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Wednesday Window Dressers vs the Fed as Assets Continue to Bubble

Related imageThere's a battle going on at the top of the market.  

Four Fed speakers this week pulled out their pins and took a poke at the market bubble:  

  • Williams said "There seems to be a priced-to-perfection attitude out there.” and that the stock market rally "still seems to be running very much on fumes."  Speaking to Australian TV, Williams added that "We are seeing some reach for yield, and some, maybe, excess risk-taking in the financial system with very low rates. As we move interest rates back to more-normal, I think that that will, people will pull back on that."
  • Fischer said  "The increase in prices of risky assets in most asset markets over the past six months points to a notable uptick in risk appetites…. Measures of earnings strength, such as the return on assets, continue to approach pre-crisis levels at most banks, although with interest rates being so low, the return on assets might be expected to have declined relative to their pre-crisis levels--and that fact is also a cause for concern."  Fischer then also said that the corporate sector is "notably leveraged", that it would be foolish to think that all risks have been eliminated, and called for "close monitoring" of rising risk appetites.
  • Dudley said rates will keep rising as long as financial conditions remain loose: "When financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened.  On the other hand, when financial conditions ease—as has been the case recently—this can provide additional impetus for the decision to continue to remove monetary policy accommodation."
  • And Chairwoman Janet Yellen said yesterday that some asset prices had become “somewhat rich" although like Fischer, she hedged that prices are fine… if one assumes record low rates in perpetuity… “Asset valuations are somewhat rich if you use some traditional metrics like price earnings ratios, but I wouldn’t try to comment on appropriate valuations, and those ratios ought to depend on long-term interest rates,” she said.  Yellen then said (already being taken out of context by bulls): "Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will."

In fact, here's the video of Yellen's statement:

Image result for stock market head in sandUnless Yellen is very ill, I don't think her prediction is likely to hold up for her lifetime – let alone ours!  Of course, no one ever thinks there is going to be a crisis, certainly not those in power or they'd do something about it, right?  Far from reassuring the markets yesterday, they continued selling into the close as it seemed like the Fed have their heads in the sand and are running their models on some sort of fantasy economy that doesn't reflect the reality those of us on the ground are trying to deal with.

The Fed sees a bubble but they aren't eager to rein it in, like Bernanke before them, they are trying desperately to have it both ways because, as we know, we have a President who judges his performance by how high the Dow goes and no one who wants to be the next Chairman wants to burst Trump's bubble.  

Image result for bubble bursting animated gifAs I noted yesterday, it is possible for the economy and Consumer Wages and Corporate Profits to catch up with the bubble values we currently have but there are also so many potential danger points – we have to have a whole lotta luck to bounce past the danger without at least some sort of correction.

That being said, we have PLENTY of hedges and they were stress-tested yesterday so we went bargain shopping and found 4 long trades that we added to both the Long-Term Portfolio and our Options Opportunity Portfolio.  The stocks we liked were Cisco (CSCO) at $31.76, Finisar (FNSR) at $26.58, GE (GE) at $27.21 and Target (TGT) at $52.07 and, of course, we sent out a Top Trade Alert with some options plays that leverage the gains for our Members. 

In our June 23rd Top Trade Alert we also picked GE as well as Sprouts Farmers Market (SFM), which had fallen all the way to $20 (now $22, up 10%), Quicklogic (QUICK), which was languishing at $1.20 (now $1.50, up 25%) and Chicago Bridge and Iron (CBI), which just blasted 39% higher yesterday and is on the way back to $30 for a nice double on the stock alone (way more with options).  

In yesterday's morning report we were liking the Russell Futures (/TF) short at 1,415 and we hit 1,400 for a $1,500 per contract gain there and the Nikkei (/NKD) shorts topped out at $500 per contract gain but the Dollar (/DX) was as dangerous as we thought it was into the Fed and is now at 96.15, which is down $300 per contract – can't win them all but I still like those contracts down here.  

Today we're keeping a close watch on the Nasdaq to see how bouncy it is.  We had a big discussion about those levels in our Live Member Chat Room, so I won't rehash it here but suffice to say that 5,690 on /NQ is the strong bounce line so bullish if we pop over and bearish if we don't – simple enough?  

We've already bet a bit more bullish – having faith that the low-volume pre-holiday trading will make it very easy to dress the end-of-quarter windows and next week will be completely pointless with Monday a half-day and Tuesday closed, which means a lot of people (including me) will stretch it out to a week's vacation.  

And, of course, we have our hedges – don't leave home without them! 


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  1. Nasdaq at the 50 MA line!

  2. Good Morning, everyone! Join us for our webinar today at 1pm (Eastern) here:

    Note: There will not be a webinar next week, as Phil will be traveling, but we are going to have a webinar on 7/12. (Phil will still be traveling, but we're going to try a long-distance, European webinar.) 

