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Tempting Tuesday – Fools Rush Us Towards the Strong Bounce Lines

We're getting there.

The S&P 500 Futures (/ES) are only at 2,431.50 at 7:49 and yesterday, in our PSW Morning Report, we predicted a weak bounce to 2,430 while the strong bounce line is still 0.5% away at 2,442.50 and, if we don't get over the strong bounce line today, odds are this has just been the pause that refreshes for the bears, who are consolidating above -2.5% line (2,418) for a proper break-down – but we still have faith as those dip-buyers are well-trained, aren't they?

We haven't made any bearish bets yet but we'd love to see 5,850 tested on the Nasdaq, but it's not likely we get that high today.  Nor is 1,377.50 likely on the Russell but the Dow (/YM) is over its strong bounce line at 21,670 and failing that line will be the signal we're looking for to add some shorts to the indexes.  These are the handy charts I made for our Members in yesterday's Live Chat Room:

The S&P Chart was already posted in the Morning Report and let's not give the Dow too much credit as we were looking to confirm a more bearish channel, from 22,000 to 21,450 (-2.5%) but, in reality, the drop was only from 22,100 to 21,600, which is 500 points so our 5% Rule™ says to expect 100-point bounces to 21,700 and 21,800.  The 22,670 line confirms that the Dow is failing within a longer-term, weaker trend we believe is in progress.  The short story is, the Dow has to hit 21,800 before we consider it in proper recovery.  

If you want an upside hedge right away, try the Nikkei (/NKD) which tested a major bottom at 19,300.  Once they cross over 19,400, that line can be used for a bullish bet with tight stops below 19,400 and, of course, the Nikkei loves a strong Dollar (good for exports), and the Dollar is nice and low in its channel at 93.35 so a higher Dollar gives us a greenlight on that bounce play.  

With the Nikkei falling from 20,300, a 5% pullback takes them to 19,285 and the low was actually 19,265, so a bit of an overshoot to what our Rule predicted but we'll still use 19,285 as the baseline to calculate the expected bounces and the fall was 1,015 and we'll round it off and call it 1,000 and round of to 19,300 and that means we expect 200-point bounces to 19,500 (weak) and 19,700 (strong) and, as you can see, /NKD already failed their strong bounce last week so now we don't expect much more than a weak bounce but, even so, 200 /NKD points are good for $1,000 per contract profits – so we'll still take it!

200 Nikkei points is 1% and the Nikkei ETF (EWJ) is at $54.33 and a 1% move is just 0.50, so it's really not worth playing as a stock or options play.  That's what's great about the Futures – they are perfect for making quick in and out moves like this.  We'll do a little futures trading in our Live Trading Webinar tomorrow, at 1pm (EST).  Last week our live Futures trades made just under $1,000 during the Webinar – that was certainly worth attending!  

We're also looking for a long on Oil (/CLV7 – Oct) Futures when they get back above the $47.50 line but tight stops today as they still have 26,941 open September contracts at the NYMEX and at least half of them are FAKE orders that need to be cancelled or rolled by 2pm.  We're expecting a move higher into next week's holiday weekend, which will be the last gasp for demand this year so, if they are ever going to see $50 again – this is probably their last chance to put a run together.  

Click for
Current Session Prior Day Opt's
Open High Low Last Time Set Chg Vol Set Op Int
Sep'17 47.45 47.85 47.40 47.46 06:20
Aug 22


0.09 1724 47.37 26941 Call Put
Oct'17 47.59 48.04 47.57 47.64 06:20
Aug 22


0.11 123004 47.53 525062 Call Put
Nov'17 47.74 48.19 47.72 47.79 06:20
Aug 22


0.11 8911 47.68 214468 Call Put
Dec'17 47.87 48.31 47.84 47.91 06:20
Aug 22


0.12 5202 47.79 337541 Call Put
Jan'18 47.97 48.40 47.97 48.04 06:20
Aug 22


0.15 1475 47.89 158452 Call Put

However, as you can see, the NYMEX strip is STUFFED with over 1.2Bn Barrels worth of contracts (1,000 barrels per contract) in the front 4 months and keep in mind these are all fake, Fake, FAKE orders for the terminal at Cushing, OK, a facility that has an 85Mb capacity, so it's physically impossible for all that oil to ever be delivered – even if Cushing were not already pretty much full.  NYMEX trading is essentially a scam, a shell game to drive up the prices you pay at the pump for gasoline as well as for the petroleum products that heat your home or become consumer goods.  

Image result for 3 card monte animated gifThat's why we're so good at predicting it – we know it's a scam and we know how the scam works.  It's kind of like betting you will not be able to find the Red Queen when you are playing 3-Card Monte - it's pretty much a given that you won't – and we simply bet you won't.  It's interesting that you can read 100 articles on oil today that try to explain yesterday's drop and not one of them will mention it was the 2nd to last trading day for the Sept contracts and the trader had to dump 40,000 FAKE orders.  No one mentions contracts at all though we point it out all the time as the PRIMARY driver of oil prices into rollover weeks.

There may be some pressure on the few remaining contracts early today and maybe we'll see $47 (also a good place to go long if we get there) so tight stops at $47.50 but cerainly we'd like to be positioned long for the bounce on oil, which is down $2.50 from $50 (5%) but Brent (/BZ) is only down $1.50 from $53 (2.5%) and a $4 gap is virtually unheard of between the two so it's very likely to close and more likely to close up than down, once they are done rolling out of the September contracts they never really wanted (into October contracts they also don't really want).  

Since 2.5% is a decent correction, this one can be played using USO options.  USO is at $9.69 and a 2.5% move up would give us $9.93 and our target is next Friday for the long weekend so we could play the Sept $9 calls, now 0.72 with very little premium and we'd look for an 0.20 gain (27%) for the week.  You can see why we like Futures better, /CL pays us $200 per contract for an 0.20 gain while each $73 option contract pays just $20 profit – though they do use less margin.

Hope springs eternal ahead of the Jackson Hole meeting this week and, as I said during my Benzinga Radio interview yesterday morning, we haven't burned the dip buyers enough yet to teach them a good lesson so we need to step back and let them have their fun (or join them with /NKD) while we wait for good set-ups to jump back in on our shorts.  As I said yesterday, there's not much data this week and Durable Goods on Friday are likely to be a bummer, so what is there to get bullish about?

Be careful out there.  


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  1. Good Morning.

  2. ~~ CMG – Chipotle Mexican Grill target lowered to $250 from $315 at Deutsche Bank; maintain Sell.

  3. Good morning, I do like the bounce charts, makes it so easy!

  4. TEVA is almost at another 26 year low with the market rallying bigtime… wtf?

    Is there bad news today?

  5. I think that is the bad news, jabob



    ~~Teva Pharmaceutical Industries Ltd.’s women’s health assets have drawn interest from U.S. health-care and consumer product makers Church & Dwight Co. and Cooper Cos., which are considering bidding for part of the portfolio, according to people familiar with the matter. Story link: {NSN OV34HW6JTSE8 <GO>}

    * Final bids for Teva’s women’s health portfolio, which could be valued at $2
    billion or more, are expected as early as this week, the people said, asking
    not to be identified because the deliberations are private. The Israeli
    drugmaker may sell the unit as a whole or split the U.S. and European assets
    after bidders showed interest in different parts of the unit, they said.
    * Church & Dwight and Cooper are most interested in the unit’s U.S. treatments
    and may compete with bids from European and Asian firms as well as private
    equity companies, the people said.
    * Teva, working to pare about $35 billion in debt after an ill-timed
    acquisition of Allergan Plc’s generics division, is divesting assets to
    preserve its credit ratings. The company is also considering disposals of its
    European oncology and pain treatments as well as its Medis unit. Teva may
    also sell some respiratory products, people familiar with the matter had said.
    * Other potential bidders for women’s health include India’s Intas
    Pharmaceuticals Ltd. and French buyout firm Astorg Partners, which could use
    the business to expand its portfolio firm HRA Pharma, the people said. Teva’s
    portfolio has also attracted buyout firms such as CVC Capital
    Partners, Apollo Global Management LLC, Avista Capital Partners, Thomas H.
    Lee Partners, Apax Partners, TPG Capital as well as France’s Pierre Fabre SA
    and Spain’s Chemo Group, people familiar with the matter have said previously.
    * No final decision has been made and the companies could still decide against
    a bid, the people said. Representatives for Teva and Church & Dwight declined
    to comment. A spokesman for Cooper, which would make the acquisition through
    its surgical division, didn’t have an immediate comment. Representatives for
    Intas and Astorg didn’t respond to calls.

