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Federally Funded Wednesday – S&P About to Retest 2,640 as Fed Withdraws Stimulus

Yawn, are we there yet?

This is the same chart we were using since the beginning of February and, in March, the markets have been full of sound and fury which has signified nothing as all that bluster has us right back where we started, with the S&P 500 finishing yesterday's session at 2,716 – exactly 3 points higher than we were 30 days ago.  

When we did finally break out over the Strong Bounce Line at 2,728, the S&P flew all the way up to 2,800 (3/12 and 3/13) when I said we were going to short the S&P (/ES Futures) back to 2,400 and we hit 2,700 (up $5,000 per contract) on Monday and 2,720 is a weak bounce from that.  My comment on the overall market was:

"I said we plan on deploying more cash when the S&P drops to 2,400, which is 15% down from the current 2,800 but that includes people paying $1,600 for a share of Amazon (AMZN) that generated $4.56 in profit last year for a return of 0.285% – Japanese bond investors laugh at Amazon shareholders!  Come on folks, this is ridiculous – markets can't sustain these kinds of gains."  

Now you know what I meant by that comment – markets can't go up just because – there needs to be real money flowing in and a real economy to sustain it – we have neither of those things.  Yes, the economy is growing, but not fast enough to justify those kinds of market moves and that's why we have our 5% Lines™, especially our Must Hold Levels™ – to remind us where the REAL value is in the markets and that keeps us from losing our heads and chasing ridiculous valuations.  

It also tells us when things are too cheap and, just like there was a mania to buy stocks at sky-high valuations, there's a mania to sell perfectly good stocks like GE (GE), L Brands (LB) or Chipotle (CMG) at fire-sale prices – surprisingly in the midst of the same rally (see our March 12th Top Trade Review for those trade ideas). 

Even now, Amazon (AMZN) added back $41.50 (2.7%) yesterday as it retests $1,600, which is almost an $800Bn market cap – just 10% less than Apple (AAPL) who made a $48 BILLION profit last year.  And how much did AMZN make last year?  $3Bn.  So AMZN can doulbe ($6Bn) and double ($12Bn) and double again ($24Bn) and it STILL wouldn't be making 1/2 of what AAPL already makes yet traders are considering them of essentially equal value now?  

That's what is ridiculous and unsustainable about the market and what's most ridiculous is that we're too scared to short AMZN because, no matter how crazy you think traders are – they can be even crazier than that!  And you will hear blowhard analysts and TV pundits gushing over Amazon while they open up grocery stores and retail stores that CAN NOT POSSIBLY sustain the margins that their on-line business has (in theory – it's never actually made money but that's another article).  

Like Tesla (another massive scam disguised as a company), Amazon sustains themselves by misdirection – constantly entering new businesses and rolling out new product – even though the old ones don't make any money.  Amazon makes money selling cloud computing, not selling products, yet the cloud computing aspect of Amazon is facing slowing growth and Oracle (ORCL) just dropped 10% after reporting that cloud revenue growth continues to slow and margins are being squeezed.  

Now, an Amazon optimist may say that AMZN is taking their market share but it's not just AMZN, it's MSFT, IBM and DELL and GOOGL – tough competition for ORCL and AMZN yet all of them are growing because cloud computing is new and exciting and AMZN just so happened to have a huge competitive advantage because they had to maintain a massive computer presence for their own operations (as does GOOGL), so it was very profitable to use those same computers to service the needs of other companies as well.  

For Alphabet (GOOGL), who make $13Bn a year and carry a $762Bn valuation, cloud services add 10% to their bottom line and for Microsoft (MSFT) cloud services are now 28% of their $21Bn in profits against their $717Bn valuation.  IBM (IBM) did $15Bn (18%) in cloud revenue last year out of $80n in sales and AMZN did $14.5Bn (8%) out of $178Bn in sales but cloud profits for Amazon accounted for $3.5Bn of the $3Bn the company made in 2017.  

Wait, isn't $3.5Bn more than $3Bn?  That's right, the other 92% of AMZN's operation runs at a $500M loss.  What analysts get wrong when projecting Amazon's growth is that they extrapolate the company's growth in retail sales and then assume profits will grow along with them but this is what happens when a company has so many different revenue streams – you need to look at them separately, not together. 

In Amazon's case, the more they grow retail, the more they have to sell just to break even and the easy money has already been made on the cloud and the competition for go-forward Dollars is going to be fierce and Amazon isn't actually a tech company – they are a company that bought a lot of tech, had extra space on their servers and had the great idea to rent out something they had already paid for.  The big boys will eat them for lunch down the road.  

Fortunately for AMZN, that lunch can be eaten at Whole Foods as Bezos has prayed at the Temple of Musk and bought that company (and their profits) to distract you from the fact that AMZN itself doesn't have any.  Look over here – groceries!  No, over here, Echo!  No, over here, Prime!  That's what Tesla does with their Gigafactory and SpaceX and Boring Company, Hyperloop and Solar City – Elon Musk keeps you distracted long enough to hide his actual financials behind the curtain while promising the illusion of profits in – THE FUTURE!!! 

Well, investors, like voters, are pretty much idiots and they will walk right past a company like Apple, that is ACTUALLY making $12Bn PER QUARTER now for a company that makes less than $1Bn per quarter just because AMZN is willing to bullshit investors while Apple, who make more money than any other company on Earth, tends to be quiet and conservative in their outlook.  

