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Terrific Tuesday – Everything is Awesome, Again

Everything is Awesome!  

The markets are back up to our weak bounce lines (see yesterday's report) though I think we'll be using them as shorting lines this morning as the Dollar is recovering quickly, up 0.6% and that's bound to put a bit of pressure on the markets as they finally hit some resistance.  Dow (/YM) 24,350 is my favorite short at the moment, with tight stops over the line and 6,850 on the Nasdaq (/NQ) will make a fun shorting line as well.    

Why short?  Well, nothing at all has changed other than it's POSSIBLE that China and the US will have a trade agreement instead of a trade war but, other than that – all the other stuff that caused the market to fall off it's highs all month haven't gone away – Thursday's trade talk just made them worse and now they are not worse – they are the same – not better either.  

The President is still being indicted, the Government is still in turmoil, Russian "diplomats" were just expelled from pretty much every NATO country (even ours, surprisingly) so we may have just started the next cold war only this one is being fought with a guy who already has your browser history and all of your passwords.  

Image result for khrushchev shoe animated gif

Of course Khrushchev was very much cut from the same cloth as our President, as noted by this summary of the "shoe-banging incident" at the UN:

On 12 October, head of the Filipino delegation Lorenzo Sumulong referred to "the peoples of Eastern Europe and elsewhere which have been deprived of the free exercise of their civil and political rights and which have been swallowed up, so to speak, by the Soviet Union".[12] Upon hearing this, Khrushchev quickly came to the rostrum, being recognized on a Point of Order. There he demonstratively, in a theatrical manner, brushed Sumulong aside, with an upward motion of his right arm—without physically touching him—and began a lengthy denunciation of Sumulong, branding him (among other things) as "a jerk, a stooge, and a lackey", and a "toady of American imperialism"[13] and demanded Assembly President Frederick Boland (Ireland) call Sumulong to order. Boland did caution Sumulong to "avoid wandering out into an argument which is certain to provoke further interventions", but permitted him to continue speaking and sent Khrushchev back to his seat.

Khrushchev pounded his fists on his desk in protest as Sumulong continued to speak, and, according to some sources, at one point picked up his shoe and banged the desk with it.[14]

Was America "great" during the cold war?  I'm still not clear on what "great" is supposed to be and when it is that "again" refers to.  I've looked it up – it's not actually clarified or stated specifically anywhere.  "Making America Great Again" is simply a propaganda phrase for adults, kind of like saying "All your dreams will come true" to children because you don't know specifically what their dream is but you know that, if you promise to make them come true – they'll behave themselves for you.  Kids aren't experienced enough to ask for a clarification – I can't imagine what excuse adults who fall for this idiocy have...

The same is true for traders, who are happy to buy into the fantasy that we can go $1.3Tn (6%) into debt on top of the $21Tn we already owe while the economy is growing at less than a 3% pace and everything will be awesome and there will be nothing to worry about.  Since late January, we have careened from crisis fall to relief rally in the markets – like a house of cards that topples and is immediately rebuilt – over and over again.

Of course, in the big picture, we're still far below the January highs but almost halfway back to the February and March highs (2,800 on /ES), so that's something, right?  If we establish a channel with a floor at 2,640 (our 20% line), that will indeed be very bullish and it means we may actually be seeing our 30% line at 2,860 again but, for the moment, as we noted yesterday morning in this chart, we're still waiting just to see the weak bounce at 2,684:

As I said above, I'm more inclined to go short here because there is NOTHING that I'm seeing in the news or the data that justifies us moving to the more positive range (over the 20% line) which means we're more likely still on track to fall into the 10-20% range, where 2,640 is the top and 2,420 is the bottom.  That's the range we predicted we'd end the year in and this year is just getting started but it seems to me there's still more money in shorts than in longs at this level.  

I may change my mind after earnings.  McCormick (MKC), the spices company, knocked it out of the park this morning with an 18.5% beat and IHS Markit (INFO) beat by 10% while FactSet (FDS) beat by 14% so things are good in the world of spices and data so far.  Lululemon (LULU) reports this evening along with Shoe Carnival (SCVL), Restoration Hardware (RH) and Sonic (SONC) and SONC is cheap at $24.79 but the others are not cheap at all and I'll be interested to see if they can justify their high valuations.  

As you can see from Earning's Whispers' chart, options on SONC imply a higher move than it usually makes and we can turn that to our advantage by selling premium into earnings.  In this case, the Sept $22.50 puts are $1.25 and that would net us into the stock at $21.25, which is a $3.50 (14%) discount to the current price so that's a no-brainer to sell if you don't mind owning SONC for $21.25 as the worst case.  We can leverage that further by betting $25 will hold up and add a spread as follows:

  • Sell 10 SONC Sept $22.50 puts for $1.25 ($1,250) 
  • Buy 20 SONC Sept $22.50 calls for $3.50 ($7,000)
  • Sell 20 SONC Sept $25 calls for $2.20 ($4,400) 

The net cost of that spread is $1,350 and it pays $5,000 if SONC is over $25 at September expiration.  That would be a $3,650 (270%) return on cash and the ordinary margin for selling the 10 puts is $1,745 so it's a nice, efficient way to make $3,650 in 6 months if all goes well.  We'll track this one and see how it goes. 

