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Markets Get No Loving on Valentine’s Day Inflation Massacre

Related imageHappy Valentine's Day!  

There's a massacre for the markets as we're down 300 points in a massive failure of the strong bounce lines which we predicted for you a week ago, which are:

  • Dow (/YM) 24,100 is weak and 24,700 is strong
  • S&P (/ES) 2,610 is weak and 2,670 is strong
  • Nasdaq (/NQ) 6,440 is weak and 6,580 is strong
  • Russell (/TF) 1,480 is weak and 1,510 is strong

We needed to see strong bounces on all 4 indexes taken AND HELD for at least a full day before we could safely say the correction is over (it's not).  

Strong inflation numbers are killing us this morning (CPI), keeping the Fed on the table for more tightening.  There had been no real news in the past week to change what were obviously overbought conditions 2 weeks ago so there was no logic in racing back to the overbought conditions – though we're still a good 5% below the highs.  If you almost had a heart attack last week, this is a good time to consider hedges and a great example can be found from the way we adjusted our Money Talk Portfolio (which we discussed on Feb 1st in our Morning Report) by adding a Nasdaq Ultra-Short (SQQQ) hedge that has gained $5,900 in two weeks, almost exactly offsetting half the damage to the portfolio – as intended.  That trade idea was:

SQQQ is the ultra-short Nasdaq ETF that's a 3x inverse of QQQ.  So, if the Nasdaq drops 10%, SQQQ goes up 30% (in theory, it's not perfect).  I'm going to add the following trade as a hedge and WE EXPECT TO LOSE MONEY ON THIS ONE – it's like life insurance, you pay for it but you hope that, each year, it's a waste of money!  

  • Buy 40 SQQQ Sept $16 calls for $2.80 ($11,200)  
  • Sell 40 SQQQ Sept $23 calls for $1.20 ($4,800) 
  • Sell 5 ALK 2020 $60 puts for $8.20 ($4,100) 

That's net $2,300 and $2,620 in margin (from the short puts) to protect our current $36,975 gains and our potential profits – not a large price to pay and, if the Nasdaq drops 10%, then SQQQ (now $16.25) should climb 30% to $21.12 and put the $16 calls $5.12 in the money for $20,480, so we'd be up $18,180 and the max pay-out on the spread is $28,000 so about $26,000 of downside protection – which is half of what we started with!

 As of yesterday's close, the Sept $16/23 bull call spread was $3 ($12,000) and the short ALK puts were $7.60 ($3,800) for net $8,200, up $5,900 overall but still $20,000 below it's full potential.  Unfortunately, the two long positions we added; General Electric (GE) and Barrick Gold (ABX) are both off to terrible starts – but that mean they are stilll great for new entries.   ABX reports tonight and we're hoping to get as much love as Chipotle (CMG) did last night, with a 10% pop this morning.  CMG was in our Long-Term Portfolio with the following trade from Jan 2nd (see: "2018 Tuesday – How we will be Building our New $100,000 Portfolios") - the first trade in our new portfolio:

CMG/Streth – It's tricky as sales are up 10% from 2016 but profits ($187M) not even half of what they were in 2015 ($475M) and they are getting, at $292, $8.2Bn for the company so at POTENTIAL profit, it's a very reasonable 17 p/e but, at actual profit, it's a ridiculous 44 that you could never justify for a full-grown chain.  How long will it take them to get back to $475M in profit but, even if they do, that really only justifies $300 so I would not be aggressive with them at all, but that's not to say I wouldn't play.  You can:

  • Sell 5 CMG 2020 $270 puts for $35 ($17,500) 
  • Buy 10 CMG 2020 $280 calls for $65 ($65,000) 
  • Sell 10 CMG 2020 $310 calls for $51 ($51,000) 

That's a net credit of $3,500 on the $30,000 spread so 10x return on cash and TOS says $12,400 in margin – so nice and efficient.  Also, since I don't expect them to make any rapid recovery, we can sell 4 March $310 calls for $12 ($4,800) and, if we can collect $4,800 a quarter selling calls, that's another $38,400 while we wait to see if we clear $33,500 on the main spread.  

Let's make that the first official trade for the new LTP!  

CMG was off to a terrible start, dropping $50 from our entry (which came in a bit better than planned) and, in our Live Member Chat Room, we made the following adjustments. 

February 7th, 2018 at 10:38 am | (Unlocked) | Permalink

We have CMG in the LTP and I still like the trade, though you could set it up a bit lower now.  

Good thing we sold the short calls – that kept us out of trouble.  It's too early to pull the trigger but the $310s we'll buy back and wait for a bounce to sell something else for $5-6,000.  If we do that every few months (just 30 days on this one), we'll pick up $20,000 per year as a bonus while we wait to see if we get $30,000 for the spread that was a $10,600 credit to start!  

That's the sneaky way the LTP works over time.  It's a pretty simple trade with a high probability of success but we can work it into a $70,000 gain off a $10,000 credit over 2 years.  

And we only sold 5 puts hitting us for $13,000 in margin.  The risk of assignment is $135,000 so 13.5% of our buying power but it's not a realistic risk.  What's the chances CMG falls below $200?  It's not nothing – look what SVXY just did – but realistically, I look at the risk at 500 x $70 (to $200) for $35,000 vs making maybe $80,000, so well worth it (and then we can roll the puts too!).

February 8th, 2018 at 12:16 pm | (Unlocked) | Permalink 

CMG – We're kind of even so let's get more aggressive.   We'll buy back the 4 short March $310 calls at $1.40 – not because I think we'll come back but it clears the slot for a sell on the bounce.  Now we'll take a proper risk and buy back the 10 short 2020 $310 calls ($38) as they are up $12 ($12,000) and I want to lock it in.  We can then roll our 10 long 2020 $280 calls ($50) to 10 long 2020 $260 calls ($58.50) as that's well-worth $8.50.  

So now, if CMG goes higher, we'll sell the $310s again for $50 but have a much wider spread that's deeper in the money (and we'll sell more short calls).  If CMG goes lower, the $300 calls are $43 and we'd sell them by $40 and we'd be in a $40 spread ($10 wider) at a $20 lower strike for net $6.50 more.  That's our worse (not worst) case!  

