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Thursday – F*cked by the Fed (there’s no other way to put it)!

Well, that's that!  

The great unwind has begun and I was off by $100Bn (20%) yesterday, when I predicted the Fed would aim for $500Bn a year in balance sheet reductions (they are going for $600Bn) although, to be fair, they are gradually stepping up to $600Bn so the net effect will be the same $500Bn a year, which is what we calculated would be the most even a recovering economy could withstand.

Keep in mind that treasuries are only half of the assets the Fed holds, they also have a lot of stock they need to dump and a whole lot of real estate and mortgages they need to find buyers for as well and you KNOW what happens when a seller HAS to sell to raise cash by a certain time – they are simply not going to get great prices for the assets they are dumping.  

It's a lot easier to write a check to buy things than it is to sell them – ask anyone who's thrown a garage or estate sale.  Whatever the Fed ends up writing off will be losses that transfer to Treasury and ultimately add to our deficit.  None of this is accounted for in Trump's already pure-fantasy budget and, in fact, the Fed ADDED $97.7Bn in profits to the Treasury last year, reducing our defict.  If instead they lose $100Bn a year – that's a $200Bn swing in our deficit.  That's 5% of Government spending – no small item!

The market seems oddly calm about all this but, as we discussed in yesterday's Live Trading Webinar (where we shorted Oil (/CL) at $51 and the Russell (/TF) at 1,445), the process for large funds and banksters involves several meetings and perhaps board votes before they begin to unwind their own assets – so the real reaction is likely to be delayed into next week.  

The quick reaction was a 1% drop in the indexes, a half-point drop in bonds (higher rates) and goaaaaallllll!!! on our Dollar trade, as it blasted up to our 92.50 target from the Morning Report and that was good for same day gains of over $750 per contract, which we cashed in during the live Webinar – almost exactly at the highs.   You're welcome!  

Remember:  I can only tell you what is likely to happen and how to make money trading it – that is the extent of my powers – the rest is up to you!  

I can tell you that, alhough we have $250,000 worth of hedges against a 10% drop in the markets in our Short-Term Portfolio - I'm very concerned it's not enough as the great unwinding begins because, as we discussed yesterday, the Fed's $4Tn infusion of capital combined with another $10Tn from Central Banks around the World and another $12Tn in Government bailouts (resulting in higher debt) and $10Tn in stimulus spending have been the ENTIRETY of the planet's growth for the past 10 years.  The Fed is saying they are going to start taking back their money and, while the Government's may pretend they don't have to worry, all that debt is going to bust their budgets going forward as rates on those massive debt piles begins to rise.  

In fact, just this morning S&P finally got around to reading my warnings on China's debt and has downgraded China's rating from AA- to A+.  "A prolonged period of strong credit growth has increased China's economic and financial risks," S&P said in a statement. "Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to some extent."  Gee, ya think?  The ratings cut, announced after Chinese financial markets closed for the day, could raise Beijing's borrowing costs slightly, but the more significant impact is on investor sentiment.

Image result for china debt 2017Like Japan, China's Government Debt has climbed to 257% of GDP and that's up 143% since 2008 which means, every year for 10 years, China has put 14% of their GDP into stimulus and their economy grew at 7% a year.  As I've said many times in the past – you can ignore math only so long before it bites you in the assets.  The bigger the GDP grows, the more it costs to keep growing it and the more it costs to grow it, the greater the interest gets on debt service, which creates a drag on the economy that requires you to provide even more stimulus for each unit of growth.  Ultimately the economy becomes too big to succeed.  

Math is a critical tool for Fundamental Invesors like us (and there are so few of us left) and Math is still the ultimate fact and facts do matter – eventually.  We were discussing yesterday (in the Webinar) how the Financial News is often fake, with bulls and bears pushing their agenda – even through the most trusted sources.  That's why the vast majority of investors (over 80% now) have retreated to the tea leaves of Technical Analysis – Fundamental Investing has become very hard work!  

Take oil this week.  Complete load of nonsense and not just because I was wrong about a drop into the contract rollover yesterday.  It's all a gigantic scam (see recent PSW Reports on the subject) and very easily manipulated but we keep our eye on the Fundamental ball and yesterday, we stuck to our guns as oil hit $51 during our Webinar and stayed short and this morning we are being rewarded with a $4,900 gain on the day as oil comes back to test $50 (our original shorting line was $50.50).  Overall, it's a $10,000 turnaround ($1,000 per contract) since yesterday's call to stay short in the Webinar.  

You have to wade through a tremendous amount of BS to play these markets.  Here's two articles published at about the same time this morning:

Remember the IEA is the propaganda arm of OPEC and OPEC has a meeting on Friday and is pulling out all the stops to keep Brent (/BZ) at $55 into the meeting.  As noted in previous Reports, the Saudis need to pull off a massive win with their Aramco IPO – the future of their entire country (or at least the monarchy) depends on them selling off the state oil company at a valuation well in excess of $1Tn and they are not going to get there if Brent is below $55.  They've already pushed the IPO back from Q1 to Q4 next year so, one can assume, even the Saudis don't think they can hold $55 ($50 on /CL) through the winter.  That makes shorting /CL at $51 sort of a no-brainer.  

Are we consolidating for a move up or a move down?  As you can see from this chart, if all OPEC does on Friday is keep the cuts they have now, we're heading back towards 3 quarters of inventory builds in 2018.  It's only 12 (2030) years until China, France, Germany, India, Netherlands, Norway, and the UK plan to eliminate fuel-burning cars entirely - and that represents half the World's population (and Africans don't have many cars) with more countries joining the list each month at this point.

About half (50%) the World's oil is used for transportation and 60% of that (30%) is used for cars.  If the whole world moves towards ending gasoline consumption by 2030, we divide 30% by 12 and get a reduction of 2.5% per year in gasoline consumption (see – MATH!!!) but it's only half the World committing so far and the adoption rate is not linear so a fairly small impact this year and next but rapidly accelerating after that.  

Even worse for OPEC's future is that China and India have both committed – and that is the primary source of the IEA's consumption growth projections.  As I said – BS!  So it would be foolish to value an oil company as if it's a long-term going concern – you have to look at them more as wind-down businesses, that may not be around at all in 2040.  Yes, we will still use oil for all sorts of things but we have a 40-year supply of oil in the ground at the current rate and we're pumping out 2.5% of it each year (and we discover more too) but if consumption drops just 25%, then we have a 50-year supply and we're over-pumping by 25% and prices will collapse.  Also, once people see all-electric cars in just over a decade, they are certainly not going to believe we won't completey replace oil in less than 5 more.  

Netherlands and China?We survived peak wood and we survived peak coal and now we are very likely to survive peak oil and, HOPEFULLY, that will also help us survive peak carbon.  China and India are not just simply trying to improve their books by importing less oil – they are also trying to save the planet (over Team Trump's objections) and to save their own citizens, who are dying at a rate, in China, of 1.6M people per year, making it the one of the leading causes of death in the country.  

The great thing about pollution is it's very democratic – the Top 1% have to breath the same air as the Bottom 99% and there's only so much canned air you can carry around on a long walk.  Suddenly, even the rich are concerned about their continuing ability to breath – something that makes the Chinese Party Leaders seem a lot smarter than the average Republican, who are still selling out America's lungs to the Koch Brothers.  

