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Which Way Wednesday – Earnings Edition

SPY 5 MINUTEUp and down the market goes, where she stops – no one knows!  

As you can see from Dave Fry's SPY chart, we had a wild ride yesterday with volume on the sell side and then the bots taking us back up to finsh the day back where we started.  We were fortunate enough to be skeptical in the morning (see yesterday's post) and our Futures shorts (see early morning Tweet) were all massive winners.

We even had fun teaching Futures Trading Techniques in yesterday's Webcast but, as you can see from the chart, our 1-2:15 time-frame was nowhere near as exciting as the morning session had been!  

It's a wild market ride in a generally newsless week and earnings are sending us flying every which way.  As Dave notes in his morning post:


"There is a battle of pundits taking place as bulls and bears duke it out for headline honors of accuracy. Goldman Sach’s David Kostin maintains his bearish outlook for stocks saying: “The S&P 500 is overvalued by by almost any measure.”

Meanwhile Bank of America M/L’s Macneil Curry tells stock investors to “watch out” as seasonal turn much less construction once February rolls around. Like many others he judges complacency to be near the traditional levels that lead to corrections. In between was

Bloomberg’s Richard Yamarone warns, “It looks like this year’s economic horse will pull-up lame”, adding, “The Bloomberg Orange Book Sentiment Index has been running below 50 for 49 consecutive weeks which implies a stagnant growth rate in GDP in the 2-to-2.5% range.” This, he ventures, implies a lack of desirable growth in real disposable personal incomes." 

Nonetheless, we added two new Inflation Fighting Trade Ideas to our list yesterday and that gives us 3 so far and we're still looking for two more candidates.  We called a bottom on LULU at $46 on yesterday's dip with a trade idea that has a potential 7,400% upside if they get back to $60 and we added 5 of them to our Income Portfolio for just $200 with a potentail $15,000 payback in just two years.   

If you were not in our early morning Member Chat, you missed our call on XCO, which took off like a rocket on no particular news (other than our call, of course).  Our pre-market trade idea, which was:

XCO – Back in mid-Dec we liked the stock at $4.92, selling 2015 $5 puts and calls for $3.10 for a net $2.80/3.90 entry.  That trade has almost 100% upside if the stock simply holds $5.  Those options have dropped a bit now but you can establish a similar trade selling 2016 $5 puts for $1.60 and $5 calls for $1.25 with the stock at $4.88 for a net $2.03/3.52 entry. 

If successful, this trade gets called away for $5 for a 146% gain on cash in 2 years and all XCO has to do is hold $5 – not a bad bet!  Even if you chase it, it's not so bad but already the spread closed at $2.41 yesterday after giving us easy fills on the morning dip – up 15.8% in a single day – not a bad way to trade!  This is the kind of stuff we're teaching in our weekly Webcasts and, of course, in PSW's Member Chat every single day. 

NYSIFundamentally, we're still skeptical but the Dollar diving back to 81.10 this morning has kept us from making any bearish bets in the Futures though we're chomping at the bit to short oil, now $95.72 and hopefully we'll get a re-test of $96.50 into tomorrow's inventory reports, which would give us a good reason to go short on USO, long on SCO again.  

We'll see if the Dollar can find a floor back at 81.10 or, in the very least, 81.  The Euro is strong at $1.357 and the Pound even stronger at $1.657 with the Yen at 104.41.  A bounce in the Dollar would make Japan happy, but not our own markets but I'm not seeing any major catalyst this week likely to make that happen so the rally seems safe for the moment and we can simply turn our attention back to the same breakout levels we have been watching all year, which are:

  • Dow 16,500 (1% higher)
  • S&P 1,850 (0.5% higher) 
  • Nasdaq 4,175 (1% over)
  • NYSE 10,400 (0.3% higher)
  • Russell 1,070 (on the button)

3 of 5 of those indexes over the line and we'll have to add more bullish plays.  Not that we haven't been adding them anyway, we'll just have to be more enthusiastic about it.  

Speaking of bullish plays, our LQMT ship came in.  That was one of our very rare penny stock picks and we have been in since June 3rd, where we bought 10,000 shares for .11 ($1,100) and then doubled down at .08.  Yesterday they popped .28 and of course we're taking profits but we do still like them for the long haul as they are one AAPL announcement away from $1 though also one lack of AAPL announcement away from .20 again so, as a new entry, I'd wait until after earnings.  

If the S&P has trouble at 1,840, that's going to be a bearish sign and we expect the Dollar to pop so Oil Futures will be a short below $95.75 (/CL) or off a rejection at $96, whichever comes first.  The Russell (/TF) may retest 1,175 again and a failure there is "game on" for the shorts as well (see yesterday's webcast).  That trade was a $1,000 per contract winner yesterday morning and worked out better than our Dow (/YM) shorts at 16,350 but those were good for $500 and far less stressful to play.  

Be careful out there! 


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  1. Good Morning!

  2. Good Morning—hope everyone is keeping warm

    waiting patiently for /RB and /NG plays

  3. Good morning! 

  4. TOS balances are very messed up this morning.  Anyone else having an issue?

  5. Holy cow, Nat gas spiked to $4.60 (/NG) that is a short (tight stops over).  

  6. Good morning! GILD has been up nicely. Big gap up this morning!

  7. rperi / TOS - same for me, wacky numbers in the P/L Day column.

  8. Oil Lines

    R3 – 97.20
    R2 – 96.34
    R1 – 95.86
    PP – 95
    S1 – 94.52
    S2 – 93.66
    S3 – 93.18

    Yesterday's high and low – 95.49 / 94.15

  9. so if I try to look at portfolios in OPTtrader tab all I see is things like CMGputs, no strike I see a price but not sure how to read this, any ideas? Are any of the google docs being maintain still? TIA

  10. GILD / Invest – Pharm had this one right when he said they would go to $85…

  11. After seeing Think or Swim, on the web casts, has very powerful features, etrade pro has better charts, but TOS has problems for days to a month once and etrade 1 hour in almost 2 years, even then they were able to handle telephone trades with no delay. I don't understand why so many are so loyal.

  12. TOS/Rperi – Mine looks normal.  

    GILD/Invest – Great call by Pharm! 

    $96 just got tapped in oil (/CL) – Game on.  

  13. STJ, GILD is almost hit Pharm's target $85. Anyways, I sold 1/2 :)

  14. TOS normal here as well…

  15. Sagemm- suggest you post your questions over on Opt's side. The "official positions" are listed in a spreadsheet at the top. Usually there are a number of non-official or side play positions. Looking at the spreadsheet will not help much unless you are familiar with the basics of Opt's trading plan.

  16. Looks like yesterday, lots of effort to keep up appearances but Dow starting off 150 points lower than it was.  

    S&P failed 1,840 so RUT a short at 1,173.  Watch the Dollar (81.185)

  17. Thanks pstas but aren't those the trades made here?

  18. Hard drive / Phil – To continue yesterday's conversation, I don't believe that these guy's business is replacement anymore. I would be willing to bet that most of their sales are for new computers, server farms  and now external hard drives as many people use them for backup and extra storage. 15 years ago, the failure rate was probably higher, but looking at the numbers yesterday, a 5% failure rate after 3 years is nothing. Especially since a lot of people don't even keep their computers that much longer anymore. 

  19. I liked your presentation yesterday, Phil.  Your trick for giving yourself a better strike is amazing.  Will you be doing more futures seminars?  

  20. Sage- no crossover between Phil and Opt- two distinct methods.

  21. I am telling you, global warming is a hoax… It's 3 times already this year that I have to plow my driveway! 

  22. Yup, Phil. I hope you could do more futures seminars too!

  23. What to look in Netflix earnings today:

    Goldman Sachs expects there was a gain of about 2.2 million subscribers in Q4, which would be within the company’s forecast of 1.6 million to 2.4 million, and would push its paying subscriber base above a whopping 33 million. Netflix is expected to forecast that it will add a further 1.7 million customers in Q1 2014, according to analysts surveyed by Bloomberg. [...]

    But Netflix’s need to generate more revenue could become much more apparent if a recent ruling by US lawmakers enables broadband providers to charge the company—which accounts for up to one-third of the US’s data traffic—directly for the amount of data it consumes.

  24. stjean

    Yesterday the high was 55, last night low 4. It's a bi-polar thing.

  25. Hi phil , ive been following for years the seminars have made things come to life for me.

    im now trading futures




  26. London real estate bubble… Suddenly real estate prices look reasonable in the US:

    When I compare the price for my house to the prices even in France, I am stunned! I don't know how people can afford real estate there!

  27. A bi-polar vortex Shadow….

  28. Record number of SUVs in the ditch this year, vortex pull stjean! 3 along .9mi yesterday.

  29. /cl, the 95.81 line is tough to beak.

  30. Looks like all the high rollers have gone to Davos as WYNN is down 5$



    How long do you think Japan's market can hold up?  Trying to determine if I want to go another round with EWJ puts, or just walk away. (March $11 puts at (.18) from Nov. trade/dd at (.10) in January) TIA

  32. with 4 min. until gas report my USO order filled, 33 minutes and something will happen.

  33. WMT going down on a steady flow

  34. shadow—gas report tomorrow 10.30 am

  35. Must have spooked TSLA this morning

  36. USO Feb $35 puts are $1.05, 5 in the $25KP (USO at $34.33).

  37. USO Feb. 34 puts, I show reports today savi, I show oil at 11:00

  38. Damn, I was in the wrong post….wondering where everyone was…..

  39. MA with a 10:1 spilt today

  40. My game was reports today and Friday is another game. Why Friday? Monday closed add 1 day not 2.

  41. Welcome back, Pharm! ;) Thanks for the GILD trade idea!

  42. Interesting….from the front page of PSW yesterday evening….

    Large call spreads trading on the iShares Silver Trust ETF (Ticker: SLV) appear to be looking for the price of the underlying to move up sharply during 2014. Shares in the SLV are down 2.0% on the session at $19.12 as of 2:15 p.m. EST.

    Volume in SLV options today is heavily concentrated in the January 2015 expiry calls, with the $30/$40 call spread trading a total of 75,000 times. It looks like the spread was purchased at a net premium of $0.19 per contract. The trade starts making money if shares in the SLV rally 58% over the current price of $19.12 to exceed the breakeven point at $30.19. Maximum potential profits of $9.81 per contract are available on the spread in the event that SLV shares jump 110% to $40.00 by expiration next year.  The same Jan ’15 $30/$40 call spread traded 60,000 times on Friday as well. Shares in the SLV last traded above $40.00 back in September of 2011. 

    I did a few of those for 19c.

  43. Just got called on the RRD Mar 17caller today.

    New play is Buy stock on todays dip and sell the Jan15 17.5 putter for 1.70 and wait for selling the June or Sept caller until stk has recovered a bit. Stk has a yield of 5.3

  44. Also, bought a few EUO Jan 15 $20 calls for 60c.  Just look at the ticker of those 'Proshares short' and you will understand why….. ;)

  45. shadow—I show API today at 4.30  and NG and CL tomorrow at 10.30 and 11.00  respectively

  46. savi I have found today and now tomorrow, NG didn't post so your right and now I am messed up.

  47. Phil/webinar, is there a replay link for yesterday's webinar? thanks

  48. Optrader/Sage – Yeah, as noted, not my thing, use the tab above and you'll be able to find his chat room.  I have been posting our Long-Term, Short-Term and Income Portfolios from Power Opt.  I just posted the LTP yesterday morning and I went over the STP in last week's webcast and printed it that day.  If you need to know about a position on our side – just ask.  

    TOS/Shadow – I like them better.  Great execution, and easy to flip from one thing to the next.  I never liked ETrade as much.  It's just a matter of preference though – that's why there are Macs and PCs.  

    5%/StJ – Especially as most people don't put anything like that kind of strain on a drive. 

