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Monday Market Movement – G20 Drops the Ball Once Again

Well, it's not like we didn't expect it.

Sadly, after a 3-day meeting of the World's top Financial Ministers in Shanghai, markets are opening weak after only vague commitments to spur growth came out of the meeting.  Chinese stocks, which desperately need a boost, fell below the critical 2,700 line on the Shanghai this morning but were pumped back to 2,687 into the close – still in a precarious position.  

Warrent Buffett and I agree that the US economy is on the mend, held down by the doom and gloom speeches on the economy – mainly coming from the GOP but also from Bernie, who brings to mind Neil Young's lyrics about being a Top 1%'er with an actual conscience:

 There's a warnin' sign on the road ahead
There's a lot of people sayin' we'd be better off dead
Don't feel like Satan, but I am to them
So I try to forget it, any way I can.

Speaking of rockin' in the free world, Chinese property developer, Ren Zhiqiang woke up this morning to find all of his social media accounts closed (he had 37M followers) after criticizing President Xi's campaign to tighten state control of the media.  "Internet users had reported that Ren Zhiqiang’s account was continuously publishing illegal information, and the impact was vile," said Jiang Jun, the regulator’s spokesman. "All online platforms should refuse to provide channels for illegal speech."  

Donald Trump is calling for changing the constitution to reign in the press in our country and, as Lincoln said: "America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves."  The Beastie Boys warned us we had to fight for our right to party back in 1986 and we didn't listen and now you have to be 21 just to have a drink and you can't even get a contact high at a concert anymore - how far are we willing to let freedom of the press slip because we're not willing to fight for it?

Sadly, the majority of Americans, rather than being outraged by the FBI's attemept to force Apple (AAPL) to hack phone accounts (yes, it's a dead terrorist but the Constitution doesn't say "except" it says "ALL"), which is essentially one giant leap towards state control of our personal communications.

What the FBI is asking for is for AAPL to create a flaw in their security, a "back-door" that can be used in "emergencies" to give the Government easy access to your phone.  As a child of the 60s, I can't even imagine how people are OK with this but it seems that most people are – even after the Snowden revelations about how quickly a "little" surveillance turns into, well China! 

I know, you are thinking "I'm a good person, I have nothing to hide" but Ren Zhaiqiang had nothing to hide either – except his opinion.  The newspapers and reporters Donald Trump wants to sue also have only their opinions to hide and, even if you agree with Trump, what if Bernie Sanders (the anti-Trump) gets elected and YOUR opinions are suddenly out of favor?  When you don't have absolute freedom for all and strongly protect the rights of minorities, you inadvertently create a situation in which the ruling party fears losing power (and freedom) so, historically, they clamp down on the opposition and all forms of dissent and then you have tyranny – even if you do wrap it in the American flag!  

“If China [today] demanded that Apple put in a backdoor, Apple would say no,” says Nate Cardozo of the Electronic Frontier Foundation, adding that the company could threaten to pull its products from the market, creating a public relations nightmare for the Chinese government. “That equation changes once Apple accedes to an FBI order. If the FBI can compel Apple to do it, and it’s publicly known that Apple has given the FBI this key, then China has a very different calculus … The PR around a Chinese demand gets a lot better for China, and a whole hell of a lot worse for Apple.”

A recent Pew Research poll found that 51 percent of Americans think Apple “Should unlock the iPhone to assist the ongoing FBI investigation,” while 38 percent say Apple should not. (The rest had no opinion.) Even the survey itself shows how effective the FBI’s messaging has been. Apple is not being asked to unlock an iPhone; it’s being asked to create software that would help the FBI unlock it. After which, there’s every reason to expect Apple and every other tech company will be asked to create more software that could be used to diminish even more civil liberties.

Anyway, we report, you decide.  As to the markets, we still have plenty of fun earnings this week and a much better idea of how sectors are performing so we'll be looking for opportunities to makes some quick money on earnings trades.  Lumber Liquidators (LL) at $11 is a big one for us today as we doubled down our position as they bottomed out and we HOPE this will be the bottom for them with an upward trajectory back over $15 once this certainly awful report is absorbed and we'll likely be adding more shares on the dip.  

Taser (TASR) is our Stock of the Decade with a $50 target in 2020 and we love them down here at $17.50.  A fun way to play earnings is to sell the March $17 puts for $1 for a net $16 entry and we can buy the Jan $15 calls for $4.90 and sell the Jan $20 calls for $2.65 so the net on the spread is $2.25 less the $1 for the short puts is $1.25 on the $5 spread that's $2.50 in the money to start.  Worst case is you end up owning TASR for net $18.25 – a risk we take in exchange for the strong upside leverage.  

We already have a lot of TASR in our portfolios – that's just the way we'd play the earnings based on where it is today.  In our Options Opportunity Portfolio, we already have 10 short Jan $15 puts we sold for $2,400 vs 20 2018 $13/20 bull call spreads at net $5,200 so $2,800 net cash outlay with an upside potential of $14,000 if TASR is over $20 in Jan 2018.  This morning we'll see whether we're on track or not for our $11,200 gain. 

Economically, we have a busy week with Chicago PMI this morning just after the bell followed by the Dallas Fed at 10:30 with Pending Home Sales in between.  PMI and ISM tomorrow, Chain Store Sales Thursday along with PMI, Productivity and Consumer Comfort and, of course NFP on Friday so we'll see if Buffett and I are right or if America is in the doldrums along with the rest of the World.

Remember, Monday's are meaningless and we're certainly glad we have our hedges from Friday, especially after reading this scathing report on Russell 2000 valuations as well as this one on S&P accounting tricks.  Be careful out there!  

 


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  1. LL hammered again on worse than expected results and withdrawal of guidance.



  2. Good Morning!


  3. Back in NJ again after helping my youngest one move to Atlanta… Empty nest now! These last 25 years passed so quickly – now one daughter in Barcelona and the other in Atlanta. Paying me back for leaving my parents behind and moving far by doing the same to me. And the oldest one is now getting married in October. An eventful year at the house!


  4. Phil / BRK.  This looks like a 165 dollar stock w/o pcc earnings ($800M )added.  I know u don't like the buffet risk, but I want to take a position on this.  Do you have a view of the target price?

    I'm looking at the following:

    Selling the 120 put at 9

    Buying the the 135 Call at 15

    selling the 165 call at 5 ( currently at 3.5) so would be naked for a bit on this  

    Thank for your help on this.


  5. stjean – I'm not looking forward to an empty nest…. Hang in there!  :)


  6. UNG going to have a 5 handle soon


  7. st_jean/Atlanta  next time you are there go out to Stone Mountain.  truly astonishing.


  8. LL- Phil if you have had a chance to look over the earnings can you either do a little hand holding or can you tell us if this company looks like it may not recover. I am hoping this is temporary as they work their way through the problems, but they also wouldn't be the first company that couldn't recover from a bad situation, so can you tell us what you think is the case here?


  9. Dr. John L. Faessel

    ON THE MARKET

    Commentary and Insights

     

    MARKET

     

     

    ·       Friday’s McClellan Oscillator was OVERBOUGHT at a plus 239

    ·        German 10-year bund at a 0.108% yield

    ·        The Shanghai composite fell 4% and closed down 79.38 points, or 2.87%, at 2,687.82 points *

    ·       Crude oil – WTI at $33.25

    ·       Friday the Dow Jones Utility average fell 2.9%

    ·       Global shares fall on G20 disappointment, Fed hike prospect

     

    Other than the Dow Jones Industrial average and the S&P 500 (SPX) the other US indexes and the stock markets of the world are in a significant correction mode. Euro markets (in the euro currencies) have been off as much as 26% and in Asia they have been off 30%. Seven out of 10 stocks in the New York Stock Exchange are in bear markets and only 23% were above their 200 day moving average. The losses are extraordinary and more margin calls will exacerbate the situation.

     

    Technically speaking; Stochastics in the S&P 500 (SPX) were at 99.91 (fast) and 92.94 (slow). These readings are extremely high and suggest that the market is well overbought and that a reversal is at hand. The McClellan Oscillator likewise is drumming the highly overbought at a plus 239. That’s the second highest read in the last year going back to early October 2015.

