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Will We Hold It Wednesday – Strong Bounce Edition

Another day, another 1.5% rally?  

That's what we need to get a 5% bounce off of Thursday's lows and we're getting there – exactly as we predicted we would last Tuesday (and the Tuesday before that).  It's not hard at all to predict these market gyrations using our fabulous 5% Rule™ since these are Bot-driven rallies and tend to closely obey the pre-programmed lines.  Our index targets were as follows:

  • Dow: 15,840 low, 16,000 weak bounce, 16,150 strong bounce – now 16,196 (strong).
  • S&P: 1,850 low, 1,887 weak bounce, 1,925 strong bounce – now 1,895 (weak) 
  • Nasdaq 3,900 low, 4,050 weak bounce, 4,200 strong bounce – now 4,104 (weak)
  • NYSE 8,800 low, 9,152 weak bounce, 9,500 strong bounce – now 9,375 (weak)
  • Russell 960 low, 1,000 weak bounce, 1,040 strong bounce – now 996 (weak)

That's 4 out of 5 major indexes not over their strong bounce lines yet so there's nothing to get bullish about (we got bullish at the bottom, of course but now getting cautious again) until we have more green crosses and, as you can see on our Big Chart (click it for bigger), we're well below holding 3 of 5 of our Must Hold lines so it's signaling caution anyway.  

We have the Fed Minutes today at 2pm and, if spun correctly, those can get us back over our lines but more likely we're rejected at our strong bounce lines and, if we're not over them by Friday – we'll be hedging again into the weekend.  Today we have a Live Trading Webinar at 1pm, EST, so we'll be live on the Fed release and we can make some adjustments there.  

1,000 will be a tough line for the Russell to cross so we'll be watching that closely for a shorting opportunity in the Futures (/TF) and it would be confirmed if the S&P (/ES) fails to hold 1,900 and that would line up with 4,140 on the Nasdaq Futures (/NQ), 16,300 on the Dow Futures (/TF) and 16,000 on the Nikkei (/NKD), which we were just long on yesterday at 15,800.  Hopefully those lines hold and we can remain hopeful.  

As you can see from the S&P Chart, at the moment we're stuck in the 5% range over our Must Hold Line at 1,850 on the S&P.  That's fine, really.  It's where we should be in absence of stimulus – that's why it's our Must Hold Level – it's the fair value of the 500 S&P companies.  In fact, on Dec 2nd at 11:11 in our Live Member Chat Room, I had pointed out to our Members:

FANG – Those are the stocks that have been driving the S&P all year – why stop now?  250 S&P points (10%) from just those 8 stocks or we'd be at 1,850 – which is our Must Hold line, which is based on the Fundamentals of the real stocks. 

That morning, in the FREE post (or you can have them delivered pre-market here), I suggested the following hedge based on our bearish S&P premise, which was:

  • Sell 20 SDS March $19 puts for $1.25 ($2,500 credit) 
  • Buy 20 SDS Jan $18 calls for $1.20 ($2,400 debit)
  • Sell 20 SDS Jan $20 calls for $0.48 ($960 credit)

SDS is the ultra-short on the S&P and it did exactly what we wanted it to, turning our $1,060 net credit into another $4,000 for a $5,060 gain while the market pulled back (we flipped long last week and bought back the 20 short puts for less then $100), which is very nice downside protection for each set purchased.  

I don't tell you these things to brag (we also shorted the Futures there and THAT was real money!) but I tell you these things so that you know that we do have good ways to protect ourselves and we are pretty good at calling tops and bottoms so MAYBE, next time you will be able to take advantage of these trade ideas with us.  In fact, in that Dec 2nd post, I even said:

The S&P gets to 2,100 and we short /ES Futures at 2,100 (with tight stops above the line) and Russell (/TF) Futures below the 1,200 line and Nikkei (/NKD) Futures below the 20,000 line and then, tomorrow or Friday, I'll tell you how much money we made shorting and you'll say "why do I never catch these great trade ideas" and I'll say it's because you're not patient enough to wait for the pattern to reset itself and just make the obvious play.  

This is the 11th time the S&P has been over 2,100 since May and, so far, it's been like a little money machine for us all year long on the short side.  I know this time may be different and the last 10 times may have been different too, which is why we stop out if we don't get confirmation from the other indexes that things are toppy but, when it works – it's good for $250, $500, $1,000+ PER CONTRACT in the Futures at $50 per point to the downside. 

We certainly put our money where our mouth is as our Short-Term Portfolio was very bearish at the time and up 213.2% (2 years) that day and, as of yesterday's close, our virtual tracking portfolio was up 346.3%, a gain of $130,000 during the downturn.  Our Long-Term Portfolio, which the STP is designed to protect, dropped $34,000 so a very big net gain, which is more luck than skill as we were only trying to stay net even during the downturn – we just happened to time our moves almost perfectly.

That timing, of course, is simply a matter of following the 5% Rule as well as finding hidden gems, like WYNN, which we featured in our Institutional Report that week and, for our Members, my comment in that day's Live Chat (10:29) was:

WYNN – Getting reasonable down here for sure. 

Income is off by a mile this year, they will be lucky to clear $250M for their $7Bn market cap (p/e 28) BUT, in prior years, they were dropping $700M to the bottom line, clearing better than 15% of revenues so you have really good operators just navigating a rough time.  The $9Bn in debt is a bit scary but they have $2Bn in cash and solid real estate assets so, even if they wrote of Macau as a massive loss ($7Bn in 3 casinos), they could probably survive it.  

If they hadn't JUST spent $4Bn on the latest Macau project at the worst possible time, I'd like them a lot more but fun for a toss since you can sell the WYNN 2018 $45 puts for $8.50, which puts you in at net $36.50, which is still almost 50% off the current price so let's sell 5 of those in the LTP.

After a rough start, those 2018 $45 puts are already down to $7.60 for a $450 (10%) gain and well on track for the full 100% ($4,250) that we'll get paid NOT to buy 500 shares of the stock for net $36.50 (our worst case).  That's what we call "Being the House" at PSW – we sell risk premium to suckers who were willing to pay us $8.50 to bet that WYNN would be below $45 in Jan of 2018.  Our valuation of the company did not agree with that premise, so we took the bet and collected a premium.  Now the stock just has to stay over $45 (40% below the current price) and we win (WYNN)!  You can still make that play and make 90% of our entry. 

Be the House – NOT the Gambler is our primary directive at PSW and I'll be giving a lecture on the topic at the Money Show in NYC this weekend.  

Meanwhile, we're HOPING (not a valid investing strategy) that the market stays strong and clears our levels – that is what we're positioned for BUT we'll be watching our lines very closely with our hedges ready to re-engage if they fail.  As you know, we're usually a lot more certain than this about what the market will do each day – so take it as a sign to BE CAREFUL OUT THERE!  

 


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  1. Good Morning everyone!

    Today's webinar (1PM Eastern) link is:

    http://philstockworld.enterthemeeting.com/m/BDZG36JN


  2. Did I mention how wonderful it is to be long PCLN since Feb 9th? Cash – what's cash? Ah, the thing that PCLN doth deliver :)


  3. PCLN/Winston – Are you locking in gains or holding for higher? I am long too and hence wanted to pick your thoughts?


  4. Good Morning!


  5. what just knocked oil down?


  6. Reality! 


  7. FU reality!!!!


  8. FU Iran!!!!!


  9. Cramer says to sell oil…


  10. Good morning!  

    This is great, John Oliver got Obama to address an issue:

    "Ghost Voting" Happens When State Representatives Vote On The Behalf Of Other State Representatives Are Not In Attendance. This Should Be A Crime. It Is A Clear Form Of Voting Fraud.
    CHANGE.ORG
     

     

    This is why I decided to get into blogging – it's a way to actually influence things without all that disgusting getting into actual politics!  

    PCLN/Winston – Kicking ass. 

    Phil – trading PCLN – it's easy. You go long when the squiggly line hits the bottom right of the chart and you go short when the squiggly line hits the top left of the chart :)

    Wise words…

    LOL Jabob – consistent and funny.  