    Thanks Bruce, Invest.  Yes, I think we'll try to do those once a month for variety.  Make sure you give good feedback to the Darwin people so we don't have fights about what the "topic" should be.  

    Nice dip on the RUT already – should be a bit of support at 1,172, of course but, below that is all good. 

    Oil is a nickels and dimes trade but many nickels and dimes.  

    NFLX/StJ – Was an article yesterday saying this may be their last good quarter – I agree.   AMZN is launching a pay TV service, also bad for them.  They already dropped a nice bit so not too much fun to chase but you can sell 5 Feb $360 calls for $10.10 and backstop it with 4 of the 2015 $370/400 bull call spreads at $10 for a $1,000 credit into earnings.  

    Futures/Tommy – That's great.  I like being able to show people what I'm talking about – that's why we always do Vegas at our live seminars too.  

    London/StJ – My cousins have moved away and rent their apartments.  The money one cousin made lets her live in France off the profits she makes renting her flat in London.  

    WYNN/Yodi – They were just too ridiculous at $215.  

    Japan/DC – As long as people accept this rampant money-printing – all will be well but once the market loses steam (and don't forget GS just issued a warning) then people scramble for other assets and then stocks go down and gold goes up and bonds go up so the Fed won't be too upset as that keeps rates low.  I am surprised EWJ has held up so well but it's way overdue for a pullback – look how managed the weekly chart is at $12.  

    Nonetheless, timing is everything and the EWJ March $11 puts are now 0.06 and another .11 gets you to the June $11 puts (.17) OR you could leave the March $11 puts, sell the $12 puts for .27 and buy the June $13 puts for $1.11 and then you are spending net .14 (original average) – .27 + $1.11 = 0.98 and you have a $1 spread so no worse than even to the downside (but then you can roll the short March puts) and you are almost entirely in the money.  

    S&P still can't get over the hump (/ES) at 1,840.  Dow even lower (16,314).  Not sure what oil is excited about.   Nat gas back to $4.60 (/NG).   RUT is bucking like a bronco between 1,172 and 1,175 (/TF).   Dollar back at 81.20.  

    Nat gas report/Shadow – Tomorrow I think.  Oil too.  

    LOL – Welcome Pharm.    SLV looks like a good trade.  

    MA/Scott – didn't want to be a $1,000 stock, I guess.  

    RRD/Yodi – Oldie and goodie.  There's a one we picked up as a crisis play (they released GOOG's earnings early and their stock tanked).  I love those kind.  

    Webinar/Robert – Relay link is HERE.  

  49. AAPL having another good day, back to magical $555.  

    /NKD calming down at 15,830 but rough ride so far.  

    /TF holding 1,172.  Oil trying to get over $96.25.   Only news I see supporting it is this:

    • TransCanada (TRP) says it has started operations on its Cushing Market Link pipeline that can ship up to 700K bbl/day of oil from the Cushing, Okla., storage hub to Port Arthur, Tex., the southern leg of the Keystone XL project.
    • The pipeline will likely ship just over 300K bbl/day of oil this month, traders say.

    That's another 3.5Mb/week they can send out of the country!  

    Here's one that seemed obvious but took a long time:

    Submitted on 2013/11/25 at 12:39 pm

    Look at LGF – Best November open of any picture and they are down 7.6% because they "only" made $161M in a weekend.  That's just nuts!  They made the movie for $130M so it's not like it won't make money and LGF is a $4.3Bn company that only makes about $200M a year (20 p/e) so this is still a big bump for them.  I hate to catch a knife when sentiment sucks but you can sell 2016 $28 puts for $5.40 and that's net $22.60 and I certainly think that's worth a 1x entry so let's sell 5 of those in the Income Portfolio and we'll be thrilled to DD if they go lower.  

    Here comes the Divergent buzz

    • Lions Gate (LGF +4.6%) shoots higher in early trading without any news out from the company.
    • Part of the focus on Lions Gate has shifted to the Divergent franchise with the first film due out in March.
    • quick scan of Amazon's best seller list for the Young Adult category shows Divergent books sits at #1, #2, and #3 in popularity.
    • There's also some chatter out that Piper Jaffray is talking up the potential for a LGF breakout.

    Those 2016 $28 puts are still $5.20 but that's way down from $7+ when they finally bottomed.  Good example of scaling in – we PLANNED to double down when they went lower but we took our initial entry at a very comfortable net $22.60.  That's scaling in in a nutshell and now, like a futures trade, we could put a stop on 1/2 the puts at $5 and that would leave us with net 5 at $6.60ish (if we get stopped out but the 50 dma is $31 and hopefully it holds.  

  50. SCO March $32 puts can be sold for $1.35 and the March $32/35 bull call spread is $1.20 so a net .10 credit with SCO at $33 and oil at $96.30.  

  51. Unless the Washington idiots change the law they can only export refined, finished products, and that is the other finish the Keystone pipeline issue. Will the US be the biggest sucker in the world?

  52. Well, here's the re-test of $96.50 we were hoping this morning for on oil.  Kind of scary after that big move up.  Dollar 81.22…

    Refined/Shadow – Yes, we ship the oil from Cushing to a ring of refineries along the Gulf Coast and THEY ship it out of the country.  

    One of the most important facts that is missing in the national debate surrounding the proposed Keystone XL tar sands pipeline is this – Keystone XL will not bring any more oil into the United State for decades to come.  Canada doesn’t have nearly enough oil to fill existing pipelines going to the United States. However, existing Canadian oil pipelines all go to the Midwest, where the only buyer for their crude is the United States. Keystone XL would divert Canadian oil from refineries in the Midwest to the Gulf Coast where it can be refined and exported. Many of these refineries are in Foriegn Trade Zones where oil may be exported to international buyers without paying U.S. taxes. And that is exactly what Valero, one of the largest potential buyers of Keystone XL's oil, has told its investors it will do. The idea that Keystone XL will improve U.S. oil supply is a documented scam being played on the American people by Big Oil and its friends in Washington DC. 

  53. Phil,

    What do you think of MA, any plays on the new stock split? 


  54. MA/Ging – We kept getting killed betting against them going up, I'm not going there again.   Maybe if they test $100 I'd like to short them at that line.  

    Speaking of lines, the Dow is having trouble holding 16,300 and RUT, so far, rejected at 1,175.  Oil hasn't crossed back under $96.50 yet and it's only been nickels and dimes to the short side so far today.  

    So much for TSLA selling off – back to $178.60 now.  

    TLT $105.71, VIX 13.04 and there goes the Dow… 

  55. Excellent summary of Keystone

    Thanks Phil!

  56. BRCM trading above the 200.  Nice.

  57. DRWI – Up 18%. 8-)

  58. Oil /Keystone


    So it´s OK if the oil go Midwest where there is no way out and is bad because it´s going out, and the reason for that is that U.S consumers pays half the value of the gasoline in the rest of the World…… huuummm.

    From my point of view the best U.S economy can do is to protect their economy is adjusting things to pay oil and gasoline as the rest of OECD countries does, paying less is a fragil model…I prefer the Norway model

  59. phil, what do you think of BBY here, still too early?


  60. I'm selling "calls" on bitcoin. Hedging AND being the house. Two of Phil's favorites…. :)

  61. advil

    You prefer US to pay more but because we produce all the oil we need and most producer nations subsidize the "people of that land" that is just excess profits to oil companies. The US refuses to tax corporate profits on oil and actually pay them. Norway is likely very different. Higher oil prices here has done one thing many times, cause a recession. It is not a simple solution that you prefer.

  62. MBA Mortgage Applications:  +4.7% vs. +11.9% last week.

    Redbook Chain Store Sales: +3.1%Y/Y vs. +2.9% last week.

    ICSC Retail Store Sales: -1.9% W/W, vs. -1.0% last week.

    At least four banks in talks to settle EU probe

    • JPMorgan (JPM), UBS, Credit Suisse (CS), and RBS are among the lenders (a fifth may be involved as well) looking to settle a EU probe into rate-fixing in the Swiss franc Libor rate, reports Bloomberg.
    • The investigation into Swiss Libor comes alongside probes in Euribor and yen Libor in which settlements have already been reached. Sources say any fines in the Swiss investigation will be smaller than the other two due to the size of the market.
    • Look for deals to be inked by the end of July.
    • "Inflation is expected to remain well below target for some time, and therefore the downside risks to inflation have grown in importance," says the bank, maintaining its benchmark overnight lending rate at 1%, but clearly considering easier policy down the road.
    • The loonie (FXC -0.3%) takes out another multi-year low, now buying $0.9062, and at its weakest vs. the greenback in about four years.
    • Interactive Brokers (IBKR -3.4%) slips in early action following earnings results last night with the top line coming in well shy of consensus forecasts.
    • Trade volume of 14.437M in Q4 was flat from a year ago. Contract and share volumes of 155.216M fell 2%. Options market making of 87.5M contracts fell 15%. Futures market making of 4.245M contracts gained 33%.
    • Cleared DARTs of 453K gained 20% from a year ago. Commission per DART of $4.23 fell one penny. Net revenue per average account of $3,375 gained 4%.
    • Electronic brokerage net revenue of $211.5M grew 22.9% Y/Y. Pre-tax profit margin dove to 23% from 51%, but the company booked a $73M loss on some big losses from customers on which it's trying to collect.
    • Market making net revenue of $52.6M fell 26.7%.

    Anadarko, BP pop higher as Einhorn reportedly takes stakes

    • Anadarko Petroleum (APC +1.9%) and BP (BP +1.1%) pop higher as David Einhorn's Greenlight Capital hedge fund acquired "medium size positions" in the two companies.

    Freeport McMoRan -1.7% as Q4 earnings fall short of expectations

    • Freeport McMoRan (FCX) -1.7% premarket as Q4 earnings drop to $0.68/share from $0.78/share a year ago and below analyst estimates, as copper and gold prices dropped.
    • Revenue rose to $5.89B from $4.51B, boosted by the company's recent oil and gas acquisitions.
    • Q4 consolidated copper sales of 1.14B lbs. were higher than year-ago Q4 sales of 972M lbs., reflecting improved volumes throughout FCX's global mining operations.
    • Q4 consolidated gold sales of 512K oz. were more than double year-ago sales of 254K oz., reflecting higher ore grades and improved operating performance in Indonesia.
    • Q4 consolidated average unit net cash costs for FCX's copper mines of $1.16/lb. were significantly lower than unit net cash costs of $1.54/lb. in Q4 2012, primarily reflecting higher copper and gold sales volumes and ongoing cost control efforts.

    Record cold temps send natural gas futures to 2 1/2-year high

    • Natural gas futures have climbed to a more than a two-and-a-half-year high as bitter cold temperatures over the eastern two-thirds of the U.S. sends demand for the heating fuel surging.
    • "For the next week and a half, the bulls are in charge of this market," one broker says, as traders bet on further price gains as weather forecasters project near-zero to subzero lows in the eastern U.S. in the days ahead.
    • The amount of natural gas now in storage is ~2.5T cf, 15% below the five-year average for this time of year, and some analysts see storage levels eventually sinking to 1.3T cf.

