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Will We Hold It Wednesday – Janet Yellen’s S&P 2,000 Adventure

Who are we kidding?

Well, the American People, for one thing.  We're also kidding Investors and Savers and other Nations and we're certainly kidding our children with these ruinous economic policies that do nothing but cover up the complete failure of our fiscal policies to address what is now an 8-year Global Recession.  

Pretending things are better than they really are at a Federal level leads Corporations, in turn, to also pretend things are better than really are – kind of like the Emporer's New Clothes – where no one wants to be thought a fool for simply admitting what is obviously true.  

Financial-management maneuvers - some reasonable and some questionable - are being pushed to extremes as executives work to keep up appearances.  If you've spent any time following the markets, then you're probably familiar with some of the tactics companies are employing to boost earnings:

Say what you want about all that stuff above. That's just how business has been done.

I have long been the fool who says the Emperor has no clothes and, finally, I'm being joined by no less a fool than Barry Eichengreen of Berkeley, who is also calling for a return to REAL Keynesianism (Government Spending) to stimulate the demand side of the equation.  Like me, Eichengreen does not think things are all that complicated but like Global Warming, those in power simply refuse to see or admit the inconvenient truth:

The solution is straightforward. It is to fix the problem of deficient demand not by attempting to further loosen monetary conditions, but by boosting public spending. Governments should borrow to invest in research, education, and infrastructure. Currently, such investments cost little, given low interest rates. Productive public investment would also enhance the returns on private investment, encouraging firms to undertake additional projects.

Thus, it is disturbing to see the refusal of policymakers, particularly in the US and Germany, to even contemplate such action, despite available fiscal space (as record-low treasury-bond yields and virtually every other economic indicator show).

Ideological and political prejudices deeply rooted in history will have to be overcome to end the current stagnation. If an extended period of depressed growth following a crisis isn’t the right moment to challenge them, then when is?

As I pointed out to our Members this morning, Japan has been using QE and low rates to fake their economy for 15 years longer than we have and it's done NOTHING to actually help them.  What it has done is led to a population that's essentially given up and not just on their own lives but on future generations as a generation of delays in marriage and low birth rates have led to a rapidly aging population which is actually declining, with deaths outpacing births by 250,000 souls per year.  

As I've been saying, Abe will likely face a no-confidence vote this summer (I also predicted Brexit will pass, so pay attention!) and now Japan's head 1%'er, Akio Toyoda has told TM employees that they can't even get 1,000-Yen raises ($9) because: "“The virtuous economic cycle that Abe has sought isn’t working well,  With Japan’s economic outlook dimming, company management can’t be aggressive about wage hikes that increase fixed costs.”    

Despite the revolt fermenting among the Keiretsu, the corporations who really rule Japan, BOJ's Kuroda only knows how to push one button to get his cheese and has been wistfully talking about the possibility of -0.5% interest rates.  Of course a country that's 300% of it's GDP in debt would love to get -0.5% interest, that would PAY THEM 1.5% of their GDP on the money they borrowed!  As I said yesterday though, it's just another form of taxation in the end as money is taken from worker/savers and given to the Government (or any rich person who wants to borrow money).

 Meanwhile, in the US, we're entering into the very dangerous STAGFLATION zone, where we have inflation despite a stagnant economy.  You won't read about this in the US Corporate Media but the Telegraph has a good article highlighting our own Federal Reserve's "sticky price indicators" that show that real inflation (the kind our Government refuses to measure) is indeed picking up quickly while the obviously ridiculous "core inflation" remains stagnant.  

sticky inflation 

Even The Cleveland's Fed's own "median consumer price index" jumped to 2.9%, with big rises are in medical services, housing rents, car insurance, restaurants, hotels, women's clothing, jewelry, and car hire. This is the long-feared inflection point we all forgot about in those halcyon days of deflation.

The Fed's is itching to tighten, saying: "We may well at present be seeing the first stirrings of an increase in the inflation rate.”  He spelled out why the 1970s 'Phillips Curve' trade-off between unemployment and inflation is alive and well, and an implicit warning that prices could soon off take since the labor market is clearly approaching the electric fence of Milton Friedman's NAIRU (non-accelerating inflation rate of unemployment).  

The economy created 242,000 jobs in February. The broad U6 unemployment rate has dropped to a cycle-low of 9.7%. The willingness of workers to switch jobs – the 'quit rate' – has surged since September and is back to 2008 levels.  Higher wage demands will follow as surely as night follows day. The Fed will not raise rates this week with so much fog still in the air.  Half the world is in a sulk,  the ISM manufacturing gauge still below the boom-bust line of 50, and US retail sales slipped again in February. 

We'll stay flexible ahead of the Fed (and we have a Live Trading Webinar at 1pm, EST so we'll be watching the Fed LIVE this afternoon) but our Futures shorts are paying off already and there's still time to jump on board as we don't see what Yellen will do to shift sentiment this afternoon – but you never know so – TIGHT STOPS!  The shorting lines for the week were (and are):  

  • Dow (/YM) 17,100 – now 17,117 
  • S&P (/ES)  2,000 – now 2,000
  • Nasdaq (/NQ) 4,325 – now 4,347
  • Russell (/TF) 1,070 – now 1,055 
  • Nikkei (/NKD) 17,000 – now 16,890


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  1. Good Morning everyone!

