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Monday Market Manipulation – Everything is Awesome!

A man walks past an electronic board showing the benchmark Shanghai and Shenzhen stock indices, on a pedestrian overpass at the Pudong financial district in Shanghai, China, in this June 26, 2015 file photo.  REUTERS/Aly Song/FIles$16,100,000,000,000.00.

That's how in-debt Chinese companies are.  China's GDP is officially $9Tn – if you believe the current numbers they are reporting, which many people do not.  Even so, that makes Corporate Debt alone 177% of GDP but, much, MUCH more importantly than that, it's 23 TIMES more than the $676Bn in Corporate Profits earned last year, which means a rise in interest rates to 5% would wipe out ALL of the profits of Chinese companies.  

Rather than addressing the situation, China's banks made $206Bn in new loans in June, on pace to add more than 10% to Corporate Debt in 2015 but, more importantly, $2.4Tn in new debt in 2015 would be 26% of China's entire (reported) GDP in Corporate borrowings.  Would you be concerned if US Corporations were reporting $4.7Tn in new debt this year?  How concerned would you be when you realized that a full 1.5% of that GDP was made up of interest and fees the banks were charging for making these loans?

Chinese manufacturers' debts are increasingly dwarfing their profits. A Thomson Reuters study found that in 2010, materials companies' debts were 2.8 times their core profit and, at the end of 2014, they had ballooned to 5.3 times CORE (gross) profits. For energy companies, indebtedness has risen from 1.1x to 4.4x core profits. For industrials, from 2.5x to 4.2x.

Even worse (yes, it can be worse) for many companies in China, they are making profits NOT on their business but in the markets!  Jinxi Axel Co, for example, has 10.5x their profits in debt and has their money in bank instruments that pay them enough interest to service their debt – they are not using it to invest in their business at all!  "The risk for these (capital) programmes is so high and the rate of return so low that we have to make the best decision for our investors (by) purchasing bank products." said Gao Hong of the company's Investor Relations department.

S&P expects China's companies to account for 40 percent of the world's new corporate lending in the period through 2019.  Rapid debt growth, opacity of risk and pricing and very high debt to GDP are a hazardous combination, Standard & Poor's says.  "Managing the debt market is probably more dangerous than the stock market because the scale of the debt market is bigger, and without any high-profile default, the moral hazard is a significant issue," said David Cui, BofA Merrill Lynch analyst

CASH!!! People!  Cash, cash, Cash and more CASH!!!  I can only tell you and show you that the conditions we are seeing now – INCLUDING the market-boosting Government bailouts – are VERY similar to what happened in 2007/8 leading up to the collapse.  That is the limit of my ability.  In 2007 and early 2008 I was also "wrong" and the markets went up and I said it was ridiculous and the markets went up and I warned people to go to cash and the markets went up and my only regret was that I didn't do MORE to warn people how dangerous the markets were at the time.  

  • 5/20/2007 - Record Weekly Wrap-Up - "We are however far more hedged than we were entering the week and I will feel downright silly if we don’t get some kind of pullback ahead of the holiday weekend…  We have pulled most of the winners off the table but still have our large protective puts (obviously not winners!) in place.
  • 8/24/2007 - I Will Gladly Pay You Tuesday - "The problem is (aside from the fact that these funds’ performance have pretty much gone down the tubes) that there is not enough ACUTAL money in the world to pay these rich people what they thing they’re worth.  That’s what a liquidity crisis is, not enough actual cash to back up our phony-baloney asset prices."
  • 9/7/2007 - Stop the Markets – We Want to Get Off! - Earlier Wednesday, I explained my rationale for being trigger happy on poorly performing positions in this market, saying: "I can always buy it back or roll down or do 100 other things with cash but the only thing I can do with a poor position if it bounces back is wait and pray – not my favorite strategy!
  • 1/15/2008 - Troubling Tuesday Morning - This is the basis of the mighty US financial system, which sucks up over 20% of the nation’s wealth each year in the form of fees and interest rates and has built an economic house of cards on the myth that infinitely rising commodity prices would be paid by leveraging every last asset the US consumer has in order to pay for them and pumping up those asset prices (homes, stocks) by flooding the markets with easy money, all the while pushing to enact Draconian bankruptcy laws to make sure they get their pound of flesh when it all hits the fan.
  • 3/14/2008 - Follow-Through Friday??? - Asia sold off last night despite our very decent day with the Nikkei falling 191 points in a poor afternoon session while the Hang Seng fell 64 points, flat-lining at the 22,200 mark, almost exactly 30% off the November highs of 31,800 and back to the level they broke out from last year.  Are we seeing signs of global rotation out of Asia (still out gaining the Dow by over 2:1 over the past year) that is following the cheap dollar into US equities or is the entire global market party coming to an end?
  • 5/8/2008 - Thursday Wrap-Up - I see no justification for this rally and I said to members yesterday as CNBC had a discussion that $120 oil was a good thing for the economy: "Yet another BS justification.  Come on guys – the last time we got this much "good news" about an investment from the media was housing…  Oil $124.33 and a Rebel Attack in the morning should punch us through $125."
  • 7/5/2008 - 50% (of the Dow, of the Year) Report - It doesn’t sound at all good does it and, if I were a foreign investor, I wouldn’t touch this banana republic with a 10-foot pole – and they didn’t!  Foreigners have been panicking out of US equities since last fall and have driven the Dow back to it’s post 9/11 lows at 7,200.  No, I’m not on another investing planet, on the left is a chart from Seeking Alpha of the Dow adjusted for Euros since 2001 – not a pretty picture is it?

At the time, I was making the point that, in steady Dollar terms, the Dow had already made the same low it had made back in 2001.  Oddly enough, I have been trying to make that point re. gold to our Members, most of whom track the performance in Dollars, not Euros or Yen, where gold is still up 15% over last year's average which, in the US, was about $1,250.

Rather than showing $1,400(ish) though, gold is at $1,109 strong Dollars or 140,000 weak Yen.  That's up from 30,000 strong Yen in 2004 so, if you were a Japanese buyer of gold, you would be up 366% at the same time US buyers are up only 146%.  For Europeans, gold was 334 Euros/oz in Jan, 2004 and now it's 1,023 – up 206%, still better than the US but far short of Japanese investors.  This is what diversification is all about – gold is a hedge on your currency devaluing.  If you are losing money in gold, you can take solace in the fact that your money is worth more.  

Priced in Euros, in fact, the S&P is back to just under the all-time high it hit in April - another 1% will do it (2,130).  It's about the same in Yen so the question is, will Japanese and European computers begin selling again once we're back at those trigger points?  When we look at a foreign index level, like DAX 11,500 (our weak bounce line) that's 11,500 priced in Euros so the line that we were using in May and June when the Euro was at $1.12 should also be adjusted up 3% with the Euro at $1.085.

That means we should adjust the 12,400 high of the DAX up to 12,772 and it means the DAX doesn't get a strong bounce until 11,845.  We don't usually worry about currency fluctuations when we're doing our charts as they don't usually move this violently but here we get a much clearer picture by taking them into account.  

I've adjusted the Fibonacci lines on the Dax chart to reflect the 3% drop in the Euro and now we see that we're only just testing the Strong Bounce line today – so don't be fooled by foolish TA analysts (pretty much all of them) who fail to take currency fluctuations into account when drawing their charts.  Do you know why they don't?  That would require actual work and thinking about more than where to draw the next squiggly line and, as Barbie says "math is hard!

Be careful out there…


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  1. Why gold is such a bad investment:

    Gold is often viewed as a hedge against inflation, and it has outpaced rises in the cost of living—but not as robustly as the alternatives.

