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Doha Disaster – OPEC Fails, Oil Falls, Markets Fall…


That's where we finally stopped out on our Nikkei (/NKD) shorts from Friday's morning post.  The short at 16,830 made $2,150 PER CONTRACT for those of you smart enough to subscribe to the PSW Report or one of our higher-level memberships.  We initiated that trade on Wednesday, during our weekly Live Trading Webinar (replay available here) where we first laid out our logic as to why the Nikkei would plunge over the weekend no matter what the Doha outcome was.  As I said in Friday's post (and on Benzinga's Morning Show):

That's right, yesterday we told you that the Nikkei was facing the Kobayashi Maru and we picked a short on the Futures (/NKD) at 16,830 and m-m-m-my Kuroda literally went to war with us, calling the Yen's recent strength "excessive" and warning speculators(us) not to get on the wrong side (our side) of his trade.  

…If we're right about the Nikkei dropping 700 points (4%) that would drop EWJ ($11.89) to $11.41 so 0.59 on the puts and let's say we look for 0.50 and a 0.15 (42%) profit by Tuesday – that's almost as much fun as playing the Futures!  

We shorted oil futures (/CL) at the bell yesterday as it tested $42 based on the ridiculous amount of fake, Fake, FAKE!!! open front-month orders at the NYMEX and the FACT that the storage facilities at Cushing, OK (where the NYMEX oil is delivered), as well as everywhere else in the country are full, Full, FULL!!!  It's a simple investing premise and one we make money on on a regular basis at PSW – simply because we pay attention to basic fundamentals like these.  

Yes, there's a big OPEC meeting this Sunday (again, see yesterday's post) but they are talking about a production FREEZE, not cuts and a freeze won't do anything to burn of the massive global glut of oil that is sloshing around out there and oil had already run up from $32.50 to $42 (29%) in anticipation of this and we considered 30% a bridge too far and $42.25 is right about where we spiked to a halt, which was also $45 on Brent Crude (/BZ) - so a perfect spot to go short.   

Remember, I can only tell you what is going to happen and how to profit from it – the rest is up to you!  In this case, our example trade from the Webinar left us with 5 contracts short on Friday morning but we stopped out 3 of the 5 to lock in a $6,000 gain and reduce our risk over the weekend.  The two remaining contracts made another $2,300 for an $8,300 total since our Wednesday webinar – now extending our 2016 winning streak into the middle of April.  

We also did a Top Trade Review over the weekend and those too, have been on a very hot roll, with 15 of 16 trades working out so far (and the 16th is our Trade of the Year – so we still have hope).  As you can see, our oil trade idea went very well too.  Natural Gas (/NG) came down to test the $1.85 line in the front month and the July contracts (/NGN6) fell briefly below $2.10, where we do like them long (now $2.13) so we can keep an eye on those for an entry opportunity.  

At the moment (8am), the Futures are at Dow (/YM) 17,762, S&P (/ES) 2,068, Nasdaq (/NQ) 4,523, Russell (/TF) 1,223 and Nikkei (/NKD) 16,500 on the button.  We'll see how things look at the open but I think we should head lower – it's really just a dip in the Dollar that's been supporting us this morning.  

As to the oil situation, with no deal on the table, Iran and Saudi Arabia may be racing to ramp UP production ahead of a possible future agreement – especially in light of an oil strike in Kuwait that is taking 1-1.5Mb/day off-line.  Most interesting in the oil patch is the fact that the NYMEX contracts roll over on Wednesday and they are still stuffed with 99M barrels of fake, Fake, FAKE orders and, given the failure at Doha – it's going to be very hard to find buyers for May delivery – despite the start of summer driving season. pit Session Quotes

Click for
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
May'16 38.75 38.75 37.61 38.16 19:56
Apr 17


-2.20 30715 40.36 99549 Call Put
Jun'16 39.90 40.00 39.00 39.49 19:56
Apr 17


-2.22 37674 41.71 480122 Call Put
Jul'16 41.03 41.03 39.80 40.33 19:56
Apr 17


-2.21 4987 42.54 240983 Call Put
Aug'16 41.54 41.55 40.29 40.76 19:56
Apr 17


-2.27 2341 43.03 94247 Call Put
Sep'16 41.60 41.64 40.58 41.25 19:56
Apr 17


-2.13 2492 43.38 136755 Call Put
Oct'16 42.11 42.11 41.04 41.46 19:56
Apr 17


-2.20 1150 43.66 59114 Call Put
Nov'16 42.25 42.25 41.29 41.82 19:56
Apr 17


-2.12 692 43.94 49043 Call Put
Dec'16 42.76 42.76 41.43 42.05 19:56
Apr 17


-2.14 6683 44.19 201887 Call Put



42.31 19:56
Apr 17


-2.10 485 44.41 36576 Call Put

That means that at least 80M, probably 90M of those barrels have to be rolled to June, which is already stuffed with 480M FAKE!!! orders or July or Aug and then we're talking 900,000 contracts in the front 3 months representing 900M barrels scheduled for FAKE delivery by August for a country that only imports 5Mbd so about 100 days until the end of July means these 900M FAKE orders would cover the US's ENTIRE import needs for 100 days and still have 400M barrels to spare and that's just one already overflowing hub (we have a dozen) in the middle of Oklahoma.

That's why oil trading is nothing more than a scam – it's a perpetual game of 3-Card Monty where they keep moving the oil around quickly and then encourage the suckers to bet on it by planting this and that story and having their paid media barkers turn a blind eye and act like the whole thing is somehow legitimate.  It's not – it's a huge scam!  Fortunately, it's a scam we understand and can make money off of – is that wrong?  

That's why OPEC has lost control of the game.  They were happy to let the con artists take over while they ran the price up from Clinton's $20 to Bush's $140 per barrel but, at that price ($5 gallon at the pump), it was simply unaffordable so the same Banksters and other thieves who manipulated the prices up began manipulating the prices down because they (and we) can make money playing oil in either direction while poor OPEC needs oil to go higher – not lower.  

Now it's a joke to talk about supply and demand when US petroleum storage is over 2Bn barrels and globally over 8Bn barrels of oil are now in commercial and government storage and that represents a 100-day supply – even if all of the oil in the World were to shut off at once.  That's what drives the price of commodities, scarcity and supply shortages.  Neither are possible at the moment – even if OPEC had cut drastically back and what we now fact is is a potential glut and that's not good for the energy sector, which has driven the recovery of the S&P recently.  

As usual, Monday's are meaningless and it's a low-data week but 103 S&P companies will report earnings, so we'll turn our attention to that.  Dudly (8:30), Kashkari (12:30) and Rosengren (7:00) speak today to help get us through what's probably going to be bad housing data at 10 am.  More home stuff through Wednesday and the Philly Fed with Chicago Activity and Consumer Comfort Thursday and, amazingly, no Fed speakers!  

On the International front, we have Germany's always exciting ZEW Sentiment Survey and, for some reason, Economorons believe it will jump from 4.3 to 9.8 (because everything is so great in Germany?) and Wednesday we get the Japanese Trade Balance, Thursday is UK Retail Sales, EU Consumer Confidence and the ECB Rate Decision – where Draghi needs to put up or shut up (he'll do neither) or he stands to lose more credibility and push sentiment back to a Brexit in June.  

Friday we get PMIs across Europe so this week won't be over until the fat lady sings.


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  1. Phil – Abiotic – From NY Times Archive 1995…. Out.

  2. Good Morning!

  3. The end of oil could be near if we had the political inclination:

    The quest to end the use of fossil fuels might not be as daunting as you think. A University of Sussex study claims that humanity could drop coal and oil within a decade, based largely on historical evidence that many tend to overlook. Professor Benjamin Sovacool notes that energy transitions have happened quickly whenever there was a combination of "strong government intervention" with economic or environmental incentives to switch. It only took 11 years for the Canadian province of Ontario to abandon coal energy, for example, while nuclear power surged to 40 percent of France's electricity supply within 12 years. In the case of fossil fuels, it's a combination of climate change worries, dwindling resources and advanced technology that could step up the pace.

    Of course, that would mean getting rid of 50% of Congress here! But I have the strong feeling that some in the oil exporting countries already see the writing on the wall.

  4. Phil – DOHA – Reason why Iranian emissary missed Doha meeting?

  5. These guys support free market only when they control a monopoly and can pay politicians to write rules that favor them. Once competition is allowed, they start complaining:

    President Obama today pledged support for the Federal Communications Commission effort to give cable TV customers a greater choice of set-top boxes. Shortly after, the top cable lobby group expressed its displeasure, saying the White House's statement "may be good politics, but it's bad government."


    Which headline do you believe?

    I was skimming Yahoo Finance for stories on MS earnings and saw how wishy-washy the headlines were. About 50% read that MS did well ( really well!), and the other 50, not so well, although they did beat their lowered estimate.  Nothing that we haven't been told before at PSW:  Be careful what you read, read a lot, and formulate your own analysis. 

  7. Is everything still awesome?

  8. Everything is Awesome! 

  9. Phil

     Whats our position on CIM ?


  10. Good morning!  

    Indexes racing to get back to green – just a big show at the moment.  

    Bernie has some insights from his Vatican visit:

    Abiotic/Naybob – It's interesting because that Dinosaur thing always rubbed me the wrong way as the oil wouldn't be so unevenly distributed (more a vegetation thing than an animal thing) and, of course, the different depths wouldn't make much sense.  If, on the other hand, oil seeps up from the magma core to the surface – the whole thing makes total sense.  

    If you look at the oil map of deepwater horizon you can see that they're going 18,000 feet down to drill BELOW the floor of the sea in the Gulf and the reason they are able to drill there is because the Gulf is an impact crater which cuts over a mile off the drilling but, in theory, if they go deep enough – there could be undiscovered oil deposits like this all over the World:

    Big Chart – If we have an up week, the Spitting Cobra is avoided.  

    Oil/StJ – Yes, that's another thing that plays into my "end of oil" thesis – we physically can't keep using oil for more than 20-25 years.  While it may be somewhat deniable by dogmatic assholes for the moment (despite 2015 being record highs and 2016 starting off breaking those records) – it will be as undeniable as gravity in less than 10 years – especially if we continue to elect Republicans who pretend it's not real and do nothing.  Once the crisis is fully upon us, the GOP will be completely discredited and we can go about the business of saving the planet (or at least trying to if it's too late).  