Here's a handly chart illustrating Revenue (outside circles) vs Profits (inside dots) for the World's Top 100 companies in 2016 (nothing more recent).  As a rule of thumb, we like the ones with bigger dots!  

Top 100 Companies Revenue vs. Profit

Until insane valuations on companies like Amazon and Tesla are washed out of the market – we're going to remain very cautious at these nose-bleed highs.  

 


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  1. Good morning all!

    Join us for the webinar at 1pm!

    https://attendee.gotowebinar.com/register/5126315024369424641


  2. Back at the Big Chart HQ! Every time it looks like we have a potential trend, something happens in the other direction.


  3. I would also like to add my congratulations to Putin for a beautifully organized rigged election!


  4. How will Facebook change:

    https://www.vanityfair.com/news/2018/03/facebook-will-never-be-the-same-after-the-cambridge-analytica-scandal

    Whether Facebook is inevitably broken up is nothing more than a guessing-game right now. As one investor recently told me, even if it is dismantled--and Facebook, Instagram, WhatsApp, and Oculus are split into separate companies--it won’t really change all that much from a consumer standpoint. It would, however, change a lot from a data standpoint. The more you use Facebook’s products, the more Facebook’s products get to use you, collectively knowing more about you than you know about yourself. Creating big, beautiful walls between that data could really hurt Facebook’s ability to micro-target its ads the way it does so incredibly well today. What is clear to everyone, whether you’re Facebook, Cambridge, Parscale and Trump, or just an average user who likes to post pictures of your kids on the social network, is that the data the company collects is unfairly being used to manipulate the 2.25 billion people who use the platform—to sway opinion, incite outrage, create division—and Facebook can’t just pretend to get out in front of its problem any longer. Something has to change.


  5. GIS – Yesterday, there were discussions on our board.  scottmi? 

    GIS down 10% pre-market after earnings. Yield now at 4.3%


  6. Good morning!

    GIS down on profit warning as inflation (what inflation) squeezes margins and their customers have no money to pass costs along to.  This is how Stagflation destroys an economy.

    /RB testing $1.99, I have 2 short now avg $1.9857 and one short /CL at $64.17 which I'll DD at $64.83 if we get there but, otherwise, I'd rather DD on /RB again just below $2.

    Welcome back, StJ!  

    Big Chart – 3 50 dma failrues and the Nas is resting right on theirs so 6,820 and bust if they fail and that makes /RTY the laggard, now 1,576 so I'd poke a short below 1,575 with tight stops above and again at 1,580 but, over that and I'd say the Nas must be out of danger anyway – so the premise would be blown. 

    Putin/StJ – What does the average Russian on the ground think?  

    FB/StJ – I don't think this is over by a long shot.  


  7. Russians / Phil – It really depends on who you ask! It's amazing how some very smart people are drinking the Cool-Aid there although I got one guy to finally admit that they don't have a free press there which of course makes a democratic process almost impossible. But they are being bombarded by so much propaganda in Russia, it's hard for the average person to have an informed opinion. And of course part of the propaganda is to tell Russian people that what they hear from outside it all fake news so you really have to fight the message! But some who in general travel outside of Russia have a clearer view of the problem. 


  8. FB / Phil – The problem might be that the changes that are needed makes them less attractive to data buyers (legal and illegal it seems). So fewer revenues and probably more regulations. Not a good combination. I am off the platform myself.


  9. This is also a fun chart:

    Money Made Per Second

    • Stocks are off to a flat open ahead of the Fed's release of its latest policy directive at 2 p.m. ET today; Dow and S&P -0.1%, Nasdaq flat.
    • The market is all but certain of a 25 bps hike in the Fed funds target range to 1.50%-1.75%, so attention with focus on projections for economic growth and interest rates, and if the Fed thinks it will raise rates three or four times this year.
    • European markets are lower, with Germany's DAX -0.3%, U.K.'s FTSE -0.4% and France's CAC -0.5%; in Asia, China's Shanghai Composite ended -0.3% while Japan's Nikkei was closed.
    • In U.S. corporate news, General Mills -9.6% after issuing below-consensus profit guidance for FY 2018.
    • Among S&P sectors, energy (+0.8%) shows relative early strength while consumer staples (-0.6%) exhibits relative weakness.
    • U.S. Treasury prices extend yesterday's losses, pushing yields higher across the curve; the benchmark 10-year yield is up 2 bps to 2.90% while the Fed-sensitive two-year yield also is 2 bps higher at 2.36%, marking a nine-year high.
    • U.S. WTI crude futures +1.3% at $64.39/bbl, hovering near a six-week high.
    • Still ahead: existing home sales
    • Congress missed another deadline to unveil a $1.3T spending bill as talks continued overnight with just days remaining for House and Senate votes to avert this year's third government shutdown.
    • Lawmakers had hoped to announce a bill by the end of the day Tuesday, but disagreements lingered over immigration, border security, tax breaks and funding for the Hudson rail project.
    • Finance ministers and central bankers from the Group of 20 countries failed to reach a shared outlook on trade after two days of talks in Argentina, but the communique released recognized the "need for further dialogue and actions."
    • Attendees also reaffirmed a set of principles that had been adopted last year at the G20 summit in Hamburg by continuing to "fight protectionism, including all unfair trade practices."

