fact that they only make $4 per $1,000 ($1,083 now) share.  That will be much improved with WFM added and CVS makes $5Bn on the same sales ($177Bn) as AMZN makes $2Bn on (and they don't make it on retail, just cloud), so you can see why AMZN wants that business so badly.  

    Actually, if AMZN could spin out their retail operation and just be the other stuff – I would love them!  I guess, to some extent, the retail operation makes the other stuff work but their margins would be amazing without the retail sector.  

    LOW/Day – I picked HD over LOW a while back but both great stocks.  LOW just picked up Craftsman, which gives them a little edge over HD on brand-names.  Earnings-wise, however, they are fairly priced and I'd wait until 11/21 earnings before deciding if they are really worth $80.

    UGA/Jeff – I wouldn't bother as we were going to flip bullish on /RB in two weeks anyway, so you don't have time to correct a mistake.  I did just short /CL at $53.50 though.  If this is the reaction to speculation over a deal, what happens if there is a deal?  If I lose in the Futures, I take a loss and move on and wait for the next chance to short.  That's not as easy in UGA as we'll be bullish into the holidays so it's a one-time play.

    TWTR/Lunar – Interesting use of the word "clever" cheeky  Not so bad to fix though as (assuming they are Jans) the $19s are $2.95 (and you took $5 off so you can't be too bad) and that's still 0.60 premium and you can pick up the 2019 $20 ($4.70)/$27 ($2.05) bull call spread for $2.375 and roll the short calls to the March $22s ($1.90) because you don't have to get all your money back in one quarter when you have 3 quarters to sell and $5 of protection.   Oh, you could also sell the 2019 $17 puts for $1.55 as they can't both be in the money – then the spread is net 0.825 – very reasonable!  

    Image result for trump twitter

    Speaking of Trump, my apologies as he was only exaggerating the number of opioid deaths, which were around 50,000 last year, almost doubling in the past two years.  Ironically, it's Trump that's causing people to want to get comfortably numb in the first place! 

    GILD/Lunar – No we just picked up CELG and LABU.  I think people will be very critical of earnings so about two weeks before things calm down.  GILD gave up a lot of gains but healthy gap fill if they hold $75.


  33. AMZN closing in on 1100.  Is Bezos now richest man?  Not sure with MSFT move today if Gates is still holding on to title.


  34. Talk about some stocks masking the indexes.  McClellan Oscillator was firmly negative coming into today.


  35. Stategy/Lunar – Well it depends on how you feel about the stock at the time, of course.   Let's look at TEVA, who were a Top Trade Idea back on Aug 1st at $32, now $13.40.  We did a spread but let's say we did the following:

    • Buy 500 share TEVA at $32 ($16,000) 
    • Sell 5 2019 $32.50 calls for $4.20 ($2,100) 
    • Sell 5 2019 $30 puts for $4.20 ($2,100) 

    That would have netted us into 500 shares at $11,800 or $23.60/share.  So, let's assume 500 are now put to us at $30 ($15,000).  Now we have 1,000 shares at $26,800, which is an average of $26.80/share.  

    The puts are cancelled and the short calls are 0.20, so of course we buy them back.  

    So now we can take a $13,000 loss and move on or add more.  Since it will cost us only $13,000 to double down – unless I think TEVA is going BK, I'd rather DD than toss $13,000 into realizing a loss.  

    First I look to see what I can sell and it turns out the 2019 $12.50 calls are $3.25, so that's something to work with and the $15 puts are $3.70 so I can:

    • Buy 1,000 (more) TEVA at $13.30 ($13,300) 
    • Sell 20 2019 $12.50 calls for $3.25 ($6,500) 
    • Sell 20 2019 $15 puts for $3.70 ($7,400) 

    The new 1,000 shares are a net $600 credit so now I have 2,000 shares of TEVA at $26,200 ($13.10) and I might be assigned 2,000 more for $15 ($30,000) which would put you in 4,000 shares at $56,200 ($14.05) so, if TEVA is, for example, at $10, the loss risk would be $16,200 – not even worse than if we take the loss now at $13,000 so why on Earth would we choose to take the loss having done that math.  