  7. thanks seer…

    I can't believe how big a POS TEVA has been.. Dangit!!!

  8. FTR at a new low too…. geez

  9. ES bounce line at 2442  reached – nice Phil.   I was playing long at 2332 and got stopped out on the run up. :(   Another close one but no cigar.  Looking to short here

  10. TEVA interesting to see the analyst targets are still quite a bit above the current price.

  11. seer — i think those were there targets from a few weeks ago.

    they will probably adjust them lower.

  12. Has there been bad news on FTR that has made it drop to new lows again???

  13. not sure whether to buy index puts or calls, what has Gartman said today, must do opposite, sure money.

  14. Good morning! 

    Oil popped at the open and now the indexes are spiking higher.  Looks like a fun day ahead.  

    • Redbook Chain Store Sales+3.2% Y/Y vs. +3.2% last week.
    • Month-to-date sales up 2.8% through August 19.
    • August sales are expected to increase 3.1%.
    • Macy's (NYSE:M) tracks higher in early action after unveiling a new merchandising structure that will rely heavily on data analytics in the crucial areas of pricing and inventory management.
    • The move by the department store operator is seen as helping on the bottom line and falls in line with a stronger digital push.
    • Shares of Macy's are up 2.87% premarket to $20.09.

    CMG/Albo – Someone has to force them down to $300.

    Charts/Mkucs – I just wish I didn't have to redraw them every time.  Would be nice if the lines stayed while the charts move.  

    Big Chart – The RUT has the most significant bounce from 1,450 to 1,350 so 20-point bounces to 1,370 and 1,390 in the big picture.  Dow bounced off it's 50 dma and Nas is back over theirs but it's  a long way before one of the others confirm.

    TEVA/Jabob – Nothing new that I see, just the same bad news uninterrupted.  

    Short/Latch – Well don't short just because we're at the lines, make sure there's no reason for the pop (none that I've seen so far).  And, of course, tight stops above.

    Targets/Seer, Jabob – Both FTR and TEVA have a lot of debt, both due to aggressive expansion.  FTR has 14 analysts and only one has a sell with 3 buys and 10 holds.  The average target is still $20 but trending down to $17.50.  With TEVA, AMGN has been selling their 10% share of the company in a planned sale – that's a lot of constant selling pressure – especially in a thin market – hard to say when they'll be done.  The Funds who want to buy TEVA use this to their advantage and plant as many stories as possible questioning TEVA's value while the constant selling "proves" people are panicking out of the stock.  That causes the retail suckers to panic – especially when they have to listen to whiners who had no conviction and scream and curse about the company.  That pushes them into selling and the stock goes even lower while the Funds scoop up shares at the lows and, when they are done – suddenly the news will turn bullish.  

    But, if you expect this to play out over days or weeks – you are kidding yourself.  LL was down since Aug of 2015 and only finally began turning up in March of 2017 after many, many false starts.  

    GOGO too, they spent money investing in a new satellite network and it was the same doom and gloom BS for over a year until, suddenly, it became popular again.  

    I like these kinds of stocks because I like to have large amounts of stocks I feel are solid values in my portfolio.  You never know when they will pop but, if they don't, they also bring in good money selling calls along the way (part covers only).  

    In the LTP, we just doubled down on FTR at $13.54 and now we have 4,000 at $19.89 ($79,560) and we sold 10 short 2019 $15 calls for $3.90 ($3,900).  Those are now $1.35 so up $2,550 is 3.2%  this month back on FTR and it's really 6.4% as we only added the 2nd half this week.  On the next pop, we'll sell something else for $4,000 and maybe we get 5 chances this year to sell $4,000 in premium but that's $20,000 or 25% of our outlay back in year 1 plus the $9,600 dividend is another 12% of what we spent so, as long as they don't go BK in less than 3 years, we should be able to recoup most of our money and whatever is left will be the profit.  

    That's my perspective on it – I really don't care what the price is every day – as long as they are paying their dividend and as long as I can sell options.  

    By the way, the FTR 2019 $13 puts are $5.80 for a net $7.20 entry – that's a fun way to get started!  With our 4,000 shares, if we were inclined to DD again, we could sell 40 of those ($23,200) and 40 of the $10 calls for $3 ($12,000) and we would knock our net cost down to $41,810 on 4,000 shares and our break-even would be about $10.50 (we'd have to roll the short calls).  But, as I looked them over in our portfolio review – I decided I'd rather pay up for the stock and collect those dividends.

    So, Jabob – If you are worried about FTR, sell half and then convert it to the short $13 puts and the short $10 calls for $8.80 and your downside risk is owning more FTR at net $4.20 and, if you don't want to do that – WTF are you doing in the stock at $12.50?  

  15. Peter Schiff – I know he is an acquired taste but I believe he has better understanding of how an economy works and explains it layman's terms.  If you listen to podcasts, have  listen on his views on taxes and big government (anti). Its the Aug 18 episode.  ~~    

  16. great explanation — thanks Phil.

    FU whiners!!!!

  17. 10 States Most Likely to Pass Recreational Marijuana Next

  18. President Trump’s list of false and misleading claims tops 1,000


    Latch, he has been preaching doom and gloom for as long as I can remember.  Eventually, like a broken clock, he'll be right.

  20. LL/TEVA – the pros take their time. They know 100% in 3 years is phenomenal. If you watch the chart everyday you'll go insane.

  21. Phil's explanation on TEVA comparing it to LL is a good one. People often say you can't beat the market and professional money managers should be given the boot, but they're only looking at ones playing by the rules. A rich guy with $100M to risk doesn't want to do any work – or can't really because they are not wired in, so they give it to a professional MM who plays the game: blast a weak stock with bad news stories while you're buying then pump pump pump until you get your 2X and get out (LL is a perfect example), aiming for ~3 years time. You return 33% annual, giving 20% to your risk capital and keeping 13% for yourself – $13M per year goes somewhere in the Hamptons. The ones who lose are the day traders who watch charts all day long – looking for the type of gains that are gambling in nature (gamblers always lose). This isn't a conspiracy theory – GS has had something like 4,000 consecutive days of trading net win. This is statistically impossible after about 20-30 days, so you know there is nothing "statistical" about it – they rig the game and people pay them a bunch of money to do it.

    With this knowledge, us tiny minions can do quite well, like with LL. But you need to have some patience and portfolio allocation to make sure you';re not risking too much in one play like FTR (personally I think FTR goes BK btw). Just because you think a stock is being gamed doesn't mean the game works out or the premise is correct. You gotta spread it around.

  22. bio--why do you think FTR goes BK?

  23. FTR – I don't really know. Just a hunch; like spending too much on landlines, which are like buggy whips IMO. I just feel like they won't make it, but I don't know anything.

  24. BDC – Good points.  The main problem I have with the LL type approach is two-fold.  I strongly believe that stopping out of a position such as LL is a better approach, then continuing to add more money to a falling knife position, and rolling out the options at lower prices.  (BTW, Phil is a master at this.)

    Each time you add to a falling knife position, you are essentially saying that this is the best place for new money.  I just don't believe that's the case.  And if a position like FTR does go bankrupt, as you suggest, the loss is staggering.  JMHO

  25. albo – hard to know if its a falling knife before you get cut by it…

  26. My approach to LL was a single stock purchase around 14 or 15 a couple of years ago and hold, so I'm not really sure what approach you were referring to. I made a similar bet on FGP at 5 recently. VRX at 10. TEVA looks like a wait-and-see for at least 3 more months. Remember – the game here is a 3 year window. Phil has pointed out, and I agree, that there's no harm in "not being first" into a stock rebound, maybe missing the first 10 or 20% to make sure a bottom is in. With VRX it went into the 8's but waiting until 10 was prudent (then look for the pumper stories, then you know it's time!).

    On the downside I usually take about a 50% loss before killing it (FTR is a good example). Then I move on — usually don't re-enter or double down or whatever else.

  27. Jabo – TEVA – Teva is a different animal from FTR.

    BDC – "personally I think FTR goes BK btw".

    Maybe, maybe not, three things about the TEVA deal one might want to know: 

    1. Allergan utilized "acquisition accounting" to inflate sales growth and boost NOLs.  Like ball ironing or a Scrotoplasty, these accounting irregularities made Actavis operating profitability and ass-ets appear to hang in a more desirable orbit.

