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Wild Wednesday – US Consumers go $1Tn in Debt, Saudis Confiscate $800Bn in Wealth

Image result for iq americansMaybe Americans are smart?  

Rather than saving $1Tn, like the Saudi Royals who have fallen out of favor, Americans go the other way and put themselves $1Tn into debt on their credit cards so the powers that be can't afford to lock them up – as they need to keep paying those 18% interest rates.  That's right, our fellow citizens have now passed the $1Tn mark in credit-card debt and that's up 11% ($100Bn) since Trump was elected as Americans are running out to pre-spend those tax cuts.

Some might say that having to pay $20Bn/month in interest alone on credit-card debt can be damaging to US consumers but those are people who know MATH and understand ECONOMICS and, fortunately, those kinds of people are NOT in charge of our country.  To quote our President "Bing, bing, bong, bong, bong, bing, bing."

Meanwhile, those tax cuts aren't coming and already the Senate Republicans are considering a one-year delay on the promised Corporate Tax Cut in order to save the $100Bn hit that provision alone takes from Government Revenues.  The news comes amid the expected growing opposition in the Senate to the current bill. One day after Trump nemesis John McCain said tax reform is "dead on arrival", on Tuesday, Sen. Ted Cruz said that the House tax bill could end up raising taxes on some middle-class Americans, and he pushed for assurances that the Senate bill would lower everyone’s taxes.  

Bloomberg reports that on Tuesday afternoon President Trump called into a meeting between Senate Democrats, National Economic Council Director Gary Cohn and White House Legislative Affairs Director Marc Short, Democratic Sen. Jon Tester tells reporters. Tester said that Trump spoke (maybe screamed would be a better description) for about 15 minutes by phone from Asia and insisted the rich will be hurt by the tax bill.

If the Top 1% can't pass a bill that steals money from the poor, they are going to turn on each other (something I have predicted for many years) and it's already happening in Saudi Arabia where one side of the Royal Family has arrested hundreds of members of the other side of the Royal Family and frozen $800Bn of their assets.  The country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.”

The crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion.  

What has happened in Saudi Arabia is that the immense Royal Family, which is the Government of the country, has already taken everything the people have to give and now the oil revenues have tightened up and the Aramco IPO (an attempt to sell off their prized asset to raise cash) got pushed off for a year so the Royals have been forced to go after each other's money and now we have a literal Game of Thrones going on in all it's back-stabbing, money-grabbing glory.

This could, of course, never happen here in America.  After all, our Attorney General is a well-balanced guy who would never issue arrest warrants for Trump's political enemies and economic rivals, right?  We'll just trust Jeff Sessions to do the right thing – just like the Saudi Attorney General is certainly doing – WITH Trump's approval (see yesterday's Report).

Related imageThis is what the Top 1% below the Top 0.1% fail to grasp.  They think they are "in the club" just because they are allowed into the gates of the club sometimes, for parties.  But within that club is a special room for the "more special" people who make up the Top 0.01%, the 30,000 Americans who's annual income averages $27.3M a year.

To the Top 0.01%, the people in the Top 1% are simply lackeys who work for them, making less money in a year than they do every two weeks while those in the Top 10%, at $164,647, make 1/166th as much as the lowest of the Top 0.01% – taking a full year to make as much as the Top 30,000 make every other day.  

With the average Net Worth of the top 0.01% approaching $250M those 30,000 people already control $7.5 TRILLION or 12% of the entire United State's wealth while the Bottom 90% (270M people) also have $7.5Tn but their wealth has been falling while the Top 0.1% has been rising and, as noted by the above $1Tn worth of credit card debt (13.3% of the Bottom 90%'s wealth is debt) – the Bottom 270M people, like the average Saudi Citizen, simply don't have anything left to give to their superiors.  

So the ultra-wealthy now have to choose what to do.  They can diminish the wages they pay to the Bottom 90% and drive them further into poverty.  Already, the Bottom 50% have less than $100,000 to retire with and it's less than $10,000 for the bottom 50% of our Citizens.  You can take the last shreds of their dignity but then you might start a revolution so the Top 30% have to look elsewhere to build their piles.  

Image result for inheritance tax effectOne major step they've taken is to begin taking over the Government and passing laws that protect their wealth, including the recent action to eliminate inheritance taxes, so they can pass their wealth along to their families, who will be 166x richer than even the top of the bottom 90% on the day they are born.  Under the old system, the mean old Government used to take 40% of that money and redistribute it among the Bottom 270M, leaving the poor Top 0.01% babies only 100 times richer than the bottom 270M – well that just had to stop, right?

As you can see on the chart, elminating the Estate Tax is really a tax on the rest of us (those who have less than $10.5M to leave to our kids) as it increases the National Debt by over $100Bn and who cares when we're already $20Tn in debt, right.  How's another $6,000 per taxpayer of debt going to hurt us?  At least we're not hurting Donald's kids by forcing them to split $6Bn instead of $10Bn.  We must stand with the GOP voters and pledge our $6,000 to make sure Eric Trump never knows the horror of an actual job!  

But keeping your Billions is not enough for the Top 30,000 – especially those 400 on the Forbes list of the World's Wealthiest.  As noted by, 80% of the private wealth in the US is inherited, which segregates wealth and opportunity sharply below the Top 1%.  In their report: "Born on Third Base" the authors call out Forbes, saying:

The truth is that Americans have never had an equal opportunity to become wealthy. Rather than concocting fables about our “opportunity society,” the editors of Forbes should be examining the birthright privileges enjoyed by many of those on the list. 

Image result for trump born on 3rd baseWhen you start your life in the Top 0.01%, you have a lot of pressure on you to increase that wealth.  Getting a job at the 7-11 isn't going to cut it.  A person inheriting $250M is already making $20M/yr at the normal stock market returns of 8% and that times 30,000 of the Top 0.01% means we need to feed them $600Bn a year just to get them out of bed in the morning.  That's 4% of our entire GDP or 100% of our GDP growth going just to pay the Top 30,000 to hold their money.  THEN they want MORE!