This morning, already, our faith is being rewarded with a quick $30 bounce (good for $30,000 gains!) that will allow us to follow-through with our re-cover. Our net entry was a $10,600 credit (we sold those short calls too) and we bought back the short March $310s for $1.40 ($560) and the short $310 calls for $38,000 ($38) and we spent $8,500 to roll the long $280s lower so net $36,460 for what is now 10 2020 $260 calls that are almost all in the money and the 5 short 2020 $270 puts that are $20 out of the money.  So, if we sell the 2020 $350 calls for $36 or more, we're in a $90,000 spread for free and have tons of coverage to sell calls, like 4 April $300s for $10 ($4,000) using 65 of the 702 days we have to sell.  That's not bad for one slot in a $500,000 portfolio!  

Having good hedges allows us to deploy MORE capital when the market is pulling back – because we have the confidence to know that, if the market stays low or goes lower, the hedges will continue to protect us.  The SQQQ hedge above, for example, did pay us $6,000 so far but has another $20,000 to go if SQQQ continues up to $23, which is where it peaked out last week.  Knowing we have $20,000 coming to us if the market stays down means we have $20,000 we can use to adjust our positions now – while the market is down.  If the market comes back, we will lose our PLANNED insurance bet on the hedges while our improved longs make even more money.  That is how you hedge!  

I will be giving a 4-hour "Master Class" on Hedging, Options Trading Strategies, Portfolio Management and Fundamental Analysis at the opening of the New York Traders Expo on Sunday, Feb 25th at 9am at the Marriott Marquis – so register now if you'd like to hear a lot more about these strategies.

Meanwhile, at 8:45 am, we're back at 24,400, 2,635, 6,500 and 1,480 and, since 1,480 is the weak bounce line on the Russell (/TF) Futures and the others are still over their weak bounce lines – we'll watch that line to play /TF long above the line – as long as the other indexes are making progress.  The sell-off is probably overdone, we knew inflation would come in hot and the Fed is already tightening at 4 of their 7 remaining meetings this year – they won't go 5 so no changes there.  That should easily pay for the class and hotel room in NYC! 

However, we could have a bigger correction – as noted above so, if /TF is below 1,480, we would rather short the Nasdaq (/NQ) Futures below the 6,500 line with tight stops above – as it has the farthest to fall.  

In any case – be careful out there – it's going to be a crazy day!  

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  1. Still quite tentative recovery!

  2. Doesn't make you feel god about our electoral process:

    The CIA director and two other top U.S. intelligence officials told the Senate Tuesday they’ve seen indications Russian agents are preparing a new round of election subterfuge. The secretary of state has said the same. 

    When asked if they were tasked by the White House to remedy the situation, all these intelligence officials said no! Wonder why…

  3. Why would silver and gold be down on higher inflation numbers, aren't they inflation hedges?

  4. That VIX move last Monday that killed all the volatility instruments was quite the outlier:

    Enter February 5th, 2018 – where something curious happened – the fear gauge disconnected from actual fear in the market. We expect a rather normal curve showing VIX prices rising as the S&P daily return declines. But last week was literally off the chart in terms of this relationship. It turns out, Monday’s move in the VIX showed THE biggest outlier in this correlation back to 1990, with the VIX Index spiking 115% on just a -4% S&P 500 drop. To give you context, a typical 4% drop in the S&P results with a 30 or 35% spike in the VIX. Here’s it visualized:

    VIX SP relationshipThat would explain a lot! It could also be that all the vol instruments created a big downdraft by themselves trading thinly traded VIX futures.

  5. Good Morning All!

    Join us for the webinar today at 1pm!

  6. Good Morning.

  7. Good morning!

    I added 2 longs on /RB at $1.66 because the API report was TERRIBLE with a 2.85Mb build in oil and a 4.6Mb build in Gasoline and 1.1Mb build in distillates.  That is almost an entire day's worth of US production (10Mb) too much oil for the week!   

    So I went long as we still have a holiday weekend coming and how much worse can the EIA report be than that?

    /NG took a dive too but that's more about Russia making an LNG deal with Saudi Arabia the puts a lot of Nat Gas on the World Market (where we now have to compete).  Plus the weather got nice again.  

    Got stopped out of /TF already with $125 gains (2.5 points) per contract and flipped to /NQ at 6,500 (long) and got stopped out of those just shy of $100 and we're watching our bounce lines very carefully today @:

    • Dow (/YM) 24,100 is weak and 24,700 is strong
    • S&P (/ES) 2,610 is weak and 2,670 is strong
    • Nasdaq (/NQ) 6,440 is weak and 6,580 is strong
    • Russell (/TF) 1,480 is weak and 1,510 is strong

    So RUT is right on the line and very bad if they fail but the others are pretty safely above at the moment and 1,480 is holding so far (which is why I made it my long). 

    You have to know your lines so, when something like this morning's drop happens, you know exactly where you want to make your bet. 

    Now we need to see these drops make quick strong bounces or we may be in technical trouble.

    Metals/Jet – Because:

    That trumps short-term pressures on metal. 

  8. Wow, this market gets riled up very easily.  Once again we're gapping up and down in the Futures – the bots are ruining this market.

  9. How about GNC back to $4.42 today.  Feel very fortunate to have lighten up yesterday at $5.50.  Huge recovery in CMG so going to use the same logic to lighten up today.

  10. HMNY .. ouch!

  11. CMG 2020 $350 calls are already $39!  For the LTP, we want to put a sell-stop in at $35 but no sense in jumping in too soon as the poor shorts are getting killed on this one.  

    On the other hand, our $260 calls are almost $80 ($80,000) and we're in the spread for net $36,460 so maybe we should take the double and run?  If not, we collect $40,000 for the short calls and then we wait two years to get $90,000 more (if all goes well) AND we get to sell calls along the way for another $25,000 (conservatively).

    OR, we could just cash in $80,000 and be happy?  

    Since the return on CMG is likely to be about $150,00 over 2 years, we'd have to find something else to double our $80,000 on and I'm thinking I'd just as well stay here but, maybe we cash the $80,000 and buy the 2020 $300 ($60)/$350 ($39) bull call spreads for $20 ($20,000) and we still have $60K in pocket, a $50,000 spread and the ability to sell short calls.  Well that adds up to $135,000 and I certainly think it's worth giving up $15,000 in the bush for $60,000 in the hand, right?

