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Monday’s Market Magic Trick – Rising Without the Fed?

This is the most important chart in the World:

It illustrates the $2Tn "taper" that is about to take place and is, in fact, taking place right now and projected to accellerate rapidly into 2019 at which point (gasp!) Central Banks will become net sellers of assets and there is NO WAY that doesn't depress prices, even with a theoretical $2Tn being repatriated from overseas accounts on the Corporate side.  

While we can't count on Corporations to spend the cash they bring back in, we can expect the massive stock buyback trend to continue.  As you can see from Credit Suisse's chart, the only real buyer of US equities for the past 10 years has been the Corporations themselves – who have engaged in MASSIVE buy-back programs that have lowered the share count of US equites by 20% which has therefore inflated the earnings per share by 20% by simply reducing the number of shares those earnings are divided by.  

This makes our Top 1% CEOs look good and also makes them much, much richer (see: "Stock buybacks enrich the bosses even when business sags") and so far, so good, as the market has gone up despite most companies making roughly the same amount of Dollars they did back in 2008 – they are just changing the math to make things look pretty.

But, much like the Oil Cartel (OPEC) benefits from cutting supply and making oil more scarce and Crypto Currency purveyors keep their supplies limited to jack up the prices - the Corporate Cartel (MFers) reduces the supply of stock AND they themselves begin buying their stock – as if it's valuable at any price.  The higher the market goes, the more they buy – what can possibly go wrong?

Like any meth addict, they are now hopelessly hooked on buybacks and simply can't stop.  It's a finite World and they have infinite amounts of money and they can't grow market share so they will reduce the number of shares in their companies to make it look like there's great demand for their stock and, most importantly, to make it look like they are accomplishing something.

Just this morning, Lowe's (LOW) announced a $5Bn stock buyback program ON TOP OF their previous $2.1Bn program.  The entire market cap of LOW is $89Bn so we're talking close to 10% of the company being bought back in just a couple of years.  That has helped Lowe's stock to go up from $20 per share in 2012 to $107 per share this morning despite earnings only going from $1.8Bn to $3.5Bn.  Yes, it's an impressive 100% gain in earnings (20% per year average) but the stock is up 400%, outpacing earnings growth by 3x!  

Financial Summary – LOW
Year End 03rd Feb 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
Revenue $m 50,208 50,521 53,417 56,223 59,074 65,017 68,909 68,568 71,266 +5.3%
Operating Profit $m 2,906 3,137 3,718 4,322 4,971 5,846 6,293     +15.0%
Net Profit $m 1,839 1,959 2,286 2,698 2,546 3,093 3,556 3,800 4,516 +11.0%
EPS Reported $ 1.43 1.69 2.14 2.71 2.73 3.48 4.16     +19.4%
EPS Normalised $ 1.63 1.73 2.17 2.73 2.73 3.50 4.51 4.52 5.65 +16.6%
EPS Growth % +12.0 +6.4 +25.2 +25.9 +0.3 +28.2 +64.3 +29.0 +25.0  
PE Ratio x           30.6 23.8 23.8 19.0  
PEG x           1.06 0.82 0.95 1.68
Profitability

People consistently overpaying for housing led to the housing crisis that tanked the Global Economy in 2008 and now, Corporations are binge-buying their own overpriced stock with all the free, ARTIFICIALLY low-interest money that has been floating around in order to bail people out of the housing collapse.  Isn't it obvious that this is only going to lead to a stock price collapse down the road???

LOW is a great company, we bought them at $75 last year as a relative value play but $107 is RIDICULOUS as it's a hardware store with a $90Bn valuation and "only" $3Bn in profits so we're paying 30x earnings at $107.  Well, not "we" because I wouldn't touch it at this price but THEY are going to buy $5Bn worth, 2.5% of the company, using 1.6 YEARS worth of earnings.  Does that not sound insane to you?  

Clearly the company doesn't have anything better to do with $5Bn, which is sad because Home Depot (HD) is 50% bigger than LOW in sales ($95Bn) and 166% bigger in profits ($8Bn) but also 3 times bigger in market cap ($241Bn).  That's right, HD is bigger in market cap than Goldman Sachs ($101Bn), Nike ($110Bn), GE ($139Bn), IBM ($155Bn) – even United Health ($240Bn), which has $184Bn in revenues and $10Bn in profits.  