     

    We’ve had a sizable bounce off of the very deep oversold condition and now were highly overbought and at resistance. Perhaps we can run a bit higher into the mega, extreme, hyper overbought, but that’s unlikely IMHO.

     

    The question of the – day – week – month – year – decade:

    As China slows, where does growth come from to turn this epic mess around? *

    Latest Chinese government figures show that economic growth rate slowed to a 25-year low of 6.9% in 2015 and 6.8% in the Q4 of last year. The Shanghai composite closed down 79.38 points, or 2.87%, at 2,687.82 points

     On top of China slowing, toss in EuroLand where the ECB has pitched in €670 billion to keep ‘it’ afloat – Japan, the world’s second-largest economy, is wobbling with negative interest rates after gargantuan stimulus – South America, is mostly a wreck with Brazil, Argentina, Venezuela totally upside down – Russia and Vladimir is experiencing recession due to the low price of crude oil, their only hope as they create nothing in a gangster state – the Middle East is a drain and in reality all the above appears to be getting worse daily. Presumably, the man on the street has hopes, fed by the lunatic media; that the governments with their magic money faucets can fix this mess. The global debt bomb only grows and when it blows, God help us. The news flow from each of these subject matters mentioned above will continue to erode the underpinnings of the market as each one’s hangups become front-page financial news. E.g. China today cuts reserve requirements.

     

    No wonder that US consumer sentiment was in a three month low in February.

     

    Last week I said:

     

    “Net, net the market has room to run higher into the OVERBOUGHT in this short covering rally [IMHO]. Key Price resistance lives at (SPX) 1947 where the shorts will load again.”

    Notably on Friday the S&P 500 (SPX) closed at 1948

    Re Oil:

     

    Last week the oil rig count fell for the 14th time in 15 weeks – by 13 to 400 – the lowest level since December 2009 and down from a peak of 1,609 in October 2014.

    S&P 500

     

    ·       The S&P 500 (SPX) closed on Friday at 1948.05

    ·       A week ago the (SPX) closed at 1917.78 the week before that it was 1864.78

    ·       Good (SPX) price support is at 1872

    ·       Key (SPX) NECK LINE price support is at 1810

    ·       Key Price resistance is at 1962 – 1992 and 2020

    ·       And at the previous top resistance at 2132

    ·       The now DECLINING  50-day moving average support is at (SPX) 1944

    ·       The now declining  200-day moving average and resistance line is at (SPX) 2026

    ·       The 20% retracement level (BEAR MARKET) is at 1704.66

    ·       Deep price support and the low of the October 2014 decline is at SPX 1862 then 1814 and 1737

    ·       Remember that the stock markets made NO advance from 1965 to 1982 in a nasty secular BEAR MARKET and if you add inflation – it was way, way worse than that. The Dow entered two long downturns in 1970 and 1974 – during the latter plunge it fell nearly 45% to the bottom of a 20-year range. This looks to me to be the set up looking at out in time for us today … 


  10. Rustle thanks for making a gloomy Monday even gloomier!


  11. Well Craigs, you could be a contrarian, then it's all good!


  12. Betty Liu on Bloomberg says everything is ok


  13. Good morning!  

    LL had the terrible earnings they were obviously going to have and now we'll see where they end up so we can make our final (hopefully) adjustments.  

    They lost 0.73/share on 13.7% lower revenues but $22.2M of the $19.8M loss was an inventory write-down of suspect flooring – not a running expense.  Cramer is chasing everyone out of it so you know someone big is buying in!  Despite all the fuss, gross margin is still 23%, down from 39.2% due to discounts, etc. they've been forced to use to steady the business.  

    John Presley, Chief Executive Officer, commented, "Over the past quarter we have taken meaningful steps to reestablish Lumber Liquidators with our customers and our shareholders. While we have made some progress in key areas such as compliance and core operational efficiency, we still have a long way to go. That said, our business model is intact, we are addressing legacy issues with clarity and candor, and we are rebuilding our brand."

    It's tricky investing in turn-arounds.  You have to have a little faith at the bottom when no one else does.  I don't have the cash flow for this Q yet but they had $53M last Q and the loss was only paper so the company is not looking at going BK but they do still have hanging legal issues that will slow any recovery and, obviously, powerful enemies who are able to rally the press against them.  Funny how HD gets a total pass for selling 28 products AFTER they were recalled.  I guess they spend more on advertising….

    While unusual, the scenario is not without precedent. Last summer, the CPSC announced a similar recall involving Best Buy (BBY). The electronics retailer and stores including Cow Boom and Tech Liquidators sold 10 different products, from cameras to gas dryers, after their recall in 2012 and 2013.

    /NGK6 crossing back over $1.80 after a dip to $1.78 ($1.70 on /NG) and I'm back to 14 long at the moment.  

    That's what I meant when I said there was no real support to $1.65 – be very careful.  

    Welcome back StJ! 

    Big Chart – Stuck around the 50 dmas – not too terrible. 

    BRK/Batman – Well you are right, I don't like the 20% downside risk of Buffett dying.  Make sure you REALLY have the money to buy them for $120.  You have a super-aggressive play which, of course, I don't like at all.  I'd rather go with (and I won't go at all) the short 2018 $100 puts at $4.75 and then pick up the 2018 $115 ($28)/140 ($12.50) bull call spread for $15.50 and then you are in the $25 spread for net $10.75 and, if BRK does take a dip, the $100s should still be safe (or rollable) and then you can spend $10 to roll the $115s to the $95s (now $45) and you'd have a $45 spread for net $20.75 that's still in the money or at the money.   While your idea may use $9 less cash to begin with, the margin is worse and my trade pays back $20 (86%) before yours breaks even.

    This is what I keep trying to teach you guys, I'd rather have an 80% chance of making 20% than a 20% chance of making 80% because, when you make 20% 80% of the time, your account looks like this (assuming you lose 20% the other time):  100, 120, 140, 120, 140, 160.  When you make 80% 20% of the time (even if you risk juts 20% the other 4 times) the same account (or allocation block) can look like this:  100, 80, 60, 108, 87, 70.    

    LL/Craigs – See above.  You do realize that this whole controversy is less than a year old so the earnings comps they have are pre-crisis so of course they look bad.  How can they possibly "turn around" in 12 months when all the comps point to a better time?  The "case" here is the incredibly short time-frame of people who think they are investors but are only traders who don't look at the bigger picture.  My takeaway from the report is that EVEN WITH all this crap, comp store sales are down just 17%, so the business is 83% intact just one year later yet it's trading at and 85% discount to last year's price.

    Net sales decreased 6.6% to $978.8 million in 2015 from $1.05 billion in 2014. Comparable store net sales decreased $116.2 million, or 11.1%, and net sales in non-comparable stores added $47.6 million versus the prior year. The Company opened 23 new stores in 2015, and as of December 31, 2015, operated 374 stores in the United States and Canada. .  

    Selling, general and administrative ("SG&A") expenses in the fourth quarter of 2015 increased $7.7 million, or 9.9%, from the fourth quarter of 2014 to $85.5 million. This rise was primarily due to a $6.5 million increase in certain legal and professional fees and related accruals.

    Cash and cash equivalents at December 31, 2015 totaled $26.7 million compared with $20.3 million at December 31, 2014. At December 31, 2015, the Company had $20.0 million outstanding on its revolving credit facility. 

     I'd be a lot more worried about this:

    Production and new orders drags Chicago PMI index

    Pending home sales unexpectedly fall in January


  14. Phil on TASR I trust you mean to sell the Mar 17 put not call!


  15. Regret on that 17 put are only .25 left


  16. $1.80 is now the stop on new /NGs.  

    NYMO/Rustle – Through da roof!

    NYMO  DAILY

    But, NYSI (longer term) not overbought yet:

    NYSI DAILY

    Big wall of worry still to climb:

    VIX WEEKLY

    Betty Liu/Mkucs – Good enough for me (or maybe more Chinese control of the media?)

    TASR/Yodi – Thanks, good catch.  Yes, too late as earnings were before the bell, that's why we took our main positions in Jan and Feb.  


  17. Phil,

    Re TASR, would like a little guidance on a few sht Mar 16 calls (sold for.93, now 4.00 after pop this AM) I had sold against 4x TASR stk and several 1/17 bcs. Considering rolling to – Apr 19s for 1.95 or 20s for 1.43 .Like the long position in TASR going forward.