    Every time gold starts to rise, one of the Banksters downgrades it!  Gold price target cut at Morgan Stanley

    • Lower gold prices will likely boost Chinese physical demand, but won't be enough to "materially reverse" the downtrend in the metal, say Morgan Stanley analysts Peter Richardson and Joel Crane, cutting their 2014 forecast by 11.6% to $1,160 per ounce, and 2015 by 12.5% to $1,138. No surprise to the key thesis: Higher interest rates as a result of the global economic recovery gaining traction.
    • Mark Hulbert reports on the work of Claude Erb whose simple interest rate correlation model says the metal will plunge to $831 per ounce should the 10-year Treasury yield rise to 4%.
    • Mosaic (MOS) is downgraded to Sell from Neutral at Goldman Sachs, which maintains a cautious coverage view on fertilizer stocks underpinned by a negative outlook for corn and soybean prices over the next 12 months that will pressure farmer economics and 2015 acreage potential.
    • With MOS discounting $360-$370/metric ton potash prices in 2015, and down only 8% from the break-up of Belaruskali in late July, the firm believes shares already reflect an overly optimistic medium-term price recovery.
    • MOS -0.8% premarket.
    • Norfolk Southern (NSC) beats estimates for Q4 led by strong revenue gains across commodity groups.
    • Coal was the only commodity to lag behind last year's revenue total.
    • A strong auto industry in the U.S. helped Norfolk Southern boost general merchandise revenue by 12% during the period.
    • The company says it plans to increase its investment total in 2014 by 12% to $2.2B.
    • NSC +1.0% premarket
    • Former NHTSA Administrator David Strickland agrees with Tesla Motors (TSLA) CEO Elon Musk that a distinction should be made about the automaker's so-called recall of the Model S.
    • Strickland notes that with the changes coming from the sky (software) and via the mail (new adapters) the actions don't fit the classic case of a consumer driving their vehicles to a dealership for a fix.
    • After shares of Tesla took a tumble on the recall story, Musk tweeted that the word recall needs to be recalled.
    • TSLA +1.1% premarket
    • Delta Air Line (DAL +1.3%) could see margins move to record levels as the stars align for the carrier, say analysts with Morgan Stanley.
    • The industry is in a mode of conservative capacity and macro factors such as oil prices and GDP are in a Goldilocks scenario.
    • Delta's margin rate could see 12% for the first time since 1990s on its way to peaking by 2016, predicts the investment firm.
    • United Tech (UTX -1.7%) "Comprehensive income" $3.9B vs $1.27B a year earlier, which included greater restructuring costs and other one-time charges.
    • Organic sales +4%.
    • Sales breakdown: Otis $3.34B vs $2.205B in 2012; Climate, Controls & Security $4.19B vs $4.15B; Pratt & Whitney $4.09B vs $3.89B; Aerospace Systems $3.45B vs $3.17B; Sikorsky $1.9B vs $3.17B.
    • United Tech expects 2014 EPS of $6.55-6.85 vs consensus of 6.82 and sales of $64B vs $65.36B
    • Intends to buy back $1B worth of shares in 2014 and spend the same amount on acquisitions. (PR)
    • Textron (TXT -3.5%) net profit rises to $167M from $148M a year earlier.
    • Cessna revenue +2.4%, delivered 62 new Citation jets vs 53 a year ago. Profit +43% to $33M.
    • Bell revenue +20%, profit +0.6% to $178M.
    • Textron Systems revenue -28%, due to lower volumes, industrial revenue +9.5%.
    • Expects 2014 EPS from continuing operations of $2.00-2.20 vs consensus of $2.23, and revenue growth of 9% to $13.2B vs $13.11B. (PR)
    • Previous
    • Costco (COST -0.8%) could feel some pain due to their low reliance on e-commerce, warns retail consultant Jan Rogers Kniffen.
    • The retailer has seen its store traffic hold up well amid a soft retail atmosphere, but critics think it could be missing an opportunity even with online sales in the billions already.
    • Despite the jabs, it's unclear if the criticism is even anything that even bothers the company with execs maintaining that Costco's off-price business model doesn't translate perfectly to online selling.
    • "We don't believe everything will be online. It will be part of the panorama out there," says CFO Richard Galanti.
    • There is an air of caution with analysts over the pace of sales growth Starbucks (SBUX) will report for its FQ1.
    • Sanford Bernstein analyst Sara Senatore isn't the only one expecting a slight deceleration from recent trends.
    • Same-store sales in the U.S. could be a particular focus, with the general slowdown in retail traffic to stores and restaurants seen as likely to have encapsulated Starbucks as well.
    • Starbucks reports tomorrow with analysts expecting EPS of $0.69 on revenue of $4.3B.
    • SBUX -0.3% premarket and -5.2% over the last 5 trading sessions on earnings apprehension.
    • "The spinoff of the single-family rental segment into a separately traded public company (SWAY) will provide investors with the opportunity to purchase Starwood (STWD +0.3%) (and potentially STWD WI) at a discount to its intrinsic value of $34.50 (pre-spin)," says Compass Point, initiating Starwood with a Buy and $34.50 price target.
    • The 2nd catalyst is the potential for boosted dividend capacity thanks to the movement on LNR commercial servicing assets from a taxable REIT subsidiary to a qualified REIT subsidiary.
    • Previous coverage of Starwood and LNR
    • Previous coverage of SWAY spinoff
    • Brinker International (EATreports comparable restaurant sales rose 0.8% during its FQ2 with both Chili's and Maggiano's staying on a positive growth track in the U.S. unlike some restaurant chain peers.
    • The results were solid considering the major hit to traffic that was seen in December due in part to wintry weather.
    • The company managed to add to its sales results through price increases and a shift in product mix toward some new menu items
    • Favorable commodity pricing during the period helped pad Brinker's bottom line during the period.
    • EAT +7.0% premarket
    • Following the company's FQ2 report, Morgan Stanley reiterates an overweight rating on New Oriental Education (EDU -0.1%) and hikes its PT to $38 from $29.2 previously.
    • Analysts Philip Wan and Timothy Chan note the quarter's enrollment rebound (+11.8% Y/Y, up from FQ1's +2%) and continued margin improvement on the back of network optimization and "solid cost control."
    • Redbook noted in its report on retail sales that cold weather sparked demand for winter merchandise to above normal levels.
    • The trend favors Dick's Sporting Goods (DKS), Under Armour (UA), and Columbia Sportswear (COLM).
    • Shares of Michael Kors (KORS +0.7%) are higher in early trading after rival Coach sees a sales slump in North America.
    • During the Coach earnings call, execs admitted losing luxury market share to Michael Kors.
    • Coach (COHreports sales fell during its FQ2 as it experienced weakness in its women bags and accessories business in North America.
    • Revenue breakdown: North America -9% to $983M; International +2% to $425M.
    • The retailer saw strong growth in China during the period with comparable sales growing at a double-digit clip during the period.
    • Gross margin as a percentage of sales fell 300 bps to 69.2% in FQ2.
    • A shocking 13.6% drop in Coach's (COH) comparable store sales in North America is hard to reconcile with a luxury category that showed some resiliency during the period, note analysts.
    • The retailer gave almost no details on its outlook for 2014, but has a conference call scheduled for this morning at 8:30 a.m. EST (webcast) where it will be hard to avoid the topic.
    • COH -7.0% premarket
    • Execs with Coach (COH -7.1%) were on the hot seat during an earnings conference call after the retailer put in a dismal holiday season sales performance in North America.
    • They defended the power of the brand and the focus on factory stores, while still conceding rivals such as Michael Kors have taken market share.
    • The jump in the company's inventory was partially planned and not a direct result of the sales disappointment.
    • The view on 2014 EBIT margin is lowered to 26%-27% from 28%.
    • The company says it will have new designer products out later this year to re-ignite interest in the brand and will increase its retail footprint by close to 9%.
    • Earnings call webcast
    • St. Jude (STJ +0.4%) net profit edges up to $123M from $120M last year.
    • Unfavorable currency fluctuations hurt sales by $27M. On a constant-currency basis, net sales +6%.
    • Sales breakdown: cardiac rhythm-management +3%; implantable cardiac defibrillator +5%; pacemakers +1%.
    • Guidance:
    • Q1 adjusted EPS of $0.94-0.96 vs consensus of $0.95, and revenue of $1.28-1.36B vs $1.38B.
    • FY adjusted EPS of $3.94-3.99 vs $3.98, and revenue of $5.6-5.75B vs $5.64B. (PR)
    • Previous
    • Evoke Pharma's (EVOK) shares soar 29% after a Phase IIb study shows that the company's intranasal delivery of metoclopramide is better at managing the symptoms of diabetic gastroparesis compared with the pill version.
    • Gastroparesis is a disorder in which the stomach takes too long to empty its contents. Metoclopramide is used to relieve feelings of nausea or vomiting.
    • Evoke plans to start a Phase III trial soon.
    • No new treatments for managing the symptoms of gastroparesis have received FDA approval since 1980. "There are very few drugs in clinical development for this debilitating diabetic complication," says Evoke CEO Dave Gonyer. (PR)
    • Intel (INTC -1.6%) has been cut to Hold by Drexel Hamilton following last week's Q4 numbers. Drexel had only upgraded shares on Dec. 6.
    • Verizon (VZ -0.7%) has been cut to Sector Perform by Pac Crest following yesterday's Q4 results (III).
    • Red Hat (RHT +0.7%) has been upgraded to Outperform by Oppenheimer. Morgan Stanley upgraded shares last week.
    • Top in-flight Wi-Fi service provider Gogo has hired DragonWave (DRWI +18.2%) to supply it with its Horizon Quantum and Compact+ mobile backhaul radios. The radios will be used to link Gogo's remote towers to wireline networks. The deal builds upon an existing supply relationship between the companies. (PR)
    • DragonWave's shares soared last week after the company announced a partnership with Chinese wireless infrastructure firm Xi'an Potevio. They continue to trade well below their 2010/2011 levels.
    • "Disappointing" is the theme as the sell-side comments on IBM's Q4 results from last night.
    • "No near-term relief" is the title of Deutsche's note (and Deutsche is a bull on the stock). The company is likely to remain in the "penalty box" until it can show evidence of stability in hardware and improved execution in emerging markets and China.
    • Investors will likely mull over whether IBM will need to reset the 2015 Roadmap this spring, says JPMorgan, expecting shares to be under pressure near-term and lowering the PT to $175.
    • Credit Suisse reiterates its Sell rating and $160 price target on the weaker-than-expected numbers.
    • Shares -3.2% premarket
    • VMware (VMW -1.2%), parent EMC (EMC -1.3%), Citrix (CTXS -2%), and SAP (SAP-1.5%) are all lower following news of VMware's $1.54B acquisition of leading mobile device management (MDM) software firm AirWatch.
    • Citrix (thanks to the Zenprise acquisition) and SAP (through its Sybase unit) compete with AirWatch. As does BlackBerry (BBRY +4.6%), which remains higher following news of itsreal estate sale plans.
    • AirWatch's products, which also include mobile app management and security solutions, complement VMware's Horizon Workspace, which provides a secure, siloed workspace for business apps and files on mobile devices. With Citrix and SAP already offering an array of complementary mobile software tools for enterprises, VMware's move is in part an attempt to keep pace.
    • AirWatch, Citrix, SAP, and BlackBerry, along with other firms such as IBM (previous) and Good Technology, are trying to profit from growing enterprise interest in MDM solutions, which help companies cope with the ongoing bring-your-own-device (BYOD) trend.
    • In tandem with the acquisition, VMware has reported preliminary Q4 revenue of $1.48B (+15% Y/Y), slightly above a $1.47B consensus.  Q4 license revenue is expected to come in at $$687M (+15%), within a guidance range for 12%-16% growth. VMware's full Q4 results are due on Jan. 28.
    • Though its Q4 results beat estimates, Motorola Solutions (MSI -3.9%) is guiding for Q1 revenue to be down 4%-6% Y/Y, and for EPS to be in a range of $0.46-$0.52. That's below a consensus for 2.4% revenue growth and EPS of $0.77. Motorola is also guiding for 2014 revenue to be flat to up 2%, worse than a consensus for 3.2% growth.
    • Motorola's government sales (71% of revenue) rebounded a bit in Q4, rising 4% Y/Y afterdeclining 4% in Q3. However, the division's op. profit fell 4% to $332M.
    • Enterprise sales were flat after rising 2% in Q3. Op. profit rose 5% to $81M.
    • Gross margin fell 190 bps Y/Y to 48.4%. Thanks to job cuts, SG&A spend fell 8% to $471M, and R&D spend 6% to $272M.
    • Movie studios have bucked up for fewer Super Bowl ads this year after the companies have failed to get the bang for the buck in the past amid edgy competition for viewers' attention.
    • Sony (SNE), Lions Gate (LGF), Paramount (VIAB) all have spots lined up, while Disney (DIS) is still negotiating to add another two or three commercials for a slate of movies across its studios, but the overall number of movie ads will be lower than in the last few years.
    • What to watch: Media analysts think 2014 will see slight shift in spending by studios across properties as they try to shift away from the tired superhero/sequel model. However, they also concede that the year might be just a blip on the radar before the Star Wars franchise reboots and Superman teams up with Batman in a highly-anticipated Warner Bros. (TWX) film set for 2015 or 2016.
    • Amazon (AMZNdenies a report indicating the company has plans to launch an online Pay-TV service.
    • The Wall Street Journal reported yesterday that Amazon was in early discussions with several media companies over content deals.
    • Carl Icahn declares on Twitter he has bought $500M worth of additional Apple (AAPL +1%) shares over the last two weeks, raising the total value of his stake above $3B (still less than 1%).
    • He also makes a renewed call for a larger Apple buyback, stating the company's board "is doing great disservice to shareholders" by not signing off on one. Never scared to self-promote, Icahn promises to publish a new "in-depth letter" on the subject shortly.
    • Apple shares have ticked higher on the remarks. Last month, the company urged shareholders to vote against Icahn's Prop. 10, a non-binding resolution calling for at least $50B in FY14 buybacks. Apple's annual meeting is on Feb. 28.
    • More on Apple/Icahn

