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Tricky Tuesday – Markets Flat Ahead of the Fed

What an exciting rally!

As you can see from our Big Chart, our indexes are up about 5% in the past 6 weeks and, so far, no sign of slowing down despite declining volumes.  The Russell (small caps) is our leader, with a 10% move in 6 weeks and only the one little pullback in early Sept – before a solid 7.5% move straight up since.  

As I noted on Thursday, we pressed our Russell (IWM) short positions using the Ultra-Short ETF (TZA) with Nov $12 calls, which were $1.35 at the time and are now $1.45.  Per our fabulous 5% Rule™, we expect a 2% (weak) retrace of the 10% run from 1,368 to 1,512, which was 54 points so 11-points back we'll call the 1,500 line and a stronger retrace of 4% would take us back to 1,490 (rounding again).  

We weren't too far off yesterday, bottoming out at 1,503 but we're pretty confident we'll hit our goal as the other indexes are at their 5% lines and not looking like they won't pull back a bit (1%) as well.  Not yet though, because tomorrow we get the Fed Minutes, which will tell us nothing new but will still be a good excuse to rally back a bit.  Also, the Dollar has dropped 1% since Friday and that is supportive of the indexes – as well as commodities and oil above $50 boosts the Energy Sector, which boosts the S&P, etc…

Anoter way to manipulate the markets is to throw out a bunch of upgrades like BAC upgrading Apple (AAPL) to $180.  AAPL is a major market-mover and BAC timed their report to come out on a very slow day, maximizing the impact of their report.  The reasoning is as bogus as the timing as BAC apparently JUST found out that AAPL will be able to repatriate some of it's cash from overseas at a low tax rate.  As I noted in our Live Member Chat Room this morning:

AAPL/Maya – If that isn't baked in by now, people are idiots.  Also, it's not true that AAPL somehow can't access their cash – obviously, since they assemble their IPhones in China, they could simply use their overseas cash to pay for the IPhones and keep their US money in the bank.  Keep in mind AAPL sold 80M IPhones LAST QUARTER – Chinese assembly alone is about $115/phone so there's $9.2Bn/qtr that can be "washed" by paying China from overseas funds and then collecting USD for phones sold stateside.  Then, of course, there's the parts that go into them, mostly from overseas too.

When you are a company with $250Bn in global sales, probably more than half overseas, then what is so strange about having $150Bn overseas – where your customers are and where your stores are and where your inventory is and where you manufacture your product and where you do business?  

What this tells me, more than anything else, is that BAC employs analysts who don't actually have a clue of how international business and finance operates and then they don't even have editors who understand (or care) enough to correct reports that make them look like idiots.  Hell, they don't even read Bloomberg the same week they are writing a post on the subject:

A Lot of Apple's Overseas Cash Is Already in the U.S. – Bloomberg

Not that it’s necessarily so far away. While a tax accountant might label the cash foreign, a lot of it is already deployed in the U.S. economy. Corporations have collectively amassed trillions of dollars in overseas profits, but much of that money has been invested in securities such as U.S. Treasuries and corporate bonds. “Just because money is technically outside the U.S. doesn’t mean it can’t be used in the U.S.,” says Megan Greene, chief economist for Manulife Asset Management Ltd.

Don't get me wrong, I love AAPL – it was our Stock of the Year in 2013, 2014 and 2015 and, of course, we still have AAPL stock as a major part of all of our Member Portfolios so I don't disagree with BAC's target – just their reasoning and timing.  Much more despicable than BAC puming up AAPL so they can dump their other stocks is Morgan Stanley's (MS) self-dealing upgrade of Tesla (TSLA), raising their target to $379 the day after the company is accused of defruading investors with knowingly false claims of production targets that they KNEW could never be met.  I, for one, would rather give Elon Musk the benefit of the doubt and assume it's just incompetence….  

Of course that doesn't stop Nomura from raising their price target on TSLA to $500 – forecasting $58Bn in revenue in 2021 from $10Bn this year.  If they double this year and double again in 2020 – they will barely be on track for that prediction but why not make the call – who's going to remember to check in 4 years?  Analysts are the enablers of bubbles and, even worse, they may have motives that have nothing at all to do with what a stock is really worth. 

Morgan Stanley, for example, just helped Tesla raise $1.8Bn in debt and got a fat fee – so of course they have a strong interest in continuing that relationship and promoting Tesla's price.  While they were pumping the stock price, MS was dumping the actual stock, getting rid of 60% of their shares in Q2 alone.  Strange behavior for people who profess to love TSLA stock soooooooooooooo much, right?  In fact, 10.2M shares of TSLA stock were transferred from Insitutional to Retail investors in Q2 – while the upgrades continued all around.  Yet no arrests will be made!

We may have been early with my May 4th PSW Report titled: "Tesla’s Earnings Miss – Emperor Musk has no Clothes!" as far as the PRICE of TSLA's stock had been concerned ($320 at the time) but not the VALUE, which is still well below $300.  As I said at the time:

A month ago, on April 4th, I wrote:  "Tuesday Turmoil – Tesla Valuation Reaches Peak Insanity" in which I noted how ridiculous it was to value Tesla (TSLA), who struggle to make and sell 25,000 cars in a quarter, at the same price as GM (GM) or Ford (F), who each make 25,000 cars PER DAY, (that's 90 times more).  The companies are not even playing in the same ballpark (though they are playing the same game, so investors get confused) – it's like betting your son's undefeated little league team can take on the Yankees – there are other factors involved than just their record against other children.

Taking that statement to it's logical conclustion, we came up with this substitute play in the auto space:

Meanwhile, General Motors (GM), a company that MADE $2.6 BILLION in PROFITS in Q1 (that's right, TSLA's entire sales, in profits alone!) is still being valued lower than TSLA and it's just as ridiculous today as it was a month ago when I laid out the following bullish GM options spread idea:

  • Sell 10 GM 2019 $32 puts for $4.25 ($4,250)
  • Buy 25 GM 2019 $28 calls for $7.25 ($18,125)
  • Sell 25 GM 2019 $35 calls for $3.60 ($9,000)

Needless to say, GM was a way better place to park money than TSLA over the summer and already the 2019 $32 puts have fallen to $1 ($1,000) while the $28/35 bull call spread is now $6.25 ($15,625) which is net $14,625 and that's up $9,750 (200%) from our net $4,875 entry in less than 6 months.  You can see why our Options Opportunity Portfolio has been having such a good summer!  