    Only if you have changed your mind should you go against the math but when you can move from 500 to 1,000 to 2,000 to 4,000 shares (and another 25% drop from here) without increasing your potential loss by much – there's really no reason not to do it.

    Also, keep in mind, that's still a trade in progress because, at $15+ we could then (if we aren't called away) have our "just" 2,000 shares and sell more puts and calls to drive the basis even lower each year – until we end up with a pile of net free shares.  

    Oops – Almost forgot we also get a $1/yr dividend while we're playing!  

    Wow, Nas up 2% for the day.  6,688 on COMP – that's past our satanic goal. 

    Richest/Rustle – They are going neck and neck with roughly 10% gains each today.  Bezos might have pulled ahead because Gates isn't all in on MSFT the way Bezos is on AMZN.

    McClellan/Rustle – But no one cares.  


  36. FWIW

    ~~Jeff Bezos is now the richest man in the world with $90 billion.

    •Jeff Bezos became the richest man in the world Friday morning.
    •The gain in Amazon stock' price added nearly $7 billion to his wealth overnight.


  37. TEVA/phil, thanks for the illustration.  would you cover TEVA with the calls today, given earnings around the corner?


  38. Rolling SQQQ Mar $23 calls to $21 for .85 


  39. Phil,

    Another strategy question – when time permits:

    IMAX – as part of the position, I have 30 short Mar 22 calls (@1.41, now 4.10 = -2.69) covering 1000 sh @ 25.34 plus 20 long Mar 18 calls (@3.42, now 7.40 = +4.00), so a net happy bcs position, barely.

    Question is given the recent, past 2 day gap vertical run-up does it make sense to roll the sht Mar 22 calls to either the June 25s ( +.36) or 26s (-.17) or wait for the next option month (Aug/Sep?). Inclination is to wait to see if reactive positive analyst commentaries drive price higher and then roll.

    Thanks in advance for your thoughts.


  40. PETX/Pharm – add or dump?


  41. TEVA/Lunar – No, I would do nothing and wait for more information so I can make better decisions. 

    SQQQ/Den – Will the madness ever end?  I've got to think funds with regular Nas stocks that have been going along for the ride have to be wanting to cash now.  

    IMAX/8800 – I'd wait.  You'll get more premiums and you can't really be more screwed to the upside while a pullback would be in your favor.  Also, consider that, when they have July or whatever, maybe you'll want to cash the stock ($25,000) and cash the March $18 calls ($14,800) and buy 60 July $25/32 bull call spreads for about $2 ($12,000) and then you can 2x roll the 30 March $22s at $4.20 ($12,600) to 45 short March $26s at $1.85 ($8,325) so you'd have $23,525 in your pocket and 60 July $25/32 bull call spreads covering 45 short March $26 calls (maybe some put selling too?) and hopefully it all works out to another $42,000 down the road.  That doesn't suck, does it?  

    Dow is not doing anything and MSFT and INTC is in the Dow!   Up $5.50 for MSFT and $3 for INTC is about 72 Dow points for just those two.  Also super strange that XOM and CVX re not doing well with oil and gasoline blasting higher.   CVX, in fact, is down $5 and offsetting MSFT's gains by itself.  

    What kind of economic recovery doesn't lift the Dow?   

    I think people have wised up to the initial GDP number, as it's usually revised down.  100% increase in inflation from 0.9 to 1.8 puts the Fed on the table and PCE jumped to 1.5% from 0.3%.  Even ex food and energy, it's up 1.3% vs 0.9% so major momentum in prices.  Also, my pet peeve:

     Excluding inventory investment, the economy grew at a 2.3 percent rate, slowing from the second quarter's 2.9 percent pace.

    Businesses accumulated inventories at a $35.8 billion pace in the third quarter in anticipation of strong demand. As a result, inventory investment contributed 0.73 percentage point to third-quarter GDP growth, after adding just over a tenth of a percentage point to growth in the prior period.

    Exports increased at a 2.3 percent rate in the third quarter, while imports fell at a 0.8 percent pace. That left a smaller trade deficit, leading to trade adding 0.41 percentage point to GDP growth. Trade has contributed to output for three quarters in a row.

