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GDPhursday – No Way We Make 3% This Year

The final Q3 GDP Report is out this morning.

While the quarterly figure is supposed to come in at 3.3%, the first Q was only 1.2% and Q2 was 3.1% and that averages 2.53%, far, far below Trump's claim of 3% and, in order to hit 3% for the year, Q4 would have to jump to 4.5% – and that's not very likely at all.  2.5% GDP growth is better than last year's 1.5% average growth rate but far, far shy of 2015's 2.92% because, in reality, it's hard to grow an $18,570,000,000,000 economy 3%, which would be adding $557Bn.  

$557Bn is the entire GDP of Argentina, the 21st ranked country by GDP.  Saudi Arabia is 20th at $646Bn, which is 3.4% of our economy.  Isreal's GDP is $318Bn, just 1.7% of our own so, essentially, the US builds an entire Israel and absorbs it into our economy every 6 months.  Singapore is $296Bn, Ireland is $293Bn,  Portugal $204Bn… you get the idea – $557Bn is a lot of money – and that's why people who tell you we're going to punch up to that level and beyond are full of crap and assume you have no idea how to do the math, so you'll swallow their crap and repeat it to other people as if it's a fact.  

According to the Tax Policy Center's report on the Trump Tax Plan that just passed the House and Senate, we are growing something by 5% of our GDP but, unfortunately, it's the level of Debt to our GDP, which already stands at 108% with just over $20Tn in debt.  Even at just 1.5%, our Government is spending $300Bn a year in interest on that debt but the Fed is raising rates at least 1% next year so that will add another $200Bn in interest payments, taking up 40% of our anticipated GDP growth. 

That can quickly get much, MUCH worse if inflation kicks up and people demand more for bonds to keep up or if the Dollar devalues if, for example, someone were to pass irresponsible tax legislation that gave huge tax breaks to the rich while doing nothing to improve the lives of 90% of the people who live in the country, which would leave little possibility for GDP growth unless, of course, the Top 10% turn around and give back all the money we're giving them by raising wages and building factories.  

Image result for trickle down theoryThat's right, we're back to the Trickle Down joke theory and now we are depending on it to magically boost the economy enough to offset the enourmous tax giveaway Team Trump is passing.  If it doesn't work, there is no plan B – there won't be enough money in the Treasury to fund stimulus and we're already $20Tn in debt (two Chinas!) and there are no countries on the planet big enough to bail us out if our economy begins to collapse – so we'd better hope Donald Trump is right and this is the way to go – because we're gone baby!  

8:30 Update:  GDP was a slight miss at 3.2% and that means we'll need 4.6% growth in Q4 to hit Trump's promised 3% for the year and, of course we believe whatever Trump says, he would not lie to us.  Unfortunately, we're not seeing any evidence yet that growth accelerated 50% in Q4 but it's only December 21st – there's plenty of time to turn things around by the end of the year, right?  

The Bank of Japan is not as enthusiastic about their own GDP but the World's 3rd largest economy whose main importer is the United States can't possibly be an indicator of our own economic health, let alone the World, right?  This morning they decided to hold rates steady at -0.1% but, if you buy a 10-year note, you can still get 0.0%, so get them while they're hot!  The BOJ will also continue to push 80,000,000,000,000 Yen into buying their own bonds at -0.1%, essentially flushing that money down the toilet while pretending their own 270% debt to GDP ratio is sustainable.  

80Tn Yen is "only" $902Bn, not even a Trillion in annual stimulus for a $5Tn economy (and falling) – what could possibly go wrong?  So far, in the Abe/Kuroda error, the Yen has plunged from 130 to the Dollar to 88.59 which means the buying power of the Japanese people has decreased by 32% over the past 4 years.  The Dollar, over the same period, had gone up from an index value of 80 (against the global currency basket) to over 100 – which is up 25% but, since the Trump error began, we've given back 10% so 2.5% GDP growth but the buying power of every Dollar you've saved over your entire life has fallen 10% at the same time.  Smoke and mirrors, baby!  

So the S&P 500 is up 28% since the election but the Dollars it's priced in have dropped 10% so really we're only up 18% in steady money returns and, as I pointed out last week, the S&P 500 priced in BitCoins has crashed 94.8% since the election so, if the BitCoin Rally is here to stay, all these silly stocks are effectively worthless as BitCoin traders see them as having no value at all.  Will the market find a floor at 0.15 BitCoins (down from 3) or will we keep gapping lower.  As with Trump's "truths" – you can't have it both ways:

Meanwhile, we do our best to scratch out some profits in this crazy market.  Yesterday we had our Live Trading Webinar and we had about $300 worth of winning Futures trades during the session but we left with 2 short Oil (/CL) Futures and we just cashed those in for an $800 gain for the Day and we're still short 2 Gasoline (/RB) Futures and long 2 Natural Gas (/NG) contracts – so we'll see how things pan out.  Congratulations to all of our Members who played along.

You can see the replay of the Webinar HERE and we had lots of fun discussions with plenty of actionable trades.  Sitting in CASH!!! is very exciting as we have nothing but opportunites in front of us and we're able to pick and choose our spots.   