And don't get complacent even if we somehow stop Trump from bringing back coal-fuled smog to our cities – the next line of attack is our drinking water as Goldman Sachs, JP Morgan Chase, Citigroup, UBS, Deutsche Bank, Credit Suisse, Macquarie Bank, Barclays Bank, the Blackstone Group, Allianz, and HSBC Bank, among others, are consolidating their control over water. Wealthy tycoons such as T. Boone Pickens, former President George H.W. Bush and his family, Hong Kong’s Li Ka-shing, Philippines’ Manuel V. Pangilinan and other Filipino billionaires, and others are also buying thousands of acres of land with aquifers, lakes, water rights, water utilities, and shares in water engineering and technology companies all over the world.

In 2008, Goldman Sachs called water “the petroleum for the next century” and those investors who know how to play the infrastructure boom will reap huge rewards, during its annual “Top Five Risks” conference. Water is a U.S.$425 billion industry, and a calamitous water shortage could be a more serious threat to humanity in the 21st century than food and energy shortages yet the Trump Administration is dismantling the 40 year-old Clean Water Act, which was meant to preserve citizens' access to clean water

The faster oil dies, the faster the usual suspects will move to take over another vital resource people can't live without as there's no other way for them to make up for what is likely to be $1Tn a year in lost oil revenues (out of $2Tn at $50).  That is, until they can figure out how to make you pay for air, of course…

Meanwhile, if you'd like a nice hedge to add to your portfolio, try this one:

  • Sell 5 Limited Brands (LB) Jan $37.50 puts for $3.40 ($1,750)
  • Buy 50 Ultra Short Russell (TZA) Oct $14.50 calls for 0.85 ($4,250) 
  • Sell 50 Ultra Short Russell (TZA) Oct $16 calls for 0.30 ($1,500) 

That's net $1,000 on the $7,500 spread that's $2,500 in the money to start.  The worst-case scenario is owning 500 shares of LB at net $39.50 (the put strike plus what you lose on the spread) and, of course, you can substitute any stock you REALLY want to own – like CAKE, where you can sell 4 April $45 puts for $5.30 ($2,120) which would drop the net to $630.  Even starting with $1,000 in cash, the profit potential is $6,500 (650%) in 4 months and for TZA to move up $1 (6.66%) all the Russell has to do is fall 2.2% from 1,445, which would be 1,413, which would be a $3,200 per contract profit on our Futures shorts as well. 

See how easy hedging is – now you can open up your own fund!  


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  1. The Russell is on a incredible tear – up over 7.5% from the dip!

  2. Thanks for the health care rant yesterday Phil – these guys are truly despicable and if you are in the top 10% thinking that it won't affect you because only poor people are targeted, think again! Anyone can end up with a pre-existing condition and these will not be covered anymore, no matter what lies these guys keep on repeating! And everybody's premiums will go up simply because they are screwing with the system. Anyone who needs health insurance should vote these guys out of office.

  3. The webinar replay is now live!

  4. Good Morning.

  5. Good morning!  

    Getting a little relief in the indexes but we can't count on any move lasting in this market.  

    /RB getting it's ass kicked as refineries are back to 100% but that demand from them is supporting oil a bit (for now). 

    $5.70 gap!  

    $3 again – time to get back in!  

    RUT/StJ – Don't remind me!  

    Health Care Rant – Now available for tweeting to your friends and enemies alike!  


  6. Good morning Phil, suggestions on entering /CL short?  which /NG contract would you trade?  Thanks

  7. Can he be our President?

    Or this guy:

    Bernie Sanders: The war on terror ‘has been a disaster for the American people’

    Silicon Valley's next big idea – just mailing cash to people and then studying them like zoo animals.

    Nestlé makes billions bottling water it pays nearly nothing for

    Is bitcoin a scam? Or the future of money? Watch and debate LIVE today

    Fonzie Jumps the Shark on Happy Days Was 40 years ago yesterday! Can't believe not national holiday- America jumped the shark on November 8th, can't wait for the nostalgic re-runs!

    Authorities say it could be four to six months before electricity is returned to Puerto Rico


    Trump w/ African leaders: "I have so many friends going to your countries, trying to get rich. I congratulate you.

    "And when you're white, they let you do it. You can do anything. Grab 'em right by the natural resources."

  8. A good read. Also takes  a poke at Bitcoin.

    Latest memo from Howard Marks: Yet Again?

  9. /CL/Mike – If you don't mind seeing your account go up and down thousands – then $50.50 is a good short on /CL but you have to either have a very tight stop above (it's $50.57 now) or REALLY want to DD at $51.50 and again at $52.50 where you'd be 4x short at avg $52 and down $2,000 per set at which point you'd have to either take your lumps or run thorough the same series to $55, where you'd have 16x at $53.75 (if you wait to $75) and down $20K – so you can see the value of taking the $2,000 loss above $52.50!

    The OPEC meeting is tomorrow, shorting is incredibly dangerous.  

    /NG/Mike – They just had a bigger than expected 97Bcf build and it's the dead time of year (no heating, no AC, no pools, no barbeque) so it could go lower but I like /NGH8, which is now $3.25 and bottomed at $3.185 last time.  Of course that's down $750 per contract so again, you either have to have a huge tolerance for pain or use tight stops at each 0.05 line. 

  10. Phil,

    Any thoughts re CHL @51 now that its broken support @ 52 but hasn't plummeted. Some disappointment over failure to raise divvy and confusion over terms of optical tender offer but it is at channel low and is telecom in China.


  11. pstas - those articles are so frustrating. It's amazing to me how uneducated and downright unintelligent some of the most self-ascribed "enlightened minds" can be and still have followers. In just one very specific instance, the number of bitcoins CAN be changed. "Bitcoin" is nothing more than a distributed software protocol and is secured by a process called consensus. The hashing provided by nodes around the world secure the blockchain only to the extent that 51% of the hashing assets are not controlled by a single entity. If they were, this entity could produce the longest blockchain. What this means in laymen terms is anyone with 51% control of the hashing effort could "fork" the software protocol (change it as they see fit) including lifting the cap on the total number of coins (or issuing 2X to themselves for fun and grins, etc, etc). Bitcoin's price reflects this possibility, and, the probability of the infinite permutations of what might occur if someone tried such an attempt. For an specific example, bitcoin DID fork and created 2X the number of coins! Earlier this year bitcoin forked off an identical chain called "Bitcoin Cash." What resulted is a new coin worth about $400 currently to bitcoin's $4000. Owners pre-fork now own both. So what we already knew was: bitcoin can be changed, AND IT WAS. What we didn't know is: what does that mean? (for example, on price, which people hyper-focus on for some reason). Sort of like predicting the future of stocks and futures, it just isn't possible.

    Marks points out he is still trying to discover what of 4 things bitcoin "is," and the answer is "it's a little bit of all four things." As an asset: The fork example above sort of feels like a traditional equity asset doesn't it? Say, close in example to someone who controls 51% of a company? This is why bitcoin, in one embodiment, "behaves like an asset."

    As far as currency goes, it's wonderful that brilliant minds like Marks have come around to the basic premise we've had since 2012 that all currency is essentially bullshit (it has value … because it has value). It's really about Trust. The FED exists for one single reason: to provide trust. Bitcoin uses a software protocol consensus to provide for trust. It was really the only unknown in the protocol in the beginning: does this system of trust work. Over the last 8 years the answer is: kind of. Bitcoin still hasn't been "hacked" vis-a-vis quantum computing style. So yes, it can provide for a system of trust that doesn't require a third party nation-state centrla bank to sit in the middle. It is really the only innovation the technology brought to the table, so it is worth considering this point for some time.