    2. Allergan debt to EBITDA non compliance was being ignored by the creditors eager for a bail out on what insiders considered a sinking ship.

    3. Then Teva CEO Vigodman stood to collect a 4.5M+ bonus on successful completion of the merger – making it unlikely that douche would act in his shareholders' interests.

    If the numbers are correct (caveat), it appears that Actavis debt load would have sunk them within 2 years, had Teva not been suckered into swallowing them at double what the price should have been, and perhaps quadruple, had they stood back and let Actavis sink. 

    That being said, and not knowing the inside cook books of multiple FTR acquisitions, and given the last mile for high speed internet connectivity as discussed here on PSW… 

    IMHO Teva is more likely of the two to go BK.  Will they? Slim chance, but it depends on how their management or lack thereof plays the hand dealt.  Phil nailed it with planted stories, retail panic and funds swooping and scooping and Out.

  28. TEVA is green today now though :)

  29. Jjennings – Not on the original position.  I'm talking about continuing to add to the losing position as the stock keeps falling.

  30. geez Nat and Bio… are you guys trying to make me vomit with this TEVA FTR BK talk…

    NAT-- I thought you were bullish on TEVA… Tradition..tradition???

    Even if both of their purchases were incredibly stupid (probably), does that mean the rest of their business sucks and they will die?

    Maybe, AMZN or TSLA will buy them ;-)

  31. Jabo – Anything is possible, but what are the odds? Never tell Han those odds. :-)  Read closely, I am bullish on both, long, long, long term.  AMZN would do well to purchase either or both, and be much better off than what is going to happen with WFM and Out.

  32. Just let us look at the good points even M is up 3.4% boy o boy!!!!

  33. LB, F, GE, GILD up too YODI!!!!

  34. BDC – I wasn't referring to your LL experience.  The position was started on PSW at much higher prices then from where you got involved.  I may be wrong, but as I recall, it was somewhere in the 40's or 50s.

    Also, as you know, a 50% loss requires 100% appreciation just to get back to even.  Very difficult to overcome.

  35. albo--you are correct.

    I actually took a quick tiny loss in the 40s and never looked at it again while it collapsed to the teens.

    It became a great recovery and Phil pounded the table plenty of times when they were cheap.

  36. I think I got involved between $25-30 on LL, after Phil recommended it.  I rolled down, and doubled down around the $15-17 level, and am now up $20k+, with another $10k expected.  This has happened with a long string of plays that Phil recommended.  The thing that hurts is when you have too much of your portfolio invested in stocks that are in the early stages of the three year process, that have not begun to recover.  Right now I'm down 13% for the year, mainly because of FTR, TEVA, CBI, LB, IMAX, CHK and BBBY.  My lesson?  Reduce initial position size.  These wouldn't be such a big problem if I had started at half the size.

  37. Noticed Thursday has been the worst day of the week last 4 months. Quite a bounce today, someone found a super ball… I took a stab yesterday, TNA calls… wow, I'm happily surprised but it's looking pretty irrational now… finger on the trigger.

  38. Last 4 weeks I meant to say.

  39. Jabo, except LB they no FU

  40. albo – Schiff – get past the gold price forecasting and see if his arguments on 'why' make sense.  To me they do…I just don't see how  we can keep accumulating debt and not either become Japan or implode.

  41. About time for lil Kim to fire another missile. I don't think he can hit Guam… go ahead, I dare ya…

    I shouldn't tempt fate, just kidding fat boy. Get a haircut.

  42. Indexes up and up – can't be bullish unless strong bounces break down OR we get back to the highs.  Tax cut talk works every time!  

    Landlines/BDC – As someone who lost money waiting 10 years for WiMax, I don't have a lot of faith in large percentages of people cutting the last mile cord anytime soon.  Even wired, Comcast can't deliver reliable speed – if the 90% of the people who still use land lines switch to the Web, it would drag down the performance for many years.   Fiber to the home will be around for a long time and that's what FTR is betting on while VZ is in the decades-long process of shedding their wire assets so that, eventually, they will be able to put landlines out of business but, for the next decade or so – I think we'll still need those buggy whips – especially in FTR's core rural base.  

    Also, on FTR, $80,000 worth of stock in a $1.6M portfolio is not adding to a falling knife – it is simply the final installment we wanted to make for 0.80 ($12) from the time we bought our first share.   It's using $40,000 of $3.2M in ordinary margin and, if it loses money – it will be a tragedy but, as long as AAPL makes it's $180,000 – it will be one we can recover from.   On the other hand, if FTR goes back to $20 and our 4,000 shares are worth $80,000 again and we're collecting $9,600 a year in dividends – then we have a lovely position that will add to our portfolio for many years to come.

    LL/Albo – Our initial position was 5 2017 $35/55 bull call spreads with 4 short 2017 $40 puts in March of 2015.  We took a $3,500 hit on that one in April.  We flipped to 10 short $25 puts (2017) and 20 2017 $15 calls and got burned for those for $10K by Dec.  Our new Dec 2015 position was 20 2019 $13 calls and 20 short $15 puts and in March of 2016 we added 30 $10/17 bull call spreads and cashed the whole thing out in June for a net $23,700 gain in about 12 months.  That IS how we scale into a position.  We lost $3,500 and we still liked it so we made a bigger bet cheaper and then we lost $10,000 and we still liked it and we made a bigger bet cheaper and then that bet made about $35,000 and we cashed it in.

    Had the original bet paid off, we would have made $15,000 so, on the whole, it worked out the way we planned… cool

    Reduce/Palotay – The above trick on FTR can often be done with stocks that go cheap to reduce.   With LB, for example, you can take the loss on 1/2 and convert it to short 2019 $30 puts at $4 and short $37.50 calls at $5.50, which reduces your basis on the other half by $9.50 with the call-away at $37.50.  It's worth considering things like that if you get stretched on a position.

    /NKD doing OK but not as exciting as the Dow.  

    Oil can't get over $48 – not encouraging for the bulls.  

    Now /RB is lagging and they should be a fun play over $1.59 with tight stops below into the holiday.

  43. albo--Phil's strategy does not require a 100% recovery to break even after a 50% drop.

    But I would think the "3 year" strategy does require a decent recovery to break even.

    Also, we have not seen any of these recoveries tested in a market that has not gone straight up (since 2009).

    I hope that Phil will get the same results even in a weak overall market if we ever have one.

    Also, my whining is usually when the market is strengthening and the FU stocks keep hitting new lows.

    Yes, this could be the opportunity we have all been waiting for… 

    But I still wish the opportunities were when they were 25-50% higher, of course ;-)  

  44. I agree with Schiff, just can't take his incessant whine. He sure likes to hear himself talk…

  45. LTP gains are swamping STP losses, so all is well.  

    Had to take my /TF shorts at 1,369 – they are just too much fun.

    Just 2 to start.

  46. mkuc-totally agree on Schiff…he can't help himself there..takes away from a coherent and important message

  47. Thanks, Phil.  I knew that LL worked out in the end.

  48. Schiff/Latch – listen to him as much as you can stand, but don't, I repeat, DON'T ever give money to EuroPacific. A friend got badly burned with them – very shady operation. "Issues" with actually getting any money back, even though had a positive balance. Ponzi comes to mind when he describes the experience.

  49. FTR – had to add just now… bot shares, covered with Oct $14 calls for net 11.97 entry. Not a lot, but did drop net adjusted cost basis quite nicely.

  50. GNC down almost 10% today

  51. FTR – I worked for  companies that bought legacy assets from telcos.  We were a private company and the assets we bought ended up having much longer and stronger earnings and cash tails than the banks thought and they became cash machines. This applies to landlines which I expect will have a longer tail than many think.  Rural population is typically older and they are less likely to give up or forgo completely a landline, but high speed Internet is the real play.  Wireless high speed internet may become a viable substitute for wireline based Internet in less densely populated rural areas (more spectrum per user available) which may be a risk to Frontier, but with streaming increasing every year clearly wireline Internet has a capacity advantage.  Frontier may become susceptible to cable co's offering wireless as a bundle.  Legacy assets seldom get good multiples but again as a cash machine repeatedly selling calls against stock with dividends is where you could get some strong returns.  

