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Thursday Market Folly – You Need an AAPL a Day to Maintain Dow 22,000

So far, so good.

After a quick rejection, the Dow is drifiting along under the 22,000 line and it LOOKS bullish but let's remember that it took big moves by Caterpillar ($10), Goldman Sachs ($10), JP Morgan ($8), Boeing ($30) and Apple ($7) on earnings to give the Dow it's last 500 points.  That's a tough act to follow for sure.

And it's been a sort of a feedback loop because each earnings win pops the index, which raises all the Dow components and then the next one hits and reinforces the gains from the last win and then the index makes a new high and more money pours into the ETFs, etc.  All very nice if you are bullish but the rally, on the whole, has come on fairly low volume and, now that earnings are over, we'll have to wonder what catalysts is going to take us over 22,000 (our shorting target), let alone hold us up here.

Over in Europe, they have earnings too and the Europeans were not as impressed with earnings as the US investors were.  In fact, Germany's DAX is down 5% from their June highs along with the Euro Stoxx Index, which fell from 3,650 to 3,450 while the S&P added 50 points (2%).  

Major Global Indexes don't usually diverge from each other that much and the Nikkei has been trending down as well so someone is delusional and it's probably the country that elected a reality show host to be their President – I'm just saying…

The Dow is up 600 points since it's June high and that's 2.8% but, more importantly, since the election, the Dow is up from 18,000 so 4,000 points is 22% and I have to ask you – has Trump made things 22% better in 9 months?  And we're not taking about a 22% rebound after a sell-off, the Dow had already gained 50% since 2012 (4 years) from 12,000 to 18,000 so this 22% is just a cherry on top of all that fudge and whipped cream that was already piled on the QE sundae that had already taken us from 6,000 to 12,000 in the 4 years before that. 

Granted we were at 14,000 (which was a silly high) in 2007 so let's call 12,000 a fair base and conside the drop an abberation.  That still makes the run since 2012 from 12,000 to 22,000 (66.6%) an average of 12% a year and earnings are in no way justifying that kind of move – THAT is why I object to these market levels.  Perhaps we are simply going to have to accept the fact that, from now on, we pay 25 times earnings for stocks instead of the historic 18 average but we KNOW this appetite for risk is artificial and based very much on the lack of risk-free alternatives.  

Speaking of risk, I see Tesla (TSLA) is blasting up $20 after earnings and that's nice but they did burn $1.1Bn in cash this Q, leaving them with $3Bn to go from producting 30 Model 3s to 125,000 per quarter.  Shouldn't be difficult, right?  At $350, TSLA's market cap is $57.5Bn and perhaps the Model 3 is the greatest car ever  made and will sell 500,000 every year of a single model and perhaps Elon Musk is a genius who has figured out how to make cars for 10% profits (vs 5% at industry leader GM) but, even if we give him those huge benefits of doubt:

  • 500,000 $40,000 cars = $20Bn
  • 10% of $20Bn = $2Bn
  • $2Bn is 1/28th of $57.5Bn

This is why we shorted Tesla as it neared $400 (see "Tesla's Emperor Musk Has No Clothes!").  This is the point ($350) at which the valuation gets silly – even if you think that everyting Musk is trying to do works out perfectly. Goldman Sachs agrees with me and warns that TSLA can drop 45% as the Government Subsidies ($7,500 per car) run out and sales trail off.  

GM, by the way, sells $164Bn worth of cars, makes $9Bn and is only valued at $50Bn, 13% less than Tesla!  Guess which one we own? 

Musk, for his part, maintains that TESLA has 465,000 net deposits on the Model 3 and that's nice but doesn't that mean that $465M of their $3Bn in remaining cash is deposits, and not theirs to play with?  We're not shorting Tesla again yet – they burned us last time we started too soon, but we will grab a short position as they close in on $400 again – because it's just silly. 

Meanwhile, if you want to make big money on electric cars, buy copper!  Copper, Graphite, Nickel, Aluminum, Lithium, Cobalt and Manganese – that's what electric cars are made of and, currently, there are only 2M of them on the roads but by 2030, there should be over 100M and adding 50M or more annually after that.

As you can see from the chart, we're talking about MAJOR increases in those materials over the next decade and this is one of those macro investments that you can be very comfortable making long-term bets on.  Over the next few weeks, we will be examinging the electric car sector because, whether it's from Tesla or not, that revolution is coming and it's a change we can certainly bet on.


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  1. tsla--any opinion on their earnings?