    Cable/StJ – Why does that even exist anymore?  If I want to watch HBO, I can go to HBO now and all the other channels have on-demand systems and the networks do too – what is cable for then?  They're just another unnecessary middle-man taking a cut at this point.  I was hoping AAPL would put a stop to this nonsense by creating iTV or something but Cook isn't the negotiator Jobs was.

    And we're green!  

    MS/DC – And the funny thing is the banks all gave each other these crazy-low estimates they are all beating.  Do they not understand each other's business or was there a meeting at the club where they all agreed to set expectations so low they could all walk right over them?

    Everything = AWESOME!  






    4-15-2016 4-13-20 PM

    CIM/QC – Well, I went to the LTP review and it looks like this:


    CIM have December contracts out now so we'll be looking to sell the Dec $14 puts and calls for $1.80 and the stocks at $13.84 and, between now and Dec there should be 0.48 in dividends at the end of June, September and Dec (if you don't get called away), so that's $13.84 – $1.80 – $1.44 = $10.60 net entry (net at the end of the year) - I love that as a new trade.  

  11. Phil,

    Tactical question regarding the GIS butterfly candidate position (long 1/18 67.5 call/55 put and  short June 60s puts and calls), I tried using (via Fidelity) the midpoint (2.64 debit) and nothing done despite lower midpoints on ISE (2.21) and CBOE (2.43) on Friday. Would you recommend dividing the order into long and short components to improve chances of filling? Try filling short portion first? Any other thoughts?

    Thanks, as always

  12. GIS/Butterfly 8800 – I always fill the legs – the broker won't fill a spread for you until they can make money off it so, even if you could get your price – if the broker can't skim a little, they'd rather wait.  

    So, looking at GIS, it's been up and down for a week but over $62.50 would be a breakout and over $63 would confirm it.  The trade we wanted was:

    • Buy 10 GIS 2018 $67.50 calls for $3.10 ($3,100) 
    • Buy 10 GIS 2018 $55 puts for $3.75 ($3,750) 
    • Sell 10 GIS June $60 puts for $1 ($1,000) 
    • Sell 10 GIS June $60 calls for $3.20 ($3,200)

    Currently, the 2018 $67.50 calls are $2.66/3.55 and last was $3.05, better than our offer (though I always offer less anyway) at 3:40 on Friday.  The $55 puts are now $3.75/4.20 and last was $3.73, also better than our offer, also 3:40 on Friday.  The June $60 puts are now 0.79/0.83 and last was 0.85 though there were plenty of $1 fills on Friday and the $60 calls are $3.20/3.40 with the last at $3.40 (way over) at 9:40 this morning.  So, if you made an offer for the legs individually – they all would have filled on Friday at our prices or better.  

  13. Phil is every Monday meaningless no matter what? 

  14. Phil,

    GIS fills – understood. One follow-up question regarding the upside breakout @ $62.50, confirmed @ 63

    you referenced above, if that were to occur would you be inclined to roll the short calls up and out?

    Thanks again

  15. Phil – Oil Scam – Brother I have been loping that dead mule forever, but with all the zombies, it just keeps comin back like the walking dead.  Beaucoup oil scam resources here and here.

  16. 8800/GIS butterfly

    I filled everything but the June $60 puts doing each leg individually. In fact, I got better pricing on all.  I have a GTC order on the June $60 puts for $1.05 which I am pretty confident will fill as I don't think the current market buoyancy will continue. FYI

  17. Rexx – M's and P's doesn't get any better.  "The Hollywood Palace" Saturday night's ABC… that theater was originally the "Hollywood Playhouse",  now I'm waxing nostalgic.

  18. dclark41/Dan,

    Thx for the feedback on your experience with GIS. Agree that the mkt looks heavy (and your June put should hopefully fill) but that sucker continues to find fuel to power – or limp – higher. 

  19. Monday/Enfil – Well, not EVERY Monday.  This one actually had some action from Doha and sometimes the BOJ or PBOC do something over the weekend but usually – doesn't matter until Tuesday.  I'd say that 2 years from now I will stop working Mondays and then most Fridays and then all Fridays and we'll see how things go from there – if I'm still in the mood to put in 3 days when I'm 60 (yikes, 60!).  

    GIS/8800 – No, that has no effect on my cautious outlook through May.  You don't need to "win" every time on Butterflies and half the time you make a change, it's detrimental – so why make changes and, more to the point – why worry about it?  

    Oil/Naybob – Quite the list.  Between us we have enough for a book!  

    /TF rejected at that 1,133 line yet again.  Lined up with 17,885, 2,085 and 4,562 and 17,000 on /NKD = FAIL!  

    Puts/DC – Good job.  See, it never hurts to ask for what you want.  Now, keep in mind, if GIS goes higher and since you sold the $60 calls for $3.20+, if we're over $63 and you give up on the short June $60s for $1, then you can always sell the $62.50 puts, now $1.80 instead because then you've collected net $5 on the spread so your break-even is $57.50 – $67.50 and anything in between is profit but just limited to $2.50 (since you can't win both sides) but it's not like we expected to win the whole $4.20 anyway and the original spread was good from $56-$64 so all you end up doing is widening the spread and raising the target slightly BECAUSE the stock broke higher – nothing wrong with that, right?

  20. they couldn't keep XOP down. LOLZ! I guess people forget oil prices have to be relative to something. For example, oil is at 40 now and it was over 100 in 2014. Yes, that's a good example of relativity.

  21. Phil/GOM   the impact crater is fact, however it did not create the basin.  All all recovered in US waters is not related to the impact crater.  Wikipiedi…In 2002 geologist Michael Stanton published a speculative essay suggesting an impact origin for the Gulf of Mexico at the close of the Permian, which could have caused the Permian–Triassic extinction event.[13] However, Gulf Coast geologists do not regard this hypothesis as having any credibility. Instead they overwhelmingly accept plate tectonics, not an asteroid impact, as having created the Gulf of Mexico as illustrated by papers authored by Kevin Mickus and others.[2][6][10][14] This hypothesis is not to be confused with the Chicxulub Crater, a large impact crater on the coast of the Gulf of Mexico on the Yucatan Peninsula.

  22. 8800/GIS

    Yes. It's annoying watching these low-volume run-ups, but I have seen this play out before.  Regardless, like Phil said above, there is always another option other than the first.  I'm going to wait a week to see what happens with earnings before doing anything—unless, of course, it fills! Cheers!

  23. I can double your nostalgia – we didn't even get ABC…

  24. Phil, dc 41,

    Thanks again gentlemen, re GIS (filled the sht call @3.20). Waiting for the rest – tough part for me (life holds other joys).

  25. Craters/Latch – So the gulf formed naturally and then was hit by a meteor that killed the dinosaurs?  I guess I mixed the two up as a single event.  

    Relative quiet in Brazilian stocks after Rousseff impeachment

    • The lower house of Congress last night voted to impeach President Dilma Rousseff, and the matter now falls upon the Senate, where just a simply majority (vs. two-thirds necessary for the impeachment vote) can send her to trial (the vote is set for next month).
    • Rousseff would step temporarily step down from power while the trial takes place, leaving Vice President Michel Temer in charge.
    • While a simple majority in the Senate is needed to put Rousseff on trial, a two-thirds vote would be necessary to remove her from office – a likely result given last night's results, say political analysts.
    • Having run up on the hope of a Rousseff impeachment, the Bovespa is lower by 0.55% in today's action. EWZ -1.4%

    What a Joke:  Early Q1 results are somewhat encouraging

    • 35 S&P 500 companies have reported earnings thus far, according to S&P CapIQ's most recent earnings report.
    • 71% have reported earnings better than Street expectations. Collectively, the S&P 500 has reported a +8.2% EPS surprise.
    • Of those companies that have announced earnings, 49% have shown double-digit or better Y/Y growth.
    • Overall, EPS growth thus far is -8.3%.
    • 95 companies report this week, including Intel, Yahoo and McDonald's.
    • Thus far, consumer discretionary companies have outperformed (11.3% growth), and materials companies are lagging (-17.8%).

    Lame quarter at Morgan Stanley still beats estimates

    • Q4 net income of $1.1B or $0.55 per share vs. $1.8B and $0.85 (after adjustment) one year ago.
    • Institutional Securities revenues of $3.7B fall from $5.3B a year ago, with FICC revenue of $873M down from $1.9B. Advisory revenue of $591M up from $471M thanks to M&A. Equity sales and trading revenue of $2.1B down from $2.3B. Compensation expense of $1.4B down from $2B.
    • CEO James Gorman: "While we see some signs of market recovery, global uncertainties continue to weigh on investor activity."
    • Wealth Management pre-tax income of $786M vs. $855M a year ago, on revenue of $3.7B from $3.8B. Pre-tax margin of 21%. Transactional revenues of $727M down from $950M.
    • Investment Management pre-tax income of $44M down from $187M a year ago.
    • CET1 ratio of $15.7%. Tangible book value per share of $30.44.
    • Previously: Morgan Stanley beats by $0.09, misses on revenue (April 18)
    • MS +1.9% in very thin premarket action

    GE close to U.S. banking system exit

    • General Electric (NYSE:GE) has completed the sale of GE Capital's U.S. online deposit platform including the transfer of all deposits to Goldman Sachs (NYSE:GS).
    • "With this sale, we are now in a position to fully exit the U.S. banking system by extinguishing our final U.S. bank charter and terminating our FDIC insurance, which we are targeting to complete by the end of this week," GE Capital CEO Keith Sherin declared.
    • Under the agreement, approximately $16B of deposits, which are comprised of online savings accounts and CDs, have been transferred and will be serviced by Goldman.
    • Now read General Electric: Jeff Immelt Holds All The Cards