    Per Phil, Wimax became a dog but the underlying spectrum had huge value and it was realized by Clearwire as an example.  Clearwire traded around $1.34 which was way less than the value of its spectrum.  It was sold to Sprint for $5.00 a share inside a year.  Fibre in the ground will always have value as well.   

  52. Jabo – "GNC down almost 10% today"

    They have a vitamin deficiency, take yours Dathan.

  53. eat drek Aviram

  54. Stu – "the assets we bought ended up having much longer and stronger earnings and cash tails than the banks thought and they became cash machines. This applies to landlines which I expect will have a longer tail than many think."

    Cogent and astute, the last mile stands, for now and Out.

  55. Jabo – "eat drek Aviram" see you have a vitamin C deficiency, its DRECK.  LU2 brother and Out.

  56. This housing chart is really strange:

    Data Source: U.S. Census Bureau

    Well, not really strange.  What happened is that home ownership peaked out so we had a housing crisis that forced the serf to sell the land back to their lords at low prices and now the lords are renting the land back to the serfs until such a time as they can get top Dollar for them, at which point they will lend money to the serfs (keeping them forever in debt and working the land) before pulling the rug out from home prices again so they can forclose on the serfs they just lent money to and then buy back all the land for pennies on the Dollar – and then do it all over again.

    It's been that way since they signed the Magna Carta giving the serfs the right to own land.

  57. FTR has a market cap of less than a Billion…..

  58. Think about it – at the lowest interest rates ever – people aren't buying homes.

  59. Data Source: BLS

    The good news is, after being paid 15% less in the 90s, people are now making about the same as they did in the 70s (adjusted for inflation).  

  60. Phil – Housing Chart – feudal dukedom at its best. The bubble artificially reflated, wages did not keep pace. Your timing could not be better, we must be on the same frequency as I am in the midst of doing a piece on disposable personal income and imputed owners rent.  Tip o the hat to StJL for posting that piece by Ritholtz claiming all is well and Out.

  61. 2,450 is a fun short on /ES (done with /NKD, of course – 19,460).

    /YM 21,850 and /NQ 5,875 are the other watch lines.

    All is well/Naybob – If you don't associate with the bottom 80% – all seems great.  

  62. GNC – Another over saturation trying to close the gap on free cash flow targets. BofA/Merrill cut them to 5.50, so they could buy more shares on the cheap and Out.

  63. RACE – no one buying houses, but Ferrari is charging ahead with all time highs..

  64. CBOE – new ATH breakout move…  This is the true 'house' in the game.

  65. Phil –  "If you don't associate with the bottom 80% – all seems great."

    Yup, its amazing how many people exist in isolationist bubbles.

  66. COH – trying to hold onto the 200dma after a drop. time to BTFD?

  67. IMAX – impressive slide on daily and weekly charts. ImpliedVol higher than HistoricVol on weekly chart. Low in downward-sloping weekly channel. Looks dismal, with no visible support on pretty much any measure or study.

  68. Scott – There is a firmness in retail stocks today. 

    Bottoming process, or dead cat bounce ?

  69. Albo – i'm going to assume dead cats all around.

  70. DF/Phil – approaching 2010 lows. Did they lose all their brands? No one drinks milk anymore? Another bargain for a watchlist?

  71. Beautiful description of QE by ex permanent secretary to the Treasury Lord Nick Macpherson.

  72. GNC made $23M in Q1 and $16M in Q2 and you can buy the whole company for less than $600M at $8.70.   Figure no big jump for XMas and "just" $80M in earnings is a p/e of 7.5 – without assuming any growth from where they are now.  

    From their CC:

    Transactions for the quarter were up 12.3%, building on the growth we saw in the first quarter of 2017. We're attracting new customers to GNC. They are shopping more frequently, and we're converting more of them.

    myGNC Rewards now has approximately 7.8 million members. And halfway through the year, we are at 80% of our 2017 enrollment goal. myGNC is consistent with our 1 price strategy. And because members earn price for every — earned points for every dollar they spend and get cashback rewards, the program encourages spending and drives return trips to redeem those rewards. After 6 months, we continue to believe myGNC members are on track to visit 6x a year compared with Gold Card members, who visited just 4x in an entire year.

    PRO Access and myGNC also are growing the ranks of contactable customers. Today, we have 3x as many customer e-mail addresses as we had 6 months ago. We're gathering data that can help us truly understand our customers in developing the platforms and expertise to tailor our communication, regimen recommendations and offers to their specific interests and needs. Our business is improving, driven by our work to fix the assortment and get pricing right, and we're pleased with the performance of the GNC store on Amazon, which features our best products and is consistently priced with on our retail locations. comp decreased 6.3% in the second quarter, which is incrementally better than Q1. We expect to achieve positive comps in the back half of the year as we lap price and book buying changes made in the prior year.

    In domestic franchise locations, revenue increased nearly $1 million during the quarter, due to the impact of a higher average store base, partially offset by a 1.1% decline in retail same-store sales.

    Our International business grew during the second quarter with a 1.3% increase in revenue and a 14.3% increase in operating income, driven by growth in our China e-commerce business. We do see a long-term opportunity in further penetrating the China market and are currently contemplating paths to accelerating our growth in that region.

    In the second quarter, we generated $27 million in net cash from operating activities, invested $6 million in capital expenditures and generated $21 million of free cash flow. We're still planning fewer new store openings and less spending on IT in 2017 and expect CapEx to be in line with last quarter's estimates of $35 million to $40 million.

    We continue to expect free cash flow to be in excess of $250 million for the year, a 1/3 of this free cash flow is driven by operating results while the rest is the product of working capital changes primarily related to inventory and accounts payable. As we discussed last quarter, we plan to use cash that previously would have been allocated through our dividend or in prior quarters to share repurchases to lower our debt levels, focusing first on paying down our revolver. In particular, we expect to have the revolver paid down by the end of 2017.

    Again, if you think of your investments as a black box that only has value based on the PRICE it's trading at today – then of course dump a stock that's down 20%.  If, on the other hand, you are a long-term investor who likes a company because of what they actually do and believes the company can generate a better than 10% annual return – then why would you not want to put your money into a business like that?

    COH/Scott – For the LTP/OOP, we have enough retail exposure but COH does get interesting around $40 ($11Bn) as they are certainly good for about $2.50 a share but, compared to LB, M or GNC – they are still expensive.  

    IMAX/Scott – Haven't you heard, movies are dead.  I guess AMZN teamed up with NFLX to kill them.  It's all over, no more movies.  That's bad for IMAX, who only made 0.15 last Q and on track to make about 0.40 for the year, which is a high p/e but, of course, they are investing a ton of money into building more theaters – which may not be a good idea if the movie business is dead.  

    AMC just as bad:

    The problem in the market is so much money is now required to keep the high flyers going that it's being sucked away from "normal" stocks.  This happened in 1999 as well as non-tech stocks tanked, no matter how good their business was.  

    DF/Scott – Another example but how many of these stocks can we afford to baby-sit?  

  73. Phil – /RB  had a small pucker up moment at 1.585 but have 2 long at 1.5914.  What is the target over the remaining 9 days?

  74. IMAX -> Dunkirk + Blade Runner 2 = all okay! Big Screen lives..just need $$ to pay for it

  75. guess we should have waited for 80c…

    FU FTR!!!!

  76. with you on FTR.  Added yesterday at a $1 higher. :(   Not a huge position overall but still down ~50% even after averaging down.  Did sell some 2019 $10 put today though……….so in it for the long haul. 

  77. I love the layout of the charts the past two days.  While, I am still learning this 5% rule, it is much easier to follow.  Nice job.   

    /CL or /RB - Phil, Are you in either of these at the moment?  Based off the comments in the morning post, it appears the $4 gap is still there with /BZ and if there is a high probability we will see a run up into the Holiday weekend.  I'd like to go long, but wanted to check after the comment: "Oil can't get over $48, not encouraging for the bulls" .   Fine with waiting for another dip and playing it over the weekend.  

  78.  NGL New Position.

    This was from Briefing Trader earlier :


    ~~• "At current price of $9.37, NGL yields 16.7%. Company has suffered through some execution issues the past couple of quarters. However, NGL is still targeting 1.3x distributable cash flow coverage for this year.
    •Recent comments by RBC Capital Markets are very much in line with my thinking on the name at these levels:?RBC Capital Mkts lowers their NGL tgt to $14 from $20. RBC notes, continued Refined Products pressure more severe than expected; they lower estimates. Stock reaction (off 20%) understandable, but they think it's overdone; current 15%+ yield implying distribution at risk again. If NGL anywhere close to lower expectations, distribution is safe and stock looks cheap at 5-7x P/DCF. Getting credibility back through execution is key.