  63. SPY Mar 189 Calls…I am DD on them. 

  64. Based upon APC note above in Phil's long summary….buying Feb 85 Calls.  1.93 now.

  65. You're welcome Shadow. 

    BRCM/Albo – That one's in our Income Portfolio, overall trade is still doable:

    Submitted on 2014/01/07 at 10:32 am

    At least BRCM is nice enough to give us a good entry.  Crappy dividend so I think we can make our own by buying the 2016 $25/32 bull call spread for $3.20 and selling the $25 puts for $3.10 for net .10 on the $7 spread that's $4 in the money to start and we can buy 20 of those and pay ourselves a dividend by selling 10 Feb $30 calls for .82 and that's $820 paid out on a $200 cash investment – not a bad start.    That will be the first official play for our new Income Portfolio! 

    DRWI/Albo – Great call by you and Bert!  

    Oil/Advill – The petroleum is being exported tax and duty free UNLIKE  any other oil in the World.  Rather than compare the US cost to the OECD, how about comare us prices to other petroleum producers?  

    I agree we SHOULD tax oil up to $8 a gallon and put $5 a gallon into subsidies for the poor and solar research (would generate $500Bn a year in revenues) and then people would learn to cut down on their own but the point is that it's not fair that we are the World's 2nd biggest producer and we're one of the World's biggest exporters now but our gas prices are RISING, not falling.  It's not what the drill, baby, drill crowd promised us – that's for sure. 

    BBY/Pwright – Tempting.  I did say we'd give it the weekend and they look like they can hold $24.  I'd go simple, selling the 2016 $23 puts for $5.25 with a stop at $7 and let's do 10 of those in the Income Portfolio as we're just risking $1,750 to collect $5,250.  

  66. IRWD Feb $15 calls…trying to sell for 75c.  That will close out that trade….very nice.

  67. Armchair trade for the layed back trader

    1. LO buy the BCS Jan15 43.33/50 for 4.35 and sell the Jan15 48.33 putter for 4.15

    2. Buy stock and enjoy the 4.3 % yield sell the Jan16 50/47.5 strangler for a 12$ discount and sit back and smoke your div.for two years

  68. Hedging/BDC – Good plan!  

    APC/Pharm – Not a bad idea.  

  69. CL- Keep in mind that the oil we are producing in the US lately is a result of high prices over the last few years— its expensive to get out of the sands,shale etc. If oil drops to the low 80s for more than a few months,  I think many of the sands and shale companies will pack up and go home.  LONG TERM , keeping oil in the 90s will create more exploration etc  thereby increasing our domestic supply.  Don't expect the government to do anything BUT support  artificially high oil prices—- I think crude would have to go to 150 before they made a fake showing of investigation.

  70. Phil re: BBY: thanks! 

  71. Is anyone else having problems with the TOS DDE in Excel?

  72. High oil prices keep exploration active. Oil production is up because of first horizontal drilling and second fracturing rock formations. Both are very productive and cost a fraction of vertical drilling over and over. In many places production has increased on old wells from shut down or stripper to higher production than ever. Most drilling in the last few years has been for natural gas. One method to play with numbers is sell the old non-productive well to a subsidiary that redevelops it but the cost to purchase was actually a profit to the main company. It is shocking how many of these small outfits all contribute to big oil and one guess who backs it all. It is another scam.

  73. Phil – in keeping with your TASR theme – I wonder what you think of CXW? 

    Yodi – you may like this one also – BTW I've been with you on LO and RRD for a long-time now.

  74. Fundamental Trading Webcast Recap (Replay available here):

    We concentrated on Futures Trading yesterday and this will be a monthly feature in Future Webcasts.  It is our hope that you can add this valuable tool to your trader's toolbox!  

    While we were doing the webcast, we literally made over $100 in less than 30 minutes of sample trading – that was just while we were demonstrating!  

    In our 12/31 recap, we discussed trade ideas for AAPL and LGF – both have really taken off this week.  We also discussed puts on GOOG and WYNN that are not going so well but, of course, we also had our "5 Top Macro Trade Ideas for 2014" and those are off to a great start already, after just 3 weeks.  

    While we are still "Cashy and Cautious", we are adding trades to our virtual portfolios and, at the moment (1pm on 1/21), our Short-Term Portfolio is down 0.4% ($400) and our Long-Term Portfolio is up 0.9% ($4,400) and we're still only using about 20% of our buying power, so plenty of time to start following as we have a very full year of trading ahead of us.  

    In the Long-Term Portfolio, we discussed our ""5 Inflation Fighters Set to Fly " trade ideas and, of that group, we decided to go with:

    • Buying 10 DBA 2015 $24/28 bull call spreads for $1.10 ($1,100) and selling 10 CAKE July $40 puts for $1.30 ($1,300) for a net $200 credit and what could be a $4,000 spread if DBA is at $28 or higher next January.  The possible gain on this spread is 2,100% and the net margin on the short puts is about $4,000 but, if all goes well – we only need the margin until July (assuming CAKE stays over $40 – and it's off to a good start today)!  

    We did not have a new trade for the Short-Term Portfolio but today oil hit our target of $96.50 and that does make us want to play it short:

    • Buying 5 SCO (ultra-short oil) March $32/35 bull call spreads at $1.20 ($600) and selling 5 SCO March $32 puts for $1.30 ($650) is a net .10 ($50) credit on the spread.  The potential gain on this trade is $1,550 and, if that sounds amazing – it is!  This is why we want to teach you how to BE THE HOUSE – Not the Gambler!   The risk is being assigned 500 shares of SCO at net $32.90 ($16,450) but we would stop out of the trade long before that happens.  SCO is currently at $32.68 so we're essentially betting oil stays below $96.50 into mid-March.  

    We're leaving enough room on SCO to roll or double down should oil go back near $100 and drive SCO down to $30.  Keep in mind that, even if we are assigned 500 shares at $32.10 and SCO is at $30 – we're only down $2.10 per share ($1,050) – not so terrible.  People don't like selling puts because they fear being assigned, but that's all it is – not a big deal.  As we get more experience, you'll see it in action. 

    Keep an eye out for Alerts and read our Macro Market Overview for other trade ideas during the week and follow us on Twitter for special PSW features, like yesterday morning's Futures trades that made $500 per contract on the Dow and $1,000 per contract on the Russell and with Oil.   That was just our morning!    

    We don't track every trade but we do have plenty of great trade ideas all week and we have in-depth discussion of our strategies during the Weekly Webinars, which are always available for review at your leisure. 

    Should we have any adjustments to our Portfolios, you can expect an Email like this one but, hopefully, we'll make plenty of money by just leaving them alone because we are - BEING THE HOUSE, Not the Gambler!  

    All the best, 

    - Phil

  75. Hi all,

    Phil, do we like anything in MCD for earnings tomorrow before open?  I don't like the strangles much but can't decide if i'm bullish or bearish.  

  76. A 'tsunami' of store closings expected to hit retail.  Will this cause REITs to collapse?

  77. Rookie – Thx for posting.  It also makes me wonder about our SHLD premise.  (That the value of their real estate is worth way more than their current market cap).

  78. LO/Yodi – We need to pick a few new dividend payers.  

    Oil/Hummer – Oil sands production is a bit of a game-changer.  Production costs for tar sands is about $28 per barrel, putting us on par with the Saudis but, if we mined it at the levels the oil majors would like – our air and water would look like China's or, even worse, West Virginia!  They're not going to take their toys and go home at $85 or even $75 per barrel.   Also, there's more oil being produced world-wide than is being consumed.

    The export issue is that we can produce gasoline (due to cheap oil and low taxes) cheaper than other countries, so there's money to be made exporting it, which makes it more expensive locally.  Taxes and export duties are meant to balance the equation and keep you supplied locally BEFORE you start exporting – but not in this broken and corrupt system. 

    Also, there are many supply disruptions in progress in various OPEC nations – so lots of capacity still to come back on line:

    But don't worry, we'll just stop importing and export more to keep oil looking scarce at home:

    You're welcome Pwright.  

    Scam/Shadow – Very true.  

    CXW/Gbase – I'd stay away from that sector.  Even if they don't mitigate the sentences of millions of people who are in jail for pot, they won't be arresting new ones to fill the cells.  70% of our prison population is non-violent drug offenders.  That's the main reason our prison population is so out of control compared to other countries.  

    MCD/Rdn – I can't decide either, which makes them a "no play" hopefully they have a nice miss and get cheap but I wouldn't make a bet on them.  

    Dollar 81.31 but not hurting the markets yet.  VIX 12.96, TLT 105.26 – no panic.  

    Store closings/Rookie – Depends how fast they come on the market but it isn't going to help.  Keep in mind there are probably 1M stores in the US so when someone closes 1,000 stores, I'd have to think 50,000 a year must close anyway through normal attrition (and 50,000 open, of course).  If it's the big box guys, that space is harder to fill but some Chinese guys just bought 80 acres in Las Vegas for Retail/Casino, so there's millions of square feet off the market in one deal.  Also, we're not building any new space – that's a big deal:

    SHLD/Palotay – I still like them.  

  79. Earnings tonight and there are some good ones:

    Consensus – $0.80
    Whisper – $0.81
    Average move / predicted by options – 6.4% / 6.2%

    Consensus – $1.19
    Whisper – $1.21
    Average move / predicted by options – 9.4% / 7.8%

    Consensus – $0.65
    Whisper – $0.71
    Average move / predicted by options – 13.3% / 9.9%

    Consensus – $1.57
    Whisper – $1.68
    Average move / predicted by options – 11.8% / 6.3%

    Consensus – $2.08
    Whisper – $2.13
    Average move / predicted by options – 6.2% / 8.7% (Feb options)

    Options don't seem to pay for the potential risk. Strange with NFLX after what happened the last couple of earnings.

  80. Quote of the day – confirms my notes about LULU and TGT yesterday:

    Joshua Brown, “After all, prices only loosely reflect fundamentals and spend the majority of the time trading at either reckless premiums or absurd discounts to them…should we really be expecting a stasis of reasonable valuation to be the norm for any appreciable stretch of time?”  (The Reformed Broker)

  81. FSC/Phil – re dividend payers, FSC is paying out ~1.00 year, a bit higher than their various EPS calculations and cash flow from operations doesn't cover it either, and income is from 'financing.' What's going on here? How do (can?) they sustain this? Oppty or "stay away!"?