    Here's the link for today's webinar (1pm Eastern):

  2. VRX – FWIW,  was able to make a quick trade in the pre-market.  Picked up two points.  Quick in and out.  Just trying to lower my basis.

  3. I guess it's up to Janet now to clarify what we are doing now – building a base or topping off.

  4. VRX / albo – Just don't sell any more puts… The guy from Citron was on Fast Money last night and he sees default there!

    BTW, ironic that a guy like Ackman goes after HLF for being a fraud (which it might still be) and goes to bat for VRX which might turn out to be a fraud!

  5. Looking more and more like Clinton/Trump in November. No matter what happens, I think that Trump will be on the ballot either with the GOP or as a 3rd party.

    Getting tough for Bernie now, there is no winner take all for the dems so he needs to basically win all the remaining states and with a large margin. Might be time to start negotiating jobs!

    On the other side, Little Marco finally conceded. Cruz can't win primaries in blue states and many of them left especially in the Northeast. That leaves Kasich but he has only won his own state so far. Still looks like the only sane guy on that side.

  6. Negative rates for dummies:

    I am not good enough to make sure it's entirely accurate. Paging Naybob!

  7. Thanks, STJ.

  8. BTU- Speaking of default :

    ~~Peabody Energy, hurt by weak demand for coal, says it didn't have the cash to pay a debt payment due this week and warned that it may have to file for Chapter 11 bankruptcy protection.

  9. We don't need more oil:

    British energy group Tullow Oil has discovered oil in Kenya’s northern Kerio Valley, a finding that could mean the opening of a second oil basin as the East African country prepares to become an oil exporter for the first time.

  10. Good Morning!

  11. 2 billion in free ads for Trump's insanity; virtually nothing for JM Keynes

    time for Bernie to go full new deal

  12. VRX/Albo

    Be careful.  The more I read into the company, the more I think they are going to liquidate.  The fact that they haven't filed a 10K yet is alarming to say the least.  They have a tremendous amount of debt and many people do not want to deal with them going forward.  I think there is much more downside than upside right now.  If you are profitable, think about getting out and just waiting for the dust to clear.  Too many storm clouds above this company.  I'm thinking of buying 10 puts just in case it does go out but my loss will be limited to a couple k at most.  I can live with that.

  13. AAPL – Will it break 105 today…. still running up to announce next wk.

  14. VRX / albo, rustle – And Andrew from Citron was making a case for MNK to go down with VRX and they don't look too healthy now! 

    These guys are no touch. I agree with Rustle – I would get out with any profit I have now!

  15. Thanks, guys.

  16. Good morning!  

    Good NYT article:  Figuring our what VRX is really worth.

    Big Chart – All about which side of 2,000 Yellen puts us on this afternoon. 

    I just did the morning radio show on Benzinga (9am) but no idea how to find it. 

    Trump/StJ – Trump has 661 (47%) out of 1,378 allocated (55%) of the 2,472 total.  Cruz has 406 (29%), Rubio 169 and Kasich 142 so, at this pace, Trump will not carry 51% into the convention, which then makes it contested and the Party may be able to block him out.  

    Arizona is a winner take all state with 58 delegates, Trump should get that and Utah may also go for trump but it's proportional.  Wisconsin loves Cheney so Trump should get their 42 and NY might go his way and that's 95 delegates but proportional and Penn is 71 winner take all and Jersey 51 is too and, most importantly, CA (June 7) is 172 winner take all.  So Trump could win those states for 394 plus whatever portions of NY and Utah and still come up a bit short though it won't take much in the smaller states to put him over the top – IF he gets the ones he should win.  

    Kasich/StJ – Isn't it funny how much they are pumping him up when all he's done is win his own state?  

    Negative Rates/StJ – Well, I know I'm going to borrow $100Bn but I am holding out for at least -0.25% so I can collect $250M a year while I hold it. cool

    BTU/Albo – That's why I'm not too keen on the energy sector, no one is safe.  

    New Deal/Rexx – I agree.  

    AAPL, back at $105 already.  

    VRX/Albo – Reminds me of an Eddie Murphy sketch – GET OUT!!!

    Applies to stocks too!  

  17. TSLA is up almost 100 points in pretty much a straight line.  Patiently waiting for them to unveil the model 3.  Think stock will probably sell off then plus it's the end of the qtr for hedge funds who I'm sure have been propping this pig up.  Has 35% of the float short so can be squeezed for another 20 easily.

  18. Merrick Garland is the nomination for Supreme Court

  19. Trump / Phil – No doubt that it's harder on the GOP side, but a brokered convention looks like a lose/lose proposition for them. Hard to say what he or his voters would do if they took the nomination from him even though he had the most delegates. You can already hear the screams about the "insiders" stiffing the small guys!

  20. And to my point:

    "I think we’ll win before getting to the convention," Trump said on CNN's "New Day." "But I can tell you, if we didn’t, and if we’re 20 votes short or if we’re 100 short, and we’re at 1100 and somebody else is at 500 or 400 — because we’re way ahead of everybody — I don't think you can say that we don't get it automatically. I think you'd have riots. I think you'd have riots. I'm representing a tremendous — many, many millions of people."