    These comments were made by RBC on Aug 4 in reaction to co's most recent earnings report. The stock fell to $9.25 from $12.80 in reaction the report. That is after having already crashed from $25 since January."


    FWIW – This was my play:

    Bought 1k shares at $9.45

    Sold 10 April 10 calls for $.88.

    Sold 10 April 7.5 puts at $.75

  79. Phil – Hollywood Dead - At -12% YOY, we are on target for 2017 to be the worst SUMMER box office in the last quarter century.  -15% would be the worst YOY decline ever, surpassing 2014 at 14.5%. Do we see a recent trend here?  Yet a 2016 new domestic record at 11.17B? and 2016 blobal box office revenue $38B.

    Meanwhile porn at $98B global, $16B domestic, out earning MLB, NFL and NBA combined. We perviously commented on this at PSW. It’s clear which sports and films people prefer the most. That last mile is killing Hollywood, streaming be berry berry good for FTR and Out.  

  80. Nat, how does one invest in the porn industry?  is there stock we can buy,  with those kinds of earnings there has to be a steady dividend paying porn stock somewhere. :)

  81. As it's almost Sept, good time to reflect on the Watch List after 6 months:

    AFL (2/17) - I always forget to buy AFL.  Super-solid company that trades in a channel good enough for the Butterfly Portfolio and should do better as rates tick up (insurance companies have huge reserves they have to keep in "safe" accounts).  They have $102Bn in long-term investments (bonds) that are paying them nothing – a 1% rise in rates drops $1Bn to their bottom line ($2.50/share).  You only have to pay $70.67 for a stock that threw off $6.45/share last year (p/e 11) and though they project flat – flat is just fine when you are returning 9% a year.  They pay a 2.5% ($1.72) dividend while you wait but not worth owning the stock as we can sell the 2019 $65 puts for $5.50 and buy the $60 ($13.50)/70 ($7.10) bull call spread for $6.40 for net 0.90 on the $10 spread that's 100% in the money.  

    BMY (3/5) – Last July, BMY took a huge hit because Opdivo (late-stage cancer) failed in trials and the stock collapsed.  On Jan earnings, they missed estimates by 0.03 but earned 0.63 per $60 share so on track for $2.50 and a p/e of 24.  There were, however, still extra expenses as they try to get Opdivo back on track (for wider acceptance – it's already being used for some cancers) and I think their guidance of $3/share will ultimately hold up.  Too bad we missed them at $46, now $57.26 but volatility is good for put prices and we can sell 2019 $50 puts for $5.20 for a net $44.80 entry (below the lows) and that can be paired with the $50 ($11.50)/60 ($6.25) bull call spread at $5.25 so net 0.05 on the $10 spread and ALL BMY has to do to make a $9.95 return (up 19,900% return on you nickel!) is make it back over $60 in two years.  

    DAL (3/5) – Our theory here is that Delta spends close to $10Bn a year on fuel and the new planes they are starting to get from BA are 15% more effienct so, sometime in the Future, earnings will rise $1.5Bn (33%) over time.  Unfortunately, they buy the planes up front so earnings in 2017 are projected down to $3.7Bn (still a p/e of 10) and then $4Bn in 2019 and, following hat, we can expect enough of the fleet to have rolled over to give us solid gains going forward.  Since low-cost carriers tend to rely on used planes, the majors who buy new planes will have a fuel advantage for years to come – it's a new paradigm in the industry and that's why Buffet bought in after decades of hating airline stocks.  Clearly we'd like to see them come back to $40 before pulling the trigger.  At the moment, the 2019 $45 puts can be sold for $6.10 and, if we can get that price for the $40 puts (now $3.80), I'd take a net $38.90 entry for sure.  

    ESRX (2/17) – Another beaten-down Pharma that is worth owning.  They made $2.5Bn last year, up from $2Bn the year before and they did $1.4Bn in the last two Qs so pacing towards $3Bn yet you can buy this company for $42Bn (trailing p/e 17) at $70.   We can promise to buy them for $65 and get paid $8 to do it, which is net $57 which is 18.5% off the current price.  In the LTP, I'm just going to do those but you can be aggressive and add the $60 ($17.50)/75 ($9) bull call spread for $8.50 and then it's net 0.50 for the $15 spread that's $10 in the money to start.  ESRX was added to the Long-Term Portfolio (LTP) on 2/17, selling 5 2019 $65 puts for $7.50 ($3,750) to start

    FCX (3/5) – This os one I picked last year at $4 and now they are $13.20 but I still like them!  They might actually make $1/share this year and much more if copper and gold tick up in price and yes, I'd rather buy them at $10 so no hurry here but you can already sell the 2019 $10 puts for $1.65, which nets you in at $8.35 or, if you want to be more aggressive, you can sell the $12 puts for $2.60 for net $9.40.  I think I'd be more aggressive on the puts and sell perhaps 10 ($2,600) and use that to buy 20 $10 ($5.50)/17 ($2.50) bull call spreads for $3 ($6,000) so net $3,400 on $14,000 worth of longs if all goes well.


    FMCC (5/9) – At $2.60 they seem silly cheap to me.  They are currently turning most of the cash over to the Government but are in court fighting to retain more.  $2.60 is an $8.4Bn valuation yet they made $8Bn last year!  No options.  

    GCI (5/9) – Gannett's earnings were not as awful as feared and $8.31 has dropped their market cap to under $1Bn ($940M) but last Q they dropped $33M to the bottom line and they should earn about $1 per share this year and next.  They also pay an 0.64 dividend (7.6%) with no cash-flow issues.  

    • Gannett (NYSE:GCI) is up 7.9% and reaching its highest point since early February after posting Q1 earnings where it beat on top and bottom lines and raised EBITDA guidance for the full year.

      Revenues grew more than 17%; excluding unfavorable exchange-rate changes and $1.8M in exited operations, they grew 19.3%. Digital revenues of $234.7M made up 30.3% of operating revenue.

      Net cash flow from operations of about $31.1M, vs. a year-ago $17.3M. Cash balance at quarter's end was $89.5M.

      Revenue by segment: Publishing, $694.9M (up 5.6%); ReachLocal, $77.6M (new); Corporate and Other, $968,000 (down 30.3%).

      It's boosted EBITDA guidance for the full year to $355M-$365M, up $30M at the midpoint. It's reiterated guidance for revenues of $3.15B-$3.22B, and sees capex of $65-$75M (excluding real estate); depreciation/amortization of $150M-$155M; and effective tax rate of 28-32%.


    So, in the LTP, let's pick up 2,000 shares at $8.30 ($16,600) and cover them with 20 short Oct $7.50 calls at $1.10 ($2,200) and sell 20 short Oct $7.50 puts for 0.60 ($1,200) so we net into 2,000 shares for $13,200 ($6.60) so we're not going to mind being called away at $7.50 (+18%) and the dividend is over 10% while we wait.  Worst case would be owning 4,000 at avg $7.05 – also not bad!  

    GE (3/5) – Forever $30 but talk about a safe place to park your money!  They even pay a 3.2% dividend (0.89) while you wait for something to happen – and it won't.  GE is a $262Bn company that pays no taxes ($464M refund last year on $9Bn in earnings!) and has tons of money overseas – what's not to love?  Even better, you can sell the 2019 $28 puts for $2.50 and use that free money to buy the $25 ($6.10)/30 ($3.05) bull call spread for $3.05 and that's net 0.55 on the $5 spread for a near 10-bagger if GE simply holds $30.  There's anothe interesting way to play this one and that's to effecively buy it by selling the 2019 $32 calls for $4.40 for a net $27.60 entry and then buy the $28 calls ($4.20) for a net 0.20 credit and then just sell 1/2 of the April $30s (0.75).  That way, you are collecting 0.375 per long and each time you collect $1.70 (4-5 quarters) you can spend it to roll the long calls lower (the 2019 $25 calls are $6.10) to lock in the gains and work towards a lower, cheaper spread – it's just more work that way.  