As we know, in any economy, there are winners and there are losers and if we're not going to tax the winners, then we will need more losers to make up for what we need them to keep at the end of the day.  As I noted above, we've already bled the bottom 50% dry and the Bottom 90% only average $31,244 in wages so, for the Top 0.01% to add just 10% to their $7.5Tn ($750Bn), they would need to take $5,000 from 150M wage-earners in the bottom 90%.  Remember, they have already sucked up 4% of the GDP just to maintain their wealth and that's ALL of the growth - the rest has to be TAKEN from the Bottom 99.99%.

Image result for wages top 1%Taking $5,000 from people who only make $31,244 is hard – they tend to notice.  Apparently, however, they don't notice if you keep their wages the same for 30 years while yours rises 400% (13.3% per year) – so for sure let's keep doing that, right?  No, in order to take the kind of money they need – the Top 0.01% must now go after the wealth of the Top 10% because ONLY they have enough money to make a dent in the wealth of the Top 0.01%.

The richer the Top 30,000 get, the more they need to take to keep growing their pile and the deeper into the pockets of the Top 10% they will go and the lack of a "death tax" will expand that wealth much faster as more and more of the Top 30,000 start their lives on 3rd base where, even as infants, they NEED that $600Bn in interest but, if rates rise, it will become $1Tn and then $1.5Tn and that will cause them to accumulate more weakth and then it's $2Tn, $4Tn…  

How long before the wealth of the Top 30,000 consumes the entire US economy?  We may not live to see it (unless this market rally continues) but our children will and, if your children are born with golden spoons in their mouths then God Bless – you need not be concerned but, if you are amoung the struggling 319,970,000 people in this country not in the Top 0.01% – you'd better have a plan to get behind the velvet rope in that club – otherwise your children may learn the hard way how quickly it can all be taken away from them – just ask the Saudis.  


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  1. Good morning, All!

    Join the webinar today at 1pm here:

  2. Phil


    I will be on vacation for two weeks with next limited computer access


    What would be the best hedge ?



  3. It's not a tax cut anymore, it's organized tax evasion:

    If you’re not following what this means, here’s an example. Suppose you’re uber-rich and you buy $1 billion in Apple Stock. By the time you die it’s worth $3 billion. Your heirs, lucky ducks that they are, don’t have to pay estate tax on that $3 billion. But they do have to pay normal capital gains on the $2 billion appreciation in the Apple stock. At 20 percent that comes to $400 million.

    However, the Republican bill eliminates that too. Not only does it eliminate the estate tax completely, but it allows you to “step up” the value of the estate and avoid capital gains taxes entirely. In our example, you literally get $3 billion free and clear, and you owe taxes in the future only on the appreciation above $3 billion.

    In the meantime, the rest of  us working to make our money have to pay taxes on our income because I guess work is the easy way to make it. It's passed revolting now.

  4. Good Morning.

  5. I sure hope they eliminate the federal estate tax.  Then I hope the state I live in will follow suit. It isn't very fun planning for future generations over a death tax, and then hoping you did it right…..

  6. GNC Holdings to offer senior secured notes due 2022 in a private offering

  7. GNC

    So why does the market hate it?  Are they using the money to retire other debt or start a brothel?

  8. GNC

    From its press release..

    The Company intends to use the net proceeds from this offering, together with borrowings under a new senior secured term loan facility and new senior secured asset-based revolving credit facility, to prepay and terminate its existing credit facility and to pay related fees and expenses. Any remaining net proceeds will be used for general corporate purposes.

  9. GNC – this is great news.  It should position their debt past their turnaround / china expansion plans.  In addition – something nobody is talking about,  They are distributing product out of distribution locations in china –  this was brought up in their conference calls.  They indicated they had more sales locations, but had not significantly increased their store count.  This also coincides with two of the largest Chinese health supplement companies indicating that GNC preferred partner.   

  10. GNC

    I didn't think it was bad and added a little at the bottom (so far), but the put prices really haven't gone up much.

  11. Interesting chart and observation by Jonathan Tepper: "Big divergence between Nasdaq 100 rising vs 40% of Nasdaq stocks below 200 day moving average."

  12. qcmike…best hedge?  Cash.

  13. Looks like TEVA gave away all of Monday's billionaire hopeful gains… DANGIT!

  14. Pharm


  15. Scotty, Muck – Two excellent videos yesterday.  The loss of agency is what plagues us.  Someday, physicists might figure dark matter to be the "invisible" part of the plasma and this.  The Truth is Out There – Trust No One. Out.

  16. Good morning!  

    Hedge/QC – I still like TZA.  The April $13 ($1.95)/$17 ($1) bull call spread at 0.95 gives you nice protection and you can sell calls against it if you decide you don't need it later but, using that logic, you could take the 2019 $15 ($2.65)/$25 ($1.35) bull call spread for just $1.30 and it won't give you immediate protection against a quick dip (as it would be slow to change) but it's good long-term protection against a protracted downturn and, of course, you can make back most of the $1.30 by selling, for example, 1/2x the Jan $17 calls for 0.42.   The Jans are 72 days from expiry and you are collecting 0.21 per 436-day long so 6 sales like that and you have free protection.  I wouldn't do the short sale for the vacation but, when you get back, you can leave the protection in place and sell 1/2 covers all next year.  

    Big Chart – RUT turned ugly fast.  Watch out for any sign the others are confirming.  RUT SHOULD get a big bounce off the rising 50 dma – if not – very bearish sign.

    Tax cuts/StJ – People just do not understand how quickly this will ruin the country.  We may get out credit rating downgraded over this thing.  

    Death tax/Willsons – Just give it to your kids while you are still alive.  If you don't trust them to hold your stuff – then why worry about how much you're leaving to them?  

