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Thursday Thrills as the Markets Try to Hold Our Bounce Lines

Wheeee, this is fun!  

We had a lot of fun in our Live Trading Webinar yesterday as we shorted the Russell (/TF) Futures at 1,550 after the release of the Fed Minutes led to an inexplicable rally and the Russell fell all the way back to 1,520 at the close for gains of $1,500 per contract in less than two hours – you're welcome!  

What we saw in the minutes was a Fed that is firmly on pace to raise rates 3-4 times in 2018 and, as I predicted in the Morning Report, these was nothing to get excited about and the silly morning rally completely unwound over the course of an hour's trading.  The S&P (/ES) Futures went over our 2,728 "strong bounce" line and topped out at 2,747 on a spike after the Minutes were rolled out (2pm) but then quickly fell back all the way to 2,701, good for gains of $1,350 per contract below our line and, after hours, it drifted even lower, all the way to 2,685 for another $1,300 per contract gain!  

This morning, in an effort to spin the reaction to the Minutes (as we predicted they would on Tuesday), the Fed's Bullard attempted to soften the blow, saying:

The neutral rate is "still pretty low" and the Fed shouldn't hike interest rates based on the conception from the last two decades of the twentieth century, Bullard added. It is "not the world we're living in today," he stated. In the policymaker's words, the Phillips curve effects are so weak that unemployment at 4%, compared to the natural sustainable rate of 5%, adds only seven basis points to inflation. "A lot" would need to happen for four quarter-point hikes in the benchmark rate this year instead of three, he concluded.

The key here is 3.  There WILL be three (3) rate hikes in 2018 – AT LEAST – and that's 1.5 more rate hikes than were anticipated when the market decided to get silly in November.  Yes there are tax cuts, but do tax cuts trump rate hikes?  The Fed MUST hike rates, they can't not hike rates as the US is selling a ton of bonds and, whether the Fed hikes or not, those bonds will command higher rates and the Fed would look foolish if they looked like they can't control the bond market, so the Fed pretends rising bond rates are all part of their plan.

They are also pretending inflation is part of their plan but it's really rising wages that are going to be leading to inflation and that's being brought on by a combination of low unemployment and rising miniumum wages that will have a long, rolling impact on the economy – mostly postive but, in the short-run, it can boost inflation and squeeze Corporate Profits – so not really market-friendly.

While the Federal Minimum Wage remains at a Dickensian $7.25 per hour, 18 states have passed their own laws putting them on a growth path and, already, $10 is the floor in AK, AZ, CA ($11), CO, HI, ME, NY, RI, VT, WA ($11.50) and, if those states don't implode by Summer, you can expect 10-20 other states to have initiatives on the ballot by November and, if that happens, the "biggest" gains we've had since 2008 this year will look like nothing compared to 2019.

Image result for us inflation rate forecast 2018While minimum wages are going up, workers at higher-paying jobs begin to feel more secure in a tight labor market and they too will begin demanding better compensation and that's where Corporate Margins really begin to feel the pinch but it's also the point at which money begins to move again and inflation kicks into a much higher gear than the one we're in now.  It will take a few years, but bet against inflation at your peril!  

As you can see from the chart of Monthly Inflation, prices have gone up 2% since July – that's only 7 months yet most forecasts (including the Fed) are clinging to an annualized rate of less than 2% in 2018 and that would mean the next 5 months would have to average zero to get back on track so every month we see inflation above zero is another nail in the coffin for the inflation deniers.  

Although there's a period of adjustment, stocks do just fine in inflationary periods as they tend to keep up with inflation.  If Apple sells an IPhone for $1,000 and it costs them $650 to make it and their cost of parts goes up $65 (+10%) and they charge you $1,100 (+10%) their profits go from $350 to $385 and now they are making 10% more money per share than they were before inflation – even though they are selling the same number of phones.  Isn't inflation great?  

The tricky part is the time between when their costs begin to rise and the time they are able to pass those costs on to the consumer.  In the case of AAPL, that time is -9 months as they already raises prices tremendously but, for normal companies – they tend to agonize over rasing prices for fear of losing business (and this is why we love AAPL!).  Still, rising wages is the tide that lifts all ships and workers getting 10% raises don't mind paying 10% more for a pack of gum or whatever.

Image result for wages inflation  

As we were discussing in yesterday's Webinar:  Wage increases increase the money supply for Consumers.  With a higher money supply, Consumers have more spending power, so the demand for goods increases.  An increase in demand for goods then increases the price of goods in the broader market.  Companies charge more for their goods to pay higher wages, and the higher wages also increase the price of goods in the broader market.

Don't look for the Government(s) to stop inflation, they NEED inflation to pay off their debts because the US, for example, has borrowed $20Tn at about 2%, half of which is fairly fixed for 5, 10 and 30 years and they would love the GDP to grow, through inflation, by 7% a year from $19Tn to $37Tn over the next 10 years because they would still be paying off notes at the old prices, effectively causing what is a soft default for the bond-holders, who get back money that is worth 50% less than the money they lent out.  With Global Debt now more than 100% of Global GDP – the soft default is our best-case scenario.  

Bond holders (TLT) are catching on, of course.  They may be slow but they are not entirely stupid and bonds have lost 5.5% of their value since Trump was elected, the steepest decline since 1999 and we're only just getting started as there's no putting this inflation genie back in the bottle – especially with the Global Money Supply up 200% since the 2008 crash.  