    Thanks in advance


  18. ROFL – Kudlow talking about how it's OK that some people don't like Cruz said "black people didn't like Mitt Romney and he did well."  Wow, ridiculous, out of touch and clueless all at the same time!  I'd laugh if it wasn't so awful.

    $1.82 now the stop on new /NGs.

    The G-20 Meeting Was A Big Disappointment: What Happens Next

    Fed's Brainard: U.S. is not an island

    • Federal Reserve Governor doesn't disappoint her dovish fans with a speech titled "What Happened to the Great Divergence."
    • Not only does sluggish global economic growth suggest lower than otherwise interest rates in the U.S., but deflationary pressures overseas raise doubt as to whether inflation can turn higher here.
    • "If core inflation remains below target in all major advanced economies and inflation expectations remain under pressure in many, I might expect policy divergence to remain more limited than previously predicted … This might be a good time for policymakers to reaffirm their commitment to work toward the common goal of strengthening global demand."

    Forward Guidance: The Road Map To Crazy Town

    Weighing The Week Ahead: Can U.S. Economic Strength Support Stocks?

    Bank Of America: The Worst Is Over

    Stocks inch higher on new China stimulus moves

    • Stock futures poke into the green ahead of the opening bell, as news of further easing from China boosts global market sentiment; S&P and Dow +0.1%, Nasdaq flat.
    • The PBoC says it is lowering its reserve requirement ratio by 50 bps to boost liquidity in the Chinese banking system, marking the fifth cut to the reserve requirement ratio since last February.
    • European markets have climbed off their opening lows, with U.K.'s FTSE now -0.1%, France's CAC -0.2% and Germany's DAX -0.8%; in Asia, Japan's Nikkei closed -1% and China's Shanghai Composite ended -2.9%.
    • WTI crude oil has climbed off overnight lows to trade +0.6% at $32.99/bbl.
    • In U.S. corporate front, Valeant Pharma -6% premarket after saying it would postpone its earnings report, withdrawing its previous financial guidance and announcing that Michael Pearson would return to the role of CEO after taking a medical leave of absence.

     

    Japan factory output rises fastest in a year, outlook uncertain. Japan's industrial output rose the most in a year in January, tentatively signaling a pick up in factory activity, but the outlook remains far from assured given global market jitters and weakening demand both at home and abroad. The 3.7 percent month-on-month gain compared with economists' median estimate of a 3.3 percent gain in a Reuters poll, and followed a 1.7 percent drop in December, trade ministry data showed.

    Japan's Abe: No plan to postpone sales tax hike

    • Speaking in parliament today, Japanese Prime Minister Shinzo Abe said there were no plans to freeze or postpone a sales tax hike to 10% next year and he has no intention of calling a snap election.
    • That's despite one of the leader's close advisers warning earlier this month that going ahead with the hike would risk failure for 'Abenomics' – Abe's multi-pronged economic revival program.
    • Nikkei -1% to 16,026

     

    Modi's new budget focuses on rural India

    • Indian PM Narendra Modi wants his newly unveiled federal budget to appeal to the rural poor, in a strategy shift that could boost his ruling party in coming state elections but disappoint investors.
    • Modi's landslide election in 2014 raised hopes he would draw a line under India's socialist past, cut welfare and reduce the government's role in business.
    • But rising rural distress after back-to-back droughts and a recent heavy election defeat in a largely agricultural state have upset that calculus.
    • Sensex -0.8% to 22,960.

    Arab States Face $94 Billion Debt Crunch on Oil Slump, HSBC SaysGulf Cooperation Council countries may struggle to refinance $94 billion of debt in the next two years as the region faces slowing growth, rising rates and rating downgrades, according to HSBC Holdings Plc. Oil-rich GCC states have to refinance $52 billion of bonds and $42 billion of syndicated loans, mostly in the United Arab Emirates and Qatar, HSBC said in an e-mailed report. The countries also face a fiscal and current account deficit of $395 billion over the period, it said.Expectations that these funding gaps "will be part financed through the sale of sovereign U.S. dollar debt will complicate efforts to refinance existing paper that matures over 2016 and 2017," Simon Williams, HSBC’s chief economist for the Middle East, said in the report. "With the Gulf acting as a single credit market, the refinancing challenge will likely be much more broadly felt" and "compounded by tightening regional liquidity, rising rates and recent downgrades," he said.

     

    U.K.'s Future Outside EU Is Rosy, Pro-`Brexit' Ministers SayTwo of the leading U.K. government ministers campaigning for an exit from the European Union played up the prospects for Britain if it votes to leave the bloc, rejecting warnings from Prime Minister David Cameron and Chancellor of the Exchequer George Osborne. “Britain is a great country, the people here are inventive, innovative, and they will find a way with us to actually have a real deal that gives Britain access to the world and access to Europe,” Work and Pensions Secretary Iain Duncan Smith said on BBC Television’s “Andrew Marr Show” on Sunday. “Why would we have such a low opinion of the British people that we go out and talk about leaping into the dark, we talk about profound shocks, we talk about them not being capable, that we’re too small?”

    Mervyn King: the eurozone is doomedThe eurozone is doomed to fail and will lurch from crisis to crisis unless it is broken up, according to the former governor of the Bank of England.

    Yields slip after weak Chicago PMI

    • The Chicago PMI fell 8 points in February to 47.6, led by an 18.5 decline in Production, which more than reversed January's 16 point gain. New Orders also fell sharply and Backlogs slipped further into contraction.
    • A big fall in Employment put that gauge at its lowest level since November 2009.
    • Prices paid contracted at a faster pace in February, and now stands at its lowest level since July 2009.
    • There have been some big swings in the past few months, but MNI's Philip Uglow says the underlying trend is a report running a little bit below the 50 neutral mark.
    • The 10-year Treasury yield has slipped two basis points to 1.74% since the number hit.TLT +0.4%, TBT -0.8%
    • Full report

    Buffett speaks

    • Buying IBM could be a mistake, says Warren Buffett (BRK.ABRK.B), but he hasn't sold a share and continues to expect it to be worth more in the future (though "Charlie's neutral").
    • On another troubled holding, American Express (NYSE:AXP), Buffett says it's a business that has always had to adapt, and now is no different. "It's a very strong brand, but you are going to face a lot of competition on payments."
    • On yet another roughed-up name, Bank of America (NYSE:BAC), The Oracle says CEO Brian Moynihan has done a great job after inheriting a bad hand.
    • Buffett is unlikely to be an owner of Dow Chemical's (NYSE:DOW) common stock, and likes the preferred more. He owns $3B of preferred from 2009 that pay an 8.5% annual dividend. Converting would amount to about 6% of the common float.
    • Of troubled names in general, Buffett reminds Berkshire Hathaway's stock price has dipped 50% three different times since he began controlling it. "It was terrific!" A stock going down is a good thing, unless the company itself is losing value.
    • Live blog of CNBC interview

    Icahn Enterprises EPS of -$8.56

    • Icahn Enterprises (NASDAQ:IEP): Q4 EPS of -$8.56 may not be comparable to consensus of $1.16.
    • Revenue of $2.56B (-24.0% Y/Y) misses by $1.1B.
    • Press Release

    Edgy investors push a mix of consumer staples stocks to fresh highs

    • Investors continue to take refuge in consumer staples stocks in a strategy that tips off defensive positioning and accounts for some positive macroeconomic factors that are underpinning volume growth in the sector.
    • Consumer staples stocks trading right at their 52-week high include Campbell Soup (NYSE:CPB), Kimberly-Clark (NYSE:KMB), General Mills (NYSE:GIS), Reynolds American (NYSE:RAI), Altria (NYSE:MO), Philip Morris (NYSE:PM), Church & Dwight (NYSE:CHD), Coca-Cola (NYSE:KO), Tyson Foods (NYSE:TSN), Sanderson Farms (NASDAQ:SAFM), B&G Foods (NYSE:BGS), and Cott Corporation (NYSE:COT).
    • Even Procter & Gamble (NYSE:PG) and Wal-Mart (NYSE:WMT), which acted as drags on consumer staples ETFs last year with their heavy weightings, are outperforming the S&P 500 Index this year.
    • Some analysts think political year uncertainty and global ZIRP and NIRP question marks could keep demand for staples strong.
    • Related ETFs: XLPVDCFXGRHSFSTAPSLPSCC
    • Analysis: Consumer Staples ETFs Are Looking More Attractive Than Ever (Feb. 16)
    • Prediction time: Which consumer staples stock has the most upside in 2016?