    I posted that this morning – Iran said FU to cutbacks and I guess today's meeting did not change their mind:

    • Iran appears to be taking a tough line in talks among oil producers on restraining production, despite countries including Saudi Arabia and Russia pledging on Tuesday to freeze their output at January levels.
    • "Asking Iran to freeze its oil production level is illogical…when Iran was under sanctions, some countries raised their output and they caused the drop in oil price," Iran's OPEC envoy, Mehdi Asali, told the Shargh daily newspaper. "How can they expect Iran to cooperate now and pay the price?"
    • The news comes as OPEC President Al-Sada, and Venezuelan and Iraqi officials travel to the Islamic Republic for talks aimed at forming the first global oil production deal in 15 years.
    • Tehran exported around 2.5M barrels per day of crude before 2012; the sanctions cut that to around 1.1M bpd.
    • Crude futures -0.8% to $28.82/bbl.
    • Previously: More shipments of Iranian oil ready to set sail (Feb. 16 2016)

    Europe is holding up well but we're being a bit more tentative ahead of the Fed.  


  11. F going nuts today — plowed through $12.  


  12. Trading PCLN is 90% luck and 10% dodging the next bullet. I'd be a liar if I pretended I knew what I was doing. But I'm mostly short premium and happy to let the burn off continue.


  13. How Hillary Can Win

    During the 2012 US presidential election campaign, I wrote several articles in this column offering bipartisan advice for both candidates, including How Mitt Can Win and How Obama Can Win. Today, I offer constructive advice to Hillary Clinton.

    Why is Hillary Clinton in the fight of her life for the …


  14. SAN FRANCISCO — Timothy D. Cook, the chief executive of Apple, has released a statement in which he says that a court order that directs the company to help the F.B.I. unlock an iPhone could threaten the privacy of its customers.

    Mr. Cook’s statement, a letter to Apple customers, was posted on the …


  15. This story first appeared on WSJ City: Fast, fact-packed updates on financial news impacting London. Made for mobile. Download and read for free.

    Heavyweight investors and economists have this week postulated that a recent selloff in global stock and bond markets may have been overdone.

    But there are …


  16. Italy is facing a full-blown banking crisis

    How to dump toxic waste on the public through the backdoor.

    Back during the euro debt crisis, while the ECB was buying government debt from Member States to keep Italian and Spanish government debt from imploding, German politicians fretted out loud about what exactly the ECB was buying. Among them …


  17. SGYP = buy the stock, sell the Apr $5/$4 C/P for net $2.35.  The company has a drug that is better than IRWD's GI drug (actually a peptide).  I still have the stock and the Apr $7/6 C/Ps STO.  Could be a new position or add to the old one.

    Sorry, still crazy busy with work and my kid's baseball team, who just won a tournament here in CA.


  18. WASHINGTON (Reuters) – U.S. housing starts unexpectedly fell in January likely as bad weather disrupted building activity in some parts of the country, in what could be a temporary setback for the housing market recovery.

    Other data on Wednesday showed producer prices rose last month and there were …


  19. Joe Ulrich/ WITF

    Pennsylvania’s Marcellus Shale industry has been struggling in the face of low commodity prices.

    The sound of humming drill rigs has been tapering off lately. It’s been happening for a while, but this year, the industry is going through a particularly rough patch. Drillers are laying …


  20. The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come

    It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of …


  21. The capsule wardrobe movement continues to gain momentum.

    Fast fashion deserves criticism. And our culture’s obsession with ever-changing fashion …


  22. You can trade gold and pork belly futures, why not hemp?

    Raising venture capital is difficult for any first-time founders with a company that hasn’t yet launched. Multiply that by 100 when your startup has any tangential relationship to cannabis.

    It is no surprise, then, that it took Edward Woodford, …


  23. He oversaw Washington’s bailout of the nation’s biggest banks. He campaigned for governor of California. He was one of People Magazine’s Sexiest Men Alive.

    Now, Neel Kashkari is president of the Federal Reserve Bank of Minneapolis, a position that gives him a voice in steering the course of the


  24. Hi Phil, Your play on CMG is doing great, I am smiling is there still a way to jump further on the bandwagon or wait for an other dip?


  25. Phil – "It's amazing to me that the constant repetition of a lie, rather than damning the liars, ends up being accepted by those that follow them as the truth to the point where they no longer believe the actual truth."

    For thousands of years people were sure that the earth was flat and at the center of the universe. It's not, and an astronomer who still believed that it was, and to prove as such, could make some false observations.  Sometimes the ideas that we THINK we KNOW to be true are dead wrong.


  26. Short premium/Winston – Well that is knowing what you're doing.  It's like the Butterfly Portfolio – sometimes we're right and sometimes we're wrong but sometimes it just works out right in our sweet spot and we have fantastic months that boost us forward.  As long as the rest balance out – that's all we need. 

    Cognrats Pharm!  

    Wow, we're moving now – /TF just hit 1,010, /ES 1,915, /YM 16,350, 4,156 on /NQ and 16,115 on /NKD.  

    No oil report today but I like /RB long over the 0.98 line.  

    /NG struggling to make progress.  /NGK6 is $2.043.

    GS failed to scare the muppets out of gold. 


  27. Iran oil minister just said he supported any effort to stabilize market and prices.


  28. Wow, we are bullish – LTP and STP both gaining at the same time.  I've got to do our reviews today and tomorrow – we only did the OOP last week, right?  

    CMG/Yodi – Well, we have 10 March $530/570 bull call spread with short Jan $340 puts that was a net $8,630 credit in the STP and we took the bull spread first (12/21) and then added the short puts when it went against us (1/6) and we then added 10 Jan $450/560 bull call spreads at $35.50 and those are on track for the full $110,000 if CMG can scrape out another 10% this year.  

    I don't think I want to get more bullish than that but you can still sell the 2018 $400 puts for $50 and that's pretty good if you want a short put like that.  It still nets you in for less than 50% of the highs.  

    Actually, now that I think about it, in the STP, we can buy back the 10 short CMG Jan $340 puts for $15,50 ($15,500) and sell just 5 of the 2018 $400 puts for $50 ($25,000) and that puts $10,000 in our pocket while drastically lowering our exposure – it would be silly not to do that!  

    Mechanically, though, let's do the new sale in the LTP, as it's more appropriate there.  

    Iran/Rustle – So far away. cheeky 


  29. rustle- I wonder if that means anything as far as their production? My guess is that they will all agree to say the right things and then go and do what they always do. Overproduce.


  30. Phil where does one go to see what they are saying about oil? It's obvious that traders in the know are getting the news ahead of us little folks, but where do we go to try ond get some news quickly? Rustle, where did you see that?


  31. hilarious Phil


  32. Oil/Craigs – There are oil sites like Oil Drum, where they post any breaking news but #oil on twitter or #OPEC is very effective if you run a live stream and want to read every bit of drivel that gets posted.  I'm just sticking with yesterday's call to go long over $30 with tight stops on /CL and see what happens. 

    Unless a story gets posted to a major – I'm going to ignore it anyway.  Playing the rumor game is for suckers who think they can get an edge – kind of like guys who listen for "tips" at the track – they're usually the ones who go broke the fastest.  Watch the macros and pick a position and then let the rumors confirm your position or get your finger on the sell trigger if it sounds like you were wrong but don't let the rumors BE your decision!  


  33. WSM performing lately..


  34. KMI has an interesting chart. It wasn't decimated in 2015 like a lot of the other energy plays and really didn't fall apart until late last year. Obviously Buffet likes it and that's giving it +10% run today but there could be more upside to this one if the sell off was overdone.


  35. Rumors- Phil I agree, I don't want to play rumors (unless it is the Fleetwood Mac album) so thanks. Not a word on either CNBC or Bloomberg yet on this. 


  36. craigs—I did hear it on CNBC that Iran would support anything to help.

    But I doubt Iran could be trusted with anything they say.