There are plenty of values to be had in this market – even if they are only relative values.  Coming into earnings, for example, we still like Bed Bath and Beyond (BBBY), Macy's (M), Limited Brands (LB) and Target (TGT) in the Retail Space and Supervalue (SVU), which we discussed last night.  Qualcom (QCOM) is still on sale, as is GE (GE), who just cut their dividends.  

We're not rushing into them yet, I'm just saying how, even in a toppy market, we can make a nice little Buy List and then look for the earnings reports and decide who to grab AFTER we get more facts.  We called a general bottom on Retail (XRT) back in August and we nailed it, perhaps because we called it – kind of hard to say these days as we're getting more influential.  

Anyway, our trade idea then (also for the OOP) was:

  • Sell 10 XRT Jan $36 puts for $1 ($1,000)
  • Buy 10 XRT Jan $37 calls for $3.40 ($3,400) 
  • Sell 10 XRT Jan $42 calls for $0.850 ($850) 

That's net $1,550 on the $5,000 spread that's $3,500 in the money to start.  Upside potential at $42 is $3,450 (222%) in 148 days – not too shabby.

Just 47 days later, XRT is at our goal already and the Jan $36 puts are down to 0.38 ($380) while the $37/42 bull call spread is now $3.35 ($3,350) for net $2,970, which is up a quick $1,420 (92%) and still another $2,030 (68%) left to gain for you cheapskate readers who live off our Members' scraps.  We've left the trade on into earnings – hopefully we won't regret that!  

We're not expecting much movement until after the Fed tomorrow.


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  1. I guess it takes a senator who is retiring to tell the truth:

    And if World War III does break out because Trump doesn’t know the difference between berating a contestant on The Apprentice and berating an insecure young man with dozens of nuclear weapons at his disposal? I don’t know. I suppose they’ll just blame it on Obama ruining America’s standing in the world. That’s always worked before.

    They all know that the guy is unstable but most of them are cowards!

  2. Forget the anti-depressant pills – take a walk:

  3. Quote of the day:

    "A lot of people will tend to look at valuation metrics or other indicators and feel the need to be “all in” or “all out” of the market. This is the gambler’s approach to investing. We’re not gambling though."
    (Cullen Roche)

  4. ROKU – Nice four- day move.

  5. Phil – "but Scotland might declare independence over drinks on a whim if they see this on the news…."

    William Wallace already rolled over in his grave… in 2014 the "No" side won, with 2,001,926 (55.3%) voting against independence and 1,617,989 (44.7%) voting in favour. The turnout of 84.6% was the highest recorded for an election or referendum in the United Kingdom since the introduction of universal suffrage, aye lassie and Out.

  6. Scotland / Naybob – Don't you think that Brexit could make a difference in a new referendum? That's the new factor in the equation no?

  7. Phil – "What this tells me, more than anything else, is that BAC employs analysts who don't actually have a clue of how international business and finance operates and then they don't even have editors who understand (or care) enough to correct reports that make them look like idiots."

    Cogent and astute observation.  Citron make similar clueless claims against Ubiquiti, how sales were accrued and all the off shore cash.  Perhaps Citron and BAC share analysts from the same gene pool, in need of some chlorination? and Out. 

  8. Good Morning.

  9. Phil/AAPL cash


    Good morning and thanks for the perspective on overseas business.

    You are right about the analysts…a lot of investors are constantly getting fleeced by them.

  10. CMG off to the races – i see no news on this?

  11. FU TEVA!!!! what a POS

  12. StJL – "Don't you think that Brexit could make a difference in a new referendum? That's the new factor in the equation no?"

    One might suppose it could. 55% of Scots were scared away from freedom by publicity regarding these expenses:  military (defense), monetary (currency euro, pound or Scots, treasury, mint), social welfare programs (in the last generation, they took in more than paid) and trade (being without the clout of the UK and EU).

    Just off the top of me head… the Scots would have had full independence, not had to answer to fucking bureaucrats in London or Brussels, and gotten UK nukes out of the country.  Oh and there's the little matter of 85 - 90% of North Sea oil. Hmm, maybe we know how and why those 55% were conned?  Don't forget the Belgian Walloons and Out. 

  13. Good morning!

    Corker/StJ – Seems like he finally had a crisis of conscience.  Hopefully it will spread.  

    Walking is definitely a good thing.  

    2014/Naybob – That was before the UK voted themselves out.  Now Scotland can stay in by leaving. 

    CMG/Batman – Formed a nice base for long enough, time to move up:


    LOL – So much for the opening spike up.

    • Stocks open higher following several mostly positive headlines from noteworthy companies; S&P +0.4%, Dow and Nasdaq +0.3% - all advancing to new all-time highs.
    • European bourses are mixed, with Spain's IBEX (-1%) showing relative weakness ahead of a potential declaration of independence from Spain by Catalonia's top politician; also, U.K.'s FTSE +0.3%, France's CAC flat and Germany's DAX -0.2%.
    • Asian indexes finished higher note, with South Korea's KOSPI +1.6% after being closed for more than a week; Japan's Nikkei ended +0.6% and China's Shanghai Composite closed +0.3%.
    • In corporate news, Nvidia opens +3.1% after unveiling new AI hardware that enables fully autonomous driving, Wal-Mart +3.6% after reaffirming its FY 2018 outlook and raising its guidance for FY 2019, and American Airlines (+4.6%) and United Airlines (+6.9%) are higher after each raised their Q3 guidance.
    • All of the S&P 500's 11 sectors are trading in the green, with the energy (+0.8%) and consumer staples (+0.7%) groups the top early performers.
    • The U.S. Treasury market is back after being closed yesterday for Columbus Day, as the yield on the two-year note is down 2 bps at 1.51% while the benchmark 10-year yield also sheds 2 bps to 2.36.
    • U.S. crude oil +1.8% at $50.50/bbl as the Saudis say they will cut November crude exports by 7%.