    AmEx sells Costco portfolio to Citigroup

    • The deal with Citi (NYSE:C) should close in June. AmEx (NYSE:AXP) expects to book a gain of about $1B on the sale.
    • Source: Press Release
    • AXP +0.55% premarket

    US shale frackers eye world conquest despite bloodbathDozens of indebted US shale companies face annihilation over coming months as their hedge protection runs out and creditors pull the plug, but veteran frackers insist defiantly that the slump will not stop the industry's march to world conquest.

    US first-quarter earnings outlook dims on falling oilWall Street analysts have slashed expectations for US earnings in the first quarter as companies grapple with plummeting oil prices and slow economic growth. The growing pessimism comes amid a brutal start to the year for the stock market during which the S&P 500 has been marked by volatility as the outlook for global economic growth darkens, led by uncertainty over the slowdown in China.

    The New Oil-Storage Space: RailcarsU.S. market is so oversupplied with oil that traders are experimenting with a new place for storing excess crude.

    Offshore drillers rallied today despite Ensco downgrade

    • Shares of offshore drillers gained across the board today, even as Ensco (NYSE:ESV) was downgraded to Underperform at Wells Fargo and Transocean (NYSE:RIG) was maintained with a Sell rating at Evercore ISI.
    • Wells Fargo says ESV improved its liquidity by cutting its dividend, and has $1.3B of cash and full availability on its $2.25B revolver, but backlogs were down 40% Y/Y as offshore activity fell and competition intensified, and the industry expects 70 new jackups to come out of shipyards in 2017.
    • Evercore ISI’s James West says RIG leads the industry in rig retirements but continues to have the largest fleet of the offshore drillers, and thus still has a lot of work to do before he removes his Sell rating.
    • Rowan (NYSE:RDC) offered two nice surprises in its Q4 results, securing a one-year contract for the Ralph Coffman HS Jackup at a $135 dayrate, and reporting a gain on the sale of Rowan Louisiana, which had been impaired to scrap value.
    • In today's trade: ESV +6.7%, RIG +5.1%, RDC +9.9%, DO +4.2%, SDRL +3.8%, ATW+4.2%, NE +9%.

    This is not "trouble" this is negotiating!  NY Post: Halliburton gets more "trouble" from DoJ over Baker Hughes deal

    • The DoJ is pushing for Halliburton (HAL -0.9%) to agree to even more divestitures before it moves to approve the pending merger with Baker Hughes (BHI -1.9%), NY Post reports.
    • HAL, which already has said it would sell assets that accounted for $7.5B in 2013 revenue, has reached a "breaking point," according to the report, which cites one source who predicts HAL would not be able to meet the DoJ's request.
    • HAL is in a position of weakness, and potential buyers of its assets – speculation centers around GE (GE +0.3%) and Weatherford (WFT +0.9%) – are in a strong bargaining position, the report says.

    NRG Energy cuts annual dividend 79% to $0.12

    • NRG Energy (NYSE:NRG) -4.2% premarket after reporting a Q4 loss and announcing a 79% cut in its annual dividend to $0.12/share from $0.58, which it says will provide the company with an extra $145M/year.
    • NRG's Q4 loss totaled $6.4B, primarily from writedowns including the loss of value of its struggling Texas coal plants; operating cash flow was $625M, down from $661M, which NRG says shows it is still operating very efficiently.
    • NRG says it is reincorporating its NRG Renew solar business for commercial and industrial customers back into NRG from its NRG Yield (NYSE:NYLD) spinoff.
    • Says it still plans to spin off or sell much of its stake in its home solar and electric vehicle charging businesses in the spring as previously planned.

     

    Gold keeps upward trend in February

    • Gold prices this month were bolstered by volatile moves across global stocks that sent investors flocking to safe haven assets including precious metals.
    • According to Reuters data, gold is on track for its biggest monthly gain in four years since January 2012, and rallied by about 15% since the beginning of 2016.
    • Bullion for immediate delivery +1% to $1232.90.

    Ouch!  This is why you have to be VERY CAREFUL when "bargain shopping" in commodities:  Intrepid Potash warns of potential breach in loan covenants

    • Intrepid Potash (IPI -55.8%) plunges in early trading after posting a larger than expected Q4 loss and citing the potential for a breach in its loan covenants.
    • IPI says it sold 89K tons in Q4 for a FY 2015 total of 587K tons, down 36% from 2014; average net realized sales price per ton was $277 in Q4, down 20% Y/Y, and was $339 for FY 2015, up slightly from FY 2014.
    • IPI says it remains focused on improving EBITDA generation by selling more Trio while also lowering potash cash operating costs through its conversion of the East facility.

    DryShips plans 1:25 reverse split

    • Following a trading day during which shares closed at $0.10, DryShips (NASDAQ:DRYS)has announced a 1:25 reverse split that goes into effect on March 11.
    • The split aims to put DryShips in compliance with the Nasdaq's $1.00 minimum bid rule. 26.9M shares will be outstanding post-split vs. a current 672M.

    Highlights from Jeff Immelt's annual letter

    • "We have delivered for you in the last five years…but we are still underowned by big investors."
    • "In this time of uncertainty, why not GE? We have great businesses, global scale and strong initiatives. We have a ton of cash that can protect you. And we will lead the Industrial Internet. We are the Digital Industrial."
    • "Some say we are in an 'industrial recession,' but I don't really know what that means. I learn more from what I see in individual markets and hear from customers…Growth is available, but you have to work at it."
    • "I have put together a team of early career GE leaders to coach me on our simplification journey. They inspire and motivate me; but listening to them is humbling. Through their eyes, I can see the evil nature of corporate bureaucracy; they are a good mirror for my own failings."
    • Read the letter here

    Whole Foods Market investors digest weakness at United Natural Foods

    • Shares of Whole Foods Market (WFM +0.8%) are holding up in early trading, despite the soft outlook issued earlier from key supplier United Natural Foods (UNFI -18.3%).
    • The weak read from United Natural Foods appears to be largely on the profit line, not necessarily volume (FQ2 sales of $2.05B expected vs. $2.07B consensus).
    • United Natural Foods has a distribution agreement with Whole Foods that runs through 2025.
    • Previously: United Natural Foods reports Preliminary FQ2 results (Feb. 29 2016)

    Piper Jaffray upside in Chipotle for patient investors

    • Piper Jaffray lifts its price target on Chipotle (NYSE:CMG) to $590 from $479 on its view that the underlying unit-level economics of the business are still strong.
    • The investment firm takes the long view on Chipotle in assigning a $20 EPS target to be achieved within a few years (from $6.44 this year).
    • Shares of Chiptole closed at $505.79 on Friday.

    Horizon Pharma reports Q4 and FY15 results

    • Horizon Pharma (HZNP -12.7%) Q4 results: Revenues: $244.5M (+135.5%); R&D Expense: $13.7M (+98.6%); SG&A: $125.2M (+126.4%); Operating Income: $38M (+322.2%); Net Income: $24M (+175.9%); EPS: $0.15 (+155.6%); Non-GAAP EPS: $0.63 (+215.0%).
    • FY2015 results: Revenues: $757M (+154.9%); R&D Expense: $41.9M (+139.4%); SG&A: $440.3M (+110.5%); Operating Income: $55.4M (+751.8%); Net Income: $39.5M (+115.0%); EPS: $0.27 (+108.6%); Non-GAAP EPS: $1.96 (+157.9%); Quick Assets: $859.6M (+292.9%).