    GILD (2/17) – Still priced like they are going BK even though they made $18Bn last year and should make $13Bn this year but that's still cheap when the whole company is $91Bn (p/e 7).  This is a huge conglomerate with a 20-year pipeline and one drug went generic on them – there will be others.  Selling the 2019 $60 puts for $6.30 is like free money, netting you in for $53.70 (23% off) and the $62.50 ($13.20)/77.50 ($6.85) bull call spread is $6.35 so net a nickel for the $15 spread is a very nice upside potential of $14.95 if GILD simply makes $77.50 by Jan, 2019.

    HRB (2/17) – Replacing their workers with Watson in the next few years, so a good long-term play.  Simplification of tax code may make them a good choice for more people (bad for accountants) and they are very cheap at $4.25Bn ($20.50) after dropping $400M to the bottom line in fiscal 2016.  Should be a bit lower this year (cost of IBM project) but, down the road – vroom!   2019 $18 puts can be sold for $2.75 and you can use those to fund the $18 ($4.20)/22 ($2.30) bull call spread at $1.90 so you still have a net 0.85 credit and your worst case is owning them at net $17.15 (17% off) and best case is making $4.85 on the robot revolution. 

    Image result for robot accountant 

    JNS (3/5) – Janus Capital is where Bill Gross ended up after leaving PIMCO.  Janus is an asset management company with about $170Bn under management and HNW clients don't generally move their money without good reason (as it's such a pain in the ass).  Nonethless, they missed earnings in Jan and dropped 10% so now we like them as they test $12 again and the sharp drop has run the Sept $12 puts up to $1.05 so that's a no-brainer for a net $10.95 enty and these guys are another 3.5% dividend payer (0.44) but why buy the stock and wait for dividends and hope it holds $12 when we can collect 2.5x the dividend in 7 months and protect ourselves from a drop at the same time?  

    LB (2/17) – Victoria's Secret, Pink, Bath and Body Works…  Girls need bras and they like candles and perfume too!  So, assuming there will be girls in our future, paying $16.2Bn for a company dropping $1.2Bn to the bottom line is a p/e of 13.5 for a company that historically has grown 20% a year (flat this year).  You can sell the 2019 $42.50 puts for $4 and that may as well be free money (net $38.50 entry is 25% off) so it can be paired with the $50 ($11.50)/$65 ($5) bull call spread and you know we must love this one because we're willing to pay net $2.50 for the $15 spread!  

    M (2/17) – We like M for a recovery story and, if not, as a real estate story.  They have 900 big-box stores and a $9Bn market cap so $10M per store is not a lot to pay and, at $9Bn, it's a good size to be acquired by a foreign company looking to have a presence in the US.  Meanwhile, they made $1Bn last year and maybe $900M this year so not like SHLD, who are losing $1.5Bn a year AFTER selling off land and brands yet still, for some reason, hold a $1Bn valuation.  Anyway, back to M.  The 2019 $25 puts can be sold for $3.10 and the $28 ($6.70)/$35 ($3.85) bull call spread is $2.85 so a net 0.25 credit on the $7 spread is the way to go.  

    PBI (3/5) – Pitney Bowes used to sell fax machines and now they sell information management services – a great adjustment but one that has caused many problems and they have missed EVERY SINGLE QUARTER for the past 3 years!  Margin pressure in Digital Commerce caused them to take a $168M impairment charge that led to the horrific drop since Nov.  Still, cut guidance is for $1.75 per $13.57 share and that makes them well-worth taking a chance on, since they also pay an 0.75 (5.5%) dividend.  The 2019 $13 puts can be sold for an awesome $2.50 for a net $10.50 entry and that's 3 years worth of dividends paid to you for NOT owning the stock.  I don't think they will recover much but the 2019 $13 calls are only $2.40 – because no one thinks they are recovering and if you sell the $17 calls for $1 it's net $1.40 on that side, so a nice net $1.10 credit on the combo, if you are so inclined.  

    PSA (3/5) – I generally don't like $226.61 stocks but this one pays an $8 dividend and is a good value at $220, so I am interested.  $200 should be a very solid floor so not much risk in selling Sept $210 puts for $9 because your worst case is owning them at net $201 and, if they head higher – $9 by Sept is far ahead of the dividend anyway.  I like this space as they are a REIT but no single tenant can break them and more people renting apartments means more need for extra storage space (plus retirees who can't let go of their stuff when they downsize). 

    QCOM (3/5) – This is a big deal for me as I've always liked BRCM better than QCOM but BRCM is now AVGO and hasn't been cheap in ages.  QCOM, on the other hand, at $56.44 is "only" $83Bn and they made $5.7BN last year so a 14.5 p/e is very cheap for tech and yes, QCOM is in a down cycle for their chips but then they will be in an up cycle so now is when we buy.   It makes them much more attractive that we can sell the 2019 $50 puts for $6.35 for a net $43.65 entry.  In our LTP, we jumped right in on the dip on 2/10 and sold the $55 puts for $10.50 and I would like those better but they already dropped to $8.50 so now I like the lower ones better for just $2 less.  The high volatility of the stock has also made the $50 ($10.75)/$65 ($4.40) bull call spread at $5.35 a good bargain but we're waiting and seeing in the LTP with just 5 short puts for the moment.

    SEE (5/9) – Just reported a quarter that took a loss on a unit they sold for $3.2Bn but CONSERVATIVE financials did not include sales for the unit or profits so they missed expectations and, of course, they wrote down whatever they could to avoid taxes and that made them look bad.  Good solid long-term company otherwise and the big dip let's you sell Jan $40 puts for $2, so let's sell 10 of those in the LTP so we can keep an eye on them.

    SUN (3/5) – At $25.27, they get little respect considering they pay a very reliable $3.30 dividend (13%) and should earn about $1.50 per share (p/e 16.8).  SUN is a refiner and seller of gasoline, not an oil company and it makes little sense that VLO is trading near all-time highs while SUN is down 30% from last year.  They should and probably will cut the dividend to pay down debt so possibly more downside to come but you can sell Sept $22.50 puts for $1.85 for a net $20.65 entry and that's all the risk I'd take for now.  A long spread can always be added once things stabilize.  

    SVU (2/17) – One we picked at the Seminar.  Supermarket profits are thin and they come and go – that's why you can buy a company that made $178M last year for $1Bn ($4) – that's just silly!  Even if they have a bad year, I'd be thrilled to catch 2 good years out of 5 and it's the bad years that are unusual.  You can sell the 2019 $3.50 puts for 0.70 and buy the $2.50 ($1.85)/$5 (0.70) bull call spread for $1.15 so net 0.45 on the $2.50 spread is a very exciting upside!  

    AAXN (was TASR) (3/5) – Our Stock of the Decade has pulled back to only 350% above our $5 entry so we're interested again.  A combination of widespread civil unrest and too many cameras (which TASR sells too) makes it impolitic to shoot protestors (though beating grannies seems fine).  There's a lot of competition in the body camera biz but TASR owns the stun gun market and those relationships give them a big advantage over the competition.  Sales are not a problem for TASR – camera sales were up 150% from last year with overall growth at 46% – it's a margin issue ("only" 60%) and margins can be fixed quickly in electronics.   This one is a buy for us as we took $29 and ran last year and now, getting back in is a must near $22.  We already have 5 short 2019 $20 puts in the OOP at $3.20 and they are still $3.20 so now is the time to double those down to 10 and add 10 2019 $18 calls ($7.50) and sell 10 2019 $27 calls ($3.30) for net $4.20 less $3.20 is $1 per $9 spread.  

    TGT (2/17) – At $65.55 they earn $5+ per share so p/e about 13 is very reasonable.  Having trouble passing on inflationary prices but that's just a cyclical thing and this is a great opportunity to own them cheap.  The 2019 $55 puts can be sold for $5.20 – that's great as a stand-alone sale as it nets you in for 23% off.   You can pair it with the $60 ($10)/$72.50 ($5) bull call spread and the whole thing is net free(ish) with a nice $12.50 upside.  

    VZ – All the telcos have been beaten down but who doesn't have a phone?  More and more companies are looking to put TV on your phones and tablets and TVs are turning into big tablets and your refrigerater needs web access now – it's the same logic as buying a pipeline company when demand for oil is up – these are the guys who make all that happen and VZ is the leader in installed fiber-optics (FIOS), which is very important for bandwidth-hogging virtual reality.  Almost as boring as GE but with bigger swings, VZ pays a nice 4.6% ($2.31) dividend while you wait.  The 2019 $45 puts can be sold for $4 and that's net $41 and as much(ish) as you would collect for owning the stock at $50.09 for 2 years so no-brainer there.  