Between 2008 and 2010, bonds crashed 25% so 5.5% is just a good start for what lies ahead in the bond market – and the Fed wasn't even tightening then!  What's a little disturbing is all the money that plowed into the bond market at ridiculously low rates over the past few years and that's going to be a painful unwinding but, as usual, where else are they going to put their money if not into the stock market?  Until ordinary deposit rates are back over 3.5% – we can still expect inflows to equities – no matter how shaky they look.

Meanwhile, as I said to our Members this morning, this short week is closing fast and we're back to watch and wait mode as we see if our strong bounce lines (see yesterday's Report) can be taken and held but, since they have to hold through the close and then for a full day after that without failing – it's not even possible we can head into the weekend bullish at this point.  

We already pressed our hedges last weekend so not much to do but sit back and enjoy the ride – though we will be looking for some fun Futures plays to pass the time – the most obviousl of which, at the moment, is playing Gold long at $1,327.50 with tight stops below (because the Dollar failed 90) and, of course, Coffee (/KCH8) at $119 - because who doesn't like coffee?

Be careful out there,

- Phil

 


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  1. ~~HMNY - Iinitiated with a Buy at Canaccord Genuity; tgt $15)~~

    CHK – Chesapeake Energy beats by $0.05, beats on revs  (2.63)

    •Reports Q4 (Dec) earnings of $0.30 per share, $0.05 better than the Capital IQ Consensus of $0.25; revenues rose 24.6% year/year to $2.52 bln vs the $1.26 bln Capital IQ Consensus.
     


  2. The day started so well yesterday, punched through the 50 DMA but then the machines took over and probably decided to take some profits!


  3. The NRA spokesperson got a constitutional history lesson from a teacher at the CNN town hall:

    https://www.vox.com/2018/2/22/17038928/cnn-town-hall-gun-debate

    “Define something for me … what is your definition of a well-regulated militia as stated in the Second Amendment and, using supporting detail, explain to me how an 18-year-old with a military rifle is well-regulated? And the world, our country, our nation, is going to grade your answer.”


  4. Good Morning, All!

    The webinar replay is now available!

    https://youtu.be/QDK8Y9oaOV8


  5. While we fight and deny science, China will kick our ass:

    https://www.theguardian.com/science/2018/feb/18/china-great-leap-forward-science-research-innovation-investment-5g-genetics-quantum-internet

    In January, the United States National Science Foundation reported that the number of scientific publications from China in 2016 outnumbered those from the US for the first time: 426,000 versus 409,000. Sceptics might say that it’s about quality, not quantity. But the patronising old idea that China, like the rest of east Asia, can imitate but not innovate is certainly false now. In several scientific fields, China is starting to set the pace for others to follow. On my tour of Chinese labs in 1992, only those I saw at the flagship Peking University looked comparable to what you might find at a good university in the west. Today the resources available to China’s top scientists are enviable to many of their western counterparts. Whereas once the best Chinese scientists would pack their bags for greener pastures abroad, today it’s common for Chinese postdoctoral researchers to get experience in a leading lab in the west and then head home where the Chinese government will help them set up a lab that will eclipse their western competitors.



  6. Phil. I’m on the road. But are you still planning on dinner this Saturday? I’d join. Thanks. 


  7. Phil

    When you talk gold, are you talking YG or GC?


  8. STJ/Science-we are too busy sticking to dogma because it incumbents profit from it.  Expect the rest of the world to continue to surpass us at this rate.  Very sad for the country.


  9. Thankfully we still have companies like Google, IBM and other investing in R&D! 


  10. Good morning!  

    HMNY/Albo – LOL, $15?  Well, let's hope.  Our target is $10 in the LTP and $7.50 in the OOP.

    CHK, of course, was expected.

    Submitted on 2018/02/15 at 12:54 pm

    • CHK – This one is causing us pain and earnings are next week (22nd) so I'm not inclined to adjust until we have more facts.  I'm very long-term bullish on Natural Gas though, so I'm willing to stick with CHK through troubled times.  

    Submitted on 2018/02/16 at 11:42 am

    CHK/Pirate – I was not happy with their last sale but bills were due and they had to sell something.  Overall, I believe LNG exports drive prices up faster than they can go bankrupt…

    Big Chart – All about the 50 dmas still.

    NRA/StJ – That's a good one.  

    China/StJ – Scary how fast they are passing us.  

    Failure at 2,728 – again.  /NQ 6,800 is the power short of the moment (tight stops above).


  11. Dinner/Rexx – Sure, if people want to get together in NYC, that's where I'll be Sat night (Marriott) but need to firm up plans by tomorrow for all interested.

    Gold/Rayne – I use /YG out of habit on ToS.

    Companies/StJ – But it doesn't really do the NATION any good when we privatize science.  That's why Trump's pullback from the ISS is such a terrible thing and defunding NASA is simply idiotic.  If it's not a Russian plot to destroy our country using a puppet President – then the Russians simply lucked out when this idiot got elected.  


  12. Science / Phil – It's not just Trump, it's an entire wing of the GOP that's anti-science. These guys dream of the Handmaid's Tales world. Trump is the useful idiot for Putin and the right wing nuts!