One spot we chose not to pick was Bed Bath and Beyond (BBBY), who I said I liked but I hoped they would miss earnings and disappoint so we could initiate a trade at a cheaper price.  Well they did miss and now they are down 12.5% at $21.50, which brings their market cap down to $3Bn DESPITE earning 0.44 per share (vs 0.36 expected) or $63M on $3Bn in revenues.  Q4 is half the year for BBBY so 3 x $60M is $180M + another $180M is a super-conservative $360M with a p/e of less than 10 so the sell-off is ridiculous and we would love to add a trade here (though we're not rushing in in case they get cheaper).  At the moment I like:

  • Sell 10 BBBY 2020 $20 puts for $3.60 ($3,600) 
  • Buy 15 BBBY 2020 $15 calls for $9.50 ($14,250) 
  • Sell 15 BBBY 2020 $22.50 calls for $4.50 ($6,750) 

That works out to net $3,900 on the $11,250 spread so the upside potential at $22.50 is $7,350 (188%) if BBBY manages to get back over $22.50 in two years.  The ordinary margin on the short puts is just $1,783, so it's a super-efficient trade and your worst case is owning 1,000 shares of BBBY at net $23.90, so it's an aggressive trade as the stock is cheaper than that now but we feel it's a great value here BUT, keep in mind we think it will go a bit lower, maybe test $20 so we're probably only going to buy 1/3 now and see what happpens.    

Another huge sale is being throwin on GNC Holdings (GNC), who are handing out 14.6M shares of stock to holders of $99M worth of debt.  That values the stock at $6.78 but it dilutes current shareholders by 21%, so the stock is dropping 21% but I like paying off debt with stock instead of cash so the 20% drop in the stock, to $3.95, is a great buying opportunity.  In fact, you can still sell the 2020 $5 calls for $2 so, here's the play:

  • Buy 3,000 shares of GNC for $3.95 ($11,850) 
  • Sell 30 2020 $5 calls for $2 ($6,000) 
  • Sell 30 2020 $2 puts for $1.20 ($3,600) 

Here your net is $2,250 for 3,000 shares so 0.75/share and that means you would make $12,750 (566%) if called away at $5 in Jan, 2020.  Worst case is 3,000 more shares are assigned to you at $2 and then you average $1.375 per share ($8,250).  Risking $8,250 to make $12,750 is a pretty good risk/reward ratio and it's the kind of play you can make in an IRA, since the puts have such a low strike ($6,000 even at 100% margin).  As with BBY, it's a bit of a falling knife so these are just outlines for trades – we hope to get better prices as they bottom out.


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  1. Morning, All!

    The webinar replay is now available!

  2. Good Morning.

  3. Good Morning

    Phil —I went to basic membership as I am hardly here ;-(—but I saw tat you r starting new portfolios in Jan—will I be able to access it on basic membership—or should I go back to premium as i really want to participate—thanks

  4. The hard reality about the total effect of tax cuts on growth:

    So for everyone who has not read the bill in full, here is a concise summary of the costs and benefits of the Republican tax legislation in one chart. It compares the benefits of the tax bill, as measured in higher economic growth, as calculatedby the Tax Policy Center, with the anticipated costs in higher budget deficits, as projected by the Congressional Budget Office (CBO).

    The Republican Tax Bill in One Chart

    Not surprisingly, tax cuts won't pay for themselves and Paul Ryan admitted as much yesterday. Of course he waited after the votes to mention for that admission. People who live in Kansas already knew that of course.


    "Shares of The Long Island Iced Tea Corporation soared as much as 432% pre-market Thursday morning after the company said it would change it’s name to Long Blockchain Corp."

    Ahhh.. brings back memories when this happened with all things "dot-com", "China", "Marijuana", "3D-Printing", "Rare Earth" etc.. etc…

  6. ~~AT&T, Comcast, Wells Fargo promise bonuses or pay hikes once tax cut bill passes.

    At least there is one good thing as a result of the tax cut.  Hopefully, more companies will follow suit.  It should be obvious that the way you stimulate the economy is to get more money in the hands of the middle class who will spend most of it.  Not the top 1%.

  7. ~~ GNC tanking


    GNC Holdings announces private exchange of approximately $98.9 mln aggregate principal amount of its convertible senior notes due 2020 for shares of its common stock   (4.90)

    The co announced that it has executed exchange agreements with certain holders of its 1.50% Convertible Senior Notes due 2020 to exchange, in privately negotiated transactions, approximately $98.9 million aggregate principal amount of the 2020 Notes for an aggregate of approximately 14.6 million shares of GNC's class A common stock, together with approximately $0.5 million in cash, representing accrued and unpaid interest on the 2020 Notes being exchanged. The 2020 Notes being exchanged will be retired upon completion of the exchange transactions. The exchange transactions are expected to close on or about December 26, 2017.

  8. Bonuses / Albo – All good, but these guys have been sitting on piles of cash they used to buy back stocks until now. So the timing of these bonuses is a little suspicious unless you see them as a political thank you for doing away with regulations for these industries! $1000 bonus for 250,000 employees is $250M. How much will they distribute as dividend?