    Foot Locker in focus after earnings

    The Second Tech Bubble Has Burst, And Here Come The Mass Layoffs

    Taser soars after topping expectations

    • Net income of $5.1M, or $0.09 per diluted share vs. $5.08M, or $0.09 per diluted share in the fourth quarter of 2014.
    • Revenue by segment: Taser Weapons: +15.4%; Axon +47%.
    • Total Axon and Evidence.com bookings increased 82% to $44.7M from $24.5M a year ago.
    • SG&A expenses +75% to $21.9M; R&D expenses +25% to $6.6M.
    • "We concluded a very strong year," CEO Rick Smith said. "In 2016, we see tremendous opportunity to further enhance our integrated hardware-software platform and pursue our strategic initiatives with a focus on long-term profitable growth."
    • TASR +8.7% premarket
    • Q4 results

    Synergy: Cisco had 56% of switch/router market in 2015

    • Cisco (NASDAQ:CSCO) had 56% of the global switch and router market in both Q4 and 2015 (even with 2014), estimates Synergy Research. The market's next four biggest players – Juniper, HP Enterprise, Huawei, and Alcatel-Lucent – each had shares in the 6%-8% range.
    • Synergy estimates Cisco had 69% of the Q4 enterprise router market, and 42% of the service provider router market. Its share of the enterprise Ethernet switch market, which accounts for nearly 60% of the total switch/router market, is pegged at slightly above 60%.
    • The total market is believed to have grown a modest 3% in 2015, mostly due to enterprise Ethernet switching growth (boosted by healthy data center switch demand). Weak telecom capex weighed on service provider router sales.
    • Synergy's Jeremy Duke: "[Cisco's] dominance is more pronounced on the enterprise side where HPE is the only other vendor with a double-digit market share, while on the service provider side ALU, Juniper and Huawei are all pushing hard and all have double-digit market shares. Part of the thinking behind Cisco’s partnership with Ericsson (NASDAQ:ERIC) is to help it strengthen its sales channel into service providers and to further increase its share of this market segment." On that note, Cisco and Ericsson recently claimed they already have over 200 joint customer engagements to go with a handful of initial deals.
    • Cisco is coming off a January quarter (FQ2) in which switch product revenue fell 4% Y/Y to $3.48B, and router product revenue rose 5% to $1.85B. Both SDN/NFV and the use of white-box hardware by cloud giants are viewed as long-term threats.

    It's alive: Sprint +8.5%, offering two-year subsidized contracts again

    • Sprint (NYSE:S) gained 8.5% today to hit its highest point in six weeks, and trim much of the decline it saw coming out the holiday season.
    • And just a month after quietly killing off its offering of two-year subsidized-phone contracts (and loudly proclaiming the benefits of leasing), it's quietly brought back the option for customers.
    • It's the only one of the big four carriers to do so. "We listened to our customers and are giving them more choices to get their new device," a spokeswoman tells FierceWireless.
    • And there are choices: Customers can choose leasing a phone, as with its heavily promoted "iPhone Forever" and "Galaxy Forever" frequent-upgrade deals. But they can also pay for a phone via monthly installments, pay full price, or (now) choose a 24-month subsidy contract again.
    • Leasing is a "churn killer," Sprint CFO Tarek Robbiati said at an investment conference last month, and allowed the company another revenue stream by selling refurbished products. But after being among the last carriers to drop subsidies (T-Mobile kicked off the trend in 2013), Sprint's now the only one offering that option.
    • Sprint shares are down 8% YTD.
    • Previously: New Samsungs see Sprint moving more into leasing while AT&T, Verizon wait(Feb. 23 2016)

    Fox, Warner grab most awards in a spread-out Oscars haul

    • Awards don't always translate into dollars for film distributors, but one that may get a boost still has its movie on its initial theatrical run.
    • The Revenant got a late-2015 awards-season opening and is still in more than 1,600 North American theaters, and three Oscar wins could provide a shot in the arm for the grim revenge tale for Fox (FOX +0.4%, FOXA +0.4%). It's still among the top 10 films and has drawn $170.5M domestically to date.
    • The film was considered one of the favorites for the Best Picture award before it lost out to Open Road's Spotlight.
    • The biggest haul among distributors came for Warner Bros. (TWX -0.2%), which took six Oscars — but all in technical/crafts areas, for Mad Max: Fury Road, vs. the key categories won by The Revenant (Best Actor, Best Director, Best Cinematography). Mad Max hit theaters last May 15 and closed out in late September before heading to other windows and home entertainment.

    Cook talks dividend hikes, acquisitions, privacy, car at Apple's annual meeting

    • Apple (AAPL +0.2%) is committed to raising its quarterly dividend annually, Tim Cook stated at his company's annual meeting. As it is, Apple has been announcing dividend hikes in recent years in tandem with its FQ2 (calendar Q1) report, and CFO Luca Maestri has promised an update to Apple's capital return in tandem with this year's FQ2 report. The quarterly dividend is currently at $0.52/share (2.2% annual yield).
    • Cook also suggested Apple sees the current environment as a buyer's market for acquiring tech companies. "In times when equity values are falling there's great opportunity to [buy companies]." He added Apple has bought 19 companies in the list 15 months (some purchases are known, some aren't).
    • Not surprisingly, Cook defended Apple's stance in its battle with the FBI in the San Bernardino case. "We are staunch advocates about our customers’ privacy and personal safety … We do these things because they are the right thing to do."
    • When asked about Apple's widely-rumored car efforts, Cook hinted an Apple car could take a while. "Do you remember when you were a kid, and Christmas Eve, it was so exciting, you weren't sure what was going to be downstairs? Well, it's going to be Christmas Eve for a while." The WSJ reported last year Apple is aiming for a 2019 launch date. More recently, AppleInsider reported of a hiring freeze for the project after execs became unhappy with the initiative's progress.
    • Separately, a federal appeals court (the CAFC) has overturned a $120M infringement ruling against Samsung levied by a jury handling a 2014 patent suit brought by Apple. The court ruled Apple slide-to-unlock and auto-correct patents are invalid, and that Samsung also didn't violate IP related to turning alphanumeric characters into links. The ruling comes after Samsung agreed last December to pay Apple $548M for an infringement ruling in a 2012 case.
    • Yesterday: Apple reportedly preps smaller iPad Pro, files motion to throw out court order

    Ted Cruz interview turns testy after Fox News' Chris Wallace asks about allegations of 'dirty tricks'

    Ted Cruz speculates of possible mafia ties in Donald Trump's tax returns

    TRUMP: It's fine to spread 'very good' Mussolini quotes


  19. Value Investing: the frustrating thing about this style of investing is that by definition you are forced to buy on the way down – otherwise you would be buying a GARP (Growth At a Reasonable Price) stock. LL is a case in point. The 'value' label got affixed with the stock in the mid-$20s. For those convinced about the business case, then what's not to like, as the 'value' element is inversely related to the decline in stock price. BID may be another example. It requires a lot of faith (or is that hope masquerading as faith) and deep pockets to keep doubling down. Of course, sometimes it pays off, e.g. ABX – as long as you bought all the way down from the $20s to sub $10. But it certainly doesn't do much for the ulcers.


  20. TASR/8800 – There's not much you can do about it now, would have been nice if you rolled them ahead of earnings to take advantage of whatever premium there was left in higher, longer strikes to increase your call-away price a bit.  Essentially, no matter how you look at it, you have a forced cash-out of the stock and that leaves you with a bull call spread.  So the real question is that you have (or will shortly have) $6,400 cash that was tied up in TASR stock and you would like to find a new, long play, right?  

    Of course I hate chasing and TASR is up 14% today so I'd just hold the money and be happy but the 2018 $15 puts are still $3 and that's net $12 so, if you sold 5 of those for $1,500, the worst thing that can happen to you is you end up with 500 share of TASR for $6,000 of the $6,400 you just cashed out for 400 shares.  To me, that's no downside.  Using that $1,500, you can buy the 5 of the 2018 $15 calls for $8 and sell the $22 calls for $5 and, if all goes well, you'll get another $3,500 back on that spread while still keeping all of the $6,400 cash in your pocket.  

    Value investing/Winston – Yep, not for the feint of heart, which is why there's so few of us – even though over 100 years of history show that value investing is the most reliable path to building great wealth in the markets.  I mean, what's the alternative – NOT buying things that are cheap?  No thanks!  THAT gives me ulcers!  


  21. In case you were wondering what its like down here in Texas:  

    February Dallas Fed Manufacturing Outlook: -31.8 vs.-30.0 expected, -34.6 in Jan.
    Production: -8.5 vs. -10.2 prior.
    Capacity Utilization: -8.2 vs. -7.0 prior.
    New Orders -17.6 vs. -9.2 prior.