Tomorrow morning we'll hear from Walgreens (WBA) and I really like what they are doing so a good chance to pick them up low in the channel at $67.47.   In this case, we can just do a long-term play for our Long-Term Portfolio (LTP):

  • Sell 5 WBA 2020 $65 puts for $7.50 ($3,750) 
  • Buy 10 WBA 2020 $60 calls for $13 ($13,000) 
  • Sell 10 WBA 2020 $75 calls for $5.50 ($5,500) 

In this case, we're obligated to buy 500 shares of WBA at $65 ($2,786 in margin required) and the net of our $15,000 spread is $3,750 so the upside potential at $75 is $11,250 (300%) over 2 years if all goes well.  Either they get off to a good start after earnings or we'll adjust.

Earnings season is fun, we can make trades like this almost every day! 

 


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  1. Nice bounce but the trend is now down – all the 50 DMA are pointing in one direction, down.


  2. The gerrymandering done by the GOP is clearly anti-democratic now:

    https://talkingpointsmemo.com/news/brennan-report-democrats-electoral-wave-2018-midterm-elections

    The report projects that Democrats would need to win the national popular vote for congressional districts by a nearly 11 percentage point margin over Republicans to gain more than the roughly two dozen seats they need to flip control of the Republican-led chamber.

    That means that the Dems could get 10M more votes than the GOP and still not win Congress. And you would have Ryan and McConnell explain the win by mentioning the will of the people! What a joke…


  3. There is one place where Apple is not leading – smart assistant. Apparently Siri was a rush job:

    https://www.macrumors.com/2018/03/14/siri-has-turned-sour-report/

    And not improving as fast as the others.


  4. Good Morning.


  5. Helios & Matheson announces agreement with Landmark Theatres

    Font size: A | A | A

     

    9:03 AM ET 3/27/18 | Briefing.com

    RELATED QUOTES

     

    4:00 PM ET 3/26/18

    Symbol

    Last

    % Chg

     

    HMNY

     

    3.06

    0.00%

    Real time quote.

     

     

    Through this agreement, MoviePass will be integrated into Landmark Theatres' ticketing system.

    MoviePass members who use the service at Landmark Theatres will be able to take advantage of added benefits and features including e-ticketing, advanced screening reservations, and in-app seat selection.Landmark Theatres is owned by Wagner/Cuban Companies, a group of media properties co-owned by Todd Wagner and Mark Cuban.


  6. Any views on MLHR ?

    Phil, I understand Cramer was bashing EVERYTHING NATGAS related last night.. I wonder if this would cause an even lower entry on the NG.. I also happened to be stuck with WPRT, holding a heavy bag.. torn between averaging down or cutting my loses and moving on.. Thank you.


  7. WBA/Phil- So we have 2 pharma retail? Walgreens and just CVS short puts?


  8. Good morning and wheee already (from above)!  

    Not sure if we should blame the Dollar entirely, I think my overall logic that there's nothing really to rally about is coming home to roost.  Even oil and /RB selling off (but not honey badger).  

    By the way, if we do make a big LNG deal with China, /NGV8 will go flying so my final table bang (with a shoe!) on that one!  

    DO YOU SEE THIS JAPAR – I SAID TO GO LONG ON /NGV8 at $2.814!

    Reminds me of this:

    Big Chart – Awesome!  Well, just a weak bounce so far, but beats the alternative.  

    Siri/StJ – Poor thing…

    HMNY/Jabob – That should be good for a nice pop, finally.  

    MLHR/State – We used to play them as I liked a company that's focused on the Top 10% with very expensive chairs but they've become more of a conglomerate and I lost interest.  

    At $30 they are back to a price I would pay but I have no compelling reason to own them over someone else and they are in a very competitive space (office stuff) in an environment where more offices are closing than opening.

    Cramer/State – That's him doing the bidding of his fund buddies, who are trying to get a cheap entry so they can get in so they call Cramer and have him chase out the retailers.  As to WPRT – I'm not sure what would make them a better supplier than the other 100 who sell the same stuff and, at just $200M in sales – I guess they are not that great.   Companies like this, that are losing $1 per $4 share  (now $2.33) are bound to dilute you as they run out of cash (a perpetual problem), either directly or through warrants they have to promise down the road to sell the debt they saddle you with.

    WBA/Dave – Sure, that's fine, both small entries and both ones I don't mind owning long-term.  


