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Monday’s Missing Market Mechanism – Infrastructure

Image result for tanned and restedI'm back!

In my quest to better understand the Global economy (and it's affect on teens), I dragged my family off to France and the UK for the past two weeks and tested the effects of Socialism on two girls who were raised in an entirely Capitalist system.  While we're still tabulating the data, certain trends are evidend such as "public transport is amazing", "free health care, are you kidding me?" and, of course, "free college – can we move here Dad?".  

Jackie was very impressed that the beaches don't charge fees, Maddie is actively finding out if she can keep her 504 Plan College fund if she goes to Europe instead.  Not a bad idea, really, as she's fully-funded for college but, if she takes an Advanced Learning Loan in the UK (which would require her to establish residency first), she would have her college paid for with the obligation to pay back 9% of her income over $27,000/year.  After 30 years, the program terminates, whether the loan is fully paid back or not.

That's a very fair way to have students pay for college and Madeline realizes that, since she already has enough money to buy a house in her US fund – she'd be miles ahead of the game.  Frankly, if I hadn't wisely funded the kids' 504 plans when they were born or had the market been unkind to their funds – I would have seriously considered moving the family to Europe when they started high school becasue we're talking at least $300,000 and probably closer to $500,000 to put two kids through good schools and we too could have gotten a free house in exchange for moving to Europe.  Now do you see why housing prices in London are soaring? 

Image result for london housing prices

Not only that but my Uncle has a $2M home in London and pays about 20% of the property taxes I pay on my much more modest home in New Jersey.  He also doesn't spend $20,000 a year on health care for the family with no co-pays, no deductibles – NOTHING!  For that, he is taxed 45% of his income over $150,000 but there's no tax on interest earned or the first $6,500 in dividends earned or from rental income (on a property you live in).  

In exchange for paying more taxes, however, the entire country is covered by a first-class public transport system with nicely paved roads and non-rusty bridges and drinkable tap water (no fracking!) and fanstastic public education that gives his business a well-educated work-force along with that same safety-net which means they aren't all exhausted from working 3 jobs to survive.

But it's infrastructure that I want to talk about.  This is why those evil Socialists are going to leave this country in the dust over the next few decades – because they invest in their own countries AND they take that money from the people who have the most (and who benefit the most).  

America, on the other hand, has a grade of D+ on their infrastruture report cardGREECE has a C!   Imagine having to cheat off of Greece to pass a test – THAT's how pathetic US Infrastructure is.  America has underinvested in Infrastructure to the tune of $4 TRILLION and that is a stealth tax on the 50% of our popluation that can't get to a grocery store using public transportation, can't drink the water that comes out of their taps or can't educate their children well enough to compete fairly with children who live in richer neighborhoods.  

Almost HALF of our driking water is lost through leaking pipes (6Bn gallons/day for 300M people is 20 gallons/day per person!) with 240,000 water main breaks per year considered "normal" in our crumbling water system, that hasn't been upgraded since the 70s.  Fixing the system would cost $1Tn and cut our water use in half but the companies that sell you water lobby against "raising taxes for infrastructure" and they pay their lackeys on Fox and the MSM to brain-wash you into thinking taxes are bad for you.

water sewer stormwater rates 2015 water prices United States residential waterThe average water bill is $200/month in the US and there are 110M homes so saving half that money would net back about $130Bn a year and the project would cost $1Tn, which means the Government could borrow that money and pay it off in 10 years by taxing people the same $1,000 they are saving and, after that, it's a free benefit for the next 30 years.  We've been coasting on the benefits our parents and grandparents paid for but now we're reaching the end of the line and, if we don't act soon, our children and grandchildren will be forced to shoulder a huge burden.

Likewise, the aging US electrical grid wastes half the energy that is generated and the Koch Brothers are very happy to produce twice as much electricity as you really need because they pass those costs right on to you.  If we use tax money to fix our electrical grid, the Koch Brothers will have their income cut in half – that's why it's worth it for them spend $1Bn to buy an election and make sure you live your life as if you were an uneducated farmer in 1776.  

Not that they care, of course, but we're really putting the country at risk on this one as 640,000 miles of high-voltage lines and transformers that were built in the 50s and 60s had a 50-year life-expectancy and 2017 – 1969 is already 48 years so even the NEWEST energy infrastructure is about to go past it's life-cycle while the stuff from the 50s is already critically close to failing.  

Image result for obama solar successLuckilly, Solar Energy is bailing us out a bit as homes go off the grid but any attempt by the Government to accelerate this process has been crushed by Koch-backed sleazeballs in Congress.  It's costing us $30Bn a year in "disaster response" just to keep operating the way things are so spending $1Tn now to improve things for the next 50 years would ultimately save $500Bn – and that's assuming we could keep spending just $30Bn on band-aids and no major crisis blows our budget.  Again, the benefit would be cutting electrical costs (currently averaging $1,000/month) by 50% (saving $550Bn/year for our citizens).

Although we would also cut greenhouse gas emissions from electrical generation by 50%, the solar companies are against this fix too because cheaper electricity competes with Solar, so even Elon Musk doesn't want to FIX your electrical grid – he wants you to pay to get off it yourself and your Government won't advance just two years of your savings to fix the whole problem.  That's because we elect the WRONG people!!! 