    Grab the popcorn! This could be the blockbuster of the year. We should acquire the rights to stream the GOP convention.

  21. NG?  Little dip…

  22. Uh oh, Obama defies Congress and nominates a Supreme Court judge (kind of like he's supposed to). 

    TSLA/Rustle – 50% off the bottom in a month – that's moving!  

    Don't forget, they have cheerleading analysts in their pockets who will treat the Model 3 announcement like the 2nd coming and they won't have to prove anything until they ship 6 months later.  Spec-wise, they already know what the Bolt ($35,000 before rebates) is going to look like so I'm sure they are going to beat it on paper.

    Chevy is planning for 50,000 a year and let's say TSLA does that same and lets say they make 20% per car ($7,000) so that's $350M in profit!  That would be great if cars really did make 20% a year and even greater if TSLA didn't have a $30Bn market cap, which still puts the p/e at 100 – even with those very optimistic numbers.  

    All these aluminum body cars should be good for AA – that's a lot of tin foil!    

    Trump/StJ – I think it will really hurt the GOP but too late for that anyway.  Whatever the outcome, probably 1/3 of GOP voters will hate the candidate so much they might stay home and that WILL cost them the Senate and it might even cost them Congress if they don't play this right.  I think, at this point, short of a Trump/Cruz (he'd never take 2nd) unity ticket, holding Congress is the best the GOP can hope for in November.  

    Riots/StJ – Did he just call on his supporters to riot?  

    /NG/Rexx – Those little dips are getting smaller and reversing faster and ending up higher before the next one – good sign.  

  23. Surprised CMG isn't down much more.  Still afraid to play them long until they come out and say definitively what happened to the workers in the MA restaurant.  If it's E Coli again, they are going to have major problems with customers returning to pre E Coli levels for a long time.

  24. CMG/Rustle – I just picked them for Benzinga, said selling the 2018 $400 puts for $50 was the way to go but they topped out at $45 on the quick reverse.    

  25. /NG/Phil – is NG June contract a buy around 2.04?

  26. Phil any comments from the 10:30 EIA report or do you need to see the 1PM report in order to draw conclusions (or not draw any)? I have a dentist appointment this afternoon and will miss this weeks webinar, so I am curious if you have any comments yet.

  27. Brent is right at that $40 mark and I am really curious if you still think it is a place to short after seeing that report with only 4 1/2 trading days left on this contract and 155mb still left to roll? 

  28. Business fundamentals are raining on their parade.<p><i>???? A Boom With a View???? is a column about startups and the technology industry, written by Erin Griffith. Some columns are commentary; others are a compilation of links, Tweets, and charts. Some are both. Others are neither. Find them all here:</i> …

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  30. Phil/CMG,

    Selling 1 2018 $400 Put for $45

    What can possibly go wrong with the above setup? if CMG dives down then you can possibly roll down and out with no cost or minimal cost. I guess it is the margin that is required to be available to execute and maintain such trades? Normal margin account instead of a PM account/


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  67. Phil and Co.

    I am in two trades that are not going my way at all;

    60 SSW May $17  Put @ 1.8

    30 BEN April $35 Put @ $1.9

    Would you mind giving some advice on what to do now?


  68. careful selling CMG. They can't get people back into their slophouses and the next earnings are will probably be very bad.

  69. inventory #s?

  70. Phil  / UNG – With this moving fairly well recently ( in a positive direction) i'm trying to formulate a plan around uncovering some of my positions.  I know you indicated that you saw this moving up this year then back down, and settling out somewhere in between.  I also think your 2 yr target is 9 ( 2018).  I have two positions 50X of each below.  Is there a point in time where you would uncover any of these positions ( price point on UNG, or movement in exports / global price on gas?

    2017 BCS 5(2.0) / 9 (.55) 

    2018 BCS 5(2.45 / 9(1.2) 


    Thank you 

  71. CMG   , very easy for them to go back and test $450 , even $400.  Maxim cuts PT to $350 and Cowan to $430

  72. /NGM6/Raviis – I'd rather go at $2 with tight stops below – not sure if we'll see it but I'd rather wait for tomorrow's inventory (it was warm).  

    EIA/Craigs – I was watching Obama, forgot all about it.  Net 0 is better than a build so bullish but $37.50/$40 Brent is still probably a shortable top for reasons I outlined earlier.  

    Crude inventory build comes in much lesser than expected

    • EIA Petroleum Inventories:
    • Crude +1.3M barrels vs. +3.4M consensus, +3.9M last week.
    • Gasoline -0.8M barrels vs. -2.3M consensus, -4.5M last week.
    • Distillates -1.1M barrels vs. -1.1M consensus, -1.1M last week.
    • Futures +3.4% to $37.58.

    If either break below again, then the other can be shorted until either of them are back over – very simple.

    There are a lot of contracts but I think we trade until Tuesday (3 biz days before 25th is the rule), so 5 days including today is 30,000/day, which is doable.  There are 850,000 front 3-month contracts, which is a lot but at least we're coming into the summer where, usually, that number is burned off a bit by actual use.

