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Monday Market Madness – Who’s Watching the Watch List?

It's been a busy weekend.

Last Wednesday, we put up our Watch List for 2018 and we had about a dozen trade ideas, right off the bat, that we were adding to our Long-Term Portfolio and Options Opportunity Portfolio.  Over the weekend, we've added 10 more actionable trade ideas for the OOP and LTP - so don't complain there's nothing to buy in this toppy market – we even had a nice hedging play for you on Friday.  While we're still expecting a correction – it's likely to be just another buying opportunity in a generally bullish market.  

Considering how sure I am that we're going to have a 10% correction this quarter, I was actually surprised at how many stocks there are trading for good prices.  Granted, I was looking at thousdands of stocks and found only dozens to buy – but I thought we'd find far fewer than that.  I suppose it's because the rally has been fairly narrow in scope – leaving many good stocks behind in favor of chasing the popular stocks to new highs.  

It's still too scary to short things, which is a shame – because there are so many things that are tempting to short like Tesla (TSLA) at $316 (always a good short), Amazon (AMZN) at $1,230 ($600Bn!), Netflix (NFLX) at $210 and whatever Uber is currently trading for!  We'll get AMZN's numbers at the end of the month but, last I heard, they should be about $60Bn in sales and $1Bn in profit for the quarter, which will put them up around $2Bn for the year or less than $5 per $1,230 share so it will only take AMZN 246 years to pay back investors at that pace.  

The investing premise on AMZN is, of course, that they will grow into their valuation but then their valuation jumps was faster than their growth – up 50% in 2017, in fact – yet people just keep snapping it up – with half of that growth coming since October.  

How will Amazon justify a $600Bn valuation?  It's earning $2Bn now and it's selling about $180Bn a year worth of stuff while WalMart (WMT) sells $500Bn so let's say AMZN gets as big as WMT and controls 10% of all Retail in the US – that sill doesn't get their p/e below 100x earnings.  To get to where they are prices, Amazon has to take over half of all retail in the US and, if they did that, the US economy would collapse so it's logically impossible to assume AMZN will grow into it's valuation AND the market doesn't collpase.  

There's a lot of that kind of wrong-way thinking in current stock valuations – much like there was in the Dot Com Bubble days, when "traditional" brick and mortar stores were first forecast to bite the dust.  Amazon is one of the only survivors from the Dot Com Bubble, but that was 20 years ago and, in all that time, with all those advantages, they've only gotten to $180Bn in sales out of $5Bn in US Retail, which is 3.6%.  3.6% isn't bad but, at this point, I think everyone has heard of AMZN and knows what they can do yet 96.4% of the shoppers mysteriously choose not to use them.  

Image result for time warner subscribers globalI have the same problem with NetFlix (NFLX), who are "valued" at $90Bn at $210/share and that's 25% higher than Time-Warner (TWX) at $93.60 ($73Bn) (which is interesting as T has offered $85Bn for them) and they've been around since 1985 with HBO, Cinemax, Warner Bros Films, CNN, TBS, TNT, etc. and have 49M US subscribers and antoher 80M around the World while NFLX claims to have 100M subscribers yet, strangely, NFLX only generates $10Bn in revenues and $400M in profits while TWX generates $30Bn in revenues and $4Bn in proifts.  

Yet no analysts question what constitutes a "subscriber" for NFLX or why there's a 10x discrepency in profits per subscriber.  In fact, they happily treat one subscriber as good as another and even "value" NFLX higher than TWX, though you don't see people offering NFLX $85Bn in cash for their business.  That's because it's a BS model that is 50-75% smoke and mirrors and, much like it was during the mortgage bubble – a lot of these valuations for high-flying momentum stocks can collapse in on themselves very quickly – and that is how our market bubble is likely to collapse.  

Obviously, a lot of investors are expecting lower taxes to bring about MASSIVELY better returns but, as we reviewed in early December, those investors are likely to be disappointed by the actual difference since most companies pay nowhere near the top tax rates in the first place.  We're reserving our final judgement until we get the earnings reports over the next 45 days, beginning this week with Friday's Big Bank reports along with a few interesting plays along the way:

Most of the banks are up about 20% for the year and Wells Fargo (WFC) even shook off the fake account scandal and is now trading at $62.75 or about 16 times forward earnings.  Banks generally carry low p/e ratios because, sometimes, things go wrong and they lose money but that doesn't seem to apply anymore and bank p/es are drifting towards the 20s – as if there's nothing at all to ever worry about – just 10 years after it was PROVEN there's lots to be worried about!  

As a banking hedge, I love the ultra-short banking ETF (FAZ), which is way down at $11.27 and we can play for an earnings failure with a simple spread that carries no margin and no net premium.  So, if we want to turn $500 into $1,000, we can play the following:

  • Buy 5 FAZ March $10 calls for $1.35 ($675) 
  • Sell 5 FAZ March $12 calls for $0.40 ($200) 

The net on that spread is actually $475 and it pays $1,000 if FAZ is over $12 at March expirations (16th) and, since FAZ is a 3x ultra-short ETF, it won't take much of a move down in the Financials, for it to pop the 6.5% we need to get over $12.  So that will give us something fun to watch into Friday and we'll see how it goes for our first earnings play of the season.

Meanwhile, it's a slow data week highlighted by Retail Sales on Friday but little else so, before earnings are out, we'll get a sense of whether or not the markets can gain any more ground without a catalyst to drive them (other than Fed speakers, of course).  