    The only difference between nation-state currency and digital currency is with the former the nation-state determines the value (via supply) and the latter the individual does (via exchange during use). Since all nation-state currencies are fiat they trade against each other in relative aggregate value to the country's GDP (roughly, plus debt and trade balance of course). Digital currencies are instantly global obviously and agnostic to nation-state economies. Therefore, nation-state currencies are indeed assets that value the economy of the nation-state. Global digital currencies self-value the social network that use them. A non-user of bitcoin provides no value to that system. This is why digital currencies are disruptive, they value the shifting "Knowledge Economy," which can be described as shape-shifting social network sub-economies (among other definitions) very well, where nation-state currencies value traditional asset-stripping and manufacturing economies well. Assets (oil, gold, food) tend to sit in a single place, like manufacturing factories do, so imaginary borders dividing nation-states can be served by imaginary currencies fenced off from manufacturing/asset-stripping in other imaginary-bordered countries. The Knowledge Economy has no such borders. In the 60's Japan made Toyotas and the US made Fords and now where are those things made? where are iPhones made? Every company is essentially a global company, even Scranton, PA-based Sally's Custom Tea Kettles sells to 15 countries in the Eurozone along with South America and Asia via Etsy, so …..

    One last example to consider is Equifax. Take a company that aggregates 143M very personal records. That's the old model. The new model is each entry is a ledger on the blockchain and gets issued 1 EquifaxCoin. The "value" (in traditional USD) is the aggregation of what each individual is paying to have secure versus unsecure data. I bet people would pay $1 to have secure data. So this coin is instantly worth $143M, but the open sets the value, not EquiFax, which no longer has a business model that can make money. This is the key difference in the self-valuing knowledge economy. This is also why a new coin that comes into existence can have such a high "value" so quickly. Imagine this type of disruption applied across every industry and in every nation?

    All of this is so obvious to me intuitively, should I write a book or something?

    I get too miffed to sit back and watch these morons regurgitate their insecurities onto their unsuspecting (delicate?) public minds without comment. However, I will go back to my firm rule of not talking about anything related to crypto on PSW now.

  12. BDC – appreciate the BTC comments – thanks

  13. 8800

    Here your armchair trade on CHL

    Buy stock @ 51.19 and sell the Mar 52.5/50 Strangle for 3.15 Combined monthly return 1.73% or 20% P.A.

  14. Specific only to comments on the emerging Knowledge Economy, I find this entry from wiki interesting:

    "Laws, barriers, taxes and ways to measure are difficult to apply solely on a national basis. Knowledge and information "leak" to where demand is highest and the barriers are lowest."

    I think we see a lot of that going on and it makes sense.

  15. Scandanavia has knowledge on lock-down. Spending money on education, universla income and healthcare has societal benefits, who'd have thunk it?

    But we're making america great again here – bringing back "manufacturing!" (and coal!)… I think I'm going to go cry now.

  16. Yodi,

    Thanks for the thought which I will review in context of CHL options which seem unusually stingy (ViX related, no doubt). I do appreciate being reminded of your armchair trade.

  17. China stops banking with NoKo!  Trump is announcing stronger sanctions.  

    CHL/8800 – We always like CHL around $50 but I don't think it's done falling yet.   Very likely $50 is tested and China just got downgraded so, in the very least – I'd give it until next week to see if a bottom actually forms first.  Remind me as I'd like to put them in the LTP.  

    Great summary BDC but don't forget, to some extent, the nation-state also affects demand for the currency by requiring that their fiat is the coin of the realm.   That's a huge control lever that wars have been fought for on many occasions.  The Globalism, however, has been going on for quite a while:

    Sadly our current President is an old man who thinks in terms of Nations and States.  

    Speaking of Equifax – that's a Hell of a chicken that will come home to roost eventually.  They could set up computers to trash half the population's credit over a weekend and this country's finance would grind to a halt on Monday morning.  

    • Hackers were undetected for more than four months before the security team at Equifax (NYSE:EFX) discovered the breach, according to FireEye (NASDAQ:FEYE), which was hired to investigate the attack.
    • According to FireEye's Mandiant Group, the first evidence of hackers appeared on March 10, though Equifax previously disclosed the breach as taking place in May. One security expert says it's not unusual for hackers to take weeks before accessing sensitive data. “Typically, you first build out a beachhead so that it’s difficult to get kicked out."
    • On average, it takes companies nearly 100 days to discover they've been hacked, says FireEye. In this case, it took 141 days.
    • The SEC said hackers last year attacked EDGAR – the system for public-company filings – and may have traded on the information. The agency is still investigating the source of the hack, but said the "software vulnerability" was quickly patched.
    • Beyond that there are few details, including why the SEC waited until now to disclose the attack.

    • The Bloomberg Consumer Comfort Index decreased to 50.7 from 51.9 last week.
    • State of the Economy index is down to 50.7 from 53.2.
    • Personal Finance index down to 59.0 from 59.9.
    • Buying Climate index fell to 42.1 from 42.5.
    • Aug. Leading Indicators: +0.4to 128.8 vs. +0.2% consensus, +0.3% (unrevised) prior.
    • The Coincident Economic Index flat at 115.8
    • The Lagging Economic Index +0.3% to 125.2
    • The average 30-year fixed mortgage rate rose for the first time in seven weeks, according to the latest weekly survey from Freddie Mac.
    • The 30-year fixed-rate mortgage averaged 3.83% for the week ending Sept. 21, rising from last week's 3.78%, and the 15-year fixed averaged 3.13%, up from 3.08% a week ago; last year at this time, the 30-year and 15-year fixed rates averaged a respective 3.48% and 2.76%.
    • Higher mortgage rates had been expected following a spike in 10-year Treasury yields.

    EU threatens tax changes for digital companies

    • The European Commission says it will propose new taxes on digital companies like Alphabet (GOOGGOOGL) and Facebook (NASDAQ:FB) by next spring if international tax rewrites don’t occur.
    • The Commission says the companies declare little profit in the region to avoid paying taxes. 
    • If international progress isn’t made, the Commission will proceed with one of its own tax plans, which include amending the common consolidated corporate-tax base to redefine how profits are taxed 
    • Another option is an “equalization tax” that applies to digital revenue rather than profit and has earned widespread support throughout the EU.    
    • Previously: Apple, Ireland close to reaching agreement on tax escrow (Aug. 11)