    Hurricanes Harvey and Irma, which hit Texas and Florida in late August and early September, disrupted production at factories, offices and transportation centers, the Commerce Department said Friday. More specifically, the storms affected oil and gas extraction and fuel production in Texas, and agricultural production in Florida. Emergency services and rebuilding activities increased. Still, the Commerce Department said it wasn’t possible to estimate the overall impact of recent storm activity on third-quarter economic growth.

    New White House report predicts corporate tax cuts will boost GDP by 3 to 5 percent

    Record highs?

    Category Q3 Q2 Q1 Q4 Q3
    GDP 3.0% 3.1% 1.2% 1.8% 2.8%
    Inventories (change) $35.8B $5.5B $1.2B $63.1B $17.6B
    Final Sales 2.3% 2.9% 2.7% 0.7% 2.6%
    PCE 2.4% 3.3% 1.9% 2.9% 2.8%
    Nonresidential Inv. 3.9% 6.7% 7.1% 0.2% 3.4%
    Structures -5.2% 7.0% 14.8% -2.2% 14.3%
    Equipment 8.6% 8.8% 4.4% 1.8% -2.1%
    Intellectual Property 4.3% 3.7% 5.8% -0.4% 4.2%
    Residential Inv. -6.0% -7.3% 11.1% 7.1% -4.5%
    Net Exports -$595.5B -$613.6B -$622.2B -$631.1B -$557.3B
    Export 2.3% 3.5% 7.3% -3.8% 6.4%
    Imports -0.8% 1.5% 4.3% 8.1% 2.7%
    Government -0.1% -0.2% -0.6% 0.2% 0.5%
    GDP Price Index 2.2% 1.0% 2.0% 2.0% 1.4%

  42. Phil,

    Thanks for the IMAX guidance. 


  43. Phil,

    What's your /RB position?


  44. You're welcome, 8800.

    /RB/Japar – I have 3 short at $1.703 at the moment.  Probably won't go to 4 with the weekend coming and back to 1 if we get a dip, which I doubt.

    • The total U.S. rig count fell by 4 to 909 following last week's decline of 15, the seventh drop in the count over the past eight weeks, Baker Hughes says in its latest survey.
    • However, the oil rig count rose by 1 to 737 while gas rigs fell by 5 to 172; U.S. crude trades at ~$53.75/bbl, down from $53.80 before the rig data.
    • Crude oil continues to rally, with Brent crude climbing to $60/bbl for the first time in more than two years and U.S. WTI poised to mark another six-month settlement high.
    • At last check, Brent +1% at $59.90/bbl and WTI +1.5% at $53.44/bbl.
    • Traders say today's move is driven mostly by currency markets, with the dollar whipsawed by a report that Pres. Trump is leaning towards Jerome Powell as the next Fed chairman.
    • Brent has rallied more than 30% since June as markets finally appear to tighten after a three-year slump amid strong demand and OPEC's production cuts.
    • But the $60 mark has proven a tough nut to crack for Brent, as “markets are worried that shale producers will increase output at the $60 mark, derailing efforts made by OPEC and Russia,” says Adrienne Murphy, chief market analyst at AvaTrade. “When oil approaches $60, traders become unnerved and start to selloff to avoid the slump.”

    Been watching this drama unfold:

     

    • "The Catalan parliament has approved something that in the opinion of the great majority of people doesn’t just go against the law but is a criminal act," says Spanish Prime Minister Mariano Rajoy.
    • The independence of Catalonia "is not possible," he adds.
    • The move by the Catalan government came as Madrid's Senate by a wide margin invoked a rule to take power in the region.
    • More from Rajoy: "Spain is a serious country, a great nation, and we are not going to watch while a few individuals try to liquidate our constitution."
    • The IBEX 35 is down 1.5%EWP -2%

    • Speaking to reporters now, Spanish Prime Minister Rajoy confirms the dissolution of the Catalan government. New elections, he says, will be held on Dec. 21.
    • "The Spanish are living through a sad day in which foolishness has prevailed over the law."
    • EWP -1.8%