Image result for infrastructure spending and gdp growthLack of adequate investment in infrastructure causes us to pay double on our electric bills and double on our water bills and – double for cars and gasoline as well.  Because we have such terrible public transportation, a family of 4 with two teenagers can hardly get buy with 2 cars.  The US, and I kid you not, has 797 cars per 1,000 people.  That's of any age!  The UK, with excellent Public Transportation has 519 cars per 1,000 people – 35% less!  Not only that, but they drive the cars much less because it's often EASIER to take the bus or the train – even when you have a car.  

Less money spent on cars leaves more money for other things and, of course, much less pollution and greenhouse gases are generated.  Hong Kong, a former British colony also with great public transportation, has just 77 cars per 1,000 people, India has 32, China 140.  This isn't because their people are backwards – it's simply that you don't need so many cars when there are adequate buses and trains for people to use.  

China is kicking our asses in GDP growth because they massively invest in infrastructure.  As we know from the Transcontinental Railroad (1869) or the Interstate Highway System of the 50s, when you build new roads, bridges, dams, airports, etc. – you allow new commerce to spring up around it and THAT creates jobs that drive the economy forward.  Our lack of infrastructure investing chokes off job creation and, sadly, that's the way Big Business likes it, because it also keeps their potential competition from being able to gain a foothold.  

Image result for infrastructure gdp growth

We used to be an Advanced Economy that was beginning to focus on Quality of Life issues, making real progress in the 90s but now, less than 20 years later, it's hard to ague that we're not in Survival mode and even those needs are not being met.  Yet, because the market is artificially stimulated while real, asset-creating stimulus is ignored – the people seem willing to sit by while we kick the can further down the road.  It's not going to end well and it's not going to last long at this point.

You've been warned!  


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  1. Good Morning!

  2. Winning…. Do we need new lines again?

  3. Good morning…welcome back Phil.

  4. Europe / Phil – I think that there is much to be learned from both sides of the Atlantic and that could easily be achieved if not for the fact that we are currently led by some extremely dogmatic people who refuse to learn from their past mistakes (of from science for that matter). And some in Europe could possibly learn from us on policies that might help them as well. 

  5. Or we could cut out the wars and do it all with NO tax increase. Silly, I know, will never happen.

  6. We are building infrastructure, just ask how much we're spending in Iraq and Afganistan. Half of that may disapear into a black hole, but it is money being "spent."

  7. Past mistakes mkucs….

  8. Ongoing StJ. We not only pay to blow it up but then to rebuild. Incredibly insane. Good for arms sales though.

  9. Repeat of my earlier comment so we're all on the same page:

    Good morning – officially!  

    Kept forcing myself to sleep a bit more, trying to get adjusted back to East Coast time.  

    Nothing too eventful over the weekend, markets drifting along.  I expected early July to be dead into earnings – that's why I picked those two weeks to go away.  The variable was, if I was wrong, I wouldn't have been able to put in half days from the UK last week but that was already "hedged" as a possibility and my family was pleasantly surprised that I made all of our dinner engagements.  

    I hedged my luggage when I packed too, putting most of the weight into my carry-on, in case the kids underestimated their bags and incurred a $200 penalty for being overweight but they nailed it – so I'm a proud father.  I guess hedging is in my nature and that comes from being the son of a systems analyst – as my Dad would always be looking for potential flaws in things.  

    I remember when I was a kid, we were going through an automatic car wash, which was new at the time, and my Dad said "You know, if this stops working they're going to have a very difficult time getting all these cars out."  That was my Dad, but fortunately he used the same observational skills to point out the silly things in life, which made it all very fun.  I try to pass that on to my children as well but my Dad didn't have the disadvantage of having to compete with social media for their attention.

    Anyway, so hedging is in my nature and it's not because I'm pessimistic – it's just that a short-term loss can erase years of gains and it's statistically better to sacrifice 25-33% of your gains in order to lock them in, rather than take a chance that a major loss will undo all that hard work. 

    Obviously, with our overall performance, there's nothing to apologize for.  In fact, the LTP is up 228% at the moment at $1.6M and that's up $200,000 (14%) since our 6/18 review and, essentially, we haven't changed a single thing all month!  That's already blown past our goal for the year as it's 40% of our original $500,000 and the point is, not how fantastic our longs are but how STUPID it would be to just let these things ride and risk a 20% correction that would now knock $320,000 off our gains.

    Hedging is insurance and the mistake people make is they sometimes over-insure but, if you treat it as a BALANCING tool, you will be able to enjoy your vacations a lot more – including the 30-year one you take at the end! 

    Now, the funny thing is the STP is still at $323,000, also untouched and that's actually up $18,000 since June 18th because TSLA came back to Earth and made up for SQQQ and TZA losing more ground.  So we're going to take our TSLA profits and HEDGE MORE with SQQQ and TZA and we'll probably lose all that money too but who cares as long as our LTP is putting up these stellar gains?

    I know it sucks to have those big negatives in your portfolio but hedges are SUPPOSED to lose money when the rest of your portfolio is doing well and even our long-term positions are hedges with short-calls, etc. because, as I said, hedging is in my nature but BECAUSE we are well-hedged, I can feel comfortable with the reasonable leverage risks we do take in our options trading – especially short puts, because I KNOW I will be getting a fat load of cash from our STP to help pay for the stocks I'm "forced" to buy at a discount in my LTP.