    So that is our official move for the LTP:

    • Sell our 10 CMG 2020 $260 calls for $80 ($80,000) 
    • Buy 10 CMG 2020 $300 ($60)/$350 ($39) bull call spreads for $20 ($20,000)

    And we'll wait and see how they settle before selling calls but the April $300s are already $15 so 4 of those fetches another $6,000!  

  12. Got $41 for the short $350s so now the long $300s are $59 and we can put a buy stop on them at $62 but, otherwise, hope CMG pulls back a little from a 15% run and we can buy the longs cheaper.  

    Also, let's sell 3 of the April $300s for $14 as it's too good to pass up.

  13. Smooth sailing if the RUT can take that 1,500 line and /NQ right behind on their 6,600 line and /YM (my current horse) just got over 24,600, which is my stop line now and /ES is 2,665, not a good spot as it's right in the middle with no good psychological lines either.  

    GNC/Options – Well-played.  

  14. Now gold and silver flying as the Dollar calms down.

  15. /YM is lagging by 150 points!  That's $750 per contract if they go green. 

  16. Sorry, not green but back to the pre-market gains of +150 points.

  17. EIA:

    Oil up 1.8Mb

    Gasoline up 3.6Mb

    Distillates down 500K so better than API is good for /RB longs.

    • EIA Petroleum Inventories: Crude +1.8barrels vs. +2.8M consensus, +1.9M last week.
    • Gasoline +3.6M barrels vs. +1.2M consensus, +3.4M last week.
    • Distillates -0.5M barrels vs. -1.1M consensus, +3.9M last week.
    • Futures -0.96% to $58.62.

  18. Phil / CMG – I was able to get the BCS spread at 300 ( 58) / 350 (40) and sold 4 of the Apr 320 (6.5) 

     a '19 280 puts (26.6) that I think will burn off this year.   

    Thanks for the trade…. I think we will be rolling this thing up in the future…

  19. ABX – if only it would pop over 14…..

  20. GNC – cleared out all my positions yesterday. what a relief…..  sold 5 puts just 15X  now we wait….

  21. I got stopped out of /YM at 24600 just for it to go up again

  22. Pirati – "Doing this to people who have worked their whole life's to support this country is a tragedy." 

    Your paying it forward increases my respect and gratitude, we need more to follow your humble example.

  23. CMG/Batman – We'll see how the analysts react but he should get at least 2 or 3 quarters benefit of doubt, which will take us through the end of the year and burn a lot of sold premium.   As to ABX, earnings tonight.  

    • Shares of Chipotle (NYSE:CMG) are up 14% as analysts and investors both back the pick of Brian Niccol to lead the restaurant company, even though his experience in mainly with the franchise model.
    • Niccol led Taco Bell to one of the most impressive performances in the fast-food sector over the last five years and is seen as a step in the right direction in restoring the Chipotle brand image.
    • Even large Chipotle stakeholder Pershing Square is out with a strong endorsement of the hiring.
    • Despite the seemingly unanimous approval of the CEO pick, no major investment firm has shifted its rating on the restaurant stock yet.
    • Previously: Chipotle pops after nabbing Taco Bell CEO (Feb. 13)

    The knock on GNC is they are giving up too much control to the Chinese and that could lead to debt issues down the road.  On the other hand – CHINA!!!  If we can get those guys popping pills the way Americans do…

    • January Consumer Price Index+0.5% vs. +0.3% expected, +0.1% prior.
    • Core CPI +0.3% M/M vs. +0.2% expected, +0.3% prior.
    • Core CPI +1.8% Y/Y vs. +1.7% expected, +1.8% prior.

    "You got the worst-case scenario with this economic data… a hotter than expected CPI number and weaker retail sales," says Art Hogan, chief market strategist at B. Riley FBR. "Unfortunately, CPI gets much more focus than normal because of the wage growth number" in the most recent jobs report.

    Not Good:  Business inventories rises faster than anticipated

    • December business inventories: +0.4% at $1,902.2B vs. +0.3% consensus and +0.4% prior (revised).
    • Sales +0.6% to $1,431.3B (M/M).
    • Inventory/Sales ratio of 1.33 vs. 1.37 (Y/Y).
    • January Retail Sales-0.3% M/M vs. +0.2% expected. The reading for December was revised to unchanged from a 0.4% gain.
    • Ex-autos: +0.0% M/M vs. +0.5% expected.
    • Control group +0.0% M/M vs. +0.3% expected.
    • While retail sales fell 0.3% from December's reading, nearly all categories showed positive growth on a year-over-year basis as part of a 3.9% increase.
    • The 3.9% Y/Y growth is roughly in line with the National Retail Federation's forecast for 2018 growth. After backing out auto, retail sales were flat from December and up 4.2% Y/Y.
    • The most surprising category might have been the health and personal care stores group (ULTASBHWBARAD), which fell 1.2% in January from December and were only up 0.5% from a year ago.
    • Interestingly, department store sales (JCPMKSSJWNDDS) rose 0.8% in January from December in what could be an indication of a different promotional cadence than from a year ago.
    • The National Retail Federation isn't sweating the dip in retail sales in January from December as it reminds about the better-than-anticipated holiday season.
    • NRF Chief Economist Jack Kleinhenz digs into the numbers. "The January numbers follow 5.1 percent unadjusted year-over-year growth in holiday sales during November and December, which was revised down slightly today from the 5.5 percent initially reported. December was down 0.1 percent from November seasonally adjusted but up 3.8 percent year-over-year. The three-month year-over-year moving average is at 5.2 percent," he notes.
    • The eurozone economy maintained its robust growth pace at the end of last year, setting the stage for another solid performance in 2018 that may influence ECB policymakers into winding down unprecedented stimulus.
    • Gross domestic product increased at an annualized 2.7% rate in Q4, resulting in a GDP expansion of 2.5% over the whole 2017.
    • Eurostat also said industrial production rose 0.4% in December vs. a climb of 1.3% in November.
    • Euro zone industrial production jumped 0.4% M/M against consensus of 0.2%, 5.2% Y/Y against the consensus of 4.2% underlining the fastest economic growth rate in a decade which it expects to continue in 2018.
    • "Looking ahead, surveys suggest that the region’s upturn will gather pace," said Stephen Brown, European economist at Capital Economics. "We expect the euro zone’s upturn to match last year’s strong pace in 2018, with annual GDP growth of 2.5 percent."
    Fortunately, coming out of NY, I could taste the crap and my family never drinks NJ tap water:  Report: DowDuPont knowingly contaminated New Jersey groundwater
    • DowDuPont (DWDP) shares show little reaction to a report suggesting the company knew that cancer causing agents from its chemicals were contaminating groundwater in northern New Jersey.
    • The Record and say a trove of government documents and emails reveal for the first time how extensively DWDP "worked behind the scenes for more than three decades to keep secret and then downplay the extent of overall contamination from the site and the potential health risks they posed."
    • DWDP pushed back against regulators and chose not to tell residents that the cancer causing chemicals could be vaporizing up from the groundwater into their homes, according to the report.