  82. OIL/ Phil, SnJ


    Good answer, what in my point of view is coming is that peak oil moment is brutally pushed well  into next century, a glut of  shale gas and shale oil is coming in a decade as many other countries will find it, actually prospections cover from Norway to Israel, form Poland to Canary Is. there is a rumor that below  Paris is a vast shale gas deposit, same is happening in Russia, Mexico or China…etc

    So exporting gas will be a must for U.S producers and still there will be no special risk of price for U.S consumers.

    By the way /CL going up all day!

  83. PCLN – man, selling puts on this dude has been a gold mine for me the last few weeks.  Not for the faint of heart, but when it works it really works.

  84. MM – It seems like yesterday that PCLN was breaking 1000 for the first time.

  85. Phil // SCO

    BTW – Original call was for short $32 puts ==

    ""Buying 5 SCO (ultra-short oil) March $32/35 bull call spreads at $1.20 ($600) and selling 5 SCO March $33 puts for $1.30 ($650) is a net .10 ($50) credit on the spread. ""

  86. Also, on vacant space.  Having been in the business there's a factor that's not noticed that I think is in play here – there's such a thing as "dead malls" and what does a dead mall do?  While it's classified as "vacant" commercial real estate (and doesn't bode well for the REIT that owns it), it's really not because it's unlikely anyone will fill it so what it does is decrease the total amount of CRE in the town.  A town can recover but it can be a long-long time until the mall space comes back on the market.  In my area, we have NJs dreaded Xanadu project and the Nanuet mall – both dead.   Even when I went to school in Amherst ('80s) we had "the dead mall", which was only a few miles from "the mall" but, despite a lively town in a recovering economy, it never did fill back up (just a movie theater and a few food vendors).  

    Earnings – Too early to make picks and we don't like it when the average move is MORE than the options give us.   Low VIX is the culprit here, as well as just general low volatility in this silly, fakey market.  

    I'm surprised EBAY has gone nowhere for a year.  They missed the market rally but, then again, they did go from $30 to $55 in 2012.  Next year's p/e is 17 with $3 a share expected and, if they are on track for that, they should have no problem holding the 200 dma at $53.  You can sell 2016 $45 puts for $4.30 for a net $40.70 entry and that's 27% off the current price and TOS says $4,200 net margin so not a bad way to go and, if they go lower, then you can add a bull call spread. 

    FFIV – Nice recovery, which is a shame as I'd like them if they were still $75.  When they had their big dip, we sold the Aug $77.50 puts for $2.16 and those worked out great but we never went back to the well.  

    NFLX – Wow, they might earn .70 per $332 share!  So 4x.70 = $2.80 – only 118 years like that and you're on your way to getting a return on your money!  If they are HOPING to add 2M subscribers in a quarter and they currently have 31M subscribers, which is as big as HBO but I'm not sure how good that is since HBO has been going at this for 30 years and plateau'd here.  So, if they add 25% more subscribers every year AND raise prices 20% per year then earnings go up about 50% a year (being super-optimistic) and that's about $4.50, $7, $10, $15 – so 2017 until their p/e is in the 20s but they need to go from 30M to 45M to 67M to 100M to 150M subscribers to hit those numbers – all without having their business disrupted, facing competition, cost inflation or any kind of reality at some point along the way.  Now you can see why I'm relentlessly shorting them… (and TSLA!).   See above for NFLX earnings short.  

    SNDK – Very tempting short at $72 but I have no particular reason to short them other than they were at $40 last fall but maybe they were undervalued then (we liked them at the time).  

    WDC – Another one we used to like but is now ridiculous.  Still, they have hard drives in DVRs and TVs and cars and all those surveillance systems we have around the country now and industrial robots and cameras and, of course, servers for all those Apps out there.  So, in short, same outlook as I had last year:

    WDC/Scott – Not really as there's certainly no reason to short them at this valuation.  While I understand why you see a "channel" that they are on top of, the fact is that they are priced the same as they were 20 years ago and 5 years ago while earnings and revenues are significantly higher now.  They have an $11Bn market cap, $3.5Bn in cash and about $2Bn in debt after buying back $750M of their own stock in the last 2 Qs (maybe more this Q) and they still dropped $329M to the bottom line on last earnings, which is why they popped from $32 to $36 on that report and now $45.  We liked STX and WDC when they were beaten-down and not as much up here but no way would I short them based on a chart.  

    FSC/Scott – To like them you have to like the overall business climate.  Look how fast they fell apart in 2011 when we had a little turn-down.  It's not my kind of thing – at least REITs and Trusts have assets when things go bad – these guys just end up with unpaid loans.  

    Oil/Advill – But, in a fair market, we should be paying much less, that's the issue.  Also, from an energy security standpoint, I'd just as soon hang on to the oil we do have and import as much as we can for now.  

    Oil is up today as it's the first day of the new contract and they have no pressure at all.  That's why we don't generally play much in the early part of the cycle but $96.50 did seem like a fair line to take a crack. 

    PCLN/MrM – Just stay away from earnings (though they will probably do well – just in case not).  

    SCO/Wombat – Thanks, I did fix it but a problem with our new system is the page doesn't reload unless you make a new comment so you don't see fixes.  

    Well, it's a constructive day.  RUT testing 1,180, S&P over 1,840, Nas stays up and the Dow right at 16,400 – and they did it without a weak Dollar and with rising oil and we ignored IBM too.  Could be we need to get much longer! 

  87. PCLN / MrM – Not for the faint of heart indeed… A market event would be scary I am sure…

    • So says the country's Beige Book – a quarterly survey of Chinese businesses and banks. Banks have money to lend, but "fewer and fewer firms are doing any borrowing … credit is largely being siphoned off by a privileged elite." As the pointed remark might indicate, this Beige Book is not a creature of Beijing, but instead a private effort.
    • "Bankers and the government may insist the credit spigot remains open, but it is not open for most and liquidity is not financing genuinely new economic activity.”

  88. WIN, an old favorite – now 7.66 and you can sell the 2015 7 calls for .80 and 7 puts for 1.30. Yield is 13%

    • HSBC cuts its 2014 price target for gold to $1,292/oz. from $1,435 and its 2015 forecast to $1,310 from $1,395, downgrading Barrick Gold (ABX -2.1%), Yamana Gold (AUY -2.6%) and African Barrick Gold (ABGLFABGLY) in the process.
    • ABX may benefit this year from new mine plans which could radically improve near term cash flow, but this likely will come at the expense of reserves and mine life, the firm says in cutting shares to Underweight with a $16.50 price target (from $19.60).
    • AUY enjoys low average costs but the firm believes this is more than factored in, and cites the relatively small production base and concerns about long-term sustainability of profitability at El Penon in lowering shares to Underweight with an $8.20 target (from $9.60).

  89. HSBC gold downgrades – well we know those guys are crooks anyway. can't be trusted.

  90. Phil,

      Do you like HOV for a buy/write at this point?

  91. Don't forget part of why retail stores are closing is internet sales are rising. Even that not skyrocketing UPS. So at some point the retail space becomes potential for e-commerce that will never pay retail leases. So think of small town ghost towns as a model for former retail malls. That seems to say retail holdings are in a declining market.

  92. NFLX going ape.

  93. NFLX 50$ up after hours sorry about your negative outlook Phil

  94. Oh please please please NFLX be at 400 at the open so I can sell some calls…

  95. HOV/Kev – $5 is my number but it's been a while now and the way they bounced back from $5.81 yesterday – I'm not sure they get there.  Still you can sell the 2016 $5 puts for .90 and buy the $5/10 bull call spread for $1.45 and that puts you in at net $5.45 with plenty of upside.  

    WIN/Jomp – Nice little dividend payer.  

    OK, earnings time. 

    NFLX up 10% on good growth – $380!  Have to read the whole thing but sounds good with 2.31M additions.  44M global subs (good growth outside US).  This is the biggest deal (which will be chewed over by tomorrow):

    Net Neutrality Unfortunately, Verizon successfully challenged the U.S. net neutrality rules. In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The motivation could be to get Netflix to pay fees to stop this degradation. Were this 
    draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver
    The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination.  ISPs are generally aware of the broad public support for net neutrality and don’t want to galvanize government action. 
    Moreover, ISPs have very profitable broadband businesses they want to expand. Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video. ISPs appear to recognize this and many of them are working closely with us and other streaming video services to enable the ISPs subscribers to more consistently get the high-quality streaming video consumers desire. 
    In the long-term, we think Netflix and consumers are best served by strong network neutrality across all networks, including wireless. To the degree that ISPs adhere to a meaningful voluntary code of conduct, less regulation is warranted. To the degree that some aggressive ISPs start impeding specific data flows, more regulation would clearly be needed.

    Doesn't make me feel more comfortable.  

    NFLX/Yodi – As noted in the earlier article, this may be their last good Q – we'll see what happens but certainly better than expected earnings with a big squeeze on the shorts.  

    • Netflix (NFLX) soars in the after-hours session after beating on both lines with its Q4 report and showing plenty of momentum with subscriber growth.
    • The company added 2.33M subscribers in the U.S., compared to the company's guidance for a gain of 1.61M-2.41M subscribers. Analysts expected U.S. subscriber additions of around 2.05M.
    • International net additions during the quarter came in at 1.74M, up 300K Q/Q and down slightly from the year-ago period.
    • Streaming margin was 23.4%, just ahead of guidance of 23.2% and down 30 bps Q/Q.
    • The forecast for Q1 2014 is for an addition of another 2.25M subscribers in the U.S. and 1.60M international subscribers.
    • Netflix shareholder letter (.pdf)
    • NFLX +13.5% to $378.80 AH
    • SanDisk Corporation (SNDK): Q4 EPS of $1.71 beats by $0.13.
    • Revenue of $1.73B (+12.3% Y/Y) beats by $30M.
    • Shares +2.3%.
    • Press Release

    Earnings are coming in pretty good this evening.  

  96. EBAY not waiting for earnings – jumping to $55. 

  97. These are all the first excitement shots all will calm after a day or two BUT if NFLX can jump 50$ in one shot think what can happen with AAPL!!!! People must be full of the new POT distribution

  98. NFLX up 16% now – options certainly didn't price that move! You really can't short these momos… Unreal!

    Of course, last time they made a similar move and retraced the next day!

  99. Retailers longing for a more secure credit card/smart chip based credit card.  Will that harm the CC companies like MA/VISA in the short run?

  100. EBAY over $58 now and we have Icahn making comments about spinning off PayPal. How is that legal for a guy who owns close to 1% of the stock to keep on making comments like that? Just like AAPL – he bought more 2 weeks ago and he tweets about it today, moving the stock up. Unreal…

    But in any case, good for EBAY!

  101. Why bother with net neutrality when can have this kind of speed:

    BT still has a long way to go until it connects all of Britain's homes to its fiber-optic network, but that hasn't stopped the company from exploring new ways to squeeze some extra speed out of it while it does. With a little help from friends at Alcatel-Lucent, BT boffins have created what they believe is the fastest-ever "real-world" internet connection, clocking speeds of 1.4 terabits per second using readily available hardware. If you're wondering how fast that is, the telecom giant says the network can transmit 44 uncompressed HD movies in a single second. While the project currently exists purely as a speed test, BT and Alcatel-Lucent are already talking up the possibilities of improving existing services like Infinity without having to dig up roads, potentially delivering broadband that can handle an influx of Ultra HD content on Netflix with less chance of suffering connection issues.