  3. Pharm,

    Can you comment on drug shortages. This morning we had a meeting and it repeatedly comes up that there are national shortages of certain meds. Today I was told that Epinephrine is in short supply…surprising to me. Is this a manufacturing issue? Can the suppliers not keep up, or are they limiting supply to keep prices propped (I hate to suggest that)? 

  4. Damn – missed the DX jump up.  I really suck at this.

  5. Brexit will not going to be a simple process and the people in power don't even seem to agree on what they want:

  6. Phil, 

    I went back through the archives looking for the MET trade that you said was still playable yesterday, but I couldn't find it. Would you mind reposting it? Thanks a lot. 

  7. Valuation discussion:

    Sometimes cheap stocks get cheaper and continue to fall; other times expensive stocks get more expensive and keep going up! 

    Many FU's support that sentence.

  8. Phil / CBI – i have the following positions and would like some advice on next steps on CBI the litigation looks like at will be capped at $70M max, and the sale to veritas should be announced this month.  With these out of the way – i believe  the low end of the stock should be at 15 to 18 ( assuming 3.4 EPS) and the high end maybe 30.  They will have better FCF after the sale towards back half of year.

    I currently have:

    30X '19 $15 puts (4.89 ) now 2.6 – This is a 50%ish gain in 1 week, and i'd like to close these out and role to

    30X '19 $17 puts for 3.8 


    I have 20X of the '19  $20 puts (6.3) that i'm looking to keep 

    I also have 45X the '19  $25/$32.5  ( net 2.3) the result of an adjustment ( when i was taking a bath on this position and i was just looking to break even) i'm looking adjust this to possibly a 25 / 35, but that doesn't look very appealing.  I'm also looking for advice on some short term callers to partially cover the 50X short puts – Maybe the Oct 25 Calls (1.2), ?

    Thanks for your help.

  9. And BTW, what kind of egomaniac keeps oversized fake covers of Time magazine with their picture on it in public places? I mean you could get one as a gift for fun, but keep it in your office. But 4 of them in public view? Wow…

  10. Good Morning.

  11. Phil – "don't leave home without them!"  Thanks for putting a big grin on my face and a moment of waxing nostalgic Zen. Much like disappearing Americana: roller rinks, ice palaces, drive thru dairies, drive in theaters and old school burger joints (A&W, Mel's), you just don't see these anymore. Sign O The Times and Out. 

  12. RH, almost 66 and you can sell the 2019 puts for 2.80 – crazy

  13. selling the 25 puts

  14. Good morning!  

    This is why Republicans avoid town halls these days:

    Not too long before the people storm the Bastille!

  15. I think the RUT and NYA are trying to tell us what the NAS, NDX, SMI and SOX is since June 8th.

  16. RAD looking good, holding the weak retrace of the one dollar move from 3 to 4. 

  17. Jeffdoc – It's either hit or miss onRAD.

    ~~BofA/Merrill Lynch Comments On Rite Aid (RAD), Shares Worth $1.50 If Deal Fails.

  18. Wow, speaking of window-dressing:

    Dow jumps 100 points after Europe's central bank signals easy policy isn't over

    U.S. stocks opened higher on Wednesday after the European Central Bank tried to walk back remarks made by ECB President Mario Draghi a day earlier.

    The Dow Jones industrial average jumped more than 100 points at the open, with Goldman Sachs contributing the most gains. The S&P 500 advanced 0.5 percent with financials rising 1 percent to lead all sectors higher. The Nasdaq composite gained 0.42 percent.

    A source familiar with Draghi's knowledge told Reuters that Draghi intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening.


    Draghi said Tuesday "the threat of deflation is gone and reflationary forces are at play," sending the euro to a one-year high against the dollar. The currency pulled back from those levels on Wednesday following Reuters' report.

    "This just proves how trapped they are that after just one speech and the market reaction that followed has the ECB already in a tizzy," said Peter Boockvar, chief market analyst at The Lindsey Group. "What do they think will happen when further tapering actually takes place which we still expect to happen in September?"

    Still watching the Nas

    Teeing us up for another shorting opportunity?

    Big Chart – Well the Nasdaq certainly broke through the wrong line.   Now it's 1,395 on the RUT that would signal BIG TROUBLE if it follows the Nas below the 50 dma (assuming they go back, of course). 

    Webinar – Mike Anton from TradeExchange will be our guest today.  PSW Investments did the seed financing round on TradeExchange in the Fall and we've already got the beta version of the App out – very exciting stuff!  

    As to Europe, next Weds is a travel day for me but the following Weds (12th) I want to see if doing a Webinar in Europe is laggy or if it works just fine.  As an old guy, I can't really wrap my head around how such a thing is even possible – kind of the way my Grandpa Max, who was born in 1903 felt about the Internet in the 90s – it's right there but it goes against everything we "knew" growing up.