    • MBA Mortgage Applications
    • Composite Index: -1.1.% vs. +0.9% (W/W).
    • Purchase Index: +1.0% vs. +3.0%.
    • Refinance Index: -5.0% vs. -2.0%
    • 30 year mortgage rate at 4.68% vs. 4.69%.
    • The UK wage growth picked up and the jobless rate unexpectedly dropped, propelling Bank of England to raise interest rates in the coming months.
    • The report followed annual inflation that slowed in February reflecting the shrinking gap between wages and inflation indicating that the cost of living squeeze in UK households may be coming to an end.
    • The unemployment rate fell to 4.3%, below the consensus forecast of 4.4%.
    • The number of people in employment rose by 168,000 in the three months to February, while the claimant count rose by 9,200.
    • British factory orders book balance fell to +4 in March, following +10 in February, however, data remains well above the long-run average of -14
    • "Robust global growth and the low pound have gifted UK manufacturers a strong first quarter in 2018," CBI economist Anna Leach said.
    • "Confidence among manufacturers will have been given an additional boost by the agreement of a transition deal, giving them the confidence to continue investing and planning for growth," she said.

    U.S. crude supply fell 2.74M barrels last week, API says

    • The American Petroleum Institute reportedly shows a draw of 2.74M barrels of crude oil for the week ending March 16, vs. a build of 1.15M last week.
    • Gasoline reportedly shows a draw of 1.06M barrels and distillates show a draw of 1.92M barrels.
    • Nymex April crude recently was $63.76/bbl in electronic trading, above today's $63.42 settlement price.

    Solar companies shine on optimism over tariff exemptions, panel pricing

    • Shares of U.S. solar companies enjoyed their best day in nearly a month, headed by a 10% surge in rooftop installer Vivint Solar (NYSE:VSLR), although theories behind the rally vary.
    • Garvin Jabusch, chief investment officer at Green Alpha Advisors, cites optimism that some U.S. companies will win exemptions from import tariffs; SunPower (NASDAQ:SPWR), whose case for an exclusion is "particularly strong," soared 7.6% in today's trade.
    • The possibility of lower tariffs would mean lower panel prices, which would be good news for installers such as VSLR and Sunrun (NASDAQ:RUN), Jabusch says.
    • Also, an optimistic sales forecast from Canadian Solar (NASDAQ:CSIQ) may have helped lift peers, and CSIQ's strong sales in Latin America, Australia and the Middle East may indicate that trade barriers in the U.S. may be offset by increased revenue elsewhere, Jabusch says.

    Chinese control of cobalt supply is risk for car industry, Glencore CEO says

    • The world's automotive industry is "waking up too late" to the fact that China will hold most of the world’s supply of cobalt, a key metal for electric vehicle batteries, says Glencore (OTCPK:GLCNFOTCPK:GLNCY) CEO Ivan Glasenberg.
    • “If cobalt falls into the hands of the Chinese, you won’t see EVs being produced in Europe etc. They are waking up too late," Glasenberg said today at the Financial Times Commodities Global Summit. "I think it’s because the car industry has never had a supply chain problem before.”
    • The CEO said he nevertheless could sell cobalt mines in the Democratic Republic of Congo – home to more than 60% of the world's cobalt production – to China if the price is right; Glencore, the world’s biggest producer of the metal, agreed last week to sell a third of its output to China’s GEM.
    • Expectations of supply shortages have sparked a rally that has lifted cobalt prices to ~$39/lb. from near $10 in January 2016.
    • First Quantum Minerals (OTCPK:FQVLF) says Zambia’s tax agency has issued the company an ~$8B bill for unpaid import duties; shares plunged more than 12% to C$18 on the Toronto Stock Exchange today before trading was halted.
    • First Quantum, which owns two copper mines in Zambia and has a $12B market cap, denies it owes the funds.
    • The tax assessment would be a “new significant risk for the company,” says Jefferies analyst Christopher LaFemina, as nearly half of First Quantum’s estimated value and ~80% of its estimated 2018 pre-tax earnings come from its Zambian copper assets.
    • Tesla (NASDAQ:TSLA) shares slipped into a bear market on Tuesday as analysts increasingly see the automaker entering a "make-or-break year" and critical phase in its history.
    • Goldman Sachs backed up its Sell rating the day before on forecasts that quarterly deliveries will fall short of estimates amid balance sheet woes.
    • Tesla is also the most shorted stock in the Nasdaq 100 at 22.8% of its float.
    • FedEx (NYSE:FDX-0.5% premarket despite posting better than expected FQ3 results and upbeat guidance, leaving the stock below its 50-day moving average of $253.80, but analysts pile in with praise for the company.
    • Stifel upgrades shares to Buy and raises its price target to $295 from $284, citing the company's "general earnings trajectory" following Q3 results.
    • Citi maintains its Buy rating, noting that FDX plans to cut $100M from FY 2018's Ground budget, suggesting 2019 will be in-line with $5.8B capex, and that Ground margins improved 110 bps Y/Y and are expected to improve 100-150 bps Y/Y in FQ4; CIti believes "the tide is now turning."
    • Also, KeyBanc ups its price target to $290 from $275 and continues to view FDX as positioned to benefit from both favorable macroeconomic freight demand and secular supply-chain shifts.
    • Stephens keeps its Overweight rating and $306 price target, saying that while there were "a lot of moving pieces," the company's Q4 outlook is "encouraging" and that FedEx Ground margins appear to have turned a corner, as concerns of a material capex step-up in FY 2019 "appear unfounded."
    • Southwest Airlines (NYSE:LUV-4.1% premarket after lowering its outlook for Q1 revenue per available seat mile to be in-line with the year-ago quarter, vs. previous guidance of a 1%-2% increase.
    • LUV says March Y/Y RASM trends for the non-peak travel periods have been below expectations "primarily due to the competitive fare environment that continues to pressure passenger revenue yields, and lower than expected travel demand due to the timing of spring break holidays."
    • LUV also says a "sub-optimal [Q1] flight schedule driven by the retirement of its Boeing 737-300 Classic fleet is also impacting passenger revenue yields and load factors," but it continues to expect Y/Y RASM growth in 2018.
    • LUV "continues to be encouraged by cost trends" and now expects Q1 operating expenses per available seat mile to be flat to up 1% Y/Y compared with Q1 2017 CASM of 8.68 cents.
    • Separately, LUV says it has recast certain 2016-17 financial information to reflect the adoption of new accounting rules but expects the impact to be "immaterial" to its Q1 RASM comparisons.