    Homebuilder confidence steady in April

    Silver Wheaton, Agnico-Eagle Mines downgraded at J.P. Morgan

    • Silver Wheaton (SLW -0.8%) and Agnico-Eagle Mines (AEM -1.2%) are downgraded to Neutral from Overweight at J.P. Morgan after shares have jumped a respective 52% and 44% since Jan. 19.
    • The firm says SLW’s rising exposure to silver in a weakening industrial environment is a negative, and that shares likely will remain under pressure until the CRS tax audit issue has been resolved.
    • JPM says AEM is fully valued for now but that the miner’s focus on long-term reserve replacement and projects is the best approach for the long term, and that exploration efforts have yielded strong results.
    • Now read Silver Wheaton: The audit is very concerning

    Suncor to disclose more info on carbon risk, lobbying

    • Suncor Energy (SU -0.3%) says it will disclose more details on its plans to compete in a lower-carbon future and on its lobbying activities.
    • SU also says it will provide more information related to its policy on lobbying and political donations, and list trade associations it pays to lobby the government.
    • Exxon and some other oil and gas companies have been pressured by regulators and shareholders to disclose more details on their climate change strategies.
    • Now read Oil sands megaprojects are finished, major Canada developers say

    Iron ore rally to fade as oversupply kicks in, Citi says

    • While iron ore’s price declines may have been delayed, they’re still coming, and gains likely will be reversed in H2, Citigroup analysts say.
    • Iron ore rose 23% in Q1 as Chinese mills raised production to take advantage of a rebound in steel prices, and some supply was disrupted in Australia, but Citi says both supportive factors probably were reverse, hurting the outlook for the market.
    • Citi sees the global glut in iron ore will more than double to 38M tons in 2017 before dropping to 14M tons in 2018 and rebounding to 44M tons in 2019.
    • Iron ore is one of the outliers in Citi’s view on raw materials as a whole, believing most prices in the sector likely have bottomed.
    • Relevant tickers: BHP +2%RIO +1%VALE -0.2%.
    • Now read Iron ore prices set to slip in H2, Rio Tinto CEO says and Australia ups iron ore price forecast, sees low-cost miners expanding share

    Ford's fleet sales in U.S. top 40% of mix

    • Some digging into Ford's (NYSE:F) sales in the U.S. during March by the Wall Street Journal indicates that the percentage of fleet sales was higher than normal at 40%.
    • Sales at U.S. dealers were actually down 5% in the month.
    • The trend could be a concern for Ford's bottom line with fleet sales typically less profitable than retail action.
    • Ford's inventory at the end of the March was 23% higher than what the automaker carried last year and higher than the industry average.
    • Shares of Ford are up 1.12% premarket. A bullish piece in Barron's may be contributing.
    • Now read Stop Worrying About Ford And Sub-Prime Loans

    Don't be swayed by an IBM headline beat

    • Barclays recommends investors trim their IBM (NYSE:IBM) stakes ahead of this afternoon's earnings report.
    • Shares are +26% over the past 60 days. "We do not expect IBM’s long-term revenue growth struggles to dissipate, which could pressure the stock after the recent “hope rally.”"
    • "Do not be swayed by any headline EPS beat: IBM’s results stand to benefit from a Japan-based tax credit of ~$1B, which our model excludes. Fx headwinds could moderate as well, given currency movements in the last month. Meanwhile, our conversations with industry participants indicate that IBM is pursuing a fairly aggressive cost take-out program to adjust for cloud-related pressures on operating margin."
    • But what really matters is… "It is all about software growth. Currently, we do not expect the middleware business to exhibit signs of recovery, based on conversations with industry participants. If middleware declines Y/Y at constant currency for the third quarter in a row in Mar-Q, investor sentiment could reset lower."
    • Firm's price target is $125. Implied downside 18%.

    IMAX backed by Wedbush ahead of earnings

    • Wedbush backs its bullish view on IMAX (IMAX +3.4%) ahead of the company's Q1 earnings report due out on Thursday.
    • Key drivers for future earnings growth include the expanding IMAX footprint in Europe and the Middle East,  as well as intriguing developments on the content side.
    • An improved slate of premium films and some leveraging of costs on higher sales volume could also help to lift the bottom line
    • Lead analyst Michael Pachter ranks #8379 out of 8,889 analysts on TipRanks.
    • Previously: IMAX to test indoor cycling concept (April 18)

    Netflix has a massive mindshare lead among teens

    • Piper Jaffray recently completed its semi-annual teen survey. The firm asked high school students how they currently rent movies and how they expect to rent movies in the future.
    • Key takeaways: 1. 61% indicated they use download/streaming to rent movies today. 2. Netflix (NASDAQ:NFLX) was the most popular service for renting movies currently, with 64%, well ahead of competing services from Amazon (NASDAQ:AMZN) and Hulu (Comcast, Fox, Disney) at 4% and 3%, respectively. 3. Netflix topped the list of movie services that teens expect to use the most over the next five years. Its biggest streaming competitors Amazon and Hulu garnered 6% and 5% respectively, with Redbox (NASDAQ:OUTR) slipping to 8% from 10% for fall-15.
    • "We are confident in continued domestic growth for Netflix given popularity in the teen demographic. Maintain Overweight and $122 price target." Implied upside 9%.
    • Netflix reports today after the close.
    • Now read Netflix's Pie In The Sky Valuation »

    SunTrust's Peck reiterates Buy on Twitter, seeing users stabilize

    • Ahead of next week's earnings, Twitter (TWTR -1.6%) has gotten a reiterated Buy from SunTrust Robinson Humphrey's Bob Peck, who sees "stable to better" user adds as key to success.
    • After the company lost 2M net monthly active users in Q4, Peck sees a turnaround and 4M net adds, which would bring it near 305M total by quarter's end. The first quarter is seasonally stronger for MAUs, he notes.
    • He's "cautiously optimistic" about platform activity despite continuing risks on users' time spent, from Facebook and Snapchat.
    • Twitter is scheduled to report after the close April 26.
    • Now read Twitter Struggles To Drive Traffic »

    Q/A session with Microsoft expert Mary Jo Foley showcases its upside

    • UBS recently hosted a call with Microsoft (NASDAQ:MSFT) expert Mary Jo Foley, who has covered the company for 2+ decades. Highlights:
    • Q: How far along is the company in its transition to the cloud? A: Microsoft continues to show progress across multiple product fronts as the company manages its way through the cloud transition. The company is well on its way to management's stated goal of a $20B commercial cloud run rate by FY18, having  recently reached a $9.4B run rate at +71% y/y growth. We think the company gets there much quicker, but caution that MSFT's expansive customer base could present additional challenges. Evidence: FQ2 commercial cloud revenue accelerated to a >$9.4B run rate (up more than 70% y/y, w/ >350 of the Fortune 500 now using 2+ MSFT cloud offerings). This puts the business well above pace towards reaching mgmt's stated objective of a $20Bn run rate in FY18 (which assumes a ~35% CAGR). We note that this growth has been entirely organic (w/ no major acquisitions boosting numbers), and that at the current pace (~70% y/y growth), the company would reach this target ~1 year ahead of schedule.
    • Q: How much upside remains given share price appreciation over the past 12 months? A: MSFT shares have traded up ~30% over the past 12 months (vs. NASDAQ down 3%), but we still think there is room left in the tank, as the company is demonstrating product strength in several new categories (CRM + ERP, O365, security, IaaS/PaaS, BI/analytics), which we believe present MSFT with $185B+ of additional market opportunity.
    • UBS: MSFT is executing a balanced top- and bottom-line story, featuring CEO Nadella "innovating" and CFO Hood "disciplined spender." With a strong initial push, we see real benefits starting to show through in the numbers, including: 1) Unearned revenue building (flat in F15, but est. +11% in F16); 2) cost cutting measures taking hold, with opex flat (F14 to F16) and margins inflecting (~30% OM in F15, which we think can get back to the mid-30s); and cash flow trending in the right direction (1H16 FCF +9% y/y). The new era of MSFT is resonating with investors and we expect shares to continue to benefit from the move to higher-quality platforms and the company's aggressive push to the cloud.
    • Firm has an $60 base price target on MSFT. Implied upside 8%. Its upside case valuation is $80. Implied upside 44%.
    • Now read Microsoft Build Shows A Very Intriguing Path »

    Disney +2.4%, earns upgrade from Pivotal

    • Walt Disney (NYSE:DIS) has popped 2.4% in the first minutes today after an upgrade by Pivotal Research, and following another in a string of strong box office debuts.
    • Pivotal upgraded to Buy from Hold, and raised its price target from $104 to $121 — implying 22.7% upside from Friday's closing price.
    • The company's reboot of The Jungle Book overwhelmed box-office competitors over the weekend, drawing $103.6M after opening in more than 4,000 theaters — more than $83M more than its nearest film competition.
    • Last week, JPMorgan Chase reiterated its Buy rating and $118 target on shares.
    • Now read Disney Park Activist Play With 200% Return Potential »

  26. Phil – ABX

    I have the following positions and think I would like to take some cash out:

    +10* 17ABX $5Calls @2.74 now 10.75

    -5* 16Jun $16Calls @ 0.71 now 1.23

    I would appreciate your recommendation, Thanks

  27. what are they using to keep this maket up?  A defo trade what you see not what you think day.

  28. ABX/Edro – Well, if you cash in the $10,750, you're left with the 5 short calls and you can cover those with 10 2018 $12 ($6)/17 ($3.60) bull call spreads at $2.40 ($2,400) so that's leaving $2,400 on the table rather than spending $600 anyway to buy back the short calls. Figure those expire near worthless and you sell 5 more Oct $18s (now $1.40) for $900 and you're on track to quickly get the remaining $1,800 back AND you still have $5,000 potential upside if all goes well.

    What/Malsg – Dudlley said the Fed is cautious (ie still easy) and the free money train continues.  Also, oil didn't collapse because of the Kuwait story but that strike will end quickly so this is all silly.  Nothing to do but sit back and watch it happen for now.

    Even sillier is the way earnings are off 8.3% from last year, when the S&P was pretty much where it is now but they are calling it 71% beats because expectations were for much worse (expectations that were taken way down right before earnings only).  It's such an incredible, sickening scam of a market, but at least we know how to play it!  cheeky


  29. Check out DIS flying!  That's another one I had to convince people not to panic out of:

    Submitted on 2016/01/26 at 12:49 pm

    DIS/Naybob – Old news and makes me think the bottom is in and the jackals are trying to keep things cheap by recycling news while they load up the truck. 