    Even at 186,000 miles per second (light speed), 4,000 miles (not counting switching) is 2% of a second so it's not unnoticeable and, in my mind, I can't conceptualize how that doesn't cause a packet clusterf*ck trying to send voice and images like that.

    Epi/Jeff – I know that one is overblown, surprised you are getting "briefed" on something that perpetuates incorrect info.  Supplies are tight but that's mostly from increased sales of pens after the prices came down so there's plenty around, it's just being used up in temporary storage vehicles.  

    /DX/Latch – The Flash would have missed that one!  

    Related image

    "I lost how much?"  

    Brexit/StJ – Just like a divorce.  I wonder who will get custody of Scotland?  

    MET/Kevin – It says "Our Met Life (MET) play is also chugging along (same Report)" and the report lined above was: "The Long-Term Portfolio trades we took for our Members back on March 14th".  MET is flying today ($54.13), so a bit chasey.  

    Valuation/StJ – Surprisingly unhelpful (for those of us who believe valuation is actually knowable).  

  19. Valuation / Phil – In most cases just an exploratory process sometimes painful! IMHO I don't know that there is a knowable valuation, only valuation criterias based on many factors including personality. 

  20. Phil….head fake in oil?

  21. CBI/Batman – $22 already.  I'm pretty sure about $30.  As noted early this morning, I like the short 2019 $22.50 puts, now $5.50 as that's net $17 and you know $17 is silly if the lawsuit is off the table.  So yes, I'd take the profits on the $15s and flip but you can flip to 1/2x and simply get more bang for the buck (and more flexibility, as you can always roll down to 2x).  Or go to the $20s for consistency, no sense having multiple legs at different strikes for no reason.  I think the 2019 $25/32.50 spread is fine but, if you'd like to sell short calls, first think of what's reasonable, like selling 20 of the Jan $27.50s for $2 (but again, I think we go higher) so that's $4,000 and $4,000 pays to roll the 2019 $25s ($4.40) to the $22.50s ($5.70) but the $20s are $6.80 so I'd do that roll for $2.40 and then you can be super-comfortable about the short calls (and you can always sell 20 more Jan $25s for about $5,000 if CBI fails to hold $20).  

    Whenever you are adjusting, think a few moves ahead and try to make adjustments that keep you flexible.  

    Trump/StJ – Really psychotic guy.  And now he's mad at Bezos again:

    Better watch out what you say about the President or he'll come after your business!  Even though Amazon doesn't own the post, Bezos does.  

    And he retweets Fox and Friends 4 times in one day!  And this:

    That's our President folks, keepin' it real….

    Although math is not his strong suit:

    "Off by more than 100%" – and that one is from the White House's official tweet!  

    You KNOW I am going to be looking for places to live while I'm in Europe…

     Volume/Scott – There's no evidence at all in that article, just a bunch of disconnected nonsense to support his opinion. 

    RH/Jomp – That's the advantage of playing super-volatile stocks (if you have the balls, of course).

    Oops, oil out,   Oil up 100,000, Gasoline down 894,000, Distillates down 200,000, Propane/Other seems to be up 3.9Mb though – that should put a damper on the otherwise good news (compared to API but lame ahead of the holiday). 

    Not really playable. 

  22. 1,420 on /TF – have to take a poke there short (tight stops above).  

    Valuation/StJ – I don't believe that.  Companies are worth what they earn over time times what the market is willing to pay for those earnings.  It may be hard to determine the variables but it's a knowable number in the long-run, though random in the short run.  

    Head fake/Pat – We're in the middle of a range and people simple don't know what to do.  I do – STAY OUT OF IT!  

    See $42 is good to play long and $46 is good to play short and maybe you can play $43 long and $45 short with tight stops but why play at all when it's not obvious?

  23. Phil,

    When do we get back in /NGV7? Would like to accumulate for hurricane season

  24. /NGV7/Japar – Well it's $3.125 at the moment and we'd love to see a pullback to $3.  Still two months from hurricanes and it looks like it will be hot in the north but about average in the south so I'm not expecting any major demand over the summer.  Hopefully it pulls back.  

    Guy on CNBC just called Trump a "complete moron", noting that AMZN has been collecting web taxes for years and Trump's tweet can be disproved with a 10-second Google search.  Guy is chiding the CNBC crew saying "Why are we sitting here acting like it's normal for the President to tweet something that is factually incorrect?" and, of course, CNBC is jumping to Trump's defense (lest they incur his wrath).  CNBC: "That's his appeal, that he is spontaneous – that's why people like him..."  JESUS CHRIST!  WTF is wrong with this country???

  25. Volume/Phil – Really? no evidence, except numbers, math and examples.. but yeah, one can get statistics to say whatever you want, and clearly he had an agenda to support. LOL. Perhaps it was observed market behavior (plenty of nonsense in that) which provided the opinion, rather than the other way around. 