  9. GE catching a bid, where’s Jabo? 


  10. .As we come into quarter's end, this interesting comment from Briefing Trader :

    This is a weird quarter as it is the first time since 2011 that quarterly EPS forecasts have been revised higher during the quarter (typically, the bar is lowered by a few percent and then companies leap over it easily.. this time, it has been raised 5%). That sets up the potential for a rally into announcements and a sell-the-news reaction.


  11. GE/Phil- I do not hold as many GE as LTP recommended, I thinking of scaling up my long calls. Will you still recommend buying the 13 calls or I should be looking to scale with the $10 calls?


  12. Jeff, Jabo is still FU on FTR


  13. jeffdoc and yodi…wonder o wonder miracle o miracles.. GE and FTR are up for a change!!!


  14. StJ – I was running an analysis on 2016 House data applying a generic shift. Here's some figures:

    2016 R versus D, actual votes: 50.56% to 49.4%

    2016 House composition (241/194): 55.40% to 44.60%

    The GOP gerrymander is most effective at a vote % of 54.9% for Dems (who would still only be at 47.8% of the House). This is a differential (votes – house seats) of -7.1%. That is basically what the article you linked to is saying too. However, consider that if the Dems received 100% of the votes they'd have 100% of the seats so gerrymandering gives you advantages in some areas of the curve, but takes away from others. So my question to myself was, "where's the maximum positive differential." 

    It turns it comes at Dems getting 63.9% of the vote (+28.9% over GOP) where they would have 303 House seats (71%) or 7.1% more than House seats than vote totals. The GOP never considered the threat of only getting 36.1% of the vote or they never would have allowed this to happen. Granted, it is a tall order to get crushed so badly, even with 2 years of the Trump disaster in play, but it is worth noting the DEM House/Seats correlation goes positive at ~59.5% of the vote, where they would win about 50.5% of the seats (259). So the Dems effectively beat the gerrymander if they an get 6 in 10 votes.

    Also, very important is the state level this election because lines get redrawn in 2020. IMO a silver lining in the Hillary loss is the landslide back from GOP state houses control that is obviously reversing quickly now (see: Virginia). That was a major concern I had if Hilary had won; a GOP state house control that would've created a constitutional convention crisis. This scenario has completely evaporated. There is zero concern here now, so I thank Trump deeply for that.


  15. HMNY – Could get a bit of a short squeeze here.


  16. *correction above: 59.5% of the vote = 59.5% of the seats (where the curve crosses into Dems favor)


  17. TWTR – Down today on negative Citron comment.


  18. housing prices still on fire


  19. GE/Dave – Rule of thumb is you want to spend 0.50 or less to roll $1 in strike (that's in the money) as you're buying $1 for 0.50, so why not?  2020 $13s are $2.75 and 2020 $10s are $4.65 so $1.90 means it's right on the edge of what should be done.  Of course, if you are also selling calls and you can just sell the $18s ($1.10) instead of the $20s (0.70) to cover – then that extra 0.40 tips the equation in favor of the $10/18 spread as a new play.  

    Good silver lining BDC. 

    HMNY/Albo – I think they've got the goods, this thing is going to be hard to stop.   Also, unlike FB, they are not collecting intrusive data and, for their market, they are collecting exactly the data that the movie companies want for that specific purpose – so less likely they get in trouble for it.

    TWTR/Albo – They are all going to get regulated, the question is what will it cost them.  Also, the US is nothing compared to the spanking they will get in Europe and Asia, who don't live in a police state and still have some illusion of privacy rights.  

    $2.01 was bouncy on /RB so far.

    /CL testing $65 while /BZ is testing $70 – won't be pretty if they both fail so good short on /CL below $65 if Brent is below $70.

    Honey badger don't care:

    Housing/BDC – Glad I talked my Mom into keeping her place.  I told her housing would come back and she'd be essentially living there for free while her house appreciates.  Went from $350K to $450K so far down in Florida over 5 years since my Dad died – back around what they bought it for but now above her $275K debt on it.  


  20. Thanks for the analysis BDC although I still think it's a tall order to get to the point where the curve reverses. The GOP is banking that Dems will never get over 59% of the votes so gerrymandering still works in their favor. But winning seats at the state level will indeed reverse that eventually although the Trump admin is working hard to mess with census so that's another fight!


  21. I have just entered PDCO.. Unless they are going out of business, one would think tehre should be a reversal of trend some time in the near future..+% div helps too.. Looking for approval :)



  22. Phil

     TEVA what would be a new trade?

     Thanks





  23. PDCO/State – Nice, boring company.  Making just under $200M with a $2Bn valuation – nothing wrong with that.  

    The CEO quit last June and that sent them into a tailspin though there's been no harm to sales and earnings.  I guess people gave up on the idea of growth and they were priced for it at the time.  Nice 4.7% ($1.04) dividend so you could buy the stock ($21.73) and sell the Oct $22 calls for $2.10 and the Oct $20 puts for $1.85 and net in for just $17.78/18.89 or you could just sell the Oct $21 puts for $2.25 as it's way more than the dividend and your worst case is owning them for net $18.75 but, if over $21, you pocket a 10% gain without even owning the stock in just 6 months. 