    WFM (2/17) – Nowhere near as cheap as SVU but WFM made $500M last year and is selling for $10Bn so p/e 20 but I like the fact that they are pushing into Europe and I like the rollout of their less-expensive 365 stores – though they are cannibalizing sales and eating into the bottom line for now.  Since it's a slow roll, I would just plant a stake by selling the 2019 $30 puts for $4.50 and see how things go with a break-even at $25.50. 

    XOM (2/17) – Still cheap at $81.50.  You can sell the 2019 $80 puts for $9 and buy the $70 ($14.25)/85 ($5.75) bull call spread for net $8.50 and you get an 0.50 credit on the $15 spread that's $11.50 in the money to start.  

    So we're off to a good start, I may add a few more as time goes by but here's a nice, diversified set of stocks that has something to fill every need a portfolio may have for balance.   That's why keeping a watch list is so valuable for traders – we have premises and price targets and we'll see how they hold up along the way.  

    So, how are we doing?

    • AFL, BMY, DAL, FCX, GCI, GILD, HRB, JNS (now JHG), SEE, SUN, VZ and WFM are winners. 
    • ESRX, FMCC, PBI, QCOM, AAXN (TASR), TGT are stuck in neutral.
    • GE, LB, M, PSA, SVU, XOM are losers (but we ditched XOM).  

    Of course the point of the Watch List is to buy thing when they are cheap so I'm more interested in the cheap ones now.  

    • ESRX is in the LTP and we're over our net.  
    • FMCC would be great if they had options, but they don't. 
    • GE – I'm very surprised we dropped so low.  Multinational corp, pays 4% dividend, makes $1.50 share, should benefit from infrastructure…  Should we not buy them just because they are out of favor?  We grabbed 2,000 shares at $27.40 in the LTP, selling the $25 calls and $28 puts for $6.85 to net in for $20.55, so $24.50 is fine with us!  
    • LB – I just said on Benzinga will be our Trade of the Year in 2018 if it's still down here ($36.50) .  In the LTP and OOP we just added to our existing positions.  
    • M – M pays a massive dividend ($1.50 = 7.5%) but we have the spread and, fortunately, we just punched it up in both our bullish portfolios.  
    • PBI – Simply a buy again.  They were up nicely and now back to where we liked them so a similar play would make a nice entry.  The stock goes in and out of favor but what do we care?  Just buy it when it's low in the channel and sell it when it's high.  Guidance, by the way, is now the $1.75 I predicted at the time.  
    • PSA – Though they are down, this was our target.  The Sept $210 puts are now $11.70 so down $2.70 from $9 but it's a watch list – we never bought them, we were just watching them.  NOW they are more interesting to sell.  Not Sept, but March is out and you can get $11 for the $195 puts – much better deal but I still don't like $200 stocks for the OOP (or even the LTP, actually).
    • QCOM – I'm surprised how they are dragging against the Nas rally.  Earned $2.16 in the last two Qs and no reason they won't earn $2 more for $4 per $52.40 share.  I know they are not selling magic beans but how can you not like them down here?  That's why they went into the LTP.
    • SVU – All that panic over WFM getting bought killed their nice rally.  We own them with a $13/25 bull call spread that's mostly in the money so who cares?
    • AAXN (TASR) – In the LTP and the OOP and also in the running for Trade of the Year in 2018 at $22. 
    • TGT – Another retail victim that I certainly still like.  We looked at selling $55 puts for $5.20 for a net $49.80 entry and the stock is beaten up to $56 – do we care what people think?  No, we make our $5.20 and we're happy.  Of course they got so cheap we added them to the LTP already. 
    • XOM – Was in the LTP but we didn't like oil after July so we got out of XOM too.  Good call.

    Other Watch List candidates were: NVDA, ALB, GT, CSCO and STWD but I'm not in the mood to do a write-up.  

  82. FTR   After reading the articles Phil news feed posted and comments here  specially Phil and Stuman I believe that the future will be with FTR,  IoT  is coming, driverless, drones, internet live stream  etc. wireless  radio band is already in saturation point, even the promised land of 5G is still away and that will require heavy investments in a more expensive credit level.

    Land lines  are already there, and are limitless in capacity specially with the new optic switches that multiply capacity in a Moore law rate.

    So Jabo, doing what Phil recommends  (it´s smart proposition)  will  avoid being suffering each day, the future will  be in your side.

    FTR is in my watchlist 

  83. Phil, What do you think of SPXU or SQQQ here, given this low-volume bounce? Thanks. Strether

  84. Phil/FTR

    good time to double down or do you more downside from here. it is touching the 0.80 that you predicted…:-)


  85. /RB/Latch – I wish I were that good but I just think it will go higher.  When I make $1,000, I'm usually happy and would have to have a good reason to stay in it from there.  

    IMAX/Latch – Inhumans, Kingsman, Blade Runner, Geostorm, Thor, Justice League, Star Wars, Black Panther – that's the schedule for the rest of the year plus regular films they blow up in between.  I know I'll see pretty much all of them.

    FTR/Jabob – Goaaaaaaaaaaallllllllllllllllllllllllllll!!!!!  

    /CL/Joseph – Well I took $500 on /CL and ran and /RB I'll let run for now.  Both very dangerous trades though – be careful.  

    NGL/Albo – I think that sector might come back a bit next year as they can't keep not spending on E&P.  Eventually, current wells run dry.  

    Trend/Naybob – From a single data point?  No, I don't see a trend.  

    Image result for extrapolating

    Porn/Ult – Try RICK. It's a good stock actually, we used to play them after the crash (under $10) but not thrilling at $24 as too many people stuff Dollars into them and pump up the price.  

    RICK/Terra – Yeah I like them.  $7.32 for the stock and you can sell the  May $5s for $2.50 and the $7.50 puts for $1.35 and that’s net $3.47/5.49, which is plenty of upside and discount for 8 months.

    Those were the days!  

    SQQQ/Streth – I haven't warmed up to SPXU yet – it's still really small and thinly traded.  DXD or SDS would be my preference at the moment.  The DXD hedge we just reviewed this week is still playable.  

    • 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) 

    It's still the right time-frame and the spread is the same, even better with the AAPL puts at $4.85 now.  You can, of course, sell any put on something you want to own (see watch list above) to offset the cost. 

    FTR/Pat – I didn't think we'd make $12 so I called for the DD 10% ago.  angry  Hard to say when they will stop falling – I wouldn't rush in too soon.  

  86. If we only had inside Trump Tweet information it would be so easy to play direction of market.  If I knew Trump would tweet about the good Nazis today, I'd go bearish.  But if his phone was taken away from him by Kelly, I'm staying bullish.

  87. AMZN

    Phil – This guy must have been reading your mail, or following you on PSW. 8-)

  88. Thank you for your thoughts Phil, I missed this morning, so I'll be patient and watch for a dip. If not, there will be something along shortly.  I like those beating on the table trades right now.  Thanks again!

  89. FTR- 20% dividends. unreal. You've been saying 80c ($12) for so long I expect them to make a stand here. Bought more for $12, sold 2019 $10 puts for $3.80 and 2018 $14 puts for $4.20. Hope it's not a falling knife, but honestly it's already one of the most shorted stocks in the market. Can't see it staying here… been wrong so far, but I believe.

  90. Phil – "Trend/Naybob – From a single data point?  No, I don't see a trend."

    That was not a single point as 2014 + 2017 Summer's were mentioned.  Summer season is the annual lionshare for box office, usually 3 or 4 to 1 gross over the other seasons. 

    Currently, we will have 3 out of the last 4 Summer's with negative declines. Pile on, BTB Yoy Summer declines, last time that occurred quarter century ago, in 90-92 with a three peat.  Bad sign.

    Currently, FALL with 2015 -14% and 2016 -16% has already run double digit Yoy declines, a first.

    Further, what we mentioned to keep it short, two out of the last four years with record DOUBLE digit Yoy Summer seasonal declines in 2014 and 2017, due to peak revenue season, a more important first.

    There's your data to extrapolate, with a definite trend. Clear handwriting on the wall that everything being a blockbuster, like what is holding up the indexes, is not working.  More important, mode of viewership due to discretionary spending habits is changing.  Those lower 80% can't afford it and Out.

  91. IMAX- here are some interesting numbers on movie box office. The table legend is a bit confusing but I checked with the source and the 2017 data is YTD- easily exptrapolated to annual per the linked chart.