    Transocean -6% as Chevron ends rig contract early

    • Transocean (RIG -5.7%) sinks on news that Chevron (CVXterminated its contract for an ultra-deepwater drillship, effective in November, prior to its expiration in October 2018.
    • The Discoverer Clear Leader drillship has been under contract since November 2014 at a $575K dayrate.
    • RIG says it will be compensated through a ~$148M lump-sum payment in contract termination fees.
    • The red-hot Global X Lithium ETF (LIT -1.5%) is off slightly in today's early trading but that follows an all-time high reached yesterday morning, as investors rush in to bet on a coming surge in electric car sales.
    • Since the Xinhua newspaper reported Sept. 11 that China may start to wind down production and sales of cars using fossil fuel, investors have poured $143M into LIT, and this Tuesday alone saw nearly $50M in inflows for the now $651M fund – an "extremely rare" display of interest in an ETF, especially one so narrowly focused, says Todd Rosenbluth, director of ETF and mutual fund research at CFRA.
    • The cost of a lithium battery has been cut in half over the last three years, leading to an "inflection point" in demand for the metal, says Jay Jacobs, director of research at Global X Funds.
    • Tesla (TSLA -0.8%) accounts for nearly 7% of the Global X LIT fund, and FMC Corp. (FMC-1.1%), which has a major lithium producing unit, accounts for nearly 25%; other top holdings include SQM (SQM +1%), Samsung SDI (OTC:SSDIY), Panasonic (OTCPK:PCRFY) and Albemarle (ALB -1.2%).
    • Shares of fuel cell power companies including Plug Power (NASDAQ:PLUG), FuelCell Energy (NASDAQ:FCEL), Ballard Power (NASDAQ:BLDP) and Hydrogenics (NASDAQ:HYGSrallied in today's trade amid heightened awareness of recent natural disasters including hurricanes and earthquakes: PLUG +13.7%, FCEL +5.7%, BLDP +5.6%, HYGS +1.1%.
    • The U.S. Energy Department said just last week that "the business case for fuel cells is growing… [the U.S.] is taking a leadership role in technology development, manufacturing and economic impact. A main reason for this success is the increasing investment by the private sector and business community."
    • BLDP's recent analyst day prompted H.C. Wainwright to double its stock price target to $6 from $3, citing the company's promising China opportunities among other factors.
    • FBR Capital also hiked its price target, to $6 from $3.50, saying BLDP is in the early stages of capitalizing on the use of fuel cells for vehicle electrification and deserves to trade at a premium to peers given its technology leadership, local presence and partnerships in China, and improving financial position.
    • PLUG Chairman George McNamee disclosed earlier this week that he purchased 200K of the company's shares worth $426K.
    • Caterpillar (CAT -0.1%) reports an 11% Y/Y increase in worldwide retail machine sales for the rolling three-month period ending in August, nearly unchanged from July's 12% gain.
    • Total machine retail sales in Asia and the Pacific climbed 44% in August following July's 45% jump, while North America sales inched 1% higher after a 4% gain in the previous month.
    • Energy and transportation sales for the rolling thee-month period fell 3% after slipping 2% in July.

    Target expands next-day essentials delivery

    • Target (TGT -1.6%) expands its next-day delivery service of essential household items to eight new markets in the U.S.
    • Consumers in Atlanta, Chicago, Los Angeles, New York, Philadelphia, San Francisco, St. Louis and Washington, D.C./Baltimore areas will be eligible for the service.
    • The company says testing in Dallas, Denver and Minneapolis showed strong demand for restocking of on-the-go snacks, beverages, cereal, macaroni and cheese and paper towels.
    • Target blog post

    Veritone +17% as AI platform awarded best of IBC

    Image result for terminator animated gif
    • Veritone (NASDAQ:VERI) has jumped 17% to a new all-time high the morning after its artificial intelligence solution came away with the "best of show" award at IBC.
    • The product, aiWARE, is a multi-engine platform that runs in a Quantum StorNext-managed environment.
    • The result allows customers of the media-software company to leverage the power of cognitive engines in areas including object recognition, optical character recognition and transcription to get new value from existing video and audio without the requirement to move it to the cloud.
    • Analysts had a bullish reaction to Tesla working with Advanced Micro Devices (NASDAQ:AMD) to build a self-driving car chip but reaffirm the previous ratings and price targets.  
    • Rosenblatt Securities Hans Mosesmann reiterates a Buy rating and $22 price target for AMD.
    • Mosesmann writes that the Tesla collaboration validates AMD “in a field that nobody was considering as viable” and gives the chipmaker its first play in the self-driving market. Mosesmann continues that the deal “says that AMD’s CPU/GPUs in PC and server markets are the real deal.” 
    • Jefferies semiconductor analyst Mark Lipacis reiterates his Buy rating and $19 price target for AMD. 
    • Lipacis says the Tesla shipments won’t have a near-term impact on AMD’s bottom line but calls the deal a “critical win for AMD” that supports the firm’s belief the company will benefit from the next big thing in technology. 
    • Lipacis also comments on Nvidia (NASDAQ:NVDA), which was bumped to the side in favor of AMD, saying that near-term headline risks aren’t favorable but he doesn’t see a long-term risk. 
    • AMD shares are up 1.89% premarket. 
    • Nvidia shares are down 2.3% premarket.  
    • Previously: CNBC: Tesla working with AMD on self-driving car chip (Sept. 20)
    LOL – Two hours later:  AMD partner denies Tesla product commitment
    • Advanced Micro Devices (NASDAQ:AMD) partner GlobalFoundries denies CNBC’s report yesterday that it has received a Tesla (NASDAQ:TSLA) commitment for autonomous driving products, via Reuters.  
    • Nvidia (NASDAQ:NVDA) shares had slid on the earlier news and remain down 3.12% but could now rebound.
    • AMD has fallen back and now is only up 0.21%.
    • Previously: CNBC: Tesla working with AMD on self-driving car chip (Sept. 20)

    Manchester United higher after earnings

    • Manchester United (MANU +2%) reports broadcasting revenue jumped 38% in FQ4 and matchday revenue improved 5%.
    • EBITDA of £$70M was achieved during the quarter vs. £62M consensus.
    • "We concluded a successful 2016/17 season with a total of three trophies and a return to Champions League football," says Executive Vice Chairman Ed Woodward.
    • Looking ahead, the company expects FY18 revenue of £575M to £585M vs. £603M consensus. That number could get a boost if Man U's strong 4-0-1 Premier League start continues.
    • Previously: Manchester United beats by £0.04, beats on revenue (Sept. 21)

  18. 1,449 on /TF – that was our theoretical top per 5% Rule.  

  19. So much for that – 1,449.90.  

  20. Equifax exposes:

    1) the old model does not secure our data at all. Basically everyone should assume all of their data is public and act accordingly. For most folks this means you are in some state of active monitoring, the same way you monitor your home's security with ADT.

    2) The new model is personal ownership and control (see my comment above). It is counter intuitive that the way to make something secure is to distribute it! But a distributed asset has value and value means cost. Hackers would need to spend a boat load of money to steal data because it has value now. 143M records had no value, so stealing them was cheap. If hackers needed to spend $1 each to steal each ledger, they would get 10-100k records and then give up. That's really the insider-secret you will only learn from reading PSW – the economic power of a self-securing data set that is also self-valuing — the hackers get priced out. This is a significant concept despite being so simple, it can, for example, move elections in the most powerful country on Earth (i.e., Trump's active social media support from Russia was low cost).

    Bill Gates, for all the crap he takes, was on to this when he quipped that "email should cost 5 cents." This is a high enough cost to eliminate spam forever. [Of course, this comment was a while ago and we've all moved on from "email" (is that like a text that is more difficult to send for no reason hahah), but it still applies to the way we communicate today, like posting Trump rally support on FB and twitter]

    3) the new model is, well, relatively "new." No one knows how it's going to shake out and who the winners/losers are going to be: wait for it: NO ONE FRICKIN KNOWS. Guys like Marks conveniently segregate the community into "Pumpers" and "Skeptics." Lame. I segregate into "People paying attention" and "everyone else." And Marks is the latter.