    TEVA/QC – There's no new play for me over $15 but you can sell the 2020 $15 calls for $2.75 which gives you a $12.25 entry and I'd just see how that goes but you can pair it with the 2020 $15 ($5.20)/$20 ($3) bull call spread at $2.20 so you'd still have an 0.55 credit and $5 more upside if they are over $20.

    Incredible how this market can just decide to head higher for no actual reason…

    LOL – CNBC now saying "GE in Rally Mode" after saying how dead they were last week.  Apparently, someone unknown has been buying a lot if it recently. 


  24. Thanks Phil


  25. Again using MCD to keep Dow up, while closeout bubbles on the Tech Sector.


  26. 24,350 is a fine spot to try shorting again on /YM. Lined up with 2,666 (weak bounce), 6,737 and 1,540 so very good lines to watch on all but /NQ.

    • Dow 24,350 (weak) and 24,550 (strong)
    • S&P 2,666 (weak and satanic) and 2,688 (strong) 
    • Nasdaq 6,850 (weak) and 6,950 (strong) 
    • Russell 1,565 (weak) and 1,580 (strong)

  27. MCD/That – 25x earnings is still a lot for them.

    TSLA, meanwhile, failed $300.

    NFLX is still stubbornly high (we shorted the April $320 calls):


  28. Nope, looks like we're holding up at the weak bounces.  That's a strong sign if we hold them into the close but, of course, Nas and RUT are still red so, if anything, they have a lot of catching up to do.

    Consumer confidence misses estimates

    • Feb. Consumer Confidence127.7 vs. 131.0 consensus; 130.0 (revised) in Jan.
    • Present situation Index 161.2 vs. 162.4 prior
    • Expectations Index 106.2 vs. 109.7 prior.
    • Redbook Chain Store Sales+3.6% Y/Y vs. +3.2% last week.
    • Month-to-date sales +3.2% Y/Y.
    • March sales are expected to be up 3.8% Y/Y and 0.6% M/M.

    They are getting very desperate:  Reuters: OPEC, Russia considering 10-20 year oil alliance

    • OPEC and Russia are working on a long-term deal that could extend controls over world oil supplies for 10-20 years rather than on a year-to-year basis, Saudi Crown Prince Mohammed bin Salman tells Reuters.
    • “We have agreement on the big picture, but not yet on the detail," bin Salman says.
    • Russia has worked alongside OPEC during previous oil gluts, but a 10-20 year deal between the two would be unprecedented.
    • Despite longstanding differences, Russia and Saudi Arabia have been drawn together by a common interest in propping up flagging world oil prices, and by Russia's new-found clout in the Middle East since the country's military intervention in Syria.

    GE +5% on rumors of Buffett investment

    • Embattled General Electric (GE +5.5%) jumps the most in two years amid speculation that Warren Buffett will buy a stake in the company.
    • “It may be a plausible theory, given Buffett had recently spoken to the press that he might be interested in GE at the right price,” William Blair analyst Nicholas Heymann tells Bloomberg.
    • GE’s surge follows a decline yesterday to the lowest since 2009; the stock is the worst performer on the Dow this year after also holding the dubious distinction last year.

    Tesla falls after Nvidia suspends self-driving car tests

    • Ryder (R +0.4%) announces the launch of an asset-sharing platform for commercial vehicles.
    • The company has been testing the COOP platform in Atlanta this year with 100 vehicles.
    • "We are excited to launch this new platform that makes trucks shareable at a time when the sharing economy is driving innovation in many industries. Seasonal and cyclical truck shortages, coupled with fleets’ excess and unused capacity, demonstrates the benefit of having a technology like COOP available in the marketplace," notes Ryder CEO Robert Sanchez.
    • "COOP represents one of several strategic investments we are making to leverage technology and capitalize on disruptions our industry will see over the next five to 10 years," he adds.
    • Ryder expects to deploy COOP in major markets in 2019.