    GNC/Jabob – Wow, F them!   Actually, it doesn't matter as we targeted $5 to be called away but it's cutting it close to the bone now.  

    I'm fine with the move but not looking to up our position on that one.  What people don't like about senior note offerings is it drops the shareholders to dead last if there is a liquidation event so you can't even count on the break-up value of the company to support your share price.  In other words, GNC can be near BK but, at $400M in market cap, you can see a pretty clear path to getting at least $3-4/share (120M shares) in a liquidation but now they are borrowing $400M and placing that debt ahead of you for repayment.  Since they lost $400M last year – that means you could be just a year away from $0.  But they made $60Bn in the last 3 Qs and just announced $21.5M for Q3 so, though it was a disappointment – it's still a profit and paying down debts will lead to more profits going forward. 

    Divergence/Pharm – That's a great visualization of what I've been talking about.

    TEVA/Jabob – Down a penny.  You really need to get a hobby – anything to distract you from staring at these charts all day!  

  17. Phil/GNC

    how about selling the Jan 2019 7.5 Puts and getting into the 5/7.5 BCS? Instead we can sell strike 5 as well.


  18. VRX,  I think after yesterdays report its safer to sell some premium. Looking at buying the stock and selling 2019 puts and calls.  $15 calls pays $3.60 and either the $10 or $12.50 puts

  19. Did EIA data come out?

  20. Build in Oil but draw on Gasoline and Distillates sending mixed signals:

    • EIA Petroleum Inventories: Crude +2.2M barrels vs. -2.9M consensus, -2.4M last week.
    • Gasoline -3.3M barrels vs. -1.9M consensus, -4.0M last week.
    • Distillates -3.4M barrels vs. -1.4M consensus, -0.3M last week.
    • Futures -0.65% to $56.83.

    GNC/Pat – We already have a position but yes, as a new play, I still like the short 2019 $7.50 puts for $3.20 – which is about what we sold them for when we first entered.  That by itself is a very nice return or net $3.30 entry is worst case.  I'd wait until they stabilize to add a bull call spread or the stock with a covered call (which is what we began with).

    VRX/Stock – Let them calm down first! 

    Wasn't there something I was going to look at today?  

    Speaking of companies that are not dead yet:

    • Seadrill (SDRL +6.8%) surges for a third straight session to bring its gain close to 70% for the week, following recent news that two groups have shown interest in potentially making offersthat would rival a debt-cutting plan put forward by its major shareholder.
    • A proposal from a group holding ~25% of SDRL’s bonds and another plan from a bond investor have surfaced while the company has been soliciting restructuring offers.
    • Seeking Alpha contributor Vladimir Zernov believes SDRL's recent move is "purely technical" sparked by bondholders' activity and higher oil prices after a period of flat trading, but says nothing has changed in the company's fundamentals.

    AAPL popped $175, that's lifting the indexes a bit.  

  21. Speaking of bleeding money!  

    • Sears Holdings Corporation (NASDAQ:SHLD) says it entered into an agreement with the Pension Benefit Guaranty Corporation to release approximately 140 Sears properties from ring-fence arrangement in exchange for $407M of contributions to its pension plans.
    • The company says the new agreement provides it with extra financial flexibility through the ability to monetize properties.
    • In an update on Q3 results, Sears says it expects to report an EBITDA loss of $250M to $300M and sees a Q3 loss attributable to holders of about $525M to $595M.
    • SHLD -1.00% premarket to $4.95.
    • Source: Press Release

    Not just GNC:

    • Vitamin Shoppe (NYSE:VSI) reports total comparable sales down 6.6% in Q3.
    • Retail store comparable sales declined 7%.
    • comparable sales slipped 5%.
    • Segment sales: Retail: $282.41M (-6.2%); Manufacturing: $20.87M (-14.3%).
    • Gross margin rate fell 190 bps to 30.5% primarily due to deleverage in occupancy and supply chain from lower sales as well as additional investments in pricing and promotions.
    • Adjusted SG&A expense rate +450 bps to 30%.
    • Adjusted operating margin rate decreased 640 bps to 0.5%.
    • Store count +10 Y/Y to 784.
    • FY2017 Guidance: Total comp sales: -7%; Adjusted gross margin rate: 30.6% to 30.9%; Adjusted SG&A expense: $337M to $339M; New stores:15; Adjusted EPS: $1.50 to $1.75; Capex: ~$50M.
    • VSI -6.98% premarket.