  26. Phil / CBI = thanks for the feedback and overall view on price….closed out the 15 puts and sold more of the 20 puts … keeping the spread and  will wait a bit more to sell some short callers, setting a alert at 24.5 and will look at selling short callers then…. - understand the higher target and agree.   Key issues were as follows – Legal ( 2.15B now 70 Million max) selling asset ( looks like this is on schedule for Q2) this closes some debt and frees up cash flow ( which is the las one)…  so back to my original premise on this on.

  27. Hitler and Mussolini were spontaneous too… I guess that's why people liked them.

  28. Volume/Scott – While certainly not the only indicator, what it does well is confirm the validity of a move, not predict future moves.  When you have a low-volume rally, it can easily be reversed with a high-volume sell-off and vice versa.  That's not a complicated "theory", is it?   What he does is postulate a disprovable statement that misstates the use of volume and then proves how clever he is by cherry-picking numbers to back up his statement.  The dangerous thing about that is that it then misleads people to believe that they can ignore volume – which is ridiculous.  

    You're welcome Batman.  

    Boy and THAT is how we dress the windows!  

    Hitler/StJ – I hear he loved dogs…  wink

    Image result for hitler joke

  29. Valuation / Nope. A company is worth the amount that someone is willing to pay for it and the company is willing to sell it for. 

  30. IWM popped over the all time closing high… took profits at close yesterday, reloading now… wheee!

  31. Phil – Take a look at Pandora (P). 

    Another stock difficult to search for.

  32. Think that's bad, just try searching for FU…

  33. BTW, lest we forget, we still don't have a budget resolution that was due back in April while the GOP holds all the Congress and the presidency:

    No risk there at all….

  34. Mkucs/IWM

    How are you playing it? I'm looking at some in the money August dated puts. 

  35. Ethereum explodes above $300

  36. I'm doing July as well as weeklies, having some success selling the rallies (buying puts).

  37. OMER under attack from short seller – will buy more eventually.  Glad I sold some – at the top – total luck.

  38. Market euphoria is at a 20-year high

  39. Thx Mkus. I bought some QQQ calls for next week and made a healthy 15% on those today with this little bounce. 

    I'm relaxing on futures since I'm just too busy to watch them all the time. Still need some fun plays here and there though to keep me occupied while the long dated stuff does its thing. 

  40. RB is flying

  41. Valuation/Winston – So truth is subjective?  You've just killed 5,000 years of philosophy….

    P/Albo – Yeah, no thanks on that one.  Accelerating losses, probably 0.50/share this year and maybe half of that next year if all goes well.  Having gotten Tidal a week ago, I can't even see why anyone would use anything else, though I guess most people don't care about audio quality as much as I do.  

    Budget/StJ – They can't really do a budget without a health bill first – that's why it's dead for a while if they can't ram it through now.  

    Webinar time!  

  42. OMER/Hanj – i'd be delighted to get back in at 15…!

  43. scottmi/OMER  I beleieve you will get your chance.  I expect no response from company so it would have to come from a sell side analyst – if any of them have the balls.

  44. Webinar – so who is doing the webinar today and what is he talking about?

  45. Webinar is up and running….

    Technical issues seem to be resolved…

  46. jeffdoc – epi….first I have heard of it….sorry.

  47. Truth-Truth maybe "subjective" but reality is not. Price is what price is agreed upon. That is both "truth" but more so the "reality" of the transaction.  Reality in todays market is just that, reality based on the various factors that make it reality. Be they "truth" or not truth, they "are"….  The answer to "why" is "why not….".

  48. From the Webinar:

    • We were liking /NKD short at 20,240 with stops over 20,250
    • EWJ Sept $54 puts for $1.05 are also good hedges.
    • IMAX is super good here, apparently we already added a bull call spread to our short puts.
    • I'm short 10 /TF at 1,422.66 avg, giving up over 1,430 or if /ES pops 2,440. 

    Truth/PB – So you feel that the truth is whatever people accept it to be but I have a more scientific mindset and believe there are objective truths that can be proven over time.  I guess that goes back to my love of Einstein, et al and, of course, the great Benjamin Graham said: "In the short run, the market is a voting machine but in the long run, it is a weighing machine.”  You think that the weight can be agreed upon by the parties and the actual weight doesn't matter – fine if it works for you but I tend to go with the theory that there is an absolute, measurable weight and, given sufficient time – the majority of the people will come to agree with the facts. 