    Facebook -3%: Settling civil rights suit; Zuckerberg spurns UK hearing

    • Facebook (NASDAQ:FB) will settle a civil-rights lawsuit, arguing that it had a passive role in race-targeted ads that enabled discriminatory housing practices, Bloomberg reports.
    • The National Fair Housing Alliance and other groups charged Facebook with allowing advertisers to exclude protected groups on characteristics like gender, family makeup and race.
    • A written settlement will take about 45 days to put together.
    • After eking out some morning gains, the stock is now at a session low, down 3.1%.
    • And Mark Zuckerberg won't head to an appearance before a UK parliamentary committee, a decision called "absolutely astonishing" by the committee's chair, Damian Collins. “I would certainly urge him to think again if he has any care for people that use his company’s services," Collins said after the committee heard from Cambridge Analytica whistleblower Christopher Wylie for nearly three hours.
    • Facebook (NASDAQ:FB) is lower premarket, down 1.6%, alongside a lower price target from BofA Merrill Lynch, fretting usage erosion and the prospect of a drawn-out FTC investigation.
    • But analyst Justin Post still calls the stock a Buy. He's trimmed price target to $210 from $230, implying a still-strong 31% upside.
    • The FTC probe could take years, he says: A similar investigation into Microsoft by the FTC/DOJ took over a decade. But he sees valuation support in how the stock bounced back yesterday.
    • Shares are down 9.3% YTD, but up 14.1% over the past 12 months.
    • As expected, Apple (NASDAQ:AAPLannounces a new lower-cost iPad during today’s education event in Chicago.
    • The 9.7-inch iPad has Apple Pencil support.
    • This is a developing story and will update with more information as it becomes available.
    • Update with more info: The new iPad includes Touch ID, an HD FaceTime camera, 8-megapixel rear camera, and 10-hour battery life. The iPad boasts Apple’s A10 Fusion chip and comes with an LTE option.
    • Pricing: $299 for schools, $329 for consumers. 
    • The consumer pricing matches the newly announced Acer Chromebook Tab 10, the first Chrome OS tablet. 
    • Google held 60% of the mobile computing shipments to American K-12 students in Q3, according to Futuresource Consulting. Microsoft held second place with 22% and Apple came in third with 17%. 
    • Apple shares are up 0.9%.  
    • Previously: Google debuts first Chrome OS tablet (March 26)

  29. And now we're heading down again – what a silly market!  


  30. It looks to me like we can buy back 100 (1/2) of the short DXD July $10 calls for 0.35 in the STP – let's do that and, next time we get $1.50 for 100 of the long $8s, we can take those off the table with a $5,000 profit.  


  31. PDCO -  ~~i'm a sucker for these boring companies. have levered up to $1B in debt, while doing substantial stock buybacks over last several years. Still looks like a falling knife, so not buying now, but put on a watch list. I'll wait to see a base and forward momentum. I'd be interested in $16 puts if get up to around $1.


  32. That's sensibly conservative. 


  33. Hi Phil, since I joined after you had already posted a trade on CBI, looking for a current setup.. if we still like it .


  34. I do like CBI as they should benefit from an infrastructure bill – if they ever actually pass one.  

    As a new trade, I'd sell 10 of the CBI 2020 $12.50 puts for $1.90 ($1,900) and consider that free money and put it into 10 of the 2020 $15 ($3.25)/20 ($1.60) bull call spreads at $1.65 ($1,650) and you still have a small credit on the $5,000 spread and worst case is you own them for less than $12.50.

    Also folks, don't forget about the LTP trade and earnings trade from the morning post (I'm putting it here so Top Trade People will get it too):

    I may change my mind after earnings.  McCormick (MKC), the spices company, knocked it out of the park this morning with an 18.5% beat and IHS Markit (INFO) beat by 10% while FactSet (FDS) beat by 14% so things are good in the world of spices and data so far.  Lululemon (LULU) reports this evening along with Shoe Carnival (SCVL), Restoration Hardware (RH) and Sonic (SONC) and SONC is cheap at $24.79 but the others are not cheap at all and I'll be interested to see if they can justify their high valuations.  

    As you can see from Earning's Whispers' chart, options on SONC imply a higher move than it usually makes and we can turn that to our advantage by selling premium into earnings.  In this case, the Sept $22.50 puts are $1.25 and that would net us into the stock at $21.25, which is a $3.50 (14%) discount to the current price so that's a no-brainer to sell if you don't mind owning SONC for $21.25 as the worst case.  We can leverage that further by betting $25 will hold up and add a spread as follows:

    • Sell 10 SONC Sept $22.50 puts for $1.25 ($1,250) 
    • Buy 20 SONC Sept $22.50 calls for $3.50 ($7,000)
    • Sell 20 SONC Sept $25 calls for $2.20 ($4,400) 

    The net cost of that spread is $1,350 and it pays $5,000 if SONC is over $25 at September expiration.  That would be a $3,650 (270%) return on cash and the ordinary margin for selling the 10 puts is $1,745 so it's a nice, efficient way to make $3,650 in 6 months if all goes well.  We'll track this one and see how it goes. 