  13. VIX really jumped yesterday. Down a bit today but still close to 20. Some people are still worried a little bit.






  14. Hi Phil,

    You had earlier expressed reservations about selling puts on XOM.  

    It is hovering close to its 5 year low at $75.

     20 $65 puts are $4+. 

    I believe Winston also had asked about this some time back. 

    Given the upcoming inflation, interest rates going up etc.  is this a decent bet going forward or you prefer to wait ?

    Thanks


  15. ~~CenturyLink declares quarterly cash dividend

    MONROE, La., Feb. 21, 2018 /PRNewswire/ — CenturyLink, Inc. (NYSE: CTL) today announced that its Board of Directors voted to declare a regular quarterly cash dividend of $0.54 per share, which will be payable on March 16, 2018, to shareholders of record on March 5, 2018.

    Would think that FTR should announce something soon.








  16. Phil/Dinner,

    Love to join dinner Saturday night.

    Also registered for your Master class. Looking forward to it. Thanks.


  17. Learner XOM I have the stock up for a armchair trade buy stock and sell the jan19 77.5/75 c/p for 10.30

    monthly combined return 1.56%


  18. The Battery Holds the Key


  19. XOM/Learner – I didn't like their last few earnings reports at all.  When they were around $80 I decided still not worth it.  $75 a bit better and yes, net $61 seems like a good price but not one on the top of my radar for value.  I think oil is being artificially held up and will eventually collapse again but who knows when….

    FTR/Albo – Earnings are in 5 days, expect something then. 

    I love the above article that uses "science" and "facts" to prove gun control works.  I prefer math:

    • School shooter + AR15 = 20 dead
    • School shooter + no guns = 0 dead

    It's really not that complicated.  Many countries have successfully applied this formula already…  

    Master class/Ayyaps – Great and good news on the class, I think it's going to be underwitten if all goes well.  If so, you'll get a refund.  We'll figure out Dinner once we know how many are coming. 


  20. Speaking of oil, pulling back from $62 ahead of inventories at 11.

    $1.75 failing again on /RB

    Honey badger don't care:

    25,000 crossed on /YM, 2,720 on /ES, 6,825 on /NQ and 1,542.50 on /TF – still below where we shorted yesterday so – patience. 


  21. Master Class???How do you sign up and when is it?


  22. SWN – My add from Tuesday up big today.



  23. Master Class? I live on the West Coast…I can't get to NYC for the weekend


  24. SWN/Albo – Very good call on them.

    Well, even though I got burned at first yesterday, still starting my /TF scale at 1,545 – just in case it doesn't make it.

    NYC/Millard – Tell Musk to get on that hyperloop!  All you would have to do is lay down in a tiny little tube for 3 hours without peeing and PRESTO! – you're in New York! 


  25. CHK – Up 25%.


  26. Be sure and tell folks if you do a class in Las Vegas…It is easy for son the west Coast to get to…


  27. Phil--why do you think there is no love for ABX?

    Gold continues to be much stronger and ABX is sitting at a 52 week low?

    Why?


  28. us on the west coast


  29. QUIK – can't recall who got me into that one, but if you're around, it's had quite a pullback recently, so DD, wait, or bail?  It's tapping 6 month rising support today so will be interesting to see what happens.


  30. According to midpoint pricing, you can buy SQQQ $20 $30 2020 BCS for net $0!!!


  31. CHK/Albo – Well it was so oversold.  

    Vegas/Millard – We might do Vegas in November but, since I've started doing weekly webinars, not as many people seem to be interested in heading to Vegas.  I like Vegas – good excuse to go!  

    ABX/Jaobob – Lots of debt, rising rates but those people are wrong.  Same as people were wrong about CHK – just takes a slap in the face to make them realize it.  CLF went down to $1.20 in 2016 – traders are idiots, you can't always look for a reason why they are idiots. 

    • Anglo American (OTCQX:AAUKFOTCPK:AAUKY) says it doubled its net profit in 2017 - marking a decisive turnaround from two years ago – cut debt in half and announced its highest dividend in a decade.
    • Anglo's net profit for the year totaled $3.17B, up from $1.59B in 2016, with solid gains across its commodity portfolio, but missed the $3.25B analyst consensus forecast, sending shares lower in London trading.
    • But strong cash returns allowed the company to declare a final dividend of $0.54/share, making its annual payout of $1.02/share the biggest since 2007.
    • CEO Mark Cutifani says Anglo will avoid a return to the big-spending ways that hurt the company and many of its peers two years ago, focusing instead on "small-scale capital, quick-return projects" such as adding a new ship to its underwater diamond mining project offshore Namibia.

    QUIK/MrM – I'm quite certain it wasn't me!  

    2,728 on the nose on /ES.  25,115, 6,825 and 1,547.50 and I still have just the 1 /TF short. 

    SQQQ/Knight – That's a good catch.  Even at $4.50/$4 net 0.50 is a fantastic deal.  I put in a bid for 50 at 0.10, we'll see if it fills.  Not going to mess around trying to leg in though.  