    "Most other indexes of current manufacturing activity also indicated further contraction in February. The new orders index fell 8 points to -17.6, reaching its lowest level since May 2009, when Texas was in recession. The growth rate of orders index remained strongly negative at -17.4. The capacity utilization index was largely unchanged at -8.2. Meanwhile, the shipments index rose 10 points to -1.1 after plunging last month.”

    "Labor market indicators reflected further decline in February. The employment index dropped 7 points to -11.1, hitting its lowest reading since November 2009. Eleven percent of firms noted net hiring, while 22 percent noted net layoffs. The hours worked index was fairly steady at -9.8, suggesting a continued pullback in employee hours”


  22. stockbern /business conditions  Here's a story from saturdays NY Times along the same lines

    http://www.nytimes.com/2016/02/25/business/energy-environment/falling-oil-prices-force-cutbacks-at-smallest-companies.html

    …almost time to move to Monana


  23. "The New Oil-Storage Space: Railcars. U.S. market is so oversupplied with oil that traders are experimenting with a new place for storing excess crude."

    Jarred my memory, end of Q3, a subsidiary (Union Tank Car) of a BRK subsidiary (Marmon) bought 25K tank cars from GE.  Union Tank Car is one of only five rail tank car makers in the US.  Anyway, they neglected to report the purchase price and buried the $1B price disclosure in the Q3 BRK financials.  Some analysts whined about a lack of disclosure, Buffet just grinned like he's doing right about now. McLovin It. Out.


  24. Phil,

    Thanks for the TASR thoughts. I like the product line and understand why it is stock of the Yr/Decade status (esp in light of current tragedies with lethal force and ensuing negative press and incentives for police to switch to non-lethal force) but the 47 P/E still seems to leave it open to a drop esp should something go awry in execution. This Q earnings beat est by .05 (.09 vs .04) but ytd earnings dropped by .01 vs last ytd. (.38 vs .39) Just saying.


  25. Adding to my B/W plays Today I added MS bought the stock for 24.94 and sold the Mar2 25 call for .65 if flat will give me a retutn of 2.6% in 11 days.


  26. Phil, any interest in shorting TSLA?


  27. Dallas Fed/Stock – Yuch!  Still, it's an improvement from Jan in parts but New Orders is really disturbing.  Of course the oil situation has a lot to do with that. 

    Buffett/Naybob – He's a smart cookie – watches the macros and pounces when he sees an opportunity.  

    TASR/8800 – The 47 p/e is because they switched from a sale to rental model so the gun they make for $300 and sell for $500 is now the gun they make for $300 and rent for $200 in year one, causing a $100 "loss" with future revenues to come.  By year 3, they are making $100 more for the same gun and in years 4 and 5 it's all gravy.  Also, this is a slide from their shareholder presentation:

    So TASR is growing fast and spending to do it and they changed their model so they recognize less revenues up front and more down the line.  What's not to like?  

    TSLA/Lunar – They are low in the range so I wouldn't touch them (as I certainly wouldn't go long).  


  28. Phil,

    Thanks again for the added insight on TASR


  29. MUST READ commentary on Trump and the KKK


  30. UNG – more weakness to go for next two weeks at least?

    http://signaltradinggroup.com/seasonal_projections/seasonalprojNG/


  31. /NG – this shows better current weakness:

    http://signaltradinggroup.com/seasonal_accuracy/seasonalcng/


  32. Well gee, UGAZ hit 76 cents??? wow


  33. UNG – damn. can I resist the sucking pull to 'average down' here? maybe just a few contracts…?#mistakesIkeepmaking


  34. You're welcome, 8800. 

    Trump/8800 – Anyone who can't simply say "I want nothing to do with the KKK" has some real issues.  Still, that's PRESIDENT Trump to you:

    UNG/Scott – That gives us plenty of time to form a good base but hopefully not down 10% from here first!

     

    UNG in the same boat, barely holding $6. 

    I think we're going to need a bigger chart!  surprise


  35. In case you missed out on Donald Drumpf

    https://www.youtube.com/watch?v=DnpO_RTSNmQ


  36. Some sources are eyeballing 1.50 on NG (now at 1.70) so that's 5.30-ish on UNG. There could be lot's more time to "average down," so I'm doing this slowly at best. My gut is telling me Mid-March for the true bottom and lot's of time to play up-swings over the next 2 years so no need to be impatient now.


  37. As some economists and Wall Street traders began to sense danger ahead of the crippling housing market collapse of 2008, Donald Trump waved away the worries and offered a concrete expression of confidence in the industry.<p>In the spring of 2006, the tycoon hosted a glitzy event at Trump Tower to …


  38. BDC/UNG

    What will it be for UGAZ for that bottom? 30% down on UNG = 90% down on UGAZ ???

    regards


  39. <b>Tolyatti, Russia (CNN) —</b> The global oil crisis isn’t just taking a toll on Russia’s economy. It’s also hitting ordinary citizens.<p>Leonid Emshanov, a mechanic at the Avtovaz auto plant in Tolyatti, doesn’t want to show me his home. It’s too crowded he says.<p>Leonid and his wife Natalia live with her …


  40. Following the biggest beat on record in January jumping to 55.6, <b>Chicago PMI collapsed in February to a stunning 47.6</b> – below the lowest estimate from …


  41. Theories abound as to why U.S. productivity growth has stalled. Economists attribute it to everything from a slowdown in business investment to inadequate measurement techniques that fail to capture efficiency gains from new technologies.<p>A recent research note from J.P. Morgan Chase offers another …


  42. Argentina has agreed to pay $4.65 billion to four hedge funds on Monday in a deal that could put an end to a more than a decade of mudslinging and legal attacks.<p>The hedge funds, which include the billionaire Paul E. Singer’s NML Capital, are the last among of group of investors that declared legal …


  43. The recent carnage in financial markets has prompted much speculation about whether the U.S. economy is headed into a recession. If so, it certainly isn’t acting that way.<p>Forecasters have a notoriously bad record of calling recessions. Back in October 2008, for example, many economists still …


  44. Sweden’s economy is on a massive tear, but for the country’s central bank, that’s actually pretty awful news.<p>Sweden’s economy grew by 4.5% on an annual basis during the fourth quarter of 2015, according to figures published on Monday.<p>That’s far ahead of the expected 3.6%, and well above the 4.1% …


  45. UNG at 5.30 = -11%, so -33% for UGAZ I'd think (76 cents => 49 cents), though I don't play in the 3X ultra space so I don't follow these too closely (the only really long term profitable play on these is to sell naked calls IMO). I might dabble if they do a 1/100 RS in the near future. So then they'd be about $50 and people can take that price seriously again, and then NG has a resurgence and goes +50% (NG to 2.25, UNG to 7.95) and UGAZ could go to $125 minus a little for decay.


  46. The conservative justice hasn’t quizzed lawyers before the Supreme Court during oral arguments since February 2006.<p>WASHINGTON — U.S. Supreme Court Justice Clarence Thomas asked several questions during oral arguments on Monday — the first time he has done so in more than 10 years.<p>Thomas was silent …


  47. I have heard many different numbers cited for the break-even cost of shale oil, but some context is required to properly address the issue. My colleague Art Berman covered a good bit of that context in an article here last fall called Only 1% Of The Bakken Play Breaks Even At Current Oil Prices. In …


  48. Trump, says Oliver, is America’s back mole: Cancerous and need of attention<p>Leonardo DiCaprio was still Oscar-less when “Last Week Tonight” host John Oliver hit airwaves last night to give GOP frontrunner Donald Trump the thorough flogging he so rightfully deserves.<p>“We have mostly ignored Trump on …


  49. Nice "risk on" indications in HYG and JNK today.


  50. Yikes, all the gains slipping away.  Meaningless Monday strikes again.  


  51. Judge Thomas's question – "anybody know how to work this Ouija Board?"


  52. Trump / Phil – And I come back to NJ as that huge toolbag Christie endorses him. This guy has to be the worst NJ governor in my lifetime. The opportunism in this guy is as big as the guy himself! And then Trump treats him like crap and pushes him away. 

    They defeated Jim Florio when he raised sales tax by 1% to try to balance the budget and meet the state's pension obligation, or just as it's called govern. And we re-elected that Christie who doesn't give a rat's ass over the average citizen and wants to hang around billionaires and actually demeans 1/2 of us because we disagree with him. Unreal!