    * EBITDA, Sales, Cash flow, EPS guidance lowered & dividend cut by 75%:
      guidance lowered on weakness in US generic business due to accelerated
      price erosion and decreased volume mainly due to customer consolidation.
    * Debt paydowns: Will repay $5 bn in 2017 as previously stated subject to
      timely divestitures. Proceeds from $2 bn asset sales in '17 will be used to
      pay down debt. Will repay debt as it matures in 2018 and will provide further
      update in 2018.
    * Covenants/Leverage: Leverage at the end of the quarter is 4.65x net
      debt/EBITDA. Currently on track with current covenant of 5.0x. Covenant by
      the end of the year is 4.25x. Should cash flow be lower than expected by year
      end the company may have to renegotiate covenants, CFO stated.
    * Cost reduction: Now expects to achieve $1.6 bn in cost savings by the end of
      the year. 1) Reduced headcount by 7,000 people since the close of the
      Actavis Generics deal, which is 2,000 above initial plans. 2) Expects to
      close or divest 6 plants in 2017 and 9 in 2018. 3) Expects to exit 45 markets
      globally by the end of 2017.
    * Divestitures: Expects to divest the global Women's health and oncology and
      pain businesses in Europe. Proceeds from these businesses along with other
      asset sales are expected to be at least $2 bn.
    * Copaxone: expects no generic Copaxone in 2017. Expects 20-25c of EPS
      reduction if there is generic Copaxone for a full quarter.
    * Leverage: Ended the quarter at 4.65x debt/EBITDA and 4.56x net debt/EBITDA.
    * 2017 guidance: sales $22.8-$23.2 bn (previous $23.8-24.5 bn), EBITDA
      $7.2-$7.4 bn (previous $8.0-$8.4 bn), adj EPS $4.30-$4.50 (previous
      $4.9-$5.3), CFO $4.4-$4.6 bn (previous $5.7-$6.1 bn).
    * Generic pricing: Generic deflation is expected to be in the high single
      digits for the remainder of the year.
    * Dividend: Quarterly dividend per share was cut to $0.085 from $0.34.
    * CEO: Continues to search for a permanent CEO.
    * Leverage Covenants: On a net debt/EBITDA basis. Q1 being the first full
      fiscal quarter after the Funding Date occurs. Funding date means the day as
      of or following the Effective Date when the draw down of the Term loans occur.
      1Q 5.25x
      2Q 5.25x
      3Q 5.00x current covenant according to the company
      4Q 5.00x
      5Q 4.25x
      6Q 4.25x
      7Q 4.00x
      8Q 4.00x
      9Q 3.50x

    TEVA FIRST LOOK: CUTS DIVIDEND, LOWERED GUIDANCE TEVA (Baa2/BBB/BBB; N/N/S; Underweight Cash) reported 2Q’17 EPS of $1.02, missing estimates by 4 cents. The company lowered its 2017 EPS guidance to $4.30-$4.50 (prior $4.90-$5.30). TEVA posted revenues of $5.7 bn, up 12.9% y/y and adj EBITDA of $1.4 bn down 8.8% y/y.

    TEVA stock is down 15% pre-market.

                          2Q’17           2Q’16     % Change
    Sales                $5,686          $5,038        12.9%
    R&D                    $486            $375        29.6%
    Adj EBITDA*          $1,413          $1,549        -8.8%
    EPS                   $1.02           $1.25
    Cash                   $599          $6,984
    Debt                $35,052         $10,918

                    LTM 6/30/17     LTM 6/30/16     % Change
    Sales               $23,371         $19,552        19.5%
    Adj EBITDA*          $6,111          $6,271        -2.6%
    Cash                   $599          $6,984
    Debt                $35,052         $10,918

    * D&A for 2Q’17 from 2Q’16

    * TEVA posted revenues of $5.7 bn, up 12.9% y/y and adj EBITDA of $1.4
      bn down 8.8% y/y.
    * Generic medicine segment sales increased 20% y/y to $3.1 bn,
      reflecting the inclusion of the Actavis Generics business.
    * Specialty medicine segment sales were down 9% y/y to $2.1 bn. The
      decrease in specialty medicines revenues compared to the second
      quarter of 2016 was primarily due to lower sales of our CNS and
      oncology products, partially offset by a payment of $75 million which
      we received in connection with our agreement to sell our royalties
      and other rights in Ninlaro® (ixazomib) to a subsidiary of Takeda.
    * Copaxone sales decreased 10% y/y to $1.0 bn. Copaxone® revenues in
      the United States, were $843 million, a decrease of 12% compared to
      the second quarter of 2016, mainly due to lower volumes of
      Copaxone® 20 mg/mL as well as negative net pricing effects despite a
      price increase of 7.9% for both Copaxone® products in January 2017.
      At the end of the second quarter of 2017, according to June 2017 IMS
      data, our U.S. market shares for the Copaxone® products in terms of
      new and total prescriptions were 26.5% and 28.8%, respectively.
      Copaxone® 40 mg/mL accounted for over 85% of total
      Copaxone® prescriptions in the U.S.

  3. TSLA/jabo

    People are discounting the loss because they knew it would take a lot of money to launch the Model 3.  Earnings per share were much better than expected or loss per share was much better.  Musk was caught in a lie that I pointed out last week about having over 500,000 reservations for model 3 which did not include cancellations which brings it down to 465,000 and that doesn't include requests for cancellations which some are saying brings it 350,000 but he is claiming that they are getting 1800 reservation per day.  Hard to believe him but people do.  When I saw that Mark Spiegel, TSLA's most adamant bear is throwing in the towel, makes me think stock is going higher, and with some analyst upgrades, can get to 385 again possibly break through to 400.  Spiegel still thinks TSLA is a scam but he can't fight the crowd.

  4. Good Morning.

  5. LB.. ouch!

  6. Hola amigos y amigas! Just made it to the hotel in Argentina so no posting lines today! That 11 hours overnight flight is really a pain! New chart tonight. Right now nap.

  7. Okay, is it just my human brain or does 66.6 appear ALOT?

  8. need underwear!!!

    Victoria's Secret parent L Brands reports July sales decline

    Font size: A | A | A


    7:27 AM ET 8/3/17 | MarketWatch

    Victoria's Secret parent L Brands (LB) said early Thursday that it had a July revenue and same-store sales decline, but that it expected second-quarter earnings at the high end of its 40 cents to 45 cents guidance. July revenue declined to $768 million from $777 million in the year-earlier period, the company said, while July same-store sales fell 7%. The company said its exit of swim and apparel categories hurt July same-store sales for L Brands by 4% and Victoria's Secret by 5%. L Brands shares have plummeted 32.7% over the year-to-date, compared with a 10.7% rise in the S&P 500 . 