    DIS/OOP, DC – Well that would make sense if either we fear DIS going back over $100 by March (nope) or we wanted to cover with $90 or $95 calls (nope).  So, since I don't have any premium sales to replace it with, best to just let the extra 0.87 expire while we wait and see.  

    I know Pat.  Monday's are often dull (and meaningless) and one of these days I'll stop working on Mondays and take more long weekends.   Then Fridays…

    Submitted on 2016/02/09 at 12:37 pm

    DIS/Pstas – There was a news article yesterday on CMCSA where it said cord-cutting was much less of an effect than was being assumed.  That applies to ESPN, of course.  I'm fairly sure DIS should be $100 with $5.50-$6 in earnings so even at 15x $90 would be a solid floor.  Star Wars is already over $2Bn and another one is out in Dec and then there's the toy sales, which made HAS's quarter and the parks are packed and Shanghai opens in June….  I think $6+ is more likely this year. 

    Submitted on 2016/02/09 at 5:25 pm

    DIS/Jeff – Ouch,, down 6% now ($87).  

    Disney Q1 earnings jump 32% to $2.9B on Star Wars

    Disney rides 'Star Wars' to killer quarter

    Disney Delivers Record Quarterly Earnings On Star Wars Success

    Disney theme parks start 2016 off with a bang

    Disney Networks Still Losing Subscribers, But Recent ESPN Uptick

    Disney posted earnings of $1.63 per share on revenue of $15.24 billion for the latest quarter, while analysts surveyed by Thomson Reuters had estimated for earnings of $1.45 per share on revenue of $14.75 billion for the quarter.

    The 14% growth in revenue was driven the release of Star Wars: The Force Awakens, which pushed studio entertainment revenues up by 46% to $2.72 billion.

    Media networks revenue increased by 8% to $6.33 billion because of advertising revenue growth, while parks and resorts revenue jumped by 9% to $4.28 billion due to strong results from domestic parks.

    They are right on track to $6/share, with a more than 10% beat ($1.45 expected) and Star Wars will do another 50% before it's done.  Currency issues hurt media revenues (overseas contracts for movies, Disney Channel, ESPN, etc).  No sense in complaining about it – we'll just buy more…

    Submitted on 2016/02/10 at 10:18 am

    DIS/RS – I'll be making bullish adjustments to take advantage of the dip.  

    DIS/Pstas – I thought we'd be stronger today (the markets, not DIS) but $90 is the bottom we expected and $89 not bad after such "disappointing" earnings.  

    Submitted on 2016/02/10 at 3:20 pm

    DIS/Pat – They are being attacked on the ESPN issue by people who want to drive their price down so they go after the ONLY thing in their massive earnings statement that looks bad.  It's a narrative being spun by funds who either have shorts or are looking to clear out the suckers so they can go long on a company that gambled $4Bn on Lucas Films to control Star Wars for the next 100 years and already made $2Bn of it back in year one!  

    Submitted on 2016/03/08 at 2:09 pm

    IS/JPH – Well, they are at $98.50 and holding up well but it would suck if they dropped.  The $87.50 calls are $11.20 and the short $100s are just 0.70 so net $10.50 out of $12.50 is not bad.  I still like DIS long-term so I'd cash the $87.50s for $11.20 and buy the Jan $95 ($10.20)/$105 ($5.40) bull call spread for $4.80 so you pocket $6.40 (small profit) and have $10 more coming if DIS makes $105 in Jan and then you can let the short $100s expire worthless, saving you 0.70.  Keep in mind, on the $4.80 spread, if you stop out at $3 you still netted $9.40 from your $5.72 entry.

    Submitted on 2016/04/05 at 6:07 pm

    DIS/Craigs – Minor setback I would think.  Iger has a few years left (65) but not sure how deep the bench is but DIS has 200,000 employees – I'd imagine they'll figure something out.  

    Jan 26th was when I sent out a Top Trade Alert on them – a little early but that's normal for me as I tend to do that initial purchase when they hit fair value ($95).


  30. We hit 18,000 all is good, unbelievable.

  31. Phil, how do you see IBM's earnings tonight?

  32. hi phil – this is a test

  33. new subscriber here

  34. EWJ/Phil – did I see you say that EWJ is no longer a short now the weekend has passed and M-M-M-My Kuroda (LOL!)  may now be more free to take down the yen more?..

  35. ABX/Phil – Is there an ABX play that I can enter now. Have no positions on ABX.


    ps: Was unable to trade this name previously.

  36. Phil – is it too late to enter the HOV trade now that it is up?

  37. I guess 18,000 was the line  :)

  38. 18,000/Bulls – Not in the Futures (17,918) so, through June 30th, sentiment is down, not up.  

    IBM/JMD – I think they may have gotten a bit ahead of themselves and international revenues got killed by the Dollar and the general economic slowdown but cloud should be booming.  I'm fairly sure $140 will hold regardless and any kind of good news can get us back over $160. 

    Welcome Hanjongin!  

    EWJ/Scott – Yes, it was just an over the weekend trade, the event has passed and now they can go back to talking up the markets. That's why the Futures are miles better than puts – puts made nothing, despite the huge drop.

    ABX/Raviis – Well it's up a ton at $15.80 but you wish you had bought it for $10.05 so why not sell the 2018 $12 puts for $1.95 and net $10.05 is your worst case and that's a 20% return even in an IRA that takes full margin (TOS says margin is $1.21 so 150% return on margin is very efficient).  Then, if $1.95 isn't good enough for you, you can add the 2018 $12 ($6)/17 ($3.65) bull call spread and that nets $2.35 so net 0.40 on the $5 spread that's $3.80 (850%) in the money to start and your worst case is owning ABX at net $12.40.

    Can you believe people buy stocks without using options?  devil

    HOV/Hanj – Well, we got in at $1.50 but, like ABX above, you can simply sell the 2018 $2 puts for 0.80 and that nets you in for $1.20 and, if you REALLY want to own HOV and don't mind paying $2, you can use the 0.80 to pick up the $2 calls for 0.50 and you still have a net 0.30 credit for a net $1.70 entry (where we are now) but then you get all the upside over $1.70 going forward with no cash out of pocket.  This play makes the most sense if you have a portfolio margin account, where margin would be about 0.60, rather than tying up cash in a long.  Otherwise, just the put sale is a great return. 

    Dow tops 18K for first time since July

    • Today's rally briefly brought the DJIA (DIA +0.5%) above 18K for the first time since last summer. The average has pulled back a hair since, and currently sits at 17.982. At the year's low in mid-February, the Dow had fallen to nearly 15,500.
    • Leading the way today is a 2.55% gain for Disney after a big opening weekend for The Jungle Book.

  39. Phil/HOV – thanks!  I hate selling puts on mkt up days – I will chance it to see if I can collect more premium on a down day.

  40. HOV/Hanj – Always look at recent transactions, if you can.  Those 2018 $2 puts were 0.80 last week and bid/ask is still 0.70/0.80 so, if you fill at 0.80 – it's not like you would have gotten a much better price.

  41. phil, your suggestion to cover the AAPL trades with short $110 calls was brilliant.  Would you suggest leaving them in place or closing them out.  thanks.

  42. Phil – DIS – after 88 years, that Steamboat Willie still gets a dog head tilt and a big AW!! outta me.

  43. Fun earnings tonight:

    Consensus – $0.03
    Whisper – $0.05
    Average Move – 13.6%
    Priced into options – 11.2%

    Tough call here as they could beat by a couple of pennies, announce 6M new users and would trade up $10 in no time!

  44. You can sell a 90/130 weekly strangle for $1 against $10 of margin which is incredible as it's a $40 range in a $108 stock!

  45. What's the volume today? I'm guessing on the light side as usual. 

  46. AAPL/Lunar – Well I'd put a stop on 1/2 at least but earnings aren't until 4/25, so I wouldn't rush to sell with a week to go.  

    Apple June Quarter iPhone Units May Miss Big, Says Maybank

    Japan Quakes: Apple iPhone7 May Be Delayed, Warns Morgan Stanley

    How Serious Is Apple's Reported iPhone Output Cut?

    Willie/Naybob – DIS went back to using it for their movie co logo but then they have this new anime Micky which I do not like:

    I guess it plays better in Asia but gee… my childhood!  

    NFLX/StJ – I hope they pop to a shortable line.  The new AMZN Prime is going to hurt them for years to come because Jeffy don't care if he makes money…

    I'm not a Netflix person but I haven't heard about any of their new shows taking off.  Daredevil always rubbed me the wrong way, Jessica Jones was good by comparison but I never bother watching it, Marco Polo was a complete waste of my time and then there's Bloodline, Sense8, Narcos and Atelier – none of which I know a thing about.  Then they have some comedies but no buzz there either.  That's a lot of money sunk into no-hit programming.  How long can they pretend stuff like that doesn't matter?

    Volume/Jeff – 55M on SPY at 3pm vs 127M avg (and that avg is crazy low now) so figure 75M tops for the day puts it on par with half days and vacation days.  

  47. Phil – Willie – yeah like I used to say about Jane, I'm not too Fonda that…

    IRS – Today is tax day, and I just finished filing. I am going to have a Dude's Death on the rocks (chocolate ice cream, coffee liquor, splash of milk, vodka, irish cream whiskey), its like an adult ice cream beverage that Jeffrey Lebowski would imbibe, and I feel like this

  48. Sen. Bernie Sanders has all but eliminated Hillary Clinton’s polling lead among Democratic primary voters nationwide as their race for the nomination becomes more heated, a new Wall Street Journal/NBC News poll has found.<p>Mr. Sanders for the first time is close to tying Mrs. Clinton: Some 48% of …

  49. It’s called the law of supply and demand.<p>When a commodity costs more to produce than the current market price, producers usually stop producing it. …

  50. YP Holdings LLC, the digital advertising business of what was formerly called, plans to submit a first-round bid Monday to merge with …

  51. AAPL- Phil are you suggesting a stop on those 110 calls we sold or the longs from earlier trade? What would be your target on the stop for whichever you meant?