    I took my vacation because we're about to start our hedge fund (Q4) and I don't anticipate having much time to take off while we get it rolling.  If any accredited investors are interested in starting with us, contact Greg (admin at phistockworld dot com) and he can get you on the list but we're also looking for people who want to invest along with PSW Investments and OWN part of the Fund Management Company, so instead of complaining about the fees – you can collect them!  

    That's BEING the House, baby!  

  10. I meant starting the war in the first place….

  11. Agreed, but we are currently bombing in 7 countries and maintaining approximately 800 military bases around the world. We are the terrorists.

  12. ….such a responsible people we are….We break it, We buy it…. :(

  13. Good morning again!  

    Big Chart – As noted above (and Friday), it's time to roll our hedges, not time to draw new (sillier) lines. I will say, however, that I was encouraged by my trip because UK and France are not doing any worse than we are, economically.  UK is actually better but the mood has been crushed by Brexit so the underlying strength is being squandered and ignored amidst all the wrangling over what is essentially just an economic treaty. 

    Both sides/StJ – Sure, we could all benefit from each other's ideas if we all weren't so sure of our own superiority.  

    Wars/Mkucs – The war we need to cut is the war on poverty.  Not the war against poverty but the war against poor people we have in this country.  We're spending $1Tn/yr locking people up, 75% of those people are charged with drugs or stupid crap that they simply couldn't make bail for or get a good attorney to fight.  Our incarceration rate is 5x average countries (25% of the people imprisoned in the World are in the US) – truly insane and, of course, losing a breadwinner impoverishes more families:

    The children of incarcerated people pay enormous costs. They are five times more likelyto go to prison than their peers. They’re likely to be stigmatized and suffer long-term emotional and behavioral challenges. They also have a greater chance of living in poverty or general instability at home or becoming homeless themselves.

    We are terrorists/Mkucs – No, we're the all-powerful oppressors that breed the conditions that encourage terrorist retaliation.  

    Pottery Barn Rule, 1020.

  14. Phil – couple questions…

    I have been playing along with /NGV7 – which I thought were October contracts I just noticed TOS has them listed as expiring in Sept – is this normal? am I in the correct contract?

    Also there are some sold ITM $15 calls on CSIQ in the OOP expiring this week – ant ideas on what to do with them?



  15. Agree!!! So how do we stop?

  16. tsla???

  17. StJL – "Wow Phil – spend 2 weeks in Europe and you come back a changed man"

    Phil, when was the last time you were in Europe for an "extended" period?

    Phil – "That's because we elect the WRONG people!!! "

    Been going on post Truman, at all levels.

    Muck – "We are building infrastructure, just ask how much we're spending in Iraq and Afganistan. Half of that may disapear into a black hole, but it is money being "spent.""

    What do you want them to do? Spend that all that wasted money on healthcare, education, social safety nets, services, programs and infrastructure that would benefit the public?  You have better odds that the War on Drugs, aka the War on the Poor will end.  In reality, hell will freeze over first or there will be blood.

    Muck – So how do we stop?  Time to choose.

    Phil – "What's going on in this country is not capitalism, it's protectionism for the already rich to prevent others from competing on a level playing field."

    If you took away their "double Irish with a Dutch sandwich" tax evasion schemes, the Bezos and Cooks of the world would cry "we pay too much", let alone make them pay the back taxes due.  And these exemplary models of leadership will really throw a tantrum, and say "we can't compete", if you take away the anti trust advantages, and the outsourcing to labor at the margin they have utilized to destroy their competition and the American way of life.

    These are our leaders and roll models? I'd rather stick needles in my eyes. Just whining turncoats who take advantage and not Heroes for even one day and Out.

    Welcome back Phil.

  18. /NGV7/Jeff – They are October contracts (for October delivery) which expire in Sept.  They are currently the front-month contract but you sure should have taken $3.05 and ran just now (see last week's discussion) and now is a good time to flip to /NGZ7, which is currently $3.28 so maybe back around $3.20 or $3.25 if you want to be aggressive.  

    CSIQ/Jeff – In the OOP, we have:

    Long Call 2018 19-JAN 10.00 CALL [CSIQ @ $16.83 $0.49] 20 1/5/2017 (186) $8,600 $4.30 $2.70 n/a     $7.00 $0.40 $5,400 62.8% $14,000
    Short Call 2017 21-JUL 15.00 CALL [CSIQ @ $16.83 $0.49] -20 1/5/2017 (4) $-2,660 $1.33 $0.57     $1.90 $0.50 $-1,140 -42.9% $-3,800
    Short Put 2019 18-JAN 10.00 PUT [CSIQ @ $16.83 $0.49] -20 1/5/2017 (550) $-5,600 $2.80 $-1.60     $1.20 - $3,200 57.1% $-2,400

    CSIQ is way over at $16.92 and now it's a question of how confident are we that it will continue higher?