  9. StJ;  enjoy Argentina!,   Few steaks in the world are better that US ….but Argentinian….try a quincho, in winter  it´s great for lunch

  10. Jabob.. LB stock starting to recover, forward guidance on earnings was better… Would have been happy to get this assigned for a 6% dividend yield price, but don't think it is going to happen. 

  11. learner--i wish teva would start to recover.. FU portfolio getting slammed today..


  12. TEVA down 20%.  Amazing the crap picks that I take from this site.  

    Between CBI, TEVA, GE, FTR, UNG, CHK I've lost over 20K.  

    Yes value…blah blah blah.

    I'm done.

  13. why is FTR down 10% today?

  14. Thanks Advill! I'll try… My son-in-law (still funny saying that) is from Mendoza so I have already heard plenty about the meat. Although he likes the meat in the US too.

  15. Shhhh. You're posting in your sleep stjeanluc……rest now

  16. LOL CDN… Could not sleep. That TEVA is going to hurt now. Have to wait for a few more FU to double down now.

  17. FU stjean!!!!

  18. FU stjean!!!!!!!!!

  19. ;-)

  20. FTR under a buck again…wtf?

  21. Stjesnluc

    Go see the pink house 

  22. Stjean…..just walk slowly towards the light…..hold on,,,,NO NO. you're going the wrong way!!!  Go see the pink house

  23. Good morning!

    TEVA dividend cut has people heading for the hills.  We have the 2019 $25 calls in the LTP and, worse off, the short $37.50 puts but at least we sold them for $9.60 so our net entry is $27.90 and we're only $2.50 below that so nowhere near as damaging as it looks (so far).  At the moment, the $25 calls are $4.50 and the $17.50 puts are $9 so I'd be inclined to spend $4.50 to roll down, sell the $27.50 calls for $3 (so net $1.50 to drop our spread $7.50) and then DD for $6 more but no hurry as we'll see how TEVA holds up for a couple of days.

    As to LB, how many different ways can people sell off the stock on the same news.  They discontinued two lines of clothing that weren't making much money so of course the comp sales are down but the profits are UP – how is this a bad thing?  Just because traders don't understand the businesses they are betting on doesn't mean we have to follow them.  LB 3-year sales were $11.45, $12.15, $12.57 and earnings were $1.04, $1.25, $1.15 and this Q they sold $2.4Bn, which is fine as last Q was the big one with $4.5Bn in sales so on track for another up year and profits are on the rise yet this is their chart:

    They are on track to make over $3 this year so, for $45, that's a p/e of 15, which is low for the sector and ridiculous for a company with steady or rising sales. 

    Discounting the loss/Rustle – Yes, they did that with GM before they went BK too.

    Hola StJ.  Glad your trip went better than mine (still waiting for our bags).  Have a good time.

    666/Malsg – I think it's because I find it amusing to point it out when it comes up but it is 2/3, so a lot of things naturally occur there. 

    Crap/Burr – Well I hope it's not your whole portfolio but value stocks tend to do poorly when momentum stocks are hot and vs vs.  It's all part of a balanced portfolio and, as noted above, we simply use our gains from other positions to build up the "losers" so, then their turn comes, we have nice, big, cheap positions to ride up.  CBI needs infrastructure spending, TEVA is a turnaround and needs a CEO, GE is GE, FTR also long-term play, UNG and CHK are based on multi-year nat gas exporting as well as the general trend to cleaner energy – which of those premises do you reject?

    FTR/Jabob – Wow, that was a nasty reverse. 

    Somebody seems to be cashing out.  I guess the earnings CC wasn't that inspiring.

  24. Silver held $16.50 nicely.

    Oil up and /RB down means that /RB long play into the weekend has a strong probability of success.  

    I'd go for a long over $1.64 with tight stops but don't be greedy at $420 per penny, per contract.

  25. TSLA/Phil

    Not saying I think the company is a fundamental buy, I absolutely don't, but I think Musk bought himself a quarter to keep the stock price up.  It'll depend on production now and how many orders he is really getting.

  26. CL    Operators are beginning to hedge at prices below $50!   Forget about offshore sector for awhile

  27. Thank you for sharing Latch!

  28. TEVA..

    any rec on what to do if we are long the 30--40 2018 call spreads and short 2018 37.5s.. ouch

  29. I'm holding SQQQ until it breaks 27 then it might be time to say "not yet" on the crash

  30. I know you're not saying that, Rustle!  I agree, there's enough there to keep the plates spinning a while longer but it's kind of strange they hand-make 30 cars and only give them to employees and call that "delivered on schedule".  How you get from this to 10,000 cars a week in two years is beyond me.  

    Oil/Latch – That's a very big negative.  It's what Chavez tried to do before oil collapsed back in the crash.  These guys sense a disaster coming.

    TEVA/Jabob – Same thing, roll to the 2019 $17.50s, sell the $27.50s and the 2018 $37.50 puts are $12 and they are only down $3 so you can just take the loss rather than risk it if you're not sure.  Otherwise, the 2019 $32.50 puts are $8.80 so 14 of those is an even roll from 10 and essentially the same margin, only risking $8,000 more cost of assignment for 400 more shares ($20/share).  Keep in mind, if you are comfortable with the roll then there's no reason to rush it – just ask for good prices or just give the downgrade police a chance (as we are doing in the LTP).  