    General Mills -6% after guiding 2018 earnings below consensus

    • General Mills (NYSE:GIS-6.3% premarket despite narrowly beatings expectations for FQ3 earnings and revenues after cutting its full year earnings forecast, citing a sharp increase in freight and commodity costs.
    • GIS forecasts FY 2018 EPS of $3.08, below the $3.17 analyst consensus estimate, coming in flat to 1% growth compared to its previous guidance of a 3%-4% increase.
    • For FQ3, GIS says adjusted operating profit margin decreased 120 bps to 15.7%, primarily reflecting lower adjusted gross margin.
    • Net income more than doubled to $941.4M in the quarter, helped by a one-time $504M tax benefit from the recent changes in the U.S. tax code.
    • “Like the broader industry, we’re seeing sharp increases in input costs, including inflation in freight and commodities,” the company says. "We are moving urgently to address this increasingly dynamic cost inflation environment."

    Nordstrom -4.8% as company breaks off go-private talks with family

    • The special board committee at Nordstrom (NYSE:JWN) says it's broken off talks with the Nordstrom family over taking the company private.
    • Shares are down 4.8% after hours.
    • The committee says it couldn't reach agreement on an acceptable price with the family group, which includes Co-Presidents Blake Nordstrom, Peter Nordstrom, and Erik Nordstrom; President of Stores James Nordstrom; Chairman Emeritus Bruce Nordstrom; and Anne E. Gittinger.
    • "The Special Committee believes that Nordstrom is well positioned to capitalize on future opportunities to gain market share through its customer strategy, centered on three strategic pillars: providing a differentiated product offering; delivering exceptional services and experiences; and leveraging the strength of its brand," the committee says in its statement.

    Videogame sales build on 2018 with 23% February gains

    • Videogame sales rose 23% in February, with continuing strong hardware gains making up for a flat month among game titles.
    • Overall sales came to $995M vs. a year-ago $811M, according to NPD Group. Hardware sales jumped 55% to $316M; software sales were flat at $397M (same as last February); and accessories rose 35% to $282M.
    • Combined with the best January in seven years, the month brought YTD overall videogame gains to 39% ($2.1B total).
    • Hardware sales are up 79% YTD, with Feburary gains driven by continuing growth in Nintendo Switch (OTCPK:NTDOY) and in Xbox One (NASDAQ:MSFT). Sony's (NYSE:SNE) PlayStation 4 was the best-selling individual console, while the Switch has hit the highest installed base for a console's first 12 months, analyst Mat Piscatella notes.
    • In software, it was growth in Switch titles that offset declines elsewhere. Monster Hunter: World(OTCPK:CCOEY) repeated at the top spot in dollar sales, followed by Call of Duty: WWII(NASDAQ:ATVI) and NBA 2K18 (NASDAQ:TTWO). Dragon Ball: Fighterz (OTCPK:NCBDF) fell from the No. 2 spot to fourth, just ahead of Grand Theft Auto V (TTWO) which is hanging around at No. 5.
    • Rounding out the software top 10: No. 6, UFC 3 (NASDAQ:EA); No. 7, Kingdom Come: Deliverance (Deep Silver); No. 8, Mario Kart 8 (OTCPK:NTDOY); No. 9, Super Mario Odyssey(OTCPK:NTDOY); No. 10, Tom Clancy's Rainbow Six: Siege (OTCPK:UBSFY).
    • After hours: OTCPK:NTDOY flat; MSFT flat; SNE +0.7%OTCPK:CCOEY inactive; ATVI flat; TTWO +2%OT
    • With criticism swelling about the lack of a public statement from Facebook (NASDAQ:FB) CEO Mark Zuckerberg on the Cambridge Analytica scandal, the company held an open employee meeting today to discuss the matter, but neither Zuckerberg nor Chief Operating Officer Sheryl Sandberg attended, the Daily Beast reports.
    • Today's meeting was planned to be led by Deputy General Counsel Paul Grewal but Zuckerberg's potential participation today wasn't clear; Zuckerberg is expected to lead a meeting on Friday.
    • Shares are off session lows, now down just 3.5%.
    • “Mark, Sheryl and their teams are working around the clock to get all the facts and take the appropriate action moving forward, because they understand the seriousness of this issue," a Facebook spokesperson told the Daily Beast.
    • Previously: Facebook and social peers keep sinking on spiraling regulatory news (updated)(Mar. 20 2018)