    Since 1975, the beginning of the period in which private ownership of gold has again been legal in the U.S., the metal has returned an average of 0.8% annually after inflation, compared with 5% for bonds, 8.3% for stocks and even 1.1% for cash, according to Christophe Spaenjers, a finance professor at HEC Paris business school. “It can be very difficult to rationalize the price movements of gold, even with the benefit of considerable hindsight,” he says.

    Miners will probably take another hit today!

  2. Is ABX turning into CLF?

  3. Phil/GLD – I let the short July 115s expire worthless so I only have long Sept 110s what would you sell here to get back into a BCS.


  4. Eddie for my liking no good selling calls on GLD on a drop like today

  5. once again Pharm is right

    check out EXEL

  6. EXEL….get out!  We will take the pop and call it a day.

    Oh, good morning!

  7. Interesting chart:

    chart 1

  8. More charts about China and it's not pretty.

    Check out this one that outline the lies about GDP growth:

    chart 1

    With its usual efficiency, China’s National Bureau of Statistics released its 2015 Q2 growth estimate earlier this week. Reportedly, GDP rose by 7.0% in the four quarters to Q2. We remain sceptical about the accuracy of China’s GDP data, and the speed with which they are compiled. Our own measure of economic activity — the China Momentum Indicator — suggests the current pace of growth is nearer 3.0%.

  9. Phil/GLD,

    I was not able to enter the Jan 110/115 BCS on friday for GLD. With the drop today the 105/110 looks okay too. ?

    thanks as always.


  10. out of EXEL    the original trade was 09/06/12  -  that one took a while

  11. Pharm, reviewing some positions over the weekend- still in PLX and CRIS. About even on PLX; not so much on CRIS. Still like them? 

  12. Going to short BIIB if we can get a bit higher move.  Data for the Alzheimer's drug is coming out this week from LLY, and my gut (LOL) tells me it is going to fail.  Why? Well, there have been several other drugs after the same target from LLY (BIIB's partner here and the drug already failed once), PFE, MRK, etc that have all failed.  Why would this one all the sudden work?

    PLX and CRIS, I like them both.  Unfortunately, they are not paying the dividends they should have thus far.  PLX is a poor man's Genzyme, CRIS has some good targets in the pipeline, just years from fruition.

  13. Phil / This mornings post was the strongest "move to cash" statement yet.  I don't see how I can ignore this one.

  14. Yodi Thanks that makes sense I should have bought back the July’s and sold some Sept on Friday. I guess I will be naked and see what happens from here.

  15. Phil: I have 50 Jan 17 Puts for GDX at $2.01 with a breakeven at $14.99. GDX is at $14.28  down $1.14. Should I stop it out or hang in there?

    Thanks in advance.

  16. Those GDX put are short.

  17. Phil

    Just got off the phone with Trade King.  They had some sever issues on Friday as I was trying to place a trade for (3) Jan. $20 SQQQ calls with a limit at $2.90. The trades never went through as I kept getting a message saying "unable to process trade at this time" which is how I found out their sever was down.  I contacted them on-line and confirmed the problem.  Throughout the afternoon, I kept trying to get the trade through (about 6 times) without success each time getting the same "unable to process" message.  The last trade I put on was limit $2.80, yet it did not process either.  About 3:00PM I tried to execute the trade again, but when I looked at the "order status" page I saw that they had executed all 6 of the trades that were not "able to process" and the last trade (limit $2.80) was waiting to be executed.  Long story short, when I called them this morning, I told them I didn't think any of the trades were valid because as far as I was concerned, none of them were completed (ordered) because they were "unable to process" them.  They are arguing that the initial trade I placed (limit $2.90) was valid because of my intent to place the trade.  They agreed to wipe out all the others.  I think this is ridiculous and am waiting for a supervisor to call me later.  It's not that big of a deal because the trade was small, but I am a little irritated because I am having to honor an order that they were not able to process.  Do they have a leg to stand on?  Thx.

  18. Gold down another  $27.  Sold another 1/4 /GCQs.

  19. Good morning!  

    PEK WEEKLYGreat note by Dave Fry:

    SocGen’s Albert Edwards:

    The slew of economic data out of China this week had economists chuckling into their GDP spreadsheets. No-one I meet really believes the economy is growing anywhere near the 7% the Chinese Statistics Bureau insists is the correct number. But that doesn’t really matter. What matters is that the Chinese policy makers are throwing the proverbial kitchen sink at a spluttering economy and a faltering stock market (the latter having been stoked up to help the former). So far investors have failed to appreciate the futility of their efforts as centrally planned economies and markets will surely fail sooner rather than later.   

    When I read a quote in the FT from one economist that “The government could not have hoped for a more perfect set of data”, I did actually laugh out loud. But National Bureau of Statistics (NBS) spokesman Sheng Laiyun, in a robust statement on Wednesday, said that "China does not underestimate its GDP deflator and we don't overestimate our GDP". This is in response to some interesting articles that suggest that China’s GDP deflator has been underestimated for various technical reasonsand by underestimating GDP inflation the Chinese NBS is ‘inadvertently’ overstating real GDP growth (H/T to Zero Hedge). Certainly, the sharp Q1 dive in GDP inflation into outright deflation was significant as far as we are concerned for it helped explain the authorities’ shift to a much more aggressive easing mode. In Q2, GDP inflation popped back up to rise by 0.1% yoy instead of the 1.1% decline in Q1 (see chart below). Although higher, that is still not a ‘good’ outturn.” 


    This is explosive stuff folks.  That's why we added more shorts into the weekend and why I was willing to ride out those short NFLX, because the whole global house of cards is going to come down at some point and we'll need some shorts!  In the STP, we make $29,260 back if NFLX fails to hold $120 and, in the LTP, we make $71,200 if NFLX fails to hold $105.71.  

    By taking the bulk of the hit in the STP (now down to $210,000) and transferring the 40 short Jan $105.71s and their cash to the LTP, we've effectively done the money transfer we wanted to do from the STP to the LTP only the position is currently down about $50,000 so we have all of the losses and none of the benefits (and, of course, continuing risk) so far.  

    Still, as I said to Yodi last week, I don't consider this gambling any more than I consider betting water will freeze at 0 celsius to be gambling – maybe it has some salt in it and maybe I'm off by a few degrees or maybe it will take longer than I thought but, with Netflix – it is simply NOT worth $100 a share and that will be "discovered" at some point.   By itself, I may not want to make a big bet on the play but, in conjunction with the fact that I think the whole market will sell off and added to the fact that we have $700,000 worth of bullish positions and need a bearish bet for balance – it's a good short to hold onto…

    Gold/StJ – I love how gold is under attack from all sides at the moment.  Smells like opportunity to me.  Sure, if you randomly bought gold in 1975 (when the Dollar was in the crapper), it's only up from $200 to $1,100 or 450% and if you divide that by 40 years and de-compound it and adjust for inflation, etc – it doesn't look very good, does it?

    On the other hand, an investor with a brain who bought gold for $100 as the dollar got artificially strong in 77 when the Fed was moving from easing to tightening, and held on for just 4 years – that guy made 7-8x back and then, hopefully since he was smart, he put some of that money in the declining stock market in time to catch the Clinton rally and, when gold was back down to $200 and stocks were at records in 1999 – maybe he decided it was time to switch again.  That guy is pretty rich now!  

    Those who forget the past are condemned to repeat it but those who allow others to manipulate their view of the past by cherry-picking data points are just as badly off.

    ABX/Jabob – I'd say it's already another CLF.