  9. GNC, my butt is red from that nasty spanking.

  10. Butt I don't understand why  its worth a 25% haircut.

  11. STJ – I agree, it isn't much. 

  12. Good morning!  

    See, for every good trade you think you're missing with CASH!!! there's always the GNCs and BBBYs to make up for it.  Now they are good opportunities for the new portfolio instead of annoyances in the old ones.

    Since declaring his presidential candidacy in 2015, Donald Trump has posted 990 tweets critical of the press. More here, at :

    Incredible.  Freedom of speech and press is our most basic right and forms the foundation of our society and we've elected a man who's against it.  

    Very good 5 min analysis video on Wayfair, which is an important company to know about.  I learned about them when PSW Investments was considering investing in a furniture company and W was the reason we decided there was no future in that space for small players.  Should have just bought W but, like AMZN, they make no money while they destroy their competition.

    Dow looks intent on giving us another chance to short at 24,850 (/YM) and that should be 2,690 (/ES), 6,500 (/NQ) and 1,550 (/TF) so all good shorting spots to watch (with tight stops above, of course).  

    /RB is coming down nicely now, $1.73 so congrats on trade #2 from the Webinar – now we just need /NGV8 to pick up by October….

    December 20th, 2017 at 3:07 pm | (Unlocked) | Permalink

    We are short 2 /RB ($1.736), 2 /CL ($57.96) and long 2 /NGV8 ($2.653) from the Webinar.   Made a few hundred on the indexes too so a good session.

    As noted above, took the non-greedy exit on /CL

    Big 182Bcf drawdown in Nat Gas this week but not surprising this time of year but still, very supportive of $2.65 on /NGV8 (still there).

    Portfolio/Savi – Other than the delay, you should be able to follow the Portfolios in Basic.  Sorry you haven't been around much.  

    Deficit/StJ – And those are seriously low-ball estimates.  

    LTEA/Kinki – Wow, what a f'ing joke!  Still up 180%.  We should buy up some dead ticker symbol ($500K) and then name it "Blockchain Warehouse", triple our money and get out.  Seems to be legal…

    Things like this make me very happy to be in CASH!!! – this is simply not a rational market. Market cap of LTEA popped from $25M to almost 100M on $6M in sales and $15M in losses.  

  13. GNC it is interesting.  Dilution. 15 million more shares to be spread over 325 million market cap. 65 million  shares as of yesterday. So 20% might be close to 'right'.  (From $325 million/65 million shares = $5 share to $325 million/80 million shares = $4/share).  Also makes outstanding debt look like its worth maybe 60 cents on the dollar -  They gave up $100 note to get 15 million shares now worth $3. So bond holders only collected 60 million.

  14. T/Albo – T paid $6.5Bn in taxes last year on $20Bn in earnings so 32.5% puts them near the top of corporate tax payers.  Next year it will be $4.2Bn so, out of $2.3Bn saved, they are giveing 200,000 employees $1,000 ($200M) and it gets the President to talk about them for a month with positive PR and, of course, Trump HAD been blocking the T/TWX merger and now they'll let it go through.  That's worth Billions right there so great move by T!  

    And what StJ said!  

    GNC/Baron – Well, per above, you can DD at an effective $1.375 so think about it.  What they did is eliminate $99M in debt in exchange for stock at a much higher price – who wouldn't want to do that?  Of course the fear is they do it again and again and suddenly you're diluted 50% – so people are panicking but, if you add shares at the lower price, then the dilution becomes a wash – just make sure you are budgeted for more than one DD if you are going down that path.

    60%/Rexx – Well I think, at the time they agreed, the stock was higher.  I expect the bondholders to do the math and DD when we hit a 50% haircut for them at about $3.40 as that would average them in at about $5, which is likely sustainable over the long haul.  That's how they expect to get out whole in 2020.  

  15. Deficits / Phil – And as you know, they'll use these deficits numbers to cut spending and we know how much cutting spending when the economy slows down helps growth. Because when granny gets less money in her social security check and she is bankrupt because of her lack of healthcare it has a positive impact on growth. Some of these guys are evil, but many of them are simply ignorant.

    "Ignorance is the softest pillow on which a man can rest his head." Michel de Montaigne

  16. Phil – You made good points on T.  Guess trickle down is still alive and well.

  17. And will T give their employees $200M every year because the US Taxpayers are giving them $2.3Bn EVERY year and will T give their employees raises or does this bonus let them put it off for a year at least?  And how many employees will the fire when they merge with TWX who will go on unemployment and cost US Taxpayers thousands every month?  Gosh, economics is complicated!  cheeky

    Ignorant/StJ – Mostly evil because, even in the reddest states, people try to lobby and educate these Congresspeople and their own constituency has people who go BK from medical care or elderly care or die because some company recklessly destroys the environment but they not only ignore it but they pretend it doesn't happen because those people don't come with big checks and the system is set up so you can't win without big checks so the only people who come to office (and more and more so these days) are the people who are willing to sell out to Corporate interests.  The main thing standing in the way of this plan was unions, who pooled the people's money to support the people's interests – so they were vilified and run out of town for the past 40 years until they are no no longer a factor.  The only other reliable supporter of the people was the Church and the GOP got all evangelical to take that away too.  