    Amazon's Pharmacy Licenses Threaten CVS Health 

    • As Venezuela teeters on the edge of default, U.S. oil service companies face the prospect of hundreds of millions of dollars in writeoffs for overdue payments from the PDVSA state-run oil company.
    • Halliburton (NYSE:HAL) has a $727M investment in Venezuela including $429M in outstanding bills, Schlumberger (NYSE:SLB) has $700M at risk including receivables and a promissory note for past work, Weatherford (NYSE:WFT) has at least $158M in outstanding bills, and Baker Hughes (NYSE:BHGE) holds receivables and inventory valued at $100M, Reuters reports, citing to the most recent financial reports from the companies.
    • All three major ratings agencies downgraded Venezuela's sovereign's bond rating and for PDVSA late last week after Pres. Maduro said the country could restructure $60B in bonds, widely seen as signaling a possible default.
    • BP helped Mexico execute its $1.26B 2018 oil hedge, the biggest in the industry, becoming the second oil major after Royal Dutch Shell (RDS.ARDS.B) to participate in the program, Reuters reports, citing multiple industry sources.
    • Big Wall Street banks such as Goldman Sachs, Citigroup and J.P. Morgan have dominated Mexico’s program for years but their role has diminished with tighter regulations on bank commodity trading, including a near total ban on proprietary trading.
    • For more than a decade, Mexico’s government has paid for a hedge every year in an attempt to guarantee its revenues from oil exports by state company Pemex; the program is seen as the world’s top sovereign derivatives trade.
    • Take-Two Interactive Software (TTWO -0.6%) has spiked 8% after hours after its fiscal Q2 earnings beat revenue estimates and the company raised expectations for 2018 bookings.
    • Net revenue rose to $443.6M from $420.2M, and recurrent consumer spending was up 66% (and made up 48% of total net revenue). The usual suspects were key contributors this quarter: NBA 2K17, Grand Theft Auto Online and Grand Theft Auto V, along with WWE SuperCard and WWE 2K17, and XCOM 2.
    • Digitally delivered net revenue rose 31% to $302.9M (68% of total).
    • Net bookings, meanwhile, rose 20% to $77M; net bookings from recurrent spending were up 84% and made up 42% of total. Catalog made up $310.5M in net bookings, and digitally delivered net bookings were up 52% to $355.7M.
    • For fiscal 2018, it's trimmed expectations for GAAP net income due to higher internal royalties tied to strong performance of Grand Theft Auto (V and Online), to $63M-$91M. But net bookings are now expected between $1.93B-$2.03B, and net cash from operations is forecast at $300M.
    • For Q3, it now expects GAAP net revenue of $440M-$490M, a net loss of $29M to $40M, and net bookings of $610M-$660M.
    • Press Release
    • Shares in Snap (SNAP +2%) have taken a spill, down 19.1% after hours as Q3 revenues fell well short of expectations and new users disappointed analyst consensus.
    • Losses more than tripled — net loss came in at $443.2M, vs. last year's loss of $124.2M — but came in slightly better than expected. EBITDA fell to -$178.9M, better than consensus for -$193.3M.
    • Daily active users grew to 178M from a year-ago 153M (up 17% Y/Y, and up 3% Q/Q). Average revenue per user grew 39% Y/Y to $1.17 from $0.84.
    • Hosting costs grew as well, though, to $0.68 per DAU from a year-ago $0.64 and Q2's $0.61.
    • Cash used in operations was $194M; free cash flow came to -$219.96M. Cash and equivalents and marketable securities came to $2.3B.
    • Conference call to come at 5 p.m. ET.
    • Press release
    • Fossil (NASDAQ:FOSL) is down 25% in early AH action following the company's Q3earnings report.
    • The retailer's comparable sales growth topped expectations for a 9% drop with a 6% decline for the quarter.
    • Weakness was seen across product categories, with sales down for watches (-3%), leathers (-19%) and jewelry (-21%).
    • The really painful part of the earnings report came with the guidance. Fossil sees Q4 revenue of $854M to $926M vs. $952M consensus and EPS of -$0.04 to $0.51 vs. $1.33 consensus.
    • Previously: Fossil beats by $0.32, beats on revenue (Nov. 7)
    • Apple (NASDAQ:AAPL) topped the U.S. smartphone market in Q3, according to new data from Strategy Analytics.
    • Overall smartphone shipments were down 2% on the year to 39.5M units. 
    • The firm’s data shows Apple shipping 12M units, down 2.1%, for a 30.4% market share. Samsung’s market share was 25.1% in the quarter with 9.9M shipments. 
    • In Apple’s earnings report last week, the company said it sold 46.7M iPhones worldwide in the quarter. 
    • Other Apple news: Israeli start-up Corephotonics filed a patent infringement case in a California court yesterday accusing Apple of taking its dual camera tech for use in the iPhone 7 and 8 Plus models. 
    • Key quote, referencing a meeting between Corephotonics' CEO and Apple: “Apple’s lead negotiator expressed contempt for Corephotonics’ patents, telling Dr. Mendlovic and others that even if Apple infringed, it would take years and millions of dollars in litigation before Apple might have to pay something.”   
    • Previously: Apple up 2.9% after Q3 beats revenue, EPS, and device estimates (Nov. 2)

  22. Phil – This AM's rant was not very good, it was a Capolavoro. No smooch on the forehead, just a high five.

  23. Phil/TSLA


    I am still holding the TSLA trade from a few days ago.  4/18 320P/350C/370P and have used the 370P to generate income during the day.  It looks like the target on the downside to be 280, but I am trying to decide where to have my stop if this really gets going on the upside for the 370P?  Thanks, Linda 

  24. Ok here is that pesky question again

    What do you think of the current price of   BBBY, GIS, GME, M ?

  25. Phil

    What were your thoughts on SKT’s earnings report?

  26. Wow, oh wow.  We are doomed.

    Johnstown, PA.  

  27. XT/bdc – another ETF I picked up a small position in a few months back..  looks like not too much overlap with the ROBO and BOTZ, but pursuing similar forward potentials.

  28. GNC

    We were  right; nice comeback.  Bought a few shares and sold couple of puts even if  prices not that great relatively speaking.

  29. Phil/Rb- up big, time to bail? Missed the chance this morning to exit even. 

  30. I'm getting mixed messages there, Naybob.  

    Anyway, I need to convey concepts sometimes as stuff I say does get picked up in the broader media but most of them don't even understand what's happening here.  

    Speaking of which, the bathtub inflation example we discussed yesterday:

    Submitted on 2009/01/07 at 11:01 am

    Gold/Jordan – See above.  My gold premise is very simple:  The global governments have increased the money supply by 10% or more aimed mainly at banks who lever it 2:1 so it’s sort of like saying if you have a 50 gallon bathtub and you put 100 gallons of water in it are you likely at some point to get wet?  Gold is being used as a hedge against there being a huge mistake made and inflation soaring on us.  The nice thing about GLD is you can buy the 2010 $70s for $19.45 which have just $7 in premium and you can sell Feb $86s for $3, which takes you up to $900 gold next month without having to pay your caller more than $1 and your net entry is $16.45 on a $16 spread so no danger of it getting away from you to the upside.  If gold falls, as long as you can collect $2.50 a month for 12 months, you will make a 50% profit regardless of the value of your long position by Jan 2010 so I can’t imagine a better way to hedge against inflation than holding these.  $1,500 gold would put you $80 in the money so 10% of your portfolio in a gold hedge can turn to 40% on a big run (assuming it’s not so sudden that you get called away).