  53. CNX up nicely.  Sold some of their coal assets.


  54. STJ – I agree with you on Trump, as does Meg Whitman :

    ~~Meg Whitman, the Hewlett-Packard chief executive who served as the national finance co-chairman for Chris Christie’s failed presidential campaign, is calling the New Jersey governor’s endorsement of Republican frontrunner Donald Trump “an astonishing display of political opportunism.”

    “Donald Trump is unfit to be president,” Whitman said in a statement Sunday. “He is a dishonest demagogue who plays to our worst fears. Trump would take America on a dangerous journey.


  55. BTU – also unreal is the market cap of BTU is only 45 million. 


  56. Thomas/Rexx – My answer to Thomas as to what's the difference between restricting a person's 1st or 2nd amendment rights would have been to say "FU Thomas" and then pull out a gun and fire a few shots at him and then ask "so, do you see the difference?"  I suppose, with Scalia gone, he's looking to fill the role of biggest asshole.  It's very possible Scalia had threatened Thomas and told him not to speak for 10 years - no telling with those weirdos…

    Christie/StJ – Don't get me started.  I'm leaving this area soon before the impending commuting disaster destroys all property values.  It's already catastrophic getting in and out of the city and we've only got MAYBE 10 years left before the Lincoln Tunnel fails with the Holland not far behind.  

    In fact, it was Christie who unilaterally canceled the last, funded plan to build a new tunnel under the Hudson.  “We are years from completing a new tunnel — even if we started today,” noted Cuomo and Christie in a recent letter to President Obama.

    A closure of one of the two tubes that make up the tunnel for a week or longer over the next several years is “almost guaranteed,” according to Tom Wright, president of the venerable Regional Plan Association.

    "It would create a transportation nightmare that has so many negative ramifications for our economy and our quality of life,"  said Jamie Fox, New Jersey Transportation Commissioner. "Anyone who thinks if one (tunnel) gets shut down, that life will go on normal is sadly mistaken. It will affect everyone."  



    "There is no silver bullet that will solve the transportation problem if the tunnel goes down," Fox said. "We've dealt with crisis before, 9/11, the Manhattan blackout, (so) there are contingency plans. But those incidents involve a couple of days, not an extended period of time."

    Why did Christie kill the tunnel, and what did he do with the money afterward? As we reported back in April, Christie diverted a total of $3 billion of highway toll increases and Port Authority of New York and New Jersey money originally earmarked for the tunnel to bail out Jersey’s finances – the biggest one-time budget fix of his administration.


    CNX/Albo – I think people were surprised they were able to unload them.  

    BTU/Scott – Incredible drop in those guys to penny stock status.  Up 10% today though!  


  57. The John Oliver piece on Donald "Drumpf" is totally awesome!!! 


  58. Darn shame Oliver isn't hotsting the daily show. He learned his craft from the master.


  59. `I love the Internet, you see such interesting things!  

    Oliver/Mkucs – I like his long-form show and Noah's not too bad but Willmore on the Nightly Show is great – that's my new favorite (next to Oliver) and Samantha Bee is doing a good job with Full Frontal (also weekly).  Colbert, sadly, went the other way, I don't like his new show.  

    Gold plowing back towards $1,240, silver very laggy at $14.92 and was great off $14.75 – still a good play on /SI, especially long over $15 with tight stops. 


  60. Colbert is probably making more than the other 4 combined. He took the money. I don't blame him. Comedy Central Let some real talent go. Wilmore is good, Trevor? Meh…


  61. Trump is the f**k you vote. It's that simple.

    That's a whole lot of people voting with their middle finger.


  62. Phil, 

    Would you make any adjustments on BID to allow more time for recovery: short July 22 put, long July 20/30 bcs? Also, what are your thoughts on AMT as butterfly candidate?


  63. Judge Thomas/ Haha. I was just saying he now needs a Ouija to consult his mentor.

    But pls go easy on waving yr weapons in the courtroom, sir


  64. BID/JMD – We already did adjust the OOP (2/12).  Now it's 40 2018 $15/23 bull call spreads that were $8.10/4.20 at the time and we have 15 2018 $23 short puts ($7.05) and 15 short March $22 calls we sold for $1.05.  I'm good with that set-up for now, my bigger concern was that March would get away from us. 


  65. Christie's a thief.  Along with the tunnel baloney, take a look at the Bayonne dock deal.  And the Pulaski skyway. And today, the WTC Path station.  OMG $4 Billion.  (And Gov.Cuomo had to go along with all the Port Authority shenanigans.) All this crap to say he's a bona fide austerity case.


  66. Phil / LL – Thoughts on any new positions or changing existing? 


  67. VRX getting crushed.  Ackerman getting hurt.


  68. LL/Batman – Look how fast the buyers jumped back in today.  Looks good, actually.  We'll take a good look tomorrow, after the analysts get their chance to weigh in (you know how I feel about it).  

    Not a good way to end the month, down about half a point.  


  69. That would be very bearish for oil very quickly. I don't want to use the word "never" since it's very extreme but high oil prices might be a thing of the past bar any geopolitical meltdown:

    http://jalopnik.com/how-evs-could-kill-gasoline-cars-starting-in-the-2020s-1761822759

    In predicting the potential for a so-called “crisis” in the oil market in the wake of electric-car production, Bloomberg slated that event—which would entail electric cars displacing two million barrels of oil per day—could occur as early as 2023. But that’s aggressive, and accounting for sales drop-offs on electric vehicles would put that crisis further down the road by several years.

    And big oil with their head in the sand:

    OPEC maintains that electric vehicles (EVs) will make up just 1 percent of cars in 2040. Last year ConocoPhillips Chief Executive Officer Ryan Lance told me EVs won’t have a material impact for another 50 years—probably not in his lifetime.


  70. Looks like big business is already missing their big friend on the SCOTUS:

    http://talkingpointsmemo.com/dc/scalia-cases-being-dropped

    Last week, Dow Chemical made headlines by opting for a $835 million settlement in a class action lawsuit rather than risk having the case heard by a Scalia-less Supreme Court. A lower court had already ruled against the company for allegedly conspiring to fix prices for industrial chemicals, and prior to the settlement, Dow had appealed to the Supreme Court to overturn the ruling.

    In the absence of Scalia's vote, taking the case to the eight other justices risked the company not just a loss in the specific case, but the potential for a broader ruling that would have put companies in a tougher position in future class action lawsuits.

    The current court line-up "increased the likelihood for unfavorable outcomes for business involved in class action suits," Dow said in a statement Friday, according to the AP.

    Can't have a Supreme Court fighting for the rights of the citizen and corporations are people too with feelings!


  71. Albo / CNX, working it, I love this pick!!! And don't forget our old friend CLF is up 18% just today! This was a bottom feeding position we took. They have 3 big white candles since their 1.25 uber-low last month. Kudos to low entries! I also like CENX (aluminum) and they are even over the 200 day now 

    BTU / coal is dead.

    NG is not however. UNG the one true laggard. It'll turn eventually…


  72. Using NG to produce electrical power is way WAY up in December (At the expense of coal). It would be interesting here on PSW to find picks that are utilities that BUY natural gas and SELL electricity (which has more a of a died price over time). That cost/revenue spread must be at some sort of all-time right now.

    Another low NG price play is MEOH. Most methanol is made from natural gas. If the gas is derived from bio-sources then the resulting methanol can be considered a renewable liquid fuel. The 2 year chart shows some of the same general commodity weakness, so good entry point. They pay a 3.47% yield right now.

    These are also good hedges against plays like UNG because they continue to perform as long as NG stays low.


  73. hmm, I think I meant "more of a fixed price" above. oops. freud


  74. Colbert and Stewart needed to continue their shtick through Nov 2016 IMO. They let it go a bit too early. I agree that Colbert's new show isn't a good fit. His old show on CC was unique and quite perfect and their Mon-Thur night 1-2 punch was perfect late-night television. I don't watch Trevor or any of the spin offs either. I try to catch John Oliver from time to time because he's clearly the best out there currently.


  75. DAX up 1.3%


  76. Good morning!

    Once again the market proves that Monday's are meaningless as we spring right back to where we started.  