    • Jan. Leading Indicators+1.0% to 108.0 vs. +0.6% consensus, +0.6% prior (unrevised).
    • Coincident Economic Index +0.1% to 103.0.
    • Lagging Economic Index +0.1% to 104.0.
    • February Kansas City Fed Composite Index+17, vs. +16.5 consensus, +16 prior.
    • Manufacturing Index +21 vs. +16 prior.
    • “February was another good month for factories in our region,” said Wilkerson. “A rising number of firms reported higher input and selling prices.”

    EIA Petroleum Inventories

    • EIA Petroleum Inventories: Crude -1.6barrels vs. +1.8M consensus, +1.8M last week.
    • Gasoline +0.3M barrels vs. -0.3M consensus, +3.6M last week.
    • Distillates -2.4M barrels vs. -1.5M consensus, -0.5M last week.
    • Futures -0.15% to $61.59.
    • The 30-year fixed mortgage rate reached its highest level since April 2014, according to the latest weekly survey from Freddie Mac.
    • The average 30-year rate rose for the seventh straight week to 4.40% for the week ending Feb. 22, up from 4.38% in the previous week, and the 15-year rate averaged 3.85%, up from 3.84% a week ago; last year at this time, the 30-year and 15-year fixed rates averaged 4.16% and 3.37%, respectively.
    • After years where buyers had the upper hand because of elevated supply, the market for higher-end, pre-owned business jets is beginning to favor sellers, Bombardier ((OTCQX:BDRAF+1.6%), (OTCQX:BDRBF +1.7%)) CFO John Di Bert told the Barclays industrial conference in Miami. "That absorbs a lot of demand that was out there."
    • In addition to commercial planes and trains, Bombardier previously had $500M in used aircraft inventory but is now "fully sold out."

     

    • Concluding its strategic review, the board ends up rejecting a conditional indication of interest to buy the company for somewhere in the area of $9-$11 per share.
    • CEO Andrew Smith is out, effective February 28. Also out is Executive Chairman Daniel Decker. Replacing Smith atop the company is current CFO Cindy Baier. Replacing Decker atop the board (as non-executive chairman) is Lee Wielansky.
    • Baier joined Brookdale (NYSE:BKD) as CFO just over two years ago. Chairman and CEO of Opportunistic Equities, Wielansky was elected to the board at BKD at about the same time as Baier started at the company.
    • Also out is Chief Administrative Officer Bryan Richardson. His position is not expected to be filled.
    • Source: Press Release
    • Shares are down 20.2% to $7.10.

     

    • Boston Beer (SAM -7.4%) sees full-year EPS of $6.30 to $7.30 to fall well short of the consensus mark of $7.54. The wide range is due to the uncertain volume range indicated in depletions guidance of 0% to 6% for the fiscal year.
    • "We are still seeing challenges across the industry, including a general softening of the craft beer and hard cider categories, more and more start-up brewers opening their doors, and retail shelves that offer an increasing number of options to drinkers," says Boston Beer CEO Jim Koch on the beer environment.
    • Analyst reactions to SAM: Stifel Nicolaus reiterates a rating Hold and $169 price target price, saying it sees a better risk-reward profile in other brewers. Susquehanna analyst Pablo Zuanic is also cautious. "We stay Neutral but our concerns are rising, especially in the context of valuation and the stock’s recent run," writes Zuanic.
    • Previously: Boston Beer beats by $0.06, revenue in-line (Feb. 21)

     

    • Windstream Holdings (NASDAQ:WIN) is up 7.1% and tagged its February high after Q4 earnings where revenues edged expectations and the company took a big writedown in its ILEC business.
    • It posted a net loss of $1.84B after taking a $1.8B noncash goodwill impairment charge tied to the ILEC Consumer & Small Business and Wholesale segments. Operating loss was $1.8B, vs. a year-ago operating gain of $74M.
    • Service revenues grew nearly 15% to $1.48B; it fell 3% on an adjusted-revenues basis.
    • Adjusted OIBDAR dropped 1% to $521M.
    • Service revenues by segment: ILEC Consumer and Small Business, $476M (down 4%); Enterprise, $760M (near flat); Wholesale, $190M (down 8%); CLEC Consumer, $51M (down 5%).
    • Adjusted free cash flow for the 2017 was $143M.
    • The company points to significant improvement in the maturity profile of its balance sheet, with $2B in maturities pushed out an average of more than two years, and no meaningful maturities before 2020.
    • For 2018, it expects service revenue trends "slightly improved" vs. 2017; OIBDAR is seen at $1.95B-$2.01B, and capex of $750M-$800M. It's forecasting adjusted free cash flow of about $165M, assuming cash interest on LT debt of about $385M.
    • Press release

  32. QUIK – Mrmocha  that was me.  QUIK is still my largest position (number of shares), even though it's very speculative.  The company has been almost like a venture capital startup.  They have developed products for smartphones, wearables, and hearables, that enable low power and always on applications, ala ALEXA.

    The revenues should start to ramp up sharply in a few months.  They have announced 9 design wins, and the signing of license agreements with several OEMs.

    I've been around this name far too long, tying up capital, but still think it has great potential.  But as I said, it's very speculative.