    Submitted on 2011/09/27 at 2:29 am

    Coordinated action/DC – Yes, this is MORE.  Making sure Dollars are available is just a liquidity issue but that doesn’t help the PIIGS deal with their debt, just stops their banks from imploding.  Eventually it’s all just more and more water filling the bathtub while everyone tells us inflation will never spill out but one fat guy jumps in and shouts "Eureka" and suddenly the floor is soaking with it.

    TSLA/Lala – Well, I assume you mean you have this:

    • Sell 6 TSLA April $350 calls for $23 ($13,800)
    • Buy 6 TSLA April $370 puts for $65 ($39,000)
    • Sell 6 TSLA April $320 puts for $34 ($20,400) 

    I'm not sure what you mean but using it for income during the day or the "upside" of $370.  Do you mean the max value?  It was a net $4,800 spread and the $370 puts are already $78 and the $320 puts are $42 so net $36 there out of $50 possible and the short $350 calls are $16 so net $15,600 out of a potential $30,000 if TSLA is below $320 in April.  I called for cashing in one of the $370 puts so we played a little bullish for the bounce, but the bounce has been weak so far and below $300 we would have to re-cover.  So please clarify the question if this didn't answer it.

    Pesky/Tangled – I don't mind, it's just hard when I only have 2 screens instead of 5.

    BBBY – As I noted in the review

    2017/10/20 at 2:22 pm:

    BBBY – These guys are stupid cheap.  We took our lumps on the initial entry but now is time to re-invest and roll our 10 2019 $30 calls ($1.25 = $1,250) to 20 of the 2019 $20 calls at $5 ($10,000) and we'll sell 20 of the 2020 $27.50 calls for $3.40 ($6,800) so net $1,950 to double down at a 25% lower strike seems like a good deal, right?  Our 10 short 2019 $30 puts are $9.80 ($9,800) and we can roll those to 15 of the 2020 $25 puts for $7 ($10,500) and that's another $700 off the roll cost.  

    Earnings are not until 12/20 and there hasn't been any news since Oct, just the poor report in Sept that already punished them and the general fear of AMZN that has been hitting the whole sector.  Guidance in Sept was for $3/share earnings so the p/e is now 6.5 at $19.38.  But BBBY had a 20% growth in on-line sales last Q so of course the store comps were bad as they are chasing their own customers on-line.  They are a possible buyout candidate at this point so I still like them on several levels.  Target-wise, $30 is fair for Jan 2020.

    GIS – In our Butterfly Portfolio we bought back the short-term short cxalls and left ourselves with 20 2019 $57.50 calls covered with 15 Jan $57.50 calls and 15 short 2019 $55 puts we sold for $5.50 so our net bottom is $50 – as we called it back in July and the short calls will go worthless, as we expected and then we should move back to $55 (p/e 18) into next Jan (assuming the market stops being so crazy) and then $60 by 2020 so we will be rolling the 2019s to 2020s once the short calls expire.

    GME/DC – That one is in the LTP and we have 1,000 shares of the stock at $25.75 and we sold 10 of the 2019 $20 puts for $3.20, so that's our floor.  We also sold calls we bought back in anticipation of making a bottom.

    TTWO just popped 11% on great sales and people don't seem to be able to put Two and Two together and figure out that GME sells most of that stuff.  

    Not only that but GME is making $3.30/share and that's pretty steady last-year to this year to next year so not exciting growth – unless you are going to price the stock at $17 and make the p/e not even $6 – then it's fantastic.  Even a p/e of 10 takes them to $33 – almost a double from where they are now. 

    M – Is a real estate play. SHLD was a real estate play too but Lampert stole the assets and put them into SRG, which is now worth $2.25Bn while SHLD fell to $500M.  So far, M has not tried to rip off it's shareholders like that and their company is valued at $5.4Bn, even though they made $600M last year (p/e under 10) and even though their land holdings have been appraised for $13Bn PLUS they have a credit card business (don't forget Bloomingdales is M too) worth Billions as well (SHLD spun out DFS, now worth $24Bn).  Just applying a normal 10-12 multiple on their earnings puts them up around $7.5Bn – a 50% gainer from here. 

    SKT/DC – It was a good report.  They beat on the important metrics and paid down $300M in debt, causing an 0.36/share loss adjustment that gave them a "losing" Q but for great reasons.  I'm very happy with them.  

    Doomed/Pharm – So pathetic.  

    I guess SNAP is staying down after all that drama.  

    /RB/Ravi – I'm still in but yes, should be dumped if you are not willing to take a big loss before it eventually calms down. 

    Of course I am adding more back at where it peaked out on Monday, but that's the way I play it.  

  31. Phil,

    What's your take on /CL? I didn't expected to go up after that report.

  32. Thx Phil, done the same on my side already. Sometimes get into trouble with futures and although I do my own thing based on your initial thoughts, good to sync up with you to ensure the premise why we got into the position hasn't changed. Thank you again.

  33. /CL/Japar – That's what makes it a good short (again) at $57.50 – you KNOW the move up is BS so you can short with confidence. 

    /RB/Ravi – Just don't forget to scale back out on this dip!  

    Webinar Time!  

  34. AMC – languishing.. going to add another small round..  .20 dividend coming up in December. Orders in to Buy shares, sell March $13 calls for net 10.80 entry. Orders also in to sell Dec $12 puts @ 1.00.  If goes through will get this position to just over 1% of that account, so keeping that it in perspective. Not been rushing 'all in' to anything!