  52. (Reuters) – Hasbro Inc (HAS.O), the No. 2 U.S. toymaker, reported better-than-expected quarterly profit and revenue, driven by strong demand for Disney Princess dolls and toys based on the Hollywood blockbuster “Star Wars: The Force Awakens.”<p>Revenue from toys targeted at boys, including toy guns …

  53. Earlier this month, a couple of inventive young go-getters at Buzzfeed tied enough rubber bands around the center of a watermelon to make it explode. Nearly a million people watched the giant berry burst on Facebook Live. It racked up more than 10 million views in the days that followed.<p>Traditional …

  54. Like any Bay Area resident with a pulse, Neal Mohan is a big fan of the Golden State Warriors, but as a busy Google executive, he can’t make every home game in person. “That courtside seat is limited by the laws of physics,” says Mohan ruefully. Luckily, he won’t be bound by those rules for very …

  55. The unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel.<p>Spooked by a fresh wave of defaults at state-owned …

  56. In a 367-137 vote with two absent and seven abstentions, Brazil’s lower house of Congress voted to impeach President Dilma Rousseff.

  57. The day after the Democratic presidential candidates discussed their shared desire to realize a $15 minimum wage during a debate in Brooklyn, …

  58. While talks among major producers to cap oil output in Doha fizzled, investment advisory firm Sanford C. Bernstein & Co. sees a silver lining: …

  59. The tap in her apartment yields water only every two weeks. It comes out yellow. Her 8-month-old granddaughter is ill. And as Yajaira Espinoza, a …

  60. Oil prices may have rallied on a new International Energy Agency forecast for demand to erode the excess supply next year and hopes exporters will soon agree to tighten the spigots, but producers shouldn’t get too excited.<p>Underlying markets factors are likely to ensure the surge is short-lived, …

  61. You often hear me harping on the <b>dangers of too much debt</b>, and I keep my eyes peeled for significant work that backs up my concerns.<p>In my recent</i> …

  62. This weekend’s blockbuster story was the report that in response to a proposed Congressional Bill that would allow a probe into the Saudi role behind …

  63. Home Broadband 2015

    Three notable changes relating to digital access and digital divides are occurring in the realm of personal connectivity, according to new findings …

  64. Earlier this morning, the Bigelow Exapandable Activity Module (“BEAM”) was successfully attached to the International Space Station. The module is a prototype expandable structure, which is being tested for its performance in space.<p>According to NASA, the BEAM will be fully expanded with air in late …

  65. The business of online news has never been forgiving. But in recent weeks, what had been a simmering worry among publishers has turned into borderline panic.<p>This month, Mashable, a site that had just raised $15 million, laid off 30 people. Salon, a web publishing pioneer, announced a new round of …

  66. The online retailer’s new streaming video offering could be a significant competitor<p>Amazon fired what many saw as a warning shot in front of the Netflix warship on Sunday by making its Prime Video streaming service available as a standalone offering—and at a price that is lower than its …

  67. A deal to freeze oil output by OPEC and non-OPEC producers fell apart on Sunday, leading to a steep drop in oil prices towards $40 on Monday.<p>Below are the key facts, questions and answers about the meeting:<p><b>WHAT WERE THE DOHA TALKS TRYING TO ACHIEVE?</b><p>Some 18 oil nations including OPEC’s leader Saudi …

  68. Not everyone is jumping for joy about the impeachment Sunday evening of Brazilian president Dilma Rousseff.<p>Fitch Ratings reiterated their negative watch on Brazil’s BB+ junk credit and highlighted concerns over judicial independence with regards to the ongoing Petrobras case in the Supreme Court. …

  69. Paying Up for Being Poor

    Being poor in the U.S. can be expensive. Judging from the latest inflation data, it’s becoming more so.<p>Overall, inflation isn’t much of a problem in the U.S. For the past several years, the Federal Reserve has been struggling to get its preferred measure of consumer-price inflation up to its target …

  70. <b>Top insurer Lloyds warns that a “pandemic” of global civil unrest could go viral, threatening international stability.</b><p>Lloyds commissioned leading …

  71. Former Federal Reserve Chairman Alan Greenspan admitted in an interview with Sara Eisen that quantitative easing did what it was supposed to do, …

  72. Action Alerts PLUS<p>Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before …

  73. Schlumberger on Thursday unofficially kicks off what is expected to be a grim earnings season for the US energy sector.<p>Earnings of companies listed …

  74. Bank’s downbeat tone in recent months prompted analysts to slash earnings forecasts

  75. NEW YORK, NEW YORK — With less than 24 hours until the presidential primary, a group of New Yorkers who saw their party affiliations mysteriously …

  76. Spending on luxury goods by Chinese shoppers abroad fell last month for the first time since such records began in 2010, leading to the worst ever …

  77. Big cars, high-volume sports, immense portion sizes. The US is different from other countries in many ways. Here’s another: Americans are more likely than most people to believe that hard work pays off.<p>In a 2014 Pew Research Center survey of 44 countries, 73% of Americans deemed hard work “very …

  78. Brazil’s currency reversed big gains built up from Congress voting to impeach president Dilma Rousseff and sank lower on Monday after the country’s …

  79. <b>Why One Analyst Believes Gold Prices Could Hit $3,000 An Ounce by Frank Holmes</b><p>After finishing its best quarter in 30 years, gold extended its gains, …

  80. (Reuters) – Minneapolis Federal Reserve Bank President Neel Kashkari on Monday doubled down on his call for reforms to the U.S. banking system, saying that failing to make changes could leave taxpayers on the hook for big bank bailouts in any future financial crisis.<p>”I agree that many current …

  81. Americans’ hatred of taxes defies logic.<p>A recent Gallup poll pegged the percentage of Americans who think their own federal income tax bills are too high at 57%. That’s up from 51% last year and it’s the highest level since 2001, just before the Bush tax cuts became law.<p>Here’s the problem. Just …

  82. After years of broken promises, Paul Ryan and the GOP insist they’re a “month or so” away from a health care “plan”<p>Let’s travel back in time to January 2014, to a news conference John Boehner held where the then-speaker of the house discussed the House GOP’s agenda for the coming year.<p>“I think …

  83. “Helicopter money” isn’t coming to Japan anytime soon.<p>In an interview with The Wall Street Journal, Bank of Japan governor Haruhiko Kuroda ruled out the use of “helicopter drops” of money.<p>”Helicopter money” is a broadly-defined term that includes anything from governments potentially depositing …

  84. "they" are are sure pushing " buy the dip " in oil names today

  85. Phil – "Why does that even exist anymore?  If I want to watch HBO, I can go to HBO now and all the other channels have on-demand systems and the networks do too – what is cable for then?  They're just another unnecessary middle-man taking a cut at this point. "

    He who owns the pipe controls what gets smoked. If Sat providers DirecTV or Dish could offer high speed internet, or high capacity wireless was more prevalent the story would be different.  People need dependable high speed internet access and they ASSUME the only way to get it in mass is mainlining through the pipeline.  

    My buddy Ham (KFML) utilizes high capacity wireless in small communities, and I have in the past for large telemetry and data systems.  BTW – UBNT at $33, meh, it opened at $15. Keep an eye on it, great f-ing product, cheap and easy to deploy.

  86. Ice cream drinks/Naybob – Judyies in Amherst makes all kinds of nice ice cream drinks.  Was just there with the kids a few weeks ago and they were upset we couldn't share.  Have to go back there every time I'm visiting the old school.

    AAPL/Craigs – I'm talking about Oct $110s we covered last week in the LTP at $8, those are now $6 and it's no emergency to get out of them and, next week we'll decide if we need a full cover or not either way.

    Buying the Dip/Stock – Just crazy, crazy moves today – nothing to do but watch in awe.  

    UBNT/Naybob – One we used to watch and gave up on.  

  87. Well that was a boring session – hopefully we have exciting earnings to make up for it.

  88. Phil/DIA,

    Need you advise on a calendar spread set up. If I buy June 17 180 Put for 4.00 and then sell this week 179 Put for 0.53. And then keep selling weekly puts. Is this a good setup? Lets say there is more chance of going down than up and in that case should we go for a call option setup? What do you look for a calendar setup or is it not a good option mostly.

    If you think the index is at a resistance then what would be good option setup?

    Thanks as always.


  89. I guess we are not shorting NFLX after all… Guidance is the culprit although they still don't make any money. Of course that has been the case for AMZN for the last 15 years so NFLX has a good 10 years to go.

  90. Phil / IBM – Earnings while beating estimates, are down both on revenue and earnings YOY.  I cleared out my holding over the last few weeks and am looking start a new position.  I think the model ports are also out of IBM.  I'd like to get your view on this – i'll be on the con call starting in a few minutes to see what the tone is.  My gut tells me its a good time to short some in the long term, or at least start a short and cover later with a long call.  What is your price target for 2017 and 2018?

  91. Phil IBM – correction:


    My gut tells me its a good time to short some in the SHORT  term, or at least start a short CALL and cover later with a long call.  What is your price target for 2017 and 2018?

  92. Good column by Krugman:

    How can this paradox be resolved? Well, suppose that those high corporate profits don’t represent returns on investment, but instead mainly reflect growing monopoly power. In that case many corporations would be in the position I just described: able to milk their businesses for cash, but with little reason to spend money on expanding capacity or improving service. The result would be what we see: an economy with high profits but low investment, even in the face of very low interest rates and high stock prices.

    And such an economy wouldn’t just be one in which workers don’t share the benefits of rising productivity; it would also tend to have trouble achieving or sustaining full employment. Why? Because when investment is weak despite low interest rates, the Federal Reserve will too often find its efforts to fight recessions coming up short. So lack of competition can contribute to “secular stagnation” — that awkwardly-named but serious condition in which an economy tends to be depressed much or even most of the time, feeling prosperous only when spending is boosted by unsustainable asset or credit bubbles. If that sounds to you like the story of the U.S. economy since the 1990s, join the club.

  93. /cl- Phil is the 80,094mb open still a lot to roll? 

  94. Phil, my father (81) is trying to build a portfolio that will average 4.5 yield.

    While he decides which stocks to pick, I was wondering if you would pick one from one of the portfolios. I'd like him to sell premium and be happy owning the stock if he is called.  If not one of yours, then how about WDC @ $4 with 5%yield.? The Jan 2017 puts are $5.25 @37.5 strike.   Would you describe the spread/combination you'd recommend that you typically use in your portfolio?  