    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Apr'16 36.74 37.93 36.61 37.83 11:18
    Mar 16


    1.49 255417 36.34 154613 Call Put
    May'16 38.48 39.62 38.39 39.53 11:18
    Mar 16


    1.45 156362 38.08 514318 Call Put
    Jun'16 39.43 40.53 39.33 40.41 11:18
    Mar 16


    1.37 45727 39.04 220723 Call Put
    Jul'16 40.31 41.21 40.03 41.14 11:18
    Mar 16


    1.38 12550 39.76 100735 Call Put
    Aug'16 40.85 41.76 40.64 41.71 11:18
    Mar 16


    1.38 12702 40.33 60856 Call Put
    Sep'16 41.21 42.19 41.10 42.14 11:18
    Mar 16


    1.34 17100 40.80 86464 Call Put

    Don't forget, we have Easter week (spring break) so lots of travel demand and then it's Memorial Day and the start of Summer Driving Season and our summer target is $45 so, generally, we're kind of bullish but $37.50 is right on track so it's only about 0.50-$1 one way or the other now with no major conviction in either direction.  

    CMG/Pat – You never want to sell puts in stocks where you don't REALLY want to own the stock for the net which, in this case, is 100 shares of CMG at net $355 for $35,500.  In basic margin, that's $17,750 and, for taking that risk, you collect $4,500 now and maybe you never end up owning the stock and your return is 25% on risk.  Of course, ordinary margin (not even PM) is just $4,000 according to TOS and PM is essentially $0 so, in a portfolio like our LTP, which is mainly cash and has $80,000 allocation blocks, it's just a free $5,000 as we'll never notice an impact on the portfolio's buying power.  We already sold 5 of those puts in the LTP for $48.25 back in Sept to pay for some insurance.

    SSW/Latch – I take it you mean you BOUGHT the $17.50 puts for $1.80?  Well, they are 0.65 now so I'm not sure what you want me to say.  As a shipper, they are far from the worst off and, worse for you, they are paying a $1.50 dividend, which does tend to put a solid floor on a stock around $15, which is about where you decided they should go lower.  Buying 60 puts makes you the sucker we like to sell puts to, so thanks for that but maybe next time come join us on the other side of the table – you might be happier!  

    BEN/Latch – A solid financial stock you shorted at the lows – what could possibly go wrong?  Oh, that:

    Back in the crisis, BEN was on our Buy List around $20 but it more than doubled and we lost interest.  Again though, it's not a stock I'd bet against at $35 and those April $35 puts are 0.55 so, unless Yellen destroys the market this afternoon – I'd just call it a very expensive lesson in the dangers of paying ridiculous premiums and gambling on short-term outcomes betting against stocks that are already low in the channel.  Even at $15,000 – it's still cheaper than a semester at Wharton.  

    CMG/BDC – Comp sales were down 36.4% in Jan and now down 26.1% in Feb and in March they'll be down 16% and then 6% in April and back to normal in May, when they'll be back to making $1Bn for the next 12 months against their $13Bn valuation (p/e 13) vs 25 for MCD, 21 for WEN or 2,500 for SHAK or even 23 for WFM.  April earnings will suck, of course but we knew this was going to happen and they are just regurgitating the news (along with the burritos) and this too shall pass….  surprise

    UNG/Batman – No, I'd just be thrilled if they hit $9 and you make a nice profit.  Don't turn the trades into something they are not.  Rather than pay $1.20 to uncover the longs, why not sell the $5 puts for 0.80 and lower your basis to near $0?  If you are super gung-ho bullish, you can use 1/2 of that money to roll the short $9 calls ($1.15 for 2018) up to the $12 calls (0.70) but how about just being happy to get a double and moving on to other trades that diversify you rather than putting more eggs in the same basket? 

  73. Pharm,

    Any opinion of ZYNE?  Know they have similar cannabinoid therapeutics for seizures for people who suffer from epilepsy like GW Pharmaceuticals except there's is a transdermal patch which obviously gets to the bloodstream quicker allowing less of the drug with possible less side effects than GW's drug.  GW has a 1.4BB market cap, and ZYNE has about 100mm market cap.  Don't have a position in either yet as ZYNE just followed GW's news the other day and went from 9 to 21 and is now back to 12.60.  But my thought process is if both these drugs work, both companies should be much higher unless GW buys ZYNE or a larger company buys both.  The key people at ZYNE worked at two other companies that both were strategically bought out, last one I believe was NuPathe.  Your thoughts would be greatly appreciated.

  74. btw, meant theirs not there's

  75. Yellen/Phil – what could she say that would cause a negative reaction in the market?  If she does nothing, we go up (I think). If she raises rates, we go up (because everything is awesome!). No way she is going to cut rates. so… what is anyone really waiting for?

  76. Yellen/Scott – Nothing is baked in through June at this point.  Any hint of tightening at the next meeting will cause a sell-off and, as noted in the morning post, inflation is creeping in by the Fed's own measures and employment is booming and there are now wage pressures – these are all of the Fed's check boxes for raising rates – not whether or not the S&P is at an all-time high.  