    Tomorrow morning we'll hear from Walgreens (WBA) and I really like what they are doing so a good chance to pick them up low in the channel at $67.47.   In this case, we can just do a long-term play for our Long-Term Portfolio (LTP):

    • Sell 5 WBA 2020 $65 puts for $7.50 ($3,750) 
    • Buy 10 WBA 2020 $60 calls for $13 ($13,000) 
    • Sell 10 WBA 2020 $75 calls for $5.50 ($5,500) 

    In this case, we're obligated to buy 500 shares of WBA at $65 ($2,786 in margin required) and the net of our $15,000 spread is $3,750 so the upside potential at $75 is $11,250 (300%) over 2 years if all goes well.  Either they get off to a good start after earnings or we'll adjust.

    Dow now red!  


  35. Berkshire Hathaway Files Amended 13D on USG

    On March 23, 2018 Berkshire’s CEO and another Berkshire executive held a telephonic discussion with two executives of the Knauf Entities and three representatives of one of the advisors of the Knauf Entities, during which Berkshire proposed to grant to the Knauf Entities an option to purchase all of the Berkshire Entities’ shares of Common Stock of USG, subject to legal review. Such option would be exercisable only in connection with the consummation of a purchase by the Knauf Entities of all of the outstanding shares of Common Stock of USG that the Knauf Entities did not already own, at a price of not less than $42.00 per share, subject to and in accordance with applicable law and contractual restrictions. The option exercise price per share was proposed by Berkshire to be the price per share paid to such other holders of Common Stock of USG by the Knauf Entities, less the option purchase price of $2.00 per share to be paid to the Berkshire Entities upon entering into a definitive option agreement. The option would have a term of approximately 6 months.

     


  36. Sonc/Phil- putting that earnings trade into OOP or LTP?


  37. Thank you Phil


  38. Treasury yields drop as stocks again turn shaky

    • Early gains for the averages have evaporated, with the S&P 500 now down 0.1% and the Nasdaq down a full 1%.
    • The "Big Brother" trio is leading declines, with Facebook off 3.7%, Google 2.3%, and Twitter 10.4%. Earlier, Andrew Left said Twitter was a short as its data-privacy vulnerability gets more airplay.
    • Tesla is down 6.3% and closing in on a 52-week low after Nvidia reportedly suspended self-driving car tests (Nvidia is off 7.3%).
    • The 10-year Treasury yield is down six basis points to just under 2.80%. TLT +0.75%TBT-1.5%
    • Ominously, junk is not following suit, with both HYG and JNK modestly lower on the session.

    Large investors see 20% correction within 2 years

    • Stocks will underperform in 2018, and are likely to see a major correction within 24 months, according to a survey conducted by Commonfund. 
    • Over 200 endowments, pensions, and foundations participated in the survey. Trade wars and protectionism were the greatest threat to the global economy, followed by rising interest rates.
    • Emerging markets, private equity, venture capital and natural resources have a more promising outlook according to these investors.
    • The onshore CNY exchange rate, which is a managed float against the USD, rose to the highest since 2015 on expectations that China will soften its stance on trade-related tensions.
    • OCBC Bank analysts said, "The sudden appreciation of CNY against the dollar shows that market believes that China is likely to compromise to ease the trade tension."
    • "The plan highlighted by Premier Li Keqiang last week, which covers four areas including goods trade, service trade, manufacturing sector & FDI, is likely to be the guideline on how China will further open its market.”

    Silver weakness signals slowing economic growth

    • Silver prices are down over 3% this year compared to a 3% gain for gold, raising the gold-to-silver ratio to over 82x, the highest since 2016.
    • Industrial uses account for 55% of total silver demand, according to the Silver Institute. A higher gold-to-silver ratio is seen as a negative economic indicator because money managers cut silver positioning when the outlook for growth is weakening, and gold rallies on rising equity volatility.
    • Hedge fund positioning in silver futures is the most bearish on record according to CFTC data. Positioning flipped rapidly from record long last year to record short now.
    • "There's just not many people looking to buy silver at this point in time," said Walter Pehowich of Dillon Gage Metals. "There's a lot of silver that comes out of the refineries, and they can't find a home for it," he added.

    Twitter, down 9.9%, responds on its data licensing business

    • Responding (surely) to a new short report from Citron Research -- which said congressional scrutiny might end poorly for the company's data licensing business — Twitter (TWTR -9.9%) says "Twitter is public by its nature."
    • "Public Tweets are viewable and searchable by anyone. This is the power of Twitter," the company says in a tweet.
    • "To be clear – our data licensing business does not sell DMs" (direct messages, which are private communications between Twitter users). "Any reports to the contrary are wrong."
    • Citron said "Wait until the Senate hears Twitter's hidden secret": that the company will generate $400M this year from private data sales rather than advertising.
    • Twitter pointed to a blog entry detailing how its data licensing business uses the public data.
    • The stock's now at its lowest point since Feb. 7.
    • Netflix (NFLX -4.4%) is taking some heat in Brazil for its new series that is based on a political corruption scandal in the nation.
    • Brazilian ex-President Dilma Rousseff maintains that The Mechanism is spreading lie about her and Luiz Inácio Lula da Silva, who is currently running for president.
    • Reports out of Brazil indicate that Netflix is the target of boycotts and subscription cancellations due to the controversial series.