    U.S. Gulf Coast LNG exports seen dominating global market

    • With the U.S. set to become a dominant player in the global market for liquefied natural gas, officials and consultants at the S&P Global Platts annual LNG conference in Houston say the U.S. will need to ramp up exports in the coming years as increasingly efficient drilling methods create a domestic supply glut.
    • "We're going to have too much gas with nowhere to go," says Renato Pereira, VP of business development and marketing for Tellurian (TELL -0.3%).
    • Steven Winberg, the U.S. Energy Department's assistant secretary for fossil fuels, says the U.S. has six projects underway in Texas, Louisiana, Georgia and Maryland that will support LNG exports of more than 10B cf/day.
    • Cheniere Energy's (LNG +0.5%) Sabine Pass facility in Louisiana, for now the only U.S. LNG terminal in operation, already has shipped more than 800B cf of natural gas since it began exports in 2016, and last week announced two long-term agreements to export LNG to China.

    General Electric's Hidden Gem 

    • Denny’s (DENN +7.4%) reported Q4 restaurant sales growth of 6% Y/Y and franchise and license revenue growth of 0.5% Y/Y.
    • Domestic same-store sales +2.2%; company restaurants +2.1% and domestic franchise restaurants +2.2%.
    • Q4 operating margin declined 140 bps to 30.9%; restaurant operating margin declined 120 bps, franchise operating margin improved 10 bps.
    • They opened 14 new system restaurants including 3 international franchised locations.
    • FY2018 guidance: Same-store sales growth of 0-2%; revenue $634-642M; tax rate of 22-24%.
    • Previously: Denny's beats by $0.02, misses on revenue (Feb. 13)

    Groupon 10% lower after Q4 profits miss

    • Groupon (NASDAQ:GRPN) is 9.6% lower premarket after posting Q4 earnings that saw a dip in revenues and profits that missed Street expectations despite record EBITDA.
    • Direct revenues fell by double digits even as marketing expenses rose.
    • Net income from continuing operations swung to a gain of $51.1M from a year-ago loss of $39.5M. EBITDA hit a quarterly record of $105.3M, up 31%.
    • Global units sold fell 6% to 54.6M as the company worked to maximize gross profit (which rose 10% to $386.9M).
    • Revenue breakout: Third-party and other, $346.6M (up 8.8%); Direct, $526.6M (down 10.2%).
    • Operating cash flow was $270.6M, and free cash flow was $255.1M.
    • For 2018, it's guiding to EBITDA of $260M-$270M, light of consensus for $271.7M.
    • Conference call to come at 10 a.m. ET.
    • Press release

    Universal Display, Samsung announce long-term OLED agreements

    • Universal Display (NASDAQ:OLED+8.1% premarket following news that it extended its supply agreements with Samsung (OTC:SSNLF) through year-end 2022.
    • OLED says the agreements affirm that the company will continue to supply its UniversalPHOLED phosphorescent OLED materials and technology to Samsung Display for use in its OLED displays.

    YouTube TV adds Turner networks, boosts price to $40

    • YouTube TV's skinny bundle is adding a key draw, and beefing up its pricing as well.
    • The company has a deal with Turner (TWX -0.3%) to add its suite of eight networks, including TBS, TNT and CNN as well as Cartoon Network and Adult Swim. That brings the base package to more than 50 networks including local big-broadcast stations.
    • Meanwhile, the price of the service for incoming members goes up to $40/month on March 13; those signed up before then continue paying $35/month.
    • It's also moved to new markets, bringing its coverage to the top 100 U.S. TV markets (and reaching more than 85% of TV households).
    • Google (GOOG +0.1%GOOGL +0.2%) hasn't disclosed subscriber numbers for YouTube TV, which launched in April 2016.

  24. Phil – "Strong inflation numbers are killing us this morning (CPI), keeping the Fed on the table for more tightening. – Good Note From Dalio"

    "the acceleration of demand into capacity constraints and rise in prices and profits causes interest rates to rise and central banks to tighten monetary policy," – Dalio

    All along those lines…  Higher interest rates are both a cause and effect of higher money velocity, but there are contrary forces at work. Dalio observes the resultant pattern but not the actual cause.

    Like Yellen, Bernanke and Greenspan, one can easily become lost (can't see the forest for the trees) or seem a bit Schizo when "conundrums" which really are not, take effect.

    Market rates are rising (US dollar Libor) and dislocating from the "natural" rate which has been negative for quite some time. However, this is not due to healthy economic activity, real wage inflation or Fed raises. IMHO, in the near term, velocity is going to fall further, and here is why…. because higher rates cause the markets to rebalance as short term funding rolls over. 

    Think like a money manager, when expecting higher rates you extend your funding duration. So far the banks have been flush with liquidity.  But QT works against this existing dynamic, esp. for smaller banks.  

    Demand can increase faster than supply because more financing is accomplished by the creation of new money as the bankers, NOT the Fed's interest rate manipulation, determine whether to extend additional superfluous, or problematic credit.

    Now here's your moment of Zen…  When funding duration is extended to negate rising cost of loan funds, large CDs, etc. more money becomes idled in the payment's system, causing money velocity to decelerate.  Thus the rate of change in long term money flows exceeds that of short term money flows by a much higher ratio.  Not good.

    The above causes induce FOMC schizophrenia, do I stop (raise) because inflation is accelerating, or do I go (neutral or cut) because Real GDP is falling?  This monetary conundrum produces stagflation, initially higher prices and profits, but later, a larger volume of bad debt.  Which transcends into lower real rates of interest and further economic strangulation viz. the new norm which we are in. 