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  1. Except for the Russell, markets are going parabolic! Don't people remember 1999? Are earnings going to go up 40% next year?

  2. Leveraged ETF are a symptom of Wall Street behavior:

    Over time, the financial markets have become less about serving the real needs of corporations and more about serving the profit needs of Wall Street. And Wall Street pumps this message out every day taking advantage of our behavioral biases selling you the false dream of a get rich quick scheme in the markets. After all, if they told you to diversify, be less active, think more long-term, etc. they would likely make less money. There is an inherent conflict of interest in the profit model of Wall Street and many of the products they offer. The result of all of this is that the financial markets look a lot more like a casino these days than an exchange for raising capital, hedging operations and allocating savings.

    Leveraged ETFs are one of the worst versions of this new reality as they promote short-termism in an inefficient tax and fee vehicle. There are several reasons for this:

    • As previously noted here, many leveraged ETFs have an inherent time decay. These instruments are designed to lose value over time.
    • Leverage is one of the biggest risks in portfolios as it increases costs and magnifies the behavioral risk in a portfolio. 

    There is of course usefulness of these leverage ETFs if you well educated about their behavior and you can even take advantage of the decay for example. But it's not for the average investor for sure.

  3. Still feel like there will be a pull back in TEVA since it seems like they have given up on their IG rating.  Not sure the market has priced that in, but I would consider it a buying opportunity (if it even happens).

    ~~Teva Pharmaceutical Industries Ltd., announced that its subsidiary, Teva Pharmaceuticals International GmbH., has signed a global license agreement with Alder BioPharmaceuticals. The agreement validates Teva’s IP and resolves Alder’s opposition to Teva’s European Patent No. 1957106 B1, with respect to anti-calcitonin gene-related peptide (CGRP) antibodies and methods for their use. It also provides Alder with clarity for its ongoing plans in the field. Story link: {NSN P28MS0MEQTYE <GO>}

    * Under the terms of the agreement, Alder has received a non-exclusive license
      to Teva’s anti-CGRP antibodies patent portfolio to develop, manufacture and
      commercialize eptinezumab in the U.S. and worldwide, excluding Japan and
      Korea. In exchange, Alder has agreed to: Withdraw its appeal before the
      European Patent Office; Make an immediate one-time payment of $25 million to
      Teva; Make a second one-time payment of $25 million upon the approval of a
      biologics license application (BLA) for Alder’s eptinezumab with the U.S.
      Food and Drug Administration or of an earlier equivalent filing with a
      regulatory authority elsewhere in the license territory in which any Teva
      licensed patents exist; Following commercial launch of eptinezumab, pay $75
      million at each of two sales-related milestones (at $1 billion and $2 billion
      in sales achieved in a calendar year) and provide certain royalty payments on
      net sales at rates from 5% to 7%.
    * “This agreement reinforces the broad coverage provided by Teva’s IP in the
      field of anti-CGRP antibodies therapy. At the same time, it also helps
      facilitate the ongoing development of additional potential therapies in this
      exciting field – this can only be good for our increased understanding of the
      area and ultimately improved patient wellbeing”, said Marcelo Bigal, M.D.,
      Ph.D., Chief Scientific Officer and Head of Specialty R&D at Teva.

  4. Some thoughts about Shiller's CAPE:

    And despite the fact that many – perhaps rightly – are arguing that interest rates are artificially low, they are what they are; and it is extremely illuminating to actually take a step back and see some actual figures.  Today, the yield on US 10Y government debt is 2.47%.  That’s an effective bond P/E of 36x.   In the autumn of 1981, the yield on the same debt reached 15.85%.  That’s a P/E of 6.3x.  Can we really ignore interest rates, and use the P/E of equities in 1981 as a relevant historical benchmark on the P/E for equities in 2018?

    I don’t think we can.  Even when adjusting for the “real vs nominal” issue outlined in footnote 2 below, the opportunity cost of investing in equities and the market multiple is inexorably linked. 

    In the above example, on September 30, 1981, the Shiller CAPE was 7.6x, a 20% premium to bond yields.  Today, the Shiller CAPE is at 33.0x, a 8% discount to bond yields. 

    I guess arguments for justifying today's prices but I still think that these markets are crazy!

  5. Good Morning.

  6. Good morning!  

    Indexes off a tiny bit but we'll see what sticks.  /YM 25,250 is a good line to play on a cross below, lined up with 2,740, 6,660 and 1,560 so those all have to be below to stay short.  Otherwise, back to the normal grind higher (see big chart).

    Very little news this weekend but I think markets need good news just to sustain these levels. 

    TEVA/Seer – Israeli Government can step in and fix their credit with a backstop provision.

    Prices/StJ – Same story, the money has nowhere else to go but then the danger is that, at some point, there will be an alternative and the money will move out of equities – then down we go.

  7. Getting a big Crypto flush this morning.

    MRM - Any thoughts on GBTC ?

  8. Greencoin flying since last night, though. Getting a solid bid at BTC 0.00000009. That's up 800% in a month! Phil, has anyone actually used GRE to pay for their subscription?

  9. STX up this morning on no news. Just this rumor that they own a boatload of Ripple:

    https:// $STX

  10. GRE/Jet – We only had a few takers on our offer, hopefully we can do better next time.  

    Not only is GRE up huge but transaction volume is through the roof – seems like something is up.  

    Dollar back over 92.  Still have 4 long of those.

    STX/Jet – LOL, that's all it takes these days.  

  11. STX

    I sold the March $50 call on that.