    Yelp must have totally blown it with Eat 24.  I know we don't use it anymore – mostly GRUB as it's so easy and well-organized and they have more restaurants than Eat24 (and now they'll have them all).  

    • GrubHub (NYSE:GRUB), up 1% out of the open today, has closed its $287.5M acquisition of Eat24 from Yelp (YELP -0.5%), kicking off a five-year partnership between the two on online takeout/delivery.
    • That's the third acquisition closed that was discussed on GrubHub's last earnings call, along with Foodler and OrderUp. The company will discuss the acquisitions and their impacts in its upcoming earnings call.
    • Along with the deals, GrubHub refinanced its credit facility with a five-year, committed $350M facility made up of a $125M term loan and an expanded $225M revolver.
    • Yelp got $251.7M in cash at closing, and another $28.8M in cash will be held in escrow for 18 months.
    • Redbook Chain Store Sales+3.2% Y/Y vs. +4.1% last week.
    • Month-to-date sales up 3.2% through October 7.
    • October sales are expected to increase 3.6%.
    • Wal-Mart (NYSE:WMT) posts a strategy update ahead of its annual investment community meeting today.
    • “We’re combining the accessibility of our stores with eCommerce to provide new and exciting ways for customers to shop," says CEO Doug McMillon.
    • McMillon plans to highlight the retailer's innovations such as one-hour delivery from stores in China, commitments to sustainability, service to communities, and investments in associates.
    • On the financial front, Wal-MArt reiterates 2018 guidance and says in FY19 it expects sales to grow at or above 3%. Sales growth at Walmart U.S. eCommerce is anticiapted to be about 40%.
    • A new two-year $20B share repurchase program is unfurled.
    • Perhaps the most interesting reveal from Wal-Mart is its plan to add 1K online grocery locations in the U.S. and fewer than 15 Supercenters in FY19.
    • WMT +1.50% premarket to $81.72.
    • Source: Press Release
    • Crude oil prices add to earlier gains on news that Saudi Arabia will cut its monthly crude exportsin November by 7% compared with a year ago; WTI futures +1.2% to $50.18/bbl while Brent +1% to $56.30/bbl, pointing to their first back-to-back gains in two weeks.
    • OPEC Secretary General Mohammed Barkindo, while seeing "clear evidence that he [oil] market is rebalancing," also is calling on U.S. shale producers to help hold down global oil supply, warning extraordinary measures might be needed next year to sustain the rebalanced market in the longer term.
    • Uber (Private:UBERtells a UK parliament business committee that classifying its drivers as workers would cost “tens of millions” of pounds.
    • The number comes from Uber’s UK Head of Policy Andrew Byrne, saying, “I don’t have the precise figures…but I’m certain it would be the tens of millions certainly.” 
    • Under UK laws, drivers classified as workers would have the right to more benefits than those considered self-employed. Uber argues its drivers prefer the freedom.   
    • Byrne expects the judge to make a ruling before Christmas.     
    • Previously: FT: SoftBank's Uber investment hits new snag (Oct. 9)
    • United Continental (NYSE:UAL) reports revenue passenger miles fell 1.6% in September to 17.236B. Domestics RPMs were down 1.9% Y/Y due in part to the major hurricanes during the month.
    • Capacity was up 1.7% to 21.415B available seat miles. Domestic ASMs increased 1.2%.
    • September load factor -270 bps to 80.5%. YTD load factor -50 bps to 82.6%.
    • United says it has provided cargo capacity and flights to deliver over 1.5M pounds of relief supplies to people in need in Texas, Florida, Puerto Rico and the Caribbean.
    • United guides for Q3 unit revenue growth of -3.5% to -4.0% vs. -3% to -5% prior view.
    • UAL +3.91% premarket to $67.23.

    • RCI Hospitality (NASDAQ:RICK) updates on FQ4 sales results.
    • The restaurant/nightclub operator expects club and restaurant sales of $38.1M to be reported for the quarter vs. $32.0M a year ago.
    • Same-store sales of $32.4M are anticipated vs. $30.4M a year ago.
    • "The Nightclubs segment increased 19.2% in total sales and 7.3% on a same-store basis, while the Bombshells segment grew 18.8% in total sales and 2.1% on a same-store basis," says CEO Eric Langan.
    • The company plans to report full Q4 results on December 14.
    • Source: Press Release
    • As many as 20 wildfires are burning across northern California, setting at least 73K acres ablaze and destroying at least 1,500 buildings in Wine Country in Napa and Sonoma counties.
    • The fires have caused at least 10 fatalities, and Sonoma County says it has received more than 100 reports of missing persons; residents say they are shocked by the speed and ferocity of the flames.
    • The Santa Rosa Press Democrat reports that while 75% of the region’s grapes already have been picked, most of the cabernet sauvignon and merlot crop was still on the vines.
    • Constellation Brands (NYSE:STZ), whose brands largely use grapes grown in the region, says it closed its tasting rooms in Napa Valley and Sonoma; shares fell 1% in yesterday's trade.
    • PG&E (NYSE:PCG) says ~100K customers in the two counties are without electric service and ~30K gas customers are without service; the company's meteorologists say overnight gusts of 50-75 mph are fanning the flames, which have damaged its electrical system in some locations.
    • A pretax loss of $2.9B-$3.1B from this quarter's hurricanes and earthquakes is higher than the $2.5B estimated by Morgan Stanley.
    • The team there remains bullish, however, noting the loss amounts to just 2.6% of book value. The insurer also has more than $3.5B in cash and short-term investments on its books.
    • AIG is lower by 2.1% in premarket action.
    • Previously: AIG cat losses to be about $3B in Q3 (Oct. 9)
    • Yesterday, California Governor Jerry Brown signed a bill into law that requires drug makers to explain and justify price increases. Specifically, drug firms must provide 60-day notice to insurers and government health plans before increasing the list price of any medicine that costs more than $40 by at least 16% in a two-year period.
    • Health plans must provide detailed information about prescription drug costs and the portion of premiums related to this expense.
    • The law, vociferously opposed by the pharmaceutical industry, will go into effect January 1, 2018.