This doesn't seem wrong to you?  Do you really think this can just keep going on and on and the markets will go higher and higher and we'll pay 40, 50, 60 times earnings and nothing bad will happen?  The global GDP simply can't possibly grow fast enough to keep up with market valuations so, every year, more and more of the global GDP is being sucked up by the markets (and the Top 1%) leaving less of everything for the Bottom 99%.  In fact, we just got disappointing GDP numbers on Friday and the markets still went higher – INSANE!

David Rosenberg took a closer look at the GDP numbers and noticed something odd.  It seems that the Personal Savings Rate (something we discussed on Friday) fell from 3.3% to 2.6% and that caused the PCE to jump from 0.8% to 3.8% and that caused the GDP to read 2.6% instead of 0.6% so almost the ENTIRE GDP came on the backs of consumers draining their savings accounts over the holidays in the misguided hopes that they will really benefit from Trump's Tax Plan.

A t this point, we can only cross our fingers and pray that it works or there will be Hell to pay when that check comes due.  What is very clear to economists, but apparently not at all understood by market cheerleaders, is that this level of borrowing is NOT sustainable and certainly can't be extropolated to continue by paying 30x earnings for consumer goods companies.  

In fact, just this morning, China warned investors that their GDP will likly slow to 6.5%-6.8% this year and warned of potential black swan or grey rhino effects.  Black swans, or unforeseen occurrences, and gray rhinos, or highly obvious yet ignored threats, are likely to occur this year with adverse consequences – according to China's Vice-Secretary General of National Development, not in a speech but in an Op-Ed of a state controlled newspaper so it's an official Government statement.  That echos an earlier statement made by a former Chief Economist of the Chinese Central Bank.  

The Chinese government, unlike the US Government, has been cracking down on debt risks as well as factory pollution, which by itself puts a cap on how much the economy can expand.  There's also a lot of concern about the debts run up by provinces who've used stimulus measures to meet their economic goals for decades.  Earlier this month, China’s banking regulator chief told the official People’s Daily in an interview that a black swan event could threaten the country’s financial stability, adding that risks, while still manageable, are “complex and serious.”  

Global credit rating agencies S&P and Moody’s both downgraded China’s sovereign credit rating last year, citing worries about its rapid build-up in debt after years of credit-fueled stimulus used to meet official economic growth targets yet investors could care less and keep buying China, Japan, Europe, the US as if everyting is fine and only going to get better, spurred on by the Banksters, who need the retailers to come in and take these tremendous bags off their hands (see: "Earnings have been ‘unambiguously positive,’ and it’s going to get even better, says JPMorgan").  Those are the kind of superlatives you tend to get ahead of a correction and just look at the little suckers pouring in at the top:

I'm not saying the economy sucks or is even in trouble (though China is and Japan is) but it's not so great that we should be paying 30 times earnings for hardware stores or sneaker companies or soft drink makers – all of whom historically trade at more like 15 times earnings than 30.  We had this same conversation about housing back in 2005, 2006 and 2007 and it took 3 more years of record gains before the market finally corrected so far be it for me to keep you from having fun but please, Please, PLEASE:

Be careful out there!  

 


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  1. Good morning and goodbye – I'm off to the big city to seek my fortune.

    Back around noon.


  2. Phil – Your AM rant is not good, it's EXCELLENT. 

     

    "Huge disconnect as Central Bank buying tapers off and stocks stage a massive rally to start the year: It's like no one believes there's no Santa Clause."

     

    I will try to explain the "divergence" or counter intuitive above.

     

    Two things: as the dollar weakens, it makes imports more expensive and exports cheaper, leading to some moderation of our trade balance deficit.  Where does that extra money get invested?

     

    In addition, a weaker dollar alleviates stress in EM and foreign held USD denominated debt servicing. Where does that extra money get invested?