    For equifax, I'd bet against them though. Put options kind of thing. See, I can contribute to this stock board after all ;)

  21. Why Sanctions Against North Korea Are Causing Pain in ChinaAlong China’s border with North Korea, residents are more worried about feeding their families than the possibility of nuclear war. In Hunchun, a city of about 230,000 people near China’s shared frontier with North Korea and Russia, protests briefly broke out last month after the United Nations Security Council approved sanctions banning exports of seafood and other goods from Kim Jong Un’s regime. Dozens of wholesale stores were shuttered, dealing a blow to the packagers, distributors, drivers and restaurateurs who depend on the trade.

    Ten Cities Tell the Tale of China's Spreading Real-Estate RiskBeijing and Shanghai are now well known for their ballooning house prices — double-digit gains last year prompted more regulatory tightening. But the the risk factors that could decide the fate of China’s property boom can be found well beyond the capital and biggest city. A close look at the available economic data of ten cities reveals big differences in the factors that can inflate, and deflate, property bubbles, including population growth, income gains and the ratio between house prices and pay.


    Yen Falls as Dollar Jumps on Fed's Hawkish Tone. The yen maintained losses in early Asian trading after the dollar surged and Treasuries tumbled as the Federal Reserve struck a more hawkish tone than markets anticipated. Asian equity-index futures signaled a mixed start. The yen was weaker for a fifth day after Bloomberg’s dollar index rose with the central bank setting an October start for shrinking its balance sheet and maintaining a forecast for another rate increase this year. The 10-year Treasury yield approached 2.30 percent. A slump in Apple Inc. dragged tech shares lower. Oil advanced above $50 a barrel and gold was steady. Contracts on the Nikkei 225 Stock Average rose, while they fell on the Kospi index and were little change on the Australian benchmark.

    Soaring Food Prices Spice Up Asia's Inflation OutlookRadish prices jumped 71 percent from a year earlier in South Korea last month. In India, prices for tomatoes and onions have doubled from a year ago. Japan’s squid prices rose 17 percent in July from a year earlier. And in China, egg prices have surged at least 62 percent since April at Beijing’s Xinfadi, the nation’s largest agriculture wholesale market. With exports across Asia faring better than just about anyone expected and domestic demand in most markets robust, could this be the start of a long-anticipated inflation breakout?

    This $700 Billion Public Employee Ticking Time Bomb Is Only 6.7% Funded; Most States Are Under 1%

    One-third of the island of Molokai — the fifth-largest island in Hawaii — is up for sale for $260 million.

    In the 1800s, part of the land was occupied by the Hawaiian royal family.

    What, No Hurricane Bounce? Ford(F) Idles 5 North American Plants In Wake Of Slumping Car Sales

    Toys ‘R’ Us bankruptcy could push retail loan default rate past 10% by year-end: Fitch

    Taser says its X26 model is second to none in stopping suspects. It also comes with higher cardiac risk:

    Amazon(AMZN) is taking on the drug supply chain, says report

  22. Equifax/BDC – They will spend the rest of this decade in court, that's for sure.

  23. Great article on inflation: What Happens When Inflation Walks In?

    So much for the "death" of retail:

    This is not about Retail, this is about a perfectly good company being taken over and stripped of it's assets to benefit Bain-type raiders.  

    According to S&P Global Market Intelligence, there have been 35 retail bankruptcies this year, almost double the 18 retail bankruptcies of last year. The filing by Toys ‘R’ Us this week was the latest.

    What many of these retailers have in common is that they were taken private in leveraged buyouts (LBOs) by private equity (PE) firms. Toys ‘R’ Us, Payless ShoeSource, The Limited, Wet Seal, Gymboree Corp., rue21, and True Religion Apparel were all LBOs. Gander Mountain can also be included in this list if you reach back to its 1984 LBO. Far too many LBOs are simply asset stripping operations by Wall Street vultures who load the company with enormous debt, then asset strip the cash from the company by paying themselves obscene special dividends and management fees.

    After extracting enough cash from Toys R Us and loading it up with a debilitating pile of debt, the three PE firms tried to unload it to the unsuspecting public in an IPO in 2010. They were hoping for an additional payday, the icing on the cake, so to speak. But they had to scuttle their efforts due to “challenging market conditions.”

    Yet toy industry sales have been “robust,” growing by 5% in 2016, and by a compound annual rate of 5% since 2013.

    Incapably managed by the PE firms, Toys R Us has been losing market share in its struggle with online retailers, particularly Amazon, and with Walmart at every level, and with other toy stores. Nevertheless, if the company weren’t overleveraged and didn’t have PE firms leeching off it, its slowly declining revenues and thinning profits turning to losses wouldn’t be the end of the world.

    Speaking of Bitcoin:

    Well, I was on the way to buy a car with 10 Bitcoins but, by the time I got to the dealer at lunch, I was one bitcoin short…

    New Burger Robot Will Take Command of the Grill in 50 Fast Food Restaurants

    worries that faulty readings of history are driving US equity investors to assume excessive risk

    Taibbi: Steve Bannon Splits From Trump, Hilarity Ensues – Rolling Stone

    "Everybody has a plan to normalize their balance sheet until they get punched in the mouth"



  24. Just watching the news here in Europe, surely Trump made another ass of himself due to his speech in the UN. Many leaders in Europe shaking their heads. Something wrong with his brain functioning or his speech writer. German exterior minister will speak shortly.

  25. but yodi…did you see the SIZE of that UN crowd?!!!  ;)

  26. Yes they all wanted ti see the circus clown

  27. Phil are you out of TF trade ?

  28. I've scaled in up to my eyeballs in shorts… /TF can fail now, XLF can take a hike, oil can spill… QQQ is cooperating somewhat

  29. I just want to know who's buying up here the day after Yellen the Yetti took away the punch bowl?

  30. Trump/Yodi – It's amazing how little is said of that awful speech (more like a rant) to the UN.  Who insults other world leaders?  Not to mention Socialism!  What an embarrassment he is!  

    • UK Prime Minister Theresa May is due to make a speech on Britain's future relationship with the European Union tomorrow in Florence, Italy.
    • Indications are that May will signal that she supports a "soft" exit for Britain from the EU. A harder Brexit is supported by some in the cabinet, including foreign minister Boris Johnson.
    • The fourth round of Brexit talks are scheduled to begin on Monday.

    /TF/Pat – No, we didn't pop 1,450 so I'm still in at 1,435 but angry

    • Consumer staples are weak after Dr Pepper Snapple lowers its profit forecast due in part to supply issues resulting from the string of natural disasters in the Caribbean, U.S. and Mexico.
    • Wells Fargo analyst Bonnie Herzog warns that similar disruptions could hit other consumer staples names such as Clorox (CLX -2%), PepsiCo (PEP -0.3%), Kimberly-Clark (KMB -1.2%), Church & Dwight (CHD -1.8%) and Procter & Gamble (PG -1.6%) (per Bloomberg).
    • The list of staples stocks retreating today include Coty (COTY -3.4%), Avon Products (AVP-3%), Estee Lauder (EL -1.6%), Unilever (UN -1.4%), Energizer (ENR -1%) and Molson Coors (TAP -0.9%).
    • Previously: Dr Pepper trims profit guidance (Sept. 21)
    • Capital One (COF -0.7%) is initiated with a Sell rating and an $81 price target at Piper Jaffray, which says the company is stuck in a cyclical downtrend, marked by intense competition, eroding margins and credit loss rates continuing to move back toward historical levels.
    • Despite higher rates and loosening underwriting standards, Piper Jaffray says COF's margins have not expanded, noting that net interest margin remains subdued due to rising debt costs, an elevated loan/deposit ratio and above average deposit betas.
    • "While we believe COF is building one of the better deposit gathering franchises, the near-term headwinds on asset yields from intense competition will likely keep margins capped," Piper says.