    Not yet/BDC – Gotta keep paying for life insurance, despite the persistent living condition….  angel

  31. thanks Phil-- they are killing teva and ftr today ;-(

  32. Phil/Disaster

    "They can sense disaster coming" so the DXD trade looks to be a good bet to hedge till Oct

    "Buy 100 DXD Oct $11 calls for 0.45 ($4,500)
    ? Sell 100 DXD Oct $13 calls for 0.12 ($1,200) 
    ? Sell 5 AAPL 2019 $120 puts for $4 ($2,000)  "

    DXD BCS still at the same price


  33. Latch,  thanks for sharing…  this foretells that US shale producers will now start increasing production for these hedged volumes.  CL outlook gets more bearish and the more it flirts with $50 or above, the more producer hedging will come on and more production/increase supply.

  34. Killing/Jabob – Yes, very annoying after those nice gains too.  FTR is making a huge push into fiber/commercial and that's expensive and long-term but, if they do it with their CA, TX and FL footprint – revenues could skyrocket.  Only not this Q or next Q or the Q after that.  If you are in the stock thinking they will suddenly jump to $20 – get out.  If you are in the stock expecting $30 in 5 years and a $3/yr dividend – then stay in.

    Disaster/Pat – I mean for OPEC countries that rely on oil for more than 1/2 their GDP, not a market disaster, though I do think we're overdue for a correction and just need a reason to drop.

  35. ALL/important stuff  Something jsut happened at our house that I wanted to share  - hug your family – what we do here is not the most important thing in the world.  MY 14 yr old daughter went out for a run this morning as she normally does for 30 mins – she was supposed to meet my wife for breakfast – she never showed.  We had to get the police involved as she did not take her cellphone with her as it was dead.  She was gone for 2 hours before we heard from her – she had gotten lost and run in the other direction and ended up way far away – she used a person's phone to call.

    Hug your kids.  Nothing compares to the fear that we felt but thank God that she is safe.

  36. Any thoughts/level on /ngz7?  Still holding two long

  37. Phil/Zyne

    you mentioned it some time back with a Nov BCS 15 / 22.5 for 2.50. This was also recommended by Pharm. The BCS is down to around 2.05. Still a good bet to get into the trade?


  38. Phil-- I would be happy to hold it if it would just move higher and stop crashing after every up move.

    Obviously, 30 would be great now but that is only $2.

    I am not blaming you it is just frustrating to own some of these companies (FTR, TEVA, IMAX, M, F, LB) and see them get demolished and 'hope" to break even on them in many years "if" things improve for them.

    Again, I am not blaming you for my trades. Just hate owning these dogs right before they crash hard.

    On a positive, I am out of GNC and actually made a little $$ with that dog--thanks for your guidance.

  39. han--whoa… happy it was only a scare. i know that feeling.

    good perspective.

  40. han – I am glad your daughter is safe

  41. Wonder if there is a trade in any of the comps that are dropping due to TEVA?

    ~~Mylan MYL, Perrigo Co. PRGO, Celltrion,  Taisho Pharmaceutical Holdings Dr. Reddy’s Laboratories Ltd.

  42. Phil--any chance teva recovers a little before the end of the day?

    isn't this sell off a little overdone? 

    were their numbers that bad? 

  43. Leraner  - LB – What do you see as the price target and timing on this one?  I know you've dug into this in some details and would like to understand your perspective ….   This year 2nd half was supposed to be stronger but recent numbers did not appear to bear that.

  44. Kids/Hanj – Glad all is well.  We have different styles of parenting.  When Jackie was 9 she announced she would run away because we were rotten parents (we wouldn't take her to some concert) and we decided to call her bluff and told her "good luck".  I wanted to see how far she'd take it and she's a stubborn girl and she packed her stuff and walked out the door and then spent several hours wandering around (we could see her via phone tracking) until she finally showed up at her friends house, asking the parents if they could adopt her.  After being rejected there, she came home, put her stuff back in her room and sulked for 2 days – resigned to her fate of living with us FOREVER!  Of course we live in a nice, safe neighborhood so I tend not to worry much about the kids when they're out but you never know – which is why I never pass up an opportunity to do things with my children.

    /NG/Jeff – We're still hanging at the lows but I think $2.80 on the front-month will hold up.  Last year we bottomed out in Aug a bit below $2.60 and again in Nov and Feb so holding $2.80 now would be nice progress and, of course, it's hurricane season so possible bonus rounds for the next few months.

    ZYNE/Pat – That's right, we talked about them on 6/13.  I was going to use it for my Nasdaq TV spot but we ended up talking about something else.

    Submitted on 2017/06/13 at 2:45 pm

    We wanted to discuss leverage today so let's talk about how we can limit our risk while still having good upside with a speculative play on the Pharmacy play, Zynerba Pharmaceuticals (ZYNE).  

    ZYNE makes transdermal delivery systems (skin patches) for cannaboid therapeutics (pot) to help treat epilepsy and they are conducting a Phase II trial that, if it goes well in August, could lead to explosive growth.  Or it could fail and they die – so it's the kind of play where we want to limit our losses.  

    Rather than buying the stock for $18, we can instead go past our expected August event and buy a bull call spread that limits our downside risk:

    • Buy 4 ZYNE Nov $15 calls for $7.50 ($3,000) 
    • Sell 4 ZYNE Nov $22.50 calls for $5 ($2,000) 

    That puts us in the $3,000 spread for net $1,000 and our loss is limited to the $1,000 we put in yet our upside potential is $2,000 (200%) at $22.50.  In order to make $2,000 at $22.50 you would need approximately 400 shares of stock for $7,200 and limiting your loss to $1,000 would mean you would have to set a stop at $15.50 and phama stocks are very volatile.

    Using the spread does cap your gains but it limits your losses and gives you great leverage (7:1 in this case).  Not only that but, because you are buying 4 $15 calls for $1,000 ($2.50 each), your break-even is $17.50, which is 0.50 below the current price – giving you a discount to buying the stock right from the start.  