  37. Berkshire Hathaway 13F – New stakes in KMI; raised stakes in WFC, DE, AXTA, LBTYA; sold out of CBI


  38. I'm in UNG at 7


  39. LL      moving in the right direction


  40. Phil – "Florida's Supreme Court Ruled in Gore's favor and it was the SCOTUS that upheld BUSH's appeal to overturn Florida's ruling and have the bogus election stand, thus dooming the United States to the worst 8-year period in its history."  Speaking of things that were and still are DEAD WRONG in the extreme… and we will be paying the price for the blind acceptance of these literalist's for decades to come.


  41. Will SCO break under the 50? the lower "double top" needs to be confirmed with a move to a local minima under 150, currently 13 points below the 50-day.


  42. bio…under 150 and I owe you $1


  43. Just opened a play on PPC to set away until Jan17 and take home 13% for the 10 month with a downside protection of 15% 

    Buy the stock @ 22.87 sell the Jan17 22 call for 3.68


  44. Jabo: found an old wallet with $6 in it. You're on!


  45. Phil – what does your crystal ball says about the FOMC today?


  46. Ideas/Naybob – I think the biggest problem with people today is that they have embraced the concept of "everyone is entitled to their own opinion," which isn't really a good idea anyway and they have compounded that by confusing opinion with facts.  You are not entitled to your own facts, facts are, in fact, facts and the existence of facts should then put an end to any opinions on a subject.  That is no longer the case in America, where overwhelming factual evidence can now be countered by one loudmouth's opinion and even more easily by a single lobbyist with a rigged study because – somehow – people also believe that any "experts" opinion is as valid as any other.  

    This all has to stop before we begin to devolve as a species.  IQs are already marching downhill fast and, if we don't do something very soon, there won't be a generation of teachers available to teach the next generation of students how to think critically at all. 

    Of course, "THEY" just ran a test program to accelerate the process by putting lead in the water – so let's not expect "THEM" to be increasing the education budget anytime soon. 

    We just have the worst priorities as a country!  

    WSM/Randers – Good thing too as we have a lot of short puts in the OOP (10).  

    KMI/StJ – Generally a good business to be in.  

    Rumors/Craigs – Biggest album of all time (in the 70s) and my kids have never heard of it…  frown

    LL/Stock – CEO has luekemia, interesting reaction.

    Court/Naybob – That's why this election is probably life and death for America as it will set the tone for the court for the next 20 years.  If a Republican gets elected and gets to replace Ginsburg, Kennedy and Breyer with Conservative judges (maybe Scalia too!), then you won't even recognize this country in 2025.

    Image result for age of supreme court justices

    If we consider the number of cases decided by single vote majorities to be a fair proxy for a Court’s polarization, it becomes easy to see that our current Court is by and large the most partisan in years. In the period between 1801 and 1940, less than 2% of all the Supreme Court’s decisions were decided by a 5-4 vote. By contrast, the Rehnquist and Roberts Courts have seen just over 20% of their cases be decided by this small margin. This shift provides a clear indication that polarization has indeed spread to the judiciary.

    Modern justices seem to often vote in ideological alignment with the party of the President that appointed them. This phenomenon is relatively new. In the past, the party of the appointing President did not predict a justice’s votes. Twentieth century justices Earl Warren, William Brennan, and Harry Blackmun all leaned liberal despite being appointed by Republican Presidents. Now, these types of justices have become extinct. In the 2014-2015 term, virtually every 5-4 decision the Court gave out was split perfectly along party lines. This, combined with the increase in 5-4 decisions, is an indicator of  just how partisan the Supreme Court has become.

    If you follow that link, just last year, Same Sex Marriage was 5/4, Obamacare 6/3, anti-redistricting 5/4 (twice), anti Housing Discrimination 5/4, anti Confederate Flag 5/4, anti Pregnancy Discrimination 6/3 – just imagine those things being reversed.  Redistricting alone would consolidate Republican power for decades to come.  

    SCO/BDC – Well I don't see oil going below $30 again.  

    PPC/Yodi – Dragged down internationally.  Hopefully they come back but slow, I think. Still, they survived a bad earnings report so that's a good sign.  

    Fed/Bulls – I can't imagine anything in the minutes to derail the rally but it will be hard to get us over 1,925 on /ES today (strong bounce) and we're almost there and right there on SPX.  Same with Nas 4,200 – tough to cross in one day but NYSE at 9,500 (strong) so good sign if they can stay over into the Fed that we might have room to run.  


  47. Phil, do you have a view whether the S&P low of 1810 will stick and we are now in an uptrend, subject to volatility…or something else? Maybe it's all too uncertain. Thanks. Strether


  48. Phil   probable the same question as Strether.. Is everything awesome again?


  49. S&P/Streth – I think 1,850 should stand firmish.  Not that we can't go below but I think, from there, we should be able to put in a +10% year overall.  

    Awesome/Stock – Not at all but everything is not worse than it was in the fall – it's just that the risk factors are finally being priced in and expectations are being rationally adjusted from 2,100 to 2,000 – not a big deal at all and we're just having these violent swings as people rotate their positions away from silly stocks (FANGS) to more sensible ones.  

    Oil $31 – good enough for me (+$1,000)!  


  50. Phil I do not disagree with you about oil not going below $30 again, but I am curious why you are sure of this? If the Iranians and Iraqis (or any of these guys)are being counted on to keep a lid on production in order to drive up prices, why would they suddenly do what they have never been able to do and actually abide by these agreements? Are you simply counting on a cyclical shift at the same time? Are you expectiing inventories to stop growing now?


  51. Oil/Craigs – It's not sudden.  We are now in the 3rd qtr of oil being under $50 and under $40 since Dec so the numbers you see now (losses) in Q4 earnings are significantly worse in Q2 and how long do you think that can be sustained?  There's nothing sudden about this – the Saudi plan was to break the backs of marginal producers and their plan is working so EITHER there will be an OPEC agreement that takes 2-3Mb off line per day OR there will be bankruptcies etc. that do the same over the next 6 months.  Add that to the fact that Feb is the bottom of the demand cycle and it's very unlikely that another panic will take us back below $30 – where we shouldn't be in the first place.  

    Keep in mind those are Brent prices, which are $35 at the moment but it gives you an idea of what reality looks like.  People could stand producing 90Mbd and losing a few bucks per barrel at $50 but $35?  Not the same thing at all.


  52. I hope you are correct Phil..

     

    I like oil over $30 ;-)


  53. I am back… Did I miss anything?


  54. Phil – "I think the biggest problem with people today is that they have embraced the concept of "everyone is entitled to their own opinion," which isn't really a good idea anyway and they have compounded that by confusing opinion with facts."

    Opines are much like an anus, everyone has one and is entitled to it, replete with benefits and detriments.  I concur, it is the conflation of opines with facts, that gets in the way.

    Phil – "You are not entitled to your own facts, facts are, in fact, facts

    We made too many wrong mistakes, and the future ain't what it used to be.  Yogi is smiling down on you.

    Phil – "Of course, "THEY" just ran a test program to accelerate the process by putting lead in the water – so let's not expect "THEM" to be increasing the education budget anytime soon." 

    I can only assume the test program you are referring to is Flint? or any town East of the Mississippi, in an allegorical sense.


  55. minutes…


  56. Phil – Hypothetical – If one suspects that silver might hit the $20-25 range and gold might hit the $1350 – $1415 range by no later than mid April.  What would be the best way to play that with futures contracts?

    I think we will see ES resistance tests at 1930, if it passes then 1940, if it passes then perhaps at 1970. Out.