    What do these charts have in common?  They are the only stocks left in my brother's portfolio, which is 90% cash.  Also there's some LQMT.  

    Speaking of LQMT – I'm so proud of my daughter, Maddie, who decided she would rather have 10,000 shares of LQMT ($1,400) than a new phone for her 15th birthday.  Well, that and a sushi dinner with her friends…  We discussed it during the plane ride and she looked up the company information with me and checked out the technology and we talked about the trials and tribulations of manufacturing materials and she decided she was young enough to ride it out since she had patient money

    Liquidmetal Technologies Announces Record Number of RFQ’s for Q2 2015

    Liquidmetal Technologies Announces Receipt of First European Prototype Order

    Apple Extends Partnership with Liquidmetal til 2016 – Analyst Blog

    I don't like recommending penny stocks, of course, and rarely do.  That being said, I love this one!  Generally, we've been accumulating the stock by accumulating it below 0.14 and selling 1/2 at 0.28.  God forbid people use this logic with gold or other stocks, of course…

    GLD/Eddie – I would not sell at the moment because I firmly believe $1,050 is a floor.  GLD is down $2.72 today so figure it goes down $3 more at $1,050 so I'd look at my Sept $110s ($1.30) and figure they drop to the price of the $113s (0.67) and then I'd spend $1.65 to roll them to $109s (now $3.70) which should drop to the price of the $112s (now $2.30) and THEN I would sell the Sept whatevers for $1 (probably the $114s) to pay for it.  Actually, I'd do the roll now, in case $1,100 is bouncy and do the sell only if we go below.  

    Image result for burns excellent memeEXEL/Pharm – Excellent!   Good logic on BIIB too.  

    Interesting/StJ – More like terrifying. 

    China/StJ – Even more terrifying!  

    GLD/Pat – Of course, same premise, better prices. 

    Cash/Stock – I hope I'm getting that across.  Better to wait and see if China really resolves than getting caught in the briar patch.  

    GDX/IHS – 2017 is a long way away.  Those puts are $4.20 so net $12.80 with GDX at $14.20 means you would be paying $1.40 in premium just to get out of the position.  If someone assigns you the stock at short $17, however, you are down $2.80 or 0.80 more than you collected.  Why would you pay a 0.60 premium to get out now?  

    If it makes you feel better, the GDX 2017 $11 puts are $1.10 and you can roll your loss of $2.20 down to 2x the short $11 puts and then GDX can fall 30% more and you still break even in the end.  Worst case is you buy 2x at $11 vs 1x at net $15, so risk 50% more cash to own twice as much at 40% less but, of course, then if GDX pounds back over $17, you make no profit.  

    Again – Gold CAN go lower.  Even lower than my $1,050 target, which is roughly the extraction cost.  How long can extraction costs be below sales cost.  Well, it takes 1 quarter to report to investors how badly your operations are going and another quarter for the repercussions to set in but if miners aren't significantly cutting back in 6 months (like oil companies have been), then very bad things begin to happen.  

    Trade/DC – If you read the broker contract you clicked "I agree" to at some point, you'll find they have the right to take all your money and burn it if they want to.   What baffles me is that the SQQQ calls are now $2.73 and that they would risk pissing off a customer over $34.  Also, logically, they are correct in that you did intend to buy 2 at $2.90 and, despite the error in reporting the position was filled, they did do as you requested (multiple times).  So morally I think they have you but, from a customer relations standpoint – how can they even let it get that far?  

  20. Extraction costs / Phil – As I was saying last week, the strong dollar has to have an impact on these extraction costs. With the dollar up 20% in the last 12 months, extraction costs are more like $800 or so now. So room on the downside before it becomes too painful for the miners. That won't stop them from selling off though!

  21. Dollar dive is boosting equities but not commodities over the last hour.  

    Nikkei doesn't like Dollar dives:

    VIX likes everything:

    Extraction/StJ – That's true, we may have more downside tolerance as extraction costs decline.  Hopefully the earnings reports from the miners will give us better figures but I think maybe $900-950, not $800.  

  22. My guess is that miners with mines outside of North America will fare better overall…

  23. AAPL – crap I didn't want to buy the nearest 135 calls on Friday for $1 and now they are 1.95! 

    BTU puts – a gift that keeps on giving.

    Does CLF survive? This is getting bad. Watching 32 for UCO… given the carnage catching a big white candle would be very nice. I don't have any short term calls but would love to be able to plunge into a couple this week or next if their was some sort of bottom-calling catalyst.

  24. BTU – pet theory: the feds are taking this chance to give a final crushing blow to coal: they are forcing the cleanup cost issue and such now. This is like TBTF banks but in reverse – kicking them when they are down.

    Coal won't survive this.

  25. Coal / BDC – We need to separate coal into 2 categories though – metallurgical coal (as opposed to thermal coal) is still needed by the steel industry and can't be gotten rid of. It's obviously taking a hit from 2 directions – China is hurt badly and all coal companies are being sold, no matter what they produce!

  26. stjean are you saying CLD will survive and BTU will not???

  27. Phil: GDX…Thanks for your perspective I agree.

  28. DUST up 21%

  29. Coal / Jabo – I am not making predictions for individual companies but clearly metallurgical coal has a much greater industrial value than thermal coal. 

  30. Wow, this is very sad considering all the effort to prop things up:

    AAPL on a tear now, earnings tomorrow night!  

    CLF/BDC – They have $355M in cash and $3Bn in debt and last year they burned $44M though the outlook for ore gets worse and worse so this year they may lose more.  They report on the 29th and expectations are for a 0.11 loss for about -$15M.  CLF is selling on 1/2 of what they sold last year as they've cut production and are only selling what they can make money on (local shipments where they can beat overall prices with shipping included).  In theory, they have done enough of this to make this Q the low point, but we'll have to see what they say.  

    Still, this is now a $2.98 stock that made 0.22/share last year – and last year sucked too.  In a good year, they can make well over $1 share – we just have to hope they survive that long.  

    Image result for iron ore prices 2015

    As with gold, silver, copper… at a certain point, you imagine there must be some actual cost to producing a thing that would cause a floor somewhere.  Let's say you usually sell your children when they are 6 months old for $50,000 and it's been a great business but then the price drops to $25,000 as Chinese children flood the market and then $12,500 and now you can only get $6,000 for a child.  

    Do you keep having children or can you find something better to do for 15 months than get pregnant, have a baby and get it ready for sale?  Even if you are in the baby-selling business – you still may, at some point, look for a better way to make money as the market turns on you.  

    Sure, it's cheap to start a baby and you have all the equipment and maybe in 9 months the market will be back but, if you play it wrong and 6-month old babies are still just $6K in 15 months – then surely you could have done something better over the 15 months than have another baby.   That's why, even if it's all people know how to do – at some point they stop producing when prices are down for prolonged periods – even though they show no sign of slowing down over the short run…

    Coal/BDC – I'm NOT looking for coal to come back.  

    Good point on metallurgical, StJ. 

    You're welcome, IHS.  

    DUST/Jomp – Still not where it topped out last Nov even though gold and miners are worse off – that means there's huge friction costs in it so not a great long-term hedge.

  31. Phil how do you feel about the bull call spread on FXI we put on in the STP?  It's early in the game but the neg news flow out of China is horrendous.   