     

    Now, add in the curtailment of QE or quantitative tightening by the FED, Santa stops buying, more bonds floating.  The stage is set, then the game is on…

     

    Net foreign direct investment (the healthy kind) in US economic activity has declined. So again, where did those aforementioned excess dollar servicing flows go over the last year? 

     

    Depending upon who is doing the investing, those flows have gravitated towards and chased yield. Some in the form of EM equities, HY bonds and foreign REITS. Some in safe haven in the form of US based treasuries, agency debt, HY corp issuance, and equities.

     

    Foreign private accounts, while decreasing UST holdings, have increased their holdings of equities and corp bonds. Meanwhile, foreign central banks and EM's, have increased their holdings of UST's.

     

    The bottom line is our net foreign liability position has increased. If spreads widen, and or equities sell off, viz. those assets lose their attractiveness, what happens if the foreigners begin to liquidate? Food for thought.



  3. Oil: On The Edge



  4. AP FACT CHECK: Trump’s half-baked claims on climate, economy


  5. Stock markets mixed as investors eye records, corporate news








  6. Secret Memo Hints at a New Republican Target: Rod Rosenstein




  7. Disney’s 300,000 Square Foot Bet On Sports


  8. Drawing new lines…. And renaming our Must Hold line to Catastrophic Retracement! Or maybe to Back Up the Truck and Load Up on Good Companies!



  9. Our president is an idiot who can't get his basic facts straights:

    https://talkingpointsmemo.com/livewire/trump-ice-caps-setting-records

    He then launched into a baseless claim about ice caps.

    “The ice caps were going to melt, they were going to be gone by now, but now they’re setting records,” Trump said.

    Despite Trump’s suggestion that the ice caps are not melting as quickly as expected, NASA reported in March that the polar ice caps had reached record lows.



  10. ~~ DPS

    Dr Pepper Snapple and Keurig Green Mountain to merge — DPS shareholders will receive $103.75/share in a special cash dividend and retain 13% of the combined company.


  11. Good Morning.



  12. Who's buying/Phil – great morning rant, but I'm confused on two points:

    1) "the only real buyer of US equities for the past 10 years has been the Corporations themselves – who have engaged in MASSIVE buy-back programs that have lowered the share count of US equities by 20%"

    b) "just look at the little suckers pouring in at the top:"

    So the major buyers over a 10 year period have been corporations, but at this moment, there is a flash flood of retail buyers entering, after long quiescence?

    As you say, this will certainly get ugly.


  13. GBTC – 91-to-1 stock split.


  14. FU AMZN!!!!!


  15. VIX up big today.


  16. Looks like we might be getting prices on AAPL! Getting close to some support lines between 165 and 168.


  17. LABU at a new high.. 

    opinion? Phil /  pharm???


  18. Trying a scalp trade in LABD at $2.92.


  19. That new Apple smart speaker doesn't sound very smart:

    http://www.businessinsider.com/apple-homepod-limitations-things-it-cant-do-2018-1/#1-homepod-cant-pair-with-android-phones-1

    The HomePod version of Siri isn't prepared to answer random questions like Alexa and Google Assistant. It's not 100% clear what the device's limitations are exactly, but Apple says Siri on the HomePod is capable of "general knowledge."

    They are not competitive at all in that market! Maybe they should ask Alexa for some advice.


  20. I am on my way back now, on schedule.

    Nice dump so far with weak bounces  but 1600 should hold on the Russell   



  21. Euro-Area Economy Powers On


  22. Phil,

    Portfolio protection, would you recommend any plays for protecting the downside ? I have TZA April 10 calls at 2.30 which are down to 1.25 now.

    Thanks as always

    Pat


  23. PFE AND Alb/Phil

    Good morning!

    We did a little spread in it with the stock at $128, specifically, the 2019 $120/135 spread for $7, now $3.80.

    I believe we also sold the April 2018 $130 puts for $ 5…I am it sure about the puts as I got stopped out of them.

    With the stock down from $130 to $110….stay with it or do you have new thoughts on it?