  57. FCX has doubled in less than a month.


  58. Kudos to Phil for a number of things:

    The WYNN Jan 18 45 put sale @ $10.50 – got in at better prices than the recommended – looks like that one is up there with the best

    Busting my chops so much so that I thought long and hard about hedging. Finally got my hedging mojo working – buying SDS BCS when the market was rising and I was in panic off mode, so when the market went down I saw the payoff and it made me ride a couple of storms in relative tranquility

    Then pointing out how to leverage the SDS position (Jan 18 13/23 BCS by selling calls when the days looked darkest (boy, those short March 16 SDS $30 calls lost premium rapidly)

    Using the recent weakness to adjust spreads downwards and out, so now things are set fair for Jan 18, and I have plenty of short premium to burn off over the next 10 months

    That's just the recent list – I've got five volumes of notebooks full of Phil's ideas and knowledge. They're well thumbed through and one of my most valuable resources.


  59. DX, my favorite Mortgage REIT – Earnings and revenues came in slightly better than expected in the 4th quarter.  Book value declined, but as of 12/31 was $7.71.  Stock at $5.89 is yielding 16.30 % and selling at
    25 – 30% below book.  I continue to own it and like it.  The stock goes x-divd in less than a month.
     


  60. Quick update on my low stress dividend portfolio:  Things have been going reasonably well with my conservative buy/write dividend portfolio.  My portfolio has about 45 positions in it (all 1x entries), and it weathered the recent downturn with flying colors.  Mainly because the portfolio has a below average beta.  The makeup is a mix between true buy/writes, and short puts.  I'm currently only using about 20% of my portfolio margin buying power. 

    I'm having good luck hedging with SDS, TZA, NFLX and TSLA, and was able to take very good profits below 1,850 on the SPX. I have found STJ's UVXY play (shorting 2017 $170 calls) to be very useful for offsetting my investment in hedges. Selling these calls when volatility is spiking made me more comfortable investing heavier in short term hedges, because I knew if we rallied my UVXY gains would offset some or all of my losses in SDS and TZA.  

    Having the majority of my portfolio in low PE dividend payers, means that they should be very high probability plays.  Having this ballast in my portfolio has made me more comfortable riding out the ups/downs on positions like LL, CLF, UNG and RIG because I have confidence that I have decent gains coming each year from the safe portion of my portfolio.  This should flatten out my annual performance, and hopefully get me consistently in the black.  Right now I'm about 60% invested, per my sizing rules.  If I was 100% invested, the potential profit is about 20-24% annually, which can then be enhanced by short term trading, butterfly positions, etc.

    Everyone has to figure out the style that works for them.  This seems to fit my needs quite nicely. Let me know if you guys have any questions.  

    Kudos to Phil for teaching me (and the rest of us) the necessary skills to manage our accounts confidently.


  61. Palotay – You might be on to something with "financing" hedges with UVXY… They really offset each other quite nicely and you can count on cashing the UVXY anyway. Interesting!


  62. $30/Jabob – Ah but how long before that doesn't satisfy you either.  

    No StJ, just the normal nonsense.  

    Flint/Naybob – Yep, not much pushback there.  

    Silver/Naybob – Well I still love ABX as the levered play on gold and SLW for silver.  We just looked at ABX in the webinar and I like selling those 2018 $10 puts for $2.50 as that's net $7.50 so who doesn't want that?  Then you can pair that with a bull call spread.  You have very aggressive targets with very short time-frames.  I'd be more comfortable with Jan $10 ($2.10)/17 ($1.13) bull call spread for 0.97 and you can buy 2 or 3x vs the short puts and make incredible amounts of money if all goes well.  If gold is $1,350, ABX will be so far over $17 that you'll get most of the money out early.

    SLW is at $15 and there you can sell 2018 $10 puts for $1.70 and use that to buy the Jan $13 ($3.80)/18 ($1.80) bull call spreads for net 0.10 with a nice $5 upside.  

    FCX/Albo – As I was saying in the Webinar, that's what our sideline cash is for!  

    Submitted on 2016/01/22 at 10:25 am

    Copper/Burr – I don't usually play it – it's just that $2 was such a good line with the catalyst of the Global markets bouncing.  I'd play FCX if you want to be long copper.  

    They are about 60% levered to copper (20% oil/gas and 15% gold) so a good general materials play and priced for BK at $5.2Bn ($4.40) with $16Bn in sales (at these prices!) and -0.14/share this year but probably back in the black next year and this is a company that has dropped $2-3Bn to the bottom line in past years.  

    You can sell the FCX 2018 $4 puts for $2.10 and leave it at that (100% upside at $4 – even in an IRA!) or you can pair it with the 2018 $1 ($4)/5.50 ($2.15) bull call spread at $1.85 and that's net 0.15 credit with $4.65 of potential upside (31x cash) at $5.50+.  Very margin-efficient trade – Good enough for 20 in the LTP and we either make $9,300 or we own $8,000 worth of FCX!  

    Thanks Winston!   See, I just have to repeat myself often enough to catapult the propaganda…  cool

    DK/Albo – I would think the Fed minutes are good news for the REITs.  

    That's great Palotay.  As I often say, my goal is to give you plenty of tools for your tool belt and help you get good at using them.  Once we accomplish that, you can build your own portfolio quite nicely and it's a skill that will last you the rest of your life.  That's always been my goal – you made me very happy! 


  63. What are the expectations for WMT tomorrow?  Up or down, Anyone 


  64. Damn, life is hard for these rappers. Time for a GoFundMe I guess:

    http://abovethelaw.com/2016/02/50-cent-says-bankruptcy-plan-will-force-him-into-indentured-servitude/

    — Lawyers for 50 Cent, arguing in court papers that a proposed debt repayment plan for the rapper, a plan that was suggested by his creditors (including a woman who won $7 million from him in a sex-tape dispute), would amount to a “form of modern-day indentured servitude.” His lawyers claim that under the plan, 50 Cent would only receive “access to food and shelter on the whims of [opposing counsel].”

    Small people don't understand how hard it is to deal with money problems when you are rich! See Kanye for example…


  65. Phil – I missed the Webinar. What are your thoughts on the FOMC minutes?


  66. Working from  beach house in Monterrey Bay.   Had beautiful 70 degree weather last 4 days.  Now turning ugly with rain and wind forecast.  Markets are behaving.  Selling some covered calls.  AAPL, Ctsh,  F.  


  67. Costco is a drug… Good article:

    http://www.forbes.com/sites/robinlewis/2016/02/16/costcoholics-costcos-113-7-billion-addicts/#63d402dd5f73

    Costco pays its employees an hourly average that is more than two-and-a-half times the minimum wage, and almost twice what Walmart employees make. Almost 80 percent of its employees have company-sponsored health insurance. With initiatives such as these, Costco earns incredible employee loyalty, which in turn results in fantastic productivity.

    Other companies that invest in their employees’ workday happiness and loyalty are also performing well financially. Among them are Nordstrom, The Container Store, Sephora, REI and Whole Foods Market. Doug Stephens, founder of the consulting firm Retail Prophet, told Bloomberg Businessweek: “This is the lesson Costco teaches. You don’t have to be Nordstrom selling $1,200 suits in order to pay people a living wage. That is what Walmart has lost sight of. A lot of people working at Walmart go home and live below the poverty line. You expect that person to come in and develop a rapport with customers who may be spending more than that person is making in a week? You expect them to be civil and happy about that?”


  68. Phil, it was DX not DK, but I see your point.  I just think there is enough cushion there to make it attractive.


  69. WMT/Yodi – Well, they already came back 20% off $55 but I think $70 is fair so up another few bucks unless we have a negative surprise.  

    Mo money, mo problems, StJ.  Of course he could have maybe not made the sex tape…  

    Although Forbes estimated that 50 Cent's net worth was $155 Million in 2015, when he filed for bankruptcy he reported assets that valued from $10 million to $50 million. However, sadly– his debts equaled just as much!

    Ouch!  

    Fed Minutes/Bulls – They were doveish but no more so than has been baked in by this rally already so I didn't think we had enough to punch over 1,925 or 1,025 or 16,500 or 4,200.  Now we just have to step back and see how tomorrow goes after people have a chance to digest. 

    Monterrey/Batman – Now that's the way to trade!  