    Monetary policy implemented by those who think to control the "natural" rate and influence market rates, and an entire economy by targeting a single rate, is nothing more than one dimensional, economic voodoo bullshit. 

    Along all those lines and the Watchtower, and there is also this popular version. Why I have no idea, so let us not talk falsely now, the hour is getting late and Out.

  25. So now we are back to 24,600 (24,700 is strong), 2,670 (exactly the strong bounce), 6,611 (well over 6,580) and 1,510 (also exactly the strong bounce), so it's just the Nas over at the moment and we need 2 more to confirm.  If we fail to hold the strongs today – it's very likely we test the weak bounces before trying again (assuming they hold).  

    Getting late/Naybob – I see real wage growth in Europe, Asia and US and that offsets a lot of the factors you site re. velocity.   The main reason velocity dies is because you put money into the hands of those who don't need it so it stagnates into inflating assets which then, like expanding black holes, begin to suck more money out of the actual economy.  Rising wages for the bottom 80% can reverse that trend in a stunning way and I'm a lot more worried about inflation than deflation looking forward.  

  26. Guy on CNBC says SHLD is heading into a liquidation event.  Would be bad for the market if they have a messy BK.   Not just blowing smoke because Oct 2018 bonds are trading at a 25% discount so a lot of the bondholders don't think they'll make it to October.  

    Dollar crapped out and back to 89, too exhausting to play.  

    Doesn't bode well for the "rally" if the Dollar fell almost a point since the open and the indexes aren't even up a point.  Gold and silver are popping though. 

    /RB $1.68 is very nice for those of us playing that game.  

    I just have the two long but I'll cash one at $1.70 or close if it fails.  

    Webinar Time 

  27. Dollar index will keep falling and stocks will keep rising is that the theme?

  28. Phil// What do you think about this article about HMNY?

  29. Phil – I see real wage growth in Europe, Asia and US and that offsets a lot of the factors you site re. velocity. 

    With regard to velocity, bubble asset and wage inflation, your preachin to the choir.  That arresting of capital is the new norm and indeed, healthy wage inflation for all can reverse that.  HOPE is ever HIGH…

    With regard to real wage growth here's what SCROTUS said in his SOTU speech… “After years of wage stagnation, we are finally seeing rising wages.

    AND here is what the stats say….  After adjusting for inflation, US wages are only 10% higher in 2017 than they were in 1973, with annual real wage growth just below 0.2%, and with far less purchasing power.

    As for US REAL average WEEKLY and HOURLY earnings growth, BOTH at levels below July 2009; declining since Jan 2015; and falling into NEGATIVE growth Jan 2018.

    Backing that up: at levels below Q3:2009, declining since Q4:2015, and falling into NEGATIVE growth Q4:2017… Employed full time: Median usual weekly real earnings: Wage and salary workers: 16 years and over 

    In the EU – Since 2009, stagnating or even decreasing real wages became the dominant feature. A total of 7 EU countries show negative annual growth rates. In another 14 EU countries the annual average growth rate of real wages is below 1% and only 7 countries show a fairly strong real wage development of 1% or more on average per year. See here and here.

    Brother Phil, keep bangin the table, we love ya and realize that HOPE is EVER HIGH. After seeing those stats, if one still thinks REAL wages are growing in the US and EU, please follow these simple guidelines and share.  Jimmy, Freddy, Seymour, Orson, Cling and Clang it's time for HR and Out.

    In Asia - with the exception of Japan, rising real wages from peanuts to popcorn.


  30. Phil/ webinar- any new positions from webinar?

  31. Any major reason for Oil whipping around today? havent had a chance to pay much attention

  32. /RB all the way to $1.72

  33. /ES at 2700. I have one short but not sure about it. Tight stop, hopefully a little rejection. 

  34. For film buffs, recommended along with The Shape of Water and Get Out… Phantom Thread, a simply twisted, wickedly delightful, post war London "crime" drama love story.  Superb costumes, original musical score, direction, and yes, DDL does it again.

  35. Sold more AKS Jan 4 puts for $ .52.

    QUIK – Reports after the bell.  Not looking for much for the 4th quarter, but think this quarter should start the ramp up in revenues that I've been waiting for.

    CTL – Also reports after the close.  The quarter they are reported only included LVLT for a little over a month.  Wondering if they'll take some big write offs.

  36. Wow, $2 move on oil and 0.04 on /RB – Merry Christmas!  

    Indexes blasted backs so now all they have to do is hold their strong bounces for the day and we'll remain bullish until/unless they fail them (or fail the recent highs again). 

    Oil surges 2.4% in late trade, settling at $60.60, after smaller-than-expected rise in US stockpiles


    HMNY/Rookie – I was under the impression they wanted the money to secure the rest of MoviePass that they don't already own.  This happened already in October 

    Published: Oct 12, 2017 8:17 a.m. ET

    Data firm Helios & Matheson Analysts Inc. HMNY, -9.39% said on Thursday that it is increasing its majority stake in movie-theater subscription service MoviePass. The company said that since announcing its initial acquisition Aug. 15, Helios & Matheson has received aggregate gross proceeds of about $12.8 million from the holder of its senior secured convertible notes, satisfying its $10 million financing condition in its pending majority ownership MoviePass acquisition. With that, Helios and Matheson is increasing the purchase price to $28.5 million from $27.0 million, which raises its stake to 53.71% from 53%. Shares of Helios & Matheson were down nearly 14% in premarket trade on Thursday, after nearly tripling in the past four sessions. MoviePass also gave Helios & Matheson an option to buy additional shares for $20 million in cash based on the company's $210 million pre-money valuation. If the option is realized that will result in Helios & Matheson gaining an additional 8.7% stake in MoviePass. Helios & Matheson shares have gained nearly 897% in the year to date, while the S&P 500 index SPX, +1.35% is up more than 14% and the Dow Jones Industrial Average DJIA, +1.01% is up nearly 16%.

    I think the jackals are trying to chase people out of this stock before it goes to the moon.  Or maybe it's a huge scam…  Mitch Lowe, who co-founded NFLX and was also CEO of Redbox, founded MoviePass and has plenty of money so maybe not a scam.  