    Since then they have disappointed on earnings and there is the usual fear and panic ahead of their soon to be released Phase 2 trial study.  They got a negative note from a Cantor analyst the other day that really freaked people out:

    Piros noted, "We saw no surprises during the quarter and believe investor focus will remain on Zynerba's first upcoming Phase 2 readout in adult epilepsy. Based on prior studies of adjunctive anti-epileptic therapies, we believe a successful readout might demonstrate an approximate 20% greater reduction in seizure frequency from baseline when compared with placebo. In our view, positive data in epilepsy could significantly increase our confidence in the program, currently at 25% probability of success."

    But, in reality, he's bullish on the stock with a $28 target.  He just thinks this study is risky and we did too, which is why we risked just $1,000 to make up to $3,000.  Now the spread is a bit cheaper ($820) and the upside is essentially the same so I still like it but, as noted at the time, as a leveraged risk play – I have no conviction on the company.

    Frustrating/Jabob – Do you know what was frustrating?  Owning the S&P from 1998 to 2008!  Then it took off.  How many FUs along the way?  Depending on where you came in, it dropped 50% (and more) twice before it finally turned up but, had you consistently sold calls for 10% a year back in your pocked, then you would have collected 100% of what you paid while you waited and now you own it for net zero while it flies higher.  

    That's how I like to play stocks.  Over time, value wins out but TIME is measured in years, not days or even quarters.  If you are going to be a value investor, you need to stop expecting momentum stock returns or you'll always be frustrated. 

    Comps/Seer – Good idea to look at those.

    TEVA/Jabob – They cut their dividend by 75%, that forces certain funds to dump them.  I think it's best not to try to call a bottom and see where one forms.  

  45. Sell-side snippets on Tesla

    Doubters are going to doubt and believers are going to believe. Here's the latest on Tesla (NASDAQ:TSLA) from the sell-side.

    Baird (Outperform, $368 PT, Top Pick for 2017): "Q2 results were better than we feared when we previewed the quarter. Importantly, cash balance, demand commentary for all vehicles, and Model 3 margin ramp expectations were positive. Although TSLA is now in 'production hell,' we recommend investors own shares into the Model 3 ramp…We believe a positive reception to the Model 3 from early customers could significantly increase the value of the Tesla brand and further accelerate demand."

    RBC Capital Markets (PT raised to $345): "What Tesla has accomplished is extremely impressive."

    Goldman Sachs (Sell, raised PT of $200): "We now see TSLA needing to raise capital in 1Q18E (vs. 2Q18E previously) and continue to see downside risk to Model 3 production."

    Morgan Stanley (Equal-weigfht, $305 PT): "Early Model 3 launch milestones look strong, but the $2bn of 2H capex will make your eyes water. Time will tell if they are tears of joy … 2H capex guide of $2bn is really big. 2x our forecast."

    Cowen (Underperform, raised PT of $170): "As Tesla's Model 3 ramp proceeds, we continue to have more questions than answers about the company and the vagueness of details coupled with lack of disclosure from management about true capital needs and expense levels need[ed] to obtain their ultimate vision."

    Sources: Bloomberg, Benzinga and Investor's Business Daily.

    Tesla gapped up over its 50-day moving average to as high as $350.00. Shares are currently +6.75% to $347.90.

    Previously: Tesla cites strong demand across models (Aug. 2)

    Previously: Tesla +8% with Model 3 seen as on track (Aug. 2)

  46. Morgan Stanley will move up their PT when a secondary is close. 

  47. last comment was in regard to TSLA

  48. ZYNE….agreed, and noted that this was an all or nothing trade.  The data should be ok. If it is stellar, then they will pop.  My gut tells me it is a sell on the news, but…what do I know! :)

  49. Pharm/SGYP

    Anything new with them?

  50. Did Trump .. sort of .. just offer to invade Mexico?

    looking forward to Cliff jumping again now the crazies have left the trade.

  51. SGYP…waiting on revenues to see how they compare to IRWD.  Need time to shake things out.

  52. it's weird, even for Trump, to simply lie about two phone calls that never happened

    hysterical or not, it's scary to think trump and trump alone can order any of the United States' massive nuclear arsenal launched at any time, with no secondary authority. That's just the most extreme crisis, 500M+ people worldwide dying in 30 minutes, but there's a big pyramid of others under the top brick.

    We are so screwed.

  53. On ZYNE, you can also sell the Nov $10 puts for $3.50 for a $6.50 discounted entry. I have a few just for fun.

  54. TEVA down 25% … dangit!

  55. FTR down 15%.. dangit!

    now these two POS stocks are frustrating

  56. @batman – LB -  As Phil alluded, there is too much investor attention on their comps.  The fundamentals are actually improving as they cut costs and earnings go up. They guided to the high end of their earnings guidance.  Their TTM PE is only 11 and earnings trends are starting to improve.   Their comparables get easier as we get close to Dec.  Dec 2016 also had a 8% comp decline.  One quarter of comp decline normalization (bear in mind – 4Q is their seasonally strongest qtr) and this stock might pop up.  My exit target is $50 – which I am hoping will be reached by Jan 2019 for my current spread.   


    However, I am using a combination of armchair and spread strategies.

    My entry price is $41.50 (assigned put).  This gets me in at a 6% div yield and selling calls and puts for Jan 2018 will get you at least 20% for the next 6 months.  The risk is the company cuts dividend (ala TEVA), however LB's payout is only 62% vs 80% for Macys.   So the risk-reward appears decent.  Will it slip down more – perhaps high to mid $30s? Possibly – then it becomes more compelling.  