  12. Speaking of Ripple, down 30% today.  BitCoin holding $14,500 on /XBT.  

    Little Guys and Big Trading Firms Square Off in Bitcoin Futures ArenaRetail investors are more likely to hold bullish bets on bitcoin, while big players tend to be short.

    Bitcoin Futures Traders Are Quietly Building A Big Short Position

    Buckle Up: NYSE Files For Leveraged, Inverse Bitcoin ETFs

    A cryptocurrency created as a joke about a dog meme now has a market cap above $2 billion

    • Seagate Technology (NASDAQ:STX) shares are up 9.2% after ValueStreet Research outlines the company’s investments in cryptocurrency.
    • ValueStreet points to Crunchbase data showing that Seagate invested in the $28M Series A round and $55M Series B round of Ripple, which owns 61% of cryptocurrency XRP.
    • ValueStreet estimates that Seagate’s Ripple investment, if current, could be worth $7.8B based on the fact that Ripple’s XRP holdings are worth more than $160B.  
    • Previously: Seagate Technology will cut 500 jobs (Dec. 11, 2017)

    Something about China cracking down on mining.  

    China’s Foreign Reserves Extend Rising Streak Amid Capital CurbsChina’s foreign-exchange reserves posted an 11th straight monthly increase, capping a year of recovery amid tighter capital controls, a stronger yuan and resilient economic growth. The reserves climbed $20.7 billion to $3.14 trillion in December, according to a People’s Bank of China statement on Sunday, compared with a $3.13 trillion median estimate in a Bloomberg survey. That brought the full-year increase to $129 billion.

    White House Doesn't See Need for Faster Fed HikesThe Federal Reserve won’t need to pick up the pace of its planned interest-rate increases in response to the recently-passed tax overhaul package, White House chief economist Kevin Hassett said. The administration’s computer modeling of the economic effects of the tax plan result in interest rates that “aren’t inconsistent with the Fed’s current guidance,’’ he said during a Jan. 6 session at the annual meeting of the American Economic Association in Philadelphia.

    Improving Economy Sparks Rebound In Inflation BetsMarket-based inflation expectations top key threshold as investors respond to higher energy prices, tax cuts.

    Williams paints benign picture of Fed rate hikes, strong US economy

    Fed's Williams sees three rate hikes in 2018

    • The Federal Reserve should raise interest rates three times this year given the already strong economy will get a boost from tax cuts, San Francisco Fed President John Williams told an American Economic Association conference.
    • "If the data changes we can respond to that," he declared, painting a benign picture of the world's largest economy.
    • Williams has a vote on monetary policy this year under a rotation.


    Why Federated thinks 2018 could be the year of the barbell stock market

    Eurozone Upbeat on Global Economic Upturn in January

    • Eurozone sentix's index rose to 32.9 in January beating estimates of 31.5, portraying upbeat mood as global economy picked up and being indifferent towards a new government in Germany.
    • The global market is looking stable and positive and is showing moderate improvements, assuming the upturn is broad and synchronous.
    • Source:
    • Factory orders in Europe's biggest economy slipped by 0.4% in November after three months of gains, but Germany's Economy Ministry said the dip was largely due to fluctuations in bulk orders and the overall trend remains positive.
    • Following months of political uncertainty, Chancellor Angela Merkel has also begun last-ditch efforts to form a government, turning to her former governing partner, the Social Democrats.


    Holiday debt piles onto already-high credit card balances

    Global Debt Hits Record $233 Trillion, Up $16Tn In 9 Months

    Credit card debt on watch

    • Before the holiday season even started, U.S. credit card debt stood at $808B on Sept. 30, or the end of Q3, according to the Federal Reserve Bank of New York.
    • That's $280B more than the previous high hit in 2008, at the height of the financial crisis that led to the Great Recession.
    • "The scary number – $1 trillion – we'll definitely hit in 2018," said Jill Gonzalez, an analyst with WalletHub.


    Robots Have Replaced Humans In 25% Of China's Ammunition Factories

    Never mind the gadgets, here's what to look for at CES

    • Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) are set to be appointed to the lead roles in managing the mammoth IPO of Saudi Arabian Oil, according to the story, with JPMorgan, HSBC, and Morgan Stanley winning lesser mandates.
    • The government could look to sell up to 5% of the company at maybe a $2T valuation.
    • A number of exchanges, the LSE and NYSE among them, continue to angle for the listing.

    Whirlpool announces smart home collaboration with Honeywell

    • Whirlpool (NYSE:WHR) announces that it's collaborating with Honeywell (NYSE:HON) on a smart home appliance ecosystem this year.
    • The company says consumers will be able to connect Whirlpool smart appliances to Honeywell's line of connected thermostats.
    • The capabilities will roll out across brands in the Whirlpool portfolio throughout 2018.
    • "This collaboration with Honeywell is another example of how Whirlpool Corporation is working to make the connected home a reality, with functionalities that are both convenient and purposeful for our consumers," says Whirlpool exec Brett Dibkey
    • Source: Press Release

    GoPro -4.3% on COO, SVP departures

    • GoPro (NASDAQ:GPROannounces that COO Charles Prober will leave the company effective February 16.
    • SVP and General Counsel Sharon Zezima resigned from the company effective March 30. 
    • GoPro shares are down 4.3% premarket.       
    • Previously: Job cuts at GoPro's aerial division (Jan. 5)

  13. ~~pat_swap
    January 8th, 2018 at 12:19 am | Permalink | Tweet thisIgnore this user 

    Phil, GNW

    What are your thoughts on GNW, I was looking at them over the weekend it appears they have a merger offer on the table which may be blocked and I understand that is a risk but if it goes through they are trading at a significant discount than the deal offered. 2.3B vs 1.6B would you recommend to take a small position ?