  35. That oil is some BS

  36. Baron – "Just another thing I don't understand, how can 20 year rates keep going down if the economy is doing better,"

    When all other possibilities have been eliminated, what remains must be the truth. A good rule, never conflate interest rates with the price of money. The price of money is reflected in FX and price indices. Strong currency, strong economy? and vice versa? Not always so.

    More specific to your query, interest rates are NOT the price of money, they are the price of loan funds. When economic activity rises, demand for loan funds rises, so does the price in the form of interest rates. What banker does not raise rates as demand rises? This would be the bane of their existence. When economic activity declines, demand for loan funds fall, and so does the price or interest rates.

    Diametrically opposed to the artificial and false construct of the FED and MSM, the bond and eurodollar market tell the truth, the whole truth and nothing but the truth.  That being, lower rates, viz. lower cost of loan funds means, contraction in economic activity and demand.  Translated,  the global economy is not doing well and future growth expectations are worsening.  Nothing more, nothing less. The Truth Is Out There – Trust No One.  Out.

  37. NatNay,

    My problem is I insist on using the 20 year to hedge interest rate sensitive stocks.  I need another way to hedge REITS, BDC's and the like.

  38. Eurodollar/Naybob – speaking of, thanks for reference Jeff Snyder on this. Great multi-part interview with Snyder/discussion about called Eurodollar University, starting here:

  39. DIN and M report tomorrow before the close.  DIN appears to be down on Ruby Tuesday poor report two days ago, so I am leaning to the upside.  M has been teasing better news and needs to come up with something positive so again I am leaning to the upside.  Added some M 2020 $15 puts.  Any thoughts?

  40. BDC – "I have a PhD thesis in my mind of what "money actually is," 

    Money has specific purchasing power properties viz., medium of exchange, unit of account, sometimes a store of value.  The value of money is the utility it serves, viz. generalized purchasing power, and the most common yardstick is the accepted form it takes viz. credit, debt (bond, debenture, equity), instrument (ABCP, repo, MMMF, synthetic derivative, etc.), asset, and legal tender.

    The principle of substitution (or prostitution) applies to money, viz. a commodity or service will be devoted to those uses which are the most profitable. The John with $100 gets a blow and go, while the one with $1000 gets royally fucked.

    Thus, the more valuable money or is held or hoarded, if possible, as a store of value, and the less valuable is used as a medium of exchange. Hence, the bad money drives out the good.

    BDC – "since no one knows, or rather, no one can explain it to me (granted, it might just be I'm an idiot)."

    Take solace my friend, there are professional idiots who don't know what money is. All the Fed's men and their 300 Phd's, do not know the difference between money and liquid assets viz. the difference in how inside and outside money functions and its economic consequences. 

    The assumptions and misconceptions stemming from that false doctrine, stand as the root of all our economic problems.  They truly know not what they do viz. they don't know what the fuck they are doing, have amply demonstrated so for decades and we are paying the price.  The Truth Is Out There – Trust No One. Out.

  41. AMC - orders filled on stock dipping to 11.75

  42. Scottmi – Snyder is a oft misunderstood friend. Most don't get it or can't grasp his expertise. He is to ED and exposing econometric falsity, as what Moses is to stone tablets.

    Baron – "hedging interest rates risk", you can do that with eurodollar or treasury futures, interest rate swaps, options and derivatives.  Try slowly entering that phrase into Google and see what the suggestion bar starts to show you… Time for my IV, Out.

  43. AAXN 

    Anyone watching this travesty?

    8-Nov-17 11:54 ET


    Axon target lowered to $33 at Dougherty & Company

    Dougherty & Company lowers their AAXN tgt to $33 from $36. Firm noted that Axon delivered another mixed bag in Q3 with much better than expected sales and bookings offset by another miss on margins. While they are frustrated by the inconsistency from management on profitability they continue to see the Axon brand gain share vs. competitors. The company's lead on technology and product service has extended in FY17 and is evident in the dozen competitor conversion wins seen in Q3. They are also pleased to see acceleration in the company's software service revenue for exceed $16M in Q3. As SaaS revenues ramp over $100M in FY18 they expect new investors to get involved in the stock as the business model increasingly resembles an enterprise software company.

  44. Phil, today's post was phenomenal.  Your case against ever reducing taxes for the wealthy is cemented, and that should be plastered in every household in America for people to read.  I appreciate what you wrote, I've always wondered where those who want reductions in taxes think money will come from to repair roads and bridges, clean up public spaces, or pay their social security once they retire, but this brings the thought process to a whole new level for me.  I wonder if we will ever get to the point where enough people in the US will care about what happens to the next generations, to their kids and grand kids, to read and understand what is happening and to seek out solutions.

  45. Baron – yeah, wtf.  sounds AWFUL! growth exceeding goals, and R&D investments going forward.

    "We expect full year revenue growth to exceed 25%, well above our original expectation of 15% to 20% growth in 2017.  
    "We expect Q4 2017 gross margin to show slight improvement…  
    "We expect a sequential increase in operating expenses of 5% to 8% in Q4 2017, driven by R&D investments and seasonal sales and marketing activities. We are actively working to adjust the trajectory of our operating expense growth rate to drive leverage.


    May sell a couple more 22.5 strike puts.. but will watch for now. Maybe will get down to where $20 puts get fat.

  46. Phil what is your personal opinion of CDs as a cash investment vehicle. I've had TD Ameritrade account rep call both me and my mother-in-law (for who I manage her investments), trying to persuade in moving cash in our accounts over to CDs TDA offers.  I don't like tying up money for that long, especially with the market so toppy because I'll be able to use that spare cash to reinvest in stocks that unnecessarily downtrodden when the time comes, but my mother-in-law is near retirement so is more easily persuaded. (and I know you're not a financial advisor :)

  47. Pharm/schilling & mCcabe   Scary, but harmless. :(

  48. Now looking at the bottom of the PSW page, I spot a carly fiorina… Now that is some scary sh*t…. ;)

  49. FNSR – what a market. not adding here. maybe again at 12. OR over 24.

  50. Phil / Weather Maps- Can you post the weather forecast maps you usually show when looking at NG or UNG trades.  I had to break out my jacket today (NJ) but wondering if it's going to last.  Thanks!