  32. DUST / Phil – As with other 3xETF, big decay… Good for short term trades, but not so good for hedges,

  33. FXI/Cervantd – We took it BECAUSE we have a lot of bear plays on China so it was a hedge against their meddling.  So far, the meddling has been ineffective and the spread is down net $50 vs our 20 FXP Dec $25/34 bull call spread with $23 puts at net $4,920 and our 10 CHAU Nov $65/53 bear put spreads at net $7,655.  So, when I say no, I am not going to change them – it's in the context of a $4,500 position that I don't expect to lose more than $2,500 on protecting $12,500 worth of other positions against damage from a short-term policy shift that doesn't affect our underlying longer-term premise that China is F'd.

  34. CMG up 80 points into earnings.  What will they have left if earnings beat by a lot.  They have to beat just to maintain this price because everyone is already assuming they are.

  35. Ok thanks for context and clarifying.  I agree with you that China is F'd and I want to play that thesis.   2 questions:  1.  Can you provide updated levels on FXP and CHAU to initiate a position now; 2.   Does it  to keep FXI bull call spread if going short China now?  Tnx    

  36. rustle…same logic as nflx?

    these mofos are the opposite of the abxclf drek..

    for now at least

  37. CMG/Rustle – That's about normal for these high-flyers.  I'm not sure it's possible to disappoint these MoMo traders:

    FXP/Cervant – CHAU is done but FXP hasn't moved that much and our STP play was 20 Dec $25/34 bull call spreads at $3.42 and we sold 10 $23 puts for $1.89 to offset the cost for net $2.48 on the $9 spreads.  With FXP already at $34, we're spending that FXI money to lock in gains, which would be getting back $18,000 on 20 of those bull spreads against our $4,960 investment, so we simply took about 1/2 of our potential profits ($13,040, not including CHAU's potential) that we get if FXP simply stays at $34 and spent it on hedging with FXI so we get back about $5,000 if FXP fails – all very sensible and logical.

    Currently, the FXP position looks like net $9,000, still good for a double at $18,000 and you know FXI is still the same price so maybe just run the same spreads (though with less FXI if you don't have CHAU).  I'd rather have the FXP $25/34 spread we have for $4.50 than the $30/40 spread for $3.75.  If you buy, for example, 10 for $4,500, your upside potential is $4,000 if FXP stays flat and your loss is $4,500 if it flies higher.  

    Pairing that with let's say 25 of the FXI Aug $42/44 bull call spreads at 0.85 ($2,125) is not really risking 1/2 of your profits, as you intend to stop out with a $1,000 loss, which would only happen if FXP is doing well. If something odd does happen and you get blown out of FXI and lose $2,125 – then FXP would have to be doing fantastically and you'd certainly be up a lot more than that over there.  If, on the other hand, FXP goes down and FXI goes up, FXI is already $42.61 so you'll gain $1,775 on FXI about as fast as you lose it on FXP – again, barring something strange and catastrophic happening.

    So, it would take something extraordinary happening for you to have any significant loss while it's very likely you have at least a net win of 20-50% overall and it's even possible you win on both sides and collect over 100% when all is said and done.  And that's without even making a put sale.  

  38. ABX, BTU, CLF…. crimes are being committed.

  39. From Bloomberg, Jul 20, 2015, 11:20:56 AM

    The oil guru who predicted last year’s rout said $100-a-barrel crude is likely to return within five years as faltering supply fails to meet demand.

  40. From Bloomberg, Jul 20, 2015, 9:31:38 AM

    July 20 — FIFA President Sepp Blatter was interrupted at the start of a news conference in Zurich after a protester showered him with what appeared to be a wad of cash. (Source: APTN)

    The FIFA circus continues.

  41. From Bloomberg, Jul 20, 2015, 1:10:59 PM

    The first image of Earth released by NASA’s Deep Space Climate Observatory, whose camera, a million miles away, will send home new photos every day.

    NASA’s 10-year, 3-billion-mile mission to Pluto electrified the world last week when it dispatched images of a tiny planet that’s dynamic in ways even experts never anticipated. So while 3 billion miles is the current bar to ignite mission-mania in the public eye, a million-mile jaunt still isn’t too shabby. 

  42. From Bloomberg, Jul 20, 2015, 12:01:00 AM
      Tell-tale signs of a peak are all over — everyone wants to be a startup investor, including the proverbial doctors and dentists.

    Rich Wong, a partner at venture capital firm Accel Partners, doesn’t know if Silicon Valley’s startup boom is at imminent risk of collapse. He does know this: If a founder doesn’t have the stomach to weather a downturn, take the money and run.

  43. From Bloomberg, Jul 20, 2015, 9:21:21 AM

    Pearson Plc is exploring a sale of the Financial Times after receiving interest from potential buyers, according to people familiar with the matter.

  44. From Bloomberg, Jul 20, 2015, 1:56:40 AM

    July 20 — Harlyn Capital CEO and Head of Equity Simon Goodfellow discusses commodity prices with Bloomberg’s Anna Edwards and Ryan Chilcote on “Countdown.” (Source: Bloomberg)

    The rout in commodities deepened with prices touching the lowest since 2002 as the prospect of higher U.S. interest rates sent gold tumbling.

  45. From Bloomberg, Jul 20, 2015, 12:00:01 AM
      A strategy of buying stocks with the best history of price appreciation in recent quarters, such as Skyworks Solutions Inc. and Netflix Inc., while shorting the worst like Chesapeake Energy Corp. and Freeport-McMoRan Inc., has gained 15 percent this year, according to data compiled by Evercore ISI.

    Stick with your winners, goes an old Wall Street adage — advice that is working better now than almost any time in the last quarter century.

  46. From Bloomberg, Jul 20, 2015, 7:34:59 AM

    July 20 — Lockheed Martin Corp. agreed to buy United Technologies Corp.’s Sikorsky helicopter unit for $9 billion and said it expects to divest its government information systems division via a sale or spinoff. Bloomberg Intelligence’s George Ferguson reports on “Bloomberg Markets.”

    Lockheed Martin Corp. agreed to buy United Technologies Corp.’s Sikorsky helicopter unit for $9 billion and said it expects to divest its government information systems division via a sale or spinoff.

  47. From Bloomberg, Jul 20, 2015, 9:46:33 AM

    July 20 — PayPal Holdings Inc. Chief Executive Officer Dan Schulman talks about the company’s initial public offering, business strategy and outlook. He speaks with Emily Chang on Bloomberg Television’s “Market Makers.”

    PayPal Holdings Inc. shares rose as much as 11 percent in their market debut after separating from EBay Inc.

  48. From Bloomberg, Jul 20, 2015, 12:00:29 AM

    Doubling down on the debt of drillers and miners is coming back to bite money manager Franklin Resources Inc. amid a prolonged commodities slump.

  49. From Bloomberg, Jul 20, 2015, 9:02:22 AM

    Toshiba Corp. must correct at least 152 billion yen ($1.2 billion) of pretax earnings over a six year period after an internal accounting probe revealed the company overstated profits under pressure from management.

  50. From Bloomberg, Jul 20, 2015, 7:02:01 AM
      Halliburton, the second-largest oilfield services provider, is looking to sell assets to win regulatory approval for its acquisition of rival Baker Hughes Inc., valued at $34.6 billion when it was announced.

    Halliburton Co. beat analyst estimates with better-than-expected results in North America, where customers have cut spending the most since the crude market crash began a year ago.

  51. From Bloomberg, Jul 20, 2015, 12:15:00 PM
      A pilot uses a smartphone to take a photograph from the cockpit of an Airbus A350 aircraft, operated by Qatar Airways Ltd., as it is manoeuvred into position after landing during preparations ahead of opening at the 51st International Paris Air Show in Paris, on June 14.

    Airlines across the globe will need to hire 558,000 new pilots over the next two decades to keep pace with surging travel demand and a $5.6 trillion jet shopping spree, according to a Boeing Co. forecast.