    • RBC Capital Markets says Apple (NASDAQ:AAPL) could reach a “trillion dollar market-cap scenario” thanks to President Trump’s tax plan.
    • RBC estimates that the plan, which includes a corporate tax rate cut from 35% to 20%, could provide Apple with a $4 to $4.50 EPS tailwind. 
    • The tax reforms still have far to go before approval but RBC outlines key areas that could benefit Apple including tax deduction caps for interest expenses, tax rates on foreign profits, and a lowered repatriation tax. 
    • Yesterday, a Bank of America Merrill Lynch outlined a similar argument and expected the tax changes to add $0.77 to FY18 EPS and $0.89 to FY19 EPS. 
    • Previously: BofAML: Apple could benefit from Trump tax plan (Oct. 9)

  14. Walloons / Naybob – Lived in Belgium for 2 years so familiar with that CF there. Add Corsica to the bunch :-)

  15. Phil-The ATI Oct 17.5/20 B/Cs and short 17.5 put. Roll it or kill it?

  16. Phil – 2014/Naybob – That was before the UK voted themselves out.  Now Scotland can stay in by leaving.

    If they want "safety" in numbers and would rather get buggered by Brussels.

  17. ATI/Wing – Good question.  In the OOP, we have the following:

    Short Call 2017 20-OCT 20.00 CALL [ATI @ $24.15 $0.21] -10 3/20/2017 (10) $-1,800 $1.80 $2.35 n/a     $4.15 $0.25 $-2,350 -130.6% $-4,150
    Short Put 2017 20-OCT 17.50 PUT [ATI @ $24.15 $0.21] -5 3/20/2017 (10) $-1,350 $2.70 $-2.65     $0.05 - $1,325 98.1% $-25
    Long Call 2018 19-JAN 15.00 CALL [ATI @ $24.15 $0.21] 10 6/1/2017 (101) $2,820 $2.82 $6.43     $9.25 $-0.20 $6,430 228.0% $9,250

    So the short puts will go worthless and the Jan $15 calls are $9.20 but, in the OOP, we have the Jan $15,s not the Oct $17.50s.  With the Oct spread, you may as well let it go.  In our case, the short Oct $20s are $4 so we would net $5.20 by killing the spread here.  Or, we could roll the Oct $20s to the Jan $22.50s, which are $3 so $1 buys us $2.50 more upside.  

    The question is, do I have better things to do with the $5.20 I'm not taking off the table than to make $1.50 by Jan and no, I don't but, because we still think the market will correct and because I don't feel comfortable selling a put at this height – we're not going to press our luck on that one either.

    NOK must have seen the FB video and decided to give up competing in VR:

    • Nokia (NOK -0.3%) will cut jobs as it gets out of the virtual reality business, canceling its innovative Ozo hardware initiative.
    • The company will shed up to 310 jobs in Nokia Technologies, which employs about 1,090, with cuts spread across Finland, the U.S. and Britain.
    • "The slower-than-expected development of the VR market means that Nokia Technologies plans to reduce investments and focus more on technology licensing opportunities," the company says.
    • That means not just licensing what it learned in VR, but also a pivot toward the digital health business bolstered by its purchase of Withings.
    • “Nokia Technologies is at a point where, with the right focus and investments, we can meaningfully grow our footprint in the digital health market, and we must seize that opportunity,” the company says.

    Pump it up!  Credit Suisse bull sees another 12.5% upside for S&P 500

    • Recently moved to Credit Suisse from RBC, strategist Jonathan Golub has the S&P 500 moving to 2,600 by the end of this year and 2,875 at year-end 2018.
    • While "tepid" global growth has been and remains a headwind for revenues, it's forced corporations to focus on expenses and larger capital returns. Recessionary risks, he says, are well contained.
    • Tech is Golub's favorite sector, and he also sees financials outperforming, in part thanks to deregulation. Golub is bearish on the income favorites as they tend to underperform in times of rising yields.

    Chevron starts LNG production at Wheatstone Train 1

    • Chevron (CVX +1.1%) says it has started producing liquefied natural gas at its Wheatstone project in Western Australia and plans to ship its first cargo in the coming weeks.
    • CVX originally had hoped to start exporting from Train 1 of the $34B Wheatstone project in the middle of this year; Train 2 is expected to be brought onstream in 6-8 months, which will take the project up to its full capacity of 8.9M metric tons/year of LNG.
    • "Together with Wheatstone, several new LNG trains such as Yamal LNG, Cove Point and Train 4 from Sabine Pass will ramp up or start up production by year-end, [which] will sow the seeds for strong production through winter 2017-18, pushing the market into increasing overcapacity as we move into the summer of 2018,” says Nicholas Browne, head of Asia gas and power research at Wood Mackenzie, who expects prices to dip below $6/MMBtu once winter is over.

    Airlines show improved margins trend despite hurricanes

    • Airline stocks are in rally mode after unit revenue guidance is raised slightly by both American Airlines (AAL +4.1%) and United Continental (UAL +5.7%).
    • Though both airlines showed a negative impact from the major hurricanes that hit the U.S. and Caribbean, underlying margin improvement can be seen in the quarterly results.
    • Gainers in the sector today include Delta Airlines (DAL +2.1%), Spirit Airlines (SAVE +1.7%), JetBlue (JBLU +3.3%), Hawaiin Holdings (HA +2%), Southwest Airlines (LUV +1.5%), Allegiant Travel (ALGT +2.1%), Volaris (VLRS +1.9%), Azul (AZUL +2%), Copa Holdings (CPA +2.2%), GOL Linhas (GOL +0.8%) and Alaska Air Group (ALK +0.7%).
    • Related ETF: JETS


    • A new CNBC survey shows that 64% of Americans own an Apple (NASDAQ:AAPL) product, up 50% from five years ago.
    • The average household owns 2.6 Apple products, up one since 2012 (that's 62.5%!!!) .  
    • In legal news, U.S. Supreme Court asks for the Justice Department’s opinion on whether the Court should hear an Apple case related to a class-action lawsuit. 
    • The lawsuit accused Apple of illegally inflating prices through high commissions on iPhone software sales.
    • Apple wants the case tossed because it was consumers, and not developers, who filed the suit.  - Yeah, F them!  