  77. Italy’s unemployment rate fell slightly in January as job creation was aided by tax breaks to reward employers hiring people on an open-ended basis, offsetting the impact of weak economic growth.


  78. Britain’s stocks climbed to their highest level in two months, with more than 90 companies in the FTSE 100 Index rising.


  79. German joblessness fell for a fifth month in February in a sign that economic momentum will continue to be underpinned by household spending.


  80. South Africa’s rand gained for a second day against the dollar as monetary stimulus in China fueled investor appetite for riskier assets and after Barclays Plc said it won’t immediately sell its stake in its local unit.


  81. Intercontinental Exchange Inc. said it is considering making an offer for London Stock Exchange Group Plc, a week after Deutsche Boerse AG said it was in merger talks with the U.K. company.


  82. Investors are finding fewer and fewer companies to love in the corporate bond market.


  83. By a lot of measures, 2015 was the worst year for Glencore Plc since the mining and trading giant became a public company.


  84. Argentina’s deal to put a bitter 15-year creditor saga behind it won’t come cheap.


  85. The biggest Treasury market two-month gain in a year is about to give way to a selloff, based on Bloomberg surveys of economists.


  86. If you live in the eastern U.S., it’s almost time to put that snow shovel away and get out the gardening tools.


  87. Digging beneath the surface of what was otherwise an unremarkable month for U.S. stocks exposes a rare event that bodes well for bulls if history is any guide.


  88. Former Federal Reserve Chairman Alan Greenspan said negative interest rates, if pursued for an extended period of time, will eventually distort saving and investment.


  89. The one story about the U.S. economy that has virtually no traction among American voters right now is that it’s doing OK.


  90. Euro-area factories cut prices at the fastest pace in almost three years in February, compounding an already worrisome inflation environment for the European Central Bank.


  91. The pound stayed higher versus the euro and the dollar even as a report showed U.K. manufacturing expanded last month at the slowest pace in almost three years.


  92. Lego A/S said net income jumped 31 percent last year as a new video game helped Europe’s biggest toymaker gain market share in all its regions.


  93. Euro-area unemployment decreased to lowest in more than four years in January, giving European Central Bank policy makers some positive news a week before their monetary policy meeting.


  94. A mild February afternoon finds nine young men kneeling in prayer on small green and red carpets in a dimly lit dining room of an 18th-century palazzo overlooking the distant shores of the Mediterranean Sea.


  95. Prime Minister Malcolm Turnbull’s government is looking to scrap Australia’s media ownership laws in a move that could pave the way for a string of takeovers in the industry.


  96. China’s yuan advanced for the first time in eight days, with a stronger central bank reference rate easing pressure spurred by Monday’s cut to lenders’ reserve ratios.


  97. China Fishery Group Ltd.’s credit rating was downgraded by Fitch Ratings to Restricted Default after the Hong Kong-based company failed to pay a semi-annual coupon within a grace period.


  98. The oil-price collapse will compel all producers to freeze output and no early OPEC meeting can take place without such a move, the United Arab Emirates’ energy minister said.


  99. German Chancellor Angela Merkel said Europe’s discord over refugees threatens the euro, raising the stakes as European Union leaders prepare for their next emergency meeting to stem the crisis.


  100. Russia’s manufacturing industry deteriorated more than forecast in February as new export orders declined while currency volatility and cheap oil darkened the economic outlook.


  101. The worst drought in more than a century cut South African farming output and hurt manufacturing, curbing growth in the continent’s second-largest economy to an annualized 0.6 percent in the fourth quarter.


  102. Global stocks rallied with U.S. equity futures, emerging-market currencies rose and crude oil climbed to an eight-week high as monetary stimulus in China brightened prospects for the world’s second-largest economy.


  103. For Gillian Fyvie, a splash of milk on her cereal typically led to stomach ache, bloating and a swollen tongue. Not since making the switch.


  104. Thirty miles west of Wall Street, in an anonymous office park set among rolling hills and shady streets, lurks a giant of the commodities world.


  105. Ten weeks after a general election produced an unprecedented deadlock in parliament, efforts to form a government in Spain are entering a critical phase.


  106. Everyone loves the comeback kid, and they don’t come much comeback-ier than Glencore.


  107. Federal Reserve Bank of New York President William C. Dudley said that while he still expects inflation to reach the U.S. central bank’s 2 percent target over time, he’s lost some confidence in that prediction following recent turbulence in financial markets.


  108. One of the most exciting and promising developments in the history of medical science may bypass the U.S. if Congress fails to act. It needs to lift the ban on federal spending on research involving human embryos.


  109. Central bankers, it may soon be time to don your flying suits and start your engines. There’s a growing suspicion that quantitative easing and zero/negative interest rates have lost any power they might have had to kickstart the economy. So Milton Friedman’s famous “helicopter money” is back on the radar as a potential solution to what ails global growth.


  110. Carpets, vacuum cleaners and cups of coffee: those are three of the key consumer items that economists at the European Central Bank are pondering to figure out whether oil’s slump is leading the euro area into deflation.


  111. At least 100 workers at the construction site for Tesla Motors Inc.’s battery factory near Reno, Nevada, walked off the job Monday to protest use of workers from other states, a union official said.


  112. The U.K. will start payments to power generators to guarantee electricity supply in the winter of 2017/2018, a year earlier than previously planned, in an attempt to improve supply margins and encourage the building of new gas plants.


  113. Petroliam Nasional Bhd., Malaysia’s state oil company, announced management changes and plans to cut workers as it seeks to trim operating costs to cope with the worst price slump in a generation.


  114. On Tuesday, more delegates will be awarded than on any other day of the presidential race. About half of the delegates needed for a Republican candidate to win the nomination are at stake, plus about a third for Democrats. In roughly a dozen state races, Republican front-runner Donald Trump and Democratic leader Hillary Clinton seem poised to win in landslides that could render them nearly inevitable.


  115. As the U.K. over whether to stay or leave, Norway is eyeing its own way of distancing itself from the European Union. 


  116. Volkswagen AG, seeking a way out of the emissions-cheating scandal, is trying hard to show it has changed.


  117. The new sanctions that China has reportedly agreed to impose on North Korea are truly a “” to existing penalties, as American diplomats say. To make sure they are ultimately effective, however, it’s important to appreciate their limitations.


  118. The U.S. is a nation divided-- divided between zip codes where economic times are good and zip codes where they really aren’t.


  119. Malaysian Prime Minister Najib Razak received more than $1 billion in his private bank accounts between 2011 and 2013, according to the Wall Street Journal. 


  120. When members of Congress grill Apple Inc. Tuesday on its refusal to help the FBI unlock a terrorist’s iPhone, the company will be fresh from a courtroom ruling that the U.S. is seeking “a mechanism for upending the separation of powers,” that it’s afraid “open legislative debate might produce a result less to its liking” than the courts, and that it is arguing an “absurdity.”


  121. Macau’s casino market shrank less than analysts’ estimates in February, as an increased number of tourists to the city over the Lunar New Year holiday helped ease a slump that’s lasted for almost two years.


  122. The spread between the European Central Bank’s deposit rate and German two-year note yields is at its widest since November 2011, a sign of growing anticipation among traders for more aggressive easing from the ECB. The yield on the short-term debt, which is sensitive to changes in monetary policy, has been below the ECB’s deposit rate since June, based on closing prices. The spread widened on Dec. 2, the day before the central bank cut the rate to a record low of minus 0.3 percent, in a move that underwhelmed some investors.


  123. China’s officials said there is no intention or need to devalue the yuan, according to U.S. Treasury Secretary Jacob J Lew, who was speaking at a briefing in Hong Kong after Monday meetings with Premier Li Keqiang in Beijing.


  124. In November 1968 a young Rhodes Scholar by the name of Bill Clinton was “mad as hell,” as he told a friend back in Arkansas in a letter from Oxford University. Clinton’s absentee ballot hadn’t arrived in time for him to cast his vote for the Democratic nominee, Hubert Humphrey, who lost to Richard Nixon that year.


  125. ’s factory gauge extended its stretch of deteriorating conditions to a record seven months while a measure of services fell to the weakest in seven years, underscoring the challenge for policy makers as they seek to cut overcapacity in manufacturing without derailing growth.