  57. I made a piddly $3k on TSLA on the way up. I'm out now. Small money I know. But better than loosing $500M!

  58. TEVA/Phil – read your comments re: wait to confirm a bottom before rolling existing positions. However what about over the course of today a cautiously timed "still good for a NEW entry" OOP half position?   e.g. 5 - 2019 25/32.5 BCS $2.90 Sell 5 – 22.5 Puts for $3 = Net +$50 on a $7.50 spread. Looks like a short term "blood in the streets" over reaction to take advantage of? Caveat: still dropping slowly as of now! Having looked at their results is there a price that if reached soon you would "table pound" jump in with something like the above? Thx as always!

  59. Trump/Malsg – What's really amazing is the fact that he clearly sells out his base the same week he's sworn in yet they will still support him and bend over backwards to excuse his action.  

    LB/Learner – Good plan.

    Good job BDC, way better than the alternative.

    TEVA/Airvine – TEVA is a little too risky for the OOP, which, despite being at $300K, is still played like a fairly conservative $100K portfolio.  I like TEVA in the LTP because it may have a nice long-term upside and the $14K we're down on them is not even 1/3 of an allocation block ($50,000 but could be $100K at $1.6M) so we're only in early innings on building a position.  At the moment they are earning $4.50 and let's assume they decline to $3 over the next few years.  Isn't that still worth $30 (10x)?  Certainly $21 (7x) is table-banging territory and that's 7x a drop that's not even projected! 

  60. The market sentiment….

  61. TEVA/Phil – your insight & comments are appreciated. However as I thought upon looking at my notes & reviewing this Tues Aug 1st chat I did note;  (I did not participate in this trade below so that's why I was asking about an entry today)

    As a new play on TEVA, I would sell 5 2019 $30 puts for $4.20 ($2,100) and buy 10 of the 2019 $32.50 ($4.20)/$40 ($1.90) bull call spreads for $2.30 ($2,300) which would put you in the $7,500 spread for net $200 and worst case is you own 500 shares of TEVA for net $32.90 while best case is up $7,300 (3,650%) in 18 months.  

    Let's add that to the OOP.

  62. Russell still deteriorating.  NYSE too, back below 12,000.

    We got that quick penny early this morning (you're welcome) on /RB and now we're testing $1.63 and the same premise with tight stops to play for another penny ($420) has the same good chance of success with oil bouncing off $49.

    This morning Advill was asking about ALB, who are a specialty chemical maker who work with lithium.  They are also big on fracking chemicals – another good growth area.  Lithium is about 10% of their sales and that's up 50% from last year and the company seems focused on it for growth, having acquired Rockwood Holdings (a miner) in 2015.  

    I like that story and I think synergies are just starting to kick in and the company made $640M last year against a $13Bn valuation and they look on track for 15%+ growth, but I think loan costs will keep them from being too exciting for a while.  

    As an entry play, there's no reason not to sell the 2019 $85 puts for $4 as that's net $71 for an entry so basically free money to watch the position with – that's a good way to start but, for the LTP, I'd rather put it on the watch list and wait for a pullback.

    TEVA/Airvine – I forgot about that and I was right, it was too risky for the OOP and already we'll have to adjust it.

  63. Cantor Fitzgerald's Louise Chen explains why Teva needs to hire a new CEO:


    We like Teva, but we think the company has some meaningful headwinds which need to be addressed before the stock can trade meaningfully higher. 1) Whether Teva will break the company into brand and generics, 2) Whether Teva can continue to pay down its debt, maintain its investment grade rating and meet tighter covenants at the end of the year, and, 3) How the company will grow through generic drug pricing pressure. Furthermore, we don't think Teva can make decisions that would fundamentally change its strategy until it hires a permanent CEO and the new CEO has had time to assess the business. We would be more positive on Teva shares if generic drug pricing improves and/or the brand drug launches and pipeline advancements exceed expectations

  64. FTR… may see that 80c ($12) low yet, still plan to double down if the markets are sinking too? Small caps getting no love, IWM puts up 200% so far, waiting for capitulation

  65. I'd be the CEO of TEVA if they called me! :)

  66. Pharmboy-then the stock would rocket up! 

  67. Learner / LB – thanks for your thoughts on this.  I've passed on many retail plays ( currently in GNC which is doing as expected) and this is really hated by the analyst.  I've been watching this from the sidelines and waiting. I thought 40 may be a good entry point an selling the Nov 40 for 3 each may be a good opening play.

  68. FTR/Jabob – You know those articles are written by bots, right?  And anyway:

    The regional American telecom reported a mixed bag of second-quarter results ahead of the Wednesday surge. Analysts had been expecting a $0.91 net loss per share on revenue near $2.3 billion; Frontier hit the sales target but fell short of the Street's earnings projections with a $1.10 loss per share. Management lowered Frontier's EBITDA profit guidance for the full year from $4 billion to $3.8 billion, as expected. On the upside, Frontier CEO Dan McCarthy called the quarter an "inflection point" for his company, with better results ahead in the second half of 2017 and beyond.

    Oh no, my $1.1Bn company is only going to make $3.8Bn this year – where can I dump these shares???

    One day they will pay off their debt and all that will be left is the profits.

    FTR/Mkucs – Too late, we got impatient and added a bunch at $13.50ish.  

    TEVA/Pharm – They could do worse…

    OK, I'm off to dinner (still no bags – thanks Continental), later all.

  69. good point

  70. Bought some DIA puts just now for tomorrow.  Supposedly Mueller's investigation is heating up with traction.  Low risk, high reward if market falls tomorrow.