    Not much hope left…

    Image result for gop and the church

    Related image

    Woops, here's our shorting goals on Futures – game on!  

  18. So I added 2 /TF short at 1,550 and then, at 1,551.50, I added another so the whole avg would go up 0.50 and now, I'll add another at 1,552 to avg 1,551 on 4 and hopefully I get a chance to lighten up but, if not, I'll add 4 more around 1,554 to avg 1,552.50 and hope we pull back to 1,552.50 (where I'd go back to 2) before we stop out over 1,555.  Total loss would be $1,000 if I stop out 8 at 1,555 so that's my risk on this spread.  

  19. Well, none of that worked out as it failed at 1,152 before I could fill and now back to 1,550.5 so I sold the 1 I added, leaving me with 2 at 1,550.5 avg and now, since I still want 1,552.50, I'd add another 2 only at 1,554.50, which would bring the average up to 4 at 1,552.50 and, over 1,555 I'd have lost $500, so now my risk is cut in half already.

  20. /NQ is lagging at 6,499.50 so I'm shorting 2 of those now. 

    • The Bloomberg Consumer Comfort Index falls for the second straight week to land at 50.8 from 51.3.
    • State of the Economy index increased to 51.3 from 50.9.
    • Personal Finance index drops to 58.0 from 58.9.
    • Buying Climate index decreases to 43.1 from 44.0.
    • Nov. Leading Indicators+0.4% to 130.9 vs. +0.3% consensus, +1.2% prior (revised).
    • Coincident Economic Index +0.3% to 116.5.
    • Lagging Economic Index +0.1% to 125.6.

    Hovnanian beats by $0.06, beats on revenue

    • Hovnanian (NYSE:HOV): Q4 EPS of $0.08 beats by $0.06.
    • Revenue of $721.69M (-10.4% Y/Y) beats by $113.02M.
    • Shares +3% PM.
    • Press Release

    P-E players having trouble cashing out of subprime auto plays

    • Delinquencies on subprime auto loans made by non-bank lenders have been soaring for years, with the rate now approaching 10%. Subprime delinquencies on loans made by banks and credit unions, however, have remained subdued, currently at only about 4.5%.
    • "The PE guys sailed into this thing with stars in their eyes," says one banker. "It's [now]about as out-of-favor a sector as I can think of.”
    • Two of many examples: Blackstone (NYSE:BX) has poured nearly $500M into Exeter Finance since 2011, but it's still struggling with profitability. Perella Weinburg has been trying for two years without success to unload Flagship Credit Acceptance in an IPO.
    • At issue is P-E firms' need for fast growth so they can sell out and return money to investors. At Flagship, for instance, the loan portfolio has surged to nearly $3B from $89M when Perella took over a few years back – kind of tough to keep standards up amid that rush.
    • One that did make it public in 2014, Santander Consumer (NYSE:SC), has lost nearly 25% of its value since (even after a mighty rally this year). It counts KKR among its investors.
    • Source: Bloomberg's Gabrielle Coppola and Claire Boston
    • "I’m not really worried about credit on the consumer side," Bank of America (NYSE:BAC) CEO Brian Moynihan tells Bloomberg. "Especially for us because we stay at the very high end – but even if you look overall."
    • Consumer credit, of course, continues to surge ever-higher, hitting a record $3.8T in October.
    • It's a symptom of strong economy and low unemployment, say Moynihan and his fellow bank chiefs.
    • A few days before the close of 2017, BofA is up 33.4% YTD.

    Citi: Caterpillar EPS to grow 30% in 2018

    • Caterpillar (NYSE:CAT) is expected to record 30% EPS growth in 2018, according to Citigroup, which maintained a Neutral rating on the stock, while raising its PT to $160 (from $145).
    • Extending contractor backlogs and greater project visibility are helping spur machine order activity, aside from any tax-related catalysts.
    • Further evidence of a tightening overall equipment market is also apparent in certain oil patch regions with rental rates moving up.
    • CAT +0.3% premarket
    • Delta Air Lines (NYSE:DAL) says this weekend's power outage at Atlanta’s Hartsfield-Jackson airport cost the company as much as $50M, and it plans to seek compensation for its losses.
    • CEO Ed Bastian says it is not yet clear where responsibility for the outage fell between the airport or its utility provider, but DAL would seek reimbursement for losses he estimates at $25M-$50M.
    • DAL was forced to cancel ~1,400 flights as a result of the system failure, which struck at the onset of one of the busiest travel periods of the year.
    • Walmart (NYSE:WMT) is experimenting with a cashier-less store concept called Project Kepler, which "aims to reimagine the in-store shopping experience with the help of technologies like computer vision," Recode reports.
    • The initiative would operate without checkout lines or cashiers – in a similar fashion to Amazon's (NASDAQ:AMZN) futuristic Amazon Go store, which was announced a year ago but has yet to open to the public.