    Mortgage rates jump in latest Freddie Mac survey

    • Mortgage rates rose across the board in the past week after falling in the previous week, according to Freddie Mac's latest survey.
    • The average 30-year fixed rate mortgage jumped to 3.94% for the week ending Oct. 26, up from last week's 3.88%, and the 15-year fixed averaged 3.25%, up from 3.19% a week ago; a year ago at this time, the 30-year and 15-year fixed rates averaged 3.47% and 2.78%, respectively.
    • ETFs: XHBITB
    • J.C. Penney is lower by nearly 20% after slashing its earnings outlook for the year, and alongside, Macy's, Kohl's, Sears, Dillard's are all down in the area of 5%. Also stung are players like Nordstrom, and Stage Stores.
    • It's adding up to a rough session for those that rent space to the retailers: Tanger Factory (SKT-5.5%), CBL (CBL -3%), Taubman (TCO -1.4%), Kite Realty (KRG -1.5%), Kimco (KIM -2.1%), Federal Realty (FRT -0.8%), Simon Property (SPG -2.8%), GGP (GGP -1.6%), Macerich (MAC-2.6%), PREIT (PEI -4.4%), Weingarten (WRI -0.8%)
    • Previously: Simon Property beats estimates, boosts guidance, hikes dividend (Oct. 27)
    • The former Legg Mason star beat the markets forever, until crashing badly in 2008.
    • He now runs Miller Value Partners with $2.3B in assets. Among those is a $154M hedge fund, MVP1. That fund is up 72.5% YTD, in part thanks to having 30% of its assets in bitcoin.
    • Miller's not buying more at these levels, but takes pride in his contrarian stance, noting a "Murderers Row" of big shots – The Oracle, Jamie Dimon, Larry Fink, Ray Dalio, and Howard Marks among them – calling bitcoin a bubble.
    • Miller: "I believe there is still a nontrivial chance bitcoin goes to zero, but each day it does not, that chance declines as more venture capital flows into the bitcoin ecosystem and more people become familiar with bitcoin and buy it.”

    Feds probing Wells Fargo over forex trading – WSJ

    • Last week, the Journal reported on the firing of four forex executives at Wells Fargo (NYSE:WFC), and now the paper says federal prosecutors have subpoenaed information from the bank and the fired bankers.
    • At issue is an allegation of front-running in a trade made for Restaurant Brands International (NYSE:QSR), which – like Wells Fargo – counts The Oracle (BRK.ABRK.B) as a major shareholder.
    • The trade occurred within the last three years, included positions in the billions of dollars, and resulted in a loss for QSR. Wells Fargo is planning on refunding hundreds of thousands of dollars to QSR, according to the report.
    • Wells tells the WSJ the firing of the four traders had nothing to do with issues involving market collusion or front-running.

    Former Blackrock exec to raise $250M to invest in pot businesses

    • Bloomberg reports that former Blackrock executive Chris Leavy is co-chairing a $250M private equity fund, MedMen Opportunity Fund II, aimed at investing in marijuana businesses.
    • The fund, specifically targeting companies that cultivate, manufacture and sell pot, is setting up shop in the U.S.'s most popular tourist destinations.
    • New York recently added chronic pain as a qualifying condition for medical marijuana. California's recreational market opens next year. Nevada approved it for adults in July and Canada plans to legalize it by next summer. Eight U.S. states have legalized recreational use and another 21 allow it for medicinal purposes.
    • According to Cowen & Co., the $6B legal cannabis market is expected to grow (no pun intended) to $50B by 2026.
    • Selected tickers: (SMG -0.7%)(OTCPK:CBIS -4.1%)(OTCPK:GRNH +1.4%)(OTCPK:EAPH+1.4%)

    Cameco -10% on surprise Q3 loss, lower production outlook

    • Cameco (CCJ -9.7%) plunges after reporting an unexpected Q3 loss and a 27% Y/Y revenue decline, and cutting its full-year production outlook.
    • CCJ says it now sees uranium production of 24M lbs. this year, down from an earlier forecast for 25.2M lbs., due to production delays at its Key Lake mine caused by work required on the existing calciner circuit and lower production than expected at the Smith Ranch-Highland operation.
    • "There has been little change to the market and we continue to face difficult conditions, with the average year-to-date uranium spot price down about 20 per cent compared to the 2016 annual average," says President and CEO Tim Gitzel.
    • CCJ expects 2017 net earnings to come in below 2016 levels, but Gitzel says it continues to generate solid cash flows and expects to exceed the $312M reported in 2016 despite weaker earnings.
    • CCJ also cuts 2017 capex guidance to $160M vs. its previous expectation for $175M.
    • For Q3, CCJ says uranium sales volume fell 1% Y/Y to 9.2M lbs. and its average realized price for the metal tumbled 26% to C$41.66/lb.