  102. Icahn/StJ – That guy is unreal.  He's like a kid in a candy store with these new regulations (or lack thereof).  

  103. If that NFLX move sticks tomorrow, there might be a mad short squeeze in that stock… I would not rush to short it. And besides, Icahn also owns that one, he might tweet tomorrow that he has 2 NFLX accounts himself and send the stock up $50 more!

  104. phil, i thought your suggestion for the NFLX trade was a good one and followed it, but only one Feb short $360 call and one 2015 $370/$400 bull call spread.  what would your suggestion be for working my way out of the position.  wait till things settle out..or take some action into the excitement in the am?  TIA

  105. NFLX/Lunar – It depends where they open but I'd be aggressive and cash the long call and leave the two short calls but it is risky, of course.  Either way, patience is a virtue but, if you think you might want to roll, then step one is to sell the March $400 calls (assuming they are around there) and then put a stop on the Feb calls above $400 and then we can see if it's necessary to add another long spread.  Remind me pre-market and we'll have a better idea what's going on.   

  106. Proof that these top 1% guys are completely disconnected from real life:

    O'Leary, the businessman and reality television star, reacted to the report with glee earlier this week on the eponymous Canadian talk show, "Lang and O'Leary Exchange."

    "It's fantastic and this is a great thing because it inspires everybody, gets them motivation to look up to the one percent and say, ‘I want to become one of those people, I’m going to fight hard to get up to the top,’” he said. “This is fantastic news and of course I applaud it. What can be wrong with this?”

    The reaction from O'Leary's co-host, Amanda Lang, said it all.

    "Really?" she said. "So, someone living on a dollar a day in Africa is getting up in the morning and saying, ‘I’m going to be Bill Gates’?”

  107. FFIV up over 10% now – again options didn't plan for that move…Getting a little expensive here!

  108. StJ:  I hope you [and PSW] will forgive me for posting this lengthy, rather off-point [of investing] comment I clipped from a non-investment-related discussion on the definition of psychopathy.  It really caught my attention — whether it's essentially correct or not, it is certainly creative!!   As Phi often addresses the behavior[s] described, I thought it wouldn't be entirely inappropriate to post it.


    [From Science News]  



    "Dr. Hare suggests in his writings that clinical psychopaths constitute ~1% of all live human births. Clearly, he sees this as an inherent characteristic of Homo sap's genepool. If we add in the apparent 200cc cranial shrinkage of the Humanzee brain between 50K-40K BCE, we might easily project from there the psychopath dominated, fascistoid hierarchical structure built upon the obedience to mindless self-serving manipulative Authority demonstrated by the majority of the currently extant humans in any human identity group now on planet. Given that this slide toward antlike automatonism favors an army-ant like efficiency and coordination which would easily overrun any simply "co-operative" social structure, we might understand how we were able to eventually overcome what must have been (by our own comparisons of ourselves against all other animals) our cranial and intellectually superior (but 'co-operative', non-homocidal) cousin, Neanderthal. 'Group primary identity' has replaced species primary identity in the Humanzee. This allows us to mass murder each other."


    "As we have seen throughout our recorded (and earlier developmental) history, co-ordinated, mindless violence has always been successful over more 'co-operative' societies. We might look only to ancient Jericho or modern Palestine or thousands of other historical narratives as examples of what actually works in the 'human world'. It's to suppress this trait, this characteristic Humanzee behavior, that the U.S. Constitution (and a few other historical examples) was written. But, as we see so obviously, the call of our ancestral (and universal) inherent group pattern is stronger than our individual ability to maintain the behaviors promised in the Constitution, and America itself is reverting both privately, as it has always been, and now publicly to an open acceptance of our psychopathic 100% parasitic elite which, in fact, is its own distinct identity 'subgroup' composed majoritively of the very mentalities this article discusses."


    "Can anyone reading this article who has examined the concept of psychopathy deny that our universal group identity structure (America, North Korea, the Catholic Church (multiplexed subhierarchy), Communism, Facebook (corporate), and on and on) has psychopathy designed right in . It's also been pointed out that if you divide a large room full of randomly chosen human individuals into, say, Groups A and B, it is very easy to manipulate these two groups into competitive attitude between them, it's almost automatic. Nothing demonstrates the root of collective human behavior more than this simple fact: a herd of easily manipulable units managed by a consistent (~1%) genepool output of highly effective and amoral (psychopathic) manipulators whose only drive is brainstem level 'greed'. The single most defining and most highly prioritized collective behavior of "G-d's Gift to the Universe" after 1) f**king and 2) gorging is 3) cospecific mass murder. 'Creative thinking' is so far down the list of collective human priorities that it verges on deviance."


    "Given that the emergence of external data storage circa 8-6000BCE ('writing', relieving the burden (and "selection pressure) of carrying an entire 'civilization' exclusively in the heads of its constituents) has geneticists saying that our craniums are shrinking further, our future on this planet has a serious negative note built right into our evolutionary pattern. The more collectively stupid we become, the more obedient to psychopathic Authority we become and the more rigid and narrow we become in our responses to change."


    "Any 'biologist' who has graduated even high school knows what will inevitably happen to an increasingly rigid and narrow approach to a context in endless and sometimes very rapid flux. Our current universal, partially inherently hierarchical psychopath-dominated social structure is killing us. One could almost see this as Quality Control built right into our Universe. If we can't pass this test of using our 'intelligence', if we do not have enough 'intelligence' to redesign our collective structure into a sustainable, equitable form such as T. Jefferson, et al, attempted to do (and obviously failed), we do not deserve to be here, and, we won't be. But, who cares? This will be a problem for our poor befuddled great-great-grandchildren and who gives a good gahdam about THEM!!!"


  109. From Bloomberg, Jan 22, 2014, 5:15:23 PM

    Regulators are starting to scrutinize Warren Buffett’s Berkshire Hathaway Inc. to determine whether it is important enough to the financial system to require Federal Reserve supervision, according to two people with knowledge of the matter.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  110. From Bloomberg, Jan 22, 2014, 5:11:43 PM

    The New York Yankees gave Japan’s
    Masahiro Tanaka the fifth-richest contract for a pitcher in
    Major League Baseball history in an effort to bolster their
    starting staff after missing the playoffs last season for just
    the second time in the past 19 years.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  111. From Bloomberg, Jan 22, 2014, 5:09:40 PM

    Netflix Inc. (NFLX), the world’s largest subscription streaming service, projected better-than-expected subscriber growth and said it may change prices to reduce account sharing. The stock soared 18 percent.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  112. From Bloomberg, Jan 21, 2014, 6:00:00 PM

    More Davos Coverage >>

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  113. From Bloomberg, Jan 22, 2014, 12:29:41 PM

    More Davos Coverage >>

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  114. From Bloomberg, Jan 22, 2014, 8:10:22 AM

    Shehu Bello leaned on a staff as he stood guard over his two dozen head of cattle grazing outside Nigeria’s capital, Abuja, and spoke grimly about his two main adversaries: farmers and desertification.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  115. Sent from Bloomberg for iPad

    Watch this video at

    Gersh: Bitcoin Obsession Is Fascinating
    Jan. 22: Lisa Gersh, former CEO at Martha Stewart Living Omnimedia, discusses the allure and mystery surrounding Bitcoin.

    Download the free application at

  116. Sent from Bloomberg for iPad

    Watch this video at

    This Man Won $15M at Blackjack, How Did He Do It?
    Jan. 21 (Bloomberg) — Las Vegas high roller Don Johnson wins millions playing blackjack. He doesn’t lie, cheat or steal. He just knows how to play the game. Learn how one gambler transformed himself from mediocre card player into the man who won $15 million from some of the biggest casinos in the business. “The Player: Secrets of a Vegas Whale” debuts Tuesday, Jan 21st at 9pm ET/PT. (Source: Bloomberg)

    Download the free application at

  117. From Bloomberg, Jan 22, 2014, 1:05:31 PM

    Starwood Hotels & Resorts Inc. (HOT)’s
    North American hotel occupancies are at a record, giving the
    owner of the Sheraton and W brands greater ability than ever to
    raise rates in the region, Chief Executive Officer Frits van Paasschen said.

    To read the entire article, go to
    Sent from the Bloomberg iPad application. Download the free application at

  118. Psychopaths/ZZ – Reminds me of one of my favorite songs (disturbing video):

  119. Did you see the movie "7 Psychopaths"?  It was pretty good.  

    Perhaps humans have a built-in self-destruct mechanism as a species and perhaps, from the point of view of Mother Earth, that's a good thing?  

  120. Icahn / Phil – I know we bitch when Musk tweets about TSLA but at least he owns the company… Icahn is much, much worse. This guys buys into a company then a couple weeks later he tweets that he has a plan to get more value for shareholders. Stock goes up… He then asks for directors on the board and starts a fight, touts he plan some more. Stock goes up. And then 6 months later, he mentions that the board would not listen to him so he bailed out a month earlier. Stock tanks… It's a pattern with that guy. As the guy was saying on Fast Money, he loses the proxy fights but makes a ton of money. I just don't understand how that can stay legal or for that matter how this guy can sleep knowing that he screwed so many individual investors along the way. Not a good guy… Why can't these billionaires all be like Warren Buffett or Bill Gates for that matter?

  121. StJ:  Um, because most of them fit the profile set forth in my comment, supra?

  122. So true, Zero! 

  123. And actually Zero, because of the new elections laws here, these guys have more influence than before and could be hastening that self-destruction mechanism that Phil talks about. I wonder what the point is to accumulate all this money if your grand-children will have to live in a hellish world where countries will fight over food and water! Psychopathy is just "one" of many issues there.

  124. Can anyone recommend a good set of noise cancelling headphones that are good for listening to seminars online?  I am taking some classes online, plus would use them for the weekly seminars here.  Good for use on an airplane with the iPad/iPhone a bonus.  Thanks for the help ~

  125. NASDAQ and Russell off to the races and with today's earning results, we could see more tomorrow. Actually I should be drawing a 27.5% line and a 17.5% line but I am still hoping for a correction so I am procrastinating. We might need new lines Phil…. 

  126. retrying – comment under moderation – I took out the possible offending word

    Can anyone recommend a good set of noise cancelling headphones that are good for listening to seminars online?  I am taking some classes online, plus would use them for the weekly seminars here.  Good for use on an airplane a bonus.  Thanks for the help ~

  127. Headphones / reperi – Check there:

  128. rperi:  I use the Bose.  They work very well — I've had others — the cord unplugs from the headset [they give you two of them] so you can wear them for just noise cancelling, and the music quality is good — I spent a plane ride a few days ago listening to music downloaded onto my Samsung phone card from my computer.  Noise cancellation reduces transportation-noise fatigue considerably, music aside.  Occasionally I'll even wear them on the street.

  129. P.S. I use the Quiet Comfort 15, I don't like stick-them-in-your-ear headphones, because sometimes I actually wear earplugs under the headset to really dial up the peacefulness factor.

  130. Phil:  Being a new member and seeing your trade ideas, I have made it a policy never to sell naked calls.

  131. Phil / NFLX
    Been watching from the sidelines this whole time. IF I were to commit to small NFLX position, what you suggest ? I am willing to be very patient – obviously. I have no positions at this time but can't believe the jump and your fundamentals.

  132. rperi / headphones – I'll second zeroxzero's endorsement of the Bose QC15s. Excellent. I use the QC3s, both for really paying attention to what I want to focus on and also when I just need to drown out annoying sounds (crying children, construction, leafblowers, etc) and I have yet to find the equal of the Quiet Comfort 3 setup. Putting them on is like going on a brief tour of what its like to have that undisturbed quality exuded by zen monks who are seemingly impervious to external distraction.

  133. Thanks all!

  134. Good morning!  

    Futures were dipping but all better now that Europe opened and Dollar has collapsed to 80.97 – that's down about half a point and making things look pretty on indexes and commodities.  