    Thanks as always


  14. Over the weekend, we've added 10 more actionable trade ideas for the OOP and LTP "

    And where are these? 

  15. I want to make sure all are aware of our new trades from the Watch List Update over the weekend:

    ALK (1/7/18) – My favorite airline and a great operator who just took over Virgin US.  Too cheap to ignore at $73.74 and even cheaper if we sell 5 2020 $60 puts for $6.20 ($3,100) in the LTP, so we get paid to watch them for a better entry on a bull call spread.

    BBBY (1/7/18) – One of my picks for a retail survivor and they are making $2.50 per $21.34 share, so lots of room to grow.  This one is approprate for both of our bullish portfolios:

    In the LTP:

    • Sell 20 BBBY 2020 $17.50 puts for $2.80 ($5,600) 
    • Buy 30 BBBY 2020 $17.50 calls for $6.60 ($19,800)
    • Sell 30 BBBY 2020 $25 calls for $3.50 ($10,500) 

    That puts us in the $22,500 spread for net $3,700 so $18,800 (508%) upside potential at $25 and the risk is owning 2,000 shares at $17.50 + 1.85 cash per share we put in ($19.35) is a 10% discount to where we are now as the worst case. 

    In the OOP:

    • Sell 5 BBBY 2020 $17.50 puts for $2.80 ($1,400) 
    • Buy 10 BBBY 2020 $17.50 calls for $6,60 ($6,600) 
    • Sell 10 BBBY 2020 $25 calls for $3.50 ($3,500)

    In this case we have a $7,500 spread and we're paying $1,700 to be in it.  Our assignment risk is just 500 shares at $17.50 ($8,750) plus the $1,700 we laid out is $10,450 or $20.90 per share, not much of a discount if we end up owning them but, on the other hand, not much risk to our allocations either so it's more or less a free play.

    BX (1/7/18) – BX has been very good to us but I want to get into them again AFTER a correction since they are kind of a proxy for the market.  Since they pay a fat, 5% dividend, I don't mind owning them at $33 so, in the LTP, let's sell 10 of the 2020 $30 puts for $4 ($4,000) to pocket a bit of cash while we keep tabs on BX. 

    CAKE (1/7/18) - Making about $2.50 per share makes CAKE reasonable at $50.21 and, in the LTP, we had sold 10 April $40 puts for $2.75 and THAT would be a great price (net $37.25).  Currently, we can promise to buy the stock in July for $45 and collect $2.05 for the July $45 puts, which would net us in for $42.95, not as good as last year but still a nice price so let's sell 5 of them in the LTP to remind us to keep an eye on them (and pocket $2,025).

    CBI (1/7/18) – The most believable promise Trump made was to push infrastructure as it's something that badly needs doing in the US but, so far, no luck.  CBI had a rough year in 2017 but should be back on track in 2018 to make at least $1 per $18 share and possibly closer to $2, which would make them a huge bargain.  Huge option premiums make this fun for both our long portfolios:

    In the LTP:

    • Sell 20 CBI 2020 $20 puts for $5.50 ($11,000) 
    • Buy 30 CBI 2020 $15 calls for $5 ($15,000) 
    • Sell 30 CBI 2020 $25 calls for $1.75 ($5,250) 

    This is an aggressive spread where we're selling puts at a higher strike than the stock currently is at.  Our worst-case is owning 2,000 @ $20 = $40,000 and they were just at $10 in Aug so this is a risky play but it pays $30,000 at $25 against a net $1,250 credit so $31,250 upside potential is a risk we can afford in the LTP.

    For the OOP:

    • Sell 10 CBI 2020 $15 puts for $2.80 ($2,800) 
    • Buy 10 CBI 2020 $15 calls for $5 ($5,000) 
    • Sell 10 CBI 2020 $25 calls for $1.75 ($1,750) 

    Here we're laying out $1,450 but our assignment risk is owning just 1,000 shares at net $16.45 ($16,450) and, since we feel CBI COULD go back to $10, our mental risk is about $8K trying to make $10K at $25.

    CLF (1/7/18) – I still like this US iron ore producer in an age of tarrifs and trade wars.  In the LTP, let's sell 20 of the 2020 $10 puts for $3.70 ($7,400) to remind us to keep an eye on them.  It's aggressive with the stock at $8.13 but the entry is net $6.30, which is 22.5% off the current price and only $12,600 if assigned and you can sell the 2020 $7 calls for $3, which would drop our net to $3.30 and just $6,600 – what's not to like?

    GE (1/7/18) – People are really out of love with this one but I can't NOT buy GE for $18.54 – it just seems silly.  The dividend has been cut to 0.48 so we don't need to own the stock for now.  

    In the LTP:

    • Sell 20 GE 2020 $18 puts at $2.20 ($4,400) 
    • Buy 40 GE 2020 $15 calls for $5 ($20,000)
    • Sell 40 GE 2020 $20 calls for $2.35 ($9,400)

    Here we're in for net $6,200 on the $20,000 spread with $13,800 (222%) upside potential if GE is up less than 10% in two years – so not a very ambitious way to play but it should be an easy $13,800 – and that's nice to have.