  52. From Bloomberg, Jul 20, 2015, 11:54:05 AM
     Managing expectations.

    Developments in the Greek crisis justifiably diverted attention from Federal Reserve Chair Janet Yellen’s semi-annual testimony to Congress last week.

  53. From Bloomberg, Jul 19, 2015, 10:09:37 PM

    A simulated city opens Monday on the north campus of the University of Michigan to test how self-driving cars will travel in the future without mowing down pedestrians or causing colossal crashes.

  54. From Bloomberg, Jul 20, 2015, 8:25:16 AM
      Amazon: A clothing powerhouse?

    Amazon is seeing a wave of upgrades just days before it reports quarterly earnings.

  55. From Bloomberg, Jul 20, 2015, 12:57:19 PM

    Crude oil’s worst run in four months is hurting more than just commodity traders.

  56. From Bloomberg, Jul 20, 2015, 12:51:04 PM

    A panel formed at New York Governor Andrew Cuomo’s behest is expected to vote this week to raise the minimum wage for fast-food workers to $15 an hour, said a person familiar with the plan.

  57. From Bloomberg, Jul 20, 2015, 12:49:30 PM

    European Union carbon allowances rose to the highest level since 2012 after the bloc proposed tightening the market and Greece’s new bailout reassured investors.

  58. From Bloomberg, Jul 20, 2015, 12:40:00 PM

    JPMorgan Chase & Co. still has a shortfall of as much as $12.5 billion on meeting capital rules set to be approved by the Federal Reserve on Monday.

  59. From Bloomberg, Jul 20, 2015, 11:03:06 AM

    Mexico’s peso dropped to 16 per dollar for the first time since its 1993 revaluation as a rout in commodities followed an auction of oil blocks that many analysts declared a failure.

  60. ARO – Blackrock and insiders have been buying.

  61. ARO/Scott – Still poking along with that one in the LTP.

    Good note from GuruFocus:  "The Stock Market is Significantly Overvalued. Based on historical ratio of total market cap over GDP (currently at 126.6%), it is likely to return -2% a year from this level of valuation, including dividends." - It's a whole, good article. 

    Based on these historical valuations, we have divided market valuation into five zones:

    Ratio = Total Market Cap / GDP Valuation
    Ratio < 50% Significantly Undervalued
    50% < Ratio < 75% Modestly Undervalued
    75% < Ratio < 90% Fair Valued
    90% < Ratio < 115% Modestly Overvalued
    Ratio > 115% Significantly Overvalued
    Where are we today (07/19/2015)? Ratio = 126.6%Significantly Overvalued


    ECB confirms payment from Greece

    • The ECB tweets out confirmation Greece has made a €4.2B debt service payment due today. The country also cleared up amounts in arrears (default) to the IMF. The money came from a bridge loan approved late last week by the EU. Teddy KGB in Rounders: "It's a joke anyway … I am paying you with your own money."

    Barron's: Some analysts say MLPs may have hit bottom

    • A flurry of recent acquisitions in the energy MLP sector suggests it is becomingundervalued, according to a Barron's weekend report.
    • Rob Thummel of Tortoise Capital Advisors still sees energy as a growing sector over the long term; some of his favorite MLPs include Spectra Energy Partners (NYSE:SEP) and Plains All American Pipeline (NYSE:PAA).
    • Marcus McGregor, who runs the MLP equity strategy for Conning, suggests sticking with the largest, most liquid midstream MLP players which should be a step or two removed from the price of crude; he prefers Enterprise Products Partners (NYSE:EPD) and Magellan Midstream Partners (NYSE:MMP).
    • But many analysts say only long-term investors should be buying now, since the next few years could be rocky; “Too many MLP investors are taking the ostrich route,” says one who believes the energy sector will get worse before it gets better. “They see such great yields and think they don’t have to worry.”
    • Several gold miner stocks strike new 52-week lows in early trading, as gold prices plunge below $1,100/oz. overnight and adding pressure to a sector that already faces razor-thin margins.
    • Investors have turned sharply negative on gold as the U.S. dollar rises ahead of a likely rise in interest rates, and a report out of China shows lower than expected holdings of the metal.
    • While most senior gold miners can generate decent margins at $1,100 gold, many small and mid-tier producers are underwater at the price, and some of the seniors are struggling with heavy debt.
    • Hitting new 52-week lows today: ABX -9.3%, GG -7.7%, GFI -10.7%, KGC -9.4%, AGI-6.6%, AU -9.7%, SBGL -7.8%, BTG -9.3%, EGO -2.9%, NGD -8%, AUY -8.8%, RGLD-8.2%, FNV -6.8%, SLW -5%.
    • Also lower: NEM -9.4%, AEM -7.9%, NG -7%, GOLD -4.8%, IAG -5.1%, HL -5.4%.
    • BHP Billiton (BHP -1.1%) coal operations president Mike Henry tells The Australian he expects no recovery in coking coal prices any time soon, and that more mines will need to close to balance the market.
    • Uncertainty over how China is implementing new regulations to test for fluorine in coal has further dented demand, Henry says, as "one problem is that they [China] don't use the same testing standards we use, and the results on the Chinese side can be quite different from the results here – that creates uncertainty."
    • Henry nevertheless says he plans to increase production from BHP's Queensland coal mines.
    • A few days after John McCain and other politicians raised concerns (in response to aWSJ report) about a bid for Micron (NASDAQ:MU) by China's state-owned Tsinghua Unigroup, Reuters reports Micron has told Tsinghua it doesn't consider a deal possible "because U.S. authorities would block the deal due to national security concerns."
    • The news service adds Tsinghua "had communicated its interest to Micron about an acquisition but had not presented a formal offer" as of the end of last week, and that Micron "has sought advice from an investment bank but has not officially hired one since it is not seriously considering Tsinghua's offer."
    • Micron has sold off on a day the Nasdaq is up 0.3%. Shares are still up 9% from where they traded before the WSJ's report arrived. They're down 45% YTD.

  62. Phil / MLPs: Looking at the Barron's article above on MLPs, are you still a fan of AMLP?  What price level do you see as 'fair' assuming oil holds $50?  Thx

  63. Who's assuming oil is going to hold $50?

  64. AAPL – I'm currently holding 15 2017 110/140 Apple bull call spreads, with nice gains. I closed my short term covers (cherry calls as Yodi says) around $122 for a nice gain.  In an effort to keep selling premium, I decided to sell 5 September $135 calls for 1/3 sale today, to hedge a bit more for earnings.  This won't do much if Apple disappoints dramatically, but it does give me a return of close to 10% on my current bull call spread's value, in 2 months.  If Apple beats, I should be able to roll out and double down to minimize the damage, while waiting for my bull call spread to mature.

  65. AMLP/EmailMike – That's interesting because the last time I liked them was late 2012, when they were knocked below $16 and now they are back here again after visiting $19 last year.  

    They have kept on paying those 0.295 dividends (was 0.25 at the time) so that's really the only money you end up making over the long haul.  Options only go out about 6 months so constructing a trade means picking up the stock at $15.32 and selling the Jan $14 calls for $1.50 and the $15 puts for 0.85 for a net of $12.97/13.99, which makes the dividend 9%.  Blame the low VIX for that and consider that just selling the $15 puts for 0.85 returns more than the dividend over 6 months (0.59) and none of that messy owning the stock or selling calls.  Maybe a nice way to initiate a position.

    Oil/Stock – Barely holding it today but it's the last couple of days of the contract so downward pressure is to be expected.  