    He is also looking at GAP, WNR, GPS and RHHBY. I don't like retailers, and GAP especially. 

    Very much appreciated.

  95. Phil / CIM – With the VIX so low – i'm not inclined to sell the puts at this point…  Seems like it would be better to wait a bit on the puts….   If you think there is a catalyst for a move up soon, please let me know.  

  96. Ow, poor NFLX!  Like I said, no hit shows – this kind of stuff does matter and that's why they should be valued like a TV network – not a dot com superstar!

    Netflix shares plunge as subscriber forecasts miss estimates

    Netflix said it expected to add about 500,000 customers in the United States in the second quarter that ends in June, compared with Wall 


    Netflix to Issue More Junk Bonds

    Netflix (NFLX) said Monday in its shareholder letter, released with its first quarter earnings, that it will issue more junk bonds later this year. The letter explains the cash would go into into original programming: As we have written in the past, our investment in original programming 

    Original programming is expensive and tricky!  When INTC puts $200M into a new chip, they KNOW what their ROI will be but when NFLX puts $200M into a new show, they have no idea if it will get them a single new subscriber – it's a total coin flip yet INTC gets a p/e of 20 and NFLX has a p/e of 200 because people don't understand the difference in their business model.  

    DIA/Pat – Well, first of all you are paying $3.47 for a $1 spread – is that being the house or being the sucker who pays a huge premium because he thinks he knows exactly where the market will be in a week?  It's a nice-sounding play if all goes well but, what if it doesn't?

    I see lots of weeks where DIA moved $5 or more so let's say DIA goes down $5 to $175.  That would make the weekly short $179 put $4 and your June $180 puts have a delta of 0.5 so they'd gain $2.50 but lose some time value and you'd be down $1.50 on your spread.  Now you are sitting with DIA at $175 and you've now paid net $5 for the $180 puts – what are you going to sell next?  On the bright side you're in the money so you get 100% on a downside move but if you sell the $174 puts for 0.53, you're still down $1 so you only break even and have no hedge to the downside and, if the Dow pops up $5 on you – you're totally screwed.  So what's the point of the spread?  

    If you want to bet the Dow goes down – bet that it goes down.  You have very little chance of making money on that spread but the June $182 puts are $5 and the $179 puts are $3.60 so that's net $1.40 on the $3 spread and you make more than 100% if DIA even twitches lower and UNLESS IT GOES HIGHER – you can't lose money because you're starting out over $2 in the money.  THAT is how you play the downside.  

    By the way, I'm assuming you can't sell naked puts or you wouldn't be jumping through hoops like that but, as a proper hedge, I'd go for the Sept $187 ($12.20)/$180 ($7.30) bear put spread for net $4.90 and sell 1/2 the May $178 puts for $2 and that's net $3.90 on the $7 spread that's 100% in the money and the Sept $155 puts are an evenish roll at $1.84 and the $145 puts are $1 so that's your 2x roll and, if you think DIA will drop more then $35 (20%) – then why not just buy the puts?  

    If you set up a trade like that, where you are COMFORTABLE doubling down on the long spread (if the Dow drops suddenly and makes a tough roll), then it's hard to get in trouble on these outside of a real black swan event.  If all goes well, you get to sell June, July and Aug for $1 as well and PRESTO! – it's free insurance!  

    IBM/Batman – They are in the middle of a long, slow turnaround – that's why I thought $150 was running a bit hot at this point.  We are not out of IBM, we had this:

    And my BRILLIANT adjustment call was this:

    • IBM – So far, would have made a better Trade of the Year than UNG.  We were aggressively long here and well-rewarded for it but $150 is fairly priced (for now) so let's sell our 10 2018 $120 calls ($33) and buy 10 of the 2018 $140 ($19.70)/$165 ($8.70) bull call spreads for $11 so $22 off the table and we're left with $25 spreads that are $10 in the money.  Again, this is how we cash out and leave ourselves great upside.  Even better, if IBM does sell off in a market pullback, we have more money in profits in CASH!!! ($22,000) than we put to work on this trade in the first place ($7,070).  

    So we cashed out our longs because we KNEW what IBM was worth ahead of earnings and we left a nice "set and forget trade".  That's still the way I'd play it but I'd give the downgrade police a chance to attack before jumping under the falling knife (down at the 5% Rule after hours at $145).  

    My 2018 target for IBM is $200 so figure $175 in between, but not now.  2nd half of the year analysts should begin to see the light.  Remember, IBM lost out as our Trade of the Year BECAUSE we felt the turnaround story would take too long to impact them in 2016 so this is exactly according to our fall expectations for them. And no, I don't short stocks I like other than a hedge if they are WAY overbought. 

    Krugman/StJ – Very good point.  

    Oil/Craigs – If that's the correct number, it means they only dumped 19Mb today and they have 2 days left to dump about 65M more – that seems troubling to me!  /CLK6 is right at $40 and I'd watch that line but short the /CLM3 contract at $41.50 (as long as /CLK6 is under $40) as you REALLY don't want to be stuck in those contracts at expiration.  If you are short – you are in a contract to deliver X,000 barrels to Cushing, OK within 30 days – no exceptions.  First you have to find X,000 physical barrels to buy, then you have to find and pay a delivery service to get them to Oklahoma and then you need someone to get all your paperwork done properly to prove you've fulfilled your contract obligation – that would be a month of fun!  Or, you could not play and, if we get a nice drop that we feel is solely because of the rollover – THEN you can buy the /CLN6 contracts ($42.30) in anticipation of an uptick in demand into the summer (and, if you are lucky, the Kuwait strike drags on).  

    4.5%/Latch – I don't like WDC's business much (see STX earnings) and why mess around?  There's nothing at all conservative about WDC but PFE, for example, at $32.61, pays a $1.20 dividend so he can just buy 500 shares for $16,305 and sell 5 2018 $30 calls for $4.20 ($2,100) and sell 5 2018 $28 puts for $2.20 ($1,100) and that's net $26.21/27.105 (worst case if assigned 500 more, which is 17% off) = $13,105 and, if called away at $30 (10% lower than it is now), he'll collect $15,000, which is + $2,895 (22%) PLUS $1.80 in dividends ($900) for another 7% so 29% that way.  Since you are only shooting for 9% - he can do that with 1/3 of what he wants to make the money on and keep the rest on the side – in case the market collapses and other opportunities come up.  

    We're just spoiled with all our massive winners but to make retirement money in the 5% range – our strategies can do that while maximizing safety and minimizing cash outlay as well.  

    CIM/Batman – Just earnings in early May.  With the Fed on hold – they'll do a bit better than expected but, as they've moved up $3+ since the Fed (30%) – I'd say that's somewhat baked in already.

  97. Phil/NFLX issuing more debt:

    Shorting junk bonds via SJB is going to be a very good trade at some point – after the Fed follows the ECB and makes corporates part of their menu of bonds they can buy. Here's some comparison:

     In 2006 and 2007, companies issued $700 billion in bonds, of which 28% was B rated or less.   In 2013 and 2014, companies issued $1.1 TRILLION in debt, of which, wait for it, 71% was B rated or less.   In 2006 and 2007, 20% of the debt was what is called covenant light.  2013 and 2014? 60% covenant light.

    So more corporate debt (issued to fund buybacks) and more of it is junk and more of it is structured to leave the holders with zippo – all because the Fed has suppressed interest rates AND poured trillions in fake money into the market to support stocks.  If I were a betting man, and I am, I would bet that WHEN the default rate climbs above 5-5.5%, then we will see more hedge funds or larger fail bc they are forced to sell an illiquid investment into a overliquid market.  Good luck with that.

  98. Phil,  Seems that China's bond market could be a canary. Bloomberg article tonight. Strether.

  99. Thank you Phil.

  100. anyone reloading for nkd shorts

  101. Not I, said the magpie.  

  102. first we need to take out all time highs – then we need a nice blow off top – then our wizard gets to work!

  103. NFLX/ Phil – Clearly the valuation is just completely outrageous, but they do have some shows that get good reviews – House of Cards, Orange is the New Black, Jessica Jones, Daredevil, Narcos, etc… They might not be your cup of tea, but they do very well. There is a lot of competition now so original programming is the way to go – AMZN does it, Hulu does it and now even YouTube. I guess good times for studios who have that many more customers. And good for us because we have more choices! But the facts are that NFLX is hitting saturation levels in some markets like the US. So growth will be getting harder. I guess it's like TSLA, you can like the product and hate the stock!

  104. Good morning!

    Well, I was wrong about Germany's ZEW – it came in at 11.2 (up 160% from 4.3), which was a nice beat on forward expectations but, strangely, Current Situation went down 3.1 points (6%) from 50.8 to 47.7.  Even more amazing, the Current Situation reading in the Eurozone has dropped -0.3 to -12.1 (down 3%) so, according to the survey, the current situation is TERRIBLE and getting worse but the future looks bright – well, not bright since 24.5 is the "normal" average anyway.  

    If that seems confusing – check out their own quote:

    “Surprisingly positive economic news from China seem to have improved the sentiment amongst financial market experts. On balance, however, the continued poor growth in China and other important emerging markets continues to be a burden for the German export industry. Furthermore, concern about Great Britain’s possible exit from the EU seems to be having a negative impact”, comments Professor Sascha Steffen, Head of the Research Department “International Finance and Financial Management” at ZEW.

    ZEW is a survey of analysts and it's always assumed that, since they are analysts, they must know what they are doing, right?  

    Essentially, all ZEW does is follow the market – it's really not an indicator of anything though I figure when sentiment is not improving in a rally, it's toppy.  

    Australia got the party started today with a "Very Accommodative" policy statement.

    RBA Says ‘Very Accommodative’ Policy Appropriate, Aussie HindersAustralia’s central bank said “very accommodative” policy is appropriate given low inflation and reaffirmed the currency’s strength could complicate the economy’s rebalancing away from mining. The Reserve Bank of Australia, in minutes of its April 5 meeting where interest rates were left unchanged at a record-low 2 percent, noted the economy’s 3 percent expansion in 2015 was better than forecast and “broadly consistent” with last year’s improved jobs market. It said recent data suggested the economy “had continued to grow at a moderate pace” in early 2016.