    In the OOP:

    • Sell 10 GE 2020 $20 puts for $3.30 ($3,300)
    • Buy 20 GE 2020 $18 calls for $3.30 ($6,600) 
    • Sell 20 GE 2020 $25 calls for $1 ($2,000) 

    Here we're netting $1,300 on a much more aggressive $14,000 spread with an upside potential of $12,700 (976%).  Why the more agressive spread?  Because, if we did 1/2 the more conservative LTP spread, we'd net $6,900, which is nice but we're using an allocation spot in the OOP, where we only have 10, whether it's assigned at $18 or $20 – it's the same while, in the LTP, the assgingment of $36,000 worth of GE is inconsequential as we have NO realistic expectation that it will drop more than 50% – so our worst-case scenario is not very worrying.  In the OOP, we won't have the luxury of riding things out for years while waiting for comebacks, so each allocation block needs to be working hard for us.   Should GE go lower, we'd put money into rolling the $18 calls to the $15 calls ($1.25 or less) and, at some point, we'll sell some calls for income. 

    GNC (1/7/18) – GNC is restructuring and has a lot of debt to deal with and MIGHT go bankrupt, so it's too risky for the OOP but, in the LTP, we can sell 20 of the 2020 $5 puts for $3.10 and collect $6,200 to keep our eye on the stock at $3.57 when your net is $1.90 – so let's do that.  Our worst case is owning 2,000 shares at net $1.90 ($3,800).

    GPRO (1/7/18) – They are back where we liked them last year for similar reasons (job cuts) but the company has a habit of re-evaluating and pairing back projects that aren't working.  In this case it's their drone division.  While the market is taking it harshly, I was never happy that they weren't concentrating on the high-end camera market, where the big money is.  With the stock back at $5.95, we can sell 20 2020 $8 puts for $3.75 ($7,500) in the LTP and 10 in the OOP for $3,750 and our worst case is netting in for $4.25/share.  

    THC (1/7/18) – Hospital stocks are a great long-term demographic play and THC also operates urgent care centers, which are growing in popularity.  Runaway expectations sent the stock up to $21 and now they are back at $15.44 and the volatility has driven up the options pricing so shame on us if we don't take advantage.


    In the LTP:

    • Sell 20 2020 $12 puts for $3.75 ($7,500) 
    • Buy 30 2020 $12 calls for $7.10 ($21,300) 
    • Sell 30 2020 $20 calls for $4.10 ($12,300) 

    That's net $1,500 on the $24,000 spread and we'll be able to sell, for example, 10 Feb $16 calls at 0.85 ($850) using 40 of our 740 days so let's say we make 8 sales like that and make $6,800 while we wait to see if we make $22,500 (1,500%) at $20+.  

    In the OOP:

    • Sell 10 2020 $12 puts for $3.75 ($3,750) 
    • Buy 15 2020 $12 calls for $7.10 ($10,650) 
    • Sell 15 2020 $20 calls for $4.10 ($6,150) 

    That's net $750 on the $12,000 spread and we'll be able to sell, for example, 5 Feb $16 calls at 0.85 ($425) using 40 of our 740 days so let's say we make 8 sales like that and make $3,400 while we wait to see if we make $11,250 (1,500%) at $20+.  

    More to come!   

    I have to be in the city tomorrow for a TV thing but, later this week, I'll have new portfolios ready. 

  16.  I wish I could short GBTC. Has anyone bought bitcoin short futures yet?

    Phil / now greencoin is @ 10 satoshi. Did you buy at 1? that's a 10x-er. Volume isn't great though, but at least there's some interest. 

    Enviro-related coins are picking up some bids recently.Carboncoin had good weekend. I had a conversation with that dev (he's somewhat unfriendly to me, but whatever), and there seems to be some sense of a plan shaping up with their efforts, but they seem to be "secretive" and "just around the corner" which usually means nothing is really there. Solarcoin also had a run this weekend but is about -50% off the peak. It's not one of my favorites because of the premine amount (98.5B coins), but the founder is an MIT prof, so US based. EnergyCoin is Euro based (Netherlands I think). They have an online wallet announcement here that's a pretty cool integration (if it works). Some ideas about cycling. "EnergyParty" is an interesting concept, but no real "gotcha" killer app, one that pries carbon away from political conversations and into a self-valuing social network of activity. POWR is the most valuable enviro-coin. I'd say yes it's slick, polished, crypto-ICO and lots of key buzzwords, but what do you get for $500M market cap? A coin making paying for power, P2P and more automated. Sort of a problem looking for a solution; we already have a mechanism to pay for power. It may be a trustless system is useful/critical in developing countries, but trying to picture in the US people arb-ing on power at $0.10 per kWh with neighbors to get it down to 8 cents isn't bringing me to tears.

  17. Phil / CBI – Does your strategy with CBI take into consideration McDermett's merger offer? The proposal is a share for share swap – with a target closing in 2018. What is your view on MDR?  Thanks, Eric 

  18. Jet / Ripple

    The one who is REALLY seating in a not yet declared amount is Santander bank (SAN) who financed the startup with Santander Innoventures. 

    As they bought at the beginning  (invested 4 million)  at the moment analysts calculate 38,000%  and as far as I know is not reflected in the stock yet.

    For those of you who can read in Spanish  here is the link

  19. Phil /CMG

    are you still in with it?  I did it and my account executive is nervous calling me about it.

  20. Anyone see a reason for the strength in TSLA?  I can't seem to find anything.

  21. GNW/Pat – Yes, I do like them and I think they are done writing things down and should show a profit this year.   Though the 2020s are out, they are not trading much yet but you can sell the $3 puts for 0.90 and leave it at that ($2.10 entry) or add the $2 ($1.75)/$4 (0.60) bull call spread for $1.15 and it's net 0.25 on the $2 spread and, if they get called away at $4, you get an early 8x return.