  39. Pstas – Thanks on USG.  It was my hurricane play.


  40. SONC/Dave – Neither, it's just a trade idea to play earnings.  

    LOL – Down 200 now – crazy!

    Couldn't get out of those DXDs though.  frown


  41. bitcoin explained, quite well (NSFW language)


  42. Forget the Dow, Nas is down more than 2.5%, 6,600 just failed… 


  43. The 2020 $120/130 FB Call spread can be purchased for $6.30, which gives you a nice 29% return per year, as long as FB ends above $130 in two years.


  44. FB/Palotay – Well, we sold some puts yesterday but I wouldn't get too aggressive on FB until we see how they end up  getting regulated.  

    Nas down 3.5% now – Wow!  Glad it's our primary hedge…

    Dow down 370 – what a fun day.

    And, once again, Monday becomes meaningless.


  45. Took $2.84 on /NGV8 off the table as everything else is down so it might catch up.  Worst case, I get back in at $2.85 with tight stops and miss a penny. 


  46. This is why we stay skeptical until we see strong bounce lines hold for a full day.  


  47. 2,600 better be bouncy on /ES.  That's down from 2,675 so 15-point bounce to 2,615 is weak.


  48. GE is still up 4.25%.

    /NQ bounced at 6,500 but what a MASSIVE fall from 6,850 intra-day.  Instability like that has got to make traders nervous.

    Yeah, like that! 


  49. Bear markets:

    "Since 1900, by their count, there have been 36 bear markets, averaging 403 days in length and in which the Dow lost 31.1%."

    "Bear markets are erased relatively quickly."


  50. obeying the law of averages in my above post, the dow (peak 1/26/19) should bottom on 3/5/19 at 18,338.


  51. oops, peak was 2018 of course


  52. NYSE back under its 200 DMA so first test failed! The VIX has been over 15 for close to 2 months now. Clearly some worries in the market. 


  53. FB getting cheaper each day it seems. The forward P/E is an almost affordable 17 although in fairness it is based on earning assumptions made before the CA scandal so I am guessing forward earnings will be revised. There might still be some down days ahead.


  54. Paul Ryan stumbles through bizarre Twitter incident




  55. Uber’s use of fewer safety sensors prompts questions after Arizona crash











  56. Asian stocks sink, slammed by tech losses



  57. US agency eyes crash of Tesla with control system


  58. Good morning!

    Same old, same old with a little run-up into the open.  Not fooling as many people this time.

    • MBA Mortgage Applications
    • Composite Index: +4.8% vs. -1.1% (W/W).
    • Purchase Index: +3.0% vs. +1.0%.
    • Refinance Index: +7.0% vs. -5.0%
    • 30 year mortgage rate at 4.69% vs. 4.68%.

    Tech weighs on futures ahead of GDP

    • Equity markets are wobbly once again amid a tech shakeout, but investors today will also be focusing on the U.S. economy and GDP data.
    • The third estimate for the fourth-quarter is expected to show output growing at a 2.7% annualized rate instead of the 2.5% pace reported last month.
    • The Commerce Department will also publish its advance estimates for February goods trade deficit, retail and wholesale inventories, which could have an impact on Q1 GDP forecasts.

    U.S. set to borrow $294B this week

    • Uncle Sam plans to sell about $294B of debt this week, the highest weekly figure since the record set during the 2008 financial crisis.
    • It comes amid concerns about declining federal revenue due to tax cuts and increased spending in Washington.
    • Those worries have helped drive up Treasury rates this year, from 2.4% in January to nearly 3%, unnerving stock market investors.
    • China will soon announce a list of retaliatory tariffs on a large number of major U.S. imports to China, according to the Global Times, which said the Trump administration's tariffs, involving more than 1,000 products, will likely come by Tuesday.
    • The widely-read state run Global Times is run by the ruling Communist Party's official People's Daily, although its stance does not necessarily equate with Chinese government policy.

    UK retail sales fall in March, hit by snow

    Image result for let it snow frozen animated gif
    • British retail sales fell for the first time in five months in March to -8 citing heavy snowfall, stagnating household incomes, and weak consumer confidence, in a monthly survey conducted between Feb. 27 and March 14.
    • Retailers expected sales volumes and orders to grow in April but only at a subdued pace.
    • The Bank of England has said it expects overall economic growth in Britain in the first quarter of 2018 might have been slower than it previously expected because of the snowfall.

    Now THIS is how you do infrastructure!  Softbank to build world's biggest solar park

    • The next phase of Vision 2030? Saudi Arabia has signed a memorandum of understanding with SoftBank (OTCPK:SFTBY) for a $200B solar power project in the kingdom, calling it the single largest of its kind in the world.
    • The park would create as many as 100,000 jobs and shave $40B off Saudi power costs, while the total capacity to be built under its umbrella would be 200 gigawatts by 2030.