    ON PFE, I bought some stock for the dividend when it was at $32… after one roll, I have the 2019 $32 short calls that I sold for $4.20…I am sure I am going to get called away before next dividend payment…will find another dividend payer, although they all look like they have had a big run the past few months


  24. Amazing how we can't sustain a sell-off.   VIX way up.

    Long Put 2018 15-JUN 140.00 PUT [SVXY @ $122.59 $-6.28] 20 1/19/2018 (137) $57,000 $28.50 $2.58 n/a     $31.08 - $5,150 9.0% $62,150
    Short Put 2018 15-JUN 110.00 PUT [SVXY @ $122.59 $-6.28] -20 1/19/2018 (137) $-30,800 $15.40 $0.90     $16.30 $1.43 $-1,800 -5.8% $-32,600
    Short Put 2018 16-FEB 130.00 PUT [SVXY @ $122.59 $-6.28] -6 1/19/2018 (18) $-4,560 $7.60 $2.98     $10.58 $3.68 $-1,785 -39.1% $-6,345

    Assistant FBI Director resigning so Trump can put in another loyalist.

    DPS/Albo – Amazing but who knows what Keurig is up to these days as it's now private.  Not sure what the benefit is to DPS to own 13% of private company unless this is how the Keurig guys are taking them back to public, by leaving DPS as the combined company and, if that's what they are doing, then it's likely because they don't want to show their numbers but need to get out of a bad deal by dropping the stock back on the public market while the market is still handing out insane valuations.

    I would have sad short the pop bu a bit late as they're already pulling back.

    2 points/Snow – 1 and B?  Not sure what the question is on either but this is the same thing as happens at the top of any big rally, massive upgrades, mergers, buybacks, Uber drivers telling you what stocks to buy and then – CRASH! – and everyone wonders what happened….

    GBTC/Albo – That's amazing.  Mostly amazing that they were at $1,500 (down from $3,000) pre-split.

    AMZN/Jabob – Citi just upped the target to $1,600.

    At least TSLA stopped torturing us for now (we sold 3 March $360 calls for $17.50, now $14.28).

    LABU/Jabob – I love buying them when they are low but I would never short biotech – it is the future.  Global Health Care is about $20Tn/yr and Biotech, though hard to define, is "only" a $1Tn sector of Health Care (so far).

    Protection/Pat – Just yesterday I put up an SQQQ spread for the Money Talk Portfolio using ALK as an offset – that's a good one.  As to TZA, I hope they are  not naked calls.  This is why we buy bull spreads, if you had, for example, the TZA April $10/15 bull call spread at $1.50, it would be no big deal to now roll April $10s ($1.25) to the July $10 ($1.75)/$15 (0.60) bull call spread at $1.10 and then you could put a stop on half the short April $15s (0.29) at 0.50 and the other half at $1 so, even if they all stopped out, they'd only add 0.75 and you'd be in for about $2 on that $5 spread with more months to play.  If you just keep betting on naked calls – you are not hedging, you are gambling.  

    Mystery stock/Maya – What?  

    PFE/Maya – PFE is $39.25 so yes, likely to get called away as the 2019 $32s are now $7.50 so 0.25 premium is less than the dividend (0.32).  

    I would take the money and run on the stock, promise to buy it back for $35 by selling the 2020 $37 puts for $3.45 and, if you REALLY want to keep earning PFE, that's free money, right?  It's also as much dividend as you'd collect in 2 years.  

    You can then roll the short Jan $32s ($7.50) to 2x the short 2020 $40s ($3.25) and buy 2x the 2020 $33s for $7.20 so net $39.25 +$3.45 - $7.50 + 2x 3.25 – 2x $7.20 = $27.30 in your pocket and you are left with 2x 2020 $33/40 spreads that will pay up to $14 more if PFE simply holds $40 and the obligation to own 1x the stock again for $35 if it heads lower.  Over $40, you end up with net $41.30 in pocket vs max $32 if called away without risking owning any more PFE stock than you do now.


  25. Here's my Nasdaq spot:

     


  26. NAK is way down but not out – have to wait and see what happens:

    Haven't decided yet. Wasn't much we can do with the sudden drop but headline sounds worse than the facts:http://tinyurl.com/y9v

    VANCOUVER , Jan. 29, 2018 /CNW/ – Northern Dynasty Minerals Ltd. (TSX: NDM; NYSE MKT: NAK) ("Northern Dynasty" or the "Company") confirms the Environmental Impact Statement ("EIS") permitting process for Southwest Alaska's Pebble Project continues to advance under the guidance of lead federal agency, the US Army Corps of Engineers (the "Corps").