  45. Tech is miles over it's 50-dma – very dangerous.

    On that note, PSW Investments will be changing it's name to PSW Blockchain Investments!  cheeky

    Thing's that make you go hmmmmm:

    Study: people who smoke marijuana have more sex

    Image result for jeff sessions marijuana

     

    The $2 Trillion Hole: "In 2019, Central Bank Liquidity Finally Turns Negative" http://www.zerohedge.com/news/2017-10-2

    Inflation notes from CC's:


  46. phil,how do you see the sco trade 33/39 b/c spread also $35 puts  nov expiry


  47. If Saudi Arabia continues to grant citizenship to robots, will it need sharper swords to behead them?

     

    https://techcrunch.com/2017/10/26/saudi-arabia-robot-citizen-sophia/?ncid=rss&utm_source=tctwreshare&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29&sr_share=twitter

     

    Saudi Arabia just made a non-human woman a citizen, making it the first country to grant a robot the right to citizenship, at least as far as we know. Why it did so isn’t immediately evident, but the irony of a nation infamous for denying basic rights to its female citizens imbuing a robotic Audrey Hepburn lookalike with rights is not lost on us. The robot, known as Sophia, appeared onstage without an abaya, a head covering and cloak normally required of women by the Saudi government.

    “I am very honored and proud for this unique distinction,” the robot said onstage. “This is historical to be the first robot in the world to be recognized with a citizenship.”

    Just feed it The Godfather movies as input. What’s the worst that could happen? https://twitter.com/carlquintanilla/status/923238264533811200 

    Oh no, Sophia's brother is a radical (5 mins in):

    Musk is right, these guys are going to kill us all!  


  48. Phil / AAPL – Do you have a feel for how the stock will react after earnings….  I am short the Nov '17 160 call and am looking to role ….


  49. PETX…I am holding.


  50. Pharm..what do you think of APHB?


  51. Phil / IMAX – I exited my stock position -  bought at 22.5 selling at 25 ( 10K shares).   I still think they have legs but want to take the profit and get cash. back.   If there is a good Q4 I think that 27 to 28 is doable, and the downside is maybe 20????  the March Qtr should be the strongest qtr from a stock perspective ( or heading into it). I'm looking at the following :

    Buy Mar 23 Calls at 3.3

    Sell March 28 Calls at 1.4

    If there is a pull back sell the 22 puts for 1.5 ish 

    I'd appreciate your feedback on this.  Thanks 


  52. SCO/Jash – Well that's looking like a fail at this point.  The $33 are 0.65 and the short puts need to be rolled.  Remind me next week and we'll put something together.  

    IMAX/Batman – I'll be shocked if Q4 isn't good – so many blockbusters.  I like that spread for sure.  


  53. Pharm – thx


  54. /SI coming back nicely.  


  55. phil,bull call sco 33/39 cost $2.20 now $0.60 also sold $35 puts @ $3.00 now $4.35 nov expiry

    losing big time on this    EASY MONEY trade,your words ,what now


  56. Phil / Imax – thanks!


  57. Phil what has made the dollar rise ? Is this because they expect a new Fed chair who will raise interest rates? I would think the moron who fooled gullible people to elect him president would want to keep interest rates lower so he can continue to use the stock market as the only place he can claim success? 

    Also is it possible that ng dropped to bring it in line with the expiring contract? Does this happen often as far as you know?


  58. Phil can you summarize your current futures positions? Long ng, short rb are the ones I saw you mention


  59. You're welcome Batman.  

    Dollar/Cragis – EU extending QE and trouble in Spain knocked down the Euro.  Also, Fed losing Yellen so anyone else will be more hawkish than here.   Not sure about /NG but see export chart above – I certainly want to be long /NG for the next couple of years as exports ramp up.