    New iPhone X could cost Apple 10% less; Iovine stepping back from Music

    • The lower-cost iPhone X rumored for fall could cost Apple (NASDAQ:AAPL) 10% less than the original, according to DigiTimes.
    • The current iPhone X is estimated to cost Apple $400 to make while the next 5.8-in. version could save $40 per device because the manufacturing facilities are already in place.
    • The iPhone X carries a high price tag, and had a later launch date, due to production issues with the OLED screens and Face ID system.
    • Note that Apple’s savings won’t necessarily translate to consumers, but analysts have said the X sold poorly due to its high price tag, so some discount seems likely.
    • Less Music: After denying he was leaving Apple Music, a WSJ report says Jimmy Iovine will instead step back from daily involvement in the business.
    • Sources say Iovine will step back in August.
    • Apple shares are down 0.12% premarket.
    • Previously: Billboard: Jimmy Iovine leaving Apple Music in August (Jan. 5)
    • Previously: Bloomberg: Apple releasing three iPhones this fall (Feb. 26)
    • Update: DigiTimes iPhone X report confirmed the three planned models that will include the updated X, a 6.45-in. OLED phablet, and an LCD model. Universal Display (OLED +1.6%) shares are moving on the fact that Apple isn't abandoning OLED.
    • Other Apple suppliers that can move on the news:  Skyworks Solutions (SWKS +0.7%), Cirrus Logic (CRUS +1.5%), Broadcom (AVGO), Qorvo (QRVO +0.5%), Finisar (FNSR +2.2%), II-VI (IIVI -0.4%), and Lumentum (LITE +0.5%). 

    Report: Austin bombings suspect dead

    • The suspect believed to be responsible for a series of bombings across Austin, Texas is dead following an incident involving officers along I-35 in Round Rock, Texas.
    • Police were closing in on the reported "white male" when he killed himself by detonating some sort of explosive device, according to CBS Austin affiliate KEYE-TV reports.

  10. /RB Phil what do you think?


  11. Russia/StJ – Sadly, not much has really changed in the past 50 years.  

    FB/StJ – I can't get off it unless my Mom does.  

    BitCoin up 20% in last couple of days but GreenCoin is up 116% today!  I spoke to BDC and, due to favorable laws, we're going to look to reinitialize the foundation (that gives greencoins in exchange for carbon credits) in Wyoming and create a new, dynamic web site that tells the story, etc.  This is aimed for around July and we'll talk about it as it goes along.  

    PSW Investments has about 150M GreenCoins, currently at $0.001742 ($86,107) that we paid nothing for as we bought 4 BitCoins for $600 each, used 2 to buy the GreenCoins 2 years ago and then BitCoin split and we sold our two BitCoins for about $17,000 each and the 2 BitCoin Cash for another $4,000 each so we're well ahead of the game and we've debated sticking with GreenCoin or starting fresh but I think there's great value in working with a coin that's been around since early crypto days AND one that we are simply an investor in, not a founder – as it's less legally complicated that way.

    Anyway, in December, I was banging the table on GreenCoin at 0.00044 and we promised to accept GreenCoin as payment for annual Memberships in January at that price so people could get in with downside protection.  As it turned out, GreenCoin went up 300% so the Memberships were free and 200% profits left over – a good trade!  

    Unfortunately, at 0.00174, we have a sale in for 15M at 0.003 ($45,000) so I'm not telling people to chase it but we will put a floor in at 0.0009 and accept that exchange rate for Membership payments in April so, if BitCoin goes below that price – you have a good floor to buy in at.  

    I believe, with the proper promotion, we can possibly get GreenCoin on a major exchange and get the price up over a penny, which is more than 5x from here.  It's very, very speculative and the whole thing can collapse overnight but a penny would be $1.5M for PSW Investments on our $0 investment, so I like our odds!  

    Meanwhile, EIA confirms API with a nice draw across the board and that's burned the /RB and /CL shorts:

    I still don't think it's sustainable (/RB over $2), so I'm sticking with my now 4 short /RB at $1.9933 avg and I have 4 short /CL at $64.59 avg now too.

    We KNOW this is all about exports and not about US demand and what happens when you try to raise prices on something that doesn't have strong demand?


  12. Webinar/Phil- webinar is postponed to tomorrow right?


  13. No, I didn't end up going to the city so Webinar is today, at 1pm.  

    Damn, that's soon already! 


  14. Phil – Huge number of April 15 GME puts traded today.  Do you you have an opinion on the name?  Thanks.


  15. Oil testing $65 – ouch! 

    GME/Albo – See news above, games doing well across the board.  GME pays an accidental 10% dividend (because the stock dropped so hard) and make a nice $3 per $14 share so I do like them down here but what a falling knife they look like.  They keep adapting and surviving, no matter how the market changes and I do think they are worth a toss but I'd like so see a proper bottom before jumping in.  

    As a trade idea on GME, I do like:

    • Sell 10 GME 2020 $13 puts for $3.30 ($3,300)
    • Buy 20 GME 2020 $10 calls for $4.85 ($9,700) 
    • Sell 20 GME 2020 $17 calls for $1.90 ($3,800)

    That's net $2,600 on the $14,000 spread so $11,400 (438%) upside potential at $17 (up 20% in two years) and you can sell 5 May $15 calls at the moment for 0.95 so about $500 sold 10x would put $5,000 in your pocket while you wait.  So I certainly like the play and would love to add it once it stops dropping.  