    Buggered/Naybob – That's why they have the easy-access garments….  

    "Yes, Socrates himself is particularly missed,

    A lovely little thinker, but a bugger when he's pissed."

  18. TSLA/Scott – Yes, it's funny when people who actually understand the auto industry talk about TSLA – it's simply ridiculous that they have this valuation and the things Musk says are either a joke or just a straight-up con because there is simply NO WAY he can deliver on the BS he promises.  Sadly, it takes this many years for investors to wise up (and they are still up $5 today).  

    The unrelenting fact about Tesla is that the company has never made dollar one designing, building and selling luxury cars. It’s simply not possible. Tesla lives on energy credits sold to other companies, and it has taken what was once one of the most efficient and high-quality automobile plants in the world (the NUMMI plant formerly owned by Toyota) and turned it into a cesspool of gross inefficiency and poor quality. And there is no way in hell that Tesla can sell a mainstream automobile at the volumes or the price point promised. Tesla will be lucky to build 100,000 Model 3s total by the end of 2019, and trust me, even that will be a stretch. But I can assure you of one thing – the company will not be able to do it profitably. Not even remotely close, in fact.

    And what about the complicit denizens of Wall Street? There is simply no excuse for their reprehensible conduct in blowing up the valuation of Tesla beyond all reasonable expectations. And a lot of people are going to get burned because of it, big time. But then again that’s the way the wolves of Wall Street roll. It’s not about the efficacy of the investments or the financial needs of small investors, it’s about their own private little Idaho and don’t you ever forget it.

  19. You know, it was fuel enough to listen to Phil every day, but this room has so many cynics I don't know if I can take all this fun.  Is there anyone in here who thinks TSLA or AMZN or any of these others are reasonably valued?  (I will say, an S&P correction or not, and higher debt load or not, and income inequality or not, and financial engineering or not, it does seem as if the stars are aligning for higher stock prices, and I've been a sobbing quietly to myself under my bed bearish cynic since having my head handed to me in real estate in the Great Recession.) Viva la revolution!

  20. scott -simply put, we see the world very very  differently if you see FDIC as no-risk warm blanket and crypto as risk-only with no potential offsetting benefits. Personally, I'm just not a big believer in gov't programs.

  21. Hey, where is burrben these days? 

  22. Phil,

    Are you playing /CL at these levels?

  23. Crypto/BDC – I'm no fan of govt to be sure, LOL! Just not engaged on the cyptowagon yet..pure ignorance i am sure. Fascinated from the outside, though. 

  24. Baron2 – I'm not fan of TSLA, but I've preached in here what I see is the market's justification for TSLA: it's not a car company, it's a distributed energy company. The need for the electrical grid and transportation "grid" to become increasingly decarbonized is accelerating and their are very few, if any, large scale solutions addressing this need. The carbon problem is huge, from an economics standpoint it could easily represent 10% of the global GDP which is ~$8T. The current solution set being offered is in the <$1T range, or several hundred billion dollars (e.g., wind, solar expansion), so investment dollars going into "Carbon" doesn't have much of a universe to chase yet.

    TSLA is at the apex of the current paradigm shift for this: distributed energy resources (DERs), which are the decarbonization choice du jour for electrical grid components (mostly because the fuel is free, and not the "green" aspect), lithium ion batteries and of course, electric cars. The stupidity of using lithium ion batteries for electrical energy storage has been well versed on these boards; it is a scam that can exist because a modicum of technical knowledge is supposedly necessary to understand why, but currently Musk has won the messaging game by convincing fools that energy can be stored in batteries in a meaningful way (meaning: in a cost effective way) which is simply not true. However, the use of these batteries in cars is a very good use for them and Musk has the trifecta: park the EV car in the garage that has Solar City panels on the roof and push-pull electricity as needed via modern peer-to-peer net-metering. This is a different model of the future, one where one-way massively centralized utility to consumer becomes peer-to-peer decentralized production and use. The world is definitely going in this direction, but here's a tough exercise: quick! name 10 companies pioneering in this field?

    Musk's genius, if there is any, is to recognize this market void volume and fill it with a good story, which he can sell via publicly traded stock units. Once Wall Street gets a hold of it you are dealing with guys "carving out their own little Idaho" just like they did with mortgage-backed securities in 2008 so you can see where this ends up eventually.

  25. Gun-control group sues ‘bump stock’ makers, sellers

  26. Are You Excited To Have Your Tax Dollars Artificially Prop Up The Coal Industry? You’d Better Be!

  27. President Trump has made 1,318 false or misleading claims over 263 days

  28. Phil – nice blast from the past – The Bruce's 1970 – Cleese, Chapman, Idle and Palin, with Jones and Gilliam MPFC. Funny thing, Heidegger was still alive when they did the song in 73.

  29. Revolution/Baron – It's hard to be a value investor these days.  Go through our Portfolio Reviews and note the stress is on BALANCE and BEING THE HOUSE! – not being bearish.  I gave a whole long speech about why AMZN is never going to grow into it's value in a Webinar a few weeks ago and Rustle and I could write a book out of all the times we've told people TSLA is a bad bet – though we did used to be bullish on them when they first came out.

    FDIC/BDC – They haven't got anywhere near enough money to cover a major shortfall.  

    FDIC Insures $4.7 Trillion in Deposits with a $13.6 Billion Deposit …

    Good night and good luck!  

    Image result for good night and good luck murrow animated gif

    /CL/Japar – Not off that move.  Let it settle down and, of course, I'd rather play closer to rollovers.  