    "The settlement agreement that the Pebble Partnership entered into with the US Environmental Protection Agency ("EPA") last year provides Pebble an unfettered opportunity to proceed through normal course permitting under the Clean Water Act and National Environmental Policy Act," said Northern Dynasty President & CEO Ron Thiessen . "We have every confidence that Pebble's ultimate project design will meet the rigorous environmental standards enforced in Alaska and the US, and that the EIS permitting process initiated by the Corps this month will demonstrate that compliance through an open, objective, transparent and science-driven review."

    Under the terms of a May 2017 settlement agreement reached between Northern Dynasty's 100%-owned subsidiary Pebble Limited Partnership and the US EPA, the federal agency agreed it will not advance any action under Section 404(c) of the Clean Water Act until a final EIS for the Pebble Project has been completed – so long as that occurs within four years of the settlement agreement and Pebble files permit applications within 30 months of the settlement agreement. Earlier this month, the Corps accepted as complete a CWA 404 permit application submitted by the Pebble Partnership in December 2017 , and has initiated the EIS permitting process.

    In other words, they didn't get a quick pass and now they have to present a plan that takes into account the environmental concerns of protecting the water table – which MIGHT be insurmountable, but they have a few years to work on it. The people who wanted a quick pay-off have bailed.

    Thiessen said Northern Dynasty believes EPA Administrator Scott Pruitt's announcement will have no effect on the process or outcome of regulatory permitting for the Pebble Project. "Nothing has changed," he said, noting that the EIS process initiated by the Corps earlier this month will continue to proceed efficiently and that no new environmental regulations or process steps have been introduced.

    "We expect the permitting process for Pebble to advance expeditiously over the next few years, and that a draft and final EIS will be completed upon which final permitting decisions for the Pebble Project will be made," Thiessen said. "Ultimately, we believe the Pebble EIS will describe a project that protects clean water and the world-class fisheries of Bristol Bay, and presents the opportunity for substantial economic benefits for the people of the region and the state. We'd encourage all Alaskans and all interested stakeholders to participate fully in the thorough, objective and rigorous review of the Pebble Project."

    In the OOP we took a $3,000 hit on NAK as we had 5,000 shares at $1.74 but way too early to double down – even if we decide to so, for now, we wait.

    We did not buy NAK in the LTP so this is now interesting but we'll see what happens this week.


  27. Is SQQQ ever going to be able to move higher for more than half a day?? 

    WTF?!?!?!?


  28. WTF indeed, these markets be crazy!  


  29. Phil/ ALB

    No mystery stock- it’s right there , next to PFE in my question…but it’s ALB

    Now Fidelity shows the $120/$135 spread worth only $2.20 and we paid $7.10for the 2019spread


  30. Phil/PFE

    I like the idea of 2x selling of the calls, protected by the spread.

    But I hate to sell puts on a stock that’s up from $32 to $39 in quick order…Remember when PFE languished for years between $28-$32? Unless you think they are more fairly valued now or their pipeline has improved? But I don’t know that 


  31. VLO

    From Briefing :

    ~~Brent/WTI crude oil spread hits lowest level in five months… a narrow spread is negative for U.S. oil and gas refiners and negative for oil tankers.


  32. Two points/Phil – 1 and b keeps people awake – anyway, I think I got your point, which is that over the past few years the market has risen due to buy backs, driven by the big corps of course. At this moment, in contrast, the small retailers, who've been long absent, are flooding in. My initial confusion was because I didn't quite understand what you were saying is driving the market.


  33. XLF    interesting 40,000 option trade in the 2019 $35 calls for .48 to .50,  the maximum strike in 2019

    financials benefiting from rising rates, tax reform, stronger global economies, stronger M&A market, and deregulation


  34. AAPL/Phil    is this the same ole negative news that happens before every earnings announcement?


  35. From Briefing :

    HMNY

    Helios & Matheson up 11%: Hearing vague, unconfirmed chatter that Netflix (NFLX) is interested in taking a stake. 