  16. GME – how much of their profit comes from actually selling games? Because i know i pretty much buy all games now in digital format. Massive advantage of not having to go out and buy the physical game, also if your sitting on the couch and want to change games you dont have to get up and change the cd/cartridge because all the games are sitting on your systems hardrive, which have more and more space these days. 

    Maybe they sell peripherals as well like controllers and such but i would think a lot of that business is bleeding away to other players, amazon, walmart etc….???

    Haven't actually looked into GME, just my two cents on the space in general.


  17. GME/Crs – I said that about 6 years ago and look at them now.  I'm telling you, they are very adaptable:

    Year End 28th Jan 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 9,551 8,887 9,040 9,296 9,364 8,608 8,768 8,963 8,773 -2.1%
    Operating Profit $m 568.9 -41.6 573.5 618.3 648.2 557.7 518.9     -0.4%
    Net Profit $m 339.9 -269.7 354.2 393.1 402.8 353.2 349.3 333 329.4 +0.8%
    EPS Reported $ 2.41 -2.13 2.99 3.47 3.78 3.40 3.42     +7.1%
    EPS Normalised $ 2.77 1.37 3.14 3.49 3.80 3.63 3.62 3.28 3.29 +5.6%
    EPS Growth % +3.3 -50.7 +129.9 +10.9 +9.1 -4.5 -0.4 -9.66 +0.43  
    PE Ratio x           3.99 4.00 4.41 4.39  
    PEG x           n/a n/a 10.2 n/a
    Profitability

    They did one big reorg in 2013 and, since then, have not grown but have made good, steady money every year and I like to own companies like that when they are low in the channel.


  18. Has anyone on PSW made 25% consistently since joining? 

    Sounds great but having GE, FTR, GNC, HBI, LB, F, ABX, M, IMAX, and TEVA makes that 25% consistent returns seems unlikely.

    Hope i am wrong.

    Not criticizing Phil.. just curious.

     

    And I need to apologize about saying we want actionable prices on call spread/ put sale recs.

    It seems like the PSW people do not feel the same way about it as I do,


  19. /Rb/Phil- still holding to the shorts? I just grab 3 shorts at 2.09


  20. Dave, I was ready to short /rb at 2.09, now I see you meant 2.009


  21. Well /RB and /CL are doing poorly but the index shorts were great so a mixed bag for the day.  

    As noted in the Webinar, I'm holding the energy shorts through the holiday (2 weeks) unless they really blow higher as I'm fairly certain the Saudi Prince's World tour is causing the price spike along with a lot of misinformation re. US demand numbers.  

    Index shorts have been cashed now – that was a good enough drop for the day and now we're back to watching those same old lines.  

    Remember, 2,728 is the strong bounce line on /ES.

    I would think Powell's comments are stronger for the Dollar but gold and silver both popping:

    Very encouraging to see /SI hold $16.50.  

    I like /DX long above 89.50 with tight stops below. 


  22. Phil.

     

    Did you add to your /RB shorts?



  23. A Message From the CEO [DO NOT PUBLISH]


  24. Jabo;  I've been a member for 4 years and have not averaged 25%.  I am certainly positive over that time but not as good as the S&P.  I've learned a lot on the board but made plenty of mistakes which have cost me dearly.  Got too big in some of your favorite losers but really feel comfortable with my current portfolio which does include, FTR, GE, FNSR etc. but the good positions have done well to offset the losers.  With regard to the "actionable prices", I do agree that the prices Phil shows do often seem unattainable and I don't have the patience to leg in or split the position as Phil suggests.  If I like a trade idea, I now feel comfortable creating my own legs that I feel will fill.  Probably the biggest difference in how I trade ideas versus Phil is I'm selling "cherry" calls (thanks Yodi) for most of my spreads and adjusting well before expiration.  Hope that helps.



  25. /RB/Japar – I have 6 short at $2 but, at $2.02, may add a couple more to get to $2.05 but not looking for more than that.

    Huge one-day moves on not much news.  


  26. Just entered NGV8 (NATGAS October) at $2.80 with teh intention to be scaling in


  27. Any thoughts on NAT.. Recently diluted, yet again, and cut divi.. Thinking .. should take a while before they do it again.. .. Or tanker industry is dead all together


  28. Zuckerberg finally responded:

    I want to share an update on the Cambridge Analytica situation — including the steps we've already taken and our next steps to address this important issue.

    We have a responsibility to protect your data, and if we can't then we don't deserve to serve you. I've been working to understand exactly what happened and how to make sure this doesn't happen again. The good news is that the most important actions to prevent this from happening again today we have already taken years ago. But we also made mistakes, there's more to do, and we need to step up and do it.

    Here's a timeline of the events:

    In 2007, we launched the Facebook Platform with the vision that more apps should be social. Your calendar should be able to show your friends' birthdays, your maps should show where your friends live, and your address book should show their pictures. To do this, we enabled people to log into apps and share who their friends were and some information about them.

    In 2013, a Cambridge University researcher named Aleksandr Kogan created a personality quiz app. It was installed by around 300,000 people who shared their data as well as some of their friends' data. Given the way our platform worked at the time this meant Kogan was able to access tens of millions of their friends' data.

    In 2014, to prevent abusive apps, we announced that we were changing the entire platform to dramatically limit the data apps could access. Most importantly, apps like Kogan's could no longer ask for data about a person's friends unless their friends had also authorized the app. We also required developers to get approval from us before they could request any sensitive data from people. These actions would prevent any app like Kogan's from being able to access so much data today.