    Click for
    Current Session Prior Day Opt's
    Open High Low Last Time Set Chg Vol Set Op Int
    Nov'17 49.55 50.98 49.54 50.98 12:03
    Oct 10


    1.40 425522 49.58 407051 Call Put
    Dec'17 49.87 51.30 49.87 51.30 12:03
    Oct 10


    1.37 132334 49.93 390707 Call Put
    Jan'18 50.12 51.51 50.12 51.51 12:03
    Oct 10


    1.33 46166 50.18 243184 Call Put
    Feb'18 50.36 51.65 50.36 51.65 12:03
    Oct 10


    1.27 16342 50.38 121258 Call Put
    Mar'18 50.45 51.76 50.45 51.75 12:03
    Oct 10


    1.22 18252 50.53 212838 Call Put

    Front 3 months down to 1.04Bn – that's a bit of progress (10%), so less pressure into the 20th.

    TSLA/BDC – True it's being used as a MoMo stock by Wall Street to line their pockets but Musk is a very willing participant in that game.  Don't forget those showy buybacks of his own stock to impress the rubes. 

    Heidegger/Naybob – I'm sure he was pleased, he's German, after all.

  30. I miss Jon Stewart.

  31. Crazy on /TF – It's great to play if you just stick to the range.  

    • The price of iron ore has dropped below $60/metric ton on concerns that demand will suffer from an environmental crackdown in China and as supplies from top producer Australia have increased.
    • Benchmark Australian iron ore fines fell 4.1% to a three-month low of $59.1/ton, Financial Timesreports, citing a price assessment by The Steel Index, which would take losses since the start of September to more than 20%.
    • Based on vessel movements in and out of ports, UBS calculates Rio Tinto (RIO +0.5%) shipped 84.6M metric tons of ore from its mines in Western Australia in the three months to September, a nearly 9% Q/Q rise.
    • Traders say strong supply could keep prices below $60/ton, but the affect on profits at major mining companies will vary according to type of ore they produce; China's recent restriction on sintering – the highly polluting process that turns iron ore fines into a material that can be used in blast furnaces – has caused premiums for "direct charge" material such as lump and pellets spike sharply, considered a boon for companies such as Vale (VALE +0.4%) and Anglo American (OTCPK:AAUKFOTCPK:AAUKY).
    • RBC's Tyler Broda calculates that at current prices, Anglo’s Kumba mine is generating $5/ton more in margin than the traditional lowest-cost Australian mines at Rio or BHP Billiton (BHP+1.7%).
    • Rival studios including Fox (FOX +0.7%FOXA +0.9%), Warner Bros. (NYSE:TWX) and Universal (CMCSA -0.2%) are among the ones signing on to a digital film download service built by Walt Disney (DIS -0.2%), Bloomberg reports.
    • Disney shares, down as much as 1%, are swinging back to just a slight loss on the day.
    • Disney's Movies Anywhere is its "digital locker" play, where consumers can buy films and store them for access via their various devices, and Disney has been working to attract studios over the past year.
    • Meanwhile, Paramount (VIA +0.9%VIAB +0.7%) is the only major who isn't expected to join, because of a financial disagreement, according to the report. But it and Lions Gate (LGF.A-1.8%LGF.B -1.9%) could join later.
    • Efforts such as Disney's and a rival format, UltraViolet, are seen as a hedge against a box office in slow decline (ticket sales this year are down 5% Y/Y) and a collapse in sales of physical DVDs.
    • The full plan could be announced as soon as this week, Bloomberg says.
    • GNC Holdings (GNC +4.9%) will increase its presence in India through a partnership with franchisee Guardian Healthcare.
    • Guardian aims for availability of GNC products at 4K stores by 2020 in metros and tier 1 towns.
    • "While the concept of nutraceuticals is at a nascent stage in India, it is heartening to see a significantly heightened intent to include them in daily diet to fulfil nutrition intake. The Indian nutraceuticals market is expected to grow at a compounded annual growth rate of 21per cent and reach $10 billion by 2022 from $4 billion now," says GNC India CEO Shadab Khan.
    • Source: Press Release
    • Wal-Mart (NYSE:WMT) is up 4.35% after the company's aggressive buyback plan and strategic update tantalize investors. Shares hit a 52-week high of $84.48 earlier today.
    • Perhaps the headliner of Wal-Mart's update is the forecast for 40% e-commerce growth for FY19, a pace faster than Amazon's own projections on e-commerce sales.
    • In interesting moves, Target (NYSE:TGT) is up 1.99%, Costco (NASDAQ:COST) is 1.52% higher and Dollar General (NYSE:DG) is showing a 1.78% gain as investors see the Wal-Mart numbers as a positive sign for retail demand over a pure market share grab.
    • Previously: Wal-Mart update includes new buybacks, +3% growth forecast (Oct. 10)
    • Qualcomm (NASDAQ:QCOM) has offered to give up some patents to get its $38B NXP Semiconductors (NASDAQ:NXPI) acquisition through EU antitrust regulators, according to Reuters sources.
    • EU regulators the merged company would incentivize companies to purchase bundled products, which would unfairly push aside rivals, or change NXP’s IP licensing. 
    • Qualcomm says it will leave the standard essential patents with NXP, which can then sell those patents to another buyer. 
    • Qualcomm agreed only to take defensive legal actions against third parties relating to NXP’s NFC patents and offered a pledge that rivals could function with NXP products. 
    • The EU Commission will hear comments until the end of the week.  
    • Qualcomm shares are up 1.4%.
    • Previously: Qualcomm offers concessions to EU in NXP deal (Oct. 9)
    • Previously: Qualcomm declares $0.57 dividend (Oct. 10)
    • For the first time in almost two decades, Bank of America (NYSE:BAC) no longer holds the crown for being the largest U.S. bank based on deposits.
    • With deposits up 7.9% over the past year to $1.31T, JPMorgan (NYSE:JPM) is now #1.
    • Bank of America, of course, has been rapidly trimming branches over the past few years (JPMorgan is cutting as well, but at a slower pace). It's also been slower than peers in raising deposit rates amid the Fed's rate hike cycle.

  32. GM/Rustle, did you bail on the 44.5 puts, or hanging in there?

  33. Catalonia's president proposes suspending results of independence referendum and holding further talks with Spain

    Markets seem happy about it.