    Not working out on Climate Change so far…  crying

  49. So the conclusion on CSIQ was to leave it alone?  I had a bad connection and had to give up mid-discussion.



  50. I love this study.  Just as we thought, Lawyers are a drain on society but nothing as bad as Banksters who are followed closely by Management.  Surprisingly, consultants neither add or subtract to the common good – maybe I've been too hard on myself…

    This is a huge point:

    he main point that strikes me is that, with the exception of research, all the estimates are fairly small relative to salary. And, that’s even if we ignore the points in the section right above.

    This suggests that at least for “normal jobs”, your donations to charity are a more significant component of your social impact.

    For instance, if we suppose making a random American $1 wealthier is worth one “unit” of impact, then I think donations to GiveDirectly are at least 20 times better, mainly because the recipients are about 100 times poorer than the average American. And I think Against Malaria Foundation (AMF) is about 4 times more effective than GiveDirectly, so it creates 80 units of social value per dollar of donations.

    This means that, if someone earning $100,000 per year donates 10% of their income to AMF, they create $0.8m of social value per year, which is about as large as the largest externality estimates in the table.

    So, nothing wrong with being Banksters if we donate 10% of our income to charity because that creates a lot more social benefit than if we teach or even if we help discover something. 

    CSIQ/Jeff – Well we spent $400 on a $10,000 spread and it's now $7,000 but we have no reason to think it's not going to make another $3,000 (42%) between now and Dec so it's a question of whether or not we have something else to do with $7,000 that we feel more confident about making 42% on in 6 months.  At the moment – I can't think of anything – so the position rides.

    Still, keep in mind that's $7,000 in a $300,000 portfolio we're risking – about 1/4 of a $25,000 allocation block (as it was a trade that went our way right away, we never pressed it).  If it's more significant to your portfolio, you should lean more towards taking the money off the table (also we are super well-hedged).  And, of course, Rule #2 at PSW is "When in doubt, sell half!"  This is a good situation to apply that to.

  51. Phil/IMAX,

    Can I ask about the imax trade that we have? not able to find it somehow.


  52. Phil – " Guy is chiding the CNBC crew saying "Why are we sitting here acting like it's normal for the President to tweet something that is factually incorrect?" and, of course, CNBC is jumping to Trump's defense (lest they incur his wrath).  CNBC: "That's his appeal, that he is spontaneous – that's why people like him…"  JESUS CHRIST!  WTF is wrong with this country???"

    Live from Asbury Park 1977… wafting in the air and Out.

  53. 142.10, can IWM close at a new high after yesterday's performance? Wild ride…

  54. Phil-Valuations. The dialogue was around valuations. Truth in this case is a subjective price transaction. Is AMZN worth 1k per share? To you, no. To others, yes. Subjective. The reality is, the tape prints the price action and the transaction is complete. Real. I wouldn't pay 1k for AMZN, but others will. Subjective and Real all in one transaction. A paradox argument….common in the market. Thats what makes it real and unreal (ironical) and fun and un-fun and, away from paradox into truth, makes learning here enjoyable….

  55. IMAX/Pat – Well, not sure what's official at the moment but, from scratch, I'd sell the Dec $22 puts for $1.70 and you can use that to buy the $22 ($3)/$27 ($1) bull call spread for $2 to net 0.30 on the $5 spread that's $1.15 in the money to start.  

    Sycamore is buying SPLS for $10/share.  

    Speaking of trades we like:

    • Shares of Supervalu (NYSE:SVU) are up 4.43% after RBC Capital highlights why the stock was oversold.
    • RBC's take: "Despite predominantly a wholesaler (only 6% of EBIT is retail), SVU is down 25% since KR earnings and 19% since AMZN/WFM announcement (2nd most in our space). We don't think Amazon plans to directly compete for SVU wholesale customers. Amazon's impact would be related to market share gains at the expense of SVU's retail customers. WFM and Amazon Fresh are very urban, in the most dense population areas, and average 585 people/MSA square mile. This is well above average (357/sq. mile) and SVU's retailer customers (277/sq. mile)."
    • The firm backs its Outperform rating and price target of $6 (+88% upside potential) on the grocery store stock. An even deeper dive into SuperValu was posted last month on Seeking Alpha by Michael Boyd.

    That was a Top Trade from 6/21.  See, VALUE is a FACT, not an opinion….