    In 2015, we learned from journalists at The Guardian that Kogan had shared data from his app with Cambridge Analytica. It is against our policies for developers to share data without people's consent, so we immediately banned Kogan's app from our platform, and demanded that Kogan and Cambridge Analytica formally certify that they had deleted all improperly acquired data. They provided these certifications.

    Last week, we learned from The Guardian, The New York Times and Channel 4 that Cambridge Analytica may not have deleted the data as they had certified. We immediately banned them from using any of our services. Cambridge Analytica claims they have already deleted the data and has agreed to a forensic audit by a firm we hired to confirm this. We're also working with regulators as they investigate what happened.

    This was a breach of trust between Kogan, Cambridge Analytica and Facebook. But it was also a breach of trust between Facebook and the people who share their data with us and expect us to protect it. We need to fix that.

    In this case, we already took the most important steps a few years ago in 2014 to prevent bad actors from accessing people's information in this way. But there's more we need to do and I'll outline those steps here:

    First, we will investigate all apps that had access to large amounts of information before we changed our platform to dramatically reduce data access in 2014, and we will conduct a full audit of any app with suspicious activity. We will ban any developer from our platform that does not agree to a thorough audit. And if we find developers that misused personally identifiable information, we will ban them and tell everyone affected by those apps. That includes people whose data Kogan misused here as well.

    Second, we will restrict developers' data access even further to prevent other kinds of abuse. For example, we will remove developers' access to your data if you haven't used their app in 3 months. We will reduce the data you give an app when you sign in — to only your name, profile photo, and email address. We'll require developers to not only get approval but also sign a contract in order to ask anyone for access to their posts or other private data. And we'll have more changes to share in the next few days.

    Third, we want to make sure you understand which apps you've allowed to access your data. In the next month, we will show everyone a tool at the top of your News Feed with the apps you've used and an easy way to revoke those apps' permissions to your data. We already have a tool to do this in your privacy settings, and now we will put this tool at the top of your News Feed to make sure everyone sees it.

    Beyond the steps we had already taken in 2014, I believe these are the next steps we must take to continue to secure our platform.

    I started Facebook, and at the end of the day I'm responsible for what happens on our platform. I'm serious about doing what it takes to protect our community. While this specific issue involving Cambridge Analytica should no longer happen with new apps today, that doesn't change what happened in the past. We will learn from this experience to secure our platform further and make our community safer for everyone going forward.

    I want to thank all of you who continue to believe in our mission and work to build this community together. I know it takes longer to fix all these issues than we'd like, but I promise you we'll work through this and build a better service over the long term.

    NAT/State – Those tanker companies are always tricky.  I just generally stay away as you can never really figure out what they owe and what they have.  NAT is only a $300M company that ONLY made money in 2015 ($115M) vs $280M of other losing years since 2012 so I'm not sure why you think THIS is their year – but it's not for me.

    /NG/State – Now THAT I agree with:


  29. Oil in $65 and SUN (Sunoco) is in the lowest YoY point! my march 2018 options were exercised, looking around I don´t see a specific reason, is anybody aware of what is going on there?.


  30. Jabo;

    Actually my options (about 10% of the portfolio are down, some of them are PSW, some are not, I´m down in GE, HBI, OSTK, and ABX, we´ll see…. some are acting against logic as ABX or GE  but as he always has long-term views if difficult for me to be assertive.


  31. Gold closed up. 

    Bought a few GLD calls.


  32. SUN/Advill – They are an MLP these days and are paying out a very aggressive dividend at $3.30 (12.25%) despite net operating losses and negative cash flow last year.  It's simply not the same company we used to like as a refiner a few years ago.  They have also diluted by raising the share count and, recently, they sold their convenience stores to 7-11 – and that was the thing I liked the most about them! 

    Ugly finish on the day.  We'll see how tomorrow goes.  


  33. Phil, Yodi – Re: MLPs in general   

    Talking about MLPs, this recent tax legislation may have created some opportunities in MLPs, we should look to see if there are some bargains where we can do some armchair trades since they have decent yields.


  34. You would think that the latest estimates from the Fed would put a damper on the markets:

    https://www.vox.com/business-and-finance/2018/3/21/17147624/federal-reserve-interest-rates-jerome-powell

    Fed officials said in a statement that the “economic outlook has strengthened in recent months” and increased their growth estimate for this year to 2.7 percent from 2.5 percent, when they last put out projections in December. Officials estimate the economy will grow by 2.4 percent in 2019 and 2 percent in 2020. They also forecast lower unemployment and an increase in inflation to their target in the “coming months.”

    If we added $2T to the debt to get 2% growth, it just won't add up very soon. Obama did as well while raising taxes. This is far from the 3% we were promised! And rates are going up, so slowing growth, lower tax revenues and higher rates. Not looking good.


  35. record consumer debt, record corporate debt, record federal debt, a decades-long worldwide race to the bottom interest rates, ZIRP and QEI. Now we have reckless borrowing while lowering tax revenues at the same time borrowing rates go up? There is no way out except recession or inflation, and most probably, both. Also probably a bunch of wars in there too. Nationalism, all too real accelerating climate change effects, and a palpable, shiftless anger and hatred bubbling underneath.

    It's ugly. Really ugly.