    As can be seen, the number of tickets sold has remained within a tight range while dollar revenue has increased in real terms. Note ticket price increase. 

    I recall all the talk years ago about the demise of movie theaters due to the likes of NFLX and cable on demand. While there has been an impact, the industry continues to plug along. 

    Clearly, brick and mortar theaters are a mature business and as such should be milked as cash cows while investing as needed to maintain viability. The IMAX option , I think provides an opportunity to add value through differentiation and add to revenue / profits. 

    I think IMAX is just caught in a negative sentiment wave due to poor proximate box office with little or no evidence of any secular change. 

    I am short 18-Mar- $18 puts. 

  92. AMZN/Albo – As I keep saying, people act like AMZN, with their $150Bn in sales and no profits is going to make WMT, with $500Bn in sales and $15Bn in profits, roll over and die – not to mention the other $3Tn worth of Retail space.  People who make statements like "Amazon will take over retail" simply don't understand what retail is.  

    Walmart has a futuristic new weapon in the war on Amazon


    The world’s largest retailer has applied for a U.S. patent for a floating warehouse that could make deliveries via drones, which would bring products from the aircraft down to shoppers’ homes.

    An illustration from Walmart's patent application for a gas-filled aerial transport and launch system.

    Source: United States Patent and Trademark Office

    The blimp-style machine would fly at heights between 500 feet and 1,000 feet (as much as 305 meters), contain multiple launching bays, and be operated autonomously or by a remote human pilot. Amazon was granted a patent for a similar vessel in April 2016.

    The migration to the skies represents the latest volley in a clash between Wal-Mart and Amazon to grab shoppers’ attention, loyalty and dollars. In the process, the companies are increasingly treading on the other’s turf: Amazon is opening physical stores and agreed to pay $13.7 billion for upscale grocer Whole Foods Market Inc. Wal-Mart, meanwhile, has beefed up its e-commerce business through acquisitions and offers like free two-day shipping.

    Remember, if Capitalism operates correctly, the person making the least amount of profit gets the customers – that does not bode well for either of these guys.  

    You're welcome, Joseph.

    FTR/Mkucs – Belief is all we have left.

    Box office/Naybob – Oh, I assumed it was a single point because, other than 2014, there hasn't been a negative year at the box office since 2010/11.  I thought you knew that.

    Year Total
    Change Tickets
    Change # of
    #1 Movie
    2017 $7,332.3 - 824.8 - 430 - $8.89 - Beauty and the Beast
    2016 $11,377.4 +2.2% 1,315.3 -0.4% 736 - $8.65 - Rogue One
    2015 $11,129.4 +7.4% 1,320.2 +4.1% 705 - $8.43 - Star Wars: The Force Awakens
    2014 $10,361.2 -5.2% 1,268.2 -5.6% 706 - $8.17 - American Sniper
    2013 $10,924.6 +0.8% 1,343.7 -1.3% 689 - $8.13 - Catching Fire
    2012 $10,837.4 +6.5% 1,361.5 +6.1% 668 - $7.96 - The Avengers
    2011 $10,174.3 -3.7% 1,283.0 -4.2% 602 - $7.93 - Harry Potter / Deathly Hallows (P2)
    2010 $10,565.6 -0.3% 1,339.1 -5.2% 536 - $7.89 - Toy Story 3
    2009 $10,595.5 +10.0% 1,412.7 +5.3% 521 - $7.50 - Avatar
    2008 $9,630.7 -0.3% 1,341.3 -4.5% 607 - $7.18 - The Dark Knight

    I guess if you have some figures that break it down for summers in particular, I'd love to see them.  I guess people could extrapolate the data you are spouting and get negative on the trade but, of course, there's facts..

    And then Pstas has different numbers!  

    Facts are hard!  



    Year Gross* 2017
    % change
    % change
    % change
    % change
    % change
    % change
    2017 $7,332.3 - -5.2% -0.1% +5.7% +0.1% +0.1%
    2016 $7,732.3 +5.5% - +5.3% +11.5% +5.5% +5.5%
    2015 $7,343.0 +0.1% -5.0% - +5.9% +0.2% +0.2%
    2014 $6,933.7 -5.4% -10.3% -5.6% - -5.4% -5.4%
    2013 $7,328.5 -0.1% -5.2% -0.2% +5.7% - +0.0%
    2012 $7,326.4 -0.1% -5.2% -0.2% +5.7% -0.0% -

    * Gross in Millions.
    Data as of Jan 1–Aug 20 of the respective year.

    Seems to me the rest of the year is good for about $4Bn so the difference to date can be made up by +$400M or a single, unexpected blockbuster.  Meanwhile, this has little to do with IMAX other than a general view of the market.  Last year, IMAX had the new Star Wars in Q1 – how can they possibly have been expected to match that?  Same goes for all the theaters.

    Numbers only tell you half the story – you have to know how the numbers were generated to make real sense of it.

  93. Volume even lower than yesterday but up we went.  

  94. LOL, I'm no morman… I just believe they will get debt under control and pay me 20% divies for a long time to come… limp along for 5 years and I'm whole, a turnaround would be a bonus! I've looked at the numbers, not hoping (not a valid investing strategy) and hey, I believe that you believe, and that's even better!

  95. Phil – "Oh, I assumed it was a single point because, inf act, there hasn't been a negative year at the box office since 2010.  I thought you knew that.? I guess people could extrapolate the data you are spouting and get negative on the trade but, of course, there's facts.."

    Your faith, confidence, trust and snarcasm are underwhelming.  Your assumption is your mistake. As I mentioned, last year set a record.   I seem to remember somebody saying, paraphrased… that the market is at all time highs, but the foundation is weak and showing cracks.

    That's exactly what I am pointing out to you at the box office, with the same set of facts broken out with seasonality, which is a little sumptin, sumptin, I just happen to dabble in now and then. Depending where you go, the numbers vary. I'm getting some of my facts from box office mojo backed by Variety and other industry trade sites.

    BTW, I don't spout, that's for parrots and infants. If some knee jerk nellie queers on a trade, without performing their due diligence, its their problem, not mine. Last I checked, these are adults, and although some might seem to need Hobson to assist at times, I share what information I have, unbiased with no agenda. Now please excuse me as I dabble in some rum, coke and Hinchi Indian voodoo bullshit and Out.

  96. wow RB sh(*t the bed at 1.58…don't feel so bad missing the 1.6 topping.   Phil – are you still short?

  97. GNC has been reiterated by BofA/Merrill as a underperform at 5.5.

  98. Thank you Louise Linton for helping me formulate a good catch phrase when I go after someone with my Hermes bag.  "I'm going to go Linton on yo ass!"  What an idiot!

  99. Google and Walmart Partner With Eye on Amazon

  100. Warming Arctic spurs battles for riches, shipping routes

  101. One of the strongest typhoons in 5 years has hit Hong Kong

  102. Saudi Aramco IPO Sparks Rush to Privatize in Middle East

  103. Good to short RB based on API ?

    Also RB Oct is 1.49 shouldn't Sept 1.58 start to catch up to Oct prices?

    Oil prices edged lower late Tuesday after the American Petroleum Institute reported that U.S. crude supplies fell 3.6 million barrels for the week ended Aug. 18, but gasoline stockpiles unexpectedly climbed by 1.4 million barrels, according to sources. The API data also showed that inventories of distillates rose nearly 2.1 million barrels, sources said. Supply data from the Energy Information Administration will be released Wednesday morning.

  104. Good morning!

    Futures shaking off Trump's insane rally speech so far.  Just holding yesterday's gains would be impressive.  DAX topping at 12,250 again so we'll watch that but, on the whole, we're over the strong bounce lines except the RUT so we can't be bearish.

    Was good to take /NKD money and run – it gave up most of the gains.

    Oil is still a long above $47.50:

    /RB is still a long above $1.58

    Nat gas too strange to play at the moment

    /KC is a go above the $130 line but it's /KCH8 (March) at $133 that we're playing with conviction.

    /RB/Latch – Long/not short.  I missed my chance to DD at $1.58 so I still have 1 long at $1.59.

    /RB/Youri – I think Sept (/RBV7) is pricing in the holidays as it expired in 5 days and Oct (/RBU7) is not. That API report is bearish but holidays usually trump data. 

  105. Phil/Youri;  I believe the difference between /RB V and U is a required additive for the summer months that increases the cost.  I do not have an exact source but read that recently somewhere.