    Subscribers to MoviePass are issued a branded prepaid debit card. Using the MoviePass mobile app, users check-in at a supported cinema, and select a film and showtime occurring within the next 30 minutes; the card is automatically loaded with the amount of money needed to purchase a single ticket from the cinema for that film. The user then purchases their ticket as usual, using their MoviePass card as their payment method.[22]Hence, the service is subsidizing the purchase of tickets directly from the cinema by the customer. Some cinemas support e-tickets through MoviePass.[23][14][24] MoviePass has said that its service is supported at 91% of U.S. cinemas. One regional dine-in chain, Studio Movie Grill, made an investment in MoviePass, and partnered to pilot features such as integrated food ordering.[25]

    The MoviePass service has several limitations. It cannot be used for screenings in specialty formats such as 3D or IMAX. The service also does not support advance purchase of tickets, and only allows solo purchases.[23][26][24]

    Wages/Naybob – Only 10% is still 10% and imagine what another 2% a year for the next 10 years would do then?  UK wages going up 3% in a year – we have very similar conditions and lower unemployment.  It takes a while for employees to realize they have bargaining power (especially with unions outlawed) but soon they wake up and it all hits the fan.   You are sighting very backward-looking statistics and extrapolating them going forward as if this economy is the same as the after-shock economy we had 10 years ago – when people felt blessed to be getting minimum wages and cut-down benefits.  Anyway, time will tell but we're not agreeing on this one.

    Webinar/Ravi – I said someone should remind me of something but now I forgot.

  37. 'Merica!  

    Aerial footage above Marjory Stoneman Douglas High School shows students running from grounds of campus after authorities respond to report of shooting in Parkland, Florida

  38. 20 – 50 victims and shooter still at large.  

  39. Parkland is next town over from me – my daughter has friends at that school…  

  40. Trump says they should all bring guns to school from now on to stop more shootings from happening. 

  41. Has Trump ever been in a shootout? How many people would be dead in the crossfire… 

  42. Unbelievable. Did he seriously say that? 

  43. These VXX calls sold last week are already up more 60% in a week. Not sure I can wait 11 months for the last 40%! Decay works in mysterious ways.

  44. KO- covered call play: buy stock @ 44.12; sell Mar 44 call @ 1.00; plus pick up next dividend of .37 (record date approx 2/28/18).

    Returns 2.9% is called away. 

  45. Come on StJ – Get with the program or ICE will come knockin':

    Image result for good guys with guns

    Image result for good guys with guns

    Image result for good guys with guns

    Image result for good guys with guns

    Trump/Jeff – Something to that effect, the usual NRA nonsense: "This is why we need to arm the teachers – so they can shoot the students who act up…"  I guess with the new voucher program, you can select the best-armed schools for your kids to go to.  Forget the SATs, what are the target range scores for this school?

    NRA Collegiate Shooting Guide

    Recommended reading for those competitive rifle and pistol shooters wishing to start a marksmanship program in their school or college/university. Lists contacts for schools currently running a shooting program.

    NRA Junior Progressive Pistol Program

    Includes information and how to get started in the NRA Junior Progressive Pistol Program.

    VXX/StJ – Nice job on those.  

  46. And the markets don’t care. 

  47. Caring/Jeff – Just another day in paradise:

    Wel the Dow is up 1% and the S&P up 1.5%, RUT 1.5% and Nas up 1.75% with the Dollar down 0.85% – not all that impressive but we held our lines and TA people don't care about the Dollar.

  48. TEVA

    ~~ Teva Pharma jumps +11% afterhours with Berkshire Hathaway 13F filing showing a new position in it…price currently trading around $21.50  .

    YOWZA !

  49. Where’s Jabo! Go TEVA. 

  50. ~~Officials: School shooting suspect in custody.

  51. Teva … was about to post and it’s already here.. thanks Albo.  Go Teva! 

  52. CNN reports that there were multiple fatalities.

  53. sold TEVA when Moodys downgraded their debt.

    But do have a a small call spread!!!


  54. CTL – Sure looks like the dividend is secure !

    ~~CenturyLink reports fourth quarter and full year 2017 results

    Fourth Quarter and Full Year 2017 Highlights

    - Completed acquisition of Level 3 Communications (Level 3), positioning CenturyLink as the second largest domestic communications provider serving global enterprise customers, with 2017 pro forma annual revenue of more than $24 billion

    - Increased network scale and enhanced product and services portfolio enables CenturyLink to better meet the connectivity and managed services needs of customers

    - Expect 2018 Adjusted EBITDA to be higher than 2017 pro forma Adjusted EBITDA

    - Anticipate 2018 Free Cash Flow after Dividends of $850 million to $1.05 billion

  55. No thanks to Trump's tariffs!  SPWR guides lower. 


    Trading resumes in SunPower (NASDAQ:SPWR) after a halt, now -10.1% after reporting better than expected Q4 earnings and revenues but guiding Q1 and full-year revenues well below expectations, citing the 201 solar tariff decision.

    SPWR forecasts Q1 non-GAAP revenues of $300M-$350M vs. $427M analyst consensus estimate, with 275-305 MW deployed; for FY 2018, SPWR sees non-GAAP revenues of $1.8B-$2.2B vs. $2.41B consensus, with 1.5-1.9 GW deployed.

    "We are already seeing a negative near-term impact from the [201 solar tariff] ruling as the increased costs due to import tariffs have delayed certain 2018 projects and made other projects uneconomical," SPWR says. "We have also put our planned $20M U.S. employment expansion on hold and are considering other significant cost saving initiatives to lower our overall expense structure and improve our financial performance."


    Trading resumes in SunPower (NASDAQ:SPWR) after a halt, now -10.1% after reporting better than expected Q4 earnings and revenues but guiding Q1 and full-year revenues well below expectations, citing the 201 solar tariff decision.

    SPWR forecasts Q1 non-GAAP revenues of $300M-$350M vs. $427M analyst consensus estimate, with 275-305 MW deployed; for FY 2018, SPWR sees non-GAAP revenues of $1.8B-$2.2B vs. $2.41B consensus, with 1.5-1.9 GW deployed.

    "We are already seeing a negative near-term impact from the [201 solar tariff] ruling as the increased costs due to import tariffs have delayed certain 2018 projects and made other projects uneconomical," SPWR says. "We have also put our planned $20M U.S. employment expansion on hold and are considering other significant cost saving initiatives to lower our overall expense structure and improve our financial performance."