  34. TSLA – Every time it looks like it's going to lose the 50 DMA it gets a boost no matter how bad the news.  On August 3rd it rebounded above the 50 day on earnings which were actually quite bad except for the EV  credits which had them exceed low expectations.  Then the bad news on Model 3 deliveries on Oct 2, and on Oct 3 and 4 it bounces to retake the 50 DMA on (slighly) higher expectations for Models S/X in 2H2017 in spite of analyst concerns.  Same thing happening again today as it fights to get back over the 50DMA after losing it on Friday with an assessment Model 3 being hand built and Elon denying this over the weekend.  If it ever loses the 50 day for more than a few days then maybe the momentum shifts but until them every loss of the 50 day for a few days has been a buying opportunity.  I am short the stock with sold puts as a partial cover. 

  35. I hope they do not disappoint again on Nov 2nd; TEVA

  36. new game show "Are you smarter than a f*%#ing moron?"

  37. AMC/Phil – lots of noise around this Weinstein business. Do you think will lead to a pogrom/cleansing throughout Hollywood, resulting in decimated ranks of producers, directors and actors, resulting in huge fall off in movies made let alone seen because US movie-going population is finally thoroughly sickened by the whole sleezy stinking bunch of the bums?   "Asking for a friend."

  38. TSLA/Stu – People are crazy and these upgrade stories get a lot of mileage – this one just posted again:

    • Morgan Stanley analyst Adam Jones takes his price target on Tesla (NASDAQ:TSLA) to $379 from $317 to factor in the company's position with infrastructure in front of the "EV revolution."
    • "We see Tesla's rapidly growing infrastructure footprint as a key differentiator," says Jonas.
    • The price target boost from MS is based on a lift in the firm's core Tesla exit EBITDA multiple to 10X from 9X previously and a reduction in the weighted average cost of capital assumption for Tesla Mobility to 13% from 15% previously.
    • Shares of Tesla are up 2.29% on the day and are back over $350.

    What BS!  

    TEVA/Jabob – New CEO may kitchen sink the quarter before he begins a turnaround.  Nothing guarantees success more than easy comps.

    LOL Rexx.

    AMC/Scott – I think he's an exceptionally awful bastard – worse than most.  Frankly, I don't think people would be making such a big deal about him if were as common as you seem to think it is.  Did people stop watching Fox because of their massive rape culture? (I assume the rampant racism is considered a feature).  At least with Hollywood, they're not also raging hypocrites.   

  39. Phil--I don't think the new CEO has started at TEVA yet? I am sure he is involved but they haven't announced his start date. 

  40. He doesn't have to start to have all the crap tossed into the quarter he's not responsible for – that's a negotiating point when a guy comes on board.  

  41. phil,  20  vxx  oct  38/42 call spread $1650 sell 10 $40 puts $2, how will you play this trade now,vxx is dropping everyday

  42. thanks Phil.. o no ;-(

  43. Baron – "I miss Jon Stewart."

    He is partially responsible for our perfectly senseless POTUS.  Had he run, he would have won hands down.  I say partially because his running mate Steven Colbert also flaked out.  They had the perfect campaign mottos: Rally to Restore Sanity, March to Keep Fear Alive and "Sure, They Could".  They also had the  perfect poster and perfect theme song.  Instead of the perfect comedy act, we got the perfectly senseless act and Out.

  44. VXX/Jash – So it was net $1,250 and now the Oct $38s are 0.95 ($1,900) so still salvageable.  If you want to continue to be long vol, You can assume we won't hit $42 by next Friday, cash the $38s and roll to the Jan $35 ($6)/38 ($5) bull call spread for $1 as those are almost $2 in the money.  The short puts are $3.60 at the moment and the Jan $34 puts are also $3.60 so, if you can roll down $6 (15%) every quarter – it's hard to worry about those, right? 

    • The pro-business policies of the new administration were hoped to unleash a wave of corporate lending, but Federal Reserve data show the growth in such loans dropping to 2.1% from 8.1% last November.
    • "All the turmoil and the inability to move policy through Washington set in,” says Jeff Glenzer from the Association for Financial Professionals.
    • Others, however, say the slowdown may just be a return to the mean – growth in corporate lending has run well head of GDP growth in the years since the financial crisis.
    • Q3 earnings results begin this week, with JPMorgan and Citigroup on Thursday. Analysts have been trimming some earnings estimates – U.S. Bancorp (NYSE:USB) and BB&T (NYSE:BBT) to name two – as bank managements during conference season last month signaled slower-than-hoped loan growth.
    • The Wall Street Journal reports that Apple (NASDAQ:AAPL) has struck a deal with Steven Spielberg to produce new episodes of a classic 1980s sci-fi and horror anthology.
    • The deal involves Apple, Spielberg’s Amblin Television, and Comcast’s (NASDAQ:CMCSA) NBC and pertains to NBC’s show “Amazing Stories.” 
    • Spielberg will likely serve as executive producer for the ten episodes, which reportedly each have a budget of over $5M. 
    • Apple has committed $1B to developing original programming over the next year and has hired top talent including former Sony TV executives Zack Van Amburg and Jamie Erlicht.   
    • Apple has dropped its planned Elvis Presley biopic with the Weinstein Co. as Harvey Weinstein’s removal from his company, due to an increasing number of sexual assault allegations, triggered a clause that let Apple leave the deal.    
    • Previously: 64% of Americans own an Apple product; Supreme Court seeks advice on Apple case (Oct. 10)
    • Sears Canada (OTCPK:SRSCQ) files for court approval to go through a liquidation process after failing to receive any viable bids for its business.
    • The retailer has a hearing set for October 13 with the Ontario Superior Court of Justice on the matter.
    • Shares of Sears Canada trade for pennies on the OTC market. Nasdaq-listed Sears Holdings (NASDAQ:SHLD) is down 4.48% on the day and is off 27% YTD.
    • Catalan President Carles Puigdemont defuses at least a little bit of tension with Madrid, declaring independence, but then stopping the separation process to instead have talks with the Spanish government.
    • Puigdemont and his team remain in danger of arrest for sedition, and Spanish President Mariano Rajoy has previously rejected any talks until secession plans are abandoned.
    • A Rajoy spokesman following Puigdemont's speech: "He has made a deferred declaration of independence … [Puigdemont] has taken his irresponsibility to the absolute extreme by ignoring the laws, citizens."
    • Down earlier in the session, the Spanish ETF (NYSEARCA:EWP) has jumped into the green, now up 1.5%.
    • Deutsche Bank has trimmed price targets on Sprint (S -2.9%) and T-Mobile (TMUS -0.5%), saying the much-discussed merger talks face risks as the coming election year brings a swell of populism.
    • "We remain very bearish on the prospects for deal approval," analyst Matthew Niknam says, trimming the firm's target on Sprint to $7 from $8 (Sprint's down to $7.09 today), and on T-Mobile to $65 from $70 (implying 6.1% upside).
    • A less corporate-friendly mood is taking over, he notes: "The Democrats' Better Deal agenda highlights ongoing corporate consolidation as a threat to U.S. consumers, and proposes sharper scrutiny of potential deals."
    • Also today: Sprint owner SoftBank (OTCPK:SFTBYup 2.8%; T-Mobile parent Deutsche Telekom (OTCQX:DTEGYup 0.8%.
    • Wal-Mart (NYSE:WMT) execs painted a bright picture during the company's presentation today for the investment community.
    • The fresh food business at Sam's Club was highlighted as an area of strength. It was also noted that Sam's e-commerce sales rose 27% during the first half of the year.
    • Look for zero-based budgeting to start in areas of the company and for e-commerce losses to narrow.
    • The company expects capex spending to be ~$11B for FY18 and FY19.
    • Walmart International is expected to open about 255 new stores, including a focus on Mexico and China.
    • In one of the biggest developments, Wal-Mart management said will feature the smart-cart system that allows customers to find cheaper prices if they choose certain checkout and delivery options.
    • Wal-Mart 2017 Investment Community Meeting webcast
    • Previously: Wal-Mart update includes new buybacks, +3% growth forecast (Oct. 10)
    • Previously: Wal-Mart flies to 52-week high, lifts retail peers (Oct. 10)