    I really don't know how many warning signs this market can ignore but, then again, I spent the last part of 2007 and most of 2008 warning people the market was going to collapse due to ridiculous valuations (energy, commodities, banking and real estate then) and no one listened until I was suddenly a genius.  So I guess I'll just have to put in my time again…

    I'm not saying we're going to have a massive collapse, the Financials and Real Estate at the time were cooking the books and the profits were false and the commodity market went along for the ride spurred on by endless war and Bush Tax Cuts (that did nothing for the real economy) so that was nothing but air under the markets.

    Here we have probably a very good floor 20% below where we are now and no reason to test that unless China or Japan collapse or NoKo actually nukes a major city (not Guam).  

    Who's buying Mkucs – Well assume we saw Yellen yesterday and called for a full meeting this morning.  At the meeting, we asked for reports and recommendations by tomorrow and then we'll have another meeting tomorrow afternoon when we will decide what action we want to take next week. Meanwhile, next week I tell my computer guy we need to flip the switch to "SELL" but he then tells me there is no switch and our TradeBot will require at least 3 days of coding an a test run.  

    I tell him where to shove his "artificial intelligence" and scream for some floor traders to come up to the office but most of them are old men and it takes them a long time to make it upstairs.  I give them marching orders but it's more of a waddle and they get to the floor of the exchange 2 hours later and call me from a flip phone to say there are no other traders there – only computers and CNBC.   

    So now we're waiting until Wednesday before we can begin unwinding our positions and I'm very worried my competitors aren't as incompetent as we are but it turns out they are all pretty much the same.  Durable Goods is Wednesday morning and that will likely be terrible due to the storms and GDP is Thursday and that will be terrible due to the storms so those aren't going to help at all.

    So that's my time-frame – Next Weds/Thurs we should get a bit of volume panic selling.

    Date Open High Low Close* Adj Close** Volume
    Sep 21, 2017 249.88 249.98 249.18 249.64 249.64 28,791,736
    Sep 20, 2017 250.07 250.19 248.92 250.06 250.06 54,903,400
    Sep 19, 2017 250.00 250.07 249.60 249.97 249.97 47,108,100
    Sep 18, 2017 249.61 250.12 249.28 249.72 249.72 46,235,200
    Sep 15, 2017 248.69 249.29 248.57 249.19 249.19 95,432,400
    Sep 15, 2017 1.235 Dividend
    Sep 14, 2017 249.80 250.32 249.60 250.09 250.09 95,446,300
    Sep 13, 2017 249.72 250.21 249.59 250.17 250.17 59,228,000
    Sep 12, 2017 249.63 250.09 249.42 250.05 250.05 56,896,000
    Sep 11, 2017 248.04 249.30 248.02 249.21 249.21 71,364,800
    Sep 08, 2017 246.54 247.11 246.30 246.58 246.58 62,187,200
    Sep 07, 2017 247.25 247.27 246.40 246.87 246.87 58,034,700
    Sep 06, 2017 246.84 247.28 246.23 246.90 246.90 57,916,900
    Sep 05, 2017 247.26 247.52 244.95 246.06 246.06 91,398,800
    Sep 01, 2017 247.92 248.33 247.67 247.84 247.84 62,007,000

    There's 1Bn shares of SPY and about 60M trade on the "average" day, which is half of what it was a few years ago.  Anyway, that's 0.6% in a day and on days when 1% of the SPY trades, we usually head lower.  When 1% trades, there are generally buyers and sellers with a slight imbalance but what will happen if 2% try to trade off a change in sentiment?  What if funds make the very rational decision to take 20% off the table while at all-time highs because – even if the market drops 20%, they would still have 64% + 20% and be 4% ahead of the the market (which is all they care about)?  

    Selling like that can lead to some very disappointing price discovery….

    Image result for price discovery

  31. Re banksters… JUMP you fkers… :)

  32. Does anyone else find this objectionable?

    • Facebook (FB -0.2%) today is rolling out three integrations in its Messenger app, including a deal where Fandango jumps in with an offer to buy movie tickets if it thinks you're discussing a film date.
    • The company's "M" assistant "listens in" on chats, and when a movie title comes up with seeming interest in showtimes or locations, it will offer a direct link to buy tickets or watch trailers on ticketing service Fandango.
    • Facebook had an existing connection to Fandango via its flagship social network product and a chatbot on Messenger, but the new integration is the deepest yet. The feature can be muted by users, or they can conduct secret conversations such that AI bots can't listen in.
    • The company also launched integrations for suggesting GIF sharing and quick replies.
    • The company had decided in July to expand advertising in the Messenger product to a global audience.

    Image result for robot salesmanSo the future of AI is a salesperson listening in on everything you say and watching everything you do and prompting you to buy something for one of thousands of sponsors at any given opportunity?  No thanks!  

    • The new Apple (NASDAQ:AAPL) TV 4K doesn’t ship with Dolby Atmos surround sound support or support for 4K HDR YouTube videos.
    • The Verge’s comprehensive review of the Apple TV 4K reports that Apple says “the lack of Atmos isn’t a hardware limitation, and that support is on the roadmap.” 
    • The lack of YouTube 4K comes down to the fact that Apple doesn’t support the VP9 video coding format in either the TV or Safari browsers both mobile and Mac. Apple hasn’t revealed when this support could happen. 
    • In better Apple news, grocery store chain ALDI announces that its nearly 1700 stores across the U.S. now accept Apple Pay.  
    • Apple shares are down 1.39% after sliding yesterday following a statement on Watch connectivity issues, soft iPhone 8 pre-order estimates, and an analyst's suggestion that the iPhone X hasn't started final production.   
    • Previously: Apple issues statement on Watch cellular connection issues (Sept. 20)
    • Previously: Rosenblatt: iPhone 8 pre-orders lower than previous models (Sept. 20)
    • Previously: Raymond James: Apple hasn't begun final production of iPhone X (Sept. 20)

  33. Of course we aren't selling either… 

  34. No we're not because selling has been foolish for years now and we're not going to unwind without a good reason – probably the same issue many are having.  

    GRNBF tested $1, by the way – nice run.

    I should start a penny stock newsletter!  NAK testing $2 too, LQMT 0.40….