    The usual suspects weigh in on Tesla

    • You didn't think Adam Jonas would sit this one out right? Morgan Stanley's Jonas and team call the selloff in Tesla (NASDAQ:TSLA) a buying opportunity to build an Equal-weight position in the EV stock.
    • Jonas calls Tesla "undervalued with very high risk," and notes that he prefers lower-risk Ford.
    • Bernstein and Cowen are also out with notes today, with both warning on Model 3 production problems.
    • Baird calls the sentiment on Tesla the worst it's seen in a while and says short sellers are still piling in.
    • Yesterday, Citi opened a 90-day downside catalyst watch on Tesla.
    • Sources: CNBC and Bloomberg
    • Shares of Tesla are down 1.32% premarket to $275.50 after dropping 8.21% yesterday.

    Competitor discounting impacts Sonic

    • Sonic (NASDAQ:SONC) reports system same-store sales fell 2.9% in FQ2 vs. +0.5% expected. Franchise drive-ins saw a 2.8% decline in comparable sales, while company drive-ins were down even more with a 3.8% tail-off.
    • Total costs were 88.6% of sales during the quarter vs. 89.0% a year ago. Payroll costs edged up 30 bps to 39.7% of sales.
    • CEO update: "Our second quarter same-store sales decline reflected unfavorable weather and continued aggressive discounting by the competition. Excluding the impact of weather, which was a particular challenge in January and February, same-store sales were flat, consistent with the first quarter and indicative of stable underlying sales performance during the first half of our fiscal year."
    • Sonic expects same-store sales to be down 1% to up 1% for FY18. Drive-in-level margins of 15.0% to 15.5% are anticipated.
    • Shares of Sonic are down 5.29% AH to $24.00.
    • Previously: Sonic beats by $0.01, misses on revenue (March 27)

    Walgreens Boots Q2 revenues up 12%; non-GAAP EPS up 27%; shares ahead 4% premarket

    • Walgreens Boots (WBAQ2 results: Revenues: $33,021M (+12.1%); Operating Income: $1,980M (+33.9%); Net Income: $1,349M (+27.3%); EPS: $1.36 (+38.8%); Non-GAAP EPS: $1.73 (+27.2%); Quick Assets: $1,749M (-47.0%); CF Ops: $3,176M (-6.1%).
    • FY2018 Guidance: Non-GAAP EPS: $5.85 – $6.05; Company expects cash tax benefit from U.S. tax law changes in excess of $350M in FY 2018, compared with previous estimate of more than $200M.
    • Shares are up 4% premarket.
    • Rite Aid (NYSE:RAD) has completed the transfer of all 1,932 stores and related assets to Walgreens Boots Alliance (NASDAQ:WBA) in exchange for cash proceeds of $4.157B.
    • The transfer of three distribution centers and related inventory will start after September 1.
    • Rite Aid's board has terminated the tax benefits preservation plan that it adopted in January aimed at protecting its ~$2.2B in net operating losses. It was originally set to expired on January 3, 2019.
    • While its approach is at a "preliminary and exploratory" stage, Takeda Pharmaceutical (OTCPK:TKPYY) is considering making an offer for Shire (NASDAQ:SHPG), a rival drugmaker with a market value of around $40B.
    • A deal would create a global biopharmaceutical leader, strengthening Takeda's therapeutic areas of oncology, gastrointestinal disorders, neuroscience and specialized medicines.
    • SHPG +21.6% premarket

    Zuck expected to go before Congress

    • There's word on the street that Mark Zuckerberg has agreed to testify before Congress about the way Facebook (NASDAQ:FB) manages its user data despite shunning a similar request from the British parliamentary committee.
    • It would mark his first public testimony before U.S. lawmakers.
    • Facebook shares closed down almost 5% on Tuesday and have tumbled almost 18% since March 16, when Facebook first acknowledged the Cambridge Analytica scandal.
    • Google (GOOGGOOGL) has won the dismissal of a Prager University lawsuit in California that accused YouTube of censoring conservative content.
    • Alphabet does not qualify as a "state actor" subject to the First Amendment because it's a private company and not a public institution, according to U.S. District Judge Lucy Koh.
    • She also gave Prager a chance to amend its lawsuit, stating the case "demands an analysis" of California’s state constitution "in the age of social media and the internet.

    LOL – Trump gets upstaged by China:  North Korea pledges denuclearization

    • After days of speculation, China has announced that Kim Jong-un had visited Beijing and agreed to denuclearize the Korean peninsula during a meeting with President Xi, who pledged to uphold his friendship with Pyongyang.
    • The trip was Kim's first known journey abroad since he assumed power in 2011 and is believed by analysts to serve as preparation for upcoming summits with South Korea and the U.S.