    GRE/BDC – We bought 150M of them with 2 BitCoins 2 years ago for $600 each (for PSWI).  Today we seem like we have $300,000 and we already cashed the other two BitCoins for about $35,000 so it's all gravy now.  Coins with a purpose is a good sub-category.  

    CBI/Eric – Yes, cheap enough for the combined companies.  I wish CBI stayed a pure play but less downside risk this way too.

    SAN/Advill – Good catch and not a bad bank with a p/e of about 15.  I've been looking for a bank in the LTP and the Ripple aspect gives them a nice kicker so let's play them:

    Year End 31st Dec 2011 2012 2013 2014 2015 2016 TTM 2017E 2018E CAGR / Avg
    Revenue €m 56,518 54,512 50,856 55,150 54,892 51,993 52,665 47,912 49,818 -1.7%
    Operating Profit €m 7,858 3,565 7,378 10,679 9,547 10,768 13,487     +6.5%
    Net Profit €m 5,330 2,283 4,175 5,816 5,966 6,204 7,460 7,008 8,332 +3.1%
    EPS Reported 0.51 0.21 0.35 0.46 0.39 0.42 0.46     -3.9%
    EPS Normalised 0.64 0.24 0.28 0.36 0.44 0.43 0.47 0.45 0.51 -7.6%
    EPS Growth % -3.2 -63.1 +16.4 +28.3 +22.6 -0.4 +9.1 +4.85 +13.0  
    PE Ratio x           13.0 11.9 12.4 11.0  
    PEG x           2.68 2.45 0.95 0.91

    In the OOP:

    • Sell 20 2019 $7 puts for $1.25 ($2,500) 
    • Buy 20 2019 $7 calls for 0.80 ($1,600) 

    That's a net $900 credit so our worst case is being assigned 2,000 shares of SAN at $7 less 0.45 per share is $6.55, about the current price and, if assigned, we could flip and sell the $7 calls for 0.80 and drop our net to $5.75 on a decent bank – so not much risk there.  

    In the LTP, we'll do the same trade but with 50 short puts and 50 calls.  

    CMG/Advill – We did not re-add but would if they test $280 again.  

    TSLA/Palotay – There is never a reason for TSLA to be strong!  cheeky  I hope it continues though, we still don't have a short.  As stupid as this is, I think it's about Musk's weekend idea to have a super-charger drive-in restaurant.  

    Elon Musk Says Rockin’ Drive-In Restaurant, Roller Skating, and Theater Coming to Tesla Supercharger Station

    I'd say you can't make this stuff up but, obviously, Elon makes it up all the time! 

  22. Are you sure about the SAN options? 

    The market on the puts are 85c-90c and these are adjusted options.

  23. SAN/Jabob – Those are the wrong ones.  There's another set that's currently trading.  

  24. 10,815






    Jan 18 '19







  25. Grabbing 2 /KC long at $125, of course.

    Wow Jabob, really?

    Maybe they won't fill, we'll have to see.  I sure wouldn't buy the calls without filling the short puts.

  26. Phil, is there a reason why NLY or CIM better for a straight dividend investment in an IRA (or a combination of both)?

  27. PCLN – Up big again today.

    Shorted a few more deep OTM June puts.

  28. Albo which puts of Jun are you shortning?

  29. I think a new rule was implemented for 2018…… down days allowed in the markets!!!!! 

  30. Yodi – I shorted the Jun 1200 puts for 3.96.

    Was already short quite a few  Just added a few more today.

  31. NLY/Tangled – Essentially the same company so whichever one is giving you better strikes at the time.   At the moment, for example, CIM is at $18.14 and you can sell the June $18 calls for 0.70 so you are collecting more premium than the 0.50 dividend so no danger of being called away and missing out.

    I'd also sell the $18 puts for 0.85. 

    Crypto sector lit up bright red

    • Bitcoin is lower by 11% and Litecoin 9.5%, to name a couple. The highflying Ripple is down 15% today, and off 30% from a peak hit last week.
    • Ether is lower today, but that's after surging over the weekend to a new record high of more than $1.2K. Down 5% on today's session, it's now at $1,074 vs. about $725 to start the year.
    • Making the rounds as traders look for excuses: Popular valuation website CoinMarketCap today removed Korean exchanges from its price valuations. As valuations tend to be higher in Korea, price charts immediately took an ugly turn, prompting selling from the technicians who seem to make up the vast majority of crypto traders (sounds like forex).
    • While retailers announcing store closings make for good headlines, others simply choose not to renew expiring leases, and that often fails to make the news, according to Green Street Advisors.
    • Of 2,468 store closings last year, nearly 1K weren't announced, says Green Street. These unannounced closings are likely to be from non-anchors, and thus have greater effect on mall owner profitability than players like Macy's or Bloomingdale's, which usually pay cheaper rents or own their real estate.
    • "The mall owner makes most of its money from the in-line tenants," says Green Street's Jim Sullivan.
    • GoPro (NASDAQ:GPROlowers its Q4 revenue estimate to $340M from the prior $470M (+/- $10M) projection.
    • The company lowers the price of its Hero6 cameras by $100 to $399 due to customer reluctance, which will have an $80M impact on the current quarter’s revenue. 
    • Morgan Stanley says the price cut will make it difficult for GoPro to grow earnings in FY18. 
    • GoPro shares are down 22.1%.  
    • Previously: Job cuts at GoPro's aerial division (Jan. 5)
    • Previously: GoPro -4.3% on COO, SVP departures (Jan. 8)