  77. I"m not able to log ont webinar – a

  78. go oil!!!!

  79. phil is it worth to add to LL down here

  80. go ABX!!!!!

  81. and look at that dollar drop! WTF did Yellen say!?

  82. Fed reaction: "Short-term Treasury yields plunged Wednesday from a 2 1/2 -month high after the Federal Reserve cut the number of projected interest-rate increases this year, suggesting it isn't concerned about inflation."

  83. TLT down a bit indicating rising longer term rates- steepening yield curve usually indicates inflation expectations. However, utilities up- opposite effect. Too many moving parts. Need the pixie dust to settle. 

  84. And up we go… To the moon!

  85. Wow, craziness on the Fed announcing just 2 hikes this year – something we already knew.  

    We converted that to $400/contract gains on the Russell and we got out too soon as almost double that now but not bad for a half hour's work. 

    Everything is knee-jerking up as shorts have to unwind.  Dollar 97.75 is down 1% and indexes not even up 1% (but oil up 6% and gold up 2.5%) so, on the whole, good for our generally bullish portfolios.  

    Behold the mighty Euro and Yen – Janet is actually a lot crazier than people thought! 

    This is all, of course, an overreaction – we'll see how things settle out.

    LL/Rs – I'd reposition but I wouldn't spend a lot of money until we see a clear bottom.  Probably it's here but you never know.

  86. Phil / UNG – thanks for the feedback…. I actually have 20 of the Jan '18 7 puts for 1.6, which i am happy with, I think i'll keep these and add the Jan'18 5 puts for the .8…  I hate selling the puts with the VIX so low though… 

  87. UNG/Batman – I'm not sure what the benefit of adding more is, you are upping your commitment with no clear benefit as you already have much at risk on the short $7s (buying 2,000 shares for net $5.30), agreeing to buy another 2,000 for net $4.20 does very little to your net basis and doubles your obligation.

  88. Did Yellen just say "bail In"?

  89. Futures/Phil

    Would you short /ES or any of the futures at these levels Phil

  90. Yellen/rs_trade

    Yeah, she did when she said, "inflation, I don't see no inflation"

  91. Yellen is very street

  92. The intraday "play of the day" was JNUG. wowza!

  93. BBY/Phil – dropped a lot more than its dividend.. and not helped too much today by the dollar drop. Did something happen? Lost momentum?

  94. Rustle,

    I heard it in the context of to big to fail banks.  thx though

  95. I just signed the docs on a 30 year fixed refi (30 year) at 3.5% last night. I'm betting on Inflation Nation. Well, inflation world, but that doesn't rhyme. Gold's going to 8000!

    I bet a bunch on TBT in 2010-11. five or six years too soon (or more?). When we see it, we won;t even believe how nasty it's going to be.

  96. TBT / BDC – Maybe a decade too soon! I recall the TBT days and I and other mentioned then that rates would not be going up for years! We are all Japan for now.

  97. Yellen/Rs – I think she said she's bailing out of this mess before it blows up in our faces.  

    /ES/DM – Well we already have hedges so no, I wouldn't but for fun, I'd short using 2,020, 17,300, 4,400 and 1,070 as quick trades.  

    Yellen/Rustle – Good Brooklyn girl, I wouldn't mess with her.  

    BBY/Scott – Consumer news wasn't very encouraging but up on the day now.  Pullback to be expected after that huge run anyway.  Good and healthy.  

    Congrats on the house, BDC.  Hopefully, you won't have to refinance at 1%.  

  98. Thanks Phil

  99. 1% refi – haha ya, let's hope not. The M2 money supply would have to be $50T+ for that…

  100. Dollar finally found a floor at 95.50 – meanwhile, indexes never made 1% (except the Nas with AAPL flying) so I'd take all this with a huge grain of salt.  

  101. /NKD is the best way to go long overnight above 16,900.  Figure either Asia likes the Fed and rallies or the Dollar comes back and the Nikkei likes that – two ways to win!  

  102. biodiesel,

    let me start by saying i know nothing.  However in the inflation deflation debate.  wouldn't deflation come come first?  I can not see the powers that be allowing all their indebted slaves off the hook through hyperinflation.  I can envision the large banks really putting the screws to the people by first deflating everything as they buy it all up and then running it all up.  is this flawed thinking?

  103. rs_trade:  I think its the "powers-that-be" that need the inflation.  Deflation is actually quite helpful for the average consumer and retired savers.

  104. Thanks Phil. Appreciate the advice. Yes that is why I am here and expect to recover and more from this Noob mistake.  Obviously this is an advanced users site and so I'll have to work harder to stay up with you guys.

  105. Phil / UNG – Got it, thanks….   I've actually loaded less than 5% of my portfolio with UNG… which is low- in the past i've loaded up at a  trade of year much higher rate ( 20%), I also have LNG at less than 5% so combiner about 10%.    I do have IBM ( about 10% but not high enough), and Apple at about 20% which is about where i want it ( may take some off the table here  before the announce).    Everything else is small ( less than 5%)… 

  106. /NKD long working out nicely. Great call Phil! 

  107. /NKD – Dang it. Forgot to put this one on. Congrats to those who did.