    I think it's worth a fun toss on oil into Sept (Labor Day) with the UCO Sept $30 ($4.60)/$33 ($3.15) bull call spread at $1.45.  Let's do 10 of those for $1,450 in the $25KP.  

    In the STP, we can sell 20 of the $25 puts for $1.05 ($2,100) and use that to buy 30 of the spreads for $4,350 for net $2,250 on the $6,000 spread.

    AAPL/Palotay – Good sale, especially on the pop (excitement).  

    A bit of selling pressure as the Dollar comes back to 98.15.

  66. ABX, CLF, RIG:

  67. Actually, we're still early but notice where "Buy metals and minerals is" – once GDP heats up, they begin to move up – this chart says 2nd tightening, we've been buying ahead of the first one.  

  68. Phil you want to get on a call?

  69. Phil

    Does this constitute "blood in the streets" for commodities.  ABX down 15%!  That hurts.  How about and adjustment for CLF.  Do I dare ask how much lower can it possibly go?  

    If the politicians push for greater infrastructure spending it certainly should be a lot cheaper! On a good note, I was successful getting Trade King to cancel all my SQQQ trades from Friday.  

  70. Phil / AMLP-  Thanks Phil, I like that short 15p idea to start a position (especially if VIX pops from crazy low levels!)

  71. Another move down in /GC

  72. And, of course, we're not early because, in the LTP, our allocations are to own $50,000 worth of stocks as 1/20th of our $1M buying power (now $1.5M) and we have:

    • 20 short AA 2017 $13 puts ($26,000) 

    • 5 short BP 2017 45 puts ($9,000) 

    • 10 short UNG 2017 $14 puts ($14,000)

    • 25 short USO 2017 $15 puts ($37,500) 

    • 50 RIG 2017 $13/20 bull call spreads (cost/risk = $11,250)
    • 20 short RIG 2017 $27 puts ($54,000) 
    • 20 short RIG 2017 $18 calls (-$9,800) 
    • 20 short RIG 2017 $15 puts ($30,000) 

    • 50 SDRL 2017 $15/25 bull call spreads (cost/risk = $6,750)

    • 20 short ABX 2017 $15 puts ($30,000)
    • 25 ABX 2017 $10/15 bull call spreads (cost/risk = $4.425) 

    • 10 short BHI 2017 $55 puts ($55,000)
    • 10 BHI $50/70 bull call spreads (cost/risk = $6,000) 

    • 20 short CCJ 2017 $13 puts ($26,000)
    • 20 CCJ Jan $13/16 bull call spreads (cost/risk = $3,100) 

    • 30 short CLF 2017 $8 puts ($24,000) 
    • 20 CLF 2017 $5 calls (cost/risk = $5,900)

    • 25 short DBA Jan $22 puts ($55.000) 
    • 25 DBA Jan $21/23 bull call spreads (cost/risk = $2,675)

    • 10 short ECA 2017 $13 puts ($13,000)
    • 20 ECA 2017 $13/18 bull call spreads (cost/risk = $2,300)

    • 10 short OIH 2017 $30 puts ($30,000) 
    • 20 OIH 2017 $30/35 bull call spreads (cost/risk = $4,840)

    • 40 SLW 2017 $15 calls (cost/risk $23,000) 
    • 40 short SLW 2017 $18 puts ($72,000) 

    Most of these positions still have plenty of room for a double-down before we hit our full allocation and, keep in mind, we already took our winners out of the LTP, so these are the ones that were left.  Looking at the cycle chart above, our intention is simply to begin buying as we move towards the bottom of the curve and look to scale in when and if the commodity stocks get cheaper.  When oil was $45, we loaded up on energy stocks because it may have been (still may be) a multi-year low. 

    At the end of a down cycle you have blow-off bottoms and then people like Jabob start cursing and screaming and telling anyone who will listen to stay away from commodities and people like DC will look to make adjustments but we don't know how low things will go and we don't want to use too much firepower when we're not sure it's the bottom.  

    There's a panic at the moment and gold is going lower so ABX will go lower and CLF is going lower because iron ore is going lower and maybe they don't come back this year at all.  That's FINE – we didn't buy them for this year, we bought them for next year and we won't have any clue that Jan 2017 isn't a good target at least until April of 2016, when we get our Q1 reports.  

    And, of course, these are MAX ALLOCATIONS, which only matter if we get assigned.  In reality, we are down $2,000 here or $10,000 there and we could shut them down with losses if we decide the positions are not coming back but usually the point when people are screaming in pain is THE BEST time to buy more – not a time to get panicked out of positions.  

    Do we not think people will be buying commodities for the next 18 months?  If so, we're going to make a fortune on our STP hedges!  

    IBM did not impress – down 5%. 

  73. Yes BDC, give me a call.  

  74. IBM revenue was terrible. Maybe we'll get another chance at $150

  75. i have been FU ing abx clf and rig from when you liked them MUCH higher…

    but people like Phil lack the humility to ever admit being wrong

    i NEVER talk people out of buying anything on this board

  76. Gold – FWIW, an analyst on Bloomberg today indicated the reasons for gold going south is the rising Dollar and the fact that inflation is so low.  Further, he said inflation will be "artificially" engineered on the economy if natural inflation does not take hold which does not look inevitable given the current massive printing but Money Flow at historic low's .. it's being stuffed away for a rainy day.  This guy concurred with Jim Rogers who said gold will panic low to $950, a 50% retrace off the high.  I'm scaling into ABX (really slowly) as I'm down on my other miners but think long term, this will be a very different picture (if they don't all go BK).

  77. More on gold.  Jim Rogers is a very smart guy, but admits that he is a poor trader.

    FWIW – This from the guy on Briefing Trader I got the gold short idea from, discussing the sell off in gold.

    "The reason it actually happened is because gold is the one asset on the planet with no fundamental valuation that people can have any kind of faith in. Gold could go to $200,000/oz or $200/oz and there would be no possible way to understand the difference. It's price is entirely arbitrary in economic terms.
    In another market, those would have been buy stops under the 1100 level. But, in gold, they were all sell stops because there is simply no way to make a fundamental argument that gold is overpriced or underpriced at any price. Perhaps there was some big money play out there willing to bet big to take advantage of that reality. But that's just the risk you take with gold. As I said this morning, that move was not "unprecedented" or "historic". It happens all the time in gold. I have been trading gold very avidly for 10 years. I have seen this type of move at least 20-25 times in that period. Gold is thin and extremely volatile and affords no means of countertrend conviction. That's why it's so interesting to trade."


    Read more:

  78. IBM/Stock – Wow, they haven't had a good quarter in years now.  

    ABX, etc/Jabob – I'm sorry you are taking this personally, you are just a great example of a person who curses and screams at stocks.  If you don't want to be known for that, you have an odd way of going about it.  As to liking them MUCH higher – of course I did, I like them when they hit a value point and just because the PRICE goes lower – it doesn't change whether or not I like them.  

    FU GDX!!!
    FU ABX!!!
    FU CLF!!!

    FU ABX!!!!

    FU ABX!!!!

    FU ABX!!!!


    FU GDX!!!
    FU ABX!!!
    FU CLF!!!
    FU AAPL!!!


    FU ABX!!!

    Here's me on 6/26/2013:

    Well, not so much gold as that may still fall to $1,100 or even $1,000 in a proper panic but gold MINERS are getting very cheap, like ABX (which we have in our Income Portfolio), which has fallen to $15.50, which is the lowest it's been since 2002 – when gold was $450 an ounce!  ABX's market cap is now under $16Bn, which is interesting as they have 140M ounces of proven reserves.  Even if you value that gold at an extracted $100 an ounce, that's still $14Bn!  Also, NEM made a PROFIT $4.5Bn in 2011 and gold started that year at $1,309 and ABX made a profit of $3,630 in 2010, when gold bottomed out at $1,155 in July.  