  33. Good article:  Tech companies should stop pretending AI won’t destroy jobs

    China has more data than the US—way more. Data is what makes AI go. A very good scientist with a ton of data will beat a super scientist with a modest amount of data. China has the most mobile phones and internet users in the world—triple the number in the United States. But the gap is even bigger than that because of the way people in China use their devices. People there carry no cash. They pay all their utility bills with their phones. They can do all their shopping on their phones. You get off work and open an app to order food. By the time you reach home, the food is right there, hot off the electric motorbike. In China, shared bicycles generate 30 terabytes of sensor data in their 50 million paid rides per day—that’s roughly 300 times the data being generated in the US.

    government policies are accelerating AI in China. The Chinese government’s stated plan is to catch up with the US on AI technology and applications by 2020 and to become a global AI innovation hub by 2030. In a speech in October, President Xi Jinping encouraged further integration of the internet, big data, and artificial intelligence with the real-world economy. And in case you’re wondering, these things tend not to be all talk in China—as demonstrated with its past policies promoting high-speed rail and the mass entrepreneurship and innovation movement. In comparison, things get bogged down in the US. Consider the way President Barack Obama’s loan guarantee to solar-panel maker Solyndra was hammered as crony capitalism. Truckers are now appealing to President Donald Trump and Congress to stop testing of autonomous trucks.

    The rise of China as an AI superpower isn’t a big deal just for China. The competition between the US and China has sparked intense advances in AI that will be impossible to stop anywhere.


  34. China/StJ – I don't know why, but the English-speaking West at least completely ignores the technological (and economic) prowess of Korea. Korea's economy is better than either China or Japan. In scientific research, the small school, CalTech/MIT clone where I work just added 15 international students. A friend from Egypt, just starting his PhD and finishing his MS, tells me access to facilities here is much better than in his country. Another friend from Pakistan says this school is probably the best in the world for medical robotics. Students from Iran, India, Bangladesh, Indonesia are encouraging their friends to come here, and we do have students from China, a few from Latin America, and even a couple from Russia and France. A young Iranian woman, good friend, just finished her MS, and her parents came here from Iran for the commencement ceremony, very pleasant couple. She's going to Canada for her PhD. Korea is kicking the US' butt in science and tech, and more, our students are going everyplace but the US for further studies and jobs.


  35. I have 1 /ES short at 2730, scaled in starting at 2725 and back out to get there 


  36. Learner – XOM – there may be worse trades than selling a few 2020 $65 puts for $4.00, but I helped myself to a few. Every now and again it pays to offer something to the Trading Gods. 


  37. QUIK / Albo – thanks for the quick reply, I'll hang in there and see what happens!


  38. Korea/Snow – The US tends to ignore anything that isn't the US and, frankly, there's China, Japan and "Asia" and Korea is lumped in with Asia other than North Korea, who are "bad guys".  That's about as complex a though as Americans are likely to give the situation.  Even now, with the Olympics on 24/7 for 2 weeks, if you asked Americans the capitol of Korea, there's pretty much no chance they'd know.  

    Most of my daughers' friends can't name name all 4 states that start with "New" or (and I just asked this one yesterday), who was the first Vice-President so expecting Americans to pay attention to NoKo's technological prowess is a real stretch.  Anyway, you guys suck compared to Wakanda – anyone can tell you that!  

    And that, in a nutshell, is why this country is losing it's edge.  It's never been about shipping jobs overseas – it's about dumbing down our population so they'll vote for carpet-baggers and not their own self-interest while the carpet-baggers sell the country out from under them.  It's been going on for 40 years and there's no sign of stopping and, two generations after Reagan's attempt to eliminate the Dept of Education (he settled for standardized tests, which effectively did the same job), we don't have people smart enough to teach our children – even if we wanted to.  

    Image result for us view of the world


  39. Phil, Winston,  Thanks for the XOM feedback.  


  40. Actually, Phil I was in Uber with a driver from South Korea and he was complaining that lots of people think that Winter olympics is happening in North Korea due to similarity in the names :-)


  41. It's been a great four years for my Twins - and their teachers kick ass too…check out the bios!

    https://www.hightechhigh.org/


  42. 1020/Schools 

    Looks amazing!


  43. That looks good 1020.  Jackie was offered a special tech program to study at Columbia but it's like every Saturday morning so she's weighing whether or not to make the commitment.   It's very prestigious and would lock her down for an Ivy League College but I'm not pressuring as I probably wouldn't have done it my Junior year in High School.  It's funny because she only just decided to be a coder (pays a lot, you are your own boss, work your own hours, chance to hook up with a hot start-up and be set for life) and she's already great at it.  

    Anyway, our local schools are not great and barely good but you can get something out of them if you push but it is very much up to the parents.  Tina has been super-active from day one pushing the schools to offer better programs for advanced students.  If not for that, I would have had to pull my kids ages ago.

    Wow, another big sell-off.  10 points on /TF already.  

    Still just the 1 contract though…  frown


  44. 1020

     Where is the school located?

    Thanks


  45. qcmike – The schools are located in San Diego County.


  46. Phil – I would suggest Jackie go for it…if anything, it's give her an idea of whats to come and possibly open doors never considered. She does not need to worry about any 'locks'

    Jennifer thought she would like to work in a lab setting. She spent her first (mini) internship at Genentech and though that was cool, then, she interned for a semester at a lab at Cal State San Marcos.