  36. BDC – Let's not forget attacks on the press and government institutions! We are creating a climate for a big crisis. 


  37. IJabo- 

    I have been a member off and on for years.  Using these techniques I do consistently beat the S and P.  

    I often scale down the trades, and always leave plenty of room to roll.  I don’t use the trades as templates, but more idea starting points.  I also don’t pick up every single one.  I avoid defering the decisions to Phil and trying to replicate all these trades after the fact.  Don’t chase the trades.  Often they come back.  Many of them give you several entry opportunities.  Many times my executions are not as good as Phil’s, with patience sometimes they are much better.

    This year has had a slow start no doubt.  The trades are mostly 2020 leaps!  Takes some time.  Also if your broker uses midpoint pricing you need to look at each trade individually to gauge whether it is on track or not.  Often I will show a huge gain or loss, but not one option has traded.

    I am right there with you every morning with your FUs.  Honestly I love reading them.  Especially this year!  FU GE!  Get off the damn floor!  

    Maybe take a few companies that are not popular on the site, and build some Phil style trades with them and see how it goes.  Phil’s trades can get crowded, also trying a slightly different strike can help.  Focus on using fundamentals first to find the target, then focus on the construction of the trade.  Always sell more premium than you buy etc.

    It takes years to become good at this.  You can’t learn it in 140 characters or less over a long weekend.  Also like poker you will pay to learn as they say.  Expect to make mistakes.  If your trades are big, so will be the consequence to your errors.

    Phil’s Stock World has been the most important site in my financial life.  It’s impact on me over the past years has been huge.  As have my tax bills!  Hang in there!  Think learning the guitar more than say learning to ride a bike.


  38. Last comment for me, also read EVERYTHING as much as you can.  The articles in the body of the posts, the articles posted during the day, the favorites section ALL of it. 


  39. RB/mikezeula- sorry! my bad I miss typed it… I saw rb at such high price was too excited to jump in the shorts and inform members here. I think anything above 2 for RB is not going to last for long hence Phil willing to hold for longer to see how it plays. I just took a poke on CL at 65 too


  40. KC/ Phil, do you still like playing coffee down here or do you see a shift in the picture that has you looking for lower entry points?





  41. Tax Change Delivers A Blow To Professional Sports


  42. Good morning and wheeee!  

    Nice turn around on /CL and /RB (as planned) but what a scary ride to get here. 

    Of course /RB is bouncing off $2 so profits taken and now we see if the bounce is weak (0.004 after a 0.02 drop) or strong (0.008) and, if weak fails, it's a good re-short at $2.004 with tight stops above or, if $2 fails, then that's a good short with tight stops above. 

    On the whole though, keep in mind that the 0.02 pullback is a weak retrace of the 0.10 run up from the $1.92 consolidation line so it's actually still strong if $2 holds.  You have to be careful not to let your biases influence your chart interpretations:

    My logic yesterday was that there should at least be a pullback after a 5% run in /RB so I played it with conviction (oil too) overnight, scaling into the large position with large losses.  As I said at the time (during the webinar) – it's hard to call the exact top but scaling in like that let's us have a large position once we do get a turn that's reasonably close to the top but, at some point, I was down $10K and now I'm half out with a $6K total gain – so these plays are more about fundamental convictions than positive risk/reward and certainly NOT for the feint of heart (or wallet). 

    Indexes crumbling too and I took those profits way too early BECAUSE I had the oil shorts that were doing poorly and I didn't want that much risk overnight.  

    The VIX isn't even worried yet…

    /RTY is lagging at the moment and can be played on a break below 1,570 but 24,500 should be bouncy on /YM so not the best time to short.  It's a 500-point drop so 100-point bounces are a lot of slack this morning for the Dow! 


  43. Great timing on GLD, Albo! 

    I still like the Dollar (/DX) down here!

    MLP's/Learner – Unfortunately, they are so hard to figure out as they tend to have complex arrangements but happy to look at a few suggestions. 

    Low growth/StJ – The problem is that they try to force the economic cycle and that is ridiculously expensive AND damaging in the long-term as it leads to a misallocation of capital that, in a normal recession, would have found more productive outlets.  The government should use it's firepower to build roads and dams and bridges and tunnels and power plants that pay back the people for decades after they spend the money – THAT's how you build a future.  What we're doing is insane.  

    And what BDC said! 

    It's amazing that the same people who complained about Obama's spending are about to put through the biggest deficit spending package in history – at a time when we should be paying down debt – not adding to it!

    Reading/Knight – I'm very glad someone is doing the homework.  It puts the trades in context.  

    /KC/Rayne – My long on coffee is based on Global Warming disrupting growing cycles so, basically, the idea is that, at some point in the next few years, there should be at least one good crop crisis that spikes /KC back over 160 so I generally want to have a long or two whenever possible so anytime it's down around 120, I'm happy to get back in and happy to buy more if it goes lower as I wouldn't mind owning 4 or even 8 long contracts close to 100 for the very long haul.   

    What actually ends up happening though is I generally get 2 or 4 around here ($119) and then we pop into the $120s and I get stopped out.  That's fine too as this is the 7th time since Dec (so every other week) that we've had an entry at $120 or lower and profits have been $2-$5 and 7 x $3 is $21 so just as good as catching one ride to $141, right?

    At the moment, I have 2 long /KC with an average entry of $118.825 from last week.


  44. CL/Phil- still holding to you CL shorts?


  45. Storm drops record-breaking rain in parts of California




  46. White House Watch: Trade War!



  47. Test