    • Bloomberg reports that Senate Majority Leader Mitch McConnell is scrambling to bring all GOP senators into the fold to support its version of the American Health Care Act. He aims to reach a deal with holdouts by Friday so the Congressional Budget Office can analyze its ramifications over the July 4 recess.
    • A vote is tentatively scheduled for mid-July.
    • McConnell has very little leeway with the number of Republican votes needed for passage. The GOP has 52 seats in the Senate and 50 votes are needed to OK the bill.
    • Moderate Republicans, like Susan Collins of Maine, want to see less cutbacks to Medicaid and less Americans forced out of coverage before committing their support. Conservatives, meanwhile, want to see fewer insurance regulations.
    • Senate Democrats have been uniformly critical of the bill so the GOP is not counting on any votes from their side of the aisle.
    • Steel companies (SLX +3.6%) are set to benefit as "meaningful Steel Section 232 measures are nearing," Jefferies analyst Seth Rosenfeld contends as he recommends buying U.S. Steel (X +4.2%), Nucor (NUE +2.1%), AK Steel (AKS +3.2%), Steel Dynamics (STLD +3.1%) and ArcelorMittal (MT +3.5%).
    • Rosenfeld says Earl Comstock, director of the Commerce Department's Office of Policy & Strategic Planning, criticized existing anti-dumping and countervailing duties as part of an endless "whack-a-mole" problem whereas Section 232 offers more holistic policy options.
    • The analyst thinks measures will not come until July, and will be more nuanced to prevent prices from rising too quickly and hitting steel consumers.
    • Caterpillar (CAT +1.8%) is reiterated with an Outperform rating and $123 price target at Credit Suisse following a strong dealer survey.
    • The firm says the biggest impediment that prevents the U.S. dealers from exceeding their initial forecasts even further is the availability of equipment as suppliers and/or CAT are not ramping production quickly enough, but "dealers remain optimistic on the end market front, confident the cycle is turning, even with increasing evidence that an infrastructure bill is further out."
    • Dealers say backlogs of contractors are growing, reflecting continued strength in residential, non-residential construction and base hit infrastructure projects, not affected yet by weaker crude oil prices, with fairly strong backlog for the next 3-6 months.
    • GrubHub (NYSE:GRUB) — dinged yesterday by a bearish take at Monness -- is rebounding today, up 0.7%, amid a reiterated Overweight rating at Pacific Crest.
    • Worries about food-delivery competition are "overdone," the firm says — indicated by GrubHub's recent decline (down 8.3% since last Friday's close).
    • The company has a solid platform and data, analyst Brad Erickson writes, and checks with 32 restaurants aren't showing ground-gaining from either Amazon or UberEats. Amazon's restaurant count has actually declined sequentially in New York City, he notes.
    • The firm has a $50 price target, implying 14.4% upside from today's pricing.
    • Canada’s oil sands producers have little choice but to pay up and move extra barrels by train, as the construction of three pipelines needed to move its oil to market lags years behind.
    • “We’re not going to see significant new pipeline capacity until late 2019 or 2020,” says Nick Schultz of the Canadian Association of Petroleum Producers; in the meantime, companies are stuck with the extra shipping expense as crude oil prices are down ~20% from this year's peak.
    • Pipelines in western Canada can carry ~3.3M bbl/day of crude, according to CAPP, while the area is expected to produce 3.92M bbl/day this year and 4.2M next year; Suncor's (SU +0.9%) Fort Hills oil sands project is expected to start production in Q4 and ramp up to ~90% of its 194K bbl/day capacity within 12 months come online, and Canadian Natural Resources (CNQ+2%) plans to complete a Horizon project expansion that will add 80K bbl/day.
    • TransCanada's (TRP) Keystone XL pipeline still needs to win approvals from regulators in Nebraska, Enbridge's (ENB +0.7%) Line 3 project has faced delays that have pushed its in-service date to 2019, and the fate of Kinder Morgan's (KMI +1%) Trans Mountain expansion also is uncertain after opponents of the project won power in British Columbia elections.
    • Canadian National (CNI +1.2%) and Canadian Pacific (CP +1.2%) railways may benefit from a pickup in their oil businesses for the next year or two, says Cormark Securities' David Tyerman, but “they view it as a short-term boost… “They’re happy to haul the stuff, but they’re not going to spend a lot of money on infrastructure because they don’t know if this is going to be around long."
    • The new Super Cruise hands-free driving system from General Motors (NYSE:GM) was tested live on CNBC this morning.
    • The highway-only feature is expected to included on the 2018 Cadillac CT6 as a $2.5K add-on.
    • The test on CNBC went smoothly for the most part, including Super Cruise alerting when the driver didn't look at the road for a four to five second period of time.
    • While Super Cruise isn't an apples-to-apples comparison to Tesla's (NASDAQ:TSLA) Autopilot system, the direction each company takes with mapping (LiDAR), infrared lights, sensors, alerting and media integration could define the future of autonomous driving.
    • CNBC test drive (video)
    • More information on the Super Cruise feature
    • Charter Communications (NASDAQ:CHTR) is up 2.6% after pricing $1.5B in senior debt, in two tranches.
    • The company is offering $1B in 3.75% senior secured notes due Feb. 2028, issued at 99.166% of principal, and $500M in 5.375% senior secured notes due May 2047, issued at 106.529% of principal.
    • Proceeds of about $1.5% will go toward general purposes, including potential buybacks.
    • Meanwhile, Mike Khouw says on CNBC that daily call options in Charter have gotten a boost to more than seven times average. He attributes the response to the successful debt sale.
    • Analysts say Chicago Bridge & Iron (CBI +2.3%can run still higher after surging 39% yesterday following the unexpected favorable ruling from the Delaware Supreme Court in a dispute with Westinghouse Electric.
    • Wells Fargo upgrades shares to Outperform from Market Perform with a $28 price target, saying CBI now has the potential to close the valuation gap with its peers, particularly if it sells its Technology business and repairs its balance sheet in the coming periods.
    • CBI still faces several hurdles including a potential Cameron LNG charge and perhaps others, continued tight liquidity and challenging end markets, a  CEO transition and balance sheet repair, but "as CBI moves past these hurdles, we would expect the stock to continue to compress the valuation gap with its peers," Wells analyst Justin Ward writes.
    • Ward advocates a sale of CBI's Technology business, which he thinks could fetch $1.25B-$1.9B; he calculates the earnings power of the remaining business at $2.50-plus in EPS, against which the stock is currently trading at 8x, while peers Jacobs Engineering (JEC+2%) and Fluor (FLR +1.8%) trade at ~15x.
    • Loup Ventures’ Gene Munster thinks Apple (NASDAQ:AAPL) Glasses sales will exceed the iPhone, according to CNBC.
    • Munster, a favorite of Apple followers, says the launch of Glasses in 2020 will eat into iPhone sales and make 2019 the peak year for phone sales. 
    • Munster puts FY18 iPhone sales growth at 15% accounting for 64% of revenue. 
    • He expects iPhone revenues to sink from 3% to 4% for two years after the Glasses launch.  
    • Apple hasn’t confirmed the existence of Apple Glasses, but does have AR and VR projects underway.
    • Previously: Apple confirms acquisition of AR tech company (June 27)
    • Shipping giant A.P. Moller-Maersk (OTCPK:AMKAFOTCPK:AMKBF) says yesterday's global cyber attack is preventing it from accepting new orders and has caused congestion at some of the 76 port terminals it runs around the world, including in Los Angeles and New Jersey.
    • Maersk says its vessels are maneuverable and able to communicate and crews are safe, as it contains the issue and is working on a technical recovery plan with its IT partners and global cybersecurity agencies.
    • But Maersk says it does not know when business will return to normal, and it is too early to assess the economic impact.