  51. Phil – Thanks for the webinar. I don't think there were many questions due to the fact that you're always there to answer them, with much detail and thought.

    Perhaps some of that 'critical thinking' you've been preaching is sinking in….. :)

  52. 1020

    those bottom ads are, i believe,  paid advertising and usually on the other side of Phil's positions. Note FAKE news   Huge Gillespie lead.

  53. 1020 – "Now looking at the bottom of the PSW page, I spot a carly fiorina… Now that is some scary sh*t…"

    FU CARLING FIORINA Coco Jambo Style – tip o the hat to Jabo…..

  54. :)

  55. gerryf – This one is an obvious tell:  'MSNBC Segment Accidentally Admits Trump Is Right About Border'


  56. Phil/BBBY

    Which portfolio is this position in? I am not able to find it in the latest review.


  57. PRI – Wow! did anyone see this coming?

  58. DOX – earnings tonight… at channel low and touching 200ma (on div corrected charts). Someone wrote some Nov 62.5 put / 70 call combo's today for credit. Must be expecting a bit of a pop. Not sure who would take the other side, except to defend held stock…  

  59. FWIW – Both CTL & QUIK report after the close.

    I expect CTL's results to be weak and disappointing, but believe guidance going forward will be positive after the merger with LVLT.  Would be nice if they announce the dividend is sustainable (13%).  I'm underwater in this name.  It's been a falling knife for the past several months.

    QUIK, my stock of the year, is up but hasn't shown the ramp up in revenues that I'm looking for.  So I expect another so-so quarter, but perhaps will have some design wins to announce that will lead to the ever elusive ramp.

  60. Pharm/Johnstown – "It’s not like he sleeps in till noon and goes golfing every weekend, like the last president did.”


    messaging is absolutely everything

  61. AMC/Scott – They are having some real problems, I do prefer IMAX. 


    Oil/Baron – Came down nicely in the end and /RB is spikeing up for another chance to short.  

    Good Holmesian lesson, Naybob.

    Hedge/Baron – You can use VNQ (REIT ETF) for a general hedge.  Lot's of fun action on them and you can do something fun like buy the 2019 $90 ($11)/80 ($5) bear put spread for $6 that locks in the top of the range and you can sell some short-term puts, like 1/2 Dec $82 puts, which are now 0.45 but you should be able to get $1 for them on a dip and that will offset the $6 over time.  

    DIN/Baron – We have DIN in the LTP but we sold Dec $50 calls, that was our top expectations.  

    Short Call 2017 15-DEC 50.00 CALL [DIN @ $42.51 $-0.45] -10 7/21/2017 (37) $-1,200 $1.20 $-0.93 n/a     $0.28 $-0.08 $925 77.1% $-275
    Short Put 2018 16-MAR 40.00 PUT [DIN @ $42.51 $-0.45] -10 8/21/2017 (128) $-5,000 $5.00 $-2.05     $2.95 $0.25 $2,050 41.0% $-2,950
    Long Call 2018 16-MAR 35.00 CALL [DIN @ $42.51 $-0.45] 10 8/18/2017 (128) $7,090 $7.09 $1.01     $8.10 - $1,010 14.2% $8,100
    Short Call 2018 16-MAR 45.00 CALL [DIN @ $42.51 $-0.45] -10 8/18/2017 (128) $-1,970 $1.97 $0.11     $2.08 $-0.09 $-105 -5.3% $-2,075

    M I expect good things from. 

    AAXN/Baron – How ridiculous.  Great chance to improve our position.  

    Summary of Q3 2017 Results:

    Net sales increased 26% to $90.3 million in Q3 2017 compared to $71.9 million in Q3 2016. International sales were $17.1 million in the current quarter, up from $13.4 million in Q2 2017 and $11.3 million in Q3 2016.

    Consolidated gross margin was 55% in Q3 2017 compared to 65% in Q3 2016. We discuss gross margin by segment in the sections below.

    Gross profit of $49.8 million was impacted by the following factors:

    • $1.4 million of duplicate data storage and migration costs as we completed the transition from Amazon Web Services ("AWS") to Microsoft Azure.
    • $1.3 million of additional costs associated with deploying hardware into beachhead international markets at aggressive leaders' pricing. We have substantially completed shipments against these contracts and do not expect further shipments to materially affect Q4 or 2018.
    • $1.1 million of associated costs with the launch of Axon Fleet, including early customer accommodations and discounts, higher implementation costs as we refine our roll-out process, and deferred hardware revenue effects due to bundling.

    Total operating expenses in Q3 2017 were $50.6 million compared to $35.5 million in Q3 2016.

    Operating expenses were $3.1 million above guidance largely based on the following factors:

    • $1.4 million from increased commissions ($0.6 million) and selling expenses ($0.8 million) associated with sales that were $7.9 millionabove our internal budget for sales of $82.4 million.
    • $1.5 million in expenses related to international tax restructuring, remediation of material weaknesses and build out of infrastructure for new reporting guidelines (ASC 606) that take effect in Q1 2018. The tax restructuring is now complete and should yield a significant return on investment by reducing our effective tax rate by more than 10 percentage points, streamlining our administrative overhead, and simplifying our inventory management. The investments we are making in our core support functions and processes are bringing a new level of rigor and allowing us to upgrade our IT systems for scale.

    Selling, general and administrative expenses were $36.4 million. SG&A also reflected new recurring amortization expense related to the acquisition of our Australian distributor, which was not in our original forecast. This acquisition sets the foundation for us to drive greater sales at higher net margins via direct customer relationships going forward.