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  165. Comment content omitted because it is too long.

  166. Good morning!  

    Futures falling off a cliff since 4:45, Europe is down 1.5%ish and has been diving since the open.  

    Don't blame King Dollar, it's down at 94.85, mostly it was another 4% drop in Japanese exports – signaling weak global demand and their imports were down 14.2% so pathetic all around.

    Japanese exports drop for fifth month in February

    • Japan's exports fell for the fifth month in a row in February, suggesting the world's third-largest economy could dip into its fourth annual recession over the past five years.
    • Exports last month fell 4% Y/Y, but less than January's 12.9% slump, due to the bounce in sales to China as factories resumed operations after the Lunar New Year.
    • Japanese imports further decreased 14.2%, bringing the country's trade balance came to a ¥242.8B surplus.

    Under the Hood of Japan Trade Data Are Weak Exports to U.S

    "The tailwind of the weak yen has gone"

    • Via Bloomberg:
    • "Here’s a key takeaway from Japan’s trade data released Thursday: Exports to the U.S., which for most of last year were a bright spot amid slowing demand from China, were almost flat in value terms as the yen strengthened against the dollar. Overall, the outlook for Japanese exports is getting more gloomy.
    • “The tailwind from the weak yen has gone. We can’t help but hold a pessimistic view on the outlook for exports,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said. “Domestic demand won’t be dependable at all, and the same goes for exports. I can’t deny the possibility of another economic contraction this quarter.”"
    • Marh 17: Japanese exports drop for fifth month in February

    Commodities and currencies rally after Fed relents on rates

    • That bright green across the screen isn't in honor of St. Patrick's Day. Instead, it's a strong bid for commodities and foreign currencies after the Fed yesterday cut its forecast for rate hikes this year to two from four.
    • This just in: Crude oil (NYSEARCA:USO) is up on the year, rising 1.6% today to $40.63.
    • Other movers: Gold (NYSEARCA:GLD+3.25% to $1,270. Silver (NYSEARCA:SLV+3.4% to $15.74, Copper (NYSEARCA:JJC+2,5% to $2.29, Platinum (PPLTPTM+3% to $988, Lumber (NASDAQ:WOOD+3.5% to $297, Beans (NYSEARCA:SOYB+0.6% to $899.50, Corn (NYSEARCA:CORN+0.5% to $370.25, Wheat (NYSEARCA:WEAT+0.85% to $475.
    • The euro (NYSEARCA:FXE+1.15%, yen (NYSEARCA:FXY+1.3%, pound (NYSEARCA:FXB+0.85%, loonie (NYSEARCA:FXC+1.15%, aussie (NYSEARCA:FXA+1.3%, swissie (NYSEARCA:FXF+1%.

    Thursday's economic calendar

    Yellen press conference: What will it take for a hike

    • Does the Fed have a credibility problem, is the first question asked of Janet Yellen at her post-meeting press conference. The questioner notes the Fed for 2016 expected four rate hikes just three months ago, and now sees just two. Yellen explains that the "dots" aren't a plan, but instead a forecast that's subject to change as data comes in.
    • Noting strong employment gains and perky inflation, the questioner asks if conditions now aren't appropriate for a rate hike, when would they ever be? S&P 500 at 2,250, responds Yellen … that's a joke, but clearly the FOMC was shaken up by the market deterioration that followed its December move.
    • Webcast is here
    • Previously: Fed bows to markets (March 16)
    • Previously: Fed stays on hold, sees just two rate hikes this year (March 16)

    The 'unsinkable' global financial system is rushing headlong toward an iceberg

    Loads of central bank news across Europe

    • The Swiss National Bank has kept its deposit rate unchanged at 0.75%, while lowering its inflation outlook for this year to -0.8%.
    • Norway's central bank has cut its key policy rate by 0.25 percentage points to an all-time low of 0.5%, and raised the prospect of a move into negative territory.
    • An interest rate decision from the Bank of England will be released at noon local time (7:00 a.m. ET) alongside the minutes from the gathering.


    Protests sweep Brazil after release of phone tap

    • Protests swept across Brazil late Wednesday after explosive phone recordings fueledaccusations that President Dilma Rousseff had appointed her predecessor Lula da Silva as a minister to grant him immunity.
    • State prosecutors requested Lula's arrest last week over charges of money laundering and fraud, accusing the former president of secretly owning a beachside penthouse at the center of the country's corruption scandals.
    • With Lula back, many are asking: Who is really in charge of Brazil?
    • Previously: Brazil slides further on Lula, rumor of central bank chief exit (Mar. 16 2016)

    U.S. imposes fresh sanctions on North Korea

    • The Obama administration has tightened the U.S. trade embargo on North Korea following recent actions by Pyongyang that have been seen as provocative.
    • Under the new executive order, any property the North Korean government has in the U.S. will be frozen and exportation of goods from America to the nuclear-armed state will be prohibited.
    • The sanctions also shadow the sentencing of Otto Warmbier, a student at the University of Virginia, to 15 years of hard labor – after being convicted of subversion for allegedly stealing a political poster in January.