    Gold touched $1,235 again (/YG) and, of course it's heading higher now with the Dollar collapsing.  Oil was as low as $96.40 but back to $96.75 now (/CL) and a good short as soon as the Dollar stops falling (about now!).   Obviously, if the Dollar is rising though, it's time to get off the gold long! 

  135. EBAY seems to have calmed down around $58 but NFLX still $393 – very near the high.  As noted by StJ, last earnings they popped from $320 to $389 – but only for a day and they were below $320 by the end of the week.  Today is going to be a fantastic day to buy NFLX puts – if you dare! 

    Secure Credit Cards/Rookie – Think of the cost of sending out new cards to 100M people and the machines to read them!  Developing (probably already done), testing, distribution – nasty business.  

    Icahn/StJ – At this point, I'm pretty sure he looks for companies he CAN comment about for opportunities.  Any stock where he can cause a squeeze by talking about some kind of spin off.  If this catches on, it's going to make things a much bigger mess than they already are with all the Billionaires and Fund Managers jockeying to get on TV and make wild speculations about companies they are playing in. 

    Speed/StJ – So cool!  

    O'leary/StJ – I HOPE he was joking!

    Hellish World/StJ – That's the problem though, as O'leary notes, HIS children and grandchildren won't live in a hellish world, they'll live in an exclusive, gated community that looks down on the hellish world.  Far from being a disincentive, it motivates him to be even richer to insure his offspring will never be one of "them".  That's why those same people go insane when you mention taxing inheritance or allowing poor people to go good schools (where they might come in contact with their children or, even worse, learn to compete with them).  

    Headphones/Rperi – I'm on my 4th pair of Sennheisers, the PCX 250s.  They are a bit fragile (though, to be fair, this is from over 1M miles of travel over 10+ years) but they are light and comfortable and have great sound and they fold up!   Those are my favorites.  I also have the less-obtrusive Bose QC 20s, they sound very good for small ones.  The best sounding headphones I ever bought were this big old pair of Bang and Olufsens, those are 25 years old and I still have them but they are only good for home as you may as well have a helmet on….

    Good policy IHS!  

    NFLX/Wombat – I think there may be cheap puts to buy – that will keep us out of too much trouble.  We'll see what comes up.  Maybe a bear put spread will be mis-priced.  

  136. Meanwhile, woo-hoo on gold, flying up to $1,246 and stop should now be $1,245.  If you wonder how I can get motivated to get up this early – this is how!  That's why I'm planning to retire in Europe, I could get up at 6, which is 1 or 2am over here, read my paper, go have breakfast and sit back down at 8 or 9, make a couple of futures trades and I'm done for the day!  

    Dollar down to 80.915 but oil may be done going higher at $96.85.  Of course we prefer to play the cross below $96.75 or the rejection off $97 so – patience!  

    The RUT looks like it's going to fail 1,175 and very likely it will if the Dollar stops falling (/TF) and, we missed /NKD which, of course, hated the Dollar falling and dropped from 15,995 to 15,700 – a nice $1,500 move for the night-owls.  

  137. Phil – have the build a better berkshire docs gone out?

  138. [image]Speaking of oil, in the last few days we had the IMF raising their Global Outlook, lots of happy noises from the Billionaire's club at Davos and the IEA put out a report saying that accelerating global economic growth would suck up the additional supply of crude, which is total nonsense but they still said it.  The reality is they literally only raised their consumption forecast by 90,000 barrels a day (92.5Mbd) – but it's the BS spin that counts.  

    I can't find the API report this week but expectations for today's inventories are a small build in oil and gasoline – so any draw-down will be considered bullish.  

    Big news in Asia is the Hang Seng dropping 1.5%.  They fell like a rock at the open and flatlined the rest of the day.  Don't forget, Mainland China takes a week off starting the 30th but Hang Seng is only off for 2 days.  Shanghai was off half a point as well in a wild session with 2 major attempts to get even that failed.   Japan dropped 300 (1.5%) off the top but officially closed down 0.8% and India was up 0.2% and Singapore down 1% as well.  

    Japan’s Price Gauge Rises Most Since 1998: Economy. A gauge of Japan’s prices rose the most in 15 years as higher energy costs fueled broader inflation pressures, in a sign Prime Minister Shinzo Abe is making progress in stamping out deflation. Prices excluding energy and fresh food rose 0.3 percent in October on year, boosted by a weaker yen and electricity costs that have risen 22 percent since March 2011, when an earthquake led to the shutdown of Japan’s nuclear industry. The gain exceeded a 0.2 percent forecast in a Bloomberg News survey. 

    Japan business mood up, sales tax hike weighs on outlook -Reuters TankanJapanese business sentiment improved for a third straight month in January but it is expected to slide after a sales tax hike in April, a Reuters poll showed, reflecting worries about the tax's impact on private consumption. 

    Abe States Resolve to Lock In Growth

    China PMI Signals First Contraction In 6 Months; Drops Most Since May

    • China January HSBC flash PMI: 49.6 versus 50.6 expected and 50.5 previous.
    • This is the first print below 50 (the line separating contraction from expansion) in six months.
    • New orders sub-index: 49.8.
    • Preliminary data from HSBC showed that Chinese manufacturing activity contracted for the first time in six months.
    • "The weak flash PMI will inevitably inflame China slowdown worries, but this is only one data point," says strategist Linus Yip. "If more data start to also show a deeper slowdown, Beijing may be forced to stimulate in order to maintain a stable basis for growth that they need to execute reforms."

    China Data Hit Asian Shares - Asian stocks moved lower Thursday, with Hong Kong leading the region lower, following signs of weakness in China's manufacturing sector. Hong Kong's Hang Seng Index and the Shanghai Composite were down 1.5% and 0.5% respectively.

    China’s Stocks Drop as Manufacturing Report Signals Contraction. China’s stocks fell for the first time in three days as money-market rates rose and a steeper-than-estimated decline in a manufacturing index heightened concern economic growth is decelerating. Jiangxi Copper Co. and PetroChina Co. paced declines for metal and oil companies. China Construction Bank Corp. dropped 1 percent as a gauge of financial companies slid the most among industry groups. Inner Mongolia Yili Industrial Group Co. surged 4.7 percent after reporting an 80 percent jump in 2013 net income. Hebei Huijin Electromechanical Co., one of eight companies trading today after initial public offerings, surged 45 percent in Shenzhen before being suspended. The Shanghai Composite Index (SHCOMP) slipped 0.5 percent to 2,041.27 at the 11:30 a.m. local-time break.


    Investors Protest at ICBC on Concerns of Trust Default.  Investors in a troubled trust product distributed by Industrial & Commercial Bank of China Ltd. gathered outside the lender’s private-banking branch in Shanghai, demanding their money amid concerns of a default. Individuals were asked to sink at least 3 million yuan ($496,000) in the 3 billion-yuan Credit Equals Gold No. 1 product amid guarantees that it was “100 percent safe,” said Fang Ping, who was among 20 investors due to meet ICBC officials at the branch. The product, which comes due on Jan. 31, raised funds for a coal mining company that collapsed after its owner was arrested.

    China Moves to Avert Shadow Lender's Default - A mining company facing repayment of an almost $500 million loan has received permission to restart one of its coal mines, as officials try to avoid an unsettling default in China's shadow-banking sector.

    China's First Default Is Coming: Here's What To Expect

    Zhou Risks Turmoil With Easing of China Rate Controls. China central bank Governor Zhou Xiaochuan faces an obstacle in his efforts to tame financial market volatility: his own plans to free up interest rates. The benchmark money-market rate remains above the average for January even after the People’s Bank of China this week injected more than $62 billion following the biggest jump since June. At the same time, Zhou’s planned removal of interest-rate controls may make volatility tougher to prevent, with Standard Chartered Plc economist Stephen Green saying that crisis is a “rule of financial liberalization.” 

    china energy consumption by sourceBeijing Tightens City's Pollution Laws - Beijing's city government ratified a plan that sets limits on air pollutants for the first time and imposes higher fines on polluters, but state media reported that some of the harsher penalties were nixed at the last minute.

    China Taxes Give Tesla Price a Charge - The electric car will cost around half again as much in China as in the U.S. but Tesla says it could charge even more, describing its pricing policy as a "big risk."

    Rebar Trades Near 7-Month Low After China Manufacturing Weakens. Steel reinforcement-bar futures in Shanghai traded near a seven-month low as investors weighed a Chinese manufacturing index showing a slowdown against improvement in short-term money supply. Rebar for May delivery on the Shanghai Futures Exchange was at 3,426 yuan ($566) a metric ton at 11:00 a.m. local time. Futures touched 3,403 yuan yesterday, the lowest intra-day level for a most-active contract since June 14. 

    Rubber Reaches 5-Month Low as China Manufacturing Index Declines. Rubber extended losses for a fifth day to the lowest in five months after China’s manufacturing index (EC11FLAS) fell below analyst estimates, deepening concern that demand from the largest user may weaken. The contract for delivery in June on the Tokyo Commodity Exchange retreated as much as 1.3 percent to 245 yen a kilogram ($2,342 a metric ton), the lowest intraday level since Aug. 8. Futures traded at 245.9 yen at 11:25 a.m., dropping 10 percent this year.

    India Sights Record Wheat Crop - India may be heading for a record wheat output this year with a prolonged spell of chilly weather interspersed with rains over the northern breadbasket region brightening the crop outlook.

    Australians in Record Loan Spree as House Prices Soar: Mortgages.

    Brazil considers the cost of welfare as growth slowsIn a television campaign by Brazil’s ruling Workers Party, the country’s former president Luiz Inácio Lula da Silva joins his successor, President Dilma Rousseff, to warn voters that the opposition is planning the “unthinkable”.

    South Korea Growth Slows - South Korea's economic growth moderated in the final quarter of last year, but a strong rebound in exports and improving domestic demand point to a recovery in Asia's fourth-largest economy this year.

    Toyota Aims to Top 10 Million in 2014 Global Sales - World's biggest auto maker is looking to push global sales to 10.32 million vehicles this year as it banks on solid demand in the U.S. and China to set a third straight annual sales record.

    Thai State of Emergency Fails to Quell Protests

    Lenovo to Buy IBM Server Business - Lenovo Group said it has agreed to buy IBM's low-end server business for $2.3 billion in cash and stock, as the Chinese personal-computer maker tries to expand its business for corporate clients beyond office PCs.

    Europe is mixed up with FTSE and DAX just a bit red and France just a bit green but Spain and Italy are up half a point.  

    • European shares are mixed following PMI data indicating that while China's economy might be slowing, the eurozone's fragile recovery is continuing.
    • "Across the board (the eurozone data are) slightly better than expected, and show signs of growth," says strategist Nick Xanders. "It's a green shoot but earnings are going to be the more important focus over the next two weeks."
    • EU Stoxx 50 +0.1%, London -0.1%, Paris +0.2%, Frankfurt -0.1%, Milan +0.6%, Madrid+0.4%.
    • U.S. stock futures: Dow -0.2%. S&P -0.3%. Nasdaq flat.


    • Eurozone flash manufacturing PMI has risen to a 32-month high of 53.9 in January from 52.7 in December and topped consensus of 53.
    • Services have increased to 51.9 from 51 and vs 51.4.
    • Composite output has climbed to a 31-month high of 53.2 from 52.1 and vs 52.4.
    • Manufacturing output has increased to 56.7 from 54.9.
    • "The upturn in the PMI puts the region on course for a 0.4-0.5% expansion of GDP in the first quarter," Markit says.
    • “However, while gathering pace, the upturn remains fragile. Companies cut employment again, and selling prices continued to fall amid still-weak demand. Deflationary forces are clearly a concern in many countries," Markit adds.
    • The euro is +0.6% at $1.3632, having started to rise after the release of French PMI data earlier. (PR)


    Axel Weber Warns "Euro Will Come Down To Earth.. Markets Are Disregarding Risks"

    Davos: despite the optimism, there are serious questions about where the recovery is leadingAlmost everywhere, renewed growth remains highly dependent on arti?cial stimulus.