    Good point, StJ but I don't think it's bitterness – just tiredness in the employees.  It's exhausting being poor and struggling day to day just to provide the basics for your family and living one missed paycheck or one accident away from losing your home or car.  Think about how many small problems we solve by writing a check and imagine if you couldn't do that.  My pipe burst the other day and the plumber came right away (for $500) and fixed it because he knew I'd pay cash (always works great with service people).  If I didn't have money I'd do what?  Wait with the water shut off in the house until I saved or borrowed $500?  While we were waiting we drank bottled water and I promised the kids we'd go to a hotel if it wasn't fixed by bed time – most people don't have that option and it's a whole different life for them and they have to deal with all that crap every day and still show up at work with clean clothes and a smile… 

    DX/Albo – Ah, that makes more sense! 

    William Shatner is CNBC's guest after the Bell.  He's got to be please with PCLN's recovery.  


  70. 4,195 on /NQ is the 2.5% line – very impressive for one day!  


  71. Tiredness / Phil – True… That whole thing about paying employees as little as you can even to push them into poverty just escapes me completely especially coming from a family of billionaires. I wonder how the Walton pay their household employees! 


  72. Naybob   They are placing bets on bonds today:

    HYG    24,343 June $74 puts

    LQD    13,424 June $110 puts with 33,636 in OI. 

    I don't know if these are buys or sells but large premium either way.


  73. s&P.  Up day on good volume.  


  74. Phil/FANGs: I elect changing the name to PF CHANGs for fun and to be sure to add PCLN and Chipotle into the "index"!. I'll add HPQ too, just because I need an H, but they aren't really in the absurdity index.


  75. Maybe HD? 


  76. inventories


  77. The WMT's could give their 1.4M employees a $10/hr wage increase for a year from their personal fortune and only lose less than 20% of it to pay for the program ($29B).

    Of course what would really happen is WMT's staffing would become hugely competitive for high quality workers, current workers would perform far better (much like Costco, above) and productivity would go through the roof (allowing the workforce to shrink after the 1 year experiment), thereby adding 10, 20 or 50% to WMT's valuation and another $100B to the Walmart's personal fortunes.


  78. That makes too much sense BDC… Will never happen. All these guys are so shortsighted just looking at their bank balance from one month to the other. Of course, these guys never had to take a chance in life so might not be able to handle the risk. 


  79. And BTW, some of that $10/hour raise would also be spent at a Wal-Mart so really a win-win situation. But once again, it makes too much sense. Especially when you have guys like Steve Grasso on CNBC complaining that since they raised salaries to $10/hour, the stock price has never recovered.


  80. Wow, look at Oil.


  81. Phil quoted on cnbc above


  82. Stocks rallied for the third straight day with the S&P 500 now gaining more than 5% over the last three trading days.

    First, the scoreboard:

    Dow: 16,452, +255, (+1.6%)• 
    S&P 500:
    1,926, +31, (+1.6%)• 
    Nasdaq:
    4,534, +98, (+2.2%)• 
    WTI crude oil:
    $30.60, +5.5%

    Fed Minutes

    The minutes from the Federal Reserve’s …


  83. Now the bulls are in a bind.

    U.S. stocks jumped Wednesday, notching the first three-day rally of 2016 and giving the S&P 500 its biggest three-day percentage gain since August. But there’s the rub: Stocks never got “cheap” on a price-to-earnings basis and look more expensive now then they were when …


  84. Though fracking industry proponents scoff at any intimation their so-called vital industry poses even scant risks to the public, a new study …


  85. To get a sense of how much more oil the world has than it needs, look to the world’s oceans. Every day, supertankers carrying 2 million barrels apiece sit idle, in hopes that the price of oil one day will rise again. Or look at the line of ships being turned away from ports at the Gulf of Mexico, …


  86. Company blames all-day McMuffins for poor earnings.

    McDonald’s mcd decision to revive all-day breakfast in October is proving to be deadly to some of the restaurant chain’s competitors.

    Jack in the Box jack on Wednesday reported a smaller than expected quarterly profit and, without naming names, …


  87. In 17 of the 19 times in the last 100 years that Industrial Production has contracted for 3 consecutive months, the US economy has entered recession. …


  88. The Printemps department store outlet in Shanghai’s Pudong District would seem to have all the amenities necessary to succeed in modern Chinese retail: luxury brands, a venerable 150-year Parisian retailing history and an exclusive location.

    Despite these advantages, however, the store’s management …


  89. In the current environment of low real interest rates, investors are being forced to reach for yield. These investors are not happy, and many are looking to the US Federal Reserve to raise interest rates because Fed policy has pushed rates below their “fair” market value.

    Of course, the underlying …


  90. The Great Recession is widely understood to have been triggered by a financial crisis, but that analysis diverts attention from an even more malignant current that threatens to erode the U.S. economy at its very foundation: our productivity in the years since the recession has grown at only half …


  91. Tech entrepreneur Elon Musk added $10 million worth of SolarCity Corp. shares to his holdings, making a $1.8 million paper profit as shares of the solar-power installer have skyrocketed.

    That was a welcome vote of confidence for SolarCity SCTY, +13.17% and may have softened the blow from news that …


  92. , Contributor

    Today, I am looking at the strongest 10 stocks within the S&P 500 as valuations in higher multiple stocks have recently reset their valuations on recession concerns. Even though the S&P 500 has seen a 100 point counter trend rally off the 1,800 level does not mean investors should feel …


  93. Members of the US Federal Reserve considered changing course on their plan to raise rates throughout 2016, minutes from Fed’s last meeting show.

    Records released on Wednesday showed that members were worried that a global economic slowdown could hurt the US.

    Policymakers agreed that “uncertainty had …


  94. The S&P 500 (SPY) ETF is up 5.48% since last Thursday’s close. Below we provide a boatload of charts and tables highlighting where equity markets …


  95. The storied carmaker will work with Silicon Valley’s finest.

    British luxury carmaker Aston Martin has signed a deal with Chinese tech company LeEco (formerly LeTV) and electric-car startup Faraday Future. As Reuters reports, the plan was revealed at a news conference in Frankfurt, Germany. Aston …


  96. (Reuters) – North Dakota’s energy regulator said on Wednesday he is worried about hedge funds and other investment groups buying oil assets in the state and conducts background checks on potential acquirers.

    Billions of dollars in investment capital have started to flow toward the oil industry, with …


  97. Two months ago the Australian media, which unlike its US counterpart refuses to be spoon fed ebullient economic propaganda, called bullshit on the …


  98. Japanese exports crater

    Japan, one of the export powerhouses of the global economy, just posted some ghastly trade data.

    The disappointing result for January follows anequally unimpressive, and weak, trade report from China for the same time period.

    According to Japan’s Ministry of Finance, exports fell by 12.9% in the 12 …


  99. Wage hikes are actually helping Wal-Mart, not hurting it

    When Wal-Mart began raising wages for its lowest-paid workers last year, there was worry that it would impact the company’s bottom line in the short term.

    But in the long run, analysts say such hikes will actually benefit low-cost retailers like Wal-Mart in the longer term. The reason? Workers will …


  100. Amid today’s summit and Cameron’s looming pitch to The Brits, the market is starting to take the risk of UK’s exit from the EU seriously…Various …


  101. On the 10th day of every month, Junsuke Senoguchi has just one thing on his mind — the closing level of the Nikkei 225 Stock Average.