    Speaking of toppy, we have gone straight up since mid-Feb and Europe and Japan are miles behind us if this party train rolls over S&P 2,100 so we need to keep an open mind and not fight the Feds – for now.

    It is tempting, however, to play a Futures short here – in case we are rejected at 2,100 on /ES (now 2,097.50) and that's lined up with Dow (/YM) 18,000 (now 17,995), 4,585 on /NQ and 1,145 on /TF and 17,200 on /NKD.  You know the rules – short the last 2 of the 3 to cross below, but they are all below now, so we short the closest to the top (/YM or /ES) and we stop out if ANY of them go over!  

    1,800 to 2,070 is 15% so we're past that, spike to spike.  1,850 is our Must Hold line and 2,127.50 is the 15% line there so that's the toppy zone we don't expect to break out of.

    Dax having a party since breaking back over 10,000

    As we said, over 3,000 on EuroStoxx is a real rally.

    Back to stimulus/easing talk in Japan does the trick every time.  

    No one is worried.  

    Silver flying again

    Down almost 6% but shhhhhhhhh – let them enjoy the rally….

    Tuesday's economic calendar

    The Problem in China's Bond Market

    IMF's Zhu Says China Shouldn't Swap Bad Debt for Equity. China shouldn't swap bad debt for equity to avoid passing on risks to the financial system, citing IMF deputy managing director Zhu Min as saying in an interview. China should use market-oriented ways including debt and bankruptcy restructuring for deleveraging, Zhu said. Govt's stimulus shouldn't be too large as China's real economic growth rate is close to its potential rate, Zhu said.

    China's Once Booming Smartphone Sales Barely Grew in 2015: Chart

    China's Crowded Smartphone Market Heads for an Epic ShakeoutAs the economy slows and saturation takes hold, half of 300-plus domestic brands may disappear. The startup Dakele looked pretty smart when it released a phone in China four years ago. The market was doubling annually, and the company put brand-name components inside a device that cost a fraction of the iPhone. That $160 gadget went on sale just four months after Dakele opened its doors, and soon the company, which translates as "Big Cola," made inroads against Huawei Technologies Co. and Xiaomi Corp. Buzz was building for the Dakele 3 model last year, with online reviews calling it the best Apple Inc. clone. Then the sizzle started to fizzle. 

    Argentina returns to the international bond market

    • Argentina has returned to the global bond markets following a 15-year hiatus, unveiling the biggest sovereign issuance by an emerging-market nation in two decades.
    • The country is raising up to $15B, but demand for the bond issue (which will pay an interest rate of between 6.4% and 8%) was strong and attracted orders worth $65B.
    • Most of the cash raised will go toward paying off a small number holdout creditors, led by U.S. hedge funds Elliott Management and Aurelius Capital.
    • ETFs: ARGT

    Fed's Rosengren Says Market Is Too Pessimistic on Rate PathThe market’s outlook for interest rates is too dovish for one of the Federal Reserve’s more dovish policy makers. Federal Reserve Bank of Boston President Eric Rosengren said he and many private-sector economists envision a “much healthier U.S. economy” than the forecast implied by financial markets, where investors expect the Fed to raise rates by about one-quarter percentage point a year over the next three years. “The very shallow path of rate increases implied by financial futures-market pricing would likely result in an overheating that necessitates the Fed eventually raising interest rates more quickly than is desirable, which could endanger the ongoing recovery and continued growth,” Rosengren said, according to the text of a speech he is scheduled to deliver Monday in New Britain, Connecticut.

    Capitulation? US Equity Bears Dump Shorts Fastest Since 2012

    The Whole System Is Built Upon Lies And "We're In The Terminal Phase"

    The US is 'digging a great big hole'

    National debt

    Instead of collapsing, crude oil shows its resilience after Doha dud

    • The collapse in crude oil prices after the Doha deadlock fizzled out, and instead oil showed its resilience, as U.S. crude settled at $39.78/bbl, -1.4% but paring losses of as much as 6.8% in trading as low as $37.61, and Brent finished just -0.4% at $42.91 after a $40.10 low.
    • Perhaps the reaction should not be a surprise, since even if an agreement had been reached in Doha it would not have significantly reduced global supplies, just frozen them at high,and in some cases record levels, Financial Times writes.
    • Other factors mitigating oil losses were an oil workers’ strike in Kuwait that has temporarily reduced output and a growing acceptance among investors that the global market is creaking into alignment.
    • But some analysts say the deadlock in Doha cannot be simply be ignored because it raises the risk of a damaging price war, with Iran refusing to cap output following years of western sanctions while Saudi Arabia does not want to yield market share to rivals.

    Saudi's Other Warning Makes Oil Traders Sweat After Doha Failure. After his comments thwarted supply negotiations in Doha, oil traders are weighing another implied warning from the Saudi deputy crown prince: the threat of an intensifying clash with Iran over market share. It was Mohammed Bin Salman’s repeated assertions that the kingdom wouldn’t join an output freeze without Iran that derailed talks between 16 producing countries on April 17. In interviews with Bloomberg News, the prince cautioned that if other producers increased output, Saudi Arabia could respond in kind. Iran is restoring exports after international sanctions over its nuclear program were lifted in January. “It was an indication to Iranians that, look guys, if you’re not joining the table we have enough power to crank up production,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg Television interview Monday. “You can question how much more they can crank it up by, but the chances are that, now there’s no freeze, the Saudis will go ahead and increase their production as they were planning.”

    Kuwait strike lifts crude, but Russia may hike output

    • Oil prices have regained some ground as a result of an oil worker strike in Kuwait that has reduced output to 1.1M barrels per day from 2.8M.
    • The gains may be short-lived. Russia's Deputy Energy Minister Kirill Molodtsov has told reporters the country is considering raising its production this year, and a level of 540M tonnes of crude is "quite realistic," following the collapse of the Doha deal.
    • Brent +1.4% to $43.49/bbl; WTI +1.1% to $40.21/bbl.


    Goldman names five top post-Doha oil stocks: HES, EOG, CVE, PDCE, FANG

    • Goldman Sachs expects energy investors will maintain a "buy the dip" mentality, and suggests focusing specifically on its Buy-rated shale productivity favorites such as Hess (HES +4.3%), EOG Resources (EOG +2.2%), Cenovus Energy (CVE +0.3%), PDC Energy (PDCE +4.3%) and Diamondback Energy (FANG +1.7%).
    • Even after the Doha collapse, Goldman maintains its forecast for Q4 2016 WTI of $45/bbl and FY 2017 average of $58/bbl, as low near-term oil prices should ultimately enable mechanisms that will bring oil markets into better balance.
    • Now read Goldman names nine favorites for Goldilocks ideal $35 oil

    Oregon LNG export terminal plan reportedly scrapped

    • Leucadia National (LUK +0.5%), the developer of a planned liquefied natural gas export terminal on the Oregon coast, reportedly has withdrawn its proposal to build the facility because of a lack of funding.
    • The $6.3B Oregon LNG project near Warrenton, Ore., was designed to have a liquefaction capacity of 9M metric tons/year and construction was expected to begin next year.
    • The project had faced several setbacks, including a legal fight with the U.S. Army Corps of Engineers over rights to land for the facility, and local opposition because of effects on the fishing industry and the environment.

    SunEdison bankruptcy seen as 'complex' and 'messy'

    • A SunEdison (NYSE:SUNE) bankruptcy could drag in its two publicly traded holding company units, TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL), and will likely be "messy" due to their IPOs and the company's financing web of loans and credit lines.
    • "It's going to add much more complexity than normal," said Brandon Barnes, a senior analyst at Bloomberg Intelligence. "You're dealing with affiliates that may not want to be associated with the parent company."
    • A bankruptcy also has the potential to trigger defaults on multiple wind and solar farms that are generating revenue from selling electricity.
    • SunEdison had total debt of $11.7B as of Sept. 30, according to the last comprehensive figure reported.


    Con Ed cut to Sell at Deutsche Bank

    • Consolidated Edison (ED -0.3%) is downgraded to Sell from Hold with a $70 price target at Deutsche Bank, following a strong YTD performance relative to other regulated utilities.
    • The firm says ED is overvalued in the mid-70s, which is at odds with fundamentals given below average compound annual EPS growth potential – the firm projects a 2% compound annual growth rate vs. a ~4% sector average – and the absence of any formal management guidance on the long-term outlook.
    • Deutsche Bank also remains wary of potential risk from the 2014 Harlem explosion which was traced to ED’s natural gas infrastructure; New York regulators have opened an investigation, which is still at early stages, and ED eventually could face some sort of penalty.
    • Now read It's hard to make a compelling case for Consolidated Edison

    Reuters: China, major producers fail to reach steel deal

    • China and other major steel-producing countries have failed to reach a deal to tackle global steel overcapacity, as the sides argued over the causes and whether China is keeping loss-making producers afloat, Reuters reports.
    • China's assistant commerce minister denied that his country subsidizes steel exporters, saying China had cut 90M metric tons of capacity and had plans to reduce it by another 100M-150M, while critics say it would still have a capacity of ~1B metric tons, far in excess of its needs.
    • Relevant tickers: SLXXAKSNUESTLDMT

    Philip Morris misses by $0.13, misses on revenue

    • Philip Morris (NYSE:PM): Q1 EPS of $0.98 misses by $0.13.
    • Revenue of $6.08B (-8.2% Y/Y) misses by $280M.
    • Press Release

    Reuters: Target plans to increase minimum wage to $10/hour

    • Target (NYSE:TGT) has begun raising employee wages to a minimum of $10/hour, its second hike in a year, pressured by a competitive job market and labor groups calling for higher wages at retail chains, Reuters reports.
    • TGT management has informed store managers, and most employees who earn less than $10/hour should see their base pay go up in May, according to the report; the company has not confirmed any pay actions.
    • Wal-Mart said in February 2015 that it would lift its base pay to $10/hour in 2016, a step it has implemented in recent weeks.
    • Some analysts say the move to $10/hour could pressure TGT's earnings, especially as the retailer is investing billions to upgrade its supply chain and technology infrastructure in order to tackle chronic stock shortages.
    • Now read Target on watch after Barclays downgrade

    Nordstrom(JWN) is cutting hundreds of jobs, confirming a terrifying new trend among wealthy shoppers

    IBM now lower post-earnings; EPS benefits from -95% tax rate

    • IBM's official Q1 tax rate was -95.1%, thanks to a $1.2B benefit related to a $1B refund of previously-paid U.S. taxes. That yielded official tax payments of -$983M, and helped EPS beat estimates in spite of a 170 bps Y/Y drop in gross margin to 46.5% and $1.5B worth of expenses related to "workforce transformation, real estate actions, and actions in Latin America."
    • Segment performance: IBM has revised its segment reporting structure. Cognitive Solutions (solutions software + transaction processing software) revenue fell 1.7% Y/Y to $4B, with op. margin dropping to 21.8% from 32.6%. Global Business Services revenue -4.3% to $4.1B, with op. margin dropping to 4.5% from 13.2%.