    Wouldn't that be something !


  36. last paragraph from Hussman's latest missive:

    "I expect the S&P 500 to lose approximately two-thirds of its value over the completion of this cycle. My impression is that future generations will look back on this moment and say “… and this is where they completely lost their minds.” As I’ve regularly noted in recent months, our immediate outlook is essentially flat neutral for practical purposes, though we’re partial to a layer of tail-risk hedges, such as out-of-the-money index put options, given that a market decline on the order of even 5% would almost certainly be sufficient to send our measures of market internals into a negative condition. It’s best not to rely on the ability to execute sales into a falling market, because the range-expansion we’ve recently seen on the upside may very well have a mirror-image on the downside. As usual, we’ll respond to new evidence as it emerges."


  37. Winston-- I know the guy always sounds very intelligent, but when was the last time Hussman has been right about the market? He makes Gartman seem like a good market timer in comparison!


  38. Phil/F   Would you confirm that your trade idea was sell the 2020 12 puts and buy the 10 calls.  Thanks.


  39. news flash:  Mario Gabelli hears Phil's fist banging and buys GE


  40. Hoo, dollar drops like that and the market still slides? Hmmm.


  41. Not going to hold LABD overnight,  Took off at 2.94.


  42. ALB/Maya – I thought you were talking to me and Albo!  I'm not sure who "we" is as I haven't played ALB at all in our portfolios.  Anyway, so the stock is at $112 and you did the spread for $7 and now it's net $3.80 but the Jan $120s are $11, which is more than you paid for the spread and the short $135s are $6.50, which is a rip-off but $4.50, not $3.50 unless you take the worst price of each bid/ask, which you should know never to accept.  

    There are no Aprils but the March $130 puts are now $18 and the 2020 $100 puts are $13 so why would you take a loss instead of rolling.  If you don't think they can hold $100, you should have cashed out the spread a long time ago, right?  

    I think ALB simply got ahead of itself on the lithium craze but $112 is a fair price and you can cash your $120s for $11 and buy the 2020 $100 ($28)/$120 $18 bull call spread for $10 and sell the $100 puts for $13 (half is fine too) and that puts $7.50-$14 back in your pocket depending and leaves you with the $20 spread covering the rip-off short calls.  I think I'd roll the Jan short $135s at $6.50 to the June $125s at $4.20 because they are easier to roll up if you get in trouble (the Jan $145s are $4.20) and, if they expire worthless, you can then sell Jan whatevers for $4 and make more money.  

    PFE/Maya – You can certainly wait and only sell puts if the stock drops (and use that money to roll your long calls lower) – it only enhances your returns but it also cuts the margin on the short calls and provides a bit more cushion if PFE does break higher.   PFE at $40 has a p/e of 24.50, which is crazy for a major Pharma but it's cheap for the S&P 500 so, if the madness continues, they can go higher still.  

    VLO/Albo – I said that ages ago.  So funny how long it takes people to do simple math.

    1 & B/Snow – On purpose.  Well that's funny then!  I used to do that to my kids all the time – it does get them to pay attention…  So you figured it out but look at the numbers for LOW above and think about what's happening:  A) the cash gain in profits goes from $1.8Bn to $3.5Bn so up 100% 2) the EPS goes from $1.63 to $4.51 – up 170%.  To work that backwards, share count was reduced by about 40% over that time period to hit those EPS numbers on those earnings.  That's F'd up!  

    Sale Purchase of Stock -3,456,000 -3,800,000 -3,768,000

    That's the past 3 years and they are authorizing $5Bn more but also keep in mind that the stock was $75 in 2016 and $50 in 2015 (so they bought double for same money) and $35 in 2014, when they bought about 10% of the stock back in one year and whatever they did the years before so it makes perfect sense that they cut their outstanding stock by 40% since 2012 – as crazy as that seems.