    If we cash out now, we take about $8,000 off the table off a net $640 investment, so First World problems here.  If we don't cash out, we have to roll the short $15 calls ($2) to the Jan $17 calls ($2.50) and that puts $1,000 in our pockets and widens the spread by $4,000 and now only can we hopefully collect the $4,000 bonus but we still have a line on the last $2,000 from our original spread at $15+.  So, what are we risking?  We're risking $8,000 to make up to $7,000 between now and December and, realistically, we're pocketing $1,000 so even if the position drops 20% ($2,000) we still pull it off the table with a huge gain.  That makes it an easy decision, right?  

    How/Mkucs – I think it would require more "progressive" thinking.  Some might say we'd need to take a more "liberal" view of the issues and come up with fresh solutions that are more in-line with our "democratic" principles.  Can't imagine how that can happen though….

    TSLA/Jabob – I wasn't worried.  

    Elon Musk: Tesla's stock price is higher than we 'deserve' right now

    Tesla? Not Even for Free

    • TSLA shares have seen a major rise despite putrid long-term financial results. Unlike MindBody, TSLA owes about $8 billion, with more than $7 billion of that classified as under five years in maturity.
    • TSLA's cumulative cash burn has been more than $3 billion to date. Capital spending needs are enormous, making large new borrowing a necessity.
    • CEO Elon Musk is like the Pied Piper. He toots his horn and followers send money to fund his companies' losses. That is a very dangerous way for a company to operate. If the credit market freezes or the investment climate toward TSLA, in particular, deteriorates, the ability to roll over debt could dissipate quickly, or vanish altogether.
    • No rational person would likely accept ownership of the whole company for free if they couldn't sell shares to others. Would you be willing to shoulder billions in current and future deficits on the chance that TSLA will make it back someday, maybe?


    Tesla Faces Stiff Competition In Energy Storage War

    Tesla Has Its Skeptics, but Also Die-Hard Elon Musk Fanboys That Are Laughing at Short Sellers

    I like this article:

    Amazon Is Pure Madness: It's Going to Destroy Almost Every Industry Alive and It Must Be Stopped

    Europe/Naybob – About 15 years, not counting cruises.  London has gotten way nicer – last time I was there it looked like NYC in the 70s (urban blight), they really turned it back around nicely.  

  19. War/Mkucs – Yes, we can't imagine how to fix things:

  20. imax weak again…

    seems awfully cheap (I hope)

  21. go M!

    go TGT!

    go GILD!

    go GNC!

    go LB!

  22. Phil I like your comments from your trip, all well but you forgot the gasoline prices, I pay them every day!!!!

  23. RUT flying up at 1,432.5 but others are still weakish.  If NYSE goes red, I'd be inclined to short /TF or if /TF crosses below 1,430, then short with tight stops.  We're lined up with /YM 21,575, /ES 2,460 and /NQ 5,850 – all very strong lines but I'm also expecting the Dollar to bounce this week (now 94.85) so over 95 on /DX is a great place to be bullish with tight stops below that.

    Oil ($46.50) and gasoline ($1.57) remain unplayable at the moment and /NKD too crazy to call (20,095) 

    /SI $16.15 baby!  /KCU7 rejected at $135 so far.  

    LOL Jabob – It is fun when they come out of their comas, right?

    Gas/Yodi – Well if you didn't drive around in your house, it wouldn't be so bad.  Most of the Ubers I took were Prius'.  Maybe you'll be able to get one of those hydrogen fuel converters for your camper?  

    TSLA/Jabob – Well all the auto companies will now be blamed for every accident, even though we currently have 5.6M accidents per year in the US with 1.3M annual deaths globally.  Consider that auto insurance costs about $5,000/yr and figure car companies will be found 20% at fault (low-ball estimates on both variables) and that completely destroys the margins for selling autos.  That's why I think all these self-driving hopes and dreams are a bit ahead of themselves.  New laws need to be passed to reign in the legal issues but, on the other hand, you can't let companies put out a fleet of Christines and be held harmless.

  24. Jabob – Your FU portfolio is doing well today.

    Don't forget CBI.

  25. Healthcare will take this economy down! How can they design such obvious traps for people – the Cruz amendment lets company create skimpy plans but:

    To encourage continuous coverage, the GOP plan installs a six-month waiting period for anyone with a two-month gap in coverage. The skimpy policies wouldn’t qualify as continuous coverage.

    So they count for premium reduction but cannot be called insurance for continuous coverage!

  26. Hydrogen fuel now this is the only way to go. Fill it up with water please!!!!

  27. Welcome back Phil!

  28. Phil

    Any interest in this group


    alternative asset managers,

    The Carlyle Group CG

    Ares Management ARES

    Blackstone BX

    KKR & Co   KKR



  29. albo--fortunately, CBI isn't in the portfolio ;-)

    But I am happy to see it doing well for all of you!

    FTR weakening? 

  30. Phil,

    Why is the dollar so weak?

  31. So when the stock price is in the mid 300's, Musk taunts the shorts, and when it goes down, stock is overvalued.  Musk also like to hedge Phil, against class action lawsuits and stock manipulation.

  32. Yodi – "Phil I like your comments from your trip, all well but you forgot the gasoline prices, I pay them every day!!!!"