  56. CTL- Albo- this one looks to be working out nicely. Thanks for the tip.

  57. Jeffl – Hope your daughter's friends are safe.

    You're welcome Pstas.  Glad you're in.

  58. Jeffl – hope everybody is safe.

    Barrick results were so-so, minor beat – production guidance is lower. 

    Now I think gold price (inflation) might be the one driver that could propel this higher since fundamentals appear flattish.

  59. Phil--any opinion on ABX earnings?

    FU SPWR, GNC, HMNY!!!!!!!!

  60. ‘A horrific, horrific day’: At least 17 killed in Florida school shooting

  61. Adam Schiff dishes on Donald Trump’s Russia crimes

  62. Trump Lawyer’s Payment to Porn Star Raises New Questions

  63. I honestly do not know how the U.S keeps going day after day without change. In the UK we had one mass shooting in a school in 1996 that killed 16 and we passed two Firearms Acts and it still haunts the public consciousness.  That dude only had two handguns!

    Oil loving the Saudi comments (just wait until after the listing) so the RB trade is on track.

  64. Good morning! 

    Markets off to a rockin' start as Dollar drops another 0.5% to the lows.

    Just went long /DX again at 88.68 – all these people who talk about dollar weakness don't understand you can't analyze the Dollar in a vacuum.   Other countries don't want their currencies to be strong and they put a floor under the Dollar at a certain point and, recently, 88.5 has been that certain point. 

    TEVA following the script:

    Submitted on 2017/12/13 at 12:37 pm

    TEVA/Jabob – Pretty much the same restructuring noises that have been going on all month, while it's climbed 35%.  I guess it would be nice if they never, ever pulled back and every day was green but, if you want that, you should buy BitCoins or DIA – not real stocks.   


    • TEVA – Now the 2020s are out so we can roll our 30 2019 $17.50 calls at $1.95 ($5,850) to 40 of the 2020 $12.50 ($5)/20 ($2.50) bull call spread at $2.50 ($10,000) and we'll roll our 30 short 2019 $25 puts at $11.70 ($35,100) to 30 short 2019 $20 puts at $8 ($24,000).  As we initially collected $28,500 on the short puts, our net credit becomes $17,400 or $5.80 per contract so our break-even becomes $14.20.


    • OOP:
    • TEVA – Another one that is stupidly cheap.  Let's roll our 10 2019 $15 calls at $2 ($2,000) to 20 of the 2020 $12.50 ($3.90)/$20 ($2) bull call spreads at net $1.90 ($3,800) and we'll roll our 10 short 2019 $25 puts at $12.60 ($12,600) to 20 short 2020 $15 puts at $5.10 ($10,200).


    I doubt AMZN will buy them.  They are talking to generic makers in anticipation of getting into on-line pill sales.   It will be bad if they don't use TEVA but that's not likely, they'll use many suppliers and it's not new business, it will just be taken from other customers. 

    There's no reason AMZN would buy a single generic maker as even TEVA, who is the biggest, could only supply about 20% of the market's needs.  Then AMZN would have to do 80% of its business with competitors.  That's not smart unless they see it as having "house brands" of medicine but then they'd have to market to doctors etc – nightmare! 

    Submitted on 2017/12/14 at 10:01 am

    TEVA/Seer – People are loving it, up 14%.  This is why I love beaten-down businesses with good cash-flow – so many ways to fix things.  

    TEVA – Cantor Fitzgerald reiterates Hold rating, $10 PT. This price target represents a -36.31% downside over the stock’s previous closing price of $15.70.

    Submitted on 2017/12/15 at 10:23 am

    TEVA/Jeff – That's why we generally stick to 1/2 sells.  The Dec $15s are $3.20 and you have Jan $15s so that was not a good sell in the first place – those are just $3.55.  Essentially, all you end up doing is closing the position for net 0.35 – don't fool yourself into thinking a roll is somehow better.

    As a new, SENSIBLE position on TEVA, I'd go for:

    • Sell 5 2020 $17.50 puts for $4.10 ($2,050)
    • Buy 10 2020 $15 calls for $6.70 ($6,700)
    • Sell 10 2020 $22.50 calls for $3.25 ($3,250) 

    That's net $1,400 on the $7,500 spread so $6,100 (435%) upside potential and you don't have to keep guessing what it will do month to month and risk losing everything when you get it wrong.  TEVA's at $18 now, we're not asking much of it over 2 years. 

    Submitted on 2017/12/27 at 2:50 pm

    TEVA/Jabob – Oh F them!  Don't tell me you were cursing them out and complaining about how bad there were at $11 and now, at $19, you want to buy them???  If you want to be bullish with $4.50, I'd buy the 2020 $15 ($7.25)/$25 ($3.20) bull call spread for net $4.05 and, if they fall back to FU territory, then, rather than cursing at them, I'd sell the $12.50 puts, now $1.70, for $2.50 or better and use that money to roll the $15 calls down to the $10 calls (now $10.50) and THEN you could do 1/2 sales to pay for the whole thing – like March $20 calls for $1.40.  The March calls are 79 days out of 751 so 10% means you can collect $7 per long on 1/2 sales, which means the net $0 spreads would be a $7 credit at $12.50.  So, in that scenario, would you rather TEVA go up and you make $10 or go lower first and maybe you make $22.50?

    Submitted on 2018/01/11 at 10:04 am

    TEVA/Jabob – That's it then, they just needed a good push to get over $20 and now they can move back to $25 with little resistance.

    SPWR – I think they are making a point with the doom and gloom stuff as they are still negotiating to get exemption from tariffs.  

    SunPower Drops 9%: CEO Hopes for Relief in Appealing Regulation

    But yes, SPWR has the best solar technology in the World and, essentially, they are saying they will simply move operations out of the US and re-orient their business if they aren't granted trade relief.  I don't think they'll get it though because Trump's aim is to hurt the renewable industry as much as possible and SPWR is a huge threat to his donors.  