    That’s because …


  102. Japanese exports and imports fell in January at their fastest pace since 2009, and will do little to assuage the growing chorus of asking if this the …


  103. SAN FRANCISCO (Reuters) – Amazon.com Inc is quietly inviting drivers for its new “on-demand” delivery service to handle its standard packages, as the online retailer known for low prices and razor-thin profit margins looks to speed up delivery times and tamp down its growing multi-billion dollar …


  104. By Alonso Soto BRASILIA (Reuters) – Standard & Poor’s downgraded Brazil’s credit rating deeper into junk territory on Wednesday, citing its failure …


  105. LAST autumn, FlyersRights.org, a non-profit organisation representing air travellers, drafted a petition to the American Congress demanding new …


  106. Presidential Candidates Wore NASCAR Uniforms

    One appreciation I have for several North American sports is amount of reverence given to the team …


  107. On Saturday, a magnitude 5.1 earthquake rattled northwest Oklahoma, the third strongest earthquake on record for a state that has seen a remarkable …


  108. While markets take investors for a rollercoaster ride that’s not for the faint of heart, diving into which stocks and sectors are the most loved and …


  109. Walt Disney Co (DIS): A Premier Dividend Growth Stock by Simply Safe Dividends

    Walt Disney (DIS) is the type of business we like to own in our Top 20 …


  110. Saudi Arabia’s credit rating was cut two levels to A- from A+ by Standard & Poor’s, which lowered the biggest OPEC producer’s credit grade for the …


  111. Phil/JNJ

    What do you think about adding JNJ to the butterfly portfolio buying the 2018 105 calls and 90 puts.  Seems like we can get nice premiums on the short calls and puts as the stock looks like it has settled in a nice channel (90-100).  I am not sure I would sell April calls and puts because of earnings (~4/12), but nice enough premiums still in March selling 100 puts and calls.  What do you think?


  112. Phil/ AAPL April calls

    Good morning!

    Need a little input from you, please

    I bought some April $110 calls in AAPL (covered, of course, and uncovered them when appl dropped to $93). My net cost on 40 calls is $8. I made $3 by selling the weeklies a couple weeks ago, $1 last week

    Most recently, I sold the Feb 19 weekly $95's for a dollar yesterday morning with APPL at $95.20, but it ramped up all day and again today to $98.

    So, what I am thinking of doing is selling the April $110 longs for the $0.65 or so, add another couple of dollars and buy the Jan 2017 whatever's and continue selling the weeklies against them.

    Or, I could continue to roll the shorts, but am afraid I may run out of time by April. Any other ideas?

     

    Do you see a better plan or have a more specific idea?

     

     

     

     

     

     

     

    I have been selling weekly calls since, most recently, yesterday, the $95's for a dollar. I was hoping to make a dollar a week until the April expiration.

    The spike yesterday afternoon from $95 to $98 today has me a little concerned.

    I thought if the market continued to ramp up, perhaps I would sell my April $110's for whatever I can get, buy the Jan 2017's for a couple dollars more,


  113. While most of you still sleeping:

    Pre. opening of DAX moving up up up. 

    I have been playing PFE for quite some time and while this stock is on the lower scale I am setting up a play as follows;

    Buy stk @ 29.64 and sell the Mar1 call for .37 cents and sell the Mar. 29 put for .49 cents 

    PFE has a yield of present 4% and the income of this play if flat, is 2.6% combined put plus call.

    However if PFE stays flat we can play an other two weekly calls for a possible total of .70 cents.

    Obviously I am selling a 29 put only because I want to buy more stock. The present discount is 28.51 though I am paying now even 29.64. I feel this could be a very comfortable play even if you do not sell a put. 


  114. Shows you how quick the wind changes here DAX now slowly moving down a bit. 


  115. Good morning! 

    28 people killed in Turkey this morning in a massive bomb blast and you know how the markets love terrorism for some reason.  

    Oil contracts flipped to April so looks like a huge gap up on /CL to $33.64 but /CLH6 (March) is $31.43 – $2.21 gap is MASSIVE and will really screw people trying to roll contracts but only 95,000 left.  

    Click for
    Chart
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Mar'16 31.35 31.72 31.01 31.43 05:41
    Feb 18


    -

    0.77 35708 30.66 95488 Call Put
    Apr'16 33.55 33.98 33.08 33.61 05:41
    Feb 18


    -

    0.63 46090 32.98 490488 Call Put
    May'16 35.13 35.52 34.69 35.26 05:41
    Feb 18


    -

    0.57 7347 34.69 232989 Call Put
    Jun'16 36.27 36.75 35.92 36.48 05:41
    Feb 18


    -

    0.51 4309 35.97 180131 Call Put
    Jul'16 37.39 37.48 36.81 37.33 05:41
    Feb 18


    -

    0.42 1347 36.91 84914 Call Put
    Aug'16 38.31 38.31 37.59 37.94 05:41
    Feb 18


    -

    0.26 666 37.68 55331 Call Put

    API showed a 3.3Mb draw – that helped too.  If EIA doesn't confirm a draw at 11, we can expect a snap back as those 95Mb get sold off into Monday's contract close. Either way, it would be strange not to have a dip of some sort between now and Monday as people trapped with contracts are forced to act.  

    Europe is up again (mostly) and Asia had a nice session (mostly) so all continues to be well and we're creeping over those strong bounce lines in pre-markets.  Obviously, from reviewing our Portfolios yesterday – we're bullish enough so I do want to be sure before pushing us even more into bullish territory.  If we are going to hit new highs, we've only 40% of 60% recovered so a long way to go and another round of massive gains in our Portfolios if we stay on this path – no sense rocking the boat and I'll try to do our reviews today.

    Nikkei is surprisingly strong after TERRIBLE export numbers with /NKD at 16,205.  The Dollar is still at 97 and that leads me to conclude that the Nikkei is more dependent on the Dollar than it is on Japanese Economic Data!  One explanation though, that I haven't been able to confirm, is that the data is priced in Yen and the stronger Yen is what pushed the numbers down so hard (-10% was expected).  I would be sure that's happening but not one other analyst seems to have noticed this – so I have to question my own sanity.  The Yen averaged 85 in Jan, up 3.3% from 82 in Dec and, in Feb so far, it's been at 85 too.  

    Asian Stocks Expand Global Rebound as Oil Rallies; Aussie SlipsAsian stocks joined the global recovery as crude oil’s return to levels last seen at the start of February bolstered sentiment. Australia’s dollar fell amid weak jobs data, while emerging-market currencies rallied. Japanese equities wiped out last session’s retreat, and U.S. index futures climbed with Australian and South Korean shares as crude rose with Iran backing a freeze in output from key energy producing nations. The Malaysian ringgit and won rebounded, while the Indonesian rupiah snapped a two-day drop even as economists predicted interest rates there will be cut Thursday. The MSCI Asia Pacific Index rose 2.1 percent as of 10:41 a.m. Tokyo time. Japan’s Topix index rallied 2.5 percent, after slipping 1.1 percent last session. The Shanghai Composite Index rose 0.2 percent.

     Japan's Exports Drop Most Since 2009 as Sales to China FallJapan’s exports fell for a fourth consecutive month and dropped the most since 2009, underscoring continued weakness in an economy that contracted in the final months of 2015. Exports to China, Japan’s largest trading partner, were down almost 18 percent, driving an overall decline of nearly 13 percent in the value of overseas shipments in January from a year earlier. Imports dropped 18 percent, leaving a 645.9 billion yen ($5.7 billion) trade deficit, the Ministry of Finance said on Thursday. Falling exports compound poor sentiment in Japan, where wage gains have stagnated, consumer prices are barely rising and households are reluctant to spend. “The environment for Japanese exports is looking bad as Japanese companies shift production abroad, the global economy slows and the yen strengthens,” said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo. “It’s becoming clear that that there is no driver to support Japan’s economy.”

    Japanese Trade Data Collapses, Crushes "Devalue Our Way To Prosperity" Dreams

    ABOOK Feb 2016 Japan Devastation QEs

    Overproduction Swamps Smaller Chinese Cities, Revealing Depth of CrisisBeijing had hoped small cities like Suizhou would help drive the expansion of the middle class and sustain economic growthEven in China’s remotest places, relentless overproduction—here it is mushrooms and cement trucks—is clouding the country’s path to prosperity and jolting the global economy. When 48-year-old farmer Yang Qun began trading at Suizhou’s bustling morning mushroom market a half decade ago, the fungus industry was expanding, even attracting a rural lending arm of British financial giant HSBC Holdings PLC. Ms. Yang saved…

    China Food Prices Soar Most Since 2013 As Producer Prices Hit 47th Straight Month Of Deflation

     

    Australian Unemployment Spikes to 6% as Full-Time Jobs Plunge. (videoAustralia’s unemployment rate unexpectedly climbed in January as full-time employment slumped by the most since 2013, reflecting waning stimulus from record-low interest rates and a weaker currency. The local dollar fell about one-third of a U.S. cent.