    Financials suffer as Fed cuts rate hike forecast

    Mortgage REITs in the green after dovish Fed

    Excitement builds as REIT re-classification date draws nearer

    • Currently lumped into the financial sector, REITs are set to have their own sub-sector with S&P Dow Jones Indices on Sept. 16.
    • Excited yet? You should be. Cohen & Steers' Thomas Bohjalian expects far-reaching impact since nearly the entire investment community uses Global Industry Classification Standards for its framework for portfolio planning and analysis. He sees three main benefits to REIT prices:
    • Increased demand – U.S. equity funds are significantly underweight and would need to buy more than $100B of REITs just to get to a market-neutral position.
    • Reduced volatility – Boosted liquidity and the separation of real estate from the historically volatile financial sector.
    • Impact on allocations – Analysis of REITs requires unique valuation metrics, giving REIT specialists a performance advantage over generalists.
    • Howard Silverblatt notes the change will highlight the REIT sector's big 3.46% average yield, and cut the financial sector yield to 1.98% from 2.25%.
    • Ninety REITs will be classified in the new real estate sub-sector. The five largest by market cap, and maybe the five most likely to see a bounce: Simon Property (NYSE:SPG), Public Storage (NYSE:PSA), American Tower (NYSE:AMT), Crown Castle (NYSE:CCI), Equity Residential (NYSE:EQR).

  167. Houston's $3 Billion of Debt Cut by Moody's After Oil-Price DropHouston’s $3 billion of general-obligation debt was cut one level by Moody’s Investors Service, which cited weakening economic performance due to lower oil prices, the city’s pensions obligations and restrictions on raising taxes. The fourth largest U.S. city was downgraded to Aa3, Moody’s fourth-highest level, and remains on watch for additional cuts, the rating company said Wednesday. “The negative outlook reflects the recent weakness in economic and sales tax performance, fueled by energy companies’ reduced investments in personnel and capital, as oil prices have remained low,” Moody’s said in a release.

    Oil Investors See $7.4 Billion Vanish as Dividends Are Targeted. The check is not in the mail. Bludgeoned by falling energy prices, at least a dozen oil and natural gas companies have opted to cut dividends this year to preserve cash, cannibalizing payouts considered sacrosanct by many investors. The cost to shareholders: more than $7.4 billion in lost income, compared to what they would have received this year if the payouts remained the same.


    Energy sector defaults could go like dominosEnergy issuers may be headed for $40 billion in defaults this year, Fitch says.

    World coal giant Peabody faces bankruptcy as industry implodes


    Let the frenzy begin!  The world's #2 reinsurer is stocking up on gold and cash to avoid negative interest rates

    • German reinsurer Munich Re, the world's second-largest reinsurer, is boosting its gold and cash reserves in the face of the ECB's punishing negative interest rates it said on Wednesday.
    • Munich Re will also store at least 10 million euros ($11M) in two currencies so it won’t have to pay for the right to access the money at short notice, CEO Nikolaus von Bomhard said: “We will also observe what others are doing to avoid paying negative interest rates.” “We are just trying it out, but you can see how serious the situation is."
    • From Bloomberg: "Institutional investors including insurers, savings banks and pension funds are debating whether it may be worth bearing the insurance and logistics costs of holding physical cash as overnight deposit rates fall deeper below zero and negative yields dent investment returns. The ECB last week cut the rate on its deposit facility, which banks use to park excess funds, to minus 0.4%.
    • “This may well become a mass phenomenon once interest rates are low enough – the only question will be where that exact point is,” said Christoph Kaserer, a professor of finance at the Technische Universitaet in Munich. “For large institutions, that may be the case sooner rather than later. The ECB will react with countermeasures, such as limiting cash.”"

    Top China Copper Trader Says Second-Half Slump Stalks Market. One of China’s biggest copper traders expects the metal to sink in the second half as demand ebbs in the world’s biggest consumer amid a slowdown in global growth. He Jinbi, founder and president of Xi’an Maike Metals International Group, joins Codelco, the world’s biggest copper miner, and Goldman Sachs Group Inc. in predicting the metal’s advance from a six-year low won’t last. Prices, which traded above $5,000 a metric ton this month, will average between $4,200 and $4,300 this year, He said in recent interviews. “Demand for the second half might not be good and we may face some risks from the global markets,” He said at the Shanghai office of the company he founded in 1993. Maike has a joint venture, HFZ Capital Management Ltd., with Red Kite Group, one of the biggest metals hedge funds.

    U.S. to slap anti-dumping duties on some hot-rolled steel imports

    • The U.S. Commerce Department says it will impose anti-dumping duties on certain hot-rolled steel products from seven countries, according to a preliminary ruling.
    • AK Steel (AKS +3.1%), ArcelorMittal (MT +0.8%), Nucor (NUE -0.6%), U.S. Steel (X+1.7%), Steel Dynamics (STLD +1.3%) and SSAB Enterprises complained last August that the imported steel goods were being sold too cheaply or benefited from unfair government subsidies.
    • The countries affected by the ruling are Australia, Brazil, Japan, Korea, the Netherlands, Turkey and the U.K.