    So LOW is not so much a business as a financial shell game, effectively a Ponzi scheme wrapped around a functional company but the business is not being run anymore to sell hardware, it's being run to pump up the stock price but it's now costing them 1.6 years worth of earnings to keep things afloat and, if they hit $130 next year, they'll need $7Bn to buy back stock.  That's why it's a ponzi scheme, their machinations are the only reason the P/E is 30 and, once it stops, there won't be enough real buyers to support it (no cash on the balance sheets – all spent on stock) and the whole thing will collapse.  

    LOW is just a good example but there are hundreds of companies doing this and boosting the markets way beyond where they should naturally be. 

    XLF/Stock – Not doing our FAZ any good.  

    AAPL/Stock – It is possible that AAPL miscalculated how popular the 8 would be vs the 10.  From my perspective, their problem is I love my 6 and I only want the same thing, which is the 8 and I don't see enough reasons to switch to the 10 though I'll probably get the 10 in the end anyway, because I can't stand not having the coolest stuff.  Also, the 10 was not available at Christmas and I think a lot of potential buyers took the phone that was available then and now they have to wait at least a year to get a new phone.  

    So the news may be real but, even if it is, AAPL doesn't care if they sell 60M 10s or 30M 10s and 30M 8s or 40M 8s and 20M 10s – they'll eventually sell all the 10s and all the 8s they ordered so far and they will adjust the mix accordingly going forward while planning to roll out the 9s or 11s.  And the beat goes on…

    And don't forget about the cash tsunami coming their way – they have enough cash to buy HD!  

    HMNY/Albo – Too funny. 

    Hussman/Winston – Wow, that's extreme!  Looking for attention I think.

    And what Jabob said.

    F/Taihu – Well my real idea was to watch and wait for a pullback like this one but no knife-catching here.  For some reason the 2020 calls are $9.87 at $2 and the pus are $1.05 and that's what I'd go for at the moment but I'd rather wait and see where things stop.  The $11.87 calls and puts are $1.05/$2.10.

    GE/Stock – Wise man.  

    Ouch, indexes falling again.  Wheee actually as I was in the city and never had a chance to cash my short Futures.  

    And, of course, weakening bounces so I never stopped out once I got back.


  43. Of course, I spent time adding more line the the Big Chart and we go down today!


  44. MGM & LVS both at new yearly highs.  WYNN down sharply again.  If we get further weakness in WYNN tomorrow, I'll look to sell some deep OTM puts. 

    POTUS seems to be able to get away with sexual harassment, but it's Hell to pay for everyone else. And rightly so.

    Not sure how you handicap the effect on WYNN stock, but think there's value there, albeit 45-50 points lower.


  45. Lines/StJ – Isn't that always how it goes?

    Ugly finish for the indexes but beauty for my index shorts!  

    Poor WYNN!  

    MGM/Albo – I think money coming out of WYNN just going to the other players (who may benefit from WYNN's name being mud).  I agree value at some point.  If WYNN steps down and they change the name – good for a 10% bounce.  


  46. With all the money shareholders lost on WYNN, they could have afforded brand you new signage on all the casinos. Maybe rename them WYNNER and save some money.


  47. Cut my /ES shorts back to 2 at 2,859.  /NQ still 2 short at 7,000 - both back to even but at much higher strikes than where I started, keeping 2 each as I'm getting greedy on a bit of weakness (maybe a mistake). 

    /RB had a nice pullback off the morning call too but bounced back half.

    Good gains on /CL too:

    /NG going the other way as it gets colder again.  So silly – changes with the weather!  


  48. Phil – liked your nasdaq spot, nice job.

    I just started a 50K portfolio this month to follow along and learn. I can't do all the LTP/STP trades though cause account is small. Overall my portfolio is -3.6YTD. I'm not panicking or anything…I get this is a long term strategy and happy with it. My question is about how to appropriately hedge currently given:

    1) Markets have gone straight up for so long
    2) My account is already down'ish

    I have a total of 10 positions consuming about 70% of my margin.

    I have one hedge position like this:

    +2 DIA Jun 280 put ($19.25)
    -2 DIA Jun 260 put ($7.25)
    -1 DIA Feb 259 put ($1.76)

    Should I just scale back some positions until margin <= 50% and wait until my account gets more positive before adding more positions and/or hedges?