  71. Where you eating Phil? I’m in coconut creek just south of boca.

  72. Sorry- let me clarify Phil- I don't want to crash your party- just curious what restaurants you go to when you are down here.

  73. @batman -LB – even a better entry point! 

  74. Phil, should we expect at least a weak bounce tomorrow from TEVA, FTR, and LB or do you think it gets worse before it gets better? 

  75. Phil, Thank you in advance for the education that I am about to receive, it continues to be priceless. I took a position in IMAX a while ago. While the runway is 5 months out, I am wondering if I should buy back my short position in the BCS.  Or, should I be patient and do nothing, roll, or ???

    The position is as follows:

    DEC17 $23($4.00)/$28($1.30) BCS  Now, $1/$0.30 

    DEC17 $29 PUT

    I hope that makes sense.

    I ask cos, I had a similar situation with GNC last month.  I closed out the short side (70% of premium) after the stock dropped, then Q2 numbers improved my long position and it provided me an opportunity to exercise at a profit and now I am selling premiums to lower my basis.  Not sure if I executed this correctly, but it ended up working out nicely.  I was going to do the same with IMAX, however, there is quite a bit of time left.  thoughts?? 

  76. @ albo -  are you watching AAOI – core dump.  3Q guidance was weaker on product transition from 40G to 100G.  

  77. Learner, I did see that.  The 40G is definitely on the wane.  This morning :

    ~OCLR's CFO stated that 40G products are now in their end of life stage.

    Almost bought some AAOI  in the after market, decided to wait.  China appears to be not as strong as previously thought.  Looks like it might affect the fiber optic stocks.  Still think FNSR is the best bet because of the potential for their VCELs.

  78. Only on PSW is TEVA a buy.

    ". Thank God they haven't cut the dividend. Revenues missed, earning missed, lowering full year expectations, US Generics under pressure, still no permanent CEO, did they get a permanent CFO? The big positive is that appears they can sustain the dividend indefinitely and it should provide a floor for the stock price"

  79. Hi Phil, I mad a little on shorting QM (thank you) a couple days ago but do not have the time to spend in front of the computer that much so was thinking of a SCO Jan. 32.50/42.50 BCS for around 3.80. What do you think, or what spread would be best in your opinion. Thanks

  80. Good Morning Phil,

    What do you think about JCP ? I create a value based screening of S&P 500 stocks and JCP came out to be among the top 2 so wanted to get some insights from you to validate the accuracy of my value screening formula. 



  81. Big chart--pretty amazing divergence between the Dow and the RUT!

  82. TEVA Moody's downgrades to right above junk (Baa3) S&P affirms current rating (two notches above junk BBB).  

  83. Good morning!

    Oil back to testing $48.50 – these guys are in real trouble.

    Brent is now $3 higher, which is a bit stretched but which one is right?  

    /RB has been good for penny bounces ($420) on the way down but not much else.  Now we have to wait for $1.62 to be tested for a safe bounce spot (if you are inclined to go long).

    /NG still out of favor.

    Dow, as usual, makes progress in the Futures it otherwise can't make naturally – of course it's a good short again at 22,000 (with tight stops above).

    /TF is the best long above 1,405 with tight stops below but I'd go long again at 1,400.

    Cruise ships/Pstas – I wonder if this will impact them down the road if the Paris accord group turns their sites on this industry.

    Grand jury/Rustle – That's just the normal process for these investigations, not as big a deal as the media is making it.  

    Meanwhile, this is like a poster for the Democrats (from his rally yesterday):

    Eating/Jeff – Yesterday we played poker and I ate at the deli – not terribly exciting but I did get 4 3's twice for $165 bonuses each time!  Around here (Boca) I like Seasons 52, Burger Fi, Full of Crepe, the Cuban place in DelRay (don't know the name), City Oyster, Cafe Martier, Cut 432, the Melting Pot, Fries to Caviar, Tanzy, Henry's, Abe and Louie's, Rocco's Tacos, Lemongrass and Harvest – those are the ones I can think of when I think of places I like going to.  Cafe Martier (Del Ray) is highlighted as I'll go there for breakfast, lunch, brunch or dinner when I'm in Delray – I love that place!  

    Bounces/Jabob – I think we'll get a general pullback and our "bargain stocks" are not likely to be spared. 

    IMAX/Joseph – First of all, as a rule of thumb, you want to roll the long part of your bull call spread before its price dips below the net you paid for the spread so, around $2.70 was when you wanted to roll the Dec $23s (see Salvage Plays in the Strategy Section).  As to the $29 put, that's just a mechanical roll to something later with more premium so, to salvage now, you want to take the $1 from the Dec $23s and roll out to March $19 ($3)/22 ($1.70) bull call spreads at $1.30 so not much cost and your net rises to $3 on the $4 spread and your break-even is $22.  I wouldn't get fancy and just be thrilled to break even and save firepower for a possible June roll.  On the put side, at $8.75, you pretty much own IMAX for net $27ish (another reason not to push your luck on the spread.  I would roll to 2x the March $22 puts at $3 and again, just happy to make progress and you can always play more next year – you don't have to try to get even all at once.  As you note, no hurry, the Junes will come out eventually with more premium.

    Only on PSW/Burr – I'm going to use that as a commercial one day!  