    Davos Bankers Struggle to Convince Elite That Markets Are SaferTop bank executives are struggling to convince the world’s business elite in Davos the financial system is safer, more than five years since it fell into crisis.

    Europe Forges Ahead With Climate Plan - The European Commission stuck to its guns in proposing ambitious targets to combat climate change, defying expectations that it would ease up in the face of intense lobbying from heavy industry and even some member states.

    • German flash manufacturing PMI has risen to a 33-month high of 56.3 in January from 54.3 in December and topped consensus of 54.6.
    • Services rose to 53.6 from 53.5 and vs 54.
    • Manufacturing output increased to 60.4 from 57.9.
    • Composite output climbed to the highest level since June 2011, increasing to 55.9 from 55.
    • Job creation slowed to a three-month low, "sending a somewhat mixed signal about the speed of the economic upturn," says Markit. "Nonetheless, with workforce numbers increasing for a third month in succession, levels of unfinished work rising further and new business increasing markedly, the German private sector seems set to maintain its growth momentum in the coming months."
    • French flash manufacturing PMI has risen to 48.8 in January from from 47 in December and topped consensus of 47.5.
    • Services rose to 48.6 from 47.8 and vs 48.1.
    • Manufacturing output increased to 48.2 from 45.2.
    • Composite output climbed to 48.5 from 47.3.
    • "Moderate falls in new orders, employment and backlogs of work were…recorded in each case across both the service and manufacturing sectors," Markit says.
    • The CAC 40 (EWQ) is flat, while the euro is +0.4% at $1.3602. (PR)
    • Spain's economy grew for the second quarter in a row in Q4, the Bank of Spain says, expanding by 0.3% on quarter.
    • However, the recovery remains fragile, with 2013 GDP falling 1.2%. (PR)
    • In addition, unemployment edged up to 26.03% last quarter from 25.98% previously and was above consensus of 26%. Still, the number of people out of work dropped by 8,400. (PR)
    • The IBEX 35 is +0.4% and the euro is +0.7% at $1.3638.

    Ukraine Protests Turn Deadly  - At least two protesters died from gunshot wounds amid clashes with police, raising the stakes in two-month antigovernment protests that exploded into violence in recent days.

    Our Futures are still flattish ($96.82) with Dow down 70 at the moment.  Indexes look like they are getting weaker, our RUT short (/TF) working well at 1,173.9 and still playable.  Nas in the red despite NFLX pump.  Dollar 80.955, gold $1,246.

    • Congress has until late February to lift the $16.7T debt ceiling and avert a U.S. default, Treasury Secretary Jacob Lew said yesterday.
    • During the last brouhaha over the matter in October, the cap was suspended until February 7. From that point, the Treasury will be able to juggle the money about for a bit to stave off a default before running out of cash.
    • The question is how much the GOP will try to use the debt limit to try to extract concessions from the Democrats, such as with a decision on the Keystone XL pipeline.
    • "The speaker has said that we should not default on our debt, or even get close to it, but a clean debt-limit increase simply won't pass the House," said Michael Steel, a spokesman for House Speaker John Boehner.

    Citi(C) Warns "Everything Is Expensive – Pretty Much"

    "Endless Growth" Is the Plan & There Is No Plan B

    • In a Q4 interim update, Valero Energy (VLO) says it expects Q4 adjusted EPS of $1.60-$1.80 vs $0.93 analyst consensus estimate.
    • VLO sees refining operating income to be nearly as high as Q4 2012 primarily due to higher throughput volumes and slightly wider discounts for sour crude oil, and ethanol operating income is expected to be significantly higher Y/Y in Q4 due mainly to higher gross margins and production volumes.
    • Shares +4.1% AH.
    • TransCanada (TRPspent more than $1M last year to lobby U.S. legislators and the Obama administration to build the Keystone XL pipeline, ~24% more than it spent in 2012.
    • TRP's chief Washington lobbyist, Paul Elliott, is a former top campaign aide to Hillary Clinton, who served as Sec. of State in Pres. Obama's first term.
    • The State Department is conducting an environmental analysts of Keystone and will determine whether the project is in the U.S. national interest before a final decision by Obama.
    • Meanwhile, Total (TOT) CEO Christophe de Margerie is urging the U.S. to approve the pipeline to unplug a bottleneck that's stalling the development of Canadian oil sands.

    BMW: Here's Why Our New Electric Car Is Better Than Tesla's(TSLA) - "We start off by producing carbon fiber in Moses Lake, Washington, with hydropower. Then we use fully recyclable materials to build the car. We build the car with wind power. So the whole production cycle is fully sustainable."  The i3 starts at $35,325. after a $7,500 federal tax credit. The cheapest Model S comes in at $63,570. The Tesla can go farther on a full battery than the BMW (208 miles vs. 80-100 miles). But BMW is marketing the i3 more as a city car, so that range will do just fine. Plus, you can take the $30,000 you save and buy a 3 Series for those road trips.

    VW's labour chief says U.S. operations a 'disaster'Volkswagen AG's top labour representative has dubbed the carmaker's U.S. operations a "disaster" and called for more models and swift decisions to revive the German group's declining fortunes in the world's second-largest auto market. 

    Western Digital(WDC) sees weak third quarter on cautious spending. Western Digital Corp, the world's No. 1 hard-disk drive maker, forecast a tepid third quarter as it expects cautious spending and a decline in the PC market to hit sales. Shares of the company fell 2 percent in extended trade after closing at $88.08 on the Nasdaq on Wednesday.

    • Though it beat FQ2 (Dec. quarter) estimates, Western Digital (WDC) has guided on its CC for FQ3 revenue of $3.65B-$3.75B and EPS of $1.80-$1.90, mostly below a consensus of $3.73B and $1.95. The company blames a seasonally weaker hard drive market and lower factory utilization.
    • Western is down 2% AH. Archrival Seagate (STX), which reports on Monday, is down 2.1%, as is hard drive/SSD controller supplier Marvell (MRVL).
    • Western estimates the total addressable market (TAM) for hard drives was 142M in FQ2; that's slightly above guidance for TAM to be roughly flat with an FQ1 level of 139M. Gaming was an area of strength, no doubt thanks to the Xbox One/PS4 launches.
    • FQ2 gross margin was 30.1%, +30 bps Q/Q and +140 bps Y/Y, and slightly better than guidance. FQ3 gross margin is expected to be near the midpoint of Western's 27%-32% model range (implies 29.5%).
    • $150M was spent on buybacks, and 54% of revenue came from non-PC applications. ASP rose by $2 Q/Q to $60, thanks to a stronger mix of branded drive and distributor sales.
    • FQ2 resultsPRprepared remarksdatasheet
    • SanDisk (SNDKhas guided on its Q4 CC for Q1 revenue of $1.53B-$1.54B, above a $1.52B consensus. However, the midpoint of the company's full-year guidance range ($6.4B-$6.8B) is below a $6.71B consensus.
    • Q4 gross margin was 50.9%, +80 bps Q/Q and +1100 bps Y/Y. Recent NAND flash price pressure has slowed down margin expansion. SanDisk expects to have a gross margin of 47%-49% in seasonally weak Q1; that's down Q/Q, but from a Q1 2013 level of 40.5%.
    • $150M was spent on buybacks in Q4, down from a whopping $1.07B in Q3 (largely tied to an accelerated repurchase program)
    • SNDK +0.5% AH. Q4 resultsPR.
    • Following a transfer in analyst coverage, Deutsche has upgraded Microsoft (MSFT), Oracle (ORCL), and Conqur (CNQR) to Buy, and downgraded Salesforce (CRM) and Citrix (CTXS) to Hold.
    • Analyst Karl Keirstead, formerly at BMO, likes Microsoft's valuation, thinks (like Evercore) the company doesn't get enough credit for its enterprise ops amid PC concerns, and is hopeful a new CEO will cut costs.
    • Regarding Oracle, Keirstead thinks concerns about share loss to cloud app providers are priced in at a valuation of 11x 2015E EPS, and thinks app weakness can be offset by database strengths. It's worth noting some think database sales will also be pressured by cloud adoption.
    • Keirstead believes "the near-term set-up is not ideal" for Salesforce, even if the company remains "an attractive medium-term play on the cloud computing trend." He cites slowing organic billings growth, Japanese weakness, and the major sales leadership overhaul carried out ahead of Salesforce's pivotal January quarter.
    • MSFT +0.7% AH. ORCL +0.7%. CRM -0.4%. CTXS -0.7%.
    Don't you hate it when that happens?  cheeky  AT&T to take $7.6B non-cash gain
    • AT&T (T) will book a non-cash gain of approximately $7.6B on its Q4 earnings, due to changes in its pension fund and retiree benefit plans.
    • AT&T has altered its assumptions on interest rates and is enjoying a better-than-expected return on assets,
    • However, the carrier is also taking a $500M charge for a voluntary retirement package that 4,200 workers accepted. (8-K)
    • Meanwhile, AT&T has sold an office complex east of San Francisco to MetLife (MET) and Sunset Development for over $250M. AT&T will lease back half of the 1.8M square foot property. MetLife will own 49% of the asset.
    • Though Carl Icahn is pushing EBAY to do a PayPal spinoff, the company insists shareholders are better served by the status quo, and justifies its view by pointing to the ties between PayPal and eBay's e-commerce ops.
    • Icahn's likely reasoning: PayPal is growing faster than the rest of eBay, and its online payments dominance would probably yield a premium valuation in the current environment. PayPal almost certainly accounts for over half of the $70.4B valuation eBay possessed as of today's close.
    • In Q4, PayPal's revenue rose 19% Y/Y (even with Q3), and accounted for the lion's share of the $1.84B in Payments revenue produced by eBay. Payments volume rose 25% Y/Y to $52B, fueled by 31% growth from non-eBay merchants (boosted by Braintree). Registered accounts rose by 5.2M Q/Q to 143M.
    • Marketplaces revenue rose 12% Y/Y (also even with Q3) to $2.23B, with GMV (exc. vehicles) rising 13% to $21.5B; the division has been losing share to Amazon. Fixed-price sales now make up 73% of GMV. Enterprise (formerly GSI Commerce) sales fell 2% to $392M.
    • PayPal and Marketplaces respectively produced $27B and $22B in 2013 mobile transaction volumes, beating prior guidance of $20B. 40% of Marketplaces' Q4 GMV involved "a mobile touch point."
    • $254M was spent on buybacks in Q4; that figure might grow in Q1. Opex rose 9% Y/Y, slower than revenue growth of 14%.
    • EBAY pares its gains, shares now +5.2% AH.
    • Q4 resultsIcahn's stake/guidance

  139. Build a Berkshire Workshop/Deano – Docs haven't gone out yet, that's a weekend project once we get all the qualification forms in. 

  140. Gold back over $1,245 and now $1,248.50.  Silver popped $20 and is at $20.135, good for our SLW trade. 

    Dollar 80.92 and oil testing $97 so back on the short bandwagon after a quick test of $96.50 earlier – so very good trading if you're quick enough and not too greedy (/CL). 

    RUT just touched 1,175 again and still a short until it gets over (/TF)

  141. Berkshire – where do you get the qualification forms Phil?

  142. Please contact Greg (at philstockworld dot com) and he'll send them out to you. 

  143. OK, cheers

  144. hI phil

    which puts are looking good for nflx short


  145. Nice 6% move down in vix in about 30 mins!

  146. So do we test the lows again?

  147. Anyone

    In Active trader is auto send, so I do not have to confirm each time? TIA

  148. FYI It is tested it and made $10 woohooo