    NEM is suffering a similar collapse, down to $27.50 pre-market but still way above the 2002 lows so not as much fun to play but HMY is $3.35 and that's LOWER than it was when gold was $450 an ounce.  Poor NAK doesn't even sell their gold yet but they are down to $1.90 a share and make a great speculative play (an old favorite of ours before they shot up to $20 and got silly)and let's not forget silver, which is being trounced along with gold and sending AGQ down to $15.55.  

    As you can see from this Zeal Chart, $1,222 is right at that 12.2-year average low (red line) and that has only been brought down by the recent massive panic from $1,350.  So we're playing for a recovery to about $1,350 and then we'll go back to not caring about gold but this is too much fun to miss out on and already we got our re-entry at $1,230 on /YG Futures – and this time we have a $5 cushion to play with so we can trail our stop $2.50 and go for it!  

    AGQ is a crazy silver ultra fund and usually we avoid it like the plague (or Yellow Fever) but this is where it bottomed out in 2009 and then it went to $180 in 2011 so kind of fun since we can sell the 2015 $10 puts for $2 and that pays for the Jan $19 calls at $1.70 with .30 to spare, so not bad for a small poke at this level (silver $18.50).  Unlike gold, silver actually has some industrial use that should keep it from total collapse.  

    Keep in mind, I'm no gold bug.  In fact, just this past fall we were playing GLL (ultta-short gold) when it was in the $50s (now $100+) and we even had a Member quit because I was too much of a gold bear back when it was $1.850 and I refused to let anyone play it to $2,000 and called the whole thing a big scam at that time as well.   That's because gold has no real value – it's not much better than BitCoins in that regard but it is a 10,000-year tested means of exchange in human civilization and that's the one we do live in so it should be taken as seriously as any other silly currency people choose to use to exchange goods and services for pieces of paper or shiny bits of metal.  

    WTF is going on with gold again this morning? 
    It was up earlier.
    Is it because of what STein said?
    FU GDX!!!!
    FU ABX!!!

    FU ABX!!!!

    FU PCLN!!!
    FU ABX!!!
    FU GDX!!!

    Could ABX have one good day???

    FU ABX!!!

    FU ABX!!!
    FU GDX!!!

    FU GDX!!!

    FU ABX!!!

    FU GDX!!!
    FU ABX!!!

    I do admit that I was wrong – some people never do learn…  wink

    Gold/Jeddah – At the risk of being "wrong" in my call, scaling in, as you can see from the above charts, is the right way to go if you have long-term conviction but it's VERY important to remember to scale OUT as well.  

    If you are not going to buy more gold (or gold-based stocks) at $1,100, $1,050 and $1,000, why on earth would you own any at $1,200 and not stop out at $1,150?  As noted by Albo, there's no real value to some commodities so, when they break down, they can REALLY break down.  That's fine if you intend to become a huge buyer of gold at $400 an ounce so, if you have $120,000 it's enough to buy 100 onces at $1,200 but if you bet it all at $1,200 and gold goes to $1,000 – you are out $20,000 and no firepower to spare.  

    If, on the other hand, you scale in:

    You buy 30 ounces at $1,200 = $36,000

    At $1,100 you are down $3,000 and that's not even 10% so you aren't going to DD, you just need to decide, right here, that you fully intend to at $1,000.  

    At $1,000 you buy 30 more ounces for $30,000 – now you have 60 ounces at $1,100 average for $66,000.

    If you go below $1,000 you are either going to stop out and take your $6,000 loss or you are looking to double down again and, since you have $34,000 left to buy 60 more ounces – you already know you aren't buying any more until you hit $566 and, if that's not your plan (1,200 ounces at $833 average), then you shouldn't have started with 30 and it only took me a few mins to run through that – so you should ALWAYS know your entire trade strategy before you buy your first contract!!!

    Keep in mind that any time you do DD, you get half back out when even so, if you do DD at $1,000 and you bounce to $1,100, then you have 30 at $1,000 ($33,000) and now you don't have to worry again until around $900 (20% loss).  In the end, if gold holds $500 and heads back to $1,000 over time, now you have 60 shares at $833 (because you stopped out half) and are up $10,020 – EVEN THOUGH you began buying at $1,200.

    That's not even counting your ability to whittle away the basis over time by selling puts, calls, futures, whatever…  

    Long-term INVESTORS know how to make money when they have conviction.  Gold won't go bankrupt, it won't go to zero and let's say that puts a floor on gold at $250 and ounce and let's say ABX has 100M ounces of it in their mines – that's $25Bn and ABX is currently valued at $8.3Bn, or under $100 per ounce of their proven reserves.  

    Those reserves may not be recoverable at $250 but all ABX has to do is shut down operations and wait for a year, two years, 3 years and if they do that and their competition does that, then gold will one day be $500 or $1,000 and anyone who kept scaling in down to the bottom will do very, very well – but only if they have patience and a long-term perspective.  

  79. I would say that we are toppy especially the NYSE and Russell but some central bank is going to dump $200B on the market tomorrow and make me look like an idiot!

  80. Phil/ you were right about LINE !!! 

  81. Earning Whispers in tonight's report is expecting AAPL to beat estimates quite easily and report $1.94 compared to expectations of $1.80. Their predictions is that the stock will trade around $134.50 after earnings!

    They also expect GPRO and AMZN to beat – they think GPRO will move higher but AMZN price already reflects their potential earnings beat.


  82. SO glad I got out of that crapper LINE!

  83. Phil, sorry to be thin skinned today.

    Yes, I like to scream at stocks (if there is such a thing).

    I guess I got annoyed when you said I tell people to stay out of commodities.

    I don't care if you want to a call me a contrarian indicator — I really could laugh at myself (I hope).

    But it touched a nerve when you implied that I made comments on PSW about staying away from commodities. I wish I did because as of today I would be a hero ;-)

    Since you posted the FU dates it is quite obvious that ABX and CLF have been beyond annoying for years.

    Will they finally work out one day. I hope so for everyone.

    I understand your strategy well and have been on the board for years.

    Seeing a stock I own drop like a rock so quickly,  always feels lousy even with your piecing in investment strategy. Especially, if bankruptcy risk increases dramatically.

    I appreciate and understand what you are saying.

    Sorry for the insult earlier today.

  84. I got out of LINE as well. This world is insane: you can sell a "bitcoin" and buy 5 barrels of oil.

  85. Good morning!  

    Time for more of the same as we got the same Futures pump we had yesterday (into 2am) and the same sell-off since.  I'd have to move to Europe to get on that schedule….

    Dow having a particularly rough time with IBM dragging it down.  18,000 on /YM is still our shorting line there and 2,120 on /ES and 4,675 on /NQ and 1,270 on /TF is long gone (1,258) but below 1,260 is a good signal that shorts still work.  IBM is in transition mode and I still like them and they are missing from the LTP so I'll be looking for a play once the dust settles. 

    Oil tested $50 so long there, of course, /RB hit $1.90 and also a long with tight stops.  /NG at $2.84 is no play, /YG $1,106 and /SI $14.81 were lings off their lines and conviction above but sensible stops since there are now profits.  Dollar 98.03 is down a bit from high of 98.30 but no big deal.  Remember, Dollar effect only lasts for about a day and then the affected indexes tend to "normalize" (whatever that is). 