    Morgan Stanley calls Apple a "top pick" on China growth

    • Morgan Stanley calls Apple (NASDAQ:AAPL) a “top pick entering 2018” due to the company’s gains in China.
    • Analyst Katy Huberty says data shows the iPhone X selling faster than the cheaper iPhone 8 and 8 Plus in China. Huberty thinks there’s still “significant pent-up demand” from those who have owned an iPhone for longer than two years. 
    • Huberty says nearly half of the Apple users in China have already upgraded to the iPhone X.    
    • The net switching rate (% of non-iPhone smartphone owners switching to iPhone minus % of iPhone users switching away) was up 130 basis points in the four-week period that ended November 19.  
    • Previously: Apple unifying OS apps, responds to phone slowing accusations (Dec. 20)

    Crypto whales selling to the little guy

    • In keeping up with acceptable crypto-community behavior, many of the large crypto holders cashing out are portraying the move as noble act, writes Lionel Laurent.
    • The fact remains, however, that the Emil Oldenburg's and Charlie Lee's of the industry are selling after massive moves higher. The buyers are the little guys: Since the start of 2017, there's been an explosion of accounts holding tiny amounts of Bitcoin (0.1 or less), and a corresponding tumble in accounts holding sizable amounts.
    • Laurent: "It will be hard to ignore the niggling feeling that the latecomers piling into Bitcoin at the end of 2017 aren't quite as astute as the early birds who are getting out."
    • Previously: Nova Lifestyle rockets after Bitcoin announcement (Dec. 21)
    • Previously: E*Trade allows CBOE bitcoin futures (Dec. 21)
    • Com-Guard (OTCPK:CGUD +42.9%) announces that it purchased the, and website names to better explain its strategy and planned implementation of blockchain on the Raspberry Pi and specific targeted markets.
    • The first market targeted by the company will be the solar industry using the SolarCoin Currency.
    • "We are going to develop these websites to educate the Public on Blockchain Technology on the Raspberry Pi (BlockChainPi™) and its implications for the future in the Solar CryptoCoin and other CryptoCoin Markets”, says Com-Guard's Dr. Edward Savarese.
    • Source: Press Release
    • KSIX Media Holdings (OTCPK:KSIX -7.8%) announces that it has repositioned two of its wholly-owned subsidiaries and renamed both as a part of a corporate repositioning.
    • Blvd Media Group has been renamed Surge Payment Systems. The business will focus on expanded development and licensing for a blockchain service platform.
    • North American Exploration has been renamed Surge Cryptocurrency Mining and will strategically mine Bitcoin, Litecoin and other high yielding coins.
    • Earlier today, Long Island Iced Tea soared over 200% after adding "blockchain" to its name.
    • Source: Press Release
    • Thinly traded nano cap Genetic Technologies (GENE -20.1%) is down on a 10x surge in volume on profit taking from yesterday's 85% surge on heavy volume.
    • The apparent catalyst for the up move was a statement (Section D in proxy statement) by dissident shareholder GTG who is trying to refresh the board with three new candidates and change the company's strategic focus to medical data management using Blockchain technology to ensure the integrity of the data.
    • Over-eager traders appeared to have ignored GTG's clarification that its planned use of Blockchain technology is not associated with cryptocurrencies.
    • Another blockchain story for the ages.
    • Shares of Long Island Iced Tea (NASDAQ:LTEAskyrocket 245% in premarket trading after the company changes its name to Long Blockchain Corp. and says it will explore opportunities.
    • LTEA pivot: "The Company believes that emerging blockchain technologies are creating a fundamental paradigm shift across the global marketplace, with far reaching applications across all industries from financial services (smart settlements) to consumer packaged goods (supply chain verification) to healthcare (electronic medical records)."
    • NQ Mobile's (NYSE:NQ) Link Motion system involves blockchain technology, and could be a business that equals or exceeds current company revenue (about $350M in fiscal 2016), says Rosenblatt's Jun Zhang.
    • He reiterates his Buy rating and $13 price target.
    • Shares up 22.5% to $4.90.
    • Joining its rivals, E*Trade (NASDAQ:ETFC) said it will allow customers to trade bitcoin futures from CBOE Global Markets after monitoring the contracts since their debut earlier this month.
    • TD Ameritrade and Ally Financial's Ally Invest already said they will let users invest in the futures, opening the door for more mainstream adoption of the cryptocurrency.


  21. OK, so while I was reading the news, /NQ popped to 6,508 and I missed the stop out but I didn't see any real reason for it so I added 2 more shorts, now 4 @ 6,503.81.  /TF is fine at 1,550.8 avg and, as noted above, long way there before I add more.

    /ES is over the line at 2,692.50 so not a good sign for the shorts and /YM is at 24,847 so that's my final get out mark if they punch over that.  

    At the moment, losses on /TF and /NQ would be $500 total.  

  22. Keep in mind, that was the EU close so, like the US close, strange moves happen into the bell so I'm going to have a bit of patience to see what sticks if I can stand it…

  23. Death of the American Mall

  24. The Great American Tax Heist

  25. It is bad Phil but this may about peak corporate lobbying.  I'd imagine after this the marginal return on lobbying is down to very little at this point, at least as far as tax rate. Of course it is still worthwhile for the fossils to attack EPA and NOAA the Telcos to attack the FCC.  It is also the f*king greedy Kochs, Waltons, etc, etc.