    Apple Watch control coming to Whirlpool appliances; KeyBanc sees poor iPhone X sales

    • Apple (NASDAQ:AAPL) Watch users will soon have the ability to control Whirlpool (NYSE:WHR) appliances through the wearable.
    • Whirlpool announced the development at CES and said the compatibility would come later this year to 20 connected appliances. 
    • Whirlpool says Amazon (NASDAQ:AMZN) Alexa and Google (NASDAQ:GOOGL) Assistant voice controls will also arrive in 2018. 
    • In other Apple news, KeyBanc analyst John Vinh suggests that recent Taiwanese media allegations of low iPhone X orders could prove true.
    • Vinh writes that iPhone X “feedback indicates sell-through has been somewhat disappointing” and that the premium model fell short of the 8/8 Plus “due to the price tag and limited promotion.”
    • Vinh says conversations with carriers revealed “worse-than-expected iPhone X demand.” 
    • The analyst also lowered his rating for Cirrus Logic (NASDAQ:CRUS), which gets 79% of its revenue from Apple.   
    • Apple shares are down 0.2%.
    • Cirrus Logic shares are down 0.95%.      
    • Previously: Apple, suppliers drop on iPhone X sales report (Dec. 26, 2017)
    • Previously: Rosenblatt defends Apple on iPhone X sale cut (Dec. 26, 2017)
    • Previously: Apple analyst says low iPhone X estimates still "too high" (Jan. 2)

  32. Another amazing turnaround day for the indexes.  

  33. Not sure this is enough to maintain IG.  Long time for the div to return, but the debt reduction  will ensure the cash flow is there.

    ~~TEVA CEO Kare Schultz presented at a conference today:
    * IG rating: will bring down debt and leave ratings to the agencies. Will have a
      sound financial face, no matter what rating TEVA ends with up, CEO said.
    * Leverage: Expects net leverage to be less than 4x by the end of 2020. Long
      term goal for leverage is 2x. Does not like operating the company with a lot
      of debt, CEO Schultz said.
    * Debt paydowns: Initial focus will be on the remaining bank debt subject to
      covenants (~3.4 bn). Proceeds from Women’s Health U.S. divestitures (Paragard
      & Plan B) used to make prepayment of $1.77 bn on 5Y and 3Y term loans
      maturities. Will pay down debt using cash flows in the next 4 years.
    * Dividends: Will not pay dividends until there is a significant reduction in
    * Equity: No plan to issue equity at this time, CEO stated.
    * Long term growth drivers: 1) new specialty products, 2) global scale of the
      generic platform with generics, branded generics, complex generics, OTC and
      biosimilars, CEO said.
    * Philosophy: Instead of maximizing revenue, will focus on optimizing profit
      product by product.

  34. albo / GBTC - per my strategy, I closed at EOD Friday. No position today, am watching. Appears to be basing, above 2250 with candles looking good on it and on /BTC I will go long again.

  35. BDC / Bitcoin – none of the platforms I trade on will let me short. Has anyone here found a broker that let's you?

  36. TEVA/Seer – If they are not borrowing more money, IG not all that important.  Not down very much ($19.14) so people seem happy enough with the plan. 

    Bitcoin/MrM – I would be very worried about shorting them (or going long).

    Euro zone confidence at multi-year high, but inflation expectations fall

    • Eurozone economic sentiment hits multi-year high at 116.0 in December beating estimates of 114.8, business climate conditions hits an all-time high of 1.66 pushing up producer price expectations among manufacturers.
    • However, consumer inflation eased at 1.4% which are key to boost inflation to the ECB target of below, but close to 2% vindicate the ECB's decision to keep its monetary policy easy.
    • Source:

    CNBC: GoPro hires JPMorgan to evaluate sale of company; shares trim losses (updated)

    • GoPro (GPRO -10.9%), one of today's top losers after slashing its Q4 revenue forcast, heavily discounting its Hero6 cameras and planning layoffs, is trimming losses after CNBC reports the company has hired JPMorgan to put itself up for sale.
    • CEO Nick Woodman said the plan is to remain independent, but "If there are opportunities for us to unite with a bigger parent company to scale GoPro even bigger, that is something that we would look at."
    • JPMorgan had helped underwrite the company's 2014 IPO; it's not clear whether there's an interested buyer as of yet.
    • Shares are paring a decline that reached 33% at the bottom today.
    • Updated 2:39 p.m.: Woodman says the company has not engaged with JPMorgan on a sale.

    'Jumanji,' 'Insidious' top 'Last Jedi' at box office

    • With $36M in third-week grosses, Jumanji: Welcome to the Jungle (SNE +0.5%) finally toppled Star Wars: The Last Jedi (DIS -1.3%) from the top of the box-office charts; the surprise is that lightly regarded horror sequel Insidious: The Last Key surpassed the Lucasfilm behemoth as well.
    • The fourth film in the Insidious series (CMCSA -1.4%) drew $29.3M in its debut, enough for second place ahead of The Last Jedi's $23.6M.
    • Rounding out the top five were The Greatest Showman (FOX -0.9%FOXA -1%) with $13.8M in its third week, and Pitch Perfect 3 (NASDAQ:CMCSA), with $10.2M also in its third week.
    • The new Jumanji take has pulled a cumulative $244.4M domestically to go along with $275M in foreign markets to hit $519.4M worldwide.
    • Jedi, meanwhile, reached $1.2B worldwide ($572.5M domestic, $632.7M from foreign markets) — good enough to pass Rogue One and become the second-highest grossing Star Wars film behind The Force Awakens.