    Related image

    ABX/Jabob – Well, let's see:  They made $1Bn or about 0.75 per share producing 5.3M ounce of gold at $750/ounce, they reduced their debt by $1.5Bn and plan to reduce ($6.4Bn) by another $1.4Bn in 2018.  Reserves down to 64.5M ounces as they drop Pascau-Luma from their count (30M) and they wrote off losses there, cutting 0.22 from the year's total earnings.  

    Next year they are guiding 4.5-5M ounces production, so less than this year with costs creeping up to $800 so, let's say 5M x ($1,250-$800) = $2.2Bn plus $600M profit on copper is $3Bn gross profit less $1.5Bn loan reduction, $500M interest and taxes and I'd say they will earn about the same in 2018 but without the charge-back should be an improvement.  So 15x $1 is a no-brainer and 20x $1 is possible and, of course, Gold is now $1,350, not $1,250 so that adds $500M (40%) to the bottom line, as will any $100 move higher from here.  

    Guns/Malsg – It drives me crazy.  So many senseless, preventable deaths because a few gun companies are able to bribe politicians to look the other way.  I think the Defense Contractors also like the gun violence as it helps keep up the mindset that we need a strong, aggressive (expensive) military because the World is such a dangerous place.

    Saudis/Malsg – Those guys are masters as spinning things.  We'll see if they can take back $65 on Brent.

  65. Busy data day:

    • Following big gains yesterday, guns stocks are up again in premarket trade amid renewed calls for reform following a mass shooting at a high school in Parkland, Florida.
    • At least 17 people were killed when 19-year-old Nikolas Cruz, a student formerly expelled from the school, opened fire with an AR-15 rifle and multiple magazines.
    • The attack is said to be the 18th school shooting in the U.S. since the start of 2018.
    • Related tickers: AOBC +1.9%RGR +4%OLN +2.4%SPWHVSTO

    Trump said to endorse $0.25/gallon gasoline tax hike

    • Pres. Trump said today he would support a $0.25/gallon increase in federal gasoline and diesel taxes to help pay for upgrading U.S. roads, bridges and other public works.
    • The top Democrat on the Senate Environment and Public Works Committee says Trump unexpectedly raised the idea of the fuel tax increase several times during a White House meeting with lawmakers from both parties.
    • The increase, which has remained at $0.184/gallon for gasoline and at $0.244/gallon for diesel since 1993, would offset some of the cost of Trump's $1.5T infrastructure plan.
    • Groups including the U.S. Chamber of Commerce and the American Trucking Associations support the notion of a gas tax increase as the most efficient and easiest way to generate more money for projects, but Republican leaders have resisted the idea for years.

    Market Cap $15.7Bn at $13.65:  Barrick Gold posts Q4 earnings beat, guides 2018 production lower

    • Barrick Gold (NYSE:ABX+1.1% after-hours as the company reports small beats in Q4 earningsand revenues and forecasts gold production falling over the next four years.
    • ABX says Q4 gold production totaled 1.34M oz. at all-in sustaining costs of $756/oz. and FY 2017 output was 5.32M oz. of gold at AISC of $750/oz.
    • For FY 2018, ABX expects to produce 4.5M-5M oz. of gold, down 6%-15% Y/Y, at all-in sustaining costs of $765-$815/oz.; higher cost guidance primarily reflects lower anticipated gold production from Barrick Nevada, Pueblo Viejo and Veladero and increased processing of higher-cost inventory.
    • During 2019-22, ABX forecasts annual gold production of 4.2M-4.6M oz. at an average AISC of $750-$875/oz., representing a "stable base case" for the business.
    • ABX says it trimmed total debt during 2017 by $1.51B, or 19%, exceeding its target of $1.45B.
    Market Cap $11.35Bn @ $13.20:  Goldcorp +3% as Q4 net profit more than doubles
    • Goldcorp (NYSE:GG+3.2% after-hours as Q4 earnings more than double from a year ago and easily beats analyst expectations, and its program to implement $250M of sustainable annual efficiencies by mid-2018 is on track with nearly $200M achieved in 2017 across the company's portfolio.
    • GG says Q4 gold production of 646K oz. fell 15% Y/Y but full-year gold output of 2.57M oz. edged past the midpoint of company guidance of 2.5M oz.; Q4 all-in sustaining costs of $870/oz. exceeded AISC of $747/oz. for the year-ago quarter while full-year AISC of $824/oz. was in line with improved midpoint guidance of $825/oz., which the company says reflects progress in its sustainable efficiency program.
    • GG expects to produce 2.5M oz. of gold in 2018, in line with previous guidance, with AISC seen declining further to ~$800/oz.; over the longer term, the company forecasts gold production to rise 20% to 3M oz. by 2021 with AISC declining 20% to ~$700/oz.over the same period.
    • Seemingly concerned about what's next for media assets at Fox (FOXFOXA) that are headed into the umbrella of Disney (NYSE:DIS), Ryan Murphy — TV's most prolific producer — has signed a deal said to be worth a hefty $250M-$300M over five years with Netflix (NASDAQ:NFLX).
    • Murphy has been responsible for such Fox/FX hits as Nip/Tuck, Glee, American Horror Storyand American Crime Story over the past 15 years.
    • The total value of the deal depends on viewership targets.
    • The change is unquestionably a blow for Fox, which has four Murphy shows on FX right now (and American Horror Story is FX's top-rated series).
    • It's Netflix's second big deal with one of TV's biggest hitmakers: Last August, it poached Shonda Rhimes from ABC with a five-year deal for at least $100M.
    • Netflix shares gained 3% today, while Fox was mostly flat and Disney closed up 0.5%.

    Amazon to add 2,000 jobs in France

    • Amazon (NASDAQ:AMZN) will create 2,000 permanent contract positions this year in France, its largest market in Europe after Britain and Germany.
    • That will bring its total number of permanent local staff to 7,500 after investing over €2B in France since 2010.
    • Separately, CNBC has disclosed that the tech giant partnered with BofA (NYSE:BAC) on Amazon Lending, a program that provide loans for small businesses that sell on

    Google's ad-pocalypse comes to Chrome

    • Once the unthinkable – that Chrome would block online ads, Google's (GOOGGOOGL) lifeblood – will become a reality today.
    • The new feature stops short of traditional browser extensions, which typically ban all ads, but the move carries plenty of importance because Google's browser dominates the web on both desktop and mobile.
    • According to analytics firm StatCounter, Chrome is used to view about 56% of web pages.