  49. jabo – Hussman is at the last chance saloon on calling a market top – like any good forecaster, when it's going against you, you keep doubling down so you either go out feet first or in a blaze of glory!!!!! Of course, if he is right then we will never hear the last of 'I told you so.'  


  50. For sure you should wait and see but make sure you are ready to DD on the hedge (not the short puts) if the market breaks below a threshold and also consider whether the short puts are appropriate for your margin levels.  Sound like you jumped in a bit quickly, we only used about 25% of our buying power so far so the cash we still have on the sidelines (happy to DD if things get cheaper) is a big part of our hedge.  

    You are right in line with the $100,000 OOP, which is down $7K at the moment as NAK, IMAX, FNSR, GE and ABX are all behaving badly at the moment.


  51. winston--hilarious..

    I used to like to read his opinion. Rosenberg too.

    I only wish I always would have done the opposite of what they were recommending ;-)


  52. Is there no limits to his lack of class:

    https://talkingpointsmemo.com/livewire/report-trump-blasted-mccabe-after-comey-flew-fbi-plane-after-termination

    According to the report, Trump then told McCabe to ask his wife what it felt like to be a loser. (Dr. Jill McCabe, the former deputy director’s wife, unsuccessfully ran for state office in Virginia in 2015.)

    Per NBC News, McCabe replied, “OK, sir,” and Trump then hung up.

    It's just not normal human behavior let alone presidential! Can we all wake up from this nightmare now.


  53. futures look weak..

    wonder if it will last?

    is there a reason why they are dropping?


  54. Is there anybody out there?


  55. just us bots 


  56. Indexes down overall -- /YM is down about 1%.  Do you know if this triggers the 5% rule?  

    Be nice to know my if this pivot point will hold or not. It is hanging along S2 right now.   


  57. Good morning!

    A little follow-through to yesterday's drop but nothing huge.  AMZN moving into health care partnering with BRK.A and JPM is spooking the health care sector and that's big part of the sell-off so I'm going to take my Futures money and run on the index shorts.  Still have my Dollar longs – so annoying!

    Amazon, Berkshire Hathaway and JP Morgan will form company to improve employee health care

    Tuesday's economic calendar

    • The eurozone economy finished off last year with a boom, with the region's GDP expanding at 2.5%, better than anticipated by economists and the European Central Bank.
    • In a sign the vibrant pace in the euro area is set to carry on into 2018, a separate release showed regional economic confidence remaining close to a 17-year high in January.
    • Top officials from the EU will meet with the Mercosur group of Argentina, Brazil, Paraguay and Uruguay today to gauge the prospects for a free-trade deal that would follow groundbreaking commercial pacts with Japan and Canada.
    • The EU-Mercosur talks were re-started in 2010, but President Trump's move into the White House with his "America First" agenda prompted an EU push to wrap up the negotiations.

    • BuzzFeed has leaked Britain's government forecasts on the economic impact of leaving the EU, in an an assessment entitled "EU Exit Analysis – Cross Whitehall Briefing."
    • Under a comprehensive free trade agreement with the EU, UK growth would be 5% lower over the next 15 years, the "no deal" scenario would reduce growth by 8% over that period, while continued single-market access would still lower growth by 2%.
    • The Commodity Futures Trading Commission has fined Deutsche Bank (NYSE:DB), UBS and HSBC nearly $47M to settle "spoofing" charges, while the DOJ charged eight individuals for deceptive trading, calling it "the largest futures market criminal enforcement action in department history."
    • Spoofing is rapidly placing orders with the intent to cancel them before they trade in order to trick other investors by creating the illusion of demand.

    Teva to raise $5B in debt

    • Teva Pharmaceutical (NYSE:TEVA) plans to raise $5B of debt securities as it pushes ahead with a global overhaul aimed at cutting costs and managing its massive debt burden.
    • "The net proceeds… will be used for general corporate purposes, which may include additions to working capital, investments in or extensions of credit to our subsidiaries and the repayment of indebtedness," Teva said in an SEC filing.

  58. I missed the fun last night, unfortunately, that would have been way better profits. 

    5% Rule/Grass – I'm actually doing that in the morning post.