  37.  saw two big PSW type plays for 2020, selling puts and buying a call spread

    CELG and GILD 

  38. Winston 
    January 8th, 2018 at 3:14 pm | Permalink | Tweet thisIgnore this user

    Phil / Adjustment – Rolling question on a BA position:

    30 Jan 2020 BCS  240 ($46) /  280 ($26.50) net $19, currently at about net ($83 – $57) = $26

    covered with 12, Sep 18 $300 short calls, sold for $20, now at $28.20 (I initially had sold lower strike March calls, but ended up closing out a few, and rolling up as BA kept moving up.

    Faced with the dilemma of finding hard how BA can justify a $310 price tag (and very conscious of your recent article on how ridiculous BA's valuation is), but its price performance is simply onwards and upwards. It simply does not pullback. 

    With earnings coming up, the dilemma is how to find safety from a big move up, but on the other hand loath to give up the protection of the short covers if the move is down.

    I'm conscious of the fact that I am further out in time than I would like, and doubling down with an earnings event coming up seems rather like a coin toss. 

    Would be interested in the views on adjustments.

  39. Phil – StJL – Which crazy do you mean? This, this or this one? With all this crazy, its IV Time and Out.

  40. TSLA – I suspect that today's strength is attributable to all the presentations tomorrow at the Consumer Electronics Show (CES.) on autonomous driving.

    FWIW – QUIK is demonstrating their technology at the show, and I'm hopeful that it will attract some interest,  Although  the show is so huge, that they may not even be noticeable.

  41. IMAX/Phil – time to BTFD yet?

  42. CELG/Stock – They are getting generic competition for a drug that's half their revenues.  Look what happened to TEVA when 20% of their revenues went generic.  GILD I still like, but need to see them pull back a bit. 

    BA/Winston – Up and up the market goes….   So you have $40 coming to you on the $240/280 bull call spread and you sold about 1/3 the short Sept $300s.  I don't see that as a problem.  If BA goes higher, you do a 2x roll and maybe sell some puts but, if they go lower, you'll wish you had more than 12 short calls.  Wait for the facts, then react.  Keep in mind you sold the short $300s for $20 so your break-even is $320, not $309 – you are letting the premium which WILL expire WORTHLESS panic you out of a perfectly rational position.

    Crazy/Naybob – Wrong, wrong and wrong.

    I've listened to preachers, I've listened to fools
    I've watched all the dropouts who make their own rules
    One person conditioned to rule and control
    The media sells it and you live the role

    Heirs of a cold war, that's what we've become
    Inheriting troubles, I'm mentally numb
    Crazy, I just cannot bear
    I'm living with something' that just isn't fair

    Patsy Cline was never that deep!  

    TSLA/Albo – Very possible.  

    IMAX/Scott – Already called them last week.  At least they are easy to fill!  

  43. Gotta go with Phil's Crazy this time Naybob although I lover Gnarls Barkely's song!

  44. Tenet (THC) updated at JPM Health care conference today. 

    Tenet updates on cost-cutting initiatives at JPM18

    Tenet Healthcare (THC -3.1%) updated investors today on its plans to reduce operating costs at JPM18. Key points:

    Accelerating improvements in quality and patient experience.

    Divestment in non-core assets should yield over $1B ($700M in cash + $300M in elimination of leases and related debt). Process to divest Conifer underway.

    Cost reduction plan should produce $250M of annualized operating savings by year-end.

    Debt leverage ratio should be no more that 5x by the end of 2019.

    Under the new tax law, cash tax payments will be reduced by $10M – 20M per year over the next several years.

    2018 outlook: EPS: $0.58 – 0.97; non-GAAP EPS: $1.07 – 1.36.


  45. Phil// How do we participate in the hedge fund you have discussed?  Thanks.

  46. I wonder if Tenet conidered THC to not be the best stock symbol or what…

  47. Phil/TEVA-the company will not be able to repay all the debt maturing over the next 24-36 months and have to refi.   Waiting until the debt turns current (12 months until maturity) without cash on the balance sheet will almost certainly drive a negative rating action. The rating agencies will want to resolve their downgrade reviews in the next 30-60 days (according to their policies, but they have made exceptions in the past though not many).  The interest for the term loans also increases 25 bps on a downgrade.  Stock is still cheap so maybe it's already priced in, but I wouldn't mind a nice pullback so I can layer in more 2020s.

  48. crypto experts come in many shapes and sizes:

    a reminder to not judge a book by its cover…

  49. At Kennedy, the Planes Just Wouldn’t Stop Coming

  50. Retail workers feel disruption from shifting shopper habits

  51. Uh-oh! CRISPR gene-editing stocks may be worthless

  52. Republicans: Budget deal prospects are dimming

  53. Good morning!  

    I'm in the city, have to be on TV around 11 but should be back around noon.

    Hedge Fund/Rookie – Oh that's easy, just send money.  Actually, you have to fill out forms to be a qualified investor and THEN you send us money.  Contact Greg at Philstockworld dot com and he can help you get the ball rolling.  

    THC/BDC – I bet they get offers for it. 

    TEVA/Seer – Hasn't made it back to our portfolios yet but I am watching.

    Crypto/BDC – Well, I like to make money the old-fashioned way – by sitting here every morning and going "Holy Crap!"