    BREXIT Risk Spikes To Record High

    Venezuela Devalues Currency By 37% As Maduro Announces 62-Fold Increase In Gasoline Prices

    Australia Stops "Cooking" Its Jobs Report And The Result Is A Disaster: Full-Time Jobs Plunge Most Since 2013

    Worth notingAtlanta Fed Q1 GDP tracker today is at +2.7% (up from 0.7% in January).  This ‘growthier’ move could definitely catch those who have positioned for disinflation /deflation or the dreaded recession AWFULLY upside-down.  GS data is showing us that YTD buyback announcements are off to their strongest start ever at $132B—last week alone saw 47 new BBs totaling $42B authorized.  

     

    • It would be "unwise" for the U.S. Federal Reserve to continue raising interest rates given declining inflation expectations and recent equity market volatility, St. Louis Fed President James Bullard said in a speech on monetary policy.
    • A big U-turn? Bullard, who is a voting member of the Fed's rate-setting committee this year, argued for much of 2015 for an earlier hike, but said he now feels key assumptions supporting higher rates have been undermined.
    • Previously: Fed minutes show worry over market selloff, lack of inflation (Feb. 17 2016)

     

    Negative interest rates are a 'gigantic fiscal failure'When the debt-laden world faces the next global downturn, it will need the full power of helicopter money, not interest rate gimmicks.

    Housing 'Recovery' Hope Humbled As Billings & Purchases Plunge

    21 New Numbers That Show That The Global Economy Is Absolutely Imploding

     

    • Standard & Poor's has downgraded the credit ratings of several Middle East nations, in its second mass cut of large oil producers in almost exactly a year.
    • Citing pressures from the drop in crude prices, the ratings agency lowered Saudi Arabia by two notches to A- stable, and stripped Bahrain of its investment grade status.
    • S&P also cut the ratings of Bahrain and Oman to reflect lower oil price assumptions.

    • Oil is holding onto the strong gains it recorded yesterday after Iran Oil Minister Bijan Zanganeh said he would support a production "ceiling" to stabilize oil prices, but did not commit to participating in the deal.
    • It was an unexpected move from the country, which had already voiced resistance before the talks in Tehran began, with Iran's OPEC envoy calling plans to freeze output "illogical."
    • If an agreement is reached, it could become the first joint OPEC and non-OPEC deal in 15 years, as oil producers seek to boost persistently low prices.
    • Crude futures +2.2% to $31.34/bbl.
    • Previously: Oil pokes above $30 after bullish comments from Iran (Feb. 17 2016)

     

    If Oil Stays At $35, This Is What Energy Company Leverage Will Look Like

     

    • North Dakota's crude oil production fell in December for the first time in three months, down 2.5% to 1,152,280 bbl/day, as oil producers begin to acknowledging the low-price reality rolling over the entire energy industry.
    • Only 41 drilling rigs are operating in the state as of Wednesday, the lowest level since July 2009, and North Dakota producers have cut back requests to drill new wells, with only 78 permitted in January compared to 125 in November.

     

    Marathon Oil(MRO) slashes capex 50 percent, has quarterly lossMarathon Oil Corp, a U.S. shale exploration company, on Wednesday slashed its 2016 spending 50 percent and swung to a loss as the company's results were hurt by a steep decline in crude oil prices.

     

    • U.S. ethanol producers and traders foresee a bleak spring as sinking prices and soaring inventories hit margins, forcing some companies to suspend loss-making output and extend maintenance, Reuters reports from the Renewable Fuels Association conference.
    • Mark Fisler of Ocean Park Advisors said if ethanol producers keep pumping out fuel at the same levels seen in January, production would swell to more than 15B gallons, ~800M gallons more than needed.
    • Inventories reached a record 23M barrels in the week ended Feb. 5, but traders said the total could go even higher before plants began to shut down in late March for maintenance and warm weather attracts drivers back to the road.
    • Stockpiles likely will hit fresh records, executives said, pushing margins to or below breakeven costs for many producers and forcing some of the majors such as Green Plains (NASDAQ:GPRE) and Archer Daniels Midland (NYSE:ADM) to slow output.

     

     

     

     
    • U.S. residential solar installers SolarCity (SCTY +19.1%) and Sunrun (RUN +18.8%) are delivering massive gains on a good day for markets. The Nasdaq is up 2.2%, the S&P is up 1.7%, and WTI crude is up 5.3% to $30.58/barrel after Iran's oil minister suggested his country would support efforts to stabilize oil prices.
    • Yesterday, SolarCity announced fellow Elon Musk company Tesla would supply batteries for a 13MW solar/energy storage system to be built by SolarCity in Hawaii. The announcement comes nine months after SolarCity unveiled a line of solar energy storage solutions that rely on Tesla batteries.
    • Meanwhile, Hilary Clinton and Bernie Sanders have both condemned the Nevada PUC's recent decision to cut net metering rates and increase connection charges for new and existing solar installations. Sanders highlighted the efforts of local utility NV Energy (owned by Warren Buffett's Berkshire Hathaway) to get the PUC to enact rule changes. "You might want to be thinking about writing a letter with a few hundred thousand signatures on it to Mr. Buffett and say, ‘You know what? What you’re doing here in Nevada is exactly wrong.'"
    • Clinton went a step further and called for federal law changes that would prohibit state agencies/utilities from retroactively changing rates and fees for existing customers. "Utilities should not be allowed to penalize consumers with retroactive rule changes that cause financial hardship and slow the transition to a clean energy economy."
    • Earlier this week, the PUC announced its new solar rates/fees would be implemented over 12 years rather than the 4 it originally recommended. As one would expect, solar advocates called the change inadequate.
    • Yesterday: Solar stocks post big gains as markets rally, Canadian hikes guidance
    • Update: Likely helping SolarCity out: Elon Musk disclosed he bought another $10M worth of shares. His total stake now stands at 22.6%.

    • Barrick Gold (NYSE:ABX) -2.4% AH despite reporting better than expected Q4 earningsand revenues, and saying it plans to reduce net debt by at least $2B this year through the sale of additional non-core assets and creation of new joint ventures and partnerships.
    • ABX's unadjusted Q4 loss totaled $2.62B, including $3.1B in impairments mainly related to an adjustment in the company’s gold price assumptions; ABX had warned last month that it would record the charges.
    • In FY 2015, ABX says it recorded positive free cash flow for the first time in four years despite lower gold prices, generating $471M in free cash flow, including $387M in Q4; the company's total debt was reduced by $3.1B, or 24%.
    • ABX guides 2016 production of 5M-5.5M oz. of gold at all-in sustaining costs of $775-$825/oz. and 2017 production of 5M-5.5M oz. at all-in sustaining costs of $740-$790/oz.
    • ABX says its "over-arching objective is to generate, and ideally grow, free cash flow in any foreseeable gold price environment," and will seek to achieve all-in sustaining costs below $700/oz. by 2019.