    Euro $1.085, Pound $1.55 and Yen rejected at 124.50, back to 124.25 and of course /NKD is a short below 20,800 (and conviction at 20,900).

    Not much going on so the focus will turn to earnings numbers.  It's also a very low data week with some Housing stuff tomorrow but then just Leading Indicators and New Home Sales Thursday and that's the end of the week.  Next week is Durable Goods, Case Shiller, a Fed Decision, Q2 GDP, Chicago PMI and Michigan Sentiment – I'm not thinking any of those things is very bullish, maybe Case-Shiller but GDP may be negative by my count of the data leading into it.  Won't that be AWESOME?!?

  86. From WSJ:



    Forgive investors for thinking they’re in a “Groundhog Day”-like loop.

    Yet another rally has brought the S&P 500 near its record high of 2031. The index has rallied to this level several times this year and on each occasion a selloff has ensued.

    Until the recent Greece-driven selloff, the index had been trading, for about three months, in a very tight range, between 2120 and 2080. Moves to the top or bottom of that range were reversed, no matter what the news was.

    The market has been unable to push much past this point. On Monday, the S&P 500 rose as high as 2133, which would have been good enough for a new record. Traders couldn’t hold it, though, and the index closed at 2128.

    There are macro reasons for that — economic growth has been disappointing, and both earnings and revenue growth for S&P 500 companies were weak in the second quarter. That is to say nothing of China, Greece, the commodities collapse, and a market that is warily waiting for the Fed to start raising interest rates.

    But there are market internals that are providing headwinds as well.

    For one thing, only a few stocks are driving the gains. Of the S&P 500′s 3.5% year-to-day gain, virtually all of it has come from the top 15 stocks in the index, ranked by market-weight, according to data from Howard Silverblatt, the senior index analyst at S&P Dow Jones Indices.

    Apple Inc., for instance, accounted for 12.5 points of the index’s 72-point gain this year, and Inc. accounted for 7.5 points. Google Inc. (both classes of stock), Walt Disney Co., Facebook Inc., Gilead Sciences, Netflix Inc., J.P. Morgan Chase & Co., and Pfizer are also driving the gains.

    Also, there are more stocks hitting 52-week lows then highs. On Friday, 199 stocks on the NYSE set new 52-week lows, compared to 76 that made new highs. On Monday, 286 made new lows, compared to only 109 new highs. New lows have outpaced new highs most every day for the last three weeks, according to MND Partners managing director Tim Anderson.

  87. Big Chart – Toppy for sure on S&P and Nas.  AAPL up 10% accounts for 2% of the Nas move, which is 100 points out of 200 and then the AAPL suppliers another 1% so, without them, we're still struggling at the 5,000 line.  Still, we DO have AAPL earnings today and no saying we won't get another 10% and the Nas goes to 5,400.  Will that be enough to get the NYSE over 11,000 or are they trying to tell us something?

    LINE/Stock, Burr – Well it's just down with the sector at the moment.  We'll see what happens if oil makes a solid bottom at $50. 

    AAPL/StJ – I still don't know anyone who actually has an iWatch.  I doubt they will break out those numbers but I find it hard to believe they are flying off the shelves.  IPhone sales, on the other hand, should be majestic – it's really a question of how badly they have cannibalized IPad sales to get there.  

    Skin/Jabob – I wasn't saying you, I was saying people like you (as the screamer) in a poorly constructed sentence.  The point I guess you miss with ABX, CLF, etc. is that scaling in and selling options over the 2 years of FUs you are looking at, even if you didn't take some off the table when they popped, would have reduced your basis to nearly 0 by now and then it wouldn't matter if they go to $2 or whatever – as long as you can still sell calls.  

    I'm more inclined to say FU to a stock when it pops BEFORE I get a chance to double into a 2x position.  The current positions in our LTP are down $106,000 but, as noted above, we have A LOT of cyclical stocks at what we hope is the bottom of the cycle – WHICH WAS OUR PLAN!  We had a lot of tech stocks at the bottom of that cycle (from our old Buy List) and we already sold those, including AAPL when it popped $130 months ago.  With AAPL, we bought more and more as they sold off in Dec and Jan (F them!) and we were fully loaded when they took off in Feb and we TOOK THE MONEY AND RAN the second time they tested $130 in May (since they had failed the first time).  

    We also have $813,000 in cash in the LTP but only up 41% due to the $100K loss in the current positions.  That was also our plan – to have a lot of cash when the market turned ugly so we could go on a buying spree.  The whole market hasn't turned ugly (yet) but the cyclicals sure have.  

    So we spend some of our $800,000 buying more cyclicals and we wait for other stocks to come down and we spend more and more of our cash until we are 2/3 or so invested when the market bottoms and then we can turn net $704,920 into over $1M but F that strategy, it's only been working so far…

    Patience is the hardest thing to teach.  No matter how much I try, people still seem to think they can invest and never see red and that everything they buy should go up every day – even when they diversify to be safe – even when they sell a put and a call and both can't possibly win.  If there are better ways to convey these concepts, they elude me…

    Briefing/Deano – Good summary, that could be my post for the morning… 

  88. Phil 

    Europe;   You will be warmly welcome!…

    Patience, C´mon.  it´s human nature, in oof that  we have here in your chat a universe of realities…from one who was arguing that don´t have money to buy a smartphone, to other who only wrote once in many years.

    But reading almost daily your  work I can imagine you have a core of subscribers  that are long term and needs something , a candy  in daily base  and you provide it with the futures  a most in your site.

  89. Phil – Very interesting hypothetical on ABX if gold goes to $250.  The same example could be used with oil companies if the price of oil goes to $20.  The fact that these companies might have huge oil reserves worth many times more than they owe doesn't help them if they are operating companies with a large amount of debt.   Your extreme example with ABX illustrates this point.  I doubt any of us think that gold will go down to $250 or that oil will go down to $20.

    The problem is that ABX has $12 billion in long term debt.  When they shut down operations to wait for the price of gold to go back up, they can't service their debt.  When they can't service their debt, they are forced into bankruptcy, most likely Chapter 7.  Shareholders are wiped out.

    I'm afraid that's what will happen with a large number of E & P oil companies.

    I was probably very wrong in my investment thesis on XCO.  I took comfort from the fact that 3 very astute value investors had bought huge amounts of stock at $5.  Therefore, I figured selling the $3 puts was a good idea.  Unfortunately, what will most likely happen at this point is that the company will go bankrupt wiping out the shareholders.  The company will be then recapitalized with funds from these guys and others allowing the big boys to get their money back, but leaving us penniless.

    MY BAD !

  90. Hi Phil, I have an Apple Watch and like it still after one month.  Unique and entertaining.  Being paired to the 6+P is a big negative, like you said.  I am retired, but still a handyman, gardner, active in and out of the water, and an overall klutz so I am continually taking it off and on.  None the less, glad I bought it (maybe I should say AAPL bought it for me).  I am still long Apple, because they are going to have a banner year growth, profit and new product—anytime you can grab a 15% + growth company at this p.e. becomes a no brainer…particulary when you are the "house" as my friend from New Jersey preaches.  Best Regards, New

  91. albo, from my perspective, I think you touch on the most important point about investing in long term cyclicals.. buying the ones that can weather the storm by servicing their debt and going into hibernation VS avoiding the ones that cannot and go BK.  I unfortunately doubled down on XCO with the same premise just before the latest routing (my typical good timing trade).  I do believe long term this is turning into a massive buying opportunity as commodities cannot stay this low, unless the entire world is going down the tubes, but demand will turn around eventually.  My plan is waiting until what appears to be capitulation before allocating more money to commodities as I think the routing continues for a while longer.