  26. Americans Name the Top Historic Events of Their Lifetimes

  27. There, that's an effective trading trick – when I don't know which way something will go, I walk away from my desk, sit down and read the news (still watching Bloomberg though).  So I've given things 30 mins to settle down and I saw no news to indicate the markets should be punching higher and now the indexes seem to confirm that was a top so I have a bit more conviction now on my shorts.  

    Lobbying/Rexx – That's interesting.  One way to get rid of lobbyists is to eliminate regulations and taxes!   Now they have nothing to lobby about…  Trump is a genius!  Notice above news item though, that the Kochs are now spending tens of millions to convince Americans that this tax plan is good for them. 

  28. Still waiting for America to be great again – or at least back to where were were for most of Obama's term:

    Keep that in mind when Trump tells you how amazing 3% GDP growth would be if HE can accomplish it…

  29. Kochs – they ARE hellbent on reducing this republic to a watchtower state.  But  – like with "repeal and replace Obamacare" – they have no actual solutions.  I can think of many criticisms of Obamacare but none of them start out as "throw the runts to the wolves".  The Kochs are Birchers.  They  are  (accidentally? )doing somebody's bidding, destroying the social fabric of the republic. Where did their daddy make his first nut?

  30. phil, would you short the nasdaq now, by buying jan puts?

  31. Phil - perhaps new value picks:  PSG, FIT ?

  32. Well, I went past my $500 limit so gave up on those index shorts.  Too bad, I really think they'll come back down but movement is too silly to short.  

    Solutions/Rexx – They don't give a crap about solutions.  The only goal is to eliminate spending on health care for people other than themselves.  After all, the Kochs need those organs to stay alive!   Seriously, don't you think if any of those people gave a rat's ass about health care, they wouldn't dream of repealing before replacing when CLEARLY we are leaving 10s of millions of people without health care, thousands of whom will die EVERY MONTH while there's a gap.  It's murder and these people can sleep peacefully every night while it happens.  They simply have no souls….  

    Fred Koch, by the way, went BK in the US but then worked with Stalin building refineries in the 30s and then moved on to build refineries for Hitler.  He took his fortune (and connections) back to the US, did some serious war profiteering, called people he didn't like Communist sympathizers and, in the 50s, founded the John Birch Society to tear down the US Government – something his sons work hard on every day. 

    Nas/Lunar – I just lost $500 on /NQ – this is still a runaway train.   I think it's fine for a poke but, on the whole, not a good strategy at the moment.  Kind of like shorting BitCoin at $9,500 didn't seem risky…

    Picks/Scott – I still want to see Q4 earnings and FIT I don't like at all, it's just some electronics that can be sold by anyone for no margin.  I don't know what PSG is, but it sounds exciting – tell me more!  

  33. Holy cow, 6,520 on /NQ?  Gosh, I have to try again here.   I'll start with 2.  

  34. Guy on Seeking Alpha was just BS'ing about how it's only fair that the Top 10% get most of the cut since they pay most of the taxes and earn most of the money and that it's only fair if everyone gets a 10% tax cut, that they reap the most benefit.  This was my reply.  

    Wow, what wonderful, faulty logic to justify a tremendous injustice. 

    So, if people need an apple a year to live and there are 500 apples and 100 people, the US would divide up like this:

    The top 20% (20 people) have 85% of the apples (425), 21 each 
    The next 20% (20) have 10% of the apples (50), 2.5 each
    The next 20% (20) have 4% of the apples (20), 1 each
    The next 40% (40) have 1% of the aaples (5), 0.25 each

    So the bottom 40% of the people don't have enough Apples to live while the top 20% have 20x more than they need.   If the Top 20% were to give 35 apples to the bottom 40%, then at least everyone would have the one apple they need to survive and the Top 20% would still have 390 apples (19.5 each).

    The impact to the top 20% would be negligible while it would save the lives of 40% of the people but you say F them and you think it would be better if everyone got 10% more so we'd have:

    Top 20% 467 apples 
    Next 20% 55 apples 
    Next 20% 11 apples 
    Bottom 40% 5.5 apples.

    Not only have you not helped the bottom 40% of the people at all but you've given 42 apples to the 20 people who need them the least and those 42 apples would have completely fixed the bottom 40% – but noooooooooooooo….

    Also, you are living in a fantasy land because now you need 538.5 apples and where are these extra apples coming from?  Since the system is based on the Top 20% KEEPING the apples that used to go to the poor, they will have no trouble at all getting their 467 apples (23.35 each) but any shortfall in growth will now have to be divided among the bottom 80% – leading to much worse problems than you started with.

  35. StJL – "Ignorance is the softest pillow on which a man can rest his head." Michel de Montaigne

    Ignorance breeds evil. – TNN

    Thus, ignorance which is a state of mind, is the root of all evil, which is an attribute.

  36. Nice, shorted IWM but its the only one not going down so I'm out. 

    As for apples, your basic assumption that everyone needs an apple to live is incorr3ect;  people only need a half an apple to live, so no problems.

    I voted straight Democrat in NC last Nov. (rather than my usual by the person choice) because I saw this coming in a vague dreaded way, but now I'm wondering what kind of backlash we will see.