    What's the problem? 0.55 L = 2.08 E per gallon or $2.39 US for GPL with a dual fuel system.  Your one of those guys using regular unleaded 1.50L  = 5.67 E per gallon or or $6.52 US or diesel @ 1.40L, sorry bout that.  Going duel fuel GPL/Petrol is easy.  And of course you could set up your diesel to run a CNG or GPL/Diesel blend, dinky VW Jettas get 120MPG 

    For a look at some bigger diesel rigs running the blend, click here and scroll through the videos. For the mad scientist here is a complete study.  Shhhh, don't ask, don't tell, just like WIMAX in the last mile, big oil does not like this and Out.

  33. BX/QC – We had BX, KKR and CG at various times when they were cheap, none are particularly on sale now.  KKR carries a pretty heavy real estate portfolio – that makes me nervous with rising rates and BX would be my 2nd choice with both of the others too expensive.  If you are already in RE, I'd go BX but, otherwise, KKR is a reasonable exposure to RE without getting too wet.  

    With KKR, the 2019 $17 puts are $1.45 and net $15.55 is a great entry.  I'd go with the $17 ($3.20)/22 ($1.10) bull call spread at $2.10 and, of course, plan on doubling down on the puts and rolling the calls lower if they take a tumble so make sure you REALLY want to own 2x KKR long-term for $15.55!  

    Looking at BX, I like KKRs option pricing better too.

    Dollar/Japar – ECB rates come Thursday, BOJ Weds, both might raise rates so Dollar down by comparison as Yellen was doveish last week.

    Turbines/Tangled – Very cool if they really work.  5kWh is about 1/2 a homes energy needs in low wind but not sure if that $5K includes storage system or if they are counting on your meter to run backwards or if they figure it's good enough to power the basics and you'll use the grid for surges.  

    Musk/Rustle – Good point.

  34. qcm All stocks you quote with exception of ARES are on top of the ladder. I do have plays in BX  but at 29.27 and KKR has been a dog for me, so I would not enter any further plays with them at this time.

  35. Phil – The XLE looks like it's in an almost perfect downward channel.  Looking to buy if it breaks decisively through the 50dMA.  

    What are your thoughts ?

  36. Turbines – can be hooked to battery but does not come with one.  Currently set up for off grid or to hook through inverter to grid.   What I like is where I live when sun is least, wind is most.

  37. Yodi  Phil

     Thank you I going to pass

  38. CTSH/Butterfly – We are short the July 62.5 and 65 calls expiring Friday. The 65s could be rolled to the Oct 67.5  for a small debit but the 62.5s can't be rolled up without paying a larger debit. We also don't have a short put. Any suggestions?

  39. Japar – Why is the dollar so weak? – Less spending pushes the dollar up and we know that spending is not on the rise.  So there might be some liquidation of dollar denominated assets going on at the moment.  Recall the recent sell off in bonds where the 10 and 30 yr crossed the 50-and 200-DMA?

    Several factors could be involved, one way MBS hedgers attempt to decrease their duration risk is by selling Treasury securities.  And/or the FHLB's ($300B) and government MMF's ($1.2T) who supply short term collateral for market makers, are known to have duration mismatches. Sudden rises, such as the recent sell off in medium to long term rates can trigger a self reinforcing sell off in Treasury and related fixed income markets. 

    The Fed steps in if the above which is referred to as a convexity event, gets out of control.  Also, FX arbitrage (dollar carry) and liquidity factors (dollar denominated holdings and synthetics being liquidated) are holding the dollar down and counterbalancing less spending, which pushes the dollar up.  As opposed to government bond sales, all these types of liquidations, flood the market with dollars. More dollars, lower dollar.  Neither liquidations of dollar assets nor less spending are healthy market signs and Out.

  40. Phil – so will that csiq adjustment be an official play in the oop?

  41. And yes I did get out of /ngv7 at 3.051…

  42. Save the Census

  43. Any reason why FTR is getting dumped again today?

    Early morning tease…dangit!

  44. XLE/Albo – If oil collapses why would they do well?  XLE is likely to lag rising oil prices so you can always wait to be sure before jumping in long.  XLE was down at $50 in early 2016, this is still 35% higher than that, not just 15% lower than the top.   

    CTSH/Dave – I'll be doing all the portfolio reviews tomorrow, Weds and Thursday. CTSH just under $69 and a bit stretched, so we can roll along to $67.50 puts and calls for sure.

    CSIQ/Jeff – As above, will do a review soon but that's a perfectly good adjustment to make.  Good job taking your profits and running!  

    FTR/Jabob – Well Cramer keeps bashing them so his hedge fund buddies can load up at $12 and I'm not going to stand in their way.  Earnings are 8/1 – that will be fun.

  45. XLE – Not sure oil is going to collapse here.  Waiting to see.


  46. why is imax hitting new lows again??

  47. Probably just continuation of the trend Jabob.  There doesn't always need to be a new reason.  

  48. IMAX/Jabob – July no real blockbusters.  

  49. NFLX reports after the close.  Always interesting.

  50. NFLX / Albo – Interesting as in big swing moves…

  51. We gave up on shorting NFLX but I wouldn't go long.

    Indexes turning down a bit.  /TF right at the 1,430 line with 21,575, 2,456 and 5,839.  We'll see how we close.