    Wal-Mart, Walgreens, CVS turn up the heat on generic drugmaker deal

    Teva shares plummeted 24% on cheaper generic drug prices, pulling rivals lower

    [$$] No Cure in Sight for Teva



  84. Phil /ALB:

    Thank you!, will sell the puts,  I liked your approach of how to follow basic parts of the EV "revolution" ( I´m still  in the side of fuel cells as a global solution) most of the world have unreliable overloaded not automated grid and electricity networks so I can´t imagine  Cairo, Mendoza, Mexico city  or Lagos having a big base of  EV´s units.

    Still, most of Europe, Japan Korea and parts of Canada and U.S will be in the trend and are 60% of the new cars market.

  85. looking like another year low for teva 

    these "bargain stocks" keep getting cheaper (even without any general pullbacks) dangit!

  86. SCO/Jomp – I'm not very enthusiastic about shorting oil as the Saudis are heavily motivated to do SOMETHING to boost it into the Aramco offering in Q1.  Forget oil but there's a commodity where the producer of 10% of it in the World desperately wants the price to go up – do you bet against it?  On the other hand, with oil, the macros are such that I wouldn't be long either but, as far as making money – I prefer to short into the run-ups when possible though, if we are at $45 again, the longs will start looking attractive as Aramco NEEDS $50 oil and the new prince's life depends on it!  

    Big Chart – RUT below 50 dma is a very big danger sign, not bullish until they are back over (1,415) and Nas would confirm bear trend by failing the 20 dma (5,858) but must fail 5,800 for real bearishness.  NYSE not confirming the RUT move at all so nothing definitive.

    JCP/Pat – I haven't been there since I was a kid, my daughters have never stepped foot inside one, even though our main mall (Garden State) has it literally at the center (so you pass it 4 or 5 times almost no matter where you are going).  Without a massive revamp, I don't think they have much of a future.  The CFO didn't think so either, he just bolted.  

    They lost $1.3Bn in 2014 and 2015 and last year they made $1M on $12.5Bn in sales so I'm not sure how your screener works but it's different than mine!   They made $192M in Q1 and then lost $180M in Q2 so a bit erratic at best and they have little cash ($182M) and $5Bn in debt.  The good news is they are only priced at $1.6Bn ($5.43/share).  It costs them $319M/qtr just to service their debt in Q1 – what happens when rates rise?  Unless Q3 is great, they'll have to go to the well for more cash and that will drop them to $5 or less and THEN they might be more interesting but $5.43 is 11x best possible 2018 earnings – tough thing to bet on in this retail environment.

    M, by the way, who I do like, "only" made $619M last year after making double that the two years before and they are valued at $7Bn, which is 11x ACTUAL CURRENT EARNINGS – not fantasy camp earnings.   M has $9Bn in debt but has $1.3Bn in the bank and positive cash-flow.  Also, from a real estate perspective, think of your local JCPs and your local Macy's and Bloomingdale's – which real estate would you rather own?  Too many ways M wins this race to even consider JCP.

    Fuel cells/Advill – Still need the same materials as well.  Easier to play the materials macros than trying to pick winners in the retail sector. 

  87. Bargain stocks/Jabob – I'm not sure how you balance your portfolio but all of those stocks are in the LTP – they are just in portions that have very little impact on the overall portfolio.  As I said yesterday, we WANT these stocks to get cheaper so we can buy more.  I feel bad for you with your constant, obsessive complaining about the value stocks but it's a disservice to newer readers other than to use you as a cautionary tale of a person who simply doesn't understand the value of balancing a portfolio.

    There are 60 positions in the LTP and they are PURPOSELY diversified so yes, at any given time, there will be a sector that underperforms but AAPL was once a FU stock and we bought more and more of it as it got cheaper.  HOV, LL, AAXN (TASR), CLF, DBA, FCX, GM, F, TWTR…  Portfolios are all about BALANCE and the reason our top performers are generating so much profit that we don't mind the FU stocks is BECAUSE, when they were FU stocks, we stuck to our guns and increased the positions.  

    DON'T play these stocks if you can't stand short-term losses.  They are LONG-term positions that we play over years and the reason I am running the LTP since 2013 is to break people of the very bad habits you personify in your trading.  

  88. I hear you and I am not telling ANYONE not to buy these bargain stocks at these levels.

    You like to say I am a disservice to newer readers but I disagree.

    Not everyone has the 4 year LT portfolio.

    The FU stocks are 2017 entries that have been dropping all year in a runaway market.

    It isn't your fault that TEVA crashed or FTR crashed.

    Yes, I am frustrated. Sorry if I complain.

    Unfortunately, my timing on the bargain stocks has been lousy and I am showing big losses owning FTR, TEVA, IMAX, JO, GE, M, LB, and GILD. 

    Some of the others have come back a little--tgt, abx, gnc

    But some of these 2017 bargains have been portfolio killers (FTR TEVA).

    Again, I am not blaming you for my position sizes or put sales or call spreads.

    But I don't see how the LT portfolio gains really matter when most of us on the board do not have those positions. Unless there are tons of people on the board who really have been making all those gains?

    Also, I do appreciate your hard work and agree that your legging into positions is a good strategy. I just wish these bargain stocks did not drop so hard and I guess I am not so confident that they will be able to recover like AAPL which is a great money making company with tons of cash and not burdened by their debt load.

    sorry again for the complaining. 

  89. That's what I'm saying, Jaybob, YOU  need to develop a longer-term outlook. As someone who's been here for years, it baffles me that you only have these positions but,  nonetheless, it would benefit you to step back and just focus on fixing them in the context of a broader portfolio strategy. I'm happy to work on that with you, but all you do is say FU  without actually detailing what it is you have. 

     As we do in our Long-Term Portfolio, we need to go over each position and decide whether to F marry or kill each one. My main frustration from you Is my feeling that I'm failing as a teacher!