  37. I see the VIX isn't moving

  38. Homebuilders strong today.  HOV up 9%.

  39. Apples / Phil – It's always the same problem. People look at what they pay, not what's left. I would rather pay 50% taxes on $1M than no taxes on $50K but that 50% looks like horrible taxes so let's reduce that and we'll take only 10% from the guy making 50K because it's small percentage.

  40. Who says coal is dead ?

    CEIX, a coal spinoff from CNX on November 14, is up 50% since then.

  41. Got out of /NQ about even for the day on that dip back to almost 6,500 so all is well again but what a crazy market this is.

    2nd time was quite a charm!  That's why it's good to stop out – you can always get back in. 

    Half an apple/Baron – Try giving my kids half an IPhone and see if you live!  Actually that's 5 apples for 40 people so 0.25 and they still don't live.  See, when things are so bad for people you can delude yourself into thinking you're helping when you're still not helping enough.  

    VIX/Baron – What volatility.  

    Taxes/StJ – True.  It's that Randian BS that justifies such a horrible system – as if taxes will simply make people refuse to earn $1M.  Sadly, I don't see a fix – we're going in the opposite direction and automation means we simply don't need the poor any more so it's up to guys like Trump to let them starve and get diseases or, failing that, send them off to war to trim the population ahead of the final culling – which is what a lot of these guys actually pray for. 

    Coal/Albo – Coal is dead.  Post-mortem spasms is all that is. 

  42. But a very tradable spasm. 8-)

  43. Well, we're in the same boat as yesterday on the bounce lines:

    December 20th, 2017 at 12:10 pm | (Unlocked) | Permalink

    Dow 24,890 to 24,740 is 150 so 30-point weak is 24,770 and strong is 24,800

    2,695 to 2,680 is 15 points (exactly 1/10th the Dow so bots are in control here) so 3-point weak is 2,683 and 6-point strong is 2,686

    Nas 6,525 to 6,475 (because we know the Nas loves the 25s) is 50 and that makes for neat 10-point bounces to 6,485 and 6,495

    RUT, of course, is bounciest.  1,548 to 1,538 is 10 so 1,540 and 1,542 but, since we know the RUT pops 5 and 10 easily, the whole thing isn't going to be a reliable measure.  Still, we can watch 1,542 (strong bounce line) for an indicator things are breaking back down.  

    Don't forget, the Dollar is down today so this is how the indexes are doing with weak Dollar support

  44. So now we watch for those strong bounce lines to fail and that's our next signal to get bearish but, if they hold, then we start looking up again, not down.

  45. Now the indexes are looking weaker.  I picked up some /TF shorts this time at 1,552.50 (5).  Happy to leave those overnight as they're just $50/point each.

  46. Lined up with 24,800, 2,690 and 6,495.  Very good breakdown spot on the Dow too if it fails (tight stops above).  

  47. Dropped back to 2 short as we're testing 1,550, trying to lock in $400 gain since it went well so fast.

  48. Now my stop is 1,550 so locking in $500 gain.  

  49. And done. 

  50. "Thus, ignorance which is a state of mind, is the root of all evil"

    Hmmm, I thought it was money. Does that make me ignorant?

  51. Maybe ignorant people with money mkucs! That's also a good description for our leader and he is certainly at the root of much evil.

  52. There has to be some significance to the fact we are only able to kick the can down the road two weeks at a time… are we heading to weekly spending bills? Then perhaps daily? A result of endless war? Seems that way to me.

    The light you see at the end of the tunnel just might be an oncoming train.

  53. So relieved, we have a 3 week extension on the governments credit card… if the senate agrees. Isn't this exciting! It's kind of like a reality TV show… Trump must be so proud.

  54. I can't believe they went for another extension – it's such a joke.  

  55. Should have gone with my gut and shorted /BTC!  

  56. Republican and Democratic senators working on an immigration deal say they are closing in on an agreement combining a border-security package with deportation protections for young undocumented immigrants, though a final resolution would not come until January.

    Holding these kids hostage should be a crime, the Dems have not learned the lesson… you can't negotiate with terrorists.

  57. PSG/Phil – oops. I have no idea what that is either. Meant PCG. (Pacific Gas & Electric) which has been slammed on expectations following the recent california fires.

  58. Trump’s pathetic bankruptcy past shows through in GOP’s fantasyland tax bill

  59. ‘Obamacare’ surprise: Strong showing as nearly 9M sign up

  60. Nestle warned it lacks rights to California spring water

  61. Phil – went to Nobu at the hard rock – best meal of my life bar none

  62. Echoing the discussions here, this extract from JHussman's latest missive:

    The delusion of a booming economy

    A second delusion, unleashed by exuberance over the prospect of tax reductions, is the notion that U.S. growth has even a remote likelihood of enjoying sustained 4% real growth in the coming years. The most frequent reference is to the years following the Reagan tax cut, followed closely by references to the Kennedy tax cuts. This particular delusion is undoubtedly an example what Garety & Freeman described as “a data-gathering bias, a tendency for people with delusions to gather less evidence.”

    The central feature of both the Reagan and Kennedy tax cuts was that they were enacted at points that provided enormous slack capacity for growth. In particular, the Reagan cuts were enacted at a point where the unemployment rate had hit 10%, and an economic expansion was likely simply by virtue of cyclical mean-reversion. The Kennedy tax cuts (which brought the top marginal tax rate down from 90%) occurred as baby-boomers were just entering the labor force, again providing enormous capacity for growth.