  52. I would really be careful shorting NFLX but there are always so much on the razor's edge that it would not take much to take them back down to $150. I am just not that courageous…

  53. STJ – Nor am I.  I learned that lesson sometime ago.

  54. nor am I …. which could mean it gets crushed today ;-)

    • With the exception of Russia, every country ETF on the planet is is in the green this year, according to Pension Partners' Charlie Bilello – that's 44-1 for those keeping track.
    • Poland (NYSEARCA:PLND) leads the way with a 42.3% advance, followed by Greece (NYSEARCA:GREKat 37.9%, and Turkey (NYSEARCA:TUR) at 37%.
    • At the bottom is Russia (NYSEARCA:ERUS) with an 8.6% decline. Next worst is Egypt (NYSEARCA:EGPT), up 4.9%. On average, the 45 single-country ETFs are up 19%.
    • There's little major damage to be seen in the Shanghai Composite, which fell 1.4% overnight, but nearly 500 names in China tumbled their daily limit of 10%, and more than 1.2K in Shanghai and Shenzhen slid over 7%.
    • Shenzhen –  more tied to smaller-cap stocks – fared worst, with the Composite Index there down 4.3%.
    • Some local analysts are dubbing it "Black Monday."
    • Over the weekend at a financial conference chaired by President Xi Jinping, policymakers talked a tough line on deleveraging and regulation.
    • China small-cap A-shares ETFs are hardest hit: CNXT -3.7%ASHS -4.4%

    • Holding court at the National Governors Association meeting this weekend, Elon Musk made some news saying (again) that Tesla's (NASDAQ:TSLA) stock price is too high.
    • The comments, along with news of a supposed autopilot failure in a Minnesota crash, helped send Tesla lower by nearly 4% this morning.
    • Musk, however, took to Twitter a few minutes ago to clarify, calling the price high based on past and present, "but low if you believe is Tesla's future. Place bets accordingly."
    • Shares remain lower by 2.5% on the session.

    • Bloomberg reports that Alphabet’s Google (GOOGGOOGL) will offer researchers and academics free access to its quantum machinery cloud service.
    • Google predicts that its quantum system will prove supremacy to existing supercomputers by the end of this year. 
    • IBM began offering access to its quantum machine via cloud earlier this year. 
    • IBM has announced a prototype 17 qubit quantum processor. Google says it’s developing a 49 qubit machine. 
    • M.I.T. professor Seth Lloyd tells Bloomberg those numbers don’t mean a ton as useful applications won’t appear until about 100 qubits.

  55. Trump generally babbling about all sorts of things.  

    Very clear on repealing Obamacare, whether or not they have a replacement ready. 

  56. nflx… boom

  57. Trump claiming he added 45,000 mining jobs, repeats it over and over again.  This was already debunked last month.

  58. why can't imax do that???

  59. NFLX up about 8% in 2 seconds on strong subscriber growth but EPS off by a penny (0.15). 

  60. Mining / Phil – At this point you just can't believe a word these guys say. Up is down, black is white. That started with the inauguration numbers. You are dealing with either pathological liars or deeply insecure people. It can be argued that all politicians lie to a certain extent, but right now it's at every level of this administration and people around it and in the face of demonstrable facts. 

  61. NFLX taking a page from the AMZN handbook:

    Last quarter, Netflix said it would spend over $1 billion in 2017 on marketing costs alone, projecting that the company would have negative free cash flow for "many years" as it invests in original content, including an estimated $2 billion in negative free cash flow this year.

    Making money is so last century!

  62. On the other hand, that susbcriber growth is quite remarkable.

  63. Phil, 

    Do you have any index shorts?

  64. UnitedHealth beats and raises its forecast

  65. China has a donkey shortage — and why that matters

  66. California climate law touted as global model faces key test

  67. Wall Street Profits by Putting Investors in the Slow Lane

  68. Good morning!

    Things are drifting along at the moment.  We're flat but Germany is down almost 1% and falling so I sure do like shorting as the weak Dollar is the only thing holding us up and it should bounce here (94.50).



    Not really different from yesterday, when it was:

    RUT flying up at 1,432.5 but others are still weakish.  If NYSE goes red, I'd be inclined to short /TF or if /TF crosses below 1,430, then short with tight stops.  We're lined up with /YM 21,575, /ES 2,460 and /NQ 5,850 – all very strong lines but I'm also expecting the Dollar to bounce this week (now 94.85) so over 95 on /DX is a great place to be bullish with tight stops below that.

    Oil ($46.50) and gasoline ($1.57) remain unplayable at the moment and /NKD too crazy to call (20,095) 

    /SI $16.15 baby!  /KCU7 rejected at $135 so far.  

    /KCU7 pulled back to $1.32, /SI  hit $16.20 before pulling back to $16.10, oil is $46.70 all of a sudden, after testing $46 and /RB jammed back to $1.5725.

    • It looks like Qatar crisis could drag out for a while.
    • "The situation we want to move to is a neighbor that we can trust, a neighbor that is transparent, that we can do business with," said Anwar Gargash, UAE Minister of State for Foreign Affairs.
    • "This is not a crisis where we are looking for a quick fix… We need a solution that will stick."
    • Nicolas Maduro is coming under growing pressure as Venezuela's opposition announced plans for a parallel government and President Trump warned of sanctions if he moves ahead with plans to rewrite the constitution.
    • "It's time for the zero hour," said opposition leader Freddy Guevara, calling for a 24-hour strike on Thursday and the naming of new Supreme Court judges.