    She was not wild about her time in a windowless lab with her little mice friends. :)

    She is giving Politics a whirl for her Senior internship and will working for the Sara Jacobs for Congress (Darrell Issa's seat) campaign. So far So Good. 

    https://www.cosmopolitan.com/politics/a17980879/sara-jacobs-interview-california-congress/


  47. Anything to kick Issa out of Congress sounds good 1020… Although I think that he already got the message that he is unwanted there.


  48. Phil – "it's about dumbing down our population so they'll vote for carpet-baggers and not their own self-interest while the carpet-baggers sell the country out from under them."

    An educated populace is a dangerous thing and sheep are far easier to lead to slaughter.  Silence of the lambs indeed and Out.


  49. Windows/1020 – Good point.  My attitude with Jackie is she's going to do great no matter what so I want her to enjoy her childhood as well.  Oddly enough, she's the one that's driven to be the straight A student – I tend to push her to do more fun things.  Anything we can do to help unseat Issa, count us in!  

    Well, you can't keep a good market down… Or this one, either…


  50. The Girls sound very much alike. Jen is a very good artist as I know Jackie is as well and like you, I can't take credit for her 4.3 GPA. She's been happily marching to her own beat for some time now…. :)


    • Consumer Reports lists its top ten cars of 2018 by category. The rating was based on road test, reliability, owner satisfaction and safety.
    • Compact car: Toyota Corolla
    • Compact green car: Chevrolet Bolt
    • Luxury compact car: Audi A4
    • Midsized car: Toyota Camry
    • Large car: Chevrolet Impala
    • Minivan: Toyota Sienna
    • Compact SUV: Subaru Forester
    • Luxury compact SUV: BMW X3
    • Midsized SUV: Toyota Highlander
    • Full-sized pickup truck: Ford F-150
    • St. Louis Fed President James Bullard says, "Everything would have to go just right," and the economy would have to surprise to the upside a bunch of times in order to get 100bps in rate hikes in 2018.
    • It's unlikely that below target inflation of recent years will materially surprise to the upside this year, he adds.
    • The market expects the Fed to raise rates at least 3 times in 2018, with the first one at next month's meeting.
    • Previously: Fed's Bullard tries to talk down inflation worry (Feb. 6)

    ?Crude oil, energy equities rise after surprise inventory drop

    • Crude oil prices are climbing, reversing earlier losses, after U.S. crude stockpiles fell unexpectedly by 1.61M barrels in the week ended Feb. 16, compared with analyst consensus for a 1.8M barrel increase.
    • Oil in storage in Cushing, Okla., the delivery point for Nymex WTI futures, dropped by 2.7M barrels, and WTI crude currently +2.2% at $63.03/bbl; Brent crude +1.7% at $66.52/bbl.
    • “Even though refinery runs dropped below 16 million barrels per day for the first time since the aftermath of Hurricane Harvey, lower net imports have resulted in a draw,” says Clipper Data director of commodity research Matt Smtih. “The big jump in crude exports appears to have been because the EIA included the first export cargo from LOOP in last week’s number."
    • Energy (XLE +2.2%) is by far today's top gainer among industry groups; some of the biggest movers are CHK +22.8%WLL +25.5%GPOR +17%XOM +2.2%COP +2.9%OXY +2.1%APC +3.1%HES +4.1%MUR +4.3%ETP +4.2%ETE +3.5%EOG +2.5%RIG +4.8%SWN+8.8%.

     

    • Morgan Stanley outlines the weakness in Gogo’s (NASDAQ:GOGO) earnings report.
    • Analyst Simon Flannery says the FY18 outlook for adjusted EBITDA and Commercial Aviation revenue missed estimates. The company cut its 2Ku install expectations while raising the capex view. 
    • Flannery disagrees with the forecast’s calls for operational improvements and thinks the ramp will fall short of expectations.    
    • Morgan Stanley rates Gogo at Underweight with a $7 price target. 
    • Source: Bloomberg First Word 
    • Gogo shares are down 14.8% to $8.95.    
    • Previously: Gogo +7.4% after Q4 revenue beat, in-line guidance (Feb. 22)
    • A redesign of Snapchat (SNAP -7.3%) is continuing to pile up negativity, and longtime bear MoffettNathanson reiterated a Sell rating on Snap with an eye to what it says is 45% downside.
    • Meanwhile, social-media celebrity Kylie Jenner returned from a social-media hiatus after the birth of her daughter, but with one conspicuous opinion: "Sooo does anyone else not open Snapchat anymore? Or is it just me… ugh this is so sad."
    • Jenner tweeted in the immediate aftermarket period yesterday and the stock didn't react at the time.
    • Meanwhile, CEO Evan Spiegel got $637.8M in total compensation as the company went public last year — the third-highest payout ever received by a CEO (behind two payments to Och-Ziff CEO Daniel Och).
    • Barrick Gold (ABX -0.4%) predicts ongoing gold production declines over the long term but says four key projects could add more than 1M oz. to annual output starting in 2021, including three Nevada development that have been approved to proceed.
    • ABX forecasts gold production of 4.5M-5M oz. for 2018 and average annual output of 4.2M-4.6M oz. during 2019-22 at average all-in sustaining costs of $750-$875/oz.
    • Rival Newmont Mining (NEM +0.1%), which reported Q4 earnings today, expects to exceed ABX's forecast, seeing production of 4.9M-5.4M oz. of gold in 2018 and 4.6M-5.1M oz. annually through 2022.
    • ABX also says COO Richard Williams would step down to take on a new role focused on talks with Tanzania for the company’s troubled Acacia Mining (OTCPK:ABGLF) unit.