    Presently, the situation is the reverse. The structural drivers of U.S. economic growth are likely to constrain real U.S. GDP growth to less than 2% annually in the coming years, even in the unlikely event that corporate tax cuts encourage increased gross domestic investment. Corporate profits are already near record levels. The effective U.S. corporate tax rate (taxes actually paid as a fraction of pre-tax income) is already at 20% even without tax cuts. We know from the 2004 repatriation holiday that tax breaks on foreign profits encouraged little but special dividends and share buybacks. Already, the available corporate surplus is being primarily driven into dividend payouts, share buybacks, and mergers and acquisitions, rather than real investment.

    Frankly, the notion that corporate tax cuts will unleash some renaissance in U.S. real investment and growth would be laughable if the bald-faced corporate giveaway wasn’t so offensive. The policy not only vastly favors the wealthy, but is even more preferential to wealthy individuals who take their income in the form of profits rather than wages. The current tax legislation isn’t some thoughtful reform to benefit Americans. It’s a quickly planned looting through a broken window in our nation’s character.

  63. Something we should probably discuss here are the strategies needed to deal with companies issuing special dividends. What will be the impact on short call options when they are announced? The stock price gets goosed and there is little time to make adjustments before short call options are called away? I seem to remember when Costco did that it gets really messy with short call options. Does anyone have recent experience with options on companies issuing special dividends?

  64. Fifty Shades of Orange

  65. Nike’s U.S. Slump Persists

  66. Good morning!  

    Feeling good about cashing in our BitCoins (and BitCoin Cash) as we're down to $13,850 now.  

    PCG/Scott – Now those guys I've heard of.  Huge liability if it turns out they were responsible for the fires but, you're right, these are the kind of things we like to take advantage of.  They've lost about $15Bn in market cap with the recent leg because they suspended their dividend, which is forcing funds to sell.  On the one hand, it might be because they know they are at fault and are circling the wagons or it may be just because those fires damaged a lot of their equipment, and they have unusually high costs moving forward.  Either way, there's a legitimate hit on the stock.

    From what I've read, the damage from the fires was $9.4Bn and, at most, you could hold PCG partly responsible unless there was gross negligence and, even then, still likely to be less than half.  Also, they have their own insurance which again, unless it's gross, criminal negligence, is going to cover most of their damages so, even if they take a $3Bn hit, they make $1.5Bn a year and MAYBE $300M a year to pay it off for 10 years is a 20% haircut – worst case.  So let's assume they make $1.2Bn and have a 15x p/e and that's $18Bn and their market cap, at $44.50 is $23Bn so another 20% down should max them out ($36) as a floor but that's worst, worst case.  

    Apparently, the bots agree with me as they got bought up at $40 and I'm all for selling the 2020 $45 puts for $6+ to net in at $39 and I don't think the 2020 $50 ($5)/$60 ($2.50) bull call spread is very risky at $2.50 and why so out of the money?  Because I'd rather have the cheap spread and roll it lower if PCG goes lower as they'll either recover or they won't.  Meanwhile, let's say we did 10 puts ($6,000) and 15 spreads ($3,750) – that's still a net $2,250 credit for a net $42.75 entry, worst case and then we can sell 5 March $47.50 calls for $1.80 ($800) and 8 sales like that will pay us $6,400 while we wait to collect $15,000 more at $60.  

    The other thing to like about this spread is that, if PCG does go down, then not only are you very likely to collect your $6,400 without much trouble but that's only a 1/3 sale so you might be able to double it in a down to flat run by selling 2/3.  Nothing I like more than a flexible trading plan!  

    Nobu/BDC – Will you still be around next week?  Meanwhile, there's a place off the strip (way off) called Kabuto, which is a tiny sushi bar where they fly the fish in from Japan every day and the guy is a Japanese traditionalist – very simple presentation – all about the fish.  It's really good.  Nobu is nice too!  cheeky  I also love the sushi place in Aria, can't remember the name but the cool thing about them is they have a Sake Sommelier and it's really fun to do a tasting menu and the guy comes out and tells you, in excruciating detail, about the origins of each sake he brings you.  It's really fun! 

    Wow, nice $1,100 gain on /RB this morning!  $1.733 - I guess I should take it and run, right?  Friday's a tough day to short.  

    Adding 2 /KC at $121.50 to make up for it.

    Tax cut effects/Winston – Especially as evidence is gathering that not only are the Dems likely to take control of Congress next year but Trump has a better than 50% chance of being impeached and then, quite possibly, within 4 years, the whole thing could be reversed so Corporations will hoard the windfall – in case its the only one they get.

    As to special dividends, they are situational.  There's no one way they are handled.  Good rule of thumb is get out if you're worried.  

    Can you imagine you get invited to fly on Air Force One and this is what they serve you?

    Image result for air force one meals

    That comparison makes me want to cry….   

  67. Hey, I wonder if Trump cut a sponsorship deal with MCD?  That would explain a lot.

  68. MCD sponsorship… I don't even wonder, it's too obvious.