    Indexes are now 21,583, 2,457.50, 5,850 and 1,426 and I'd call /ES the laggard and short that line with very tight stops above.  

    Watch Nas 5,850 for a good on/off indicator.

    • Republican leaders have given up on their effort to replace Obamacare – for now – after the defections of two more GOP senators left the party short of votes needed to pass the American Health Care Act.
    • "Republicans should just REPEAL failing ObamaCare now & work on a new Healthcare Plan that will start from a clean slate. Dems will join in!" President Trump wrote on Twitter.
    • Stocks closed virtually unchanged in a range-bound session, as investors await biggest fish to fry later this week when the likes of Goldman Sachs, BofA, Microsoft, Qualcomm and eBay release their earnings results.
    • "Folks are waiting to see what earnings look like," says Erick Ormsby of Alcosta Capital Management. "They should be good. That should help support the market."
    • Sector movement was modest, with utilities (+0.4%) and consumer discretionary (+0.3%) leading the gainers and health care (-0.3%) lagging as the Senate delays a vote on health care reform that originally was scheduled for this week.
    • Some safe-haven assets, including gold and U.S. Treasurys, ticked higher; gold gained 0.5% to $1,234/oz. while the benchmark 10-year yield shed 3 bps to 2.31%.
    • U.S. crude oil fell 1.1% to settle at $46.02/bbl, its first loss in six sessions.

    • Consumer Banking net income of $2.032B vs. $1.674B a year ago, with revenue of $8.5B vs. $7.795B. Net interest income of $5.96B vs/ $5.781B. Noninterest income of $2.548B vs. $2.588B. Noninterest expense of $4.409B vs. $4.418B. Branches down to 4,4542 from 4,681. Mobile banking active users of 22.9M vs. 20.2B. Provisions of $834M vs. $726M.
    • Wealth Management net income of $804M vs. $705M a year ago.
    • Global Banking net income of $1.786B vs. $1.498B a year ago. Provisions dropped to $15M from $199M thanks mostly to energy.
    • Global Markets net income of $928M vs. $1.215B a year ago. Trading revenue fell 9% to $3.4B from $3.7B – FICC revenue fell 14% and equities revenue grew 3%.
    • Overall bank provisions fell to $726M from $976M, with net charge-off ratio dropping to 0.40% from 0.44%. Net interest margin dipped five basis points from Q1 to 2.34% – curious, given the bank's supposed leverage to higher interest rates.
    • CET1 ratio of 11.6% up from 10.6%. Tangible book value per share of $17.78 vs. $16.71.
    • Conference call at 8:30 ET
    • Previously: Bank of America beats by $0.03, beats on revenue (July 18)
    • BAC -1.4% premarket

    • Ecuador has dealt a blow to OPEC unity by announcing it will start raising crude production this month.
    • The country won't be able to meet its commitment to lower output by 26,000 barrels a day to 522,000, arguing that it needs the money.
    • Its exit is largely immaterial when considering the size of the global oil market, but it could create a dangerous precedent.
    • Crude futures +0.7% to $46.35/bbl.

    • General Motors (NYSE:GM) is extending a shutdown at its Orion Township, Mich., factory that builds the new Chevrolet Bolt as part of a broader effort to get control of rising inventories of unsold vehicles in the U.S.
    • GM sold 7,592 Bolts YTD through June 30 after introducing the electric car at the end of 2016.
    • GM's U.S. vehicle inventory hit a 10-year high last month at 105 days supply; inventory of Bolts rose to 111 days from 104 days between June 1 and July 1.
    • GM also is cutting production at other plants to work down what Automotive News calculates as a 126-day supply of passenger cars as of July 1; the Lordstown, Ohio, plant that makes the Chevrolet Cruze and a plant near Kansas City, Mo., that produces the Malibu sedan both have three additional weeks of downtime, and a plant in Oshawa, Ontario, will be idled for two extra weeks to reduce inventories of the Chevrolet Impala sedan.

    • Harley-Davidson (NYSE:HOG) reports motorcycle revenue decreased 4.5% to $1.27B in Q2.
    • Parts & accessories revenue slipped 8% to $237.5M.
    • Motorcycle shipments fell 7.2% to 81,807 units.
    • Gross margin rate +10 bps to 36.5%.
    • Operating margin increased 100 bps to 20.3% as a result of mix favorability driven by demand for the Milwaukee-Eight powered touring motorcycles and lower SG&A spending.Financial services revenue declined 1.5% to $188.03M.
    • FY2017 Guidance: Motorcycle shipments: 241K to 246K (-6% to -8% Y/Y); Operating margin rate: ~-1%; Tax rate: ~34.5%; Capex: $200M to $220M.
    • HOG -8.08% premarket.