     

    You can see why ABX is my favorite:   Newmont Mining slides on Q4 earnings miss
    • Newmont Mining (NYSE:NEM) -2.9% AH after reporting weaker than expected Q4 earnings of $0.04/share, down from $0.17 in the year-ago quarter, on 10% lower revenues of $1.82B, hurt by lower metal prices and delayed exports from Indonesia.
    • NEM says its average realized gold and copper price fell to a respective $1,084/oz. and $1.86/lb. in Q4, compared with $1,194/oz. and $2.55/lb. a year earlier.
    • NEM says Q4 gold production was flat at 1.3M oz., while copper production reached 39K metric tons vs. 29K a year earlier due to a higher grade ore at the Batu Hijau location.
    • NEM guides gold production of 4.8M-5.3M oz. in 2016 and 5.2M-5.7M oz. in 2017, before stabilizing at 4.5M-5M oz. through 2020 at all-in sustained costs below $1K/oz.
    • Only a competing Republican debate could have messed this up for CBS — so luckily, it was the network who broadcast this week's.
    • The network swept the top 10 shows in the ratings, with the exception of The Walking Dead on AMC, which finished third with 13.7M viewers. But the other nine of the top 10 programs were all on the Tiffany Network.
    • CBS (CBS +3.7%) says that's the first time in a decade that one of the major broadcasters has pulled that off.
    • Saturday's GOP debate was the No. 4 program, with 13.44M viewers. Topping the list were NCIS, with 16.94M, and The Big Bang Theory, with 16.25M. A pair of NCIS spinoffs, along with Scorpion, Blue Bloods, Madam Secretary and 60 Minutes filled out the rest of the list.
    • TNT (TWX +2.2%) topped cable networks, averaging 2.37M prime-time viewers, ahead of Fox News' (FOX +3.3%, FOXA +3.4%) 2.33M and AMC's (AMCX +3.2%) 1.96M. In news, NBC Nightly News (CMCSA +0.4%) led with 9.4M viewers.
    • In the season so far, CBS is unsurprisingly tops in prime-time viewers overall with an average 11.74M.
    • Previously: 'Walking Dead' midseason premiere ratings down, but still big (Feb. 17 2016)
    • Politico Media reports Yahoo (YHOO -0.1%) is shutting down its Yahoo Tech site, which is headlined by former NYT tech columnist David Pogue. Also reportedly being axed: Yahoo's food, auto, health, and music sites.
    • The report comes two weeks after Yahoo issued soft Q1/2016 guidance and announced it's laying off 15% of its workforce (~1,700 people) as part of a restructuring, and amidwidespread reports the company is weighing a sale of part or all of its core business.
    • Meanwhile, The Information reports (citing "confidential internal data") daily active users for Yahoo's home page, Yahoo Mail, and Yahoo Search respectively fell 16.5%, 11.5%, and 8.8% Y/Y from the first week of Dec. 2014 to a year later.
    • The site adds time spent by users fell even more. Tumblr is said to be "doing relatively well"; Yahoo Sports' performance is called "a mixed bag."
    • Yahoo is nearly flat on a day the Nasdaq is up 2.3%.
    • Update (4:05PM ET): Yahho editor-in-chief Martha Nelson: "On our recent earnings call, Yahoo outlined out a plan to simplify our business and focus our effort on our four most successful content areas – News, Sports, Finance and Lifestyle. To that end, today we will begin phasing out the following Digital Magazines: Yahoo Food, Yahoo Health, Yahoo Parenting, Yahoo Makers, Yahoo Travel, Yahoo Autos and Yahoo Real Estate."
    • Update 2 (4:31PM ET): Yahoo Tech won't officially close, but rather be merged into the larger Yahoo News site. Yahoo Tech editor-in-chief Dan Tynan is leaving the company; David Pogue will stay.

    This will freak out the Republicans:  President Obama to make historic visit Cuba

    • President Obama is planning a trip to Cuba next month, marking the first time in more than 80 years a sitting U.S. president will visit the country.
    • The visit to Havana would cap what administration officials see as one of Obama's legacy foreign policy achievements: normalizing relations with Cuba and taking steps toward expanded commercial relations after a 54-year freeze.

  116. This is useful:

    Justice Antonin Scalia was taking a free vacation at the exclusive Cibolo Creek Ranch in western Texas when he was found dead inside a guest room…
    GAW.KR|BY GABRIELLE BLUESTONE
     

     

     

    Sen. Bernie Sanders, I-Vt., says the best solution to address problems in the United States’ health care system is to guarantee every American access to…
    POLITIFACT.COM
     

     

     

    Health Care Rankings:

    Overall health care ranking


  117. JNJ/DC – We already talked about that one last Q:

    JNJ/Gerry – Well, we're past earnings and the stock doesn't tend to move more than $10 in a month but you are selling 2 months for $5, which means your risk is more than your reward.  Also, you are overpaying for the covers – the long puts and calls are meant to be backstops to stop you from losing too much – not to make it so you can't lose at all.  

    JNJ was at $105 least year and bottomed at $90 (not counting the flash crash to $80), where it hasn't been since 2013, so that seems like a safe floor.  The 200 dma is at $97.89 so it's not likely to get over $100 very easily so, if I were going to play it, I'd go with the following:

    • Buy 2018 $110 calls for $3.50
    • Buy 2018 $70 puts for $4 
    • Sell Jan $97.50 calls for $2.20
    • Sell Jan $92.50 puts for $2.25

    That puts you in the spread for net $3.05 and there's no doubt you can make that up over time.  I don't like the trade because we have to go a bit too low on the long puts so I would throw this out on that basis – also because I don't have absolute faith JNJ won't sell some medical device that kills a lot of people (again).  But, logically, if you own the $70 puts for $4 and the short $92.50 puts are $2.25 then you will be able to, in the worst case, roll them to even lower 2018 puts and then you'd have a bear put spread that limits your losses to the net $3.05 on the spread.  To the upside, you are well-covered and could roll your way out of trouble so this spread leans bullish but the lack of catastrophic downside protection along with my lack of faith that JNJ won't have a catastrophic event would be why I don't use this one.  

    These spreads are all about risk reward.  If you net in at $3 and you collect $4 in your first quarter, then you have 8 more quarters in which to sell $4 of premium so you can collect up to $32 against your $3 outlay (if all went perfectly, which it doesn't) and that means, statistically, there's nothing wrong with having a $25 downside cover as it could, in theory, be made up for but, as I said, I prefer to have a $15 max loss against a $30 gain (2:1 reward:risk) to feel good about making a long-term entry.  


  118. Notice on the JNJ play it did, indeed go way out of our range at $105 before coming back to expire exactly in the middle of my conservative target but that's a rougher ride than we like in the Butterfly Portfolio.

    AAPL/Maya – Well it's Russian roulette selling tight weeklies on AAPL – not a strategy I approve of since they can jam 10% on you in days.  It's like selling short strangles – you usually win but, when you don't, one loss can wipe out 10 gains.  I don't even show weeklies on my screen anymore – no need for that kind of gambling in my life…  

    Bottom line is you have the April $110s and basis is about $4, right?  Against those, you sold Feb $95s for $1 and now you owe them $3 – not really a big deal but probably $4 at the open and if your plan is to give AAPL another week or a month to beat you to a pulp – that can become a problem.  What you can do is leave the April $110s, roll the Feb calls to the April $100s ($3.35) and then, if they expire worthless, you are even.  You can pick up a SENSIBLE 2018 $90 ($20)/120 ($8.50) bull call spread for $11.50 and that's $15.50 accounting for your loss and then, if the short April $100s don't expire worthless, your spread will be in the money and you have 20 months to roll them and the long April $110s mean it can't gain more than +$7 on you into next earnings.

    Short answer – stop gambling!  If you hadn't been messing around with this you could have had the $80/120 spread for the same money and you wouldn't need to sell calls with AAPL so stupidly low.  Just because you CAN sell premium, doesn't mean you SHOULD sell premium – especially on stocks that are more volatile than the premium you're selling!  

    DAX/Yodi – Over 9,500 is good but not relaxing until we have 10,000 back so another 5% to go.  

    PFE/Yodi – Always a great stock to pick up and $1.20 dividend makes it 4%.  I'd just buy the stock ($29.63) and sell the 2018 $28 puts for $3.60 because who knows if you'll get this entry price and this VIX level combination again?  Against that you can also sell the 2018 $25 calls for $5.95 and then you are netting in for $20.08/24.02 and called away at $25 with the $2.10 in dividends (missed one) is + $6.98 or 34.7% if PFE just holds $28 for 2 years.  When I can make close to 20% a year on a trade like that – I'm happy to go conservative!  


  119. Time yet to sell some IBM calls?