    Submitted on 2017/08/25 at 11:03 am

    GRNBF/Pat – Realizing it's a total gamble but my attitude is take a chance with about $1,000/yr on speculative plays for my kids and that gives them 20 chances before they graduate college to hit the jackpot but, if they lose, they just end up with a cheaper car than the one I was going to give them.  I'm actually worried one or two will hit it big and they'll have a Million before they ever have a real job – they're never going to learn that way…

  35. AI is going to get real creepy….

  36. IWM finally red… what a fakeout

  37. More annoying than creepy but a bit of both.  WE can't afford AI but big corporations can and it means they can shove a persistent salesperson in all of our faces all the time.  Much worse than your phone ringing off the hook with spam calls will be AI smart enough to get around all your defenses and pop things up on your screen or comment on your Facebook picture of skiing in Tahoe that you should try the new Olin skis and, if you say no thanks to that, it will try to sell you 100 other items that have to do with Tahoe and skiing and, God forbid you should like something it says – now it has 3 vectors by which to annoy you and so on and so on until you kill it or it kills you.  Either way – we're going to war with AI!  

    IWM/Mkucs – That's why I prefer conviction trades.  So tedious getting in and out (but necessary if you are new at the game).  

    Not much green:

    Well, no pop into the close – that's different.  

  38. Wisconsin is basically giving all in to their new Foxconn overlords:

    The legislation would exempt the Foxconn project from a state environmental impact statement and from some state rules to protect wetlands and waterways. That has raised the possibility that environmental groups may sue over the law and project in the near future.

    To head off delays from that potential litigation, GOP lawmakers and Walker added special requirements on the courts system for handling any Foxconn lawsuits.

    First, the legislation would expedite appeals of Foxconn-related lawsuits, creating a path that would likely get any case more quickly to the state Supreme Court, where conservatives have a solid majority.

    Second, the measure requires higher courts to take appeals of a trial court order in a Foxconn case even if the order is not final. In general, appellate courts have to take appeals of the final judgments and orders made by trial courts but get to decide whether to take appeals of preliminary orders.

    Finally, the trial court rulings in that litigation would be automatically stayed until the higher court decided what to do.

    Tax rebates, their own justice system! Slaves are probably next!

  39. Wheeee!

  40. Foxconn – The number of legal challenges that should go to the Supreme Court would require several more Supreme Courts to handle.

  41. Federal Supreme Court I mean.

  42. IWM made a new all time high by one penny today. I shorted it.

  43. KR/Phil – getting to a reasonable P/E… but without knowing what a 'real' valuation is, going to just watch for now, and see when the market says "ok,. time to stop going down."

  44. Phil – "Does anyone else find this objectionable?"

    You do know that FB cookies track wherever you go on the internet?  And our Justice branch made it legal to do so?  Who do you think funded Zuckerberg?  Three letters C – I – A and Out.

    Facebook Lawsuit

  45. EFX – up 7% off of its post debacle low even though more bad news every day.  No comprende.

  46. Groceries (KR,SFS) down, Food co's (HKC,MDLZ,CAG) down, KO knocked a bit, PEP sliding down to test 200ma…  are they losing customers and brands to WMT and COST?

  47. Phil – Cookies – BTW it does not matter if you are logged in or not and Out.

  48. That Foxconn deal in picture:

    According to estimates from the Legislative Fiscal Bureau, the money Wisconsin pays to Foxconn will be higher than the taxes they get directly Foxconn and from workers at the Foxconn facility. This annual deficit won’t become positive until 2033. The cumulative deficit won’t become positive until 2042. And this all assumes that Foxconn produces the 13,000 jobs it says it will. If it doesn’t, the deal will look even worse for Wisconsin.

    By 2042 Foxconn will have moved to another state willing to subsidize them for another 20 years! Rinse and repeat (and never pay taxes). If corporations are people, why don't they pay taxes like us people!

  49. holding my 3 TF at 1425 and waiting….

  50. Still mesmerized by the Univision's coverage of the earthquake in Mexico.  The rapists and murderers are coming from around the country to help out despite little support and no pay.  Meanwhile, I don't see any condolences from Trump (but I did get that UN speech which would have been funny if it wasn't so horrifying).  I regret that I am so busy that I don't have the time I would like to work on my language skills.   Every time I do, I feel a sense of satisfaction and enlightenment I have not gotten from any other studies (and I have spent too much time in school!).  Of course, that could just be due to the different perspective globally as opposed to the stilted view we get here in the US.  Too bad expat gigs are harder to get these days.

  51. Gotta keep them potentially illegal immigrants out of the country:

    Helen Huynh and her family were devastated when she was diagnosed with an aggressive form of leukemia this past February, one that required immediate chemotherapy until she could undergo a lifesaving stem cell transplant. Despite the grim news, there was a ray of light for the Garden Grove, California, grandmother of three: one of her three sisters in her native Vietnam was a perfect match.

    But when Thuy Nguyen, Helen’s baby sister, interviewed with U.S. officials in Ho Chi Minh City, her visa was denied. Immigration officials claimed that because she had never traveled out of Vietnam before, they believed she wouldn’t return home after the transplant.

    What are we becoming?

  52. This is probably just the beginning:

    At least five California municipalities are suing five major oil companies, claiming in public nuisance lawsuits that the firms should pay for the infrastructure costs associated with rising sea levels due to climate change.

    The latest suits announced Wednesday by Oakland and San Francisco name BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell. The cities claim the oil companies knew of the dangers of fossil-fuel-driven climate change but kept mum. The cities claim that global warming, which they say has melted ice sheets and heated sea water, has contributed to rising seas by about eight inches in California over the past decade. They say it could rise 10 feet by the year 2100.

    And we have now documents that show that these guys were aware of the science (fake I know) behind global warming.

  53. Foxconn/Tangled – That's some crazy stuff.  I wonder what kind of bribes are behind the scenes.  May as well arrest Walker now and save time investigating after.  I'd like to invest $10M in building a business and get $3M from the state – where do I sign?  "Between 3,000 and 13,000 jobs" so let's say 10,000 jobs for $3Bn is $300,000 per job – doesn't seem very efficient to me!  The state is paying Foxconn about $20,000 per job per year vs an average of $2,500 in other state programs.   And don't forget what a Foxconn job looks like:

    Image result for foxconn workers

    In China they get $400/month ($2.50/hr).  Wisconsin's minimum wage is $7.25 – I very much doubt they'll be paying much more than that as it's already triple their normal labor cost but, of course, it's only $15,000 a year so, essentially, it's free labor – courtesy of Wisconsin!  No wonder they had an incentive to move the plant here – it's going to be net cheaper labor than China!  

    IWM/Mkucs – Good timing.  Hopefully that was it with the bluff at 1,449.90 on /TF

    KR/Scott – Lots of panic.  Will be watching earnings for WFM and others very closely. 

    FB/Naybob – Privacy is an illusion.  

    EFX/Tangled – Arb guys don't think they can be fined all that much.  There's going to be a class-action suit and getting just $50,000 for $140M people would be $700Bn so I'd steer clear – just in case – as they only make $500M/yr.  

    My $500,000 lawsuit over the Equifax cyberbreach is personal

    Equifax Lawsuits: How to Automatically Sue Equifax for $15,000

    Equifax's Massive Hacking Scandal Could Cost $70 Billion

    Groceries/Scott – I think the real danger to grocery stores is pre-made meal kits.  I know so many people using some form of it, most of them send you ingredients for each meal and cooking instructions.  I've been eating pre-made gourmet vegan (Sakara) every other week for a while now and I love it – better than almost any restaurant I would go to – and they are essentially bypassing the grocery stores entirely.  Grocery stores here have been far too slow to adopt the Pret A Manger model of European markets and now it's being delivered instead.  Essentially, the supermarkets are losing the Top 20% customers (who buy their dry goods at AMZN, TGT and COST) and are left with the bargain shoppers.  