  56. Lawyers / Phil – I remember my lawyer telling me that he thought that lawyers were more important to society than teachers… BTW, relative to salaries, teachers are pretty important – $130K is probably 2x the average salary so nothing to sneeze at either.

  57. /ES closed right under the 2,340 line.  Interesting.

    AMZN/PB – No, AMZN is "worth" $1,000 per share to the people who traded 3.5M shares today, which represents 1% of the shares – it's a statistical fallacy to assume that 1% of the people are accurately determining price.  If you forced a liquidation of AMZN and tried to sell all 400M shares, THEN you would find out what people are actually willing to pay for AMZN, rather than today's slice of it.  You could argue the the 200-day moving average represents a more realistic determination of price and that I would agree with but that's way down at $850 – indicating AMZN is 20% overpriced at $1,000.  The fact that 1% of the people on any given day aren't careful shoppers means as much as a person who buys the same shirt at Nordstroms for $150 that you can buy at Macy's for $50 – he's just an idiot.

    That then goes back to why volume is significant, it simply gives you a better indication of what a reasonable sample of "people" are actually willing to pay for something.  

    Teachers/StJ – I wonder how many great and powerful people would even claim they got where they are without teachers and even the "self-taught" had to read a book by someone who was teaching them something.  It's certainly true that one of the great failings of our society is undervaluing education to the point where most of our workforce can be easily replaced by machines. 

  58. Phil/PBrown/StJL - When subjective, logic may not apply, side effects can include stupidity. History, science, logic, ask your Doctor if worship and superstition is good for you.

    Valuations (what somebody thinks its worth), price (what somebody paid for it), perception (what most think), reality (what avoids most), such difficult constructs for those whose thinking is nebulous at best. 

    This is the problem with talking monkeys of which except what is supposed in their minds, there is nothing divine.  We know very little and what we do not know is immense. We must keep learning lest many may fold under questioning like this and Out.

  59. Valuation Phil-Agree on all of your comment. Especially volume. In the few short months here, areas I admire (beside your 300% returns), are your passion and your command of subject and ability to "herd cats" as in control the market. Thanks for you time. Cheers

  60. Phil,

     Are you out of your /TF and /NKD shorts?

  61. Hey Phil, do you have an opinion on a long trade idea on FAS? Banks falling all over themselves to return money to shareholders after tonight stress tests.