    Positions/Craigs – Other than short Oil and Gasoline, I have 3 long /NGV8 and 4 long /SI as I took /KCH8 off the table.  

    Have a great weekend everyone,

    - Phil


  60. The weekend is here… fyi, Lou Reed passed this day in 2013..

    https://m.youtube.com/watch?v=KFbgAxxVh1E


  61. AMZN operating income and net income both decreased compared to 3rd qtr 2016 (excluding the positive contribution of WFM) .

    I get that they are disruptive but where is the long term profitability?



  62. Trump should be targeting robots, not Mexicans




  63. Watergate and White House interference at DOJ


  64. GOP tax bill shrouded in secrecy




  65. Asia now has more billionaires than the US






  66. New Home Sales Sept +20% MoM – New homes sold in September 2017 (52k). MSM says economy and housing robust, break out the hats and hooters, lets celebrate.   

    And now for your weekend wait a damn moment, of ZEN…. Since 1995:

    Advertised civilian non-institutional population (potential labor pool) +57M

    Advertised official labor force +29M

    New homes sold in September 1995 (54k)

    With advertised increases of 57M in potential labor, and 29M in the work force, 2K FEWER homes sold as opposed to 22 years ago.  Here's the graph seasonally adjusted annualized by month.  Now that's what we call Ro-BUST economic, wage and new home sales growth, or the new norm?  Out.



  67. As a Republic Struggles to Be Born, Barcelona Holds Its Breath





  68. Website with GOP ties funded research on Trump dossier




  69. Q&A: Why wiping of Georgia elections server matters


  70. There’s precedent for Amazon competing with so many companies. It doesn’t end well.

    From Investing, a Flipboard magazine by Dave Winer

    Perhaps no other company in history has sold so many different products (354 million) while competing against so…

    Read it on Flipboard

    Read it on qz.com


  71. Futures- anyone think the futures will be under pressure given the Muller investigation developments? I think no reaction. 


  72. Good morning!

    Futures/Ravi – You would think so but not much so far.  I guess it depends on who they indict, the way this market shakes off news, it would have to be Trump or one of his kids before people began worrying. 

    Also, I default to Buffett's point that it's nuts to take profits off the table this year when there's likely to be a 15% tax cut next year, and that's 15 of 40%, which is a 37.5% cut of what they pay so unless the market falls more than 10% (and that's super-doubtful as the Fed would save it), then there's no reason at all to take a profit before Jan 1.

    Of course, the opposite is true in Jan because it would be nuts not to take a profit off the table to take advantage of a tax cut (if it's firm by then) with the market at all-time highs.

    Flatlining so far, but it's Monday, so who cares?  /KC made a good pop. 

    $130 is my profit spot on /KCH8 so a stop there now (it's above).


  73. AMZN/Den – Willful suspension of disbelief.  Same thing audiences do when watching magic tricks.

    Why Are Markets Rising EverywhereInvestors Can’t Stop Buying Every Dip. Markets around the globe are surging to records, reflecting growing optimism about the world economy and fueling an increasing eagerness by investors to step in and buy assets whenever prices dip.

    Good point on housing, Naybob.  

    Stuck in Place, U.S. Homeowners Hunker Down as Housing Supply Stays TightMore choose to stay where they are and renovate, making it harder for renters to enter market?

    Why Cities All Across America Are Suddenly Buying Up Trailer Parks

    Manhattan Office Bubble Fizzles Without Big Chinese Buyers

    GOP Plan for a Speedy Tax Overhaul Faces Uncertain RoadAfter the bill is proposed, a sweeping passage is possible, but a compromise or a total collapse could happen just as easily.

    Bitcoin Just Hit A New Record High At $6300 – Up Over 550% YTD

     

    China Puts the Global Economy’s Health at Risk. It used to be that when America sneezed, the world caught a cold. This time around, it’s the risk of a poorly China that poses a bigger risk. The world’s second-largest economy is now trying to ward off the sniffles. While output is still growing at a pace that sees gross domestic product double every decade, the problem remains that much of that has been fueled by a massive buildup of credit. Total borrowing climbed to about 260 percent of the economy’s size by the end of 2016, up from 162 percent in 2008, and will hit close to 320 percent by 2021 according to Bloomberg Intelligence estimates. Economy-wide debt levels are on track to rank among "the highest in the world," according to Tom Orlik, BI’s Chief Asia Economist.