  51. Phil / Retirement –  I've been asked by my sister to figure out what pension survivor benefits they should should sign up for.  They have various survivor options from 0% to 50% and I also know SS pay an survivor benefits…. I've calculated it out myself but want to check…. do you know of a good website to do this on?

    If anyone on the site has input I'd love to have it.


  52. Phil, after reading your latest posts, I got deja vu all over again.


  53. SQQQ/Phil – teaching moment? I was interested in your response to Knight re; going out to 2020 on a BCS for SQQQ. I guess if you get it for very low cost or free it might be considered "well there's no real risk" so why not. However to actually make a return it appears from the long term charts (2-5yrs) of SQQQ or TZA or any other levered inverse ETF that they seem to continually erode fairly rapidly over time and also reverse split on a fairly regular basis making it unlikely to make a profit or act as an effective short term mkt rapid downturn portfolio hedge. Wouldn't it be better to limit time frame to 3 – 9 months max on such ETFs and then reload if the mkt goes through any prolonged downturn? I do like using them in "my" OOP and just made a nice return on TZA (200% thanks Phil) from mid Jan to mid Feb so I'm not against the products, just don't think I've seen you considering going so far out. As always thx for all the great info you impart on a daily basis! 


  54. CHK slide show.  

    NRZ is looking impressive with a 12% dividend:

    NRZ has good options out to 2020 so that makes them more attractive and we can pick them up for the LTP as:

    • Buy 1,000 shares at $16.61 ($16,610) 
    • Sell 10 2020 $15 calls for $1.95 ($1,950) 
    • Sell 10 2020 $15 puts for $2.10 ($2,100) 

    That's net $12,560 ($12.56/share) and we collect $2,000/yr in dividends so 16% on just the dividends plus another $2,390 if called away at $15 for a total profit of $6,390 (51%) on our $12,560 investment in two years but, hopefully, we'll be able to keep it for many more. 

    In other REITs we love:

    CIM is $16.92 but selling Sept $16 puts is only 0.80 and Sept $17 calls are 0.60 so, despite the fact that I love them – they simply aren't paying enough.

    NLY is $10.21 and this one we can play as it's too cheap.  For the LTP and the OOP:

    • Buy 1,000 shares NLY at $10.21 ($10,210) 
    • Sell 10 2020 $10 puts for $1.80 ($1,800) 

    That's net $8,410 and we're not selling calls because they are too cheap and I hope they go lower so we can buy more!   Dividend is $1.20 ($1,200)/yr so nice 14.2% while we wait to lower our basis even further.  

    ARR is another one I like, especially on Sept 19th and they are right at $22.50 and the October contracts are out and have $22.50 strikes so we may as well pull the trigger on these too for the LTP:

    • Buy 1,000 ARR at $22.50 ($22,500) 
    • Sell 10 Oct $22.50 calls for $1 ($1,000) 
    • Sell 10 Oct $22.50 puts for $2 ($2,000) 

    That's net $19,500 ($19.50) and they pay $2.28 (11.7%) but it's only 240 days vs 694 so 2 more sales at $3,000 drops us to $13,500 and drives the dividend to 17% – so it's the best of the bunch other than we have to make our sales in 3 rounds and I do prefer the better protection of collecting more up front.  Still, great stock, great dividend and a nice fit for the LTP.

    We'll see how those go before adding any more.  


  55. AAWW    I mentioned them the other day.  +16% after earnings


  56. Korea/Snow – thanks for the update. How would you play a strong Korea? $KF has had a good run, but looks like rolling over a bit just now..


  57. Phil, the mortgage REITS have been pretty hammered since rates started rising in the fall. Aren't  you concerned that rates have a long way to go before they level off and the MREITS could go a lot lower here? Thanks.


  58. Phil/RB- think it is a good short closer to 1.99 over the weekend? The liquidation date for March contract on IBrkr is Monday. There is a differential of .20 between March and April. 


  59. VIX still at 20


  60. Speaking of propping, it felt like there was a big dump coming at the close but someone just kept popping it back upwards…


  61. Art/1020 – That's Maddie though Jackie is really good at art too (which pisses Maddie off).  In fact, I think she doesn't do it only because it's "Maddie's thing".  I wish I had a picture but, in the summer, she painted landscapes on 3 of her friends' backs for a party and they were fantastic.  Maddie saw them and said "Why does everything come so easy for her?"  It's very frustrating to be the sibling of a prodigy – now I understand how annoyed my brothers were with me!  cool

    By the way, last summer I handed Jackie my checkbook and told her to download quickbooks and figure it out.  She's been doing all my bookkeeping ever since for $200/month – great deal for me, fallback skill for her.  I don't see junk mail anymore and she's even meeting with the accountants to do my taxes next month.  You should try that with Jen – no point in having a smart kid around if you don't put them to work!   On the downside – I can't tell her we can't afford something…

    Retirement/Batman – Do you mean the Veteran's benefit?  I'm no expert in that stuff.  The SS benefit thing is complicated, I don't think there's a rule of thumb as it very much depends on your family's situation and, of course, how much you need the money now vs. later and, if later, then what can you invest in now vs letting the Government hang onto it.