    Foxconn/Nabob – Are they counting the interest they'll be paying on the $3Bn deficit they'll be running?  At 5%, that would be $150Bn a year.  It's like a stadium deal – idiotic.  You're right, we should use that logic and get states to pay us to live there!  

    Wow Seer, you are right, Trump didn't say anything about the Earthquake in our neighbor's country.  And after Mexico ran in to help Texas too.  What a dick! 

    Visa/StJ – Wow, that's sick!  I'm so ashamed of this country…

    Lawsuits on oil companies are fun but what happens when you get to the Trump Court?  

  54. I'm sure "dick" thought that he might come off insincere….. :)

  55. Phil is there a stock you know of that is like MUE (really stable)  but with even better yield because it is taxable income?

  56. ON TEVA:

    This article first appeared on SumZero, the world’s largest research community of buyside investment professionals. In some cases Barron’s edits the research for brevity; professional investors can access the full version of this thesis and tens of thousands of others at

    Disclaimer: The author had a position in this security at the time of posting and may trade in and out of this position without informing the SumZero community.


    Teva Pharmaceutical Industries ’ business has undergone significant turmoil over the past two years, as its stock price clearly indicates.

    Teva (ticker: TEVA) was originally founded in 1901 as a wholesale drug distributor in modern-day Israel. By 2015, Teva was the world’s largest generic pharmaceutical manufacturer. Led by then Chief Executive Erez Vigodman, Teva made the largest acquisition in its 100-year operating history by purchasing Actavis ( Allergan’s (AGN) generic business) for $40 billion. Only six months after the deal closed, Vigodman’s habit of making disappointing acquisitions led Teva’s board to lose confidence in him and the CEO left in February without a successor. From the Actavis announcement in July 2015, the stock was halved from its all-time highs to $35 per share.

    Teva Pharmaceutical Industries (TEVA)

    INITIAL PRICE: $15.93, Sept. 5
    CLOSING PRICE: $17.11, Sept. 20

    Subsequent worries about pricing pressures in the generic pharmaceuticals industry, the lack of long-term leadership, and increasing worries about the company’s debt load led to depressed sentiment among investors. In early August, Teva shocked investors by cutting its dividend by 75% to pay down its cumbersome debt load. Until then, Teva had been paying a consistently growing dividend since going public in 1990. At the same time, Teva wrote down about 15% of the value of Actavis and revised 2017 guidance downward. Almost overnight the stock fell another 50% and it dropped below $16.

    For seven long months, Teva’s board labored to find a permanent CEO. Israeli industrialist turned activist Benny Landa pushed for a CEO with branded pharmaceutical experience and to break up Teva into two separate businesses. On Sept. 11, Teva finally announced it hired Kare Schultz, the CEO of Lundbeck, an international pharmaceutical company based out of Denmark. His hire was well-received by the market and boosted the stock 20% in one day. Schultz had helped a struggling Lundbeck return to profitability and nearly tripled the stock price during his tenure as CEO. He has also served as COO of Novo Nordisk (NVO).

    After this whole saga, Teva currently trades 65% lower than its 52-week high. Sure the situation is very messy, but Teva is trading at a levered 27% forward free-cash-flow yield. At this price, you’d expect there to be some fatal risk or rapid secular decline, but the street’s consensus expects free cash flow to remain stable around $5 billion per year through at least 2020.

    Nobody knows what the drug industry will look like in 2020, but even if the bottom falls out, the stock can still fetch $25 a share in 2020--almost 40% upside from today. Hypothetically, let’s imagine generic manufacturers buckle to purchasers, Teva’s pipeline runs dry and free cash flow gets cut to half of consensus estimates. At this new bottom, if we apply a 10 times multiple to these dismal levered free-cash-flow figures we still get a $25 billion equity value compared to today’s $18.8 billion market cap. If the market stabilizes and Teva successfully reorients its strategy towards branded drugs, this could easily be a multi-bagger.

    For the sake of building in a massive margin of safety, in valuing the stock I start with the already-pessimistic 2020 consensus earnings-per-share estimate of $4.60 and strip out the 2020 EPS contribution of $1.33 from Teva’s blockbuster multiple-sclerosis drug, Copaxone. Copaxone sales will eventually erode as it faces generic competition, but it is hard to tell where earnings will stabilize. We end up with $3.27 adjusted EPS for 2020. Assuming an inauspicious 10 times price/earnings multiple for a business that is expected to have stabilized gets us to a 2020 price target of $33. Using even more conservative forecasts in the appendix, I estimate $3.45 EPS in 2020 with Copaxone’s earnings before interest and taxes (Ebit) falling 70% by then.

    The average between these two approaches represents 100% upside from today’s price (23% internal rate of return (IRR)) over a three-and-a-third years period. A large degree of conservatism is baked into my forecasts to compensate for the high level of uncertainty associated with Teva’s business today. As the smoke of uncertainty clears, it may be possible to underwrite higher assumptions with serious upside.

  57. Well now, did the oil companies burn the gas causing the CO2? Perhaps those trying to sue should look in a mirror, shame on them for driving. How about the car companies that produced all those evil gas burning engines? Aren't they even more liable? I think the ultimate responsibility falls to those that actually burned the fuel… they should sue every car owner in California. Makes as much sense…

  58. Muck – Who To Sue? – but you legalized, regulated, taxed, advertised and marketed (made it look cool and adult) those cigarettes, they were there in the store.  How could I help myself?

    Big tobacco knew it was bad for your health, they suppressed the evidence and actively spent money to refute it.  With respect to GW and CC, so have the oil companies.  A scapegoat like Mata hari, for the governments malfeasance, will be found. Not saying it's right, but there's your moment of blame game Zen and Out.

  59. UBER loses license to operate in London – FT article (subscription needed)

    Guardian article: US ride-hailing company to appeal after Transport for London says it is not a ‘fit and proper’ operator

  60. Good morning!  

    MUE/Tangled – See the dividend list above.  Can't think of one off-hand other then NLY, if you call that stable.  For me, NLY pays a 10% dividend ($1.20) at $12.35 and I can sell the 2019 $12 puts for $1.55, which is the same as 5 dividends so I get the benefit of the dividend and, even in an IRA, it's the same return on margin and my worst-case is getting an entry at net $10.45.

    Bitcoin/Latch – That's a good perspective.

    TEVA/Ilene – I like that report.

    Oil/Mkucs – You sound like the people who said the cigarette companies only made them and no one told people to smoke them.  That logic did not work well in court.  And what Naybob said. 

    Uber/Winston – They were so much cheaper than London cabs – and nicer for the most part.  Shame if they are forced out.  

    OPEC apparently did not extend the cuts.  Still $50.42 but I'm happy with my shorts again.  

  61. Oil/Mkucs   It’s about money, “According to the state controller’s office, the unfunded liability of California’s 130 state and local government pension plans stood at $241.3 billion as of 2014, the most recent year for which figures are available.”     and you can still buy cigarettes because the taxes collected outweigh any public health issues

  62. Yes, it's always about the money. So is pot legalization. Wouldn't happen if they couldn't levy hefty taxes. Cops courts and jailers make a good living off locking those people up… and they all get pensions too!