    Visualizing $63 Trillion Of World Debt

    The World's Largest Sovereign Wealth Fund Is Investing With No Valuation Model

     

    Taliban Kill 28 Afghan Police as Attacks Escalate NationwideTaliban militants stormed police checkpoints late Saturday and before dawn Sunday in three provinces of Afghanistan, killing 28 policemen in the latest in a series of attacks across the countryTens of heavily equipped insurgents, including holders of night-vision rifles, initially began sporadic shooting at three police checkpoints and two army bases on the highway leading to Khan Abad district in northern Kunduz province, said Hayatullah Amiri, the governor of the district, by phone. At about 3 a.m. local time, they stormed one of the police checkpoints, killing all 13 officers stationed there except one who fled.

    Anti-Muslim Party Poised for Success in Queensland Snap ElectionA snap election in Australia’s Queensland is poised to show a surge in support for populists in the traditionally conservative state. Premier Annastacia Palaszczuk asked the state’s acting governor to dissolve parliament on Sunday before announcing a Nov. 25 vote. The election is likely to be tight, with the balance of power potentially going to Pauline Hanson’s anti-Muslim immigration party One Nation: its estimated 18 percent support state-wide may be even higher among disaffected voters in regional areas.

    Asian Stocks Nudge Higher on Global Growth Outlook. Asian stocks rose as better-than-expected U.S. growth data added to evidence of improving global economic health, with investors awaiting key earnings results and an announcement on who will helm the Federal Reserve. Equities in Australia and South Korea climbed and Japan’s Topix index hovered around the highest since 2007 following another record for the S&P 500 Index Friday. Profit reports due this week from some of the world’s largest companies may show if there’s enough juice in the earnings season to propel another leg higher for global shares. Bond and currency markets continue to be gripped by speculation around who U.S. President Donald Trump will choose as the next Fed chair, with Governor Jerome Powell said to be the front-runner. Japan’s Topix index was flat as of 9:18 a.m. in Tokyo. South Korea’s Kospi index gained 0.4 percent. Australia’s S&P/ASX 200 Index rose 0.1 percent. Futures on Hong Kong’s Hang Seng Index gained 0.3 percent in most recent trading.

    A Missing Piece of the Global Growth Jigsaw Starts to Fall Into PlaceA missing piece in the global growth jigsaw appears to be falling into place. Spurred by higher profits and buoyant stock markets, some of the world’s best known companies from Amazon.com Inc. to Volkswagen AG are ramping up spending on new plants and equipment after years of caution. For an international economic expansion already gathering speed, that could prove a boon. The thinking is that capital investment, or capex, will stoke not just demand, but ultimately higher wages and inflation. That’s a positive for central banks and governments yearning to see profits trickle into workers’ pockets. Employers have been reluctant to spend even amid an economic upswing spanning 75 percent of the globe.

    Three Crucial Things We Still Don't Know About the Aramco IPOThe financiers and corporate chieftains gathered for Saudi Arabia’s ‘Davos in the Desert’ heard the same message again and again. From the crown prince down, Saudi leaders wanted no room for doubt: the initial public offering of oil giant Aramco is "on track" for 2018.

    OPEC who? US oil producers are moving into the Asian market

    Everyone's a Metals Bull as the Global Economic Engine Fires UpGlobal growth is on a tear, and that can only be positive for metals prices. That’s the message coming from the industry ahead of LME Week. For the first time in years, optimism is widespread among traders, smelters, miners and brokers gathering in London, buoyed by a combination of strong growth across the world’s key demand centers, supply curbs in China and a return of investor interest. "The global economy looks much better than it has done probably since the crisis, maybe before that," said Saad Rahim, chief economist at Trafigura Group Pte, the second-largest metals trader. "I’m pretty bullish."

    Houston Texans kneel during anthem in protest of Bob McNair comments

    Trump Heralds GOP "Anger, Unity" As WSJ Warns Dems "The Russian Dossier Dam Is Breaking"

    This Is A Big Problem" – North Korea Nuclear Test Site Headed For A Devastating Collapse