    Research and development expenses were $14.2 million in the quarter, which reflects our investment in new product offerings, including Axon Fleet, RMS, and another significant program that we expect to announce and ship in 2018.

    Loss from operations was $0.8 million in Q3 2017 compared to income of $11.1 million in Q3 2016. The decrease in operating income was tied to gross margin compression as well as an increase in total operating expenses in the quarter.

    Keep in mind, AAXN is essentially a razor company – they give away the razors so they can make money selling the blades for years to come.   There's a loss leadership as they expand but, of course, that only benefits long-term investors – and what are those?

    Thanks Rperi!

    CDs/Rperi – As your broker if they have sweeps into money-market accounts.  That's a good compromise.  Meanwhile, how much is a CD going to pay?  1.25%?   So for $100,000 locked up that's $1,250 for the year.  You can promise to buy $15,000 worth of T by selling 5 of the 2020 $30 puts for $3.20 and that's $1,600 right there.  Even in an IRA account, that would leave $85,000 free and one more put sale like that and you're making more than a CD with $70,000 still available.  

    FNSR/Scott – Dropped wildly out of favor.  

  62. FNSR/Phil – this from Goldman's Doug Clark: "On the other hand, Finisar does boast optionality from M&A which would generate meaningful cost synergies."  LOL!

  63. Phil/VNQ

    Thanks for the trade.

  64. Maps/EMike – Short-term warm, longer-term (Dec/Jan/Feb) "normal" which is a lot cooler than warm.  

    On the other hand, not "cold" anywhere all winter – except the Dakotas and who would notice?  The weather is not what our long /NG premise is about but it's certainly been keeping it low so far.  

    Thinking/1020 – Well that would make me happy.  cheeky

    Ads/Gerry, 1020 – Where are these ads?  I have ad-blocker, so I don't see them.  

    BBBY/Pat – It's in the LTP. 

    Indexes curling over, Good time to short /ES at 2,590 (tight stops above).  Lined up with 23,500, 6,340 and 1,480.

    PRI/Scott – I sure didn't because I never play them.  DOX too, no idea.

    CTL/Albo – So painful lately.  Post merger they should start coming back but long, slow road.

    Johnstown/BDC – Incredible, isn't it?  Obama played 38 rounds of golf per year (306 total) or about every other weekend.  Trump is at 73 in 52 weeks yet the narrative continues despite overwhelming facts to the contrary.  But that's not all as Obama tended to work the Golf into his actual vacation time and as part of a trip he was on but Trump goes to his club and burns a whole 3-day weekend golfing and hanging out to promote his clubs – it has NOTHING to do with Government business.  

    You're welcome Baron.

  65. By our count, by the end of August, Trump will have spent all or part of 53 days in office at leisure, compared with 15 days for Obama through August 2009. What’s more, Trump will have played at least 33 rounds of golf, nearly double Obama’s 17 rounds — and that’s even before Trump gets to his vacation spot, an actual golf course.

  66. Phil/BBBY

    In your trade review you mentioned year 2019 for the $20 strike and 2020 for the $27.50. Is that correct? I am not able to match with the current prices as they have changed.


  67. Phil / Maps -  Great, thank you Phil-

  68. Ads – chose by adbot? not sure if the link will work without being logged into stocktwits, but below is a link to a wordcloud from PSW Tuesday, Nov 7. Yes, it did seem like a lot of Trump talk:  



  69. CTL getting crushed.  Bought some at $14.30.

  70. CTL is my personal FU.

  71. Albo, nice.    Beat me.  $14.72

  72. those ads are hilarious, here' one of my ads: "Maryland Retirement Community Only Sold Homes To Muslims"

    LOL! and a picture of a muslim woman in a full burqa to boot. Good stuff.

    Who knew PSW was so Fair & Balanced???

  73. On conference call CTL CEO reiterated that he thinks they will be able to maintain their dividend.  If so, that's big.  Should officially declare in a week or so.

  74. Phil – the golf thing would bother me but the truth is I want this guy playing MORE golf, like 24/7 if I had it my way.

    No mention of the election today in the morning post but +9% democratic shift in the Virginia House of Delegates allowing the Dems to go from 34 to 50 of the 100 seats (recounts on close races will determine control). Look at are #94 here, 12 votes!!!!

    market looking toppy folks, let's still vigilant, might catch a sharp move down where those long options over-perform because of the volatility spike on top of the price movement! I can't hold out much longer, itchy trigger finger on SQQQ TZA etc etc!!! 

  75. VNQ oscillates like a standing wave. I like the 83 Dec puts for $0.15 and VNQ has oscillated below 83 a total of 6 times since March (6 times in 8 months). If the timing is wrong and VNQ goes to 86 from here in Dec, do the same thing with the 84 puts in January and you've got say a 50% of catching an oscillation down with the ability to make 5-10X return.

  76. oops those VNQ's at 0.15 are the Nov, not the Dec, and I don't like the play for 0.60 so ignore…

  77. Ain't this the truth: no volatility.

    You can firmly pin me in the camp of thinking we'd be seeing all sorts of volatility. The trade of the year that wasn't!

  78. ~~ ROKU – Roku beats by $0.19, beats on revs; guides Q4 revs mostly above consensus  

    ~~After Hours Movers of Note: ROKU +28%.

  79. Thanks Biodiesel

  80. Thanks Albo

  81. ‘Do not not try us’ Trump sends warning to Kim Jong Un

  82. Not markets, not politics..  
    Stamets is -Legend-.

  83. New details suggest Michael Flynn may have cut a deal with Robert Mueller back in July

  84. After Carter Page implicates him, Corey Lewandowski fesses up about Trump-Russia scandal

  85. This Week In Petroleum Summary Printer-Friendly Version

  86. Michael Flynn drops a major hint to the media that he’s cut a deal against Donald Trump

  87. Justice Department Says Not So Fast to AT&T’s Time Warner Bid