    • Lockheed Martin (NYSE:LMT): Q2 EPS of $3.23 beats by $0.12.
    • Revenue of $12.69B (+9.6% Y/Y) beats by $270M.
    • Shares +2.6% PM.
    • Press Release

    • Johnson & Johnson (NYSE:JNJQ2 results ($M): Total Revenues: 18,839 (+1.9%); Consumer: 3,478 (+1.7%); Pharmaceutical: 8,635 (-0.2%); Medical Devices: 6,726 (+4.9%).
    • Net Income: 3,827 (-4.3%); non-GAAP EPS: 5,017 (+3.1%); 1.40 (-2.1%); non-GAAP EPS: 1.83 (+5.2%).
    • Company says sales growth will accelerate in H2. Global results negatively impacted by baby care products, but partially offset by domestic OTC products.
    • 2017 Guidance: Revenues: $75.8B – 76.1B from $75.4B – 76.1B; Non-GAAP EPS: $7.12 – 7.22 from $7.00 – 7.15.
    • Shares are up 2% premarket on light volume.

    • Toshiba (OTCPK:TOSYY) shares jumped almost 20% in Tokyo overnight as investors returnedfrom a public holiday on Monday.
    • The rally comes after a California court postponed a hearing on Western Digital's (NYSE:WDC) attempt to block Toshiba's memory chip business sale.
    • Another boost? David Einhorn's Greenlight Capital just revealed a stake in the struggling conglomerate.

    • Last night's season 7 premiere of HBO's Game of Thrones (TWX -0.5%smashed the network's viewership records, drawing 16.1M total viewers, a 50% gain from the 2016 premiere.
    • Of those, 10.1M of them were watching on linear TV, with the remainder from DVR and streaming viewings. It's the most-watched season premiere for any HBO series.
    • It set new benchmarks for concurrent streamers across its services HBO Go (TV Everywhere for authenticated users) and HBO Now (standalone streaming service).
    • HBO also notes last night's premiere was GoT's most tweeted, at 2.4M tweets during the episode (thanks in no small part to a cameo from singer Ed Sheeran).
    • Time Warner is flat in after-hours trading.

    • Netflix (NASDAQ:NFLX): Q2 EPS of $0.15 misses by $0.01.
    • Revenue of $2.79B (+32.2% Y/Y) beats by $30M.
    • Shares +7% AH.
    • Press Release

    • Netflix (NASDAQ:NFLX) is up 8.2% after hours after posting bullish subscriber numbers for Q2 and strong expectations for the coming quarter, and beat expectations on revenue despite a narrow profit miss.
    • It posted domestic net adds of 1.07M, well ahead of estimates for adding 633,000 subs. International streaming net adds came to 4.14M vs. an expected 2.63M.
    • Streaming membership sits at 104M, crossing a symbolic milestone of 100M users, and the company notes it has more international members (at 50.1% of base) than domestic members now.
    • The company forecasts total net streaming adds of 4.4M in Q3, vs. 3.99M expected. It sees Q3 international adds coming to 3.65M.
    • It's also guiding to Q3 revenues of $2.96B vs. consensus for $2.876B, and net income (GAAP) of $143M vs. consensus for $101.6M. Netflix expects its first ever annual profit contribution from international operations.
    • "Earnings interview" to come at 6 p.m. ET.
    • Press release
    • Shareholder letter

    • Netflix (NASDAQ:NFLX) is flying after hours, up 8.4%, following a beat on revenues and some subscriber numbers much stronger than expected.
    • The company's above-consensus forecast for Q3 subscribers (4.4M vs. expected 3.99M) reflects some expectations that Q2 momentum will continue but tempered a bit as "we are cognizant of the lessons of prior quarters when we over-forecasted and there was lumpiness in net adds, likely due to demand being pulled forward (into Q2 in this case)."
    • Meanwhile, free cash flow is running out the door faster, at -$608M vs. a year-ago -$254M, and Q1's -$423M. "With our content strategy paying off in strong member, revenue and profit growth, we think it’s wise to continue to invest," it says, noting it expects FCF of -$2B to -$2.5B for 2017 and reiterates the company expects to be FCF negative for "many years," fed by debt financing.
    • In a competitive look, the company says the market's broad enough for it to go from zero to 50M streaming households even as HBO keeps adding U.S. subs. "It seems our growth just expands the market. The largely exclusive nature of each service’s content means that we are not direct substitutes for each other, but rather complements."

    • The United Food and Commercial Workers Union comes out against Amazon's (NASDAQ:AMZN) proposed purchase of Whole Foods (NASDAQ:WFM), sendingt a letter to antitrust enforcers warning about the dangers of the $13.7B deal.
    • Union president Marc Perrone argues the takeover would hurt consumers by giving AMZN such power over suppliers that prices could go up while the quality and variety of products could be reduced.
    • Perrone also says the deal is "not about improving customer service, products or choice. It is about destroying Whole Foods jobs through Amazon-style automation."
    • The UFCW represents ~800K clerks and other workers at other grocery chains but not WFM employees.
    • Alibaba (NYSE:BABA) is following up on Amazon's (NASDAQ:AMZN) entry into the grocery scene with news of its own: three new Hema supermarkets in Beijing and Shanghai.
    • The stores blend online and offline shopping: Besides various tech features, like smartphone purchases and Alipay payments, the outlets double as fulfillment hubs, which can deliver goods within 30 minutes.

    • Rearden LLC is going after Walt Disney (NYSE:DIS) use of a facial-capture technology, potentially threatening the company's ability to profit from the top-grossing movie of 2017.
    • The lawsuit alleges copyright, patent and trademark infringement in the March blockbuster Beauty and the Beast, as well as 2014's Guardians of the Galaxy and 2015's Avengers: Age of Ultron.