    Airfares down 2% in February

    • U.S. air fares fell 1.8% Y/Y in February, according to data compiled by the Bureau of Transportation Services. The decline is due in part to a high level of competition in key markets where discounters butt heads.
    • The decline in fares would probably be more pronounced if the metric were on a per mile basis.
    • BTS data
    • Related ETF: JETS.
    • Related stocks: ALGTJBLUSAVEVALUV.

    Reuters: Major automakers agree to install auto-braking systems by 2022

    • Major automakers will announce tomorrow that they have agreed to install automatic emergency braking systems in nearly all U.S. vehicles by September 2022, Reuters reports.
    • The agreement reportedly includes automakers representing more than 99% of U.S. light vehicle sales, including GM, Ford (NYSE:F), Toyota (NYSE:TM), Honda (NYSE:HMC), Volkswagen (OTCPK:VLKAFOTCPK:VLKAY) and Fiat Chrysler (NYSE:FCAU).
    • The NHTSA announced in September a deal in principle with 10 automakers to eventually add the technology to prevent thousands of crashes a year; the final agreement includes additional automakers.

    Mobileye pops on report that major automakers will commit to install auto-braking systems

    • Shares of driver assistance systems specialist Mobileye NV (MBLY +8.1%) surged after Reuters, citing three sources close to the matter, said that major automakers willannounce a pact to install auto-brake systems by 2022.
    • Reuters noted that The U.S. National Highway Traffic Safety Administration (NHTSA) announced a deal in principle with 10 automakers in September to eventually add crash-prevention technology and that the NHTSA plans to unveil the final agreement tomorrow.
    • Among those joining the deal are Toyota, GM, Ford, Fiat Chrysler Automobiles NV, Honda, and Volkswagon, says Reuters.
    • While NHTSA Administrator Mark Rosekind didn’t confirm any details, he told Reuters that his administration is “very excited.”
    • Last month: Mobileye falls on light guidance, but quickly recovers

    Williams-Sonoma(WSM) shares drop after outlook, earnings missWilliams-Sonoma Inc. shares dropped in the extended session Wednesday after the high-end home furnishings retailer's outlook and quarterly results fell short of Wall Street estimates. Williams-Sonoma shares fell 6.4% to $55.65 after hours. The company forecast adjusted first-quarter earnings of 48 cents to 52 cents a share on revenue of $1.07 billion to $1.09 billion. Analysts surveyed by FactSet had estimated earnings of 55 cents a share on revenue of $1.1 billion.

    Reuters: Valeant lenders to prepare tough demands

    • Creditors of Valeant Pharmaceuticals (NYSE:VRX), which warned about a possible default on Tuesday, are beginning to demand new terms that could further pressure the drugmaker's business model, Reuters reports.
    • They see an opportunity to renegotiate core elements of their loan agreements, potentially saddling the company with higher costs of debt and more restrictions on how it deploys capital.
    • Valeant has until March 30 to file audited financial statements, but if it fails to do so, it then has 30 days before lenders can demand accelerated repayments.

    Report: Apple signs up for Google's cloud, uses much less of Amazon's (updated)

    • Sources tell enterprise tech site CRN Apple (NASDAQ:AAPLhas begun usingGoogle's (GOOGGOOGL) cloud infrastructure (IaaS) platform, and has "significantly reduced its reliance" on market leader Amazon Web Services (NASDAQ:AMZN), which it has used to help run iCloud and other services.
    • Google execs have reportedly told partners Apple is spending $400M-$600M on the Google Cloud Platform – CRN says it isn't clear if this reflects an annual spending rate or capacity purchases. Morgan Stanley estimated last month Apple, which has been investing heavily in its own data center infrastructure, spends ~$1B/year on AWS.
    • The report comes three weeks after Spotify, which has relied on both AWS and its own servers, announced it's migrating its infrastructure to the Google Cloud Platform. It also shortly follows a Wired column about cloud storage giant Dropbox's (Private:DROPB) efforts to migrate stored files from AWS to a home-grown infrastructure relying on "a software system built by its own programmers with a brand new programming language" (not something many companies have the resources to pull off). Aside from Spotify, known Google clients include Snapchat, Coca-Cola, Best Buy, and Sony.
    • Amazon still towers over the IaaS market, while Google is viewed as #3 or #4 (behind Amazon, Microsoft, and perhaps IBM). Synergy Research estimates Google's IaaS and cloud app platform (PaaS) revenue totaled less than ~$300M in Q4; Amazon reported Q4 AWS revenue of $2.4B (+69% Y/Y).
    • Michael Fraser, head of cloud management software firm InfiniteOps, argues Google's huge fiber network provides bandwidth cost savings – possibly an incentive for Apple, given the amount of download activity it handles – and that its platform (per InfiniteOps' tests) delivers better performance than that of any major rival. "Google is actually the cheapest play in the market when you take into consideration everything they're doing and when you take into account their various incentives."
    • Amazon closed down 0.5% after slipping in the wake of CRN's column (the Nasdaq rose 0.8%), and is down 1% in after-hours trading.
    • Update: The Information's Amir Efrati backs up CRN, while suggesting Apple is getting the best of the deal. "It’s true, @iCloud to be partially powered by @googlecloud. But will take a year & unlikely to be profitable. @awscloud lost $ from iCloud."