    Image result for deja vu all over again

    Related image

    Hey, /KC finally perked up:

    I love it when my portfolio jumps up and I have to figure out why – it's like a really fun treasure hunt!  

    SQQQ/Airvine – Ah grasshopper, you are only thinking one-dimensionally.  I want to have 50 of the SQQQ  $10/20 bull call spreads for $2,500 (0.50) or less because THEN I can sell 10 of the April 20 calls for $1 ($1,000) and collect 40% back on my money in 57 out of 694 days.  I have no fear at all of SQQQ burning me to the upside because I'm 5x covered and, if it goes lower, I can still sell lower calls to cover another $1,000 so my desire to own them at that price has nothing to do with hedging (we already have hedges) – it's about setting up a good position that allows me to sell monthly premium.   Whether or not there's any value left in the spread 694 days from now is incidental as I expect to collect roughly $10,000 selling short-term calls.  

    AAWW/Stock – Fails my screen because they only make $42M at $1.6Bn (p/e 40).  Also, it takes me weeks to study a new REIT before I decide I like their holdings and trust their management so I am loathe to jump on new ones.  I've been watching NRZ since summer and badly regretted not jumping on them when they spiked down to $15.24 a couple of weeks ago so I decide to pull the trigger now after reading their presentation.

    REITs/Jet – That's why we're only spending $40K (one allocation block) in a $500K portfolio.  Plenty of room to double down if they get cheaper.  The Fed is on a slow, steady pace – not the maniacal tightening Greenspan put people through but that's the kind of pain that's priced into the REITs at the moment. 

    If you are not going to buy when things are cheap – when are you going to buy?

    /RB/Ravi – $1.99?  Where on earth is it $1.99?  Do you mean $1.79?  Do you mean /RBJ8?  That's $1.96 for April but no, I wouldn't short without a reason this low in the channel and give them a whole weekend to screw me over:

    Fed/Pstas – They certainly won't be supporting them like they used to.

    Dump/MrM – All I care about is they keep failing the 50 dma and, as I just told a reporter, it seems to me we're consolidating between the 50 and 200 dma for a move lower, not higher.  If we were going higher – there wouldn't be so much resistance at levels we've passed already.  


  62. scottmi/Korea – huh – playing Korean stocks is not something I've considered – the big Korean companies are heavily family owned (here called chaebol, same as Japan's zaibatsu) and hence often manipulated (not to say US stocks aren't), and the currency is heavily tied to the dollar, so fluctuates with that. Korean men are absolute fools for easy money, so there are many experienced scammers around, and the stock market is a favorite haunt. This (and the NK manipulation) is one reason Korea was going to shut down the crypto currency exchange (until the head regulator espousing the shutdown suddenly died of a heart attack – stress of the job is the reported reason).

    In short, I'll have to think about that.


  63. Phil/RB- yes I mean the April contract which is 1.96 and I hope ‘they’ will push it close to 1.99 or higher before 2.30pm tomorrow. 

    I stopped trading the March contract early this week as 27th Feb, Tuesday 9 am is the liquidation cut off at IBrkr. 


  64. Mueller files new charges against Manafort and Gates




  65. Long-term mortgage rates climb to 4.40 percent








  66. CEO of Anbang (huge Chinese Insurance) is removed for fraud and embezzlement – Fun! 

    Chinese Regulator to Take Over Anbang Insurance

    China’s insurance regulator said it will take over Anbang Insurance Group for a year, as the company’s illegal practices may threaten its solvency.

    They were going to buy Starwood at one point!  The bought the Waldorf Astoria for $2Bn.  This is why I'm very reluctant to invest in Chinese companies – when a massive company like that can be rife with corruption, hard to say anything is safe. 

    The move is Beijing’s biggest effort yet to rein in a new kind of Chinese company, in this case one that spent billions of dollars around the world over the past three years buying up hotels and other high-profile properties. The rise of these companies illustrated China’s growing economic might, but Chinese officials had grown increasingly concerned that they were piling up debt to make frivolous purchases.

     Anbang in recent years also purchased the Westin St. Francis hotel in San Francisco, the Loews Santa Monica hotel in California and the Fairmont Chicago hotel, among other properties. Anbang offered more than $13 billion for Starwood Hotels and Resorts before abandoning its bid in 2016.

    Mr. Wu, Anbang’s chief, had sought to extend his political ties in the United States. In November 2016, he met with Jared Kushner, the son-in-law and a top adviser of President Trump, in a bid to buy a stake in a Manhattan office building partly owned by Mr. Kushner’s family company.

    Move along folks, nothing to see here…


  67. $258Bn week capped with 7-year note sale that went off at 10% higher interest and 10% lower bid/cover ratio:






  68. Russia’s Man In The White House



  69. Good morning!  

    Well, "THEY" seem determined to close this week near those highs and that SEEMS bullish for the week:

    But really, it's not bullish at all:

    Just a strong bounce that is still failing and – even if they take the lines – it don't mean a thing for a single day.  So we will ride the snake for the day:

    Ride the snake, ride the snake
    To the lake, the ancient lake, baby
    The snake is long, seven miles

    Ride the snake, he's old, and his skin is cold