  62. Shorts/Japar –  Went out right after work, certainly wasn't expecting that. Will have to deal with later or tomorrow.   Seems to be because Banks passed the stress test, certainly not a surprise    

  63. Banks/Kapella – We're actually still short FAS in the STP but it's a leftover leg of a bullish trade we may need to kill if they break over $50.

    If you want to play banks bullish, I'd go for WFC, which is behind the others due to the scandal at $54.33.  Due to the volatility, you can still sell 2019 $50 puts for $4.15 which nets you in at $45.85, not far from the lows.  If you want to be more aggressive, I'd go for the $50 ($7.70)/$60 ($3.10) bull call spread at $4.60, which would be net $2.53 per $10 spread if you sell half as many puts as calls.  So for example, selling 10 WFC 2019 $50 puts for $4,150 and buying 20 of the spreads for $9,200 nets you into $20,000 worth of spreads for $5,050 with close to 300% upside potential at $60+.

  64. Oil testing $45, /RB testing $1.50 – gotta have faith in those manipulators.  

  65. /CL- Is Gartman still alive?

  66. Hi Phil – Have a safe trip and a good time with the Family!

  67. Mafia gangs move to Germany as business hits hard times in Sicily

  68. After Helicopter Attack, Venezuelans Ask, What Was That About?

  69. U.S. Tech Firms Feel the Heat in Europe

  70. Forty Arrested Protesting Health Care on Capitol Hill

  71. Safe Travels Phil  

  72. U.S. Image Suffers as Publics Around World Question Trump’s Leadership

  73. Blue Apron Serves Up an Insipid Offering

  74. Good morning!  

    /NKD and /TF calming down a bit, /ES back at 2,440 so we'll see what happens. 

    Gartman/Aquila – Shame on us for not betting the house against him.  Only took 24 hours for him to be totally wrong.


    Trip/1020 – Thanks, working until 1pm today and then off to Paris. 

    • The U.S. Commerce Department's final estimate of Q1 GDP is expected to show the economy growing at a 1.2% annualized rate.
    • "If it shows any sign of upside surprise, that could be very positive for both equity and bond markets. However, any kind of downward revision would really cast a very, very downward spell," BK Asset Management's Boris Schlossberg told Trading Nation.
    • The previous reading, published last month, showed economic growth slowing less sharply than the initial figure.

    AI Will Add $15.7 Trillion to the Global EconomyArtificial intelligence may not be so threatening after all. Amid warnings of the economic disruption that robots and automation could unleash on the world economy as traditional roles disappear, researchers are finding that new technologies will help fuel global growth as productivity and consumption soar. AI will contribute as much as $15.7 trillion to the world economy by 2030, according to a PwC report Wednesday. That’s more than the current combined output of China and India.

    Japan Retail Growth Slows as Wages Continue to DisappointJapan’s retail sales growth slowed in May compared to last year, signaling that consumers are still reluctant to open their wallets. 

    FBI Director McCabe Subject Of Three Separate Federal Inquiries Into Alleged Misconduct: Report

    Lacy Hunt: The Fed Has Undermined The Economy's Ability To Grow

    Why Janet Yellen is very wrong about the banks

    Moody's Warns That Private-Label Credit Card Issuers Will Be Crushed By Retail Implosion

    How Did It Go So Wrong" Goldman Asks, As It Slashes Oil Price Target

    Investors Just Panic-Dumped "Growth" Stocks As ETF Outflows Hit Record High


    • The rebound in U.S. natural gas prices above $3/MMBtu could be derailed this summer by a looming supply glut, some analysts and market participants say.
    • Companies have been accelerating drilling in 2017 to capture higher profits and meet demand for low-cost gas in the U.S. and abroad, and international markets drew more heavily on U.S. supplies this year.
    • A ramp up in gas drilling in the Marcellus and Utica shales, and new pipeline infrastructure in the northeast promises to push more gas into the U.S. market, and oil drilling in the Permian Basin, an area rich with associated gas, also  should boost production.
    • Additional production from those fields and other gas-rich formations could lift 2017 U.S. gas output by 3B cf/day in 2018, Tudor Pickering Holt's David Pursell tells Argus Media – enough gas to offset the 700M cf/day increase this year in gas pipeline exports to Mexico and the 1.5B cf rise in gas intake at Cheniere Energy's Sabine Pass export terminal in Louisiana.

    News on laptop ban, travel ban

    • The Department of Homeland Security has decided not to expand an in-cabin "laptop ban" on planes flying to the U.S., but will instead demand tighter security measures.
    • If any airline doesn't meet the new requirements, DHS said it could ban its flights.
    • The new procedures were announced before President Trump's modified travel ban goes into effect tonight.

    This robot-made pizza in Silicon Valley should terrify Domino's(DPZ) and Pizza Hut

  75. Phil,

    Are you expecting the markets to push up into the end of the quarter and maybe drop a little in the first week of July? Looks like they've pushed the dollar down to prop everything else up