  45. tsla – Phil – Rapidly growing infrastructure is another joke.  They are way behind in their stated commitment to the supercharger network of 10,000 stalls by year-end.  This article below is a bit old but they have to blow the doors off to make their 2017 objective.  I have not seen Telsa publicly talking about how great they are doing against their 10,000 supercharger target.  Also, I have seen some articles stating that the cost to Telsa of providing superchargers is likely in the range of $.40 per kilowatt.  Not going to be a moneymaker.  

    Jonas is the worst of them.  He will write a negative story with a positive headline which is about all that is needed to drive up the price.

  46. Biodieselchris,

    Thanks for your take on TSLA.  Can you think of a similar example in our industrial history?

  47. Superchargers/Stu – And keep in mind that's 10,000 "outlets", not locations.  It sounds like a lot but there are 5,000 COUNTIES in the US and maybe 1 supercharger for every 4 counties at most.  That's very much like if a car company told you you could get free gas – but it's 2 counties away from you.  How useful is that, really?  

    It's another one of those things that appeal to people who can't do math because cars that get 30Mpg only use 500 gallons a year on average so $1,500 of gas.  So if I sold you a Porsche Cayenne, which is $80,000 for $85,000 and told you we'd pay for all your gas – would that swing you away from the TSLA for $140,000?

  48. John Prine's birthday today.. caught this one on the radio. Mr. Peabody didn't take my Paradise away, but he did give me a loss carryforward a couple years back…

  49. The Trump White House’s ‘joke’ excuse

  50. World shares mixed as momentum fades after Wall St record

  51. Sears Canada closing all of its stores

  52. Climber kills himself after girlfriend’s avalanche death

  53. American Kakistocracy

  54. Good morning!

    I have to be in NYC for the Nasdaq interview this morning so not much time.  I'll be back around noon.

    No webinar today – that would be too crazy, we'll do it tomorrow at 1pm.

    As expected, we're still generally flatlining into the Fed Minutes (2pm) and yes, I still expect a sell-off because we got a sell-off after the actual meeting on the 20th from 2,510 to 2,490 (so not a big drop) and what are the minutes going to say to justify 2,550?

    • The Nikkei gained a modest 0.3% overnight to close at 20,881, its highest level since late 1996. Before getting too excited, some will remember the Nikkei as breaking above the 20K level a number of times over those 20-plus years, only to pull back. It's never come anywhere close to its record of nearly 39K hit on the last trading session of 1989.
    • Bulls, however, will note corporate profits as up 23% Y/Y in Q2, and corporations actually making shareholder-friendly moves like bringing in independent directors and buying back stock.
    • Federated Investors portfolio manager Dariusz Czoch: "It was difficult for us to invest in Japan because of lack of transparency and corporate governance issues, and also the country itself for the last two decades was quite difficult … We are changing our mindset.”

    Yes, this time is different – again;

    • "We say this not as hyperbole, but based on a quantitative perspective," says the team at Morgan Stanley. "Dispersions in valuations and growth rates are among the lowest in the last 40 years; stocks are at their most idiosyncratic since 2001; and equity hedge fund beta is at its highest since March 2008.”
    • Record highs seem to come on a daily basis, just two of 11 S&P sectors are in the red for the year, and even the most modest of pullbacks have been nonexistent. Similar action is being seen across Europe and in emerging markets.
    • Morgan Stanley of late is seeing evidence of boosted investor risk appetite – noting cyclical sectors doing better than defensive ones, and small-caps outperforming big-caps.
    • A deal between China and South Korea to swap currencies has expired amid tensions over Seoul's hosting a U.S. missile defense system, but South Korea says discussions to renew the deal are still ongoing.
    • The two had an arrangement to swap 360B yuan for 64T won (about $56B), in order to boost trade and enhance financial stability by cutting reliance on dollars for settlement.
    • Renewals had come easily since the deal was established in 2009, but "they say things have changed now," a Bank of Korea official says.
    • But the coming Communist Party Congress, set to begin next week, may be playing a role in the delay as well.
    • Previously: Chinese stocks back off from post-holiday rally as yuan sees stronger fix (Oct. 10 2017)

  55. Yowza !

    ~~AMZN – Amazon target raised to $1350 from $1100 at Credit Suisse  (987.20).