      Tech Services & Cloud Platforms revenue -1.5% to $8.4B; op. margin dropped to 3% from 13%. Systems (hardware) revenue -21.8% to $1.7B (the mainframe upgrade cycle played a role); op. margin dropped to -0.5% from 11.3%. Global Financing revenue -11.2% to $410M; op. margin fell to 43.1% from 49.2%.

    • Other details: 1) Unlike in prior earnings reports, IBM hasn't broken out its geographic performance or services backlog, or broken out sales growth for various hardware and software businesses. 2) "Strategic imperatives" revenue (cloud, analytics, and "engagement") rose 14% Y/Y to $7B (compares with a 5% drop in total revenue to $18.7B). 3) The annual "cloud delivered as a service" revenue run rate (boosted some by M&A) rose 42% Y/Y to $5.4B. 4) Mobile revenue rose 88% Y/Y, security 18%, and analytics 7%. 5) Forex had a 300 bps impact on revenue growth (-5% vs. -2%).
    • Financials: $900M was spent on buybacks. Thanks partly to the aforementioned expenses, SG&A spend rose 12% Y/Y to $6.01B, and R&D spend 12% to $1.46B. That contributed to a drop in op. margin to 5.5% from 15.3%. Free cash flow was $2.3B, up from $1.1B a year ago. IBM ended Q1 with $14.9B in cash and $18.8B in non-Global Financing debt.
    • IBM -2.6% after hours to $148.50.
    • IBM's Q1 results/2016 guidanceearnings release

    IBM(IBM) Earnings Show It's Still Struggling With New Product Growth. (video) IBM forecast second-quarter profit that fell short of analysts’ projections, signaling its multiyear effort to become a purveyor of cloud products and technology using artificial intelligence won’t soon stop its four-year sales slump. About 38 percent to 39 percent of the company’s full-year earnings forecast of at least $13.50 per share will come in the first half, Chief Financial Officer Martin Schroeter said Monday. That projects to about $2.78 to $2.92 a share, compared with the $3.45 average of analysts’ estimates compiled by Bloomberg.IBM shares fell as much as 5.4 percent to $144.30 in extended trading.


    Disney up 3% now after blockbuster rollout from 'Jungle Book'

    • Disney (NYSE:DIS) stock is still riding high today, +3%, after a triumph at the weekend box office with a reimagining of The Jungle Book.
    • The film crested $103M to easy surpass another debut, Barbershop: The Next Cut(TWX +1.1%), which took the No. 2 spot with $20.2M.
    • The Jungle Book (which opened slightly ahead overseas) added $189.9M in a foreign take to make an impressive worldwide total of $293.5M.
    • Earlier, Pivotal Research upgraded Disney to Buy and gave a 17% boost to its price target for the stock.
    • The success of Warner's Batman v Superman: Dawn of Justice is still front-loaded, as that film fell off another 61% in its fourth week to $9M and the No. 4 spot. It's earned $311.3M domestically and $829.3M worldwide, however.
    • As for Universal (CMCSA +1%), a heavily watched studio after its dominant 2015, The Boss slid 57% in its second week to finish third with $10.2M. It's a big drop for a Melissa McCarthy film, but for a film that's been plagued by poor reviews.
    • Now read Debugging The Disney Misconceptions »

    And Chill!  Netflix dives after subscriber growth underwhelms

    • Netflix (NASDAQ:NFLX) announces it brought in 2.23M net subscribers in the U.S. during Q1.
    • International subscribers net growth tallied 4.51M net as the company swept into new territories. The combined total missed the consensus estimate from analysts.
    • Total Netflix memberships at the end of the quarter were 81.50M to top guidance from Netflix for 80.86M subs.
    • Q1 total streaming contribution margin rose 80 bps Q/Q to 17.0%. The contribution margin rate in the U.S. where the Netflix business is more established hit 35.5%
    • Guidance for Q2 is for 500K U.S. adds and 2M global. Some analysts are already down with forecasts for +4M for the quarter.
    • Netflix says original content debuting on the service helped push up the U.S. subscriber number.  The company expects only a moderate increase in churn due to higher pricing from the "un-grandfathering" of older customers.
    • There is no material update on China.
    • Q1 shareholder letter (.pdf)
    • NFLX -11.6% after hours to $98.88 after a 2.8% decline during the day session.

    Netflix Crashes After Forecasting Slower Subscriber Growth, Despite Burning $1BN In Last 12 Months

    Glitches cancel DirecTV's first 4K baseball game; new try tonight

    • AT&T's (T +0.4%) plans to bring baseball coverage into the 4K era hit a snag due to technical glitches (all too familiar in new technology rollouts).
    • The company and its DirecTV unit made ambitious plans to show 25 MLB games in the ultra HD format this year, beginning with Friday's game between the San Francisco Giants and the Los Angeles Dodgers. But an issue with a "third party's" field production truck pushed AT&T to cancel the broadcast, spurring frustrated tweets. That game still showed in HD on the MLB Network.
    • DirecTV launched three channels dedicated to 4K and have dispatched reps nationwide to promote signups to its Ultimate/Premiere packages that offer the broadcasts.
    • The next baseball game on the 4K schedule is tonight's game between the Chicago Cubs and St. Louis Cardinals, where DirecTV will try for a fresh debut.
    • Now read AT&T: Expect Growth Due To The Increase In Customer Base »

    Credit Suisse expecting big upside from Facebook, Amazon, Google

    • Credit Suisse reiterated bullish takes on a few members of the FANG trade today (now the FAA trade?): Facebook (FB +0.7%), Alphabet (GOOG +1%, GOOGL +1%) and (AMZN +1.5%) all got re-upped as its top large-cap sector picks, and it gave one a target bump.
    • All three hold an Outperform rating from the firm. It's lifted its price target on Facebook to $142 (implying 28.6% upside from today); on GOOGL, its target is $920 (16.8% upside) and on Amazon, it holds a target of $800 (25.9% upside).
    • The companies are spending heavily as they enter new investment cycles, analyst Stephen Ju says, which has spurred some investor concerns but bodes well for revenue generation. Amazon and Google will be responding to demand with spending, he writes, "and hence we are happy to be wrong (too low) in our capex projections as this would mean that our revenue projections are also too low."
    • Alphabet/Google is narrowing the "monetization gap" between mobile and desktop by pricing mobile up over the long term, he says. At Amazon, unearned revenues may be up as the Prime subscriber growth may have accelerated over the last two quarters.
    • As for Facebook: "We submit that there are two more Facebooks lurking inside Facebook as Messenger 'chat feed' evolves to a news feed over time and ultimately opens the way for native ads."
    • Now read Chatbots And The Future Of Facebook Messenger »

    Apple, FBI to testify before House panels

    • The battle over encryption is heading to Capitol Hill again as Apple's (NASDAQ:AAPL) general counsel, Bruce Sewell, and FBI officials appear before House members to defend their positions.
    • The company's court battle with the government over a phone used by one of the San Bernardino shooters was recently resolved, but the two parties continue to fight over unlocking an iPhone used in a New York drug case.

  105. A new map for America – Great NYT Article


    Jerry Greenfield and Ben Cohen (Ben and Jerrry), along with hundreds of other activists, were arrested as part of Democracy Awakening’s direct action on the steps of the U.S. Capitol Building.


    “The history of our country is that nothing happens,” said Ben, “until people start putting their bodies on the line and risk getting arrested.”

    Protesting injustice has been on the agenda all weekend. We’ve been in Washington, D.C. with Democracy Awakening, a remarkable event that brought together hundreds of groups and thousands of people in an effort to fix our broken democracy. There are two trends that everyone from Greenpeace to the NAACP has realized are making it impossible for much good work to get done. The first is the flood of unregulated cash flowing into campaigns and elections. And the second is the wave of attacks in many states on citizens’ right to vote.


    Did you hear a word about this from your MSM media outlet?  Wouldn't this be the kind of celebrity stuff they are usually all over?  Why is a lid being kept on this news?  Is it because the news is owned by the very same special interests these people were protesting?

    300 arrested at Democracy Awakens protest against money in politics

    Democracy Awakening: Mass Civil Disobedience Planned on Capitol Hill to Cap Week of 900+ Arrests

  106. Debt/Hanj – I agree it's very worrying and makes a logical play but that's been true all year and look where that thing has gone:

    It's hard to fight the Fed – especially when there's a dozen of them playing against you!   This is one of those rare cases where a speculative call is the best way to play.  The Oct $26 calls are $1.60 so just 0.50 of premium and, if we get back to $30 at any point over the next 6 months – that's a $2.40 (150%) profit on the limited risk (especially if you stop out below $1 and make the reward/risk 4:1).  

    Since that's an appropriate play for our Options Opportunity Portfolio (OOP) let's play 10 ($1,600) for fun and see how it goes.  

    China bonds/Streth – FAKE!!!  

    /NKD/Tommy – I think the /YM shorts are almost a sure thing today.  Weakness from IBM and GS – how can they hold 18,000?  

    NFLX/StJ – I do like the company but it's the valuation that bugs me – they should be valued like TWX or DIS, not like AMZN (AMZN shouldn't be valued like AMZN either!). 

